Global Min. Tax's Safe Harbors Carry More Complications

Tax attorney Joshua Odintz spoke with Law360 about safe harbor mechanisms in the Organization for Economic Cooperation and Development's (OECD) global minimum tax guidance. Through these safe harbors, the OECD aims to provide relief to companies from some reporting requirements and "top-up taxes" that governments can impose to meet a 15 percent minimum corporate tax rate. The minimum tax regime, known as Pillar Two of the OECD's larger plan, creates hefty compliance costs for both taxpayers and administrators, Mr. Odintz explained, and its designers may have underestimated those costs.

"I think they're kind of skeptical of businesses' claims that this is expensive," he said. "I'm also concerned that the people around the table from the inclusive framework do not understand how much energy will be expended by governments at the tax authority level."

Mr. Odintz continued that a temporary undertaxed payments rule (UTPR) in the guidance is particularly helpful for U.S. lawmakers trying to determine how to meet Pillar Two standards after major components of the Tax Cuts and Jobs Act (TCJA) expire in 2025. At that point, rates on global intangible low-taxed income, foreign-derived intangible income and the TCJA's base erosion and anti-abuse tax will increase, for example.

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