A potential tightening of some rules which enable multinational corporations to lower their U.S. tax bill seems to be in the works.
The Internal Revenue Service is considering a plan to curb a tactic commonly used by multinational corporations with American operations to lower their tax bills, a move that would help bring back some of the billions of dollars in taxable profits held overseas.
The plan was described on Wednesday by two government officials briefed on the matter, who spoke on the condition of anonymity because they said the plan was still in its early stages.
In recent years, the IRS has increased its scrutiny of corporations using what is known as transfer pricing. Multinational corporations, whether based in the United States or overseas, are able to cut their U.S. taxes and keep profits offshore in low-tax jurisdictions through their calculations of the prices associated with transferring goods and services between their divisions.
To understand the details on how this works, this Uncle Sam Gets Zero blog post has some details.