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Global Tax Insights

The Latest Word on the Candidates’ Tax Reform Proposals

August 10, 2016

Manufacturers, read up on potential changes to business & international taxes under the two major presidential candidates’ proposals.

Taxes are a hot button for business owners, especially during a presidential election year. KLR’s 2016 Manufacturing Industry Survey report shows that 43% of respondents expect taxes to increase or significantly increase over the next year, while 49% expect their tax burden to remain unchanged.

Here’s a closer look at the two major presidential candidates’ key positions on federal tax issues most relevant to manufacturers.

Business Taxes

Should your company defer taxable income — or take the hit in the current tax year? When’s the right time to invest in capital projects, employee retention or community development? Here’s insight on how the candidates’ proposals might affect these decisions.

Clinton. She has no specific proposal on corporate tax rates, but she favors a two-year, 15% tax credit for businesses that share profits with workers and a $1,500 apprenticeship tax credit. Under the Clinton plan, businesses would also be eligible for tax credits for investing in community development and infrastructure. She’d eliminate tax incentives for fossil fuels.

Trump. He proposes a flat corporate tax rate of 15%, but would eliminate or reduce many corporate “loopholes” and impose a phased-in cap on deductibility of business interest. He would also extend the 15% tax rate to income from pass-through entities, rather than taxing this income at personal income tax rates.

International Tax

Can your company save taxes by moving its tax residence abroad? Both candidates have plans to curb corporate inversions and other strategies that some domestic companies use to avoid paying U.S. taxes.

Clinton. She favors stronger rules to deter corporate inversions, including an exit tax on unrepatriated earnings of U.S. companies that engage in inversions. She also plans to discourage U.S. affiliates of multinational companies from engaging in “earnings stripping” by limiting their interest deductions.

Trump. He’d eliminate income deferral from controlled foreign subsidiaries and impose a one-time deemed repatriation tax of 10% on currently deferred foreign profits. He contends that, by lowering corporate income taxes to 15%, U.S. tax rates would be more competitive globally and fewer companies would move abroad to lower taxes.

The Best Laid Plans

While a president may be influential in federal tax law changes, no president can implement his or her proposals alone — and an individual candidate’s position may change, depending on market conditions and other factors. Whether or not these proposals become law also depends on who’s elected to Congress.

It’s a long road to November. But, rest assured, our team of global tax specialists is monitoring the candidates’ positions to provide our clients with the best possible tax planning advice for the coming year.

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