On 5 March  2024, the US Joint Committee on Taxation published a report – Background And Analysis Of The Taxation Of Multinational Enterprises And The Potential Reallocation Of Taxing Rights Under the OECD’s Pillar One. The report was released before a House Ways and Means Tax Subcommittee Hearing on OECD Pillar 1: Ensuring the Biden Administration Prioritizes Americans. The House Ways and Means Committee has scheduled a public hearing for 7 March 2024.  This document, prepared by the Joint Committee on Taxation, describes the legal and economic background relating to the taxation of income earned by multinational enterprises and the potential economic and revenue effects of Pillar One Amount A.

Part I includes an overview of select issues of US taxation of cross-border activity. Subpart A is a general overview of the U.S. tax principles common to inbound and outbound taxation, subpart B describes US tax rules applicable to foreign activities of US persons, subpart C describes US tax rules applicable to foreign persons, and subpart D describes special measures to address potential tax avoidance, and subpart E describes how issues relating to overlapping or conflicting jurisdiction to tax are resolved.

Part II describes international efforts (lead in part by the Organisation of Economic Co-operation and Development (OECD) at the direction of the G-20) to agree on a new means of allocating certain income of multinational enterprises and to coordinate the implementation of a global minimum tax.

Part III provides an analysis of recent economic literature that discuss the implications of cross-border taxation and Pillar One.

Part IV provides an analysis of the potential economic and revenue effects of the new means of allocating taxing rights with respect to certain income of multinational enterprises as outlined by the OECD’s draft “Multilateral Convention to Implement Amount A of Pillar One.”