Corporate tax proposals outlined in Biden’s proposed infrastructure plan

Yesterday President Biden released details on an infrastructure plan known as the American Jobs Plan. As part of this, the Made in America Tax Plan was also released; this is designed to fund a significant portion of the infrastructure initiatives. Tax reform contained in this release focuses only on corporate measures (although Biden has committed to individual reform measures as well, just will likely be under a separate initiative in the coming weeks).  Effective dates are still to be determined and may vary from provision to provision.

The headline in this proposal is the increase in the corporate tax rate from 21% to 28% with enforcement of a “minimum” tax for local country operations. There are some specifics of how this will be implemented/calculated that have not been developed yet. This proposal also calls for the elimination of the FDII deduction and other industry-specific provisions that exist today. To ensure enforcement and revenue collection, the Made in America Tax Plan does include a proposal for increased IRS funding to assist with compliance review and audit enforcement.  The aforementioned provisions will likely have a broad impact on how US multinationals best structure their US and global operations.

Given the impact these proposals will have on recently-enacted TCJA provisions, it is not anticipated that there will be widespread Republican support, so the timing is still uncertain.