Sponsors (13)
This bill trades increased federal revenue and reduced profit-shifting to U.S. possessions for higher tax bills and compliance costs for corporations operating in those possessions, which could dampen investment and raise costs for workers and consumers.
Federal taxpayers/the U.S. Treasury will likely receive higher receipts because corporations claiming a smaller deemed-paid foreign tax credit will owe more U.S. tax (effective for post-2024 taxes).
Taxpayers in general will experience improved tax equity because the bill reduces the incentive for profit-shifting to U.S. possessions by lowering the full credit for taxes paid there.
U.S. corporations with tested foreign income taxed in U.S. possessions will face higher U.S. tax bills beginning in 2025, increasing their immediate tax burdens.
Businesses operating in U.S. possessions (and their customers and workers) could see reduced after-tax returns that may lower investment, raise prices, or lead to reduced hiring.
Corporate taxpayers and financial institutions will face added compliance complexity as tax departments must apply the new 80% rule for post-2024 taxes and adjust tax planning.
Based on analysis of 3 sections of legislative text.
Introduced February 13, 2025 by Nicole Malliotakis · Last progress February 13, 2025
Creates a new 40% investment tax credit for qualifying investments in ‘‘critical supply chain’’ manufacturing facilities placed in service in U.S. possessions or Puerto Rico, with rules on eligible property, eligible taxpayers, and credit transferability. Also reduces the deemed-paid foreign tax credit for taxes paid or accrued to U.S. possessions from 100% to 80%, both changes effective for amounts after December 31, 2024.