On March 31, 2021, the Biden administration announced the American Jobs Plan which calls for investment of about $2 trillion this decade. To pay for these expenditures, Biden also proposed the Made in America Tax Plan (the “Tax Plan”). Although the proposed statutory language for the plans have not yet been released, here are some key takeaways:
Corporate Tax Rate: corporate tax rate will be increased from 21% to 28%.
Global Intangible Low Taxed Income (GILTI): the GILTI tax rate will be increased to 21% and GILTI will be calculated on a country-by-country basis. The Tax Plan will also eliminate the rule which allows 10% of qualified business asset investment (“QBAI”) deduction on GILTI inclusion.
Global Agreement on Minimum Tax: the Tax Plan proposes to encourage other countries to adopt strong minimum taxes on corporations. The Tax Plan also denies deductions to foreign corporations on payments that could allow them to shift profit out of the United States if they are based in a country that does not adopt a strong minimum tax.
Inversions and Tax Havens: the Tax Plan will make it harder for U.S. corporation to invert.
Offshoring and Onshoring Jobs: the expenses coming from offshoring jobs will not be deductible. The Tax Plan will also provide a tax credit to support onshoring jobs.
Foreign Derived Intangible Income (FDII): FDII deductions will be eliminated. The revenue from repealing the FDII deduction will be used to expand R&D investment incentives.
Minimum Tax on Large Corporation’s Book Income: the Tax Plan will impose a 15% minimum tax on the book income, which would apply only to the “very largest corporations.” The Tax Plan does not include a definition for the “very largest corporations”.
Elimination Tax Preferences for Fossil Fuels: the Tax Plan will eliminate the tax preferences for fossil fuel industry. The Tax Plan also proposes to restore payments from polluters into the Superfund Trust Fund to pay for environmental clean up.
Ramping up Enforcement: the Tax Plan will make it harder for the largest corporations to avoid or evade taxes by eliminating parts of the tax code that are too easily abused. The Tax Plan will also allow the government to invest in enforcement; the Internal Revenue Service will have the resources it needs to enforce the tax laws against corporations.
For details, please refer to the White House Fact sheet: https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/31/fact-sheet-the-american-jobs-plan/