Earnings Stripping under the BEAT
46 Pages Posted: 29 May 2019 Last revised: 30 Nov 2020
Date Written: May 28, 2019
The Base Erosion and Anti-Abuse Tax is generally regarded as among the most important changes wrought by the Tax Cuts and Jobs Act of 2017, which is itself regarded as among the most important pieces of tax legislation in the last several decades. This paper evaluates the new BEAT provision along with recently proposed regulations. The analysis makes several points about the nature of earnings stripping, the interaction of the BEAT with the new limitation on deducting business interest, the treatment of costs of goods sold under the BEAT, and the BEAT’s approach to depreciable and amortizable property whether purchased, leased or licensed.
Keywords: BEAT, Earnings stripping, Interest stripping, Base erosion, Base erosion anti-abuse tax, Business interest limitation, 163(j), inventoriable costs, capitalization, costs of goods sold
JEL Classification: H25, H26, H87, K34
Suggested Citation: Suggested Citation