Treasury Announces Plan To Reduce Taxes On Manufacturers’ Foreign Income
The U.S. Department of the Treasury announced last week that it had approved a proposal put forth by the National Association of Manufacturers (NAM) that would provide relief for U.S.-based manufacturers facing high taxes on foreign income.
The policy is necessary, NAM said, because in moving the United States toward a territorial system that allowed businesses to bring foreign earnings back to the United States without incurring additional U.S. tax, the 2017 tax reform bill signed into law by President Donald Trump created a provision, called Global Intangible Low-Taxed Income, that essentially imposed a minimum 13.125 percent tax on foreign earnings. While the move was intended to target low-taxed foreign income, NAM argued that the GILTI could hit manufacturers with foreign income taxed at high rates due to its interaction with existing international tax rules and that outcome would be contrary to what Congress intended.
Under the policy announced last week by the Treasury Department, manufacturers would not face additional U.S. tax if their foreign tax rate is greater than 18.9 percent.