International Aspects of U.S. Income Taxation
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Description
This book addresses the international aspects of U.S. tax law—the rules that govern U.S. taxation of U.S. activity by foreign persons and foreign activity by U.S. persons. It is an outgrowth of materials I have prepared for various courses in international taxation offered in the LL.M. program in taxation at New York University School of Law over the last twenty years. Though primarily attended by LL.M. students from the United States and numerous foreign countries, J.D. students typically also enroll in the courses, and there is no reason why the book may not be used with either group of students. The book is informed not only by teaching experience, but also by my experience practicing international tax law. I have tried to cover not only what is academically interesting, but also what is practical and important to tax practitioners in the private and public sectors. International tax draws from many sources and is exceedingly difficult. The book is designed to capture within its covers all that a student needs (other than the Internal Revenue Code and Treasury Regulations) to gain a sophisticated understanding of the field. There are many fine primers and treatises on international tax, but the rules are so intricate that students, who rarely have time to read outside sources, learn best by focusing on the primary material. My observation is that it is desirable that students studying international tax have prior or contemporaneous academic or practical exposure to corporate tax and at least passing familiarity with partnership tax. Each section of the book begins with carefully selected reading assignments in the Code and Regulations, followed by introductory “Notes” and then primary and secondary materials (cases, rulings, studies, etc.). In order to illustrate the effect of treaties, the reading assignments often include provisions of the U.S. Treasury Model Treaty and the treaty between the United States and the Netherlands, which are reproduced in the Appendix. Most sections conclude with a problem, which may be used as a vehicle for class lecture or discussion, designed to text understanding of the material in as practical a setting as brief hypothetical patterns permit. The Notes provide introductory explanation and probe policy and practical issues raised only peripherally or obscurely by the primary material. Though primarily intended as a teaching resource, the book may also serve as a research and practice tool for practitioners. The Notes, which cite numerous cases, administrative materials, and law review articles, provide overview and analysis of most relevant practice areas and are an entry point to numerous research topics. In that sense the Notes function as a concise analytical compendium, with more depth than a primer but not as exhaustive as a treatise. A table of contents follows immediately and a table of authorities and index are at the end of the book. The book, which is now in the second edition, reflects developments through August 1, 2005, including the American Jobs Creation Act of 2004. The Act repealed the Extraterritorial Income regime (“ETI”), prospectively (in 2007) reduced to two the number of separate foreign tax credit limitations, retroactively (to 2003) repealed the separate limitation for “10/50” companies, prospectively (in 2009) authorized worldwide allocation of interest expense, polices “inversion” transactions via imposition of new corporate-level tax, permits low-taxed dividends from foreign subsidiaries through the end of 2005 (and longer if, as some suspect, the sunset date is extended), relaxed taxation of international shipping operations, and made miscellaneous changes to subpart F and the inbound rules. Much of the revenue saved by repeal of the ETI (and more) was spent on a new deduction equal to a specified percentage of net income from domestic manufacturing. The percentage is three percent for 2005 and 2006, six percent for 2007 through 2009, and nine percent thereafter. When fully phased in, the deduction will translate into a rate reduction from 35 percent to just under 32 percent. Apart from the economic flaw (why single out domestic production for favorable treatment?), having to isolate net income from domestic manufacturing will subject purely domestic activity to the same genre of headaches that has long plagued international activity: the need to categorize activity and to delineate associated items of income and expense. It will be no surprise if a future Congress repeals the domestic manufacturing deduction and replaces it with a single rater structure for all types of activity.
Publication Date
2005
Edition
2
Recommended Citation
Steines, John P. Jr., "International Aspects of U.S. Income Taxation" (2005). Faculty Books & Edited Works. 689.
https://gretchen.law.nyu.edu/fac-books-edited-works/689
