Sponsors (4)
The bill allows termination of the U.S.–China tax treaty—which could make it easier for U.S. tax authorities to enforce domestic rules on China-linked income—but does so at the cost of higher taxes and possible double taxation for cross-border taxpayers, increased legal and investment uncertainty, and greater diplomatic friction that can hinder international tax cooperation.
U.S. tax authorities and taxpayers: terminating the U.S.–China tax treaty would remove treaty-based protections for China-linked cross-border income, allowing U.S. authorities to apply and enforce domestic tax rules more directly and potentially simplify enforcement.
U.S. businesses and individuals with China–U.S. cross-border income: they could face higher taxes or double taxation if the treaty is terminated.
U.S. and state tax authorities, taxpayers engaged in cross-border activity: terminating the treaty could escalate U.S.–China diplomatic tensions and reduce cooperation on tax information exchange, harming cross-border enforcement and dispute resolution.
Firms, investors, and taxpayers: tying treaty termination to a Chinese military action makes tax policy contingent on a military trigger, creating abrupt legal and economic uncertainty for firms and investors and complicating planning.
Based on analysis of 2 sections of legislative text.
Conditions initiation of U.S. termination of the 1984 U.S.–China income tax treaty on a President-certified PLA attack on Taiwan and requires diplomatic and congressional notifications.
Introduced August 1, 2025 by John Cornyn · Last progress August 1, 2025
Directs the Treasury Secretary to tell China, through diplomatic channels, that the United States intends to terminate the U.S.–China income tax treaty if the President reports within 30 days that the People’s Liberation Army has launched an armed attack on Taiwan. It also requires the President to send written notice of that treaty termination to designated congressional recipients. The measure does not change domestic tax law but triggers an international treaty termination process tied to a military action, which could remove treaty tax protections for U.S. and China-based taxpayers and affect cross-border business and investment.