Treasury proposes rule to prevent large corporations from evading income taxes
WASHINGTON (AP) — The Biden administration on Thursday proposed a new rule that would require the largest U.S. companies to pay at least 15% of their profits in taxes.
Treasury Department officials estimate that about 100 of the biggest corporations — those with at least $1 billion in annual profits — would be forced to pay more in taxes under a provision that was included in the administration’s 2022 Inflation Reduction Act. Democratic members of Congress, including Elizabeth Warren, a senator from Massachusetts, have urged the White House to implement the tax.
Similar to the alternative minimum tax that applies to mostly wealthier individuals, the corporate AMT seeks to ensure that large corporations can’t use tax loopholes and exceptions avoid paying little or no taxes on extensive profits.
The tax is a key plank administration’s’ “agenda to make the biggest corporations and wealthiest pay their fair share,” the Treasury Department said.
Treasury officials said Thursday that the AMT would raise $250 billion in tax revenue over the next decade. Without it, Treasury estimates that the largest 100 companies would pay just 2.6% of their profits in taxes, including 25 that would pay no taxes at all.
Former President Donald Trump has promised to get rid of the corporate AMT if he is elected. As president, Trump signed legislation in 2017 that cut the corporate tax rate to 21% from 35%. He now says he supports reducing the corporate rate further, to 15%.
In a letter this summer to Treasury Secretary Janet Yellen, Warren and three congressional colleagues cited research that found that in the five years following Trump’s corporate tax cut, 55 large corporations reported $670 billion in profits, but paid less than 5% in taxes.
Treasury’s proposed rule will be open for comment until Dec. 12, the department said, and there will be a proposed hearing on the rule Jan. 16.