USA Trends and Developments Contributed by: Devon M. Bodoh, Joseph M. Pari and Blake D. Bitter, Weil, Gotshal & Manges LLP
and the USA that, because of the existing US tax pro - visions targeting base erosion and profit shifting and the need to provide greater stability and certainty in the international tax system moving forward, a side- by-side system would be implemented that would generally exclude US-parented multinational groups from key aspects of Pillar Two (eg, the undertaxed profits rule and the income inclusion rule). OECD Side-by-Side Package On 5 January 2026, the OECD announced the Side- by-Side Package following the USA’s agreement with the G7 countries. While the Side-by-Side Package includes some additional items, such as a simplified effective tax rate safe harbour, an extension of the transitional country-by-country reporting safe harbour, and a substance-based tax incentive safe harbour, the package’s “Side-by-Side Safe Harbor” is particu - larly impactful because it may effectively shield US- parented multinational groups from the application of the global minimum tax rules, specifically the income inclusion rule and the undertaxed profits rule. Under the Side-by-Side Safe Harbor, a multinational group may elect to have zero top-up tax for income inclusion rule and undertaxed profits rule purposes for a fiscal year if the group’s ultimate parent entity (UPE) is located in a jurisdiction with a qualified side-by-side regime (“Qualified SbS”). A jurisdiction will be treated as having a Qualified SbS if it operates both an eligible domestic tax system and an eligible worldwide tax system. To qualify, the juris - diction must effectively achieve a minimum level of taxation at both the domestic and international levels (including controlled foreign corporation and branch rules), provide foreign tax credits for qualified domes - tic minimum top-up taxes (QDMTTs) on the same terms as other covered taxes, and satisfy specified enactment timing and review requirements. Jurisdictions recognised by the inclusive framework as having a Qualified SbS are listed on the OECD cen - tral record. If a multinational group’s UPE is located in such a jurisdiction and the group elects the Side-by- Side Safe Harbor, then this safe harbour applies to all of that multinational group’s controlled domestic and foreign operations. Notably, the Side-by-Side Safe
Harbor does not switch off QDMTTs and does not deem top-up tax to be zero for purposes of computing domestic minimum taxes. The Side-by-Side Safe Harbor applies to fiscal years beginning on or after 1 January 2026. While styled generically, the Side-by-Side Safe Harbor was clear - ly targeted as applying to the US (which is the only country listed on the OECD’s central record as hav - ing a Qualified SbS). This action appears intended to preserve some co-operation regarding the Global Tax Deal, and prevent the Trump administration’s potential implementation of Section 899 or a similar provision. However, the issuance of the Side-by-Side Package does not block the potential for US retaliatory taxes in connection with the enactment of “extraterritorial” or “discriminatory” (eg, Pillar Two and digital services) taxes. As with other OECD packages, the Side-by- Side Package requires implementation by individual countries (in particular, countries that have already adopted “extraterritorial” or “discriminatory” taxes). This takes time (at the very least, to draft and enact legislation) and there is no guarantee that most or all of the relevant countries will agree to adopt the Side- by-Side Safe Harbor. If there are deviations from the Side-by-Side Safe Harbor that are not favourable to the US in such country-by-country implementation, that could further impact whether the US contem - plates enacting Section 899 or a similar provision. Additionally, the Side-By-Side Package is not ideal in all respects from a US perspective, including that there is a stock-take in 2029 that may further impact the longevity of the Side-by-Side Safe Harbor. The US Congress also frequently considers tax changes, and the current US system could be modified in such a way that it no longer complies as a Qualified SbS. Accordingly, it is still unclear how the US may react long-term to the Global Tax Deal and whether the US may still contemplate the implementation of retaliatory US taxes like Section 899. OBBBA On 3 July 2025, the US Congress passed the OBBBA and President Trump signed it into law on 4 July 2025. The OBBBA is sweeping tax and spending legislation that, from a US tax perspective, extends a number of
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