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ADMINISTRATION MODIFIES INTERNATIONAL TAX REFORM IN FY 2011 BUDGET
President Obama released the Administrations FY 201 1 budget, and Treasury issued the General Explanations of the Administration's Fiscal Year 2011 Revenue Proposals (Green Book), on February 1 , 2010. The Administration proposed a less ambitious plan to reform the international tax regime than in the 2010 proposed budget (See Farag, "International Tax Reform Proposals: Treasury's Green Book," 20 JOIT 6 (August 2009).) Major changes include (1 ) a modified proposal to defer deductions of expenses related to deferred foreign-source income that would affect only interest expenses; (2) abandonment of the checkthe-box rule modifications proposed last year; (3) a new transfer pricing proposal that would subject to immediate U.S. tax "excessive returns" of intangibles moved to affiliates in low-tax jurisdictions; and (4) denial of a deduction to U.S. insurance companies for certain excessive non-taxed reinsurance premiums paid to foreign affiliates.
The Administration estimates that U.S. international tax reform will generate approximately $122 billion over ten years, $28.7 billion short of last year's revised estimates of $! 50.9 billion.1 Senior Administration officials said that they would work to get the revised proposals enacted this year.
Deferral of interest expenses related to deferred income. The bulk of the revenue change from last year's international provisions in the Green Book stems from the Administration's decision to limit its deferral of deductions proposal and focus solely on interest expenses. Last year, the Administration proposed to defer deductions pertaining to all expenses (e.g., interest or general and administrative costs),...