Currently, the U.S. uses a worldwide system that taxes U.S.-based multinationals' profits no matter where they are earned. However, the tax on foreign-earned income can generally be deferred until the money is repatriated to the U.S., says Christian. And therein lies the problem. This system can discourage domestic corporations from putting their foreign profits to use in America.

Furthermore, the current 35% top corporate rate is high for an industrialized nation. That hurts U.S. companies' competitiveness on the global stage, although a sea of tax breaks can lower the average rate actually paid-sometimes to zero, if not below. (Think GE.)

Agreement stops here. The incumbent wants to stick with a worldwide system and institute an unspecified minimum tax on the profits of U.S. corporations' foreign subsidiaries, even if those earnings remain offshore. To reduce that tax, corporations would be allowed a foreign tax credit for income taxes paid to the host country, Christian explains.

The idea is to make sure American companies pay tax on their foreign profits, even when their subsidiaries are located in low-tax or no-tax havens. By taxing foreign profits immediately, rather than waiting until they are repatriated, the U.S. system removes any benefits the companies have in leaving the profits overseas.

Obama also wants to deny businesses a moving-expense deduction for moving operations offshore. He has proposed a 20% tax credit for companies moving operations back to America.

To pay for lowering the domestic corporate tax rate to a proposed 28% (or to 25% for manufacturers), Obama would eliminate numerous tax breaks, including the last-in first-out (LIFO) method of inventory accounting. When the cost of goods rises, during inflationary times, for example, or when industries are susceptible to fluctuating supply prices, LIFO yields a larger write-off for the cost of goods sold, lowering current taxes.

Nixing LIFO would hurt select businesses immediately, such as oil and gas retail operations and grocers, according to Christian. "Down the road, this could be a big issue for a lot of businesses if we get into a hyper-inflation period," he warns.

Territorial
Like Obama, Romney is in favor of eliminating corporate breaks, although he hasn't specified which ones. But he seeks a lower tax rate, 25%. He also wants to repeal the corporate AMT.

Internationally, Romney prefers a territorial tax system where the profits of companies are taxed only where they are earned. "Many of our trading partners have territorial tax systems, and a lot of people, including some Democrats in Congress, think it would even the competitive game if we had a similar system," says Luscombe, but he adds that Obama sees this as rewarding companies to move operations overseas.

A related issue is what to do about foreign profits that American companies have been accumulating overseas. Romney has proposed a repatriation tax holiday without indicating whether corporations would pay a reduced rate or no tax at all on accumulated foreign earnings brought back home. Obama opposes a tax holiday.