October 27, 2021
Sens. Wyden, Warren, King unveil minimum tax on corporate profits
Senate Finance Committee Chairman Ron Wyden (D-OR) and Senators Elizabeth Warren (D-MA) and Angus King (I-ME) unveiled on October 26 a proposal for a 15% corporate minimum tax based on book income for companies that report over $1 billion in profits to shareholders, as budget reconciliation negotiations continue. The proposal comes as Senator Kyrsten Sinema's (D-AZ) opposition to raising the corporate tax rate or the tax rate on high-income individuals has refocused the tax debate on proposals other than rate increases. Senator Sinema has been working with Senator Warren on corporate tax ideas and backs the bill.
A summary noted that the proposal would preserve the value of business credits, including those for R&D, clean energy, and housing; allow credits for taxes paid to foreign countries; and include flexibility for companies to carry forward losses and claim a minimum tax credit against regular tax in future years. It said the proposal would apply to roughly 200 companies that report over $1 billion in profits.
The proposal would amend IRC Section 55 regarding the alternative minimum tax — the corporate AMT was repealed by the TCJA — to apply the 15% minimum tax to any corporation (other than an S corporation, RIC, or REIT) that has average annual adjusted financial statement income greater than $1 billion for three tax years. For corporations that are members of an international financial reporting group with a foreign parent, the threshold income is $100 million or more and requires the corporation to include the adjusted financial statement income of all foreign members of that group. Only tax years beginning after December 31, 2019, are taken into account. Adjusted financial statement income is the net income or loss reported in the applicable financial statement, with adjustments for items like book-tax year differences, related dividends, CFC income, disregarded entity income not otherwise reflected in the financial statement, and losses. Specific adjustments would be made for certain entities such as cooperatives and Alaska native corporations. The bill would apply for tax years beginning after December 31, 2022.
Senator Warren proposed a "Real Corporate Profits Tax" of 7% on a corporation's book income over $100 million in 2019, during the campaign for the Democratic presidential nomination, and introduced a bill with Senator King this past August. President Biden also proposed a corporate minimum tax during the campaign and included in his FY2022 budget plan a 15% minimum tax on worldwide book income of corporations with more than $2 billion in income, rather than $100 million.
The bill and a one-pager are attached.
Warren-King-Wyden Corporate Profits Minimum Tax