President Obama today laid out proposals aimed at closing corporate tax loopholes for U.S. multinational corporations that do business overseas, which the administration said will bring in an additional $210 billion in tax revenue over 10 years, CNN Money reports. Among the proposed changes are:
Tax deferral rules. Currently, U.S.-based multinationals may take tax deductions based on overseas operations, but they can defer don’t need to pay income taxes on the profits they make from those same overseas operations until they bring that money back to the United States, if they do at all. Obama would change that rule to require them to defer taking the deductions until they bring those profits back to the U.S.
R&D credit. Currently, tax laws provide a research and experimentation credit to companies that do their R&D work in the U.S. This is set to expire at the end of this year, but Obama has proposed making the credit permanent. In the past, lawmakers have extended the credit each year.
Foreign tax credit. Obama has proposed altering the foreign tax credit, which allows companies to claim a tax credit for taxes they paid to a foreign country.
Disappearing offshore subsidiaries.IRS rules, called "check the box" rules, allow companies to shift income from one foreign subsidiary to another in a tax haven which is not taxed. Under Obama’s proposal, some foreign subsidiaries would be treated as separate corporations and be taxed. This would be a regulatory change that would not require congressional approval.
Critics say the changes alone, without reducing the corporate tax rate, will encourage more companies to move operations overseas to more tax-friendly countries. The proposals are not expected to go over well among the business community and Republicans.
Source:
CNN Money: Obama Plans Corporate Tax Crackdown
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