The U.S. Senate Finance Committee has published a letter from Finance Committee Ranking Member Mike Crapo (R-ID), Foreign Relations Committee Ranking Member Jim Risch (R-ID), and Banking Committee Ranking Member Pat Toomey (R-PA), warning Treasury Secretary Janet Yellen against bypassing the treaty process in order to implement the OECD agreement for global tax reform. The Senate Finance Committee has also issued a separate release from Ranking Member Crapo and U.S. House Ways and Means Committee Ranking Member Kevin Brady (R-TX) in opposition to the OECD agreement.

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Ranking Members Warn Against Bypassing Treaty Process

Crapo, Risch and Toomey stress importance of Senate treaty approval power

Washington, D.C.--The top Republicans on the U.S. Senate Finance Committee, the U.S. Senate Foreign Relations Committee, and the U.S. Senate Banking Committee expressed serious concerns with the Administration's recent suggestions it is considering circumventing the Senate's constitutional treaty authority in implementing a global tax agreement. Finance Committee Ranking Member Mike Crapo (R-Idaho), Foreign Relations Committee Ranking Member Jim Risch (R-Idaho) and Banking Committee Ranking Member Pat Toomey (R-Pennsylvania) wrote Treasury Secretary Janet Yellen today asking for clarification of recent comments, reiterating the importance of constitutionally mandated congressional approval of tax treaties. The letter comes as the Organisation for Economic Development and Co-operation (OECD) is negotiating an agreement on global tax rules.

From the letter:

As you know, under the U.S. Constitution, a bilateral or multilateral tax treaty would require the advice and consent of the Senate, with a two-thirds vote of approval. Further, we are unaware of any existing congressional authorization that would permit the Administration to conclude a lesser international agreement, such as a congressional-executive agreement. As described, the nature of changes required to implement Pillar One necessitates the conclusion of a treaty, not a congressional-executive agreement or other legislative override.

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We are especially concerned given Treasury has failed to meaningfully consult our members on the potential treaty or legislative action that would be necessary to fully carry out the Pillar One agreement. In particular, the Senate Foreign Relations Committee, which has jurisdiction over treaty matters, has received no engagement from Treasury on this issue to date.

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The lack of consultation, in addition to these latest statements, calls into question how serious Treasury is in achieving bipartisan consensus on any Pillar One agreement. Further, Treasury's continued use of the negotiations to advance the Administration's tax agenda on Pillar Two, at the expense of ceding substantial U.S. taxing rights to a global rulemaking body without seeking constitutionally mandated approval, puts the durability of any agreement at significant risk.

Background: Under the U.S. Constitution, tax treaties require the advice and consent of the Senate, with a two-thirds majority vote of approval. Last week, Secretary Yellen testified before the Senate Banking Committee that a treaty "would be one way" Congress could approve the Pillar One agreement under consideration at the OECD, but she also stated there are "a number of ways" that Congress could implement Pillar One. This is the first time Treasury has indicated Pillar One could be implemented without a treaty, which suggests Treasury may pursue action that would undermine the existing approval process and the Senate's constitutional authority.