Foreign Tax Provisions in Education Jobs and Medicaid Assistance Act: Congress Enacts Foreign Tax Revenue Raisers, Including New Limits on Foreign Tax Credits

Sullivan & Cromwell LLP - August 11, 2010

On Tuesday, August 10, 2010, the President signed into law the Education Jobs and Medicaid Assistance Act of 2010, H.R. 1586 (the “Act”).
The Act provides state aid for education and Medicaid, but includes as offsets significant revenue raisers targeted at foreign tax credit transactions, foreign earnings repatriations, and other transactions, including provisions introducing a “matching rule” and other limitations on the use of foreign tax credits, and changing the sourcing of interest.  These provisions, which were previously passed by the House of Representatives as part of a tax “extenders” bill, but did not become law, were enacted in substantially the same form as they had been proposed in the extenders bill, except for changes in the effective dates, and the addition of a transition rule to the “80/20” provision.