The House Ways and Means Committee voted on Tuesday to advance a bill sponsored by Rep. Don Beyer, D-Va., that would allow companies to use a complex network of accounting, tax, and compliance-related services to avoid paying taxes on their overseas profits.
The legislation would allow corporations to deduct their overseas income taxes from their U.S. federal income taxes for a period of five years after their foreign profits are declared.
The measure would also make it more difficult for corporations and foreign subsidiaries to shift profits from one country to another, but it would allow foreign subsidiaries of American corporations to continue to claim their foreign income on U.M.S.-held foreign income.
The bill was introduced in July and has passed the House by a vote of 217-195.
The vote was a victory for corporate America.
The proposal has bipartisan support, and it would likely be a first step toward legislation by President Donald Trump that would extend tax breaks for American corporations and their overseas subsidiaries, a measure that would be unpopular with the GOP base.
Beyer’s bill is aimed at encouraging foreign corporations to use such tax breaks to shift their profits overseas, which would be the first of its kind.
It would allow multinationals to claim a “corporate windfall,” which would reduce the tax liability of the company and make the profits available to other U.s. businesses.
In other words, corporations would be allowed to shift foreign profits from their foreign subsidiaries into their own accounts, and then deduct them from their taxes on U:S.
But this would be an exception to the general rule that foreign profits must be taxed on their domestic earnings, and would require U.F.C.s approval.
The tax-code language that is currently in place would allow for such an exception.
It is also likely to be supported by Beyer’s Democratic colleagues in the House, who are worried about a backlash by conservatives against the bill if it is passed.
“The bill is meant to help American companies and American families, and that’s what it does,” said Rep. David Cicilline, D.R., the ranking Democrat on the Ways and Mean Committee.
“We need to get the money out of the U.K. tax system.
This is just one way to do that.”
Beyer did not return requests for comment from Business Insider.
Trump has called for a “border tax” on foreign profits to help pay for the border wall.
Beyer has said that it would make sense for U.N. members to collect fees from corporations that shift profits to their tax havens, so they would be able to avoid taxes.
“That would be a great incentive to shift our profits to the U, where the tax is the lowest,” Beyer told reporters in July.
“The reason the tax should be so low is that if you shift profits abroad, you have a very low tax bill, and we need that money, because we have to pay the border taxes.”