Republicans in the U.S. House of Representatives reintroduced a bill on Wednesday, January 22, that penalizes foreign countries that impose unfavorable tax frameworks on U.S. taxpayers with foreign operations.
The bill’s introduction follows two presidential actions that President Donald Trump signed on January 20, the day of his second inauguration, stating that a years-in-the-making global tax framework “has no force or effect” in the United States and another instructing the U.S. Treasury to identify foreign taxes that are discriminatory to U.S. taxpayers. All House Republicans on the Ways and Means Committee co-sponsored the bill, called the Defending American Jobs and Investment Act, which was first introduced in May 2023.
The executive order and the House bill represent a shift in the federal government’s stance on global tax coalescence. Former President Joseph Biden’s administration supported and participated in developing a global tax framework that the world’s largest economies have largely endorsed.
Over the past several years, the Organization for Economic Co-operation and Development (OECD) has convened more than 100 countries to agree on a set of global tax rules that aim to provide a fairer international tax system. Part of the global tax deal includes an undertaxed profits rule (UTPR) surtax, which would ensure that corporations pay a 15% effective tax rate on global profits.
The United States hasn’t widely implemented a corporate global minimum tax or a UTPR. However, in 2022, the Inflation Reduction Act created a minimum tax of 15% for corporations with at least $1 billion in adjusted financial statement income.
It’s unclear how this bill would fare on the House floor or in the U.S. Senate. However, if both chambers pass the bill, it is almost certain that President Trump will sign it into law.
As a new administration settles in, tax change is all but certain. Smith + Howard advisors track potential legislative changes, using those insights to help their clients navigate potential legislative change.
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