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H.R. 995: No Tax Breaks for Outsourcing Act

The "No Tax Breaks for Outsourcing Act" seeks to amend the Internal Revenue Code with the goal of eliminating tax benefits that multinational corporations currently receive for outsourcing jobs and investments overseas. The legislation targets aspects of the tax system that allow these corporations to reduce their tax liability through various credits and deductions related to income generated outside of the United States.

Key Provisions

Disallowed Tax Benefits: The bill disallows tax advantages for corporations that generate income from foreign investments and operations. This means that companies may no longer be able to claim certain deductions that significantly reduce their taxable income when they have operations or income outside the U.S.
Foreign Tax Credits: The bill also focuses on revising the rules regarding foreign tax credits, which allow companies to reduce their U.S. tax burden based on taxes paid to foreign governments. Under this new legislation, the amount that can be credited for those payments may be limited.
Treatment of Carryover Interest: The legislation includes provisions for how disallowed interest can be treated moving forward. Specifically, it states that any disallowed interest that a corporation cannot deduct will be considered part of a pre-change loss. This change is set to take effect for tax years beginning after December 31, 2024.
Inverted Corporations: The bill aims to define the treatment of "inverted corporations" (those that were originally U.S.-based companies but then moved abroad to minimize tax obligations). Under the new provisions, if such corporations are primarily managed within the U.S., they will still be classified as domestic for tax purposes, subjecting them to U.S. taxation laws regardless of their incorporation status.

Objective and Implications

The overarching objective of this legislation is to ensure that U.S. corporations contribute fairly to the tax system by minimizing the loopholes that allow for significant tax advantages when outsourcing operations. The bill seeks to encourage corporations to maintain and grow their operations within the U.S., primarily by eliminating incentives to relocate or invest overseas.