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The Senate Tax Reform Proposal
13 November 2017
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The Senate Finance Committee released a detailed summary of its tax reform proposal, following the release a week earlier of the House proposal. Although there are many similarities between the two proposals, there are also significant differences, which likely means there will be a complex legislative process ahead.
Dealmakers will now have to navigate two sets of proposals, adding complexity to the deal environment.
Both proposals significantly lower the corporate income tax rate to 20% and alter fundamental principles of the U.S. income tax system. For example, the proposals eliminate most itemized deductions, limit the deduction for interest expense, impose broad anti-base erosion rules, and alter the taxation of insurance companies and of non-U.S. earnings. The Senate proposal also includes radical changes to the taxation of deferred compensation that were dropped from a previous House proposal.
Both proposals replace the current worldwide U.S. taxation system with a territorial system that taxes U.S. multinational corporations only on income related to the United States and impose a one-time tax on all existing foreign earnings. Both proposals also impose a new minimum tax on “excess” foreign profits, particularly those generated from intangibles.
Gary M. Friedman
Peter A. Furci
Adele M. Karig
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