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    Corporate Tax Increases to Fund Infrastructure Plan

    Increasing the corporate tax rate to 28% is the cornerstone of President Biden’s Made in America Tax Plan, unveiled as part of a proposed $2 trillion infrastructure and jobs program. Other tax provisions target international profit shifting, offshoring incentives and benefits for fossil fuels in existing law. The plan outline does not contain many details but instead offers a general explanation of the proposed provisions, as described below.

    Corporate Tax Rates

    • Raise the corporate income tax rate from 21% to 28%.
    • Impose a 15% minimum tax on book income of large companies that report high profits but have low taxable income (about 45 existing companies). Firms would be given credit for taxes paid above the minimum book tax threshold in prior years, for general business tax credits (including R&D, clean energy and housing tax credits), and foreign tax credits.
    • Increase the IRS’s enforcement budget to address corporate tax avoidance by hiring and training new revenue agents to identify when corporations underpay.

    International Tax Rules

    • Bolster the global minimum tax for U.S. multinational corporations by ending the tax exemption for the first 10% return on foreign assets, calculating the GILTI minimum tax on a per-country basis and increasing the GILTI minimum tax from 10.5% to 21%.
    • Disallow deductions for the offshoring of production.
    • Repeal the Base Erosion and Anti-Abuse Tax (BEAT) and replace it with “SHIELD” (Stopping Harmful Inversions and Ending Low-tax Developments), which denies multinational corporations tax deductions for payments made to related parties that are subject to a low effective rate of tax.
    • Strengthen anti-inversion rules by treating a foreign acquiring corporation as a U.S. company based on a reduced 50% continuing ownership threshold or if a foreign acquiring corporation is managed and controlled in the U.S.
    • Reduce incentives for foreign jurisdictions to maintain very low corporate tax rates by encouraging global adoption of minimum taxes through the OECD/G20 base erosion and profit shifting framework.
    • Repeal the foreign-derived intangible income (FDII) deduction and shift the revenues to new tax incentives for research and development.

    Fossil Fuels and Clean Energy Incentives

    • Remove tax preferences and subsidies for the oil and gas industry, although the subsidies to be removed are not identified.
    • Provide a ten-year extension of the production tax credit and investment tax credit for clean energy generation and storage and make those credits direct pay.
    • Create a new tax incentive for long-distance transmission lines and expand tax incentives for electricity storage projects.
    • Create tax incentives for state-of-the-art carbon capture and sequestration projects along with specific supports for clean energy manufacturing, including an extension of the Sec. 48C tax credit program.
    • Allow a blender’s tax credit for sustainable aviation fuel.

    Biden also promises new tax incentives that will benefit U.S. corporations, passthrough entities and small businesses, including an increase in the resources available through the Low-Income Housing Tax Credit and other housing incentives.

    Reaction to the Plan

    The Administration justifies the corporate tax rate increase by citing a Joint Committee on Taxation report that found, of late, the effective tax rate on U.S. profits of U.S. multinationals was 7.8 percent. The Plan explanation also states that corporate tax revenues have fallen from 2% of GDP in the years before the Tax Cuts and Jobs Act to 1% in the years since the enactment of TCJA.

    Though most Republican members of Congress have rejected the plan outright, it has been reported that one of the Democratic Party swing voters in Congress, Senator Joe Manchin, D-WV, wants to compromise on the corporate rate increase. Because the Democrats will need all of their Senators to support the plan, the final corporate tax rate could come in at 25%.

    Many corporate leaders roundly criticized the proposed corporate tax increase although Amazon’s Jeff Bezos expressed support for the idea. The  Business Roundtable’s statement on the plan expresses support for the infrastructure upgrades but opposes paying for them with corporate tax increases, stating, “Policymakers should avoid creating new barriers to job creation and economic growth, particularly during the recovery.”

    The American Petroleum Institute also opposes the plan denying that oil and gas have special tax incentives and calling for a level playing field for all types of energy.


    The Democrat-controlled House and Senate do not need any Republican votes to pass the proposed tax legislation using the budget reconciliation process for revenue bills, but all Senate Democrats will have to vote in favor of it. Getting 100% Democratic support in the Senate will be a challenge and is likely to result in a reduction in the proposed corporate tax increases.

    Though many may lament the fact that the plan will not be bipartisan, it is instructive to remember that TCJA passed without any Democratic votes. The reality of tax legislation is that policy changes in either direction—tax increases or tax decreases—pass with the slimmest of margins and usually right down party lines.


    About the Author

    Lucia Nasuti Smeal is a guest blogger on tax topics for Frazier & Deeter. Smeal is an attorney, a tax professor with Georgia State University’s J. Mack Robinson College of Business and with Franklin University, and former editor of Tax Notes Today, published by Tax Analysts. Smeal also worked as a legislative analyst for the Congressional Research Service and is a former member of the U.S. House Periodical Press Corps. She is a frequent speaker on current tax developments.

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