International Carrots and Sticks Under the Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act reduced the U.S. corporate income tax rate from 35% to 21% effective 1/1/18. It also shifted U.S. taxation of multinational corporations from a system of worldwide taxation with deferral to a hybrid territorial system, featuring a participation exemption regime with current taxation of certain foreign income, a minimum tax on low-taxed foreign earnings, and new measures to deter base erosion and promote U.S. production.

Each student will be writing a paper on key elements of the new system, as compared to the pre-existing regime. You will not work in groups for this assignment. Your paper should explain the following concepts:

• What it means to be a territorial system with a participation regime as compared to a worldwide taxing system;

• How the U.S. will avoid U.S. base erosion through the use of a base erosion anti-abuse tax (BEAT);

• How global intangible low-taxed income (GILTI) will subject some low-taxed foreign income to current U.S. taxation; and

• How the U.S. will encourage U.S. production and exports by providing a deduction to foreign-derived intangible income (FDII).

Published articles, our text, journals and Big Four releases will be your primary research tool.