Thought Leadership

International Tax Proposals in the "Made in America Tax Plan"

Client Updates

On March 31, 2021, President Biden introduced a $2 trillion “American Jobs Plan.” The American Jobs Plan, as outlined by the Biden Administration in a simultaneously-released fact sheet, contains a sweeping set of proposals to increase investment in infrastructure while offsetting the costs of these proposals with a “Made in America Tax Plan” that would increase corporate taxes.

The international tax proposals in the Made in America Tax Plan include the following:

  • Increase the taxes imposed on a domestic corporation’s global intangible low-taxed income (“GILTI”) by—

    • raising the GILTI tax rate from a minimum rate of 10.5% (which was scheduled to increase to 13.125% for tax years after 2025) to 21%,

    • calculating GILTI on a country-by-country basis, and

    • eliminating the GILTI exemption for the domestic corporation’s net deemed tangible income return (which is a 10% return on qualified business asset investment, less certain interest expense).

  • Deny deductions to a corporation for payments that strip earnings out of the United States to a foreign corporation that is based in a country without a “strong” minimum tax. This proposal apparently would revise the base erosion and anti-abuse tax (the “BEAT”) and would be coupled with efforts to encourage other countries to adopt a corporate minimum tax. This may be inspired by criticism of the BEAT in Pillar 2 of the OECD’s digitalizing economy project and the announced efforts of Secretary Yellen to negotiate a multilateral tax agreement among OECD countries.

    • Adopt more stringent anti-inversion rules.

    • Deny deductions to a corporation for expenses related to “offshoring” jobs and provide a credit to corporations for expenses related to “onshoring” jobs.

    • Eliminate the corporate tax deduction for foreign-derived intangible income (“FDII”) and use the resulting revenue to expand the research and development tax credit.

The Made in America Tax Plan includes limited details regarding these proposals, but the Treasury Department is expected to release its “Greenbook” containing specifics regarding these proposals in a matter of weeks. We will continue to monitor developments and will provide further updates as more details are released. In the meantime, Baker Botts would be pleased to assist you in your analysis of these proposals.


 

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