A Look at the Tax Provisions in Biden’s Infrastructure Plan

Cadwalader, Wickersham & Taft LLP

Cadwalader, Wickersham & Taft LLP

The American Jobs Plan is a $2 trillion plan to repair and revitalize America’s infrastructure. The plan includes:

  • $115 billion to repair bridges, highways, roads and other transit systems;
  • $100 billion to expand high-speed broadband internet across the country;
  • $100 billion to renovate and build new schools; and
  • $100 billion to improve power lines and incentivize a shift to clean energy.

To pay for these proposals, Biden introduced the Made in America Tax Plan, which includes the following tax changes:

  • Raising the corporate tax rate to 28%. If enacted, the increased corporate tax rate is estimated to generate over $1 trillion in revenue over the next ten years.
  • Doubling the GILTI tax rate and imposing GILTI on a country-by-country basis, in line with "Pillar II" of the OECD’s global minimum tax proposal. Additionally, the Made in America Tax Plan would eliminate the exemption for qualified business asset investment (QBAI). Currently, the first 10% of a foreign corporation’s QBAI is exempted from the GILTI tax. If enacted, the expansion of GILTI is estimated to generate over $400 billion in revenue over the next ten years.
  • Preventing “inversions” by denying deductions to foreign companies based in countries without a strong minimum tax. Currently, there are no estimates about how much revenue this measure would generate.
  • Enacting a new 15% alternative minimum tax on a corporation’s net book income for corporations with book profits in excess of $100 million. If enacted, the book income tax is expected to generate over $200 billion in revenue over the next ten years.
  • Adding tax credits for “onshoring jobs” and eliminating deductions for expenses for “offshoring jobs.”
  • Reducing and eliminating subsidies and tax credits for the fossil fuel industry. Few details have been released about these changes.
  • Repealing the “Foreign Derived Intangible Income” (FDII) deduction established in the TCJA. If enacted, this repeal is expected to generate $170 billion in revenue over the next ten years. Notably, the “Overhauling International Taxation” framework recently released by Senators Wyden, Brown, and Warner would revise, rather than repeal, FDII. Under the Wyden/Brown/Warner plan, FDII incentives would be based on “deemed innovation income,” rather than derived intangible income.
  • Providing additional funding for the IRS to increase auditing capability. Though Biden’s plan contains few details, if similar to recent proposed legislation, the increased auditing and enforcement capabilities of the IRS are expected to raise $300 billion over the next ten years.
  • Potentially replacing BEAT. Without naming the base-erosion and anti-abuse tax directly, Biden’s plan stated an intent to replace “an ineffective provision of the 2017 tax law that tried to stop foreign corporations from stripping profits out of the United States.”
  • Overall, Biden’s Made in America Tax is estimated to generate $2.25 trillion over 15 years − the same as the cost of the American Jobs Plan.

The American Jobs Plan and Made in America Tax Plan would also provide targeted tax credits to encourage domestic manufacturing, generate clean energy, develop affordable housing, promote the use of electric vehicles, and make residential and commercial buildings more resilient to climate change-related disasters.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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