Large corporations can no longer use derivatives to avoid a US tax on foreign payments

The US Treasury Department is proposing new rules for how large corporations calculate a specific tax on payments to foreign affiliates. These rules aim to prevent companies from using certain financial contracts, called derivatives, to reduce their tax bill.

The US government introduced a tax in 2017 to stop large corporations from shifting profits out of the country to avoid taxes. Companies found a loophole using derivatives in securities lending. This proposal closes that loophole, making it harder for these companies to avoid the tax.