'Territorial' Tax Reform: Homeless Income is the Achilles Heel

82 Pages Posted: 19 Jul 2012

See all articles by Bret Wells

Bret Wells

University of Houston Law Center

Date Written: July 18, 2012


The article discusses the draft legislation released by the House Ways & Means Committee that would reform the US international tax regime by adopting a foreign dividends received deduction as the means to effectively adopt a territorial tax regime for the United States. The debate over international tax reform, neutrality, competitiveness, and Homeless Income has continued for more than fifty years. However, the draft legislation continues and expands the existing Subpart F regime as the primary means of protecting the U.S. territorial tax base from inappropriate tax base erosion strategies, and so it trods the same ground as existing law in that it accepts the notion that the Subpart F regime represents Congress’ answer to the Homeless Income problem. Yet, even though the Subpart F regime has attempted to represent a “backstop” to protect against inappropriate transfer pricing results, the reality is that the Subpart F regime has never been an effective “backstop” for the U.S. transfer pricing rules. Notwithstanding repeated efforts to reform the Subpart F regime, the Homeless Income problem has not been thwarted. The paper critiques the draft legislation with the objective of providing comments that will allow the proposed legislation to achieve its policy goals while policing the Homeless Income problem through the adoption of a base protecting surtax along the lines advocated in the article.

Keywords: International Taxation, Subpart F, Tax Reform, Territorial Taxation, Homeless Income, Stateless Income, Section 965, Tax Reform Act of 2011

Suggested Citation

Wells, Bret, 'Territorial' Tax Reform: Homeless Income is the Achilles Heel (July 18, 2012). 12 Houston Business and Tax Law Journal 1 (2012); U of Houston Law Center No. 2012-A-13. Available at SSRN: https://ssrn.com/abstract=2112052

Bret Wells (Contact Author)

University of Houston Law Center ( email )

4604 Calhoun Road
Houston, TX 77204-6060
United States

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