Biden Infrastructure Proposal Would Generate Significant Corporate Tax Increases
President Joseph Biden recently unveiled his $2.25 trillion infrastructure proposal, which would be paid for, in part, by corporate tax increases. While many of the details have yet to be provided, the tax increases include the following:
- Increase the corporate tax rate from 21% to 28%.
- Increase the tax rate on the foreign profits that U.S. multinational companies earn by doubling the current GILTI (global intangible low-taxed income) tax rate to 21% from 10.5% and calculating it on a country-by-country basis. Also, the plan would eliminate a deduction that allows U.S. companies to pay zero taxes on the first 10% of return when they locate investments in foreign countries.
- Make it harder for corporations to claim to be a foreign company (i.e., “invert”), for example, by acquiring or merging with a foreign company or claiming tax havens as their residence, even though their place of management and operation are in the U.S.
- Deny companies expense deductions for offshoring jobs and provide tax credits to support onshoring jobs.
- Eliminate tax incentives for FDII (foreign-derived intangible income).
- Enact a 15% minimum tax on the book income of large corporations.
- Eliminate tax preferences for fossil fuels and ensure that polluting industries pay for environmental cleanup.
- Expand IRS enforcement against corporations.
This infrastructure proposal and related tax plan will be the subject of heated discussion, negotiation, and likely adjustment over the weeks and months ahead. Another proposal, to deal with health care and social programs, is expected to be released by the Biden Administration very soon, with tax increases on high net worth individuals a primary source of its funding.
Galleros Robinson will continue to keep you informed on developments regarding this legislation.
The information presented here should not be construed as legal, tax, accounting, or valuation advice. No one should act on such information without appropriate professional advice and after a thorough examination of the particular situation.