Companies Revisit Financial Forecasts Ahead of Potential Tax Changes

New initiatives could impact business costs under the incoming Biden administration. Vertex Principal Economist & Tax Policy Advisor George Salis notes how potentially raising the global intangible low-taxed income, or GILTI rate plus a reintroduction to the alternative minimum tax could result in increased tax burdens for corporations. 

Companies are increasing their financial forecasting and planning to prepare for potential changes to the U.S. tax code under the incoming Biden administration. Which include changes to rules on GILTI. This could result in a higher tax burden for companies. Under GILTI, companies set out their tangible foreign assets and don’t have to pay taxes on 10% of the total. Above that threshold, GILTI creates a 10.5% floor through 2025 on what U.S. companies pay in foreign taxes, providing them with foreign tax credits.

Mr. Biden has suggested raising the GILTI rate to 21%. Combined with the proposed reintroduction of an alternative minimum tax, which was taken away in the 2017 Tax Cuts and Jobs Act, such proposals could result in “significant increases,” said George Salis, principal economist and tax policy adviser at Vertex Inc., a compliance software and services company.

Also, certain allowances that currently help companies reduce their tax burden, such as the provision on Qualified Business Asset Investment (QBAI) companies rely on to calculate how assets are treated for the application of GILTI, could be removed.