President Obama’s Fiscal Year 2012 Revenue Proposals: Proposals Relating to International Taxation

Sullivan & Cromwell LLP - February 25, 2011

On February 14, 2011, the Obama Administration (the “Administration”) released the General Explanations of the Administration’s Fiscal Year 2012 Revenue Proposals (commonly known as the “Green Book”). Although the Green Book does not include proposed statutory language, the Green Book contains significant detail about the fiscal year 2012 revenue proposals. This memorandum discusses key aspects of the Green Book relating to international taxation that we anticipate may be of interest to our clients. Many of the proposals are similar to the Administration’s Fiscal Year 2011 Revenue Proposals (the “2011 Green Book”). We are distributing separate memoranda addressing Green Book proposals relating to (1) domestic business taxation, and (2) individual, estate and gift taxation, both of which may be obtained by following the instructions at the end of this memorandum.

The Green Book’s international proposals fall into two groups: (1) the proposals to extend the subpart F “active financing” and “active insurance” income exceptions and the subpart F “look-though” rule for payments between related controlled foreign corporations to taxable years beginning in 2012 (all three of which are set to expire at the end of 2011); and (2) proposals that would make significant changes in existing law, each of which appeared in the same or similar form in the 2011 Green Book.