Biden’s Corporate Tax Proposals

President Biden recently unveiled his $2.3 trillion infrastructure proposal as part of the American Jobs Plan (Plan). The Plan involves infrastructure and other investments over an 8-year period as it seizes the “moment to reimagine and rebuild a new economy.”

The stated goals of the Plan are to create millions of jobs, to rebuild the country’s infrastructure, and to position the United States to out-compete China. On March 31, 2021, the White House released a detailed Fact Sheet that lays out the details.

President Biden proposes to “more than pay for” the one-time cost of the Plan over a 15-year period, with the excess going towards permanent deficit reduction. And because any good plan needs a catchy title – this one is called the “Made in America Tax Plan.” This plan involves a series (some might say raft) of changes to the corporate tax code so that it “incentivizes job creation and investment here in the United States, stops unfair and wasteful profit shifting to tax havens, and ensures that large corporations are paying their fair share.” The changes also seek to undo parts of the 2017 Tax Cuts and Jobs Act, with the White House says “made an unfair system worse.”

Below are some of the more salient proposals, many of which were initially proposed on the campaign trail. But keep in mind that these proposals are likely to morph over time as Congress weighs in with implementing legislation. For example, at least one Democratic member of Congress has refused to agree to anything that does not involve a repeal of the state and local tax (SALT) deduction limitation, and another member insists on a lower corporate tax rate (25%) than the one in President’s Biden’s proposal.

• Increase the corporate tax rate from 21% to 28%
• Create a new 15% minimum tax on the global book income of large corporations
• Increase the IRS budget to effectively enforce the tax laws against corporations who “have at their disposal . . . an army of high-paid tax advisors and accountants” who help them avoid or evade tax liabilities
• Eliminate tax preferences for fossil fuels and make sure polluting industries pay for environmental clean up
• Strengthen the global minimum tax on U.S. multinational corporations
  • Increase the GILTI tax rate from 10.5% to 21%
  • Calculate GILTI on a country-by-country basis to ensure the taxation of profits in tax-haven countries
  • Eliminate the 10% deduction from the GILTI tax (i.e., the net Deemed Tangible Income Return (DRIT) deduction)
• Repeal the Foreign-Derived Intangible Income (FDII) deduction “which gave corporations a tax break for shifting assets abroad and is ineffective at encouraging corporations to invest in R&D”
• Create rules to make it harder for U.S. companies to acquire or merge with a foreign company to avoid U.S. tax (i.e., anti-inversion rules)
• Deny deductions to foreign corporations on payments that could allow them to strip profits out of the United States if they are based in a country that does not adopt a strong minimum tax
• Deny expense deductions related to the offshoring of American jobs, and credit expenses for onshoring

The White House also plans to introduce changes to the taxation of individual taxpayers in the coming weeks, so there’s more to come on that front.