On April 7, 2021, the U.S. Department of the Treasury released a report (the "Treasury Report") that describes the Biden Administration's "Made in America Tax Plan." The Made in America Tax Plan was originally outlined by the Biden Administration in a fact sheet released on March 31, 2021 (the "Fact Sheet"). Click here for our prior client update describing certain tax proposals in the Fact Sheet that affect corporate taxpayers.
The Treasury Report provides some additional details regarding the tax proposals described in our prior client update, including the following:
- The proposed 15% minimum corporate income tax on book income (i.e., the net income reported to a corporation's shareholders) would apparently be limited to companies reporting $2 billion or more of net income. In addition, companies would be given credit under the proposed minimum tax for taxes paid above the minimum book tax threshold in prior years, general business tax credits (including R&D, clean energy and housing tax credits) and foreign tax credits.
- The proposed replacement for the base erosion and anti-abuse tax (the "BEAT"), called the "SHIELD" (Stopping Harmful Inversions and Ending Low-tax Developments), would deny multinational corporations U.S. tax deductions for payments made to related parties that are subject to a low effective rate of tax. If the United States and the international community reach an agreement on corporate minimum taxation providing for minimum tax rules worldwide, the tax rate trigger for the SHIELD would be defined by reference to the minimum rate agreed upon in such international agreement. Until such time as an international agreement is reached, the default tax rate trigger would be the Made in America Tax Plan's proposed 21% minimum tax rate on global intangible low-taxed income ("GILTI").
- As a backstop to the SHIELD, the anti-inversion rules would be significantly expanded by generally treating a foreign corporation that acquires a domestic target as a domestic corporation for U.S. tax purposes if either (i) the former owners of the domestic target own (by reason of their ownership of the domestic target) 50% or more of the stock of the foreign acquiring corporation after the acquisition or (ii) the foreign acquiring corporation is managed and controlled in the United States.
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 the proposals in the Made in America Tax Plan.
Originally published 08 April 2021
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