The US Senate Committee on Finance released draft legislation which aims to overhaul international taxation and encourage investment in America. It details changes to Global Intangible Low-Taxed Income (GILTI), Foreign Derived Intangible Income (FDII) and the Base Erosion and Anti-Abuse Tax (BEAT). These proposals from Senate Democrats aim to advance President Biden’s agenda.

According to the press release the following changes are proposed:

To overhaul GILTI, the senators propose repealing the tax exemption for foreign factories that incentivizes shipping jobs overseas, raising the GILTI rate, and moving to a country-by-country system that prevents multinational corporations from shielding income in tax havens from US tax. The senators’ proposed “high-tax exclusion” is a simpler country-by-country approach, excluding income from countries where it is already taxed at a higher rate than GILTI, with the remaining low-tax countries subject to GILTI taxation. Lastly, the treatment of research and development expenses and headquarters’ costs would be adjusted, to prevent companies from paying higher taxes under GILTI when they invest in the United States.

To overhaul FDII, the senators similarly propose ending the built-in incentive to offshore factories and other assets and equalizing the FDII and GILTI rates. The offshoring incentive will be replaced with a new provision to reward current year innovation-spurring activities in the United States, like research and development.

To overhaul BEAT, the senators propose restoring the full value of tax credits for domestic investment. To pay for this change, the proposal creates a higher, second tax bracket for income associated with base erosion; this raises revenue from the biggest base eroders and uses that revenue to support companies investing in the United States.