Key takeaways

• Yesterday, the Administration and leaders of the Congressional tax-writing committees released a “unified framework” for tax reform legislation that would significantly lower tax rates (including a 20% corporate income tax rate).
• The framework upends many fundamental and long-standing principles of the U.S. income tax system, for example by eliminating most itemized deductions, limiting the ability of C corporations to deduct interest and altering the taxation of non-U.S. earnings.
• The framework would replace the current worldwide U.S. taxation system with a territorial system that taxes U.S. multinational corporations only on income related to the United States, and it would impose a one-time tax on all existing foreign earnings (at rates to be determined).
• However, the framework also proposes a new global tax on foreign profits that would undercut the effect of adopting a territorial system of taxation.
• The framework is short on details and leaves many specifics to be decided by Congress in drafting the legislation, which will add uncertainty to the deal-making environment.