This bill would amend the tax code to eliminate used by businesses to minimize their corporate income tax burden.
Under this bill, American businesses could no longer defer or delay paying U.S. income taxes on overseas profits until the money is brought back into the country. This is generally done by taxing the profits when they are earned, regardless of where they are earned.
Tax credits given to U.S. corporations to offset the taxes they pay to other countries would be maintained as they are under current law. When a foreign government’s corporate tax rate is lower than the U.S. tax rate, companies would be obligated to pay the difference between the two rates. If a foreign government’s corporate tax rate is higher than the U.S. tax rate, the business wouldn’t have to pay U.S. corporate income taxes. These offsets would only be available for income earned in the foreign country.
Companies would be prohibited from avoiding U.S. taxes by establishing a superficial presence in a foreign country (like setting up a post office box) in order to claim status as a foreign business. Businesses that have their management and operations primarily located in the U.S. could not claim to be a foreign company.
Oil companies would not be allowed to classify royalty payments to foreign governments as foreign income taxes, which is a strategy those companies have used to minimize their U.S. tax burden.