Tax Impacts of Biden Administration’s American Jobs Plan

By James O’Rilley, Shareholder and Tax Group Practice Leader

With the recent release of President Biden’s American Jobs Plan, corporations can expect to see tax increases in the near future to help fund the $2 trillion infrastructure plan.

Focused heavily on improving the U.S. transit infrastructure, the American Jobs Plan outlines intentions to improve roads, waterways, airports and other public transportation systems. While the plan does include some tax incentives for clean energy, electric vehicles and domestic manufacturing, it’s embedded Made in America Tax Plan calls for many revenue-raising tax provisions.

Corporate Tax Increases

Most of the provisions in the Made in America Tax Plan are aimed directly at corporations. According to the White House Summary, the intention of the Biden administration is to ensure corporate America pays their fair share of taxes, discourage offshoring and strengthen global tax for U.S. multinational corporations. This should come as no surprise to many, as it aligns with what was initially presented during the 2020 presidential campaign.

Expected to increase federal revenues by over $2 trillion in the next 15 years and fund the infrastructure improvements, the proposed corporate tax provisions includes:

• Increasing the corporate tax rate from 21% to 28%.
• Establishing a 15% minimum tax on book income of corporations with over $100 million in revenue.
• Doubling the global intangible-below-taxed income (GILTI) tax rate to 21% and apply it on a per-country basis.
• Eliminating the 10% deduction for qualified business asset investments.
• Repealing offshoring tax incentives of the 2017 Tax Act for Foreign Derived Intangibles Income.
• Enhancing corporate tax enforcements.

Incentives to Come

Also mentioned in the plan, is a variety of tax incentive proposals that would help support the administration’s agenda, which includes:

• A new tax incentive to buy American-made electric vehicles.
• A 50% tax credit for the first $1 million of construction costs for employer-provided childcare facilities.
• Extending direct-pay investment tax credit and production tax credit for clean energy generation and storage for 10 years.
• A new production tax credit to spur capital-project retrofits and installations to help decarbonize U.S. industries.
• Expanding Section 45Q credit for carbon capture projects.
• Creating a tax credit for new and rehabilitated homes for underserved communities.
• Extending and expanding home and commercial energy-efficiency tax credits.

Key Takeaways

Although vague in its details, one thing is for sure, the Made in America Tax Plan will have major tax implications for U.S. companies doing business domestically and abroad. Specific details related to the proposal are expected to be released in the weeks to come. In the meantime, Doeren Mayhew’s tax advisors can help your company evaluate the potential effects of the proposed tax changes and develop strategies to combat its impact on your bottom line. Contact us today.