Wednesday, May 18, 2016

Congressional Action on Corporate Taxes

1. Protecting the U.S. Corporate Tax Base Act of 2016
Prepared by Democratic Staff, Committee on Ways and Means, Sander M. Levin, Ranking Member May 17, 2016
The Protecting the U.S. Corporate Tax Base Act of 2016 would limit two tax loopholes currently exploited by certain foreign-controlled U.S. multinational groups: Hopscotching: The first loophole allows a foreign parent or a foreign affiliate to borrow deferred earnings of controlled foreign corporations (“CFCs”) without subjecting United States shareholders to U.S. tax. This technique is known as “hopscotching.” De-Controlling: The second loophole permits foreign-controlled U.S. multinational groups to avoid U.S. tax on deferred earnings of CFCs by reducing the U.S. ownership of CFCs to a level that no longer subjects the foreign subsidiaries to U.S. taxation. This technique is known as “de-controlling.” Both of these loopholes erode the U.S. corporate tax base.

2.  Hatch touts benefits of deduction for dividends
By Naomi Jagoda - 05/17/16 01:38 PM EDT
Senate Finance Committee Orrin Hatch (R-Utah) on Tuesday touted the benefits of integrating the individual and corporate tax systems by allowing companies to deduct dividends.
Hatch said at a Finance Committee hearing that he has been working on a “corporate integration” proposal that would provide this type of deduction, and he is planning to release the proposal in the “next several weeks.”
Under current law, corporate earnings may be taxed once under the corporate tax code and a second time under the individual tax code when earnings are paid to shareholders as dividends.

by Lawrence Katzenstein , May 17, 2016
Hiding funds through unreported accounts, shell companies, transfer pricing, corporate inversions and other practices presents a high cost to national treasuries. Governments are now taking steps to combat the problem.
A recent estimate put the figure at a staggering $7.5 trillion deposited in offshore tax havens. Of this total, roughly 80% or $6 trillion is never reported or taxed. Individuals or corporations that cannot or will not take such measures are often taxed at a higher rate to make up the shortfall. This exacerbates the skewed distribution of wealth that is receiving an increasing amount of attention, e.g. in the 2016 U.S. presidential race.

By Naomi Jagoda - 05/17/16 03:28 PM EDT
Rep. Sandy Levin (D-Mich.) on Tuesday introduced a bill that would limit two tax-avoidance strategies that can be used by U.S. companies that move their headquarters overseas for tax purposes.
The legislation is the third in a series of bills that Levin, the top Democrat on the House Ways and Means Committee, has introduced to limit corporate tax "loopholes" and curb corporate inversions — transactions in which a U.S. company reincorporates overseas after merging with a foreign company.
One of the loopholes that would be limited under the new bill is known as "hopscotching." This is when the earnings of U.S. entities' foreign subsidiaries are loaned to foreign parents without being subject to U.S. tax.

Sander Levin
5. Congress Introduces Bill to Stop Corporate Tax 'Hopscotching' and 'De-controlling'
WASHINGTON, D.C. (MAY 17, 2016)
Rep. Sander Levin, D-Mich., the ranking Democrat on the House Ways and Means Committee, introduced legislation to limit two tax strategies used by some foreign-controlled U.S. multinational corporations, known as “hopscotching” and “de-controlling.”
The Protecting the U.S. Corporate Tax Base Act of 2016 is the third in a series of bills introduced by Levin and other House Democrats to curb various corporate tax strategies such as inversion.
“Americans believe that the tax code is rigged against them, and when companies can use complicated loopholes to avoid paying their fair share of taxes, they’re not wrong,” Levin said in a statement.