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1 Katherine Loughead, Biden Administration Changes to GILTI and FDII Will Yield Automatic State Tax Increases 1 (2021)

handle is hein.taxfoundation/bnasncs0001 and id is 1 raw text is: Biden Administration Changes to GILTI and FDII Will Yield Automatic State Tax Increases Katherine Loughead Senior Policy Analyst Key Findings The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and global levels. We are a 501(c)(3) nonprofit organization. ©2021 Tax Foundation Distributed under Creative Commons CC-BY-NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org Twenty states and the District of Columbia tax some portion of Global Intangible Low-Taxed Income (GILTI), although only 16 of those states have issued guidance on the matter more than three years after the federal law went into effect. States that have not yet issued guidance on their treatment of GILTI should act quickly to provide clarity to taxpayers, and states that currently tax GILTI should exclude it from their tax base. As part of the American Jobs Plan Act, President Joe Biden has proposed several major changes to GILTI, including reducing the value of the § 250 deduction, eliminating the 10 percent exemption for deemed returns to qualified business asset investment (QBAI), and taxing GILTI on a country-by- country basis. If the proposed federal changes to GILTI are adopted, more U.S. companies will be exposed to taxes on GILTI, and more income will be taxed as GILTI by the federal government and by states. Several states have legislation pending this year that would change their tax treatment of GILTI. In California, Illinois, and Minnesota, proposals are circulating to tax GILTI for the first time, while a Massachusetts bill would tax GILTI to a much greater degree. Alabama, Iowa, and Kansas exempted GILTI from taxation over the past year, while Nebraska policymakers considered but did not adopt such legislation. Twenty-two states conform to the federal deduction for Foreign-Derived Intangible Income (FDII), which would be eliminated under the Biden proposal. FISCAL FACT No. 765 May 2021

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