The White House has released a Fact Sheet, dated 31 March 2021, which outlines President Biden's plan for US corporate tax reform. President Biden intends his corporate tax reform to incentivize job creation and investment within the United States, stop unfair and wasteful profit shifting to tax havens, and ensure that large corporations pay their fair share of tax.
Specifically, President Biden proposes the following corporate tax changes:
- increasing the corporate tax rate from 21% to 28%;
- reinforcing the global minimum tax for US multinational corporations (i.e. the global intangible low-taxed income, or GILTI) by:
- setting the tax rate at 21%;
- calculating the tax on a country-by-country basis; and
- eliminating the exemption for the first 10% of return on investments in foreign countries (i.e. the qualified business asset investment, or QBAI);
- encouraging other countries to adopt strong minimum taxes on corporations and seeking a global agreement on it through multilateral negotiations;
- replacing the base erosion and anti-abuse tax (BEAT) with a new regime that denies deductions to foreign corporations on payments that could permit them to strip profits out of the United States if they are based in a country that does not adopt a strong minimum tax;
- making it more difficult for US corporations to invert (i.e. acquire or merge with a foreign company to avoid US taxes by claiming to be a foreign company although their place of management and operations remains in the United States);
- denying deductions for expenses incurred in offshoring jobs and providing tax credits for expenses incurred in onshoring jobs;
- repealing the foreign-derived intangible income (FDII) rules, which may give corporations a tax break for shifting assets abroad and be ineffective at encouraging corporations to invest in research and development (R&D) in the United States;
- enacting a 15% minimum tax on large corporations' book income (i.e. the type of income that corporations use in reporting their profits to investors);
- eliminating special tax preferences for the fossil fuel industry to put the country on a path to net-zero greenhouse gas emissions by 2050; and
- providing the US Internal Revenue Service (IRS) with the resources it needs to effectively audit, and enforce the tax laws against, corporations.