On March 31, the Biden administration unveiled a jobs and infrastructure plan, the American Jobs Plan, to address the nation's pressing infrastructure needs. The plan calls for about $2 trillion in spending over eight years. To pay for these expenditures, the plan also includes a proposed overhaul of the corporate tax system that would increase the corporate tax rate and the global minimum tax, eliminate federal tax benefits for fossil fuel companies and strengthen enforcement against corporations.
While the proposed spending would be spread out over eight years, the tax increases would continue for 15 years.
PROPOSED TAX MEASURES
The White House released a Fact Sheet that lists the proposed tax measures under the plan:
Corporate Tax Rate
The Biden plan would increase the corporate tax rate from
21% to 28%. The rate had been reduced by the Trump administration
from 35% to the current rate of 21%.
Global Intangible Low-Taxed Income (GILTI)
Modifications
President Biden's proposal would increase the
effective rate on GILTI for U.S. corporations to 21% and calculate
GILTI on a country-by-country basis. It also would eliminate the
rule that allows U.S. companies to reduce their GILTI inclusion by
10% of their average adjusted basis of qualified business asset
investments.
Encourage Other Countries to Adopt a Minimum Tax
Regime
The plan proposes to encourage other countries to adopt
strong minimum taxes on corporations and deny deductions to foreign
corporations on payments that could allow them to strip profits out
of the U.S. if they are based in a country that does not adopt a
strong minimum tax.
Inversions
In addition to enacting reforms that would remove
incentives for U.S corporations to invert, President Biden's
proposal would make the inversion process more difficult.
Offshoring/Onshoring Jobs
President Biden's reform proposal would deny companies
deductions generated by offshoring jobs and would also propose a
tax credit to support the onshoring of jobs.
Eliminate the Foreign Derived Intangible Income (FDII)
Deduction and Invest in R&D Incentives
The Biden plan proposes the complete elimination of the FDII
deduction, which was introduced as part of the Tax Cuts and Jobs
Act. The revenue collected as a result of the repeal of the FDII
deduction would be used to expand other R&D investment
incentives.
Minimum Tax on Book Income
The plan includes a proposed 15% minimum tax on U.S.
corporations' book income, which would apply only "to the
very largest corporations," according to the Fact Sheet.
Tax Preferences for Fossil Fuels
Biden's plan would eliminate all subsidies, loopholes
and special foreign tax credits for the fossil fuel industry.
Enforcement
The plan calls for increased investment in enforcement so
that the Internal Revenue Service has the necessary resources to
effectively enforce the tax laws.
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