White House lists corporate tax offsets for Biden infrastructure plan

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March 2021

In brief

President Joe Biden today held an event in Pittsburgh to announce a $2 trillion “American Jobs Plan'' focused on infrastructure and other spending initiatives, with the cost of his proposals to be offset by corporate tax increase proposals. In advance of the President’s remarks, the White House released an outline of specific infrastructure proposals and corporate tax increase offsets. 

The American Jobs Plan includes tax incentives for clean energy and domestic manufacturing, while the “Made in America Tax Plan” contains corporate tax increase proposals. The White House summary indicates that the Made in America Tax Plan is expected to increase federal revenues by over $2 trillion over 15 years to “more than pay” for the infrastructure package and reduce federal budget deficits. The corporate tax increase proposals include increasing the corporate income tax rate to 28% and several proposed changes to US international tax rules. 

The infrastructure and corporate tax increase plans announced today reflect key elements of President Biden’s “Build Back Better” plan that was announced during his presidential campaign. During a White House press briefing, administration officials indicated that tax increase proposals affecting high-income individuals will be proposed in coming weeks to offset the cost of other parts of President Biden’s campaign proposals for increased spending on child care, education, expanded access to healthcare, and targeted individual tax relief measures.

Observation: While there previously has been bipartisan support for some increased federal infrastructure spending, President Biden’s tax increase proposals will need the support of all 50 Democratic Senators and nearly all House Democrats to be enacted over the objections of Congressional Republicans. Moderate Democrats in the House and Senate may seek to scale back some of President Biden’s proposals and may seek to block others when Congress is expected to consider tax increase legislation later this year under “budget reconciliation” procedures.

Action item: Companies should be evaluating and modeling the potential effect of the infrastructure and corporate tax increase proposals being put forth by President Biden. Companies also should be communicating with policy makers about how specific proposals may affect their employees, job creation, and investments in the United States.

In detail
Overview

The White House today released a summary of President Biden’s American Jobs Plan that proposes spending on federal initiatives that are intended to “create millions of good jobs, rebuild our country’s infrastructure, and position the United States to out-compete China.” 

The White House lists corporate tax increase proposals that include increasing the corporate income tax rate to 28% and making changes to US international tax rules. The Biden administration expects the package of corporate tax proposals to increase federal revenues by more than $2 trillion over 15 years to pay for the President’s proposals and reduce federal budget deficits.

"These are key steps toward a fairer tax code that encourages investment in the United States, stops shifting of jobs and profits abroad, and makes sure that corporations pay their fair share," the White House document states.  “President Biden’s reform will also make the United States a leader again in the world and help bring an end to the race-to-the-bottom on corporate tax rates that allows countries to gain a competitive advantage by becoming tax havens.” 

The White House statement notes that tax increase proposals affecting high-income individuals will be proposed in coming weeks to offset the cost of other parts of President Biden’s domestic policy agenda.  These additional proposals are expected to call for increased spending on childcare, education, and healthcare access, as well as new targeted individual tax relief measures. "The President looks forward to working with Congress, and will be putting forward additional ideas in the coming weeks for reforming our tax code so that it rewards work and not wealth, and makes sure the highest income individuals pay their fair share."

The release today of President Biden’s infrastructure and corporate tax increase proposals follow last week’s Senate Finance Committee hearing on US international tax policy.  Senate Finance Committee Chairman Ron Wyden (D-OR) has stated that he will soon release an international tax framework options paper with Finance members Sherrod Brown (D-OH) and Mark Warner (D-VA). For more on the Finance hearing, see our WNTS Insight.

Corporate tax increase proposals 

The Biden administration today identified several corporate tax increase proposals similar to measures that the President offered during his 2020 election campaign. According to the White House summary, President Biden is seeking to make the United States a leader in efforts to “end the race-to-the-bottom on corporate tax rates” and “discourage offshoring by strengthening the global minimum tax for US multinational corporations.” 

According to the White House summary, the proposed corporate tax increases include:

  • Increasing the corporate tax rate from 21% to 28%;
  • Increasing the global intangible low-taxed income (GILTI) tax rate to 21%, applying GILTI on a per-country basis, and eliminating the 10% deduction for qualified business asset investment (QBAI);
  • Denying certain deductions to foreign corporations on payments "that could allow them to strip profits out of the United States if they are based in a country that does not adopt a strong minimum tax";

Observation: The White House summary states that this proposal addresses “an ineffective provision” of the 2017 Act and appears to replace the base erosion and anti-abuse tax (BEAT) with a provision targeted to payments made to companies based in countries that do not have a minimum tax on foreign earnings. Changes to the BEAT could potentially be motivated in part by a desire to align more closely with certain aspects of the OECD’s digital project. Treasury Secretary Janet Yellen recently stated that the United States is working with other OECD countries to reach an agreement that would set a global minimum tax rate.

  • Preventing US corporations from “inverting or claiming tax havens as their residence";
  • Denying deductions for expenses related to "offshoring" jobs and providing a tax credit for "onshoring" jobs;
  • Repealing the deduction for foreign derived intangible income (FDII) and using the resulting revenue to expand "more effective" R&D investment incentives;
  • Imposing a 15% minimum tax on large corporations' book income;
  • Eliminating tax preferences for fossil fuels and reinstating Superfund taxes; and
  • Funding IRS corporate tax enforcement.

Observation: The White House summary does not provide full details for the President’s proposed changes to the 2017 tax reform act. The Treasury Department currently is expected to release a “Green Book” technical explanation of the President’s tax proposals in late spring. 

Infrastructure and business tax incentive proposals

President Biden’s America Jobs Plan includes the following proposals:

  • $621 billion to modernize US highways, bridges, mass transit, ports, and airports;
  • $111 billion for improvements to clean water infrastructure, improving the US electric grid, and increasing access to high-speed broadband;
  • $213 billion for building, modernizing, and retrofitting affordable housing, schools, veterans’ hospitals, and federal buildings;
  • $52 billion in incentives to promote domestic manufacturing; and
  • $31 billion for small business programs to increase access to credit, venture capital, and R&D funding.

President Biden’s plan also calls for targeted investment tax credits and production tax credits for clean energy generation and storage. He also is proposing to expand the current Section 45Q tax credit for carbon capture and sequestration. 

The President’s proposals include extending tax incentives for domestic manufacturing like the Section 48C tax credit for advanced manufacturing facilities. He also proposes to provide an expanded tax credit for businesses that provide workplace childcare facilities.

The takeaway

Companies should be evaluating and modeling the potential effect of President Biden’s infrastructure and tax increase proposals, and should be communicating with policy makers about how specific proposals may affect their employees, job creation, and investments in the United States.  

For more information

For the White House summary of President Biden’s American Jobs Plan and the Made in America Tax Plan, click here.

For a transcript of the White House press briefing on the President’s proposals, click here.

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Pat Brown

Washington National Tax Services Co-Leader, PwC US

Rohit Kumar

Washington National Tax Services Co-Leader, PwC US

Kevin Levingston

Tax Policy Services Leader, PwC US

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