TAX POLICY CLIENT ALERT: House Ways & Means Committee Releases Discussion Draft of Proposal for Move to a Territorial Tax System

    View Author 2 November 2011
    On October 26, 2011, House Ways & Means Committee Chairman Dave Camp (R-MI) released a discussion draft of a proposal to reform the U.S. corporate tax regime – moving from a worldwide system of taxation toward a territorial system. The plan allows domestic corporations a 95 percent deduction for the foreign-source portion of dividends received from certain overseas affiliates, as well as for capital gains from the sale of shares in such affiliates. To help finance the cost of transitioning to such a system, domestic companies would be required to pay a one-time tax on all foreign earnings currently held offshore at a rate of 5.25 percent, with the option to pay that tax over an eight-year period. In addition to implementing a territorial system, the draft indicates a desire to simultaneously lower the top corporate tax rate from 35 percent to 25 percent, using yet unspecified base-broadening measures to pay for the reduction.