§896 Adjustment of Tax on Nationals, Residents, and Corporations of Certain Foreign Countries

Summary

The President can act when a foreign country taxes Americans or U.S. companies more harshly than the United States taxes people or companies from that country. If the foreign country won’t fix the problem after the U.S. asks, the President may officially announce two kinds of responses: he can make tax treatment for that country’s residents or companies follow the older pre-1967 U.S. rules for tax years that start after the announcement, or he can change how U.S. tax is figured so the U.S. effective tax on similar income is about the same as the foreign country’s rate. To do that, the U.S. tax can be adjusted by denying deductions, credits, or exemptions or by raising the tax rate for that income. If the foreign country later fixes its law so the unfair or higher tax is gone, the President will announce that the special U.S. tax treatment ends for tax years starting after that announcement. The President must tell Congress at least 30 days before making any announcement. The Treasury Secretary must write rules needed to carry out these actions.