Unfair Tax Prevention Act introduced by Estes, Miller

U.S. Rep. Ron Estes (R-KS) on July 18 led 10 of his Republican colleagues, including U.S. Rep. Carol Miller (R-WV), in introducing legislation that would impose reciprocal tax measures on a foreign country that has issued the Under Taxed Profit Rule (UTPR) surtax on American businesses.

The Unfair Tax Prevention Act, H.R. 4695, which Rep. Estes sponsored, aims to prevent U.S. jobs and tax revenues from being surrendered to foreign governments through the Organisation for Economic Co-operation and Development (OECD)’s Pillar 2, which is also known as UTPR surtax, according to a bill summary provided by the lawmakers.

“After repeated objections from policymakers, including myself, and business leaders, the Biden administration has negotiated a deal with the OECD that has a disproportionately negative effect on the United States and our economic competitiveness,” Rep. Estes said. “This legislation protects the U.S. tax base from unfair extraterritorial taxes by foreign countries and imposes stiff penalties on those countries if they implement them. 

“It’s time for the OECD and foreign countries to abandon the UTPR surtax and its fundamental flaws,” added the congressman.

Specifically, H.R. 4695 would define “foreign-owned exterritorial tax regime entities” (FETR) as foreign-controlled entities with extraterritorial taxes, including the UTPR surtax targeted at U.S. jobs and businesses, the summary says, and would bolster anti-avoidance rules in the U.S. base erosion and anti-abuse tax by eliminating the three percent base erosion floor and the $500 million gross receipts test for FETR entities.

Additionally, the measure would revoke the ability of FETR entities to disregard certain payments subject to withholding taxes, and would treat  50 percent of cost of goods sold as a base erosion tax benefit, among other provisions.

“Republicans in Congress reject the premise that foreign governments and organizations should be dictating how Americans are taxed in America,” said Rep. Miller. “As I’ve previously warned, countries that implement the UTPR will feel the repercussions of their bad tax policies. The Unfair Tax Prevention Act stands up for American businesses and taxpayers by ensuring companies from country’s that target U.S. businesses will feel the pain more than ours do.”

Among the members who joined Rep. Miller as an original cosponsor of H.R. 4695 were U.S. Reps. Mike Kelly (R-PA), Adrian Smith (R-NE), Vern Buchanan (R-FL), Randy Feenstra (R-IA), Lloyd Smucker (R-PA), Michelle Steel (R-CA), and Blake Moore (R-UT).