The upward curve of U.S. government stimulus rockets as 2021 draws to a close — the recent passage of the $1.2 trillion Infrastructure Investment and Jobs Act and the imminent possibility of the $1.75 trillion Build Back Better bill.
Build Back Better, the social and climate spending proposal, aims to improve caregiving and future investments in education, health and housing. The House passed the proposal on Nov. 19, which next heads to the Senate where revisions are likely.
The amount of stimulus is historic, and must be funded. Following are some of the high-level proposed tax changes that will impact international and corporate entities that will help pay for the proposals in Build Back Better.
Alternative Minimum Tax
A 15% minimum tax on adjusted financial statement income for corporations with such income in excess of $1 billion.
Revised GILTI Amendments
The global intangible low-taxed income (GILTI) of controlled foreign corporations would be subject to a 15% tax rate.
Foreign Tax Credit Amendments
Foreign tax credit limitations would be calculated on a country-by-country basis and would also eliminate the one-year carryback of foreign tax credits allowable under current law.
A 15.8% applicable tax rate would be applicable to overseas earnings of U.S.-located intangible assets.
BEAT — or base erosion and anti-abuse tax, would be increased to 12.5% for years beginning in 2023; 15% for years beginning in 2024; and 18% for years beginning in 2025 and later.
Should the bill be passed, there will be a one-year delay, however firms should note the high level of provisions and complexity for multinationals and those with offshore wealth structures that include foreign corporate structures. The need for expert international tax service and advice has never been greater.