President Obama’s Fiscal Year 2016 Revenue Proposals: Proposals Relating to Taxation of Offshore Profits of U.S. Corporations

Sullivan & Cromwell LLP - February 2, 2015

On February 2, 2015, the Obama Administration (the “Administration”) released the General Explanations of the Administration’s Fiscal Year 2016 Revenue Proposals (commonly known as the “Green Book”), which contains significant detail about the fiscal year 2016 revenue proposals.

This memorandum discusses certain aspects of the Green Book relating to taxation of offshore profits of U.S. corporations and their subsidiaries.  Subsequent memoranda will address Green Book proposals relating to (1) other international taxation issues (including with respect to limiting so-called “excess” interest deductions under Section 163(j)), (2) domestic business taxation, and (3) individual, retirement plans, and estate and gift taxation, all of which may be obtained at a later date by following the instructions at the end of this memorandum.

The Green Book’s proposals relating to taxation of offshore profits of U.S. corporations and their subsidiaries intend to limit deferral of profits offshore and, at the same time, to reduce the disincentive in repatriating such profits onshore.  The proposals include:

  • imposing a 19% minimum tax on U.S. corporations’ future foreign profits, with generally an 85% credit for associated foreign taxes paid; and
  • imposing a one-time, immediate 14% tax on U.S. corporations’ current accumulated overseas earnings, with generally a 40% credit for associated foreign taxes paid.