CED Newsletters & Policy Alerts

Action: Presidential Memorandum “The Organization for Economic Cooperation and Development (OECD) Global Tax Deal” 

What it does: The Memorandum directs the Treasury Department to inform the OECD that the US will not implement the OECD/G-20 global corporate tax agreement (“Inclusive Framework on Base Erosion and Profit Shifting”) that subjects multinational corporations with revenues above 750 million euros to a minimum 15 percent tax on profits. The agreement, which now includes 146 jurisdictions, is intended to prevent corporations from limiting their tax burden by shifting income and operations between high- and low-tax jurisdictions. The Memorandum also directs the Treasury to investigate other jurisdictions’ compliance with existing tax treaties with the US and other tax policies and present the President with options for responding to non-compliance or rules discriminating against US companies.    

Key Insights

• While the Biden Administration helped negotiate and strongly supported the agreement, Republicans in Congress strongly opposed implementation and would not have enacted the statutory changes necessary for the US to adopt the Framework. The Memorandum simply clarifies that previous commitment have “no force or effect” absent a law implementing the relevant provisions, effectively withdrawing the US from the Framework. 

• However, other jurisdictions – including the European Union, Japan, Korea, and the United Kingdom – are moving ahead with implementation, which may still result in US companies being subject to the minimum tax abroad, and therefore possible retaliation from the US, including through trade policies (e.g., tariffs) with those countries. 

• The Memorandum does not repeal statutory provisions or regulations subjecting US companies to minimum tax burdens, such as the Global Intangible Low Tax income (GILTI) and the Base Erosion and Anti-Abuse Tax (BEAT). Both were adopted as part of the Tax Cuts and Jobs Act of 2017.