On September 19, 2011 the Obama Administration released The President’s Plan for Economic Growth and Defi cit Reduction, which proposes a 10-year, $3.6 trillion defi cit reduction plan that includes several international and other business tax increases.
The defi cit reduction plan calls for comprehensive tax reform that raises $1.5 trillion in new revenue. Specifi cally, legislative language for fi ve additional revenue-raising proposals in the international tax area was outlined. The language includes the longawaited articulation of the following tax provisions:
- Deferral of interest expense deductions for foreignrelated expenses
- Determination of the foreign tax credit on a pooling basis
- Taxation of excess returns associated with intangible property transferred outbound
- Limit shifting of income through intangible property transfers
- Earnings stripping rules for inverted companies.
All of these provisions would be effective for tax years beginning on or after January 1, 2013. The proposed effective dates for these provisions look ahead to the next presidential term. Although these proposals may not be enacted in isolation, or as revenue-raisers for other legislation, in the near-term, they constitute an important window into the Administration’s approach to comprehensive corporate tax reform. When the Administration unveils its tax reform package, it may offer a system based on territorial tax principles while using some of the ideas embodied in these proposals.