United States

Corporate - Significant developments

Last reviewed - 02 August 2021

President Joe Biden, who took office on 20 January 2021, has proposed significant changes to United States (US) tax law as part of his budget submission to the US Congress. President Biden has proposed to increase corporate and individual tax rates that were put into effect by the 2017 tax reform act (Public Law [P.L.] No. 115-97). Key corporate tax law changes proposed by President Biden include increasing the US corporate tax rate to 28% and tightening US international tax rules. At the time of this writing, it is uncertain whether the US Congress will approve any of these changes as proposed or in modified form. The 2017 tax reform legislation lowered business and individual tax rates, modernised US international tax rules, and provided the most significant overhaul of the US tax code in more than 30 years. P.L. 115-97 lowered permanently the US federal corporate income tax (CIT) rate from 35% to 21%. The new CIT rate is effective for tax years beginning after 31 December 2017. P.L. 115-97 also repealed the corporate alternative minimum tax (AMT).

P.L. 115-97 provided the most significant overhaul of US international tax rules in more than 50 years by moving the United States from a ‘worldwide’ system to a 100% dividend exemption ‘territorial’ system. As part of this change, P.L. 115-97 included two minimum taxes aimed at safeguarding the US tax base from erosion, along with other international tax provisions. P.L. 115-97 also included a broad range of tax reform proposals affecting businesses, including a new 20% deduction for certain pass-through business income.

In addition, P.L. 115-97 repealed or modified many prior-law tax provisions to offset part of the cost of the tax reforms.

The Treasury Department and Internal Revenue Service (IRS) have issued extensive regulations under several key provisions of P.L. 115-97. 

Various COVID pandemic relief measures were enacted in 2020. Tax relief measures for businesses that were enacted as part of P.L. 116-136 include a five-year net operating loss (NOL) carryback (including a related technical correction to the 2017 tax reform act), a change in the Section 163(j) interest deduction limitations, accelerated AMT refunds, payroll tax relief, a temporary suspension of certain aviation excise taxes, a tax credit for employers who retain employees, and a ‘qualified improvement property’ technical correction to the 2017 tax reform act.