Sanders' "Corporate Tax Dodging Prevention Act"
Senator Bernie Sanders Corporate Tax Dodging Prevention Act is summarized in an April 14 Senate Budget Committee blog post, (Sanders is the ranking member of that committee.)
1) Ending the rule allowing American corporations to defer paying federal income taxes on profits of their offshore subsidiaries.
This would immediately bring in up to $620 billion of federal tax revenue currently owed on "offshore" profits but deferred. (It would also make available in the US more than $2 trillion of corporate profits that have been kept offshore, which could be reinvested or distributed to shareholders.)
Additionally, this would increase federal tax revenue by as much as $90+ billion each year thereafter.
These amounts are based on a report from Citizens for Tax Justice (CTJ) and the U.S. PIRG Education Fund, titled "Offshore Shell Games."
A second look at the amounts owed by these companies , detailed in a letter to Congress titled, 24 International Tax Experts Address Current Tax Reform Efforts in Congress sets the amount this would bring in at " about $900 billion over 10 years."
2) Closing loopholes allowing American corporations to artificially inflate or accelerate their foreign tax credits.
A current loophole allows corporations to claim foreign tax credits for taxes paid on foreign income even if that income is not subject to current U.S. tax. This closes that loophole.
3) Preventing American corporations from claiming to be foreign by using a tax-haven post office box as their address.
This would stop American corporations from avoiding U.S. taxes by claiming to be a foreign company because they have a post office box in a tax haven country. Sanders' bill says a corporation could not claim to be from another country if their management and control operations are primarily located in the U.S. (See last month's post, "Pfizer Buying Allergan So It Can Pretend To Be Irish In Tax Scam." The resulting company would still be based in NY/NJ.)
4) Preventing American corporations from avoiding U.S. taxes by "inverting."
In an inversion, an American corporation acquires or merges with a (usually much smaller) foreign company and then claims that the newly merged company is a foreign one for tax purposes — even though the majority of the ownership is unchanged and little or no personnel or operations have actually moved offshore.
Under Sanders' bill the U.S. would continue to tax such a company as an American corporation so long as it is still majority owned by the owners of the American party to the merger or acquisition.
5) Prevent foreign-owned corporations from stripping earnings out of the U.S. by manipulating debt expenses.
This stops multinational corporations from loading up their U.S.-based corporation with debt to companies they own outside of the US as a way to shift profits out of the U.S. company. They make interest payments to the foreign companies, deduct it, and this reduces or wipes out their U.S. income for tax purposes.
6) Preventing large oil companies from disguising royalty payments to foreign governments as foreign taxes.
U.S. oil and gas companies have been disguising royalty payments to foreign governments as foreign taxes in order to claim foreign tax credits. Sanders' bill would stop this.
Does Sanders' Plan Pay For His Infrastructure Proposal?
Sanders has proposed a detailed plan for addressing the country's infrastructure needs, with an investment of $1 trillion. His plan to close several corporate tax loopholes appears to raise the necessary funds to cover this. Ending deferral alone would bring in $620 billion, and another $90+ billion each year following. This would raise the necessary funds.
On top of this the Senate's Joint Committee on Taxation took a look at Sanders' bill and a "partial score" concluded that items 2-6 would bring in an additional $133 billion.
The Washington Post fact checker looked at Sanders' plan to fund infrastructure by closing these corporate tax loopholes and concluded that "What matters most is that Sanders's claim of raising $1 trillion is at least credible — assuming the money is not also earmarked for other spending projects."
