Our thinking

Corporate Tax Reform

President-elect Trump has proposed several reforms to corporate taxation, including lowering the business tax rate.

Lowering the tax rate

While light on specific details, President-elect Trump has proposed several reforms to corporate taxation, including lowering the business tax rate from 35 percent to 15 percent and eliminating the corporate alternative minimum tax. He has called for the closing of corporate tax loopholes (including carried interest), with the exception of the Research and Development Tax Credit.

For their parts, Republicans on the Hill have proposed reform plans of their own to lower the corporate tax rate. House Ways and Means Committee Chairman Kevin Brady (R-TX) plans to pursue tax-overhaul legislation in 2017 with the support of Speaker Ryan. With President-elect Trump’s consent, Congressional Republicans may choose to use budget reconciliation to push through tax reform, with or without Democratic support.
Repatriation and made-in-America incentives

During the campaign, Trump also outlined several reforms to protect U.S. manufacturing and repatriate corporate profits held overseas. Specifically, Trump proposed that “firms engaged in manufacturing in the U.S.” would be allowed to expense capital investment and lose the deductibility of corporate interest expense.” Additionally, Trump’s Tax Plan calls for “a deemed repatriation of corporate profits held offshore at a one-time tax rate of 10 percent.”

Inversions

With regard to inversions, Trump has said a lower rate makes corporate inversions unnecessary by making America’s tax rate “one of the best in the world,” likely indicating his administration will adopt a wait-and-see approach to inversions and other global finance positioning techniques while seeking corporate tax reform.