To amend the Internal Revenue Code of 1986 to provide that certain payments to foreign related parties subject to sufficient foreign tax are not treated as base erosion payments.

Summary

Allows a U.S. taxpayer to exclude payments made to related foreign persons from the base erosion alternative tax if the taxpayer shows that the foreign recipient and the payment are each subject to an effective foreign income tax rate of at least 15 percent. The bill directs the Treasury Secretary to issue rules for how to calculate effective foreign tax rates using financial statements, specifies what counts as foreign income taxes, and requires anti‑abuse rules; the change applies to taxable years beginning after enactment.

• Excludes related‑party payments from base erosion treatment if both recipient and payment have an effective foreign tax rate of ≥15%.
• Allows taxpayers to use applicable financial statements to demonstrate effective foreign tax rates, subject to Treasury adjustments.
• Specifies that 'foreign income taxes' mean income, war profits, or excess profits taxes paid or accrued to a foreign country or U.S. possession.
• Directs the Treasury Secretary to issue procedures for rate calculations and to write anti‑abuse rules, including recharacterization authority.
• Applies to taxable years beginning after enactment.
• Introduces administrative and compliance requirements for taxpayers to calculate and document effective foreign tax rates.
• May reduce the number of payments treated as base erosion payments for multinationals meeting the 15% test.
• Treasury rulemaking could materially affect how the exception operates through prescribed adjustments and anti‑abuse measures.