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Barack Obama 's International Tax Reform Proposal

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ABSTRACT

President Barack Obama’s international tax reform proposal aims at preventing American multinational companies from using current international tax loopholes to avoid being taxed on offshore profits. It also eliminates purported tax incentives for companies perceived to have moved jobs overseas. But more importantly, Obama’s reform attempts to rectify a longstanding tax issue in America, prevalent since the Kennedy Administration and its enactment of the Subpart F regime. The Subpart F section of the Internal Revenue Code was the result of a compromise between an Administration that desired to implement a worldwide taxation system to curb further erosion of the US tax base and a Republican-led Congress that sought to encourage U.S. foreign investment. Although Subpart F has succeeded in increasing the international income stream subject to U.S. taxation, savvy multinational corporations have not only found loopholes in Subpart F but have also avoided the code section altogether by simply filing an election to opt out of corporate status and into disregarded status by way of the check-the-box regulatory regime. This independent study starts by detailing the many methods used by multinationals to avoid the highest corporate tax rate in the world. Then, this document examines the Subpart F regime and other relevant law in an effort to understand the statutory language that allows for corporate tax avoidance. This study then takes a look at two American
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