US Treasury releases President’s plan to overhaul corporate tax system

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EY Global

7 Apr 2021
Subject Tax Alert
Categories Corporate Tax
Jurisdictions United States

On 7 April 2021, the United States (US) Treasury Department released President Joe Biden’s “Made in America Tax Plan (pdf).” According to the report, the plan’s goal “is to make American companies and workers more competitive by eliminating incentives to offshore investment, substantially reducing profit shifting, countering tax competition on corporate rates, and providing tax preferences for clean energy production. Importantly, this tax plan would generate new funding to pay for a sustained increase in investments in infrastructure, research, and support for manufacturing, fully paying for the investments in the American Jobs Plan over a 15-year period and continuing to generate revenue on a permanent basis.”

According to the plan’s summary, “The Made in America Tax Plan” implements a series of corporate tax reforms to address profit shifting and offshoring incentives and to level the playing field between domestic and foreign corporations. These include:

  • Raising the corporate income tax rate to 28% percent
  • Strengthening the global minimum tax for US multinational corporations
  • Reducing incentives for foreign jurisdictions to maintain ultra-low corporate tax rates by encouraging global adoption of robust minimum taxes
  • Enacting a 15% minimum tax on book income of large companies that report high profits, but have little taxable income
  • Replacing flawed incentives that reward excess profits from intangible assets with more generous incentives for new research and development
  • Replacing fossil fuel subsidies with incentives for clean energy production
  • Ramping up enforcement to address corporate tax avoidance

These are the major elements of the “Made in America Tax Plan,” but the proposal contains several additional tax incentives that would directly benefit US corporations, passthrough entities, and small businesses. These include, for example, a marked increase in the resources available through the Low-Income Housing Tax Credit and other housing incentives. This report, however, is focused on the elements of the package directly related to corporate tax reform and reforming energy incentives.”

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