WASHINGTON (dpa-AFX) - The U.S. Department of the Treasury and Internal Revenue Service (IRS) have proposed a new rule that aims to increase tax fairness and address significant corporate tax avoidance by some of the largest and most profitable U.S. corporations.
The new rule would make it a statutory requirement that the biggest corporations pay a minimum 15 percent tax on profits reported to shareholders, with certain adjustments. If implemented, the Corporate Alternative Minimum Tax, or CAMT, is estimated to generate $250 billion over the next 10 years, and $20 billion in 2025.
Treasury estimates that around 100 of the largest and most profitable U.S. companies will pay the CAMT annually. These corporations would have otherwise paid an average effective federal tax rate of 2.6 percent.
That's because some of the largest and most profitable corporations in the country use tax preferences and aggressive planning strategies to pay little to no taxes. These corporations report record profits to shareholders while often paying lower tax rates than nurses, firefighters, police officers, and teachers. Their ability to use complex strategies to avoid tax also gives them an unfair competitive advantage over small businesses, which don't have access to the same tax planning techniques and high-paid lawyers and accountants.
The CAMT helps level the playing field for small businesses by imposing a minimum tax on the profits that the largest corporations report to their shareholders, the Treasury says.
The Treasury made it clear that the CAMT only applies to large corporations that average more than $1 billion in profit per year, not $1 billion in sales. In addition, if these corporations pay regular taxes that equal or exceed 15 percent of their adjusted profits, they would pay no additional tax.
'The proposed rules released by Treasury today are an important step toward realizing Congress' efforts to address the most egregious U.S. corporate tax avoidance and ensure the largest and most profitable corporations in the country cannot pay little to no taxes,' said Secretary of the Treasury Janet Yellen.
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