Comparing Biden and Wyden international tax proposals (KPMG chart)

Comparing Biden and Wyden international tax proposals

Tax proposals from President Joe Biden and Senate Finance Committee Chairman Ron Wyden (D-OR) would make substantial changes to the U.S. corporate tax system—in particular, major changes to the international tax system that would reverse certain rules included in the 2017 tax law (the law that is frequently referred to as the “Tax Cuts and Jobs Act”).

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President Biden and Chairman Wyden are broadly proposing to move in the same direction—increasing the U.S. corporate rate while simultaneously raising taxes on foreign earnings. But there are important differences between Biden’s proposals and those outlined by Chairman Wyden.

KPMG on Friday April 16, 2021, presented a webcast during which details of the proposals were explored. Watch a replay of the webcast

In relation to the webcast, KPMG provided the following chart of the Biden Administration and Wyden proposals.

 

 

Biden Administration Proposal1

Wyden Proposal2

General corporate

Corporate rate and minimum tax

  • Increase corporate to 28%
  • New minimum tax of up to 15% of book income on large corporations reporting net income of $2B or more

No proposal

GILTI

GILTI rate

Increase GILTI rate from 10.5% to 21% (75% of proposed new 28% corporate tax rate)

GILTI rate increase; notes prior Democrat proposals ranging from 60 to 100% of the corporate rate

DTIR/QBAI

Net Deemed Tangible Income Return (“DTIR”) deduction (10% return on Qualified Business Asset Investment (“QBAI”))

Eliminate 

Eliminate 

Country-by-country

Apply country-by-country computation (no details on computation)

Apply country-by-country limitation by:

  • Separate GILTI foreign tax credit (FTC) baskets for each country, or
  • Mandatory high-tax exception set at the GILTI rate—apply GILTI only to income from low-tax jurisdictions

Expense allocation 

 

No proposal Treat expenses for research and management in the United States as entirely domestic
FDII

Repeal

Repeal FDII and replace with more R&D investment incentives

Open to retaining a revised version of FDII if the GILTI rate remains lower than corporate rate

QBAI

Repeal

Repeal QBAI reduction to FDII

Applicable income

Repeal

 

Modify qualifying income to be based on a % of expenses for
U.S. R&D and job training

This “deemed innovation income” would replace “deemed intangible income” in the FDII formula, so retains focus on portion that is foreign derived

BEAT

Repeal

Replace with “SHIELD,” to deny deductions on payments to foreign related parties if the payment is subject to a low effective tax rate

No proposal

Treatment of credits

No proposal

  • Allow full value of domestic business tax credits to reduce BEAT liability
  • Open question on relief for FTCs; depends on BEAT revenue

Rate

Rate for defining a low-taxed payment and acceptable minimum tax regime set by multilateral agreement, but pending such agreement, at the GILTI rate

  • Retain 10% rate for “regular” taxable income
  • Increase rate for addbacks for deductible payments

Other

 

 

Corporate residency

Treat a foreign acquiring corporation as a domestic corporation if:

  • The foreign acquirer satisfies a 50% ownership test, or
  • The management and control is in the US

No proposal

Expense allocation and apportionment

No proposal

Treat expenses for research and management in the US as entirely domestic (i.e., exclusive apportionment)

Offshoring expenses

  • Deny deductions for job offshoring
  • Provide credit for job onshoring (previously described as 10%)

No proposal

Onshoring incentive

Provide a tax credit to support onshoring jobs

No proposal

1Read TaxNewsFlash for The American Jobs Plan, released by the White House on March 31, 2021, and TaxNewsFlash for The Made in America Tax Plan, released by the Treasury Department on April 7, 2021.   

2Read TaxNewsFlash on Overhauling International Taxation, released by Senators Ron Wyden (D-OR), Sherrod Brown (D-OH), and Mark Warner (D-VA) on April 5, 2021.  

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