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  • Roberta Venturi Lechartier, Director |

The recovery plan consists of two elements – the first of which was addressed in the speech of 31 March 2021 and includes significant proposed changes to corporation taxation.  Proposals relating to individual taxation are expected to be part of the second element of the recovery plan and to be announced in “coming weeks.”

The first element of the recovery plan consists of two components – the “American Jobs Plan” and the “Made in America Tax Plan.”  According to information released so far, the American Jobs Plan proposes about $2 trillion in investments over eight years, the costs of which would be fully offset over 15 years by tax law changes in the “Made in America Tax Plan.”

The White House released a fact sheet regarding the first element of the recovery plan.

The American Jobs Plan

The Biden Administration has described the American Jobs Plan as consisting of four key elements:

  • Investment in transportation infrastructure, such as roads, bridge, and rails
  • Investment in “how we live at home,” including in infrastructure relating to clean water; universal access to affordable broadband; upgrading and reorienting power infrastructure; and investment in repairs of schools, community colleges, childcare facilities, federal buildings, and the veteran hospital (VA) system
  • Investment in “care infrastructure,” including through measures to reduce the waitlist for seeking care for family members and through ensuring that essential healthcare jobs are “well paying”
  • Investments in research and development (R&D), clean energy R&D, incentives for domestic production in certain areas, and workforce training and apprenticeships

The American Jobs Plan also includes tax incentives intended to advance its policy goals. 

Refer to Exhibit A (also included in text below) for a chart highlighting key tax proposals referenced in the fact sheet’s discussion of the jobs plan, many of which were previously mentioned during the presidential campaign.

The Made in America Tax Plan

The fact sheet states that, along with the American Jobs Plan, President Biden “is proposing to fix the corporate tax code so that it incentives job creation and investment here in the United States, stops unfair and wasteful profit shifting to tax havens, and ensures that large corporations are paying their fair share.” It further describes the proposed changes as fundamentally reforming the way the tax code treats the largest corporations and helping to “bring an end to the race-to-the-bottom on corporate tax rates that allow countries to gain a competitive advantage by becoming tax havens.” 

Refer to Exhibit B (also included in text below) for a chart listing key tax proposals in the Made in America Tax Plan as described by the fact sheet.  As indicated in the chart in Exhibit B, most (but not all) of these proposals were mentioned by Biden during the presidential campaign.
 

KPMG observation 
As the process moves forward over the coming weeks and months, the Biden Administration may announce corporate tax proposals in addition to those identified on 31 March 2021.  For example, the administration may release more proposals and provide additional technical details as part of a description of revenue proposals that Treasury is expected to issue in connection with the Biden Administration’s budget proposal.  Further, Congress can be expected to add to, and to modify, proposals as it considers legislation implementing the recovery plan. 

As indicated in previous KPMG reports (including The Biden Administration and the 117th Congress:  Possible Tax Legislation), the narrow margin of Democratic control in the Congress presents some legislative challenges and may affect the process and details of tax legislation that might ultimately be enacted, as well as the prospects for enactment.

Exhibit A

Select Tax Proposals in "American Jobs Plan"

Proposal

Proposal included in Biden campaign proposals?1

Energy and environment-related items

 

New tax incentive to buy American-made electric vehicles

Yes

Investment tax credit for high-voltage capacity power lines

No

Extend for 10-years and phase down of an expanded direct-pay investment tax credit and production tax credit for clean energy generation and storage

Yes

New production tax credit to spur capital-project retrofits and installations that bolster and decarbonize U.S. industry

Yes

Reform and expand Section 45Q credit for carbon capture projects

Yes

Housing-related items

 

Targeted tax credits for affordable energy-efficient and electrified housing units (unclear if LIHTC modification/expansion or a different program)

Somewhat

Tax credits for new and rehabilitated homes for underserved communities (Neighborhood Homes Investment Act)

Yes

Other items

 

Extend and expand home and commercial energy-efficiency tax credits

Yes

Disaster resilience tax credits for small businesses and some families

No

50% tax credit for first $1M of construction costs for employer-provided childcare facilities

Yes

Extend Section 48C advanced manufacturing tax credits

Somewhat

Chart includes as campaign proposals those proposals posted on the Biden campaign website, included in the Biden-Sanders “Unity Task Force Recommendations,” mentioned on the campaign trail, or otherwise reported during the presidential campaign.

Exhibit B

Select Tax Proposals in “Made in America Tax Plan”

Proposal

Proposal included in Biden Campaign proposals2

Business – General

 

Increase statutory corporate rate from 21% to 28%

Yes

Create a new corporate minimum tax of 15% on global book income of large corporations

Yes (widely reported)

Increase IRS corporate enforcement budget

No

Business - International

 

GILTI  - Increase GILTI rate from 10.5% to 21%

Yes

GILTI - Eliminate net Deemed Tangible Income Return (“DTIR”) deduction (10% return on Qualified Business Asset Investment (“QBAI”))

Yes (widely reported)

GILTI  - Institute country-by-country calculation

Yes (widely reported)

Replace current anti-profit shifting rules, with new rules that would disallow profit-shifting deductions by foreign corporations if the corporation is based in a country without a strong minimum tax (BEAT not specifically referenced, but proposal may involve BEAT repeal)

No

Repeal FDII

No

Tighten anti-inversion rules

Yes

Deny deductions related to offshoring jobs

Yes

Provide tax credit to support onshoring jobs

Yes

Business - Energy

 

Repeal fossil fuel subsidies

Yes

Reinstate Superfund Trust Fund taxes

No

Chart includes as campaign proposals those proposals posted on the Biden campaign website, included in the Biden-Sanders “Unity Task Force Recommendations,” mentioned on the campaign trail, or otherwise reported during the presidential campaign.

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