Corporate Tax News Issue 60 - November 2021

Autumn Budget includes significant changes to corporate tax regime

On 5 November 2021, the U.S. House of Representatives passed the Infrastructure Investment and Jobs Act. The Senate had previously approved the same version of the bill, which is now ready for President Biden’s signature. The bill provides for USD 550 billion in infrastructure improvements to the country’s roads, bridges, highways and internet connections, and includes a few tax-related provisions (e.g., information reporting requirements will be expanded for services that effectuate a transfer of digital assets (including cryptocurrency) and digital assets will be added to the rules requiring businesses to report cash payments exceeding USD 10,000).

After months of negotiations, on 28 October 2021, the White House announced a framework for President Biden’s Build Back Better agenda, a USD 1.75 trillion package of social infrastructure measures paid for by tax increases. The measures are in addition to those previously approved by the Senate in the transportation-related USD 1 trillion bipartisan infrastructure bill. In reaching the framework, both moderate and progressive Senate and House Democrats have been forced to compromise on certain priorities. Following the announcement, the Rules Committee of the U.S. House of Representatives released a rewrite of their Build Back Better Act.

Spending measures

The announced framework includes the following spending measures:

  • Extension of the childcare tax credit for one year (through 2022);
  • Extension of the refundable earned income tax credit and other investments in affordable housing;
  • Universal and free preschool for three and four-year olds and additional childcare funding;
  • Expanded home care for older Americans and people with disabilities;
  • Expanded healthcare coverage, Medicare hearing benefits and lower healthcare premiums for certain Americans;
  • Clean energy tax credits and certain climate change provisions;
  • Expanded access to affordable high-quality education beyond high school; and
  • Provisions for immigration system reforms.

Key provisions excluded from the announced framework include paid family leave and Medicare coverage for dental and vision benefits. The framework also does not include key climate change measures that would reward electricity plants that use clean energy instead of fossil fuels, nor does it include provisions that would allow Medicare to negotiate lower prices for prescription drugs.

Tax measures

To pay for the social spending measures, the framework includes the following tax increases:

  • A 15% corporate minimum tax on companies reporting over USD 1 billion in financial statement profits;
  • A 1% surtax on corporate stock buybacks;
  • A 15% country-by-country minimum tax on foreign profits of U.S. corporations, which would bring the U.S. in line with the recent global agreement announced by the OECD;
  • A 5% surtax on individual incomes over USD 10 million, an additional 3% surtax on incomes over USD 25 million and expansion of the 3.8% Net Investment Income Tax; and
  • Increased IRS funding to support additional enforcement resources focused on pursuing unpaid taxes of wealthy taxpayers (those with incomes of at least USD 400,000 per year).

Next steps

We will be closely following the progress of the proposed legislation as it makes its way through Congress. See also the U.S. Tax Policy Watch, a resource hub for the latest federal tax policy and legislative materials, including insights, alerts and videos and the Federal Tax Legislative Proposal Tracker, a side-by-side comparison of current tax law and legislative proposals.

Todd Simmens