On March 31, US President Biden outlined his American Jobs Plan, which proposes to invest significantly in infrastructure, US job creation and support for American families and communities. To pay for the infrastructure and additional spending proposed in the plan, the Biden administration intends to generate additional tax revenue through the Made in America Tax Plan.
So what exactly is in the Made in America Tax Plan—and what impact will it have on Canadian taxpayers? In essence, the plan is designed to undo much of the tax changes that resulted from the Tax Cuts and Jobs Act (TCJA) passed under the Trump Administration in 2017. The TCJA would have resulted in a $1.5 trillion tax cut over a 10-year period. President Biden’s proposals, in contrast, will reverse these tax cuts to generate about $2 trillion in tax revenues over a 15-year period.
This article addresses the most relevant details of these proposals and explores how they will likely affect Canadians and international businesses with US activities moving forward.
The Made in America Tax Plan
The Made in America Tax Plan also proposes a 15% minimum tax on “book income” for large corporations. The proposal did not disclose the mechanics of the tax—particularly, what constitutes “book income” or what is considered a “large corporation”. However, it is expected that this will apply to very large corporations as the Plan outlines that 45 corporations would have been subject to this tax in recent years.
Finally, the proposed Made in America Tax Plan would also include an increase in enforcement by the IRS to ensure that corporations pay their fair share of taxes. The tax plan would ensure the IRS has the resources it needs to enforce tax laws against corporations.
An evolving situation
At this time, it is unknown how or when these proposals would work their way into the legislative process. In its current state, this tax plan is more of an outline of the Biden Administration’s priorities versus actual proposed legislation. Canadian taxpayers with US operations should follow developments closely to determine what impact, if any, tax changes south of the border may have on their business.
Our team will keep you updated as this plan continues to develop. In the meantime, if you have any questions—or if you’d like to learn more about the proposed tax plan—please don’t hesitate to reach out to your Grant Thornton advisor.