AICPA Comments on Impact of New Net Investment Income Tax on International Tax Entities

August 7, 2013

The American Institute of CPAs (AICPA) on Aug. 5, 2013 commented to the Internal Revenue Service (IRS) and U.S. Department of the Treasury about the effect on international tax entities of proposed regulations related to the net investment income tax. The net investment income tax imposes a tax on unearned income on investments of certain individuals, estates and trusts, whose income is above the statutory threshold amounts. The Health Care and Education Reconciliation Act of 2010 added the net investment income tax to the Internal Revenue Code as section 1411.

The AICPA’s letter aligned with comments submitted by the American Bar Association on April 5, 2013, which recommend assessing the section 1441 tax at the same time as Chapter 1, Normal Taxes and Surtaxes, or imposing a look-through regime to determine section 1411 implications as if the U.S. shareholder or qualified electing fund shareholder earned the income directly.  If, the AICPA wrote, “Treasury and the IRS deem it necessary to provide an option for taxation at the time of repatriation, rather than at the time income is earned for purposes of Chapter 1, we recommend that the final guidance reverse the default and elective methods.”

“The proposed regulations as currently drafted create a significant administrative burden for both taxpayers and the IRS,” the AICPA stated. 

Please contact Shirley Twillman at or 202.434.9220, if you have questions or would like to speak to someone about the letter.