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Tax Changes to Monitor in the American Jobs Plan

By: Mindy Kamen

The American Jobs Plan, President Biden’s $2.25 trillion infrastructure plan introduced March 31, is an eight-year program that will allocate nearly $620 billion for transportation projects. It includes $111 billion to replace 100% of the nation’s lead pipes and service lines to upgrade drinking water, wastewater and stormwater systems while supporting clean water infrastructure throughout the country, $100 billion for high-speed broadband internet improvements and another $100 to modernize the nation’s power infrastructure system.

But it’s how the plan will pay for itself – the tax implications and changes – that is of interest for businesses. The Janover team is closely monitoring developments related to the American Jobs Plan to provide you with assistance and clarification as more concrete details become available. If you have questions on how this latest proposal may impact your business, please contact your Janover professional.

Potential Tax Implications

The American Jobs Plan, as proposed March 31, 2021, aims to adjust Tax Cuts and Jobs Act corporate tax code revisions to further incentivize job creation and investment in the United States and limit profit shifting to tax havens. Tax modifications as proposed March 31 will:

  • Set the corporate tax rate at 28% to help fund critical investments in infrastructure, clean energy, research and development, and more.
  • Increase the minimum tax on U.S. corporations to 21% and calculate it on a country-by-country basis.
  • Eliminate a rule that allows U.S. companies to pay zero taxes on the first 10% of return when they locate investments in foreign countries.
  • Prevent U.S. corporations from inverting or claiming tax havens as their residence.
  • Eliminate write-off expenses that come from offshoring jobs, while providing a tax credit to support onshoring jobs.
  • Eliminate a loophole for intellectual property that encourages offshoring jobs and invest in research and development incentives. This starts by eliminating TCJA tax incentives for “Foreign Derived Intangible Income” (FDII), which provide corporations a tax break for shifting assets abroad.
  • Enact a 15% minimum tax on the income corporations use to report profits to investors, known as “book income.”
  • Eliminate tax preferences for fossil fuels and ensure industries that lead to pollution pay for environmental cleanup. The proposal also will restore payments into the Superfund Trust Fund.
  • Ensure the Internal Revenue Service has the necessary resources to effectively enforce tax laws against corporations. This will be paired with a broader enforcement initiative to be announced in the coming weeks that will address tax evasion among corporations and high-income Americans.
  • Deny deductions to foreign corporations on payments if they are based in a country that does not adopt a strong minimum tax. It also will replace a TCJA provision that attempted to stop foreign corporations from stripping profits out of the United States.

Funding for Earmarked Initiatives

As proposed, the tax modifications within the American Jobs Plan will pay for the nearly $620 billion in transportation work and $650 billion for initiatives such as cleaner water and high-speed broadband. The manufacturing sector is set to receive $580 billion, with $180 billion of that going to the largest non-defense research and development program on record, and another $400 billion to support care for the elderly and disabled. While not all inclusive (click here to read the full proposal), the plan aims to provide:

  • $115 billion to modernize nearly 20,000 miles of bridges, highways, roads and main streets, which includes funding to improve air quality, limit greenhouse gas emissions and reduce congestion.
  • $20 billion to improve road safety for all users, including increases to existing safety programs and a new Safe Streets for All program to fund state and local “vision zero” plans and other improvements to reduce crashes and fatalities.
  • $85 billion to modernize existing public transportation, including buses, rail cars, stations, track, signals, and power systems in need of replacement, while helping agencies expand their systems to meet rider demand.
  • $80 billion to address Amtrak’s repair backlog; modernize the high traffic Northeast Corridor; improve existing corridors and connect new city pairs; and enhance grant and loan programs that support passenger and freight rail safety, efficiency and electrification.
  • $174 billion to grow the electric vehicle market. This includes customer rebates and tax incentives to buy American-made electric vehicles; grant and incentive programs for state and local governments and the private sector to build a national network of 500,000 EV chargers by 2030, replacing 50,000 diesel transit vehicles; converting at least 20% of the yellow school bus fleet through a new Clean Buses for Kids Program at the Environmental Protection Agency; and transforming the federal fleet, including the United States Postal Service, to electric vehicles.
  • $25 billion, including funding for the Airport Improvement Program, to upgrade FAA assets and create a new program to support terminal renovations and multimodal connections for car-free access to air travel.
  • $17 billion for inland waterways, coastal ports, land ports of entry and ferries, which includes a Healthy Ports program to mitigate impacts of air pollution on neighborhoods near ports.
  • $20 billion to reconnect neighborhoods cut off by transportation investments and ensure new projects increase opportunity, advance racial equity and environmental justice, and promote affordable access.
  • $25 billion to support projects that benefit the regional or national economy but are too large or complex for existing funding programs.
  • $56 billion in grants and low-cost flexible loans to states, Tribes, territories and disadvantaged communities to upgrade and modernize wastewater and stormwater systems; tackle new contaminants; and support clean water infrastructure throughout rural America.
  • $10 billion to monitor and remediate PFAS (per- and polyfluoroalkyl substances) in drinking water and to invest in rural small water systems and household well and wastewater systems, including drainage fields.

As the American Jobs Plan moves through Congress, the Janover team will monitor developments and provide you with assistance and clarification as more concrete details become available. If you have questions on how this latest proposal may impact your business, please contact your Janover professional.



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