Corporate Tax Accounting Rules

Current US corporate tax accounting rules seem to discourage repatriation of cash in foreign affiliates, but many companies still prefer offshore holdings. Probably the central reason for this is the fact that the US has one of the highest rates for corporate taxes in the world—35%, a major change from time periods when the US rates ranked among the lowest. Some people have called for a taxation holiday to lower the cost of repatriation. Several issues arise with this method, and currently there are no plans to pursue any such holiday. However, some political leaders and corporations continue to push for a taxation holiday. One thing remains clear, however: those in the corporate tax accounting field need to know how all of the current and future rules apply.

People opposed to the idea of a holiday say it will undercut attempts at a larger reform. In contrast, supporters believe it will encourage repatriation of funds. Another potential benefit is that investors will consider companies to have a higher value because they will not ignore overseas subsidiaries' cash holdings.

There are additional changes aside from questions about a tax holiday. Those changes are being addressed in current and proposed rules about taxation, and the 2010 proposals are beginning to be implemented in 2011 and 2012. Some of these proposals that will affect corporate tax accounting, with particular attention on foreign affiliates, are changes to a proposed deduction for deferred interest expense and foreign tax credit reform.

In the Obama Administration’s FY 2011 tax proposals, there is a clear language to defer deductions associated with interest expenses that are related to deferred income. It’s similar to the proposal from the 2010 budget, but one considerable difference is that the new rule will allow deferral of most interest expense deductions from one year to subsequent years. The contingency is that it has to meet the requirement of having been deferred in previous years. The amount eligible for deduction will be directly proportionate to how much income was deferred in the prior year.

Another suggested change is the reformation of credits. Several pieces of current legislation exist in regards to foreign income tax credits, and one of particular note is meant to prohibit foreign income and foreign taxes from being split. In the 2011 proposal, the credit would only be allowed as foreign income becomes taxable, which means that it can only be associated with the taxpayer who is asking for the credit.

Corporate tax accounting is becoming more complex as US rules face considerable changes and reforms. Many of these directly affect foreign affiliates of companies based in the United States, two of which being deduction deferrals and foreign tax credit reform. Companies like KPMG can help businesses wade through these reforms and new regulations. Join the ranks of Big Four accounting firm KPMG, in one of over 300 available jobs, listed at Big4.com.

By: Big4.com

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Kristy Short www.big4.com/ Currently, Big4.com, a website focused solely on available positions at the Big Four accounting firms, lists 300+ job openings for KPMG.