British Industry Seeks Guidance on Foreign-Source Royalties

[1] I am writing to you, early in this calendar year, to ask the Treasury and Internal Revenue Service to address the problem of the current tax treatment of royalties received by a United States corporation from a foreign parent or affiliate as a priority issue.

[2] This is a matter which we raised with Treasury Secretary Nicholas Brady as long ago as 1991 and last year my predecessor, Adair Turner, wrote to Assistant Secretary for Tax Policy, Donald Lubick, asking him to issue regulations. During 1999 we were greatly encouraged by Congressman Bill Archer's call for urgent action on this matter and had hoped from Mr Lubick's 13 August response to us that it might by now have been resolved.

[3] For your convenience I enclose copies of the previous correspondence.

[4] I very much hope that this longstanding problem can now be settled quickly and satisfactorily.

[5] In view of his keen interest in this matter I am copying this letter to Congressman Archer and writing in similar terms to your colleagues Philip West, International Tax Counsel, and Stuart Brown, Chief Counsel at the Internal Revenue Service.

Digby Jones