Democrats Release Additional Details Of International Tax Bill

Senate Democrats have released additional details of their plan to reform the international tax system. The proposal, written by Senate Finance Committee Chairman Ron Wyden (D-Ore.) and committee members Sherrod Brown (D-Ohio) and Mark Warner (D-Va.), builds on a proposal that Sen. Wyden released in April. The senators’ goal is to increase taxes on multinational corporations and raise revenue to pay for President Joe Biden’s social spending proposals.

The legislation would overhaul three taxes that Republicans created in their 2017 tax reform bill: Global Intangible Low-Taxed Income (GILTI), Foreign Derived Intangible Income (FDII), and the Base Erosion and Anti-Abuse Tax (BEAT).

In a press release, the senators explained:

• To overhaul GILTI, the bill would repeal a tax exemption for foreign factories that senators say incentivizes shipping jobs overseas; raise the GILTI rate; and move to a country-by-country system in order to prevent multinational corporations from shielding income from U.S. taxes. The bill also offers a “high-tax exclusion” that the senators say is a simpler country-by-country approach and it would adjust research and development expenses and headquarters’ costs to prevent companies from paying higher taxes under GILTI when they invest in the United States.
• To overhaul FDII, the bill would end the built-in incentive to offshore factories and other assets, and equalize the FDII and GILTI rates. The offshoring incentive will be replaced with a new provision to reward current year innovation-spurring activities in the United States like research and development.
• To overhaul BEAT, the bill would restore the full value of tax credits for domestic investment and create a higher, second tax bracket for income associated with base erosion.

A section-by-section summary of the bill is here.