Made in America Tax. More U.S. Tax Reform Planned

Around USD 2.2 trillion is to be invested in infrastructure projects in the US and USD 1.8 trillion will be made available for families. That is set out in the “American Jobs Plan” proposed by US President Joseph Biden.

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The infrastructure plan would be funded through proposed corporate tax increases, including changes to international components of the 2017 Tax Cuts and Jobs Act (TCJA), while the families plan would be funded by increases to individual taxing provisions. 

Proposals for Counter-Financing the Planned Additional Expenditure

The Made in America Tax Plan (the “Plan”) addresses how to fund the costs of the infrastructure proposals. The plan alters and adds to TCJA tax provisions in order to increase tax revenues. Changes to the Global Intangible Low Tax Income (GILTI) provisions, the anti-deferral regime applicable to US shareholders of certain foreign corporations, would eliminate certain exclusions and deductions in computing GILTI income. Moreover, GILTI liability would be calculated on a per-country basis, ending the ability of taxpayers to net losses with profits between entities in different countries with disparate tax rates, explain the advisers from Marcum LLP. Coupled with the proposed 28% corporate tax rate, the GILTI minimum tax rate would essentially be increased from 10.5% to 21%.

The plan would also repeal the Foreign Derived Intangible Income deduction (FDII) created under the TCJA, effectively eliminating a tax benefit for US corporations serving non-US clients. 

Taxation of Multinational Corporations

Finally, the plan would also replace the current Base Erosion & Anti-Abuse Tax (BEAT) provisions, with an enhanced corporate minimum tax consistent with the OECD/G20 objective of implementing a global minimum tax when multinationals with offshore affiliates are taxed below a minimum tax rate. The plan seeks to disallow deductions for the offshoring of production and put in place strong guardrails against corporate inversions.

The proposals will almost certainly be subjected to major amendments before they approach the level of support needed for passage, as we are at the beginning of the legislative process. However, some form of virtually all these proposals can be expected to find their way into US tax law. Taxpayers with multinational operations and their advisors need to be ready to respond to any changes, explain the Marcum LLP experts.

For further information please contact:

Douglas Nakajima, International Tax Co-Leader, Marcum LLP*, Philadelphia, USA

* Marcum LLP is the exclusive associated partner of ECOVIS International for accounting, tax and audit in the United States of America.
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