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International model steps #147
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A suggested approach for handling the data on corporations claiming foreign tax credits: The IRS tables provide income by the following categories:
We can then subtract off the deductions and adjustments to get taxable income from foreign sources. For foreign taxes paid, we have
Eligible foreign taxes are the greater of actual taxes and the relevant income multiplied by the US corporate tax rate. The limitation is computed by taking US taxes before credits (including AMT), multiplying by foreign taxable income and dividing by total taxable income; this will require some adjustment to recognize that MNE domestic income is only part of total corporate domestic income. Once all of that is done, we can feed the data into the model and compute constructive taxable income from related foreign corporations. We can then rescale CFC data to match this (which may require reconciling an incomplete dividend payout process). Running the model again, we can compute the FTC, and rescale the rest of the DMNE data to match. We should also adjust the process of accumulating earnings to reflect distributions not to US parents. |
The international model should receive 3 types of improvements:
Improve data collection in code so it can be done by industry.
Add profit-shifting response. From issue Profit shifting response #141:
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