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1 1 (December 2017)

handle is hein.amenin/aeiacrt0001 and id is 1 raw text is: By Eric Toder December 2017 Both territorial and worldwide systems for taxng income of multinational companies are difficult to implement because the concepts of income source and corporate residence on which the systems arebased havebecome lesseconomicalymeaningful. Fbcent legislationenacted by the House and Senate would rmove the United Statestoward aterritorial system for taxing US multinational corporations by eliminating taxation of dividends that foreign affiliates repatriate to their USparent companies. To protect the domestic corporate tax base, the billswould intro- duce a new minimum tax on foreign-source intangible profitsof US multinational companies and include measuresto curb income stripping by foreign-based multinationals from their US- owned subsidiaries. Theywould als impose aone-time transition tax, paid over time, on the accumulated foreign earnings of UScompanies. By eliminating the repatriation tax, the bills would remove atax distortion that has led UScompaniesto accumulate more than $2.6 tril- lion of past profits in their foreign affiliates, but would retain incentivesfor UScompaniesto s4ift investment and reported profitsoverseas and would continueto place some UScompa- niesat acompetitive disavantage compared with foreign--based companies that pay no home- country tax on their foreign-source income. Compared with current lav, the nae coporate income tax rate of 20 percent would reduce all these remaining economic distortions. One major feature of the tax bills moving through Congress at the end of 20 17, as well as the propo sals of all major Republican presidential candidates i'. recent years, is a provision that would create a teritorial tax system for tte United Staes. Pro- ponents have come to defne territorial taxation as a system that exempts frm tax the dividends that US-resident miul tinational corporatiorns receive from their foreign ffliates. In contrast, inder current law these dideiids or repatriated profits are taxable in the United States, but with a credi.t for the u1nderli'ng forein ircome taxes paid on the profits that pn diced the dividends. 'Iate F'iday night December 1, before the final vote, 1te Senate added a provision restoring ile coyorate aternative ninmun iax (AIM), which earlier versions of both House and Senate blls wo uld have repealed Commentators have Terriftorial Taxation: Choosing Among Imperfect Options

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