Treaty shopping prevention passes in 9/11 bill

Treaty shopping can be used to avoid paying U.S. taxes. It occurs when multinational companies located in a country without a U.S. tax treaty receive U.S. income through a subsidiary in another country that has a treaty with the U.S. to avoid paying U.S. taxes. 

Today’s bill subjects a withholding tax on subsidiaries serving as a conduit to firms without a treaty. 

The provision raises approximately $7.4 billion over ten years and is aimed at treaty shopping used by multinational companies incorporated in tax haven countries. 

In July, the House attempted to pass the legislation under suspension of the rules, which requires two-thirds support to pass. The measure failed to garner that support, 255-159.  

Today’s vote was under regular order, meaning a simple majority was required for passage.