This Note begins with commentary on the United States’ former worldwide system of taxation. This system taxed multinational corporations’ offshore profits at the applicable domestic income tax rate less credits for taxes paid to foreign governments. This tax regime provided for the deferral of income tax due on the profits of multinational corporations’ overseas operations until the time of repatriation. This Note considers the issues inherent in this system and analyzes the repatriation tax holiday under the American Jobs Creation Act of 2004. This holiday has been unanimously criticized by both sides of the political aisle and led to large multinational corporations stockpiling offshore profits at an even higher rate, likely in anticipation of more favorable legislation. This Note then contends that subsequent legislation aimed at altering the repatriation tax was viewed warily by members of Congress, who were cognizant of the holiday’s many failures. This Note concludes with an analysis of the Tax Cuts and Jobs Act, which replaced the United States’ former worldwide taxation system with a territorial taxation system. This new system, which does not tax multinational corporations’ foreign profits, rightly worries many commentators. However, anti-base erosion measures, a lower corporate income tax rate, and an influx of foreign-held cash may quell any negative effects this transition may have.
Joshua D. Harms, Legislative Foundation of the United States' New International Tax System, 42 SEATTLE U. L. REV. 211 (2018).