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OECD Pillar Two: Tax implications for US multinationals · PwC's accounting podcast

• 0:00
  SPEAKER_02: Thought leadership from PWC's national office.
• 0:06
  SPEAKER_00: Hello, and welcome to PWC's Accounting Podcast.
• 0:10
  SPEAKER_00: I'm Heather Horn.
• 0:12
  SPEAKER_00: Thanks for joining us again today for an episode on the latest developments in accounting and reporting.
• 0:18
  SPEAKER_00: For today's episode, I'm pleased to welcome our guest host, Kyle Moffitt, PWC's professional practice leader in the national office.
• 0:27
  SPEAKER_00: I'll turn it over to Kyle now to introduce the episode and start the conversation.
• 0:35
  SPEAKER_04: In today's episode, we are discussing Pillar 2 and developments earlier this year relating to administrative guidance released by the OECD, which includes a safe harbor to exempt U.S.
• 0:46
  SPEAKER_04: multinationals from certain Pillar 2 taxing mechanisms.
• 0:49
  SPEAKER_04: This is a significant development for many companies, and so today the team will provide an overview of the key provisions and dive into the related accounting and financial reporting implications.
• 0:59
  SPEAKER_04: For this discussion, I'm really pleased to welcome Pat Brown, PWC's National Tax Office co-leader, and Jen Spang, PWC's National Office Income Tax Accounting Leader.
• 1:10
  SPEAKER_04: Thanks, Pat and Jen, for joining me today.
• 1:13
  SPEAKER_04: So, so Jen, before we dive into some of the details, can you set the stage on how we got here?
• 1:19
  SPEAKER_01: Absolutely.
• 1:20
  SPEAKER_01: And maybe I'll take this as an opportunity to go through some of the acronyms that I am quite confident Pat and I are going to be dropping as we continue this conversation.
• 1:29
  SPEAKER_01: So if we take a step way back, Pillar 2 provides for a 15% minimum tax in each jurisdiction in which a company operates.
• 1:39
  SPEAKER_01: So it's not just a global minimum tax, it's a 15% minimum tax in each jurisdiction in which a company operates.
• 1:49
  SPEAKER_01: Essentially the rules provide that for each jurisdiction, a company will compare what's called its globe effective tax rate, which is essentially based upon financial statement income and taxes in a jurisdiction with some adjustments which were provided for in the model rules.
• 2:06
  SPEAKER_01: So the beginning of really pillar two.
• 2:09
  SPEAKER_01: So once you calculate that globe effective tax rate, you compare that percentage to the 15% minimum tax.
• 2:18
  SPEAKER_01: If your globe effective tax rate is less than 15%, then that difference is a potential top-up tax.
• 2:27
  SPEAKER_01: Now, of course, there's a bunch of other rules on some other adjustments and things like that to think about, but that's the basic calculation.
• 2:34
  SPEAKER_01: So now from the collection perspective, the collection of the top-up tax can be done through one of three mechanisms.
• 2:43
  SPEAKER_01: There's the qualified domestic minimum top-up tax, or you'll hear us say QDMTT.
• 2:48
  SPEAKER_01: It's a mouthful.
• 2:49
  SPEAKER_01: The QDMTT is exactly as its name would suggest.
• 2:52
  SPEAKER_01: It's a domestic minimum top-up tax, which means that a jurisdiction that has enacted such a provision would be able to calculate any top-up tax on earnings in its jurisdiction.
• 3:05
  SPEAKER_01: Then we go to the income inclusion rule, the IAR.
• 3:08
  SPEAKER_01: So the IAR basically says that for a jurisdiction that has enacted the IAR, that jurisdiction can collect from companies in its jurisdiction any top-up tax from, let's just say, subsidiaries.
• 3:22
  SPEAKER_01: Now I am way oversimplifying these rules, but just to kind of paint the picture because each of these matter as we talk about where we are today.
• 3:30
  SPEAKER_01: So the income inclusion rule lets you collect everything below that.
• 3:34
  SPEAKER_01: Okay, so then we get to the third mechanism, and that's really what we're going to spend most of our time talking about today.
• 3:44
  SPEAKER_01: This third mechanism is the UTPR or the under-taxed profits rule.
• 3:49
  SPEAKER_01: We've also talked about this on prior discussions as the backstop rule.
• 3:54
  SPEAKER_01: So under the UTPR, the UTPR essentially allows a jurisdiction to collect top-up tax resulting from any entity in your structure to the extent it has not already been collected through either a QDMTT or an IIR.
• 4:14
  SPEAKER_01: Now I should have mentioned that last point in connection with the IIR as well.
• 4:20
  SPEAKER_01: So going back for just a second, a jurisdiction would only collect the IIR to the extent a top-up tax were not already collected through a QDMTT.
• 4:32
  SPEAKER_01: So similar concept here, it's it's really like a layering.
• 4:35
  SPEAKER_01: So back to the UTPR.
• 4:38
  SPEAKER_01: While pillar two has been enacted and accounted for in a number of jurisdictions since 2024, we're talking mostly about the UTPR today because for US parented companies, 2026 is likely the first year there has been the potential for a UTPR on US operations, even though the US has not enacted pillar two.
• 5:04
  SPEAKER_01: So we have not enacted pillar two in the US, nor do we expect to.
• 5:08
  SPEAKER_01: But the UTPR could result in a top-up tax in connection with US operations.
• 5:16
  SPEAKER_01: So the natural next question is well, why haven't US operations been subject to the UTPR before now?
• 5:23
  SPEAKER_01: And that's because there was a safe harbor until the end of 2025, at least if we're talking about that through the lens of a calendar year company.
• 5:31
  SPEAKER_01: And that safe harbor expired at the end of 2025.
• 5:36
  SPEAKER_01: So now that expires, they catapult us into 2026.
• 5:40
  SPEAKER_01: Let's pause for one minute and go back to 25.
• 5:45
  SPEAKER_01: So in 25, as part of the one big beautiful bill, there was some proposed legislation which didn't make it into the final bill, but that would have provided for some retaliatory taxes on jurisdictions that had certain kinds of taxes enacted.
• 5:59
  SPEAKER_01: So digital service tax and UTPR that we just talked about.
• 6:04
  SPEAKER_01: It didn't make it into the final legislation because in late June the G7 met and came to an agreement that they would address UTPR.
• 6:12
  SPEAKER_01: Now that G7 was an agreement, and we've talked about before, there were a number of steps that needed to happen.
• 6:18
  SPEAKER_01: The OECD needed to actually deliberate and come up with administrative guidance, release that administrative guidance, and then that would need to become law.
• 6:26
  SPEAKER_01: In January, all the way up to today now.
• 6:29
  SPEAKER_01: So in January of 2020, it's not complex at all.
• 6:33
  SPEAKER_04: As I was preparing for this, I literally was looking through all the notes and doing some research.
• 6:37
  SPEAKER_04: I'm like, this is really complex.
• 6:39
  SPEAKER_01: It is really complicated.
• 6:40
  SPEAKER_01: It is indeed.
• 6:41
  SPEAKER_01: And I unfortunately I don't think it's getting easier for him.
• 6:44
  SPEAKER_01: So but so on January 5th of this year, um, the administrative guidance was released.
• 6:50
  SPEAKER_01: And so I know Pat is gonna talk through a lot of the details around it.
• 6:54
  SPEAKER_01: Um, but that's why we're talking about this again today.
• 6:57
  SPEAKER_04: Yeah, so I appreciate you setting the stage for that.
• 7:00
  SPEAKER_04: Um, so can we get into a little bit uh of the details on the administrative guidance?
• 7:05
  SPEAKER_04: So yeah, what's included in there?
• 7:07
  SPEAKER_03: Yeah.
• 7:07
  SPEAKER_03: Thanks, Kyle.
• 7:08
  SPEAKER_03: So we got four new safe harbors in the administrative guidance, or four maybe revisions or changes to existing safe harbors.
• 7:16
  SPEAKER_03: It's all very confusing, and there are so many of these safe harbors now, frankly, uh in the OECD's uh Pillar 2 guidance.
• 7:23
  SPEAKER_03: But I think it's at Jen noted the G7 statement was a statement by the G7, right?
• 7:30
  SPEAKER_03: Many more countries outside of the G7 have adopted Pillar 2 or portions of Pillar 2 into their national laws.
• 7:38
  SPEAKER_03: So the very next step that had to happen was 140 countries as part of the OECD's inclusive framework had to get together.
• 7:45
  SPEAKER_03: So that's what came out in January, a ratification of the G7 statement from last June that Jen talked about by the 140 countries.
• 7:54
  SPEAKER_03: But honestly, it's aligned along the lines of the G7 statement in the following sense.
• 8:00
  SPEAKER_03: The G7 statement talked about sort of four key elements.
• 8:04
  SPEAKER_03: And the guidance that came out in January from the OECD's enclosure framework has these four key elements in it.
• 8:11
  SPEAKER_03: The most important one, to be sure, for U.S.
• 8:14
  SPEAKER_03: headquartered companies is the so-called side-by-side safe harbor.
• 8:18
  SPEAKER_03: It is also far and away the shortest part of the document, I believe.
• 8:22
  SPEAKER_03: The safe harbor itself is extremely short.
• 8:24
  SPEAKER_03: It essentially just says if the conditions for satisfying this safe harbor are met, companies headquartered in a jurisdiction that applies this guidance will not have to pay either the pillar two IIR or the pillar two UTPR.
• 8:39
  SPEAKER_03: Okay, so the what we used to think of as the primary pillar two taxing mechanism, the IIR, the income inclusion rule, or the backstop that Jen referred to, the UTPR.
• 8:50
  SPEAKER_03: If you're a company that's headquartered in a jurisdiction that is a side-by-side jurisdiction, you don't have to essentially apply the IIR or the UTPR.
• 8:59
  SPEAKER_03: Now, technically it's not worded that you don't apply the IIR or the UTPR.
• 9:03
  SPEAKER_03: It simply says that the amount of top-up tax applied under the IIR or the UTPR will be set to zero.
• 9:11
  SPEAKER_03: Turns out that's actually relevant because of the mechanics, which we're not going to get into today, because of the mechanics of the way the UTPR is computed.
• 9:18
  SPEAKER_03: To say essentially the UTPR doesn't apply, if you simply said, well, the UTPR doesn't apply, then some other jurisdiction could say, well, if you're not applying the UTPR, then I'm going to collect even more UTPR.
• 9:31
  SPEAKER_03: So the mechanism that they had to develop is a mechanism that says essentially the UTPR, it's technically still applicable, but the top-up tax amount is set to zero.
• 9:41
  SPEAKER_03: Okay.
• 9:41
  SPEAKER_03: But that was the most important part of this document from the standpoint of U.S.
• 9:45
  SPEAKER_03: headquartered companies.
• 9:46
  SPEAKER_03: Now, it's important to note it turns off the application of the IIR.
• 9:52
  SPEAKER_03: It turns off the application of the UTPR.
• 9:55
  SPEAKER_03: It does not affect the application of the first minimum tax that Jen talked about, the qualified domestic minimum top-up tax or QDMTT.
• 10:04
  SPEAKER_03: So for U.S.
• 10:04
  SPEAKER_03: headquartered companies, once this side-by-side is enacted by all of the relevant jurisdictions, they will still have to apply pillar two concepts in every jurisdiction around the world that has adopted a QDMTT.
• 10:18
  SPEAKER_03: A QDMTT is a tax that's computed on the pillar two base, applying pillar two rules.
• 10:23
  SPEAKER_03: So if you're a U.S.
• 10:24
  SPEAKER_03: headquartered company and you have operations in many jurisdictions in Europe that have adopted QDMTTs, you're still going to be doing pillar two computations every single year because those countries, even once they put the side-by-side safe harbor in their national laws and it's fully in effect, it won't affect QDMTTs.
• 10:43
  SPEAKER_03: So that was the most important part for US headquartered companies.
• 10:47
  SPEAKER_01: Pat, one of the questions that I get from people outside of particularly the tax base is why is it called side-by-side?
• 10:54
  SPEAKER_03: Right, right.
• 10:55
  SPEAKER_03: Yeah.
• 10:55
  SPEAKER_03: Okay.
• 10:55
  SPEAKER_03: Uh great question, Jen.
• 10:57
  SPEAKER_03: I probably should have made it clear.
• 10:58
  SPEAKER_03: Um, and terminology has changed, terminology has changed a bit over time.
• 11:03
  SPEAKER_03: Back in the first Trump administration, there was a recognition, right, that the U.S.
• 11:08
  SPEAKER_03: had already adopted a version of a minimum tax.
• 11:11
  SPEAKER_03: We called it our guilty regime.
• 11:13
  SPEAKER_03: Um, that version of the minimum tax was not going to align perfectly with what the OECD was then developing, which became Pillar 2, became the IIR with the UTPR backstop.
• 11:25
  SPEAKER_03: It was clear that the U.S.
• 11:27
  SPEAKER_03: system didn't align perfectly with the U.S.
• 11:29
  SPEAKER_03: guilty regime didn't align perfectly.
• 11:32
  SPEAKER_03: Um, but there was a recognition, again, this was back in the first Trump term.
• 11:36
  SPEAKER_03: Hey, the U.S.
• 11:37
  SPEAKER_03: system's different.
• 11:38
  SPEAKER_03: We're going to coexist.
• 11:39
  SPEAKER_03: We'll call that a guilty grandfather.
• 11:42
  SPEAKER_03: That's what it was referred to in the first Trump administration.
• 11:44
  SPEAKER_03: During the Biden administration, they said, you don't need to do that.
• 11:47
  SPEAKER_03: We're going to change our laws to more closely conform to Pillar Two.
• 11:50
  SPEAKER_03: Congress didn't agree, so that didn't happen.
• 11:53
  SPEAKER_03: So now we get to this place where the Trump administration started when they came into office in January of 2025 and essentially said, look, there has to be some recognition that the U.S.
• 12:04
  SPEAKER_03: tax rules, which predated Pillar Two, should be viewed as having equal dignity with the Pillar Two rules.
• 12:10
  SPEAKER_03: That is essentially what we, the United States, demand.
• 12:13
  SPEAKER_03: If you're not willing to accommodate us on that, then we're essentially stepping away from participating in this project.
• 12:19
  SPEAKER_03: And of course, there was this sort of veiled threat in the background that Congress might take action through legislation, et cetera.
• 12:26
  SPEAKER_03: So the side-by-side concept is essentially the U.S.
• 12:31
  SPEAKER_03: tax system should exist side by side with the Pillar 2 system.
• 12:35
  SPEAKER_03: And where there would be essentially overlap between those two things where they might come into conflict, or US companies would be subject to double tax.
• 12:43
  SPEAKER_03: If you're a U.S.
• 12:43
  SPEAKER_03: headquartered companies, you apply the U.S.
• 12:45
  SPEAKER_03: rules and not the pillar two rules.
• 12:47
  SPEAKER_03: So that takes us back to this question about QDMTTs, because the understanding with respect to QDMTTs is the application of those doesn't violate side by side because that's just a country imposing tax on profits earned within its jurisdiction.
• 13:03
  SPEAKER_03: The U.S.
• 13:04
  SPEAKER_03: will come along later with its guilty regime and say, tell me how much tax was paid in your jurisdiction.
• 13:10
  SPEAKER_03: I'll give a foreign tax credit for whatever tax was paid.
• 13:13
  SPEAKER_03: But if there was no tax paid, then I, the U.S., will exercise primary taxing jurisdiction over that income.
• 13:19
  SPEAKER_03: The pillar two IIR and the pillar two UTPR won't have application, right?
• 13:23
  SPEAKER_04: So that makes sense.
• 13:24
  SPEAKER_04: Yeah, that makes sense.
• 13:25
  SPEAKER_04: I mean it's a hell, it's a great question.
• 13:26
  SPEAKER_04: Yeah.
• 13:27
  SPEAKER_04: Um and makes perfect sense.
• 13:28
  SPEAKER_03: Now, to be sure, and I want to I want to cover the rest of the stuff really quickly, Kyle, because there's not that much in there that's nearly as relevant.
• 13:35
  SPEAKER_03: There are other elements to the package.
• 13:37
  SPEAKER_03: There is a a so-called ultimate parent entity safe harbor that's also included in the January guidance that came out from the OECD.
• 13:45
  SPEAKER_03: Right now, that's not operative for anybody.
• 13:47
  SPEAKER_03: I should also note the side-by-side safe harbor is only operative for, and I should probably shouldn't use the word operative.
• 13:54
  SPEAKER_03: Just the U.S.
• 13:55
  SPEAKER_03: Just the United States that's listed, listed by the OECD as a jurisdiction that qualifies.
• 14:00
  SPEAKER_03: But no, no other country is.
• 14:01
  SPEAKER_03: But nobody else.
• 14:02
  SPEAKER_03: Nobody else is listed in the OECD as a jurisdiction that meets the qualifying criteria.
• 14:07
  SPEAKER_03: The ultimate parent entity safe harbor, it's much narrower.
• 14:10
  SPEAKER_03: Okay.
• 14:11
  SPEAKER_03: It would only apply to turn off the UTPR in the jurisdiction of the headquarters of the multinational enterprise.
• 14:20
  SPEAKER_03: That is a narrower safe harbor.
• 14:22
  SPEAKER_03: You would say if you qualify for side-by-side, the side-by-side safe harbor sort of subsumes, fully subsumes the UPE safe harbor.
• 14:29
  SPEAKER_03: So the UPE safe harbor is a lot narrower.
• 14:32
  SPEAKER_03: Right now, no jurisdiction is listed as potentially meeting the criteria for that safe harbor.
• 14:37
  SPEAKER_03: So it's sitting out there as something that other jurisdictions, apart from the United States, clearly were interested in.
• 14:43
  SPEAKER_03: Clearly we're thinking about the idea of, hey, we might qualify for a sort of narrower safe harbor, but nobody's applying it right now.
• 14:49
  SPEAKER_03: And no, no jurisdiction, to our knowledge, has raised their hand and said, hey, we need to be in there.
• 14:54
  SPEAKER_03: Right.
• 14:55
  SPEAKER_03: Okay.
• 14:55
  SPEAKER_03: Then there were two other aspects of the January guidance that is important to note.
• 15:00
  SPEAKER_03: One is there was a so-called simplified ETR safe harbor.
• 15:04
  SPEAKER_03: So this was, hey, we're going to give you a simplified computation of the pillar two rules.
• 15:08
  SPEAKER_03: This doesn't apply just to the United States.
• 15:09
  SPEAKER_03: This applies to everybody.
• 15:10
  SPEAKER_03: It doesn't just apply to QDMTTs, it applies across the board.
• 15:13
  SPEAKER_03: Unfortunately, it's not very simple.
• 15:15
  SPEAKER_03: So it's basically a simplified ETR safe harbor that's not very simple.
• 15:19
  SPEAKER_03: It's very close to the full model rules.
• 15:21
  SPEAKER_03: This is something the OECD is clearly going to be focused on going forward.
• 15:24
  SPEAKER_03: And the last piece of this, which actually is relevant from the United States' perspective, is further relief on the treatment of tax incentives.
• 15:32
  SPEAKER_03: Now, this relief on the treatment of tax incentives very much has in focus the US RD tax credit.
• 15:39
  SPEAKER_03: The US RD tax credit, it's a really important credit to members of Congress.
• 15:43
  SPEAKER_03: Under the original Pillar 2 design, the US RD credit wasn't treated very well, I'll say.
• 15:49
  SPEAKER_03: Refundable credits got much better treatment under the original Pillar 2 design.
• 15:53
  SPEAKER_03: And all non-refundable credits, which includes the US RD credit, essentially just get treated as a reduction in your tax expense.
• 16:00
  SPEAKER_03: So a number of companies were complaining, including the Biden administration, this undermines, this Pillar 2 thing undermines the US RD credit, and that's a bad idea.
• 16:10
  SPEAKER_03: Congress didn't like that.
• 16:12
  SPEAKER_03: Again, even Democrats in Congress who, broadly speaking, were more supportive of Pillar 2, didn't like that.
• 16:18
  SPEAKER_03: So the last piece of this guidance that came out in January focuses on not just the US RD credit, but non-refundable credits that are based on expenditures and a jurisdiction.
• 16:30
  SPEAKER_03: And it broadly speaking tries to provide more generous treatment.
• 16:34
  SPEAKER_03: More generous.
• 16:35
  SPEAKER_03: I'm not going to say generous in absolute terms, but more generous.
• 16:38
  SPEAKER_03: That guidance will have relevance for non-U.S.
• 16:41
  SPEAKER_03: headquartered companies, because remember, they don't qualify for the side-by-side safe harbor.
• 16:45
  SPEAKER_03: For non-U.S headquartered companies that have operations in the United States and do research in the United States, they're potentially exposed to pillar two top-up tax by virtue of doing research in the United States that would drop their rate below 15%.
• 17:00
  SPEAKER_03: So this guidance actually is relevant to the United States, this piece of the guidance, even though by far most of the focus and attention is on side-by-side, the first piece that we do.
• 17:10
  SPEAKER_03: Yeah.
• 17:11
  SPEAKER_04: Yeah, I think I think as I think about, you know, when you were talking about just the multinational enterprise, like the side-by-side safe harbor.
• 17:20
  SPEAKER_04: I mean, how does uh that enterprise uh qualify for that safe harbor?
• 17:25
  SPEAKER_03: Yeah.
• 17:26
  SPEAKER_03: So the criteria for qualifying for side by side, and it's like, what does the OECD do here?
• 17:32
  SPEAKER_03: The they essentially took aspects of the US system, wrote them in more general terms, and said, well, a jurisdiction will qualify for the side-by-side safe harbor if it meets the following criteria, which happen to align pretty darn closely with what the U.S.
• 17:46
  SPEAKER_03: has in its tax system.
• 17:47
  SPEAKER_03: That's not an accident, right?
• 17:49
  SPEAKER_03: This was written essentially very much with the U.S.
• 17:51
  SPEAKER_03: in mind.
• 17:52
  SPEAKER_03: So essentially, the requirements are the jurisdiction has to have some form of a domestically applicable minimum tax.
• 18:01
  SPEAKER_03: Remember, Jen talked about the QDMTT.
• 18:03
  SPEAKER_03: You don't need to have a QDMTT.
• 18:05
  SPEAKER_03: You have to have some form of a domestically applicable minimum tax regime.
• 18:09
  SPEAKER_03: We have that.
• 18:10
  SPEAKER_03: We have our corporate alternative minimum tax, which we all all in the tax world refer to as the CAMT.
• 18:15
  SPEAKER_03: We have to have an eligible worldwide tax system.
• 18:18
  SPEAKER_03: So essentially a minimum tax regime that applies outside of the home country jurisdiction.
• 18:23
  SPEAKER_03: Well, I mentioned we don't just have that.
• 18:25
  SPEAKER_03: We had the world's first, right?
• 18:27
  SPEAKER_03: The United States had the world's first of those, our guilty regime.
• 18:30
  SPEAKER_03: In addition, this point about QDMTTs and the sort of stacking order for QDMTTs, well, a jurisdiction that wants to qualify for side by side has to agree to give a foreign tax credit for QDMTTs.
• 18:45
  SPEAKER_03: If the jurisdiction would otherwise tax the income, but a QDMTT already taxes the income, the jurisdiction has to give a foreign tax credit.
• 18:52
  SPEAKER_03: Well, we do that under our system.
• 18:53
  SPEAKER_03: Okay.
• 18:54
  SPEAKER_03: So that also refers to the US tax system.
• 18:57
  SPEAKER_03: So these are the sort of the key elements that have to be present for a jurisdiction to qualify for side by side.
• 19:04
  SPEAKER_03: Now, it is possible, Kyle, that there are other jurisdictions that could point to aspects of their tax system and say, well, wait a minute.
• 19:11
  SPEAKER_03: We have a domestic minimum tax.
• 19:13
  SPEAKER_03: We have a worldwide tax, a worldwide sort of minimum tax type structure.
• 19:17
  SPEAKER_03: There are some other jurisdictions in the world that could theoretically claim to do this, or they could revise their laws.
• 19:23
  SPEAKER_03: And then even if they don't have it in their law today, they could revise their laws and say, hey, I didn't qualify for this before, but I want you guys to consider the changes I've made to my system and I should qualify going forward.
• 19:36
  SPEAKER_03: That was pretty hard fought in the our understanding in the discussions because the OECD and the other OECD countries really wanted the exception for the US to be limited to the US, right?
• 19:46
  SPEAKER_03: They wanted to sort of otherwise preserve the kind of, I'll use the term kind of watertight nature of the pillar two system and only have the U.S.
• 19:55
  SPEAKER_03: be an exception.
• 19:56
  SPEAKER_03: Other countries said, hang on a minute, if we can look like the US, we should be able to get equal treatment with the US.
• 20:03
  SPEAKER_03: Right now, nobody else qualifies, but you know, there are possibilities that they could.
• 20:07
  SPEAKER_04: Right.
• 20:07
  SPEAKER_04: So, right, right.
• 20:08
  SPEAKER_04: That's interesting.
• 20:09
  SPEAKER_04: So, I mean, do do we think there are other countries that are looking to do that?
• 20:12
  SPEAKER_03: I mean, I think the answer, Kyle, is considering it.
• 20:17
  SPEAKER_03: But just like, you know, you wouldn't adopt the US tax system sort of by accident.
• 20:22
  SPEAKER_03: Uh all yeah, yeah.
• 20:24
  SPEAKER_03: You wouldn't.
• 20:26
  SPEAKER_03: Right.
• 20:27
  SPEAKER_03: Yeah.
• 20:27
  SPEAKER_03: All the features of the US tax system, you wouldn't kind of stumble into that.
• 20:31
  SPEAKER_03: Yeah.
• 20:31
  SPEAKER_03: Yeah.
• 20:31
  SPEAKER_03: I think for a jurisdiction to decide to do that, they would have to decide that it's sort of worth their while to have a system that in many respects is, you know, maybe equally complicated as the pillar two rules, or certainly close to equally complicated, complicated with the pillar two rules, but isn't the same as the pillar two rules.
• 20:49
  SPEAKER_03: So you have to sort of, there's a fair amount of spade work.
• 20:51
  SPEAKER_03: I mean, I'm really there's a ton of work involved in sort of kind of, and then you have to have the OECD review it and decide that it's good enough to qualify for this.
• 20:59
  SPEAKER_03: So now to be sure, there are some very large economies, look around the world, that have not adopted pillar two, including the world's second largest economy, China, including the world's most, you know, I don't know what it's the fourth or fifth largest economy, but the world's most populous country, India.
• 21:15
  SPEAKER_03: They have not adopted pillar two.
• 21:16
  SPEAKER_03: So jurisdictions like that, you can, it's not hard to imagine those jurisdictions saying, well, we may not want to adopt pillar two, but we may want to be considered for something like what the US qualifies for.
• 21:28
  SPEAKER_03: Let's take a look at what changes, if any, we would need to make to our system.
• 21:32
  SPEAKER_03: You know, uh, there are other countries out there that have very complicated tax systems uh that, you know, some changes to their tax system might might get them closer close or close enough to be considered for side by side.
• 21:45
  SPEAKER_03: Yeah.
• 21:46
  SPEAKER_04: So so you mentioned the ultimate parent entity safe harbor too.
• 21:50
  SPEAKER_04: So expand on what that is.
• 21:51
  SPEAKER_03: Yeah.
• 21:52
  SPEAKER_03: So I mean, in really this again only applies to income that's earned in the ultimate parent entity jurisdiction.
• 22:00
  SPEAKER_03: So, you know, if you're a multinational that's headquartered not in the United States, but in Country X, and in Country X, you're subject to a robust tax system with a minimum tax regime that isn't necessarily a QDMTT, but sort of broadly speaking looks somewhat similar to a QD MTT.
• 22:19
  SPEAKER_03: You also need to have a high enough regular tax rate, right?
• 22:22
  SPEAKER_03: I think it's a 20% threshold that's required for the UPE safe harbor.
• 22:27
  SPEAKER_03: You have those systems in your domestic law, okay, but your worldwide system isn't necessarily robust enough to be considered side by side with pillar two.
• 22:38
  SPEAKER_03: It doesn't look enough like the pillar two regime or like the U.S.
• 22:42
  SPEAKER_03: guilty regime or whatever.
• 22:43
  SPEAKER_03: But one of the most problematic aspects of the Pillar Two design is this notion that if you're a company that's headquartered in jurisdiction X, right?
• 22:54
  SPEAKER_03: And you have subsidiaries outside of jurisdiction X, those subsidiaries can be subject to additional tax in their jurisdiction because the home country is not considered to be imposing enough tax on that home country income.
• 23:10
  SPEAKER_03: That is a very novel mechanism, very novel taxing mechanism.
• 23:15
  SPEAKER_03: Members of the U.S.
• 23:16
  SPEAKER_03: Congress refer to it as an extraterritorial tax.
• 23:19
  SPEAKER_03: They did not mean that as a compliment when they said extraterritorial.
• 23:22
  SPEAKER_03: It was like this is something that we regard as sort of violating traditional notions of tax sovereignty.
• 23:28
  SPEAKER_03: And so this idea of look, other countries clearly in the negotiating process saying maybe our worldwide rules are not going to be considered robust enough, but we want to have the option to say we have a robust domestic tax system, and therefore any income that's earned by our multinationals in our home country should not be considered vulnerable to the UTPR.
• 23:52
  SPEAKER_03: So if you've got a minimum tax regime, you've got a 20% or higher corporate income tax rate under your regular tax regime, you're going to be considered essentially to fit within this.
• 24:03
  SPEAKER_03: Now, what's the big fly in the ointment with the UPE safe harbor?
• 24:07
  SPEAKER_03: At least in the document that was produced in January, this is not what we would call in the tax world ambulatory.
• 24:14
  SPEAKER_03: It's not the kind of thing that you can change your log in the future and say, hey, I didn't have it before, but I have it now.
• 24:20
  SPEAKER_03: Can I now apply for and qualify for this UPE safe harbor?
• 24:25
  SPEAKER_03: You had to have already had these features in your tax system.
• 24:28
  SPEAKER_03: Now, I don't regard that, frankly, as fatal because if a country comes along later and changes their laws, they'll presumably just go back to the OECD inclusive framework and say, well, we should revise the guidance.
• 24:38
  SPEAKER_03: You'll sort of start this process over again, right?
• 24:41
  SPEAKER_03: Um, to make further revisions to the guidance.
• 24:43
  SPEAKER_03: But that's where we stand right now.
• 24:45
  SPEAKER_03: So a country would under the guidance that was released in January, a country would literally have to say, I want to qualify for this guidance, this safe harbor, and I already have these features in my domestic tax system to qualify for this guidance.
• 24:59
  SPEAKER_03: So I want to be able to tell my multinationals, you're not going to have to worry about the UTPR applying to income that's earned within the borders of our country.
• 25:08
  SPEAKER_03: That is, I think, the outcome that that some countries were negotiating for.
• 25:12
  SPEAKER_03: Again, to be clear, this is not relevant to the United States because the the ultimate parent entity safe harbor is subsumed by the side-by-side safe harbor.
• 25:21
  SPEAKER_03: So anybody that qualifies for side-by-side is not thinking about this as an issue.
• 25:24
  SPEAKER_04: Right, right.
• 25:25
  SPEAKER_04: That makes sense.
• 25:26
  SPEAKER_04: So so obviously we laid out a lot of very simple things going on in the tax world.
• 25:32
  SPEAKER_04: Um, but but Jen, and I I know I've I've I've heard you talk about this, and it seems like every time I hear you talk about it, that there have been changes.
• 25:38
  SPEAKER_04: And of course, there there have been changes.
• 25:40
  SPEAKER_04: We just talked about the this administrative guidance, but uh what what are some of the accounting considerations that companies will, you know, our listeners will need to be thinking about?
• 25:50
  SPEAKER_01: Yeah.
• 25:50
  SPEAKER_01: So I mean it really starts at you account for changes in tax law when the changes in tax law are actually enacted.
• 25:59
  SPEAKER_01: So where are we going with that?
• 26:01
  SPEAKER_01: So we've both mentioned that the side-by-side guidance is OECD administrative guidance.
• 26:07
  SPEAKER_01: The OECD, as we've talked about it in the past, does not set tax law in all of these jurisdictions around the world.
• 26:14
  SPEAKER_01: And so Pat mentioned that the inclusive framework that really had to approve all of the, frankly, the model rules, the OECD administrative guidance, everything since then, including this side-by-side guidance and the whole package, they, each of those jurisdictions needs to then go and take that administrative guidance and make it part of their law.
• 26:36
  SPEAKER_01: As you might imagine, everybody has a different process of doing that, a different amount of time to do that.
• 26:41
  SPEAKER_01: You know, the UK has already talked about, they aren't even going to take it up until 27.
• 26:46
  SPEAKER_01: So now you have a situation where you have side-by-side guidance, and I'll keep referring to that, but it would be completely uh, it would be all of the provisions that Pat has just talked about, right?
• 26:56
  SPEAKER_01: Would be in all of it is one package.
• 26:58
  SPEAKER_01: Right.
• 26:58
  SPEAKER_01: So that all of that needs to be enacted.
• 27:00
  SPEAKER_01: Once that's enacted, you can consider it in your accounts.
• 27:03
  SPEAKER_01: So what does it mean since then?
• 27:05
  SPEAKER_01: Companies have already been accounting for IAR in some jurisdictions.
• 27:09
  SPEAKER_01: You know, if for some companies, they've had it as early as 2024.
• 27:14
  SPEAKER_01: More countries came online in 2025 for general just, you know, pillar two guidance.
• 27:19
  SPEAKER_01: But now you have UTPR on US operations for probably the first time because of that safe harbor that expired, right?
• 27:28
  SPEAKER_01: So, what does that mean?
• 27:29
  SPEAKER_01: Let's imagine you're a calendar year company, you're sitting here and you're building your annual effective tax rate for 2026.
• 27:36
  SPEAKER_01: For the first time, you're going to be considering potential UTPR on US operations.
• 27:41
  SPEAKER_01: And that is until the side-by-side guidance is enacted.
• 27:44
  SPEAKER_01: Now, there are some, and Pat will keep me honest here, but I think it's less than five that have the ability in their own law to basically automatically bring the guidance in.
• 27:55
  SPEAKER_01: So they built it such that when administrative guidance came out, if you had already adopted Pillar 2, if it if in that jurisdiction where it was already enacted, there are a very small number that automatically bring in.
• 28:08
  SPEAKER_01: But the overwhelming majority do not do that.
• 28:12
  SPEAKER_03: Right.
• 28:12
  SPEAKER_03: And certainly none of the largest economies in the world do.
• 28:16
  SPEAKER_03: So the, you know, Jen mentioned the UK.
• 28:18
  SPEAKER_03: I mean, that's certainly so far, I think, the one, the biggest pain point for most US companies that I talk to is the UK, both because virtually every US multinational will have a significant beachhead of some form in the UK.
• 28:32
  SPEAKER_03: And the UK has give them credit for being forthright and straightforward.
• 28:35
  SPEAKER_03: We're not doing this until 2010.
• 28:38
  SPEAKER_03: It'll be retroactive once we do it, but we're not doing it until 2027.
• 28:42
  SPEAKER_01: So now on that retroactive, so this guidance won't go back to 24 and 25 for like the IAR.
• 28:49
  SPEAKER_01: But when we talk about retroactive, retroactive to 1126.
• 28:53
  SPEAKER_01: Right, right.
• 28:53
  SPEAKER_01: Now I do think though, even some of those jurisdictions, um, there is some conversation happening that there could be jurisdictions that if they go too far out, they might even have a problem under their own law making it effective back to even 1126.
• 29:08
  SPEAKER_01: So you mentioned complicated, I don't know, two, three, four, or five times so far.
• 29:13
  SPEAKER_01: Yeah.
• 29:14
  SPEAKER_01: So imagine being a company when you start talking about what are the financial reporting effects here.
• 29:19
  SPEAKER_01: You're a company that has to figure out does this apply to me?
• 29:23
  SPEAKER_01: Um, where am I in the world?
• 29:25
  SPEAKER_01: I have to track everywhere that this comes online.
• 29:29
  SPEAKER_01: But until it's enacted, I'm basically talking about accounting for it in my AETR, my annual effective tax rate, and applying that to my year-to-date earnings.
• 29:39
  SPEAKER_01: And then as these jurisdictions begin in piecemeal to enact it, now you're adjusting your annual effective tax rate for those.
• 29:48
  SPEAKER_01: But again, not just in 26, but even out, you know, as we talk about the UK into 2027.
• 29:54
  SPEAKER_01: So that's all, I think, important.
• 29:56
  SPEAKER_01: That's how it comes into the estimate.
• 29:58
  SPEAKER_01: I guess a few other things going back to something Pat said, QDMTT unaffected by this.
• 30:05
  SPEAKER_01: So um pillar two is you know alive and well, you'll still have QDMTT built in, even after the side-by-side guidance were to be enacted.
• 30:14
  SPEAKER_01: So there's a lot there to think about.
• 30:16
  SPEAKER_01: I think the last thing I'll just mention is so let's imagine you're a US parented company and you have five foreign subs and four of the five enact the guidance.
• 30:26
  SPEAKER_01: So they've enacted the administrative guidance, it's law.
• 30:30
  SPEAKER_01: But you have a fifth jurisdiction that has not.
• 30:33
  SPEAKER_01: The other thing that companies are going to have to monitor, and and hopefully this gets addressed.
• 30:37
  SPEAKER_01: I don't know, Pat, what you think about this, but that fifth jurisdiction are they gonna collect 100% of the UTPR on the US?
• 30:45
  SPEAKER_01: Or are they only gonna do their portion?
• 30:48
  SPEAKER_01: Right.
• 30:48
  SPEAKER_01: And that comes down to some of the rules and what Pat mentioned about it's not saying the UTPR doesn't apply, it's saying it gets set to zero and the IAR gets set to zero.
• 30:59
  SPEAKER_01: But while that's the intention, is that how all of the jurisdictions, in my example, that fifth jurisdiction that hasn't done anything yet, how are they going to look at those other four?
• 31:09
  SPEAKER_03: I mean, it's sort of it's it's catch 22 is not exactly the right way to describe this, Kyle.
• 31:14
  SPEAKER_03: But the issue is when the OECD came out with their guidance in January, they said when the side-by-side safe harbor takes effect in countries' national laws, it sets the UTPR to zero.
• 31:26
  SPEAKER_03: It doesn't say the UTPR doesn't apply for exactly the reason that Jen mentioned and I had mentioned previously, which is in her example, that fifth jurisdiction, we want to be able to say that fifth jurisdiction, okay, you haven't adopted yet the side-by-side safe harbor, but you're only entitled to a portion of additional tax as though these other four jurisdictions are all applying the UTPR.
• 31:49
  SPEAKER_03: Because look, they are applying the UTPR.
• 31:51
  SPEAKER_03: They're just setting the top-up tax amount to zero.
• 31:54
  SPEAKER_03: The problem, of course, is this is what the OECD said in their January document that they just released.
• 32:00
  SPEAKER_03: But until that has been adopted in that fifth jurisdiction's national law, they're going to say the OECD can say whatever they want, but we still have to apply our national law.
• 32:09
  SPEAKER_03: Now, in the jurisdictions that we've looked at so far, it seems like most of the jurisdictions, sort of the way they have written the UTP in their law, certainly gives you at least the prospect to be able to, as a company, to be able to argue, actually, no, I've read your law, and your law only applies to collect your portion of the UTPR, not 100% of it, in the example that Jen gave.
• 32:34
  SPEAKER_03: But there are a lot of jurisdictions out there.
• 32:36
  SPEAKER_03: And this is not necessarily a uh a clear-cut point.
• 32:40
  SPEAKER_03: And it's not a point that people had in mind because nobody had the side by side in mind when the UTPR was first put into the national laws of these countries.
• 32:47
  SPEAKER_03: So now it's sort of like, well, I'm reading legislation that was probably written and put into your national law some period ago.
• 32:54
  SPEAKER_03: How does it kind of, you know, align up with what the OECD has said?
• 32:59
  SPEAKER_03: Everybody intends now going forward, because of this safe harbor.
• 33:03
  SPEAKER_03: Well, you know, hopefully that alignment works out okay, but it's a question we're still working through.
• 33:08
  SPEAKER_01: And all of it impacts what you estimate, when you estimate it, how it looks.
• 33:14
  SPEAKER_01: And again, the key thing is that you can't uh account for a tax law change that hasn't happened.
• 33:21
  SPEAKER_04: Yeah, yeah.
• 33:22
  SPEAKER_04: Oh, that's that's that's very helpful.
• 33:24
  SPEAKER_04: Um so Pat, you know, you I think you've covered a lot of the provisions, but anything else that you wanted to add later on to that?
• 33:32
  SPEAKER_03: Yeah.
• 33:32
  SPEAKER_03: So I would say just very quickly, Kyle, because I agree.
• 33:35
  SPEAKER_03: I already talked about the simplified ETR safe harbor.
• 33:37
  SPEAKER_03: And I think for a lot of companies, that that safe harbor is not very relevant because it just doesn't simplify life very much.
• 33:45
  SPEAKER_03: I don't mean to diminish it.
• 33:46
  SPEAKER_03: I'm sure it's helpful to someone in some fact pattern, but it's not helpful in your view.
• 33:51
  SPEAKER_03: It's it it right.
• 33:53
  SPEAKER_03: Most of the companies that I've spoken with have not gotten a lot of benefit of it.
• 33:56
  SPEAKER_03: But one of the things that was snuck into the January guidance was a one-year extension of what what the OECD refers to as the country by country safe harbor.
• 34:06
  SPEAKER_03: This is a very simple calculation that's built off of essentially the tax provision from a company's qualified financial statement.
• 34:14
  SPEAKER_03: So when you hear that, you should think number I can go grab already exists, no additional work.
• 34:20
  SPEAKER_03: And the income that's reported by a country in uh in a country by country report that's already being prepared and already being filed with the OECD, and it's been in place for several years.
• 34:31
  SPEAKER_03: So the country by country safe harbor, which was supposed to expire at the end of 2026, has been extended for an additional year into 2027.
• 34:41
  SPEAKER_03: That's kind of a big deal for a lot of companies because it's like I said, it's a really simple computation.
• 34:46
  SPEAKER_03: And for a lot of companies, when I've talked to them about the simplified ETR safe harbor, their response is it doesn't look very simple to me, but I know I don't even have to really think about it until I get to the end of 2027 because I got an additional year of the country by country safe harbor, and that really does make my life easy.
• 35:02
  SPEAKER_03: So that I think is something that companies should bear in mind, even though the simplified safe harbor, the so-called simplified safe harbor is not simple, there is an extension of another safe harbor that really is simple and that really will provide some help.
• 35:14
  SPEAKER_04: Yeah, yeah.
• 35:15
  SPEAKER_04: So it's a great, great overview.
• 35:17
  SPEAKER_04: And I think as one of the things we always like to do is like highlight for our listeners like what should they be thinking about?
• 35:24
  SPEAKER_04: Um, you know, we're we're obviously in towards the end of the first quarter for calendar year companies, but you know, anything else that that companies should be thinking about for this year.
• 35:34
  SPEAKER_03: Yeah, I mean, maybe I'll kick off and Jen certainly welcome your thoughts.
• 35:38
  SPEAKER_03: So we have talked a lot, and I think appropriately so on this, you have to follow enacted law, right?
• 35:45
  SPEAKER_03: But enacted law it can mean a number of different things in jurisdictions around the world.
• 35:49
  SPEAKER_03: So one of the questions that's come up a lot is once the European Union jurisdictions have all agreed to, and they all have agreed, they all signed on to this January guidance, is it possible under EU law for um the side-by-side safe harbor and the other provisions to take what they call direct effect?
• 36:10
  SPEAKER_03: In other words, before a country adopts things into their national laws, because it's been agreed by all the member states of the EU, and it's pursuant to a pre-existing directive, because when Pillar 2 was originally brought on board, it came in with an E through an EU directive.
• 36:24
  SPEAKER_03: So this is pursuant to a pre-existing directive.
• 36:27
  SPEAKER_03: It modifies the provisions of that directive.
• 36:30
  SPEAKER_03: Everyone has signed on to it.
• 36:32
  SPEAKER_03: Can it somehow take direct effect?
• 36:34
  SPEAKER_03: I know we're sitting here, you know, very close to the end of the first quarter for calendar year companies, and we're, you know, right up against quarter close.
• 36:41
  SPEAKER_03: This is still a question that's being discussed.
• 36:43
  SPEAKER_03: I I mean, I wish I could say because it's it's the furthest thing from a straightforward question, right?
• 36:49
  SPEAKER_03: You know, under what EU jurisdictions might apply this direct effect concept?
• 36:54
  SPEAKER_03: Would all would they all apply it?
• 36:55
  SPEAKER_03: Would they all have to apply it?
• 36:57
  SPEAKER_03: Do none of them apply it?
• 36:58
  SPEAKER_03: There was a range of views out there on this question, which is a very challenging question.
• 37:02
  SPEAKER_03: I'm not an EU law expert.
• 37:03
  SPEAKER_03: I've had enough conversations with people who are to know this is a very confused area.
• 37:08
  SPEAKER_03: And I wish that it was much more straightforward.
• 37:10
  SPEAKER_03: I wish for companies we could say, here's the you know, analysis of direct effect, but it's sitting out there still.
• 37:17
  SPEAKER_03: Another issue that has come up a lot is there has always been this question about pillar two and the UTPR in particular, and whether it is compatible with bilateral tax treaties, right?
• 37:28
  SPEAKER_03: So bilateral tax treaties, which we haven't talked about today at all, but essentially our pre-existing mechanism, the United States has something like 70 uh bilateral tax treaties with other countries, and they allocate taxing rights between countries.
• 37:42
  SPEAKER_03: Bilateral tax treaties never contemplated anything like the UTPR.
• 37:46
  SPEAKER_03: And the UTPR, I think the the the way I would probably try trying to say it as neutrally as I can, Kyle, is the UTPR sits very uneasily within the framework of a bilateral tax treaty.
• 37:58
  SPEAKER_03: It's hard to read something like the UTPR and say, oh, I see how this is consistent with bilateral tax treaties.
• 38:04
  SPEAKER_03: But of course, that doesn't, because it's inconsistent with them, doesn't mean it's in technically in violation of them.
• 38:10
  SPEAKER_03: So this is a cut a question that's come up a lot as well.
• 38:12
  SPEAKER_03: The sort of how can we square the UTPR with bilateral tax treaties?
• 38:16
  SPEAKER_03: But I mentioned the word bilateral.
• 38:18
  SPEAKER_03: This means you're going treaty by treaty and looking at that question.
• 38:24
  SPEAKER_03: Right.
• 38:25
  SPEAKER_03: Yeah.
• 38:25
  SPEAKER_03: So these are some of the, sad to say, as we sit here close to the end of the first quarter, unanswered questions that we're still discussing with a lot of folks.
• 38:32
  SPEAKER_01: And then you have the accounting.
• 38:34
  SPEAKER_01: Yeah.
• 38:36
  SPEAKER_01: When Pat tells me what the tax law says, and we're going to talk about the accounting.
• 38:41
  SPEAKER_01: Yeah.
• 38:42
  SPEAKER_01: Right.
• 38:42
  SPEAKER_01: So with what Pat just teed up, and as we sit and talk about those debates, as you can imagine, everybody wants to understand how do I think about the things that I just talked about within my financials.
• 38:52
  SPEAKER_01: And the reality is in this model, you really have, I'd call it sort of two boundaries or two paths.
• 38:59
  SPEAKER_01: One, you can account for something that's not enacted law.
• 39:03
  SPEAKER_01: So in the absence of something being enacted law, I have to look at the law as it exists today.
• 39:09
  SPEAKER_01: And I have my uncertain tax position model.
• 39:12
  SPEAKER_01: So when you start talking about treaties, for example, a company might start looking at that and saying, if I look at this through a position I'm going to take, how do I think about that?
• 39:22
  SPEAKER_01: Well, they have to think about it through the UTP, the uncertain tax position model, which says two steps.
• 39:28
  SPEAKER_01: I'm really only going to focus on the first, but it's about recognition.
• 39:31
  SPEAKER_01: So when you look at that recognition step, it is based upon authoritative law.
• 39:37
  SPEAKER_01: It's based upon regulations, it's based on statutes, it's based on case law, which of course this is not in that bucket.
• 39:45
  SPEAKER_01: Right at this point, not in that bucket.
• 39:46
  SPEAKER_01: Yeah, that's not in that bucket.
• 39:48
  SPEAKER_01: So at the end of the day, it's not based upon what we expect the jurisdictions to do or what they might do, but rather it is based upon what exists today in a body of law and interpretation of law.
• 40:00
  SPEAKER_01: So at the end of the day, any positions that are taken on the financial statements need to get over that first threshold before you even get beyond that.
• 40:09
  SPEAKER_01: And that is the lens that we'll need to look at both of these questions that Pat just teed up.
• 40:15
  SPEAKER_01: I'd be remiss if you look at this and what we've talked about and complication and all that goes with that.
• 40:21
  SPEAKER_01: It's going to be important for companies to think about transparent disclosure.
• 40:24
  SPEAKER_01: So I do think that's another part that companies need to be thinking about.
• 40:28
  SPEAKER_01: Obviously, with the release of this administrative guidance in early January, you saw calendar year companies in their 10Ks putting disclosure about the existence of the administrative guidance.
• 40:39
  SPEAKER_01: The level of disclosure was kind of all over the place as to how they might have described that.
• 40:44
  SPEAKER_01: I would expect that in Q1 as well.
• 40:47
  SPEAKER_01: And for non-calendar year, they're still in the middle of all of this as well.
• 40:51
  SPEAKER_04: So you've seen disclosures all over the filing itself.
• 40:54
  SPEAKER_04: So I mean, would you expect to see it not just in the footnotes, but also MDNA or other places, obviously, with respect to like the 10 Q filings, but then thinking even about year end, like risk factors, all of these other applications.
• 41:07
  SPEAKER_01: Yeah.
• 41:07
  SPEAKER_01: So all of it.
• 41:09
  SPEAKER_01: Because if you think about it, and I know that this is a sweet spot and near and dear to your heart, but when you think about it, you can't say something in the footnotes that's non-gap, right?
• 41:19
  SPEAKER_01: But yet when you're looking at MDNA, you're talking about what you just mentioned, risk factors, what's coming, all that goes with it.
• 41:26
  SPEAKER_01: So I would expect you are seeing some disclosure, um, maybe even more heavily in that section of the financial statements.
• 41:32
  SPEAKER_01: I mean, it is a factual statement to say that the OECD released administrative guidance.
• 41:38
  SPEAKER_01: I mean, that's a factual statement.
• 41:39
  SPEAKER_01: It could be in the footnote.
• 41:40
  SPEAKER_01: But to say this is the future impact of that, now you probably are looking more at MDNA.
• 41:45
  SPEAKER_01: Yeah, outside of the financials.
• 41:47
  SPEAKER_03: I I would note as well, and this it ties into the point you guys are making about disclosure, um, that companies obviously have to do their, and I'm not an accountant to be clear, have to do their disclosures consistent with GAAP.
• 41:58
  SPEAKER_03: But one of the things that is coming up is a pain point or frustration for companies.
• 42:03
  SPEAKER_03: So we're talking a lot about provisions that are supposed to take effect when they do get adopted in national laws in 2026.
• 42:11
  SPEAKER_03: Companies won't actually pay taxes under the Pillar 2 rules with respect to the 2026 year until 2028.
• 42:20
  SPEAKER_03: There's a 15-month period after the end of the year before they actually have to make payment for any top-up taxes that are due.
• 42:28
  SPEAKER_03: So a lot of companies are sort of struggling with this dynamic of this stuff is all supposed to get done.
• 42:33
  SPEAKER_03: It's supposed to get done on a retroactive basis back to the start of 2026.
• 42:37
  SPEAKER_03: That hasn't happened yet.
• 42:38
  SPEAKER_03: I have to make financial disclosures describing everything consistent with US GAAP, but trying to provide guidance to investors.
• 42:45
  SPEAKER_03: Also, I'm armed with the knowledge that in in all likelihood, some of the things I'm describing in my financial statements, I'll never be writing a check to anybody because that wouldn't happen until so long into the future when my expectation is everyone will have adopted this by then.
• 42:59
  SPEAKER_03: But obviously they haven't.
• 43:00
  SPEAKER_03: So you can't say, well, everyone will have adopted this because that hasn't happened yet.
• 43:04
  SPEAKER_04: So it's really challenging for companies to Well, you just layered in another section of a filing liquidity and capital resources, right?
• 43:10
  SPEAKER_04: And you start to think about uncertainties and trends and things like that.
• 43:14
  SPEAKER_04: So I'm I look, I think very helpful.
• 43:17
  SPEAKER_04: Um, really appreciate the the two of you sharing your insights uh with me today.
• 43:22
  SPEAKER_04: Um, clearly a lot for companies to be thinking about um with this administrative guidance and fully expect that this is going to be disclosures that that we'll be uh seeing um a lot of.
• 43:33
  SPEAKER_04: Um we do have a number of resources available on the topic, and so we'll uh be sure to include those in the show notes uh for our listeners who want to take a deeper dive into the topic.
• 43:42
  SPEAKER_04: Thank you both for joining me today.
• 43:44
  SPEAKER_04: Thank you.
• 43:45
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