Wyden-Warner-Brown Plan Advances Overdue Corporate Contribution to our Infrastructure

Press Release

U.S. Representative Lloyd Doggett (D-TX), a senior member of the Ways and Means Committee, reacted to the draft plan from Senators Wyden, Warner, and Brown regarding taxing multinational corporations.

"The Wyden-Warner-Brown draft represents a constructive step toward developing a House-Senate consensus on the best way to pay for much-needed infrastructure by obtaining revenue from corporations currently paying little to nothing," said Congressman Doggett. "Like the President's proposal, many of the options included are key provisions of the Doggett-Whitehouse "No Tax Breaks for Outsourcing' legislation, which is now cosponsored by a majority of the House Democratic Caucus.

"To avoid continued tax avoidance, I fully support the President's recommendations to apply the Global Intangible Low Tax-Taxed Income (GILTI) tax on a country-by-country basis and to repeal the Foreign Derived Intangible Income (FDII) tax break, which has served as an incentive for tax haven abuse rather than greater domestic production. Further, costly domestic or insourcing business tax credits may sound good, but the best tax policy to encourage more American jobs is by eliminating outsourcing tax incentives.

"Hardly surprising that multinationals, which have enjoyed paying little or no tax on much of their income, are already vigorously lobbying to preserve their unfair advantage. Secretary Yellen's effort to develop a global minimum tax is the best way to avoid a continued race to the bottom in corporate taxation and stateless, untaxed corporate income."

Specifically, the No Tax Breaks for Outsourcing Act would repeal offshoring incentives by:

Equalizing the tax rate on profits earned abroad to the tax rate on profits earned here at home. It would end the preferential tax rate for offshore profits by eliminating the deductions for "global intangible low-tax income" (GILTI) and "foreign-derived intangible income" and applying GILTI on a per-country basis.
Repealing the 10 percent tax exemption on profits earned from certain investments made overseas. In addition to the half-off tax rate on profits earned abroad, the Trump tax exempts from taxation entirely a 10 percent return on tangible investments, such as plants and equipment, made overseas. Our bill would eliminate this offshoring incentive.
Treating "foreign" corporations that are managed and controlled in the U.S. as domestic corporations. Ugland House in the Cayman Islands is the five-story legal home of over 18,000 companies, many of them really American companies in disguise. This section would treat corporations worth $50 million or more and managed and controlled within the U.S. as the U.S. entities they in fact are, and subject them to the same tax as other U.S. taxpayers.
Cracking down on inversions by tightening the definition of expatriated entity. This provision would discourage corporations from renouncing their U.S. citizenship. It would deem certain mergers between a U.S. companies and a smaller foreign firms to be a U.S. taxpayers, no matter where in the world the new companies claim to be headquartered. Specifically, the combined company would continue to be treated as a domestic corporation if the historic shareholders of the U.S. company own more than 50 percent of the new entity. If the new entity is managed and controlled in the U.S. and continues to conduct significant business here, it would continue to be treated as a domestic company regardless of the percentage ownership.
Combating earnings stripping by restricting the deduction for interest expense for multinational enterprises with excess domestic indebtedness. Some multinational groups reduce or eliminate their U.S. tax bills by concentrating their worldwide debt, and the resulting interest deductions, in its U.S. subsidiaries. This section would disallow interest deduction for U.S. subsidiaries of a multination corporation where a disproportionate share of the worldwide group's debt is located in the U.S. entity, a tactic commonly known as "earnings stripping." The limit for each U.S. subsidiary would equal the sum of the subsidiary's interest income plus its proportionate share of the corporate group's net interest expense.
Eliminating tax break for foreign oil and gas extraction income. Oil and gas extraction income earned abroad gets a further break on the already half-off rate other industries pay on their offshore profits. This provision would eliminate this special tax break for big oil and gas companies.

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