EY Cross-Border Taxation Spotlight for Week Ending 27 March 2026

The second budget reconciliation bill under congressional review could be a catalyst for broader tax reform, especially in the realm of international earnings. By leveraging the reconciliation process, lawmakers can bypass filibuster hurdles, allowing more aggressive adjustments to the corporate tax rate, base erosion provisions, and foreign tax credit mechanisms. Companies with significant overseas operations should monitor the bill’s language for clues on potential repatriation incentives or new anti‑abuse rules, as early strategic alignment can mitigate future compliance costs.

In the Senate, the once‑dormant cryptocurrency tax bill is resurfacing, reflecting growing legislative appetite to clarify digital asset treatment. The proposed framework aims to define taxable events, establish reporting thresholds, and possibly introduce a specific tax rate for certain crypto transactions. For businesses and investors, this could translate into clearer guidance, reduced audit risk, and a more predictable regulatory environment. Stakeholders are advised to assess current crypto holdings against emerging criteria and consider adjusting accounting practices to align with prospective statutory requirements.

The IRS’s request for recommendations on its 2026‑27 Priority Guidance Plan, coupled with a potential expansion of the PFIC/CFC overlap rule, underscores the agency’s focus on tightening cross‑border tax compliance. Extending the overlap rule to new foreign entity classifications would close loopholes that allow U.S. shareholders to defer U.S. tax on passive income. Multinationals should prepare by reviewing existing foreign holdings, evaluating PFIC status, and engaging in proactive dialogue with the IRS. Anticipating these guidance updates can help firms avoid retroactive adjustments and preserve cash flow stability.