Key takeaways

• The Senate Finance Committee released a detailed summary of its tax reform proposal, following the release a week earlier of the House proposal.  Although there are many similarities between the two proposals, there are also significant differences, which likely means there will be a complex legislative process ahead.
• Dealmakers will now have to navigate two sets of proposals, adding complexity to the deal environment.
• Both proposals significantly lower the corporate income tax rate to 20% and alter fundamental principles of the U.S. income tax system.  For example, the proposals eliminate most itemized deductions, limit the deduction for interest expense, impose broad anti-base erosion rules, and alter the taxation of insurance companies and of non-U.S. earnings.  The Senate proposal also includes radical changes to the taxation of deferred compensation that were dropped from a previous House proposal.
• Both proposals 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 impose a one-time tax on all existing foreign earnings.  Both proposals also impose a new minimum tax on “excess” foreign profits, particularly those generated from intangibles.