Overview
Title
To amend the Internal Revenue Code of 1986 to repeal the scheduled reduction in the deduction for foreign-derived intangible income.
ELI5 AI
H.R. 1062 is a plan to keep a special money-saving rule the same for big companies that earn money from abroad, instead of letting it shrink, which could help them keep paying less in taxes.
Summary AI
H.R. 1062, introduced in the 119th Congress, aims to change the Internal Revenue Code of 1986 by stopping a planned reduction in the deduction for foreign-derived intangible income. The bill seeks to maintain the current deduction rate at 37.5 percent rather than letting it decrease to 50 percent. This legislative change is intended to take effect as soon as the bill is enacted.
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AnalysisAI
General Summary of the Bill
The proposed legislation, titled the "Growing and Preserving Innovation in America Act of 2025," aims to amend the Internal Revenue Code of 1986 to maintain the existing deduction rates for foreign-derived intangible income (FDII). Specifically, the bill seeks to prevent a scheduled reduction by adjusting the deduction rate from 50% to 37.5%. This action effectively keeps in place the current rate and prevents future reductions that were previously planned. The changes would take effect immediately upon the bill's enactment.
Summary of Significant Issues
A key issue identified in this legislative proposal is the modification of the tax deduction rate for FDII, which changes how certain businesses with significant foreign operations are taxed. There is no contextual explanation provided for this amendment, leaving questions about whether it strategically aims to stimulate specific business activities or if it is purely a fiscal decision. Furthermore, this modification could have implications on federal tax revenue, potentially affecting public services or impacting the budget deficit.
Another aspect worth noting is the assumption of familiarity that the bill’s language displays. It expects readers, including lawmakers and the public, to be knowledgeable about the existing legislative text it seeks to amend, without offering an overview or background of the current provisions. Consequently, this may lead to confusion or misinterpretation.
Finally, the bill lacks guidance on how the changes would be implemented concerning transitional rules or possible grandfathering clauses. This could introduce uncertainty for businesses planning their tax strategies under the previous expectations.
Impact on the Public
Broadly, this bill could have varying implications for the general public. By maintaining the current deduction rate, the legislation might seek to support companies with significant international operations, potentially enhancing their competitiveness and encouraging them to keep jobs and investments within the United States. However, without adequate context, the public might be concerned about the implications on federal revenues and the possible downstream effects on public services or infrastructure should tax revenues decrease.
Impact on Specific Stakeholders
For businesses, particularly multinational corporations with substantial foreign-derived income, this bill could be beneficial as it would allow them to continue benefiting from higher deduction rates, reducing their tax liabilities. Such corporations might be better positioned to reinvest savings into innovation and growth within domestic markets, potentially leading to economic benefits like job creation.
On the downside, small businesses and sectors that do not significantly engage in international operations might not directly benefit from this tax provision, potentially widening the disparity between large and small businesses. Additionally, the absence of transitional and grandfathering provisions might leave some businesses uncertain about the treatment of their current and future financial plans, presenting a risk to strategic planning efforts.
Issues
The amendment to the Internal Revenue Code in Section 2 modifies the deduction percentage for foreign-derived intangible income, altering tax liabilities for certain organizations. It is significant to assess whether this change might unfairly favor certain organizations or sectors, such as large corporations with substantial foreign-derived income.
Section 2 lacks context or rationale for why the scheduled reduction in the deduction is being repealed, leaving unclear whether this is a strategic decision to encourage specific business activities or if it might lead to decreased federal tax revenues, which could impact public services or increase budget deficits.
The legislative language in Section 2 assumes familiarity with the existing content of Section 250(a)(3) of the Internal Revenue Code without providing a summary or background, which might lead to confusion or misinterpretation by lawmakers, stakeholders, and the general public who are not tax professionals.
The effective date provision in Section 2 lacks additional guidance on transitional rules or grandfathering provisions, potentially leaving ongoing matters or compliance efforts uncertain and impacting businesses planning based on previous expectations.
Section 1 only provides a short title—'Growing and Preserving Innovation in America Act of 2025'—without detailing any specific provisions or focused objectives for the Act, rendering it difficult to assess the bill's specific intentions or projected impacts on innovation or the economy.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of the bill states that the official name of the act is the “Growing and Preserving Innovation in America Act of 2025.”
2. Repeal of scheduled reduction in the deduction for foreign-derived intangible income Read Opens in new tab
Summary AI
The bill section proposes a change to the Internal Revenue Code, specifically adjusting how foreign-derived intangible income is taxed by reducing the deduction rate from 50% to 37.5%. This change will become effective as soon as the bill is enacted.