Base erosion and profit shifting (BEPS) are "tax-avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations." For example, countries worldwide can experience reduced tax collections through various mechanisms that firms use to shift corporate profits out of higher tax jurisdictions into lower tax jurisdictions and other mechanisms that reduce interest, dividend, and royalty taxes. The Organization for Economic Cooperation and Development (OECD) has been engaged in an ongoing project to reduce BEPS. In October 2015, the OECD published its final list of 15 BEPS action items to equip governments with measures to address tax avoidance (although some updated or additional material has been provided). Some of these proposals can be (or have been) implemented in the United States and in other countries through administrative actions, and others would require legislative action. Some would require modifications of international tax treaties. U.S. multinational firms will be affected not only by actions taken by the United States but also by actions undertaken by other countries. The OECD framework was adopted by the G-20 Finance Ministers in February 2016. All OECD and G-20 countries agreed to implement four minimum BEPS standards: 1. Action 5, countering harmful tax practices (mostly aimed at patent boxes); 2. Action 6, preventing treaty abuse (largely about arranging payments to flow through countries with treaties that reduce withholding taxes on dividends and other passive payments); 3. Action 13, country-by-country (CbC) reporting; and 4. Action 14, increasing the effectiveness of dispute resolution. The BEPS project presents opportunities and concerns. One opportunity is that the United States could gain from more multinational cooperation to deal with profit shifting, which has been estimated to cause a loss in revenues of billions of dollars. The BEPS action items address the main methods of achieving profit shifting, including Action 4 (excessive interest deductions in high-tax countries) and Actions 8-10 (transfer pricing, that is, the price of purchasing and selling between related companies, in which pricing of intangibles is thought to be the major method used to accomplish profit shifting). In contrast, the United States risks losing some revenue if other countries increase their taxation of U.S. firms, even if that income was previously in low-tax jurisdictions, because the United States has a worldwide tax system that taxes income of foreign subsidiaries when repatriated but provides a foreign tax credit (i.e., credits for foreign taxes paid offset U.S. tax on foreign source income). Concerns have been expressed, in congressional hearings and in articles, about claims to U.S. multinationals' income tax bases by other countries that may be viewed as inappropriate. The Senate Finance Committee requested that the Government Accountability Office (GAO) study BEPS actions; GAO's study focused on transfer pricing guidance and documentation, including CbC reporting. The concern is that CbC reporting, which will share data with other countries about the activities of U.S. multinational firms, may be used by countries to effectively implement a formula-based approach to taxation. The United States has adopted CbC reporting for 2017 (a year behind most countries), even though all of its sharing agreements are bilateral, with a country-by-country agreement, whereas most countries signed a multilateral agreement. Companies are also concerned about confidentiality, and there have been proposals to make CbC reports public. The United States will share these data only through confidential bilateral agreements. In addition, some are concerned about the permanent establishment (which generally determines whether a country has any right to tax any profits under an income tax) issues in Action Item 7 and the use of an expanded permanent establishment treatment to allow foreign taxation of U.S. firms' income that is not appropriately allocated to the foreign sources. Some concerns about capturing revenues by other countries have been heightened by the European Union's (EU's) actions against several U.S. multinational corporations (among them Apple in Ireland) calling for back tax payments and by the United Kingdom's (UK's) and Australia's enactments of diverted profits taxes (sometimes referred to as the "Google tax"), which addresses profits of firms without permanent establishments, as well as the allocation of profits for firms with permanent establishments. At the same time, a uniform set of standards and reporting requirements may be beneficial to U.S. multinationals, as many countries might otherwise have enacted unilateral changes in rules and reporting standards. In particular, the uniform CbC reporting may be beneficial in that it forestalled unilateral enactment of reporting requirements that vary from country to country and that may have been more burdensome to firms than the uniform reporting rules. Although the United States has adopted the four minimum standards, other countries are in the process of adopting additional standards in various action items. The OECD's recent progress report highlighted increased transparency in rules, reduced opportunities for treaty abuse, curtailment of harmful tax practices via patent boxes, eliminating high returns to "cash boxes" addressed in the transfer pricing action item, and CbC reporting. Europe has a general constraint in which EU rules prohibit laws that discriminate against cross-border restrictions on trade. Such a restriction is what BEPS measures are sometimes targeting, as in the Controlled Foreign Corporation, or CFC, rules (Action 3), which are designed to prevent artificial shifting of income into low-tax foreign subsidiaries, and limitations of benefits (LOB) in the multilateral instrument (Action 15). Many of the action items may not be relevant to certain countries that already have achieved the standards (such as CFC rules or limits on interest deductions); also, many actions require legislative changes that may be difficult or time consuming. For the United States, proposed actions in Action 1 (the digital economy) or most provisions under Action 5 (harmful tax practices) would not be relevant because they apply to value added taxes (or VATs) or special regimes (such as patent boxes) that do not exist in the United States. Many of the other standards are already partly or fully captured in U.S. law and practice, even though in some cases U.S. practices are at odds with the BEPS standards. Notably, although the United States has strong CFC rules, its check-the-box and temporary look-through rules conflict with BEPS standards. Its restrictions on interest deductions are weaker than those suggested by BEPS. An important approach used by multinational corporations, cost-sharing arrangements, also appears incompatible with the transfer pricing guidelines. These issues are discussed in further detail below. This report first reviews the basics of international tax rules. It then discusses the various action items organized into Action Item 1, which relates to the digital economy and proposes standards only with respect to VATS; Action Items 2-5, 7, and 8-10, items related primarily to profit shifting; Action Item 5, which relates to harmful tax practices; Action Item 6, regarding tax treaties; and Action Items 11-15, which are primarily administrative in nature. Under a territorial or source-based tax, all income earned within a country is taxed only by that country regardless of the nationality of the firms. Alternatively, under a worldwide or residence-based system, a tax would be imposed on foreign source income and a credit allowed for foreign taxes paid. For purposes of the corporate profits tax, most countries have a territorial system (although most have some type of anti-abuse rules, as discussed below in reference to CFC rules). The current U.S. tax system is a hybrid. It has some elements of a residence-based or worldwide tax, in which income of a country's firms is taxed regardless of its location, and some elements of a source-based or territorial tax. The provisions that introduce territorial features are deferral and cross-crediting. Deferral allows a firm to delay taxation of its earnings in foreign-incorporated subsidiaries until the income is paid as a dividend to the U.S. parent company. Some income, however, is taxed currently. Income that is not part of corporate profits, such as royalties and interest payments, and income earned by foreign branches of U.S. firms are taxed currently. In common with many other countries, the United States has anti-abuse rules to tax income that is easily shifted on a current basis. Internationally, they are called CFC rules, but in the United States they are commonly referred to as Subpart F rules, after the section of the tax code containing the rules. The rules apply to foreign firms in which U.S. shareholders own at least 50% of the voting power or value, for U.S. shareholders owning at least 10% of the voting interest. Many CFCs are wholly owned by a single U.S. parent. Subpart F rules currently tax passive income (such as interest) received by a subsidiary, income of sales and services subsidiaries in foreign countries where the production and consumption of those goods and services take place in other countries, and income from insurance of risks outside the country (or within the country if receiving the same premiums). Income invested in U.S. property (including lending to the parent) is taxed currently (to prevent a way to repatriate without paying dividends). There are de minimis exclusions (for small amounts or shares or tax rates more than 90% of the U.S. rates) and full inclusion rules (when Subpart F income is more than 70% of total income). Other countries have similar rule features that trigger current taxation, such as type of income and tax rate. EU member countries are constrained in applying CFC rules to other EU member states. Since the late 1990s, the scope of Subpart F has been reduced by the adoption of check-the-box rules. Check-the-box was a regulatory provision, but it has been codified and extended through the temporary look-through rules, set to expire after 2019.