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Global Minimum Tax Implementation Guidance Protects Community Development Tax Incentive Investments

Thursday, February 2, 2023 - 4:00PM

Technical and administrative guidance released today by the Organization for Economic Co-Operation and Development (OECD)/Group of Twenty (G20) provides clarification on the treatment of key community development tax incentives concerning a global minimum tax (GMT) on multinational corporations. More than 140 nations agreed with the guidance, which will form a common approach for countries to implement the rules concerning the GMT. Under the guidance, investments in the low-income housing tax credit (LIHTC), new markets tax credit (NMTC), historic tax credit (HTC) and various renewable energy tax credits (RETCs) that are not consolidated and accounted for using the equity method of accounting will not negatively affect the calculation of whether the enterprise has an effective tax rate of less than 15%. Had the guidance provided that the tax credits would not be excluded, that could create a tax burden in some nations and there was concern that it could affect investor appetite for such credits. The U.S. Department of Treasury praised the guidance in a press release.

A Tax Credit Tuesday podcast last June discussed the implications of the GMT guidance.

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