Skip to Main Content

Law360 Quotes Peter Barnes and David Rosenbloom: Foreign Credits At Risk in Senate Tax Bill, Analysts Say

November 16, 2017, Law360

A provision in the Senate’s version of the Tax Cuts and Jobs Act requiring U.S. multinationals to calculate their foreign tax credits on an annual basis means that companies could end up with unusable leftover credits and bookkeeping anomalies due to mismatches with other countries’ accounting rules, tax specialists say.

. . .

For H. David Rosenbloom, a member at Caplin & Drysdale, Chtd., in addition to anomalies created by different governments’ accounting rules, the inability to carry over foreign tax credits “certainly cuts down on the ability to plan, and it cuts down on the ability to deliberately incur GILTI income.”

He noted that if a company carried over excess foreign tax credits, “the next year you would have an incentive to incur as much GILTI as you can. It seems to me if you have carryovers, you have an incentive to deliberately earn GILTI.”

. . .

As for other possible motivations behind the shift to a one-year calculation, Peter A. Barnes, an Of Counsel at Caplin & Drysdale, Chtd., a senior fellow at Duke University School of Law and a former tax executive with General Electric Co., offered a few reasons.

He said it’s possible Congress will argue that the annual calculation prevents carrying forward taxes from a high-tax year to shelter low-taxed income in a subsequent year. In addition, he said, lawmakers "might argue simplicity" or that the calculation includes lots of foreign subsidiaries each year, so there is some natural pooling across subsidiaries.

“What is clear, however, is [that] the U.S. taxpayers will need to make accounting elections — where available — to try to match foreign taxable income to the amount that will be recognized under U.S. tax accounting principles for the same year,” Barnes said. “That may require deferring depreciation deductions, for instance, or taking other steps to try to synchronize the timing of foreign earned income. That is not simplification for tax professionals.”

To view the full article, please visit Law360’s website (subscription required).

Excerpt taken from the article “Foreign Credits At Risk In Senate Tax Bill, Analysts Say” by Natalie Olivo for Law360.


About Caplin & Drysdale
Celebrating our 55th Anniversary in 2019, Caplin & Drysdale continues to be a leading provider of legal services to corporations, individuals, and nonprofits throughout the United States and around the world. We are also privileged to serve as legal advisors to accounting firms, financial institutions, law firms, and other professional services organizations.

The firm's reputation over the years has earned us the trust and respect of clients, industry peers, and government agencies. Moreover, clients rely on our broad knowledge of the law and our keen insights into their business concerns and personal interests. Our lawyers' strong tactical and problem-solving skills -- combined with substantial experience handling a variety of complex, high stakes, matters in a boutique environment -- make us one the nation's most distinctive law firms.

With offices in New York City and Washington, D.C., Caplin & Drysdale's core practice areas include:
For more information, please visit us at
Washington, DC Office:
One Thomas Circle NW
Suite 1100
Washington, DC 20005
New York, NY Office:
600 Lexington Avenue
21st Floor
New York, NY 10022


This communication does not provide legal advice, nor does it create an attorney-client relationship with you or any other reader. If you require legal guidance in any specific situation, you should engage a qualified lawyer for that purpose. Prior results do not guarantee a similar outcome.

Attorney Advertising
It is possible that under the laws, rules, or regulations of certain jurisdictions, this may be construed as an advertisement or solicitation.
©2021 Caplin & Drysdale, Chartered
All Rights Reserved.