Corporate tax reform/ corporate AMT/ minimum tax on corporations/ corporate tax loopholes/ Newslooks/ The Biden administration proposed a rule requiring large U.S. corporations to pay at least 15% of their profits in taxes. This corporate alternative minimum tax, aimed at closing loopholes, is expected to affect about 100 companies with $1 billion or more in annual profits. Treasury estimates the rule could raise $250 billion over the next decade.
Treasury Proposes Corporate Minimum Tax Quick Looks:
- Treasury Department proposes a 15% minimum tax for large corporations.
- The rule targets 100 companies with $1 billion+ in profits.
- Expected to raise $250 billion in tax revenue over 10 years.
- Proposal comes as part of the 2022 Inflation Reduction Act.
- Public comments on the rule are open until Dec. 12, with a hearing set for Jan. 16.
Biden Administration Targets Corporate Tax Loopholes with New Proposal
Deep Look:
The Biden administration has taken a significant step toward ensuring that large corporations pay their fair share of taxes by proposing a new rule that would require the largest U.S. companies to pay at least 15% of their profits in taxes. This proposal, unveiled by the Treasury Department on Thursday, is part of a broader effort to close tax loopholes that allow major corporations to significantly reduce their tax bills.
The new rule stems from a provision in the 2022 Inflation Reduction Act, designed to target companies with annual profits of $1 billion or more. Treasury officials estimate that around 100 corporations will be affected, many of which have previously paid minimal taxes on substantial profits. Under the current system, these companies can often exploit legal loopholes, credits, and deductions to dramatically reduce their tax obligations, in some cases paying as little as 2.6% of their profits in taxes.
The corporate alternative minimum tax (AMT), similar to the AMT that applies to high-income individuals, is intended to prevent corporations from taking advantage of these tax breaks to avoid paying taxes altogether. Treasury officials believe that without this measure, some of the largest corporations would continue to pay little to no taxes, despite earning billions in profits each year. According to the Treasury’s estimates, the 15% corporate minimum tax would generate an additional $250 billion in revenue over the next decade.
“The corporate AMT is a crucial part of the administration’s agenda to make sure the biggest corporations and wealthiest individuals contribute their fair share,” the Treasury Department said in a statement.
Democratic lawmakers, including Senator Elizabeth Warren, have been vocal advocates for the corporate minimum tax. In a letter to Treasury Secretary Janet Yellen this summer, Warren and her colleagues cited research showing that following former President Donald Trump’s corporate tax cuts, 55 large corporations paid an average tax rate of less than 5% on $670 billion in combined profits over five years. Trump’s 2017 tax law lowered the corporate tax rate from 35% to 21%, a move that drastically reduced the tax burden for many large companies.
Trump has since promised to eliminate the corporate AMT if re-elected, arguing for an even lower corporate tax rate of 15%. In contrast, the Biden administration’s proposal seeks to hold large corporations accountable and ensure they contribute more to federal revenues.
The Treasury’s proposed rule will be open for public comment until December 12, allowing stakeholders to weigh in on the details of the measure. A hearing is scheduled for January 16, 2025, to further discuss the rule and its implications for businesses and the broader economy.
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