Senator Sheldon Whitehouse (D-RI), along with Congressman Lloyd Doggett (D-TX), has introduced the No Tax Breaks for Outsourcing Act to level the playing field for American companies by ensuring that multinationals pay the same tax rate on profits earned abroad as they do in the United States. The legislation would end new tax incentives created by President Trump's tax law to outsource jobs and shift profits offshore.
"President Trump promised the American people he'd end the march of jobs and profits overseas," said Whitehouse. "Instead, he's doled out massive new tax breaks that reward offshoring. Our bill would prohibit multinational corporations from exploiting the loopholes opened by President Trump's so-called "tax reform.' Those big corporations have profited long enough from special tax breaks -- now we need a tax code that's fair to small businesses and middle-class workers."
The No Tax Breaks for Outsourcing Act would require companies with overseas profits to pay the same tax rate as other U.S. companies. The bill would:
Equalize the tax rate on profits earned abroad to the tax rate on profits earned here at home. The new tax law allows companies to pay half of the statutory corporate tax rate on profits earned abroad, and for many it may be nothing or next to nothing. This legislation would end the preferential tax rate for offshore profits and ensure companies pay the same rate abroad as they do in the U.S. This leveling of the playing field is achieved by eliminating the deductions for "global intangible low-tax income" and "foreign-derived intangible income."
Repeal 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 new law exempts from tax entirely a 10 percent return on tangible investments made overseas, such as plants and equipment. This legislation would eliminate the zero-tax rate on certain investments made overseas.
Treat "foreign" corporations that are managed and controlled in the U.S. as domestic corporations. This provision would address the "Ugland House problem" of U.S. corporations nominally organizing in tax havens. 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.
Crack down on inversions by tightening the definition of expatriated entity. This provision would discourage corporations from renouncing their U.S. citizenship. It would deem any merger between a U.S. company and a smaller foreign firm to be a U.S. taxpayer, no matter where in the world the new company claims 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.
Combat earnings stripping by restricting the deduction for interest expense for multinational enterprises with excess domestic indebtedness. Multinationals often shrink their U.S. tax bills by paying interest to their foreign-based subsidiaries. Recognizing this injustice, the House Republican tax bill originally prohibited it as President Obama had recommended in his proposed Budget. Deductible interest should be limited based on the U.S. subsidiary's proportionate share of the multinational's net interest expense, reflecting the underlying business reality. Unable to withstand lobbying pressure, Republicans abandoned this correction. This bill would restore it.
Eliminate tax break for foreign oil and gas extraction income. Big oil gets even more special help than other multinationals. Oil and gas extraction income earned abroad gets an even 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 companies.
The legislation has been endorsed by the AFL-CIO; Financial Accountability and Corporate Transparency (FACT) Coalition; Americans for Tax Fairness; Campaign for America's Future; MomsRising; Public Citizen; Economic Policy Institute Policy Center; American Federation of State, County and Municipal Employees (AFSCME); Institute on Taxation and Economic Policy; International Federation of Professional and Technical Engineers; Main Street Alliance; NETWORK Lobby for Catholic Social Justice; Oxfam America; Small Business Majority, American Federation of Government Employees, Patriotic Millionaires; International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America (UAW); American Family Voices; People Demanding Action; and the Alliance for Retired Americans.