In a slide presentation for the OECD Steering Group of the Inclusive Framework circulated late Thursday, April 8th, the Biden Administration outlined its negotiating position on the OECD’s BEPS 2.0 project. The OECD’s project involves two “pillars”: Pillar 1 would create new income apportionment and nexus rules to allow jurisdictions to tax certain multinational companies on income earned in jurisdictions where such multinationals may not maintain a physical presence, and Pillar 2 would create a global minimum tax. The OECD released two “blueprint” documents outlining its proposals on each Pillar in October 2020.

The presentation circulated Thursday, which has not yet been made publicly available, confirms the Biden Administration’s support for Pillar 2 of the project and outlines the Administration’s legislative proposals to adopt an OECD-compliant minimum tax in the U.S. It also proposes a new approach on Pillar 1 of the project, designed to simplify the OECD’s existing proposals and avoid perceived discrimination against U.S. multinational companies.

Pillar 1

As detailed in the OECD’s Blueprint, Pillar 1 would apply to large multinationals engaged in either “automated digital services” or in a “consumer facing business,” and would allocate a portion of such multinationals’ residual profit to market jurisdictions on the basis of revenue earned in those jurisdictions. The Trump Administration had previously opposed the plan, stating that it appeared to target U.S. technology companies. In the presentation circulated Thursday, the Biden Administration set forth its position on Pillar 1 for the first time, reiterating that the U.S. “cannot accept any result that is discriminatory against U.S. firms,” but going on to propose that Pillar 1 focus on “no more than 100” of the world’s most profitable multinationals. The Administration argues that this approach would mitigate scoping and business line segmentation complexities under the current Blueprint, without materially reducing the amount of profit available for reallocation. In the presentation, the U.S. noted that it is “prepared to be flexible” in other areas, including new nexus rules, to reach consensus and provide benefit to developing countries.

Pillar 2

Pillar 2 seeks to create a global minimum tax through two main mechanisms, outlined in the OECD’s Pillar 2 Blueprint: (1) an “income inclusion rule” (“IIR”), which would allow a parent company’s jurisdiction to tax on a current basis income earned through the parent’s subsidiaries subject to low rates of tax, similar to the U.S. CFC rules, and (2) an “undertaxed payments rule” (“UTPR”), which would act as a backstop to the IIR and allow a jurisdiction to deny deductions for payments made to related parties subject to low rates of taxation. Thursday’s presentation confirms the U.S.’s support for Pillar 2. In particular, the U.S. pledged to: (1) reform the GILTI regime to more closely align with the IIR, including by adopting a country-by-country foreign tax credit limitation, and (2) repeal the U.S. BEAT and replace it with a regime resembling the UTPR. The Biden Administration previously outlined its plans for these legislative proposals in policy documents released in the last two weeks.


The release of the Administration’s positions on the OECD Pillars comes amid much discussion on international tax reform proposals in the U.S. In addition to the policy documents released by the Administration, the Senate Finance Committee recently released its own proposals for international tax reform, and other U.S. legislators have offered their own reform measures strongly suggesting that there is still room for negotiation. The Senate Finance Committee is currently taking comments on their proposals, and the OECD has aimed to reach agreement on the Pillar 1 and 2 proposals by mid-2021. So time is of the essence.