The Wyden-Brown-Warner plan makes significant changes to the current international tax system, while requiring a less extensive rewrite than the Biden administration’s proposals—which include many of the same principles.

The Senate plan retains many of the same acronyms in existing law, while changing the underlying words.

For example, the tax deduction for foreign-derived intangible income, or FDII, changes to “foreign-derived innovation income.” The deduction would require companies to invest more in R&D and jobs domestically in the U.S. in order to claim the tax break.

Wyden also says that companies should pay more taxes on their offshore profits—what is currently known as global intangible low-taxed income, or Gilti. Gilti becomes “global inclusion of low-tax income,” in the Senate proposal.

Both Biden and Wyden have called for companies to calculate their overseas taxes on a country-by-country basis, a move that will give companies less room to reduce their bills. But the Senate plan takes a simpler approach—separating out all high-tax countries into a separate group, avoiding the need of a location-by-location breakdown.

Income earned in locations with low tax rates can be grouped together, with the American firm making a payment to the Internal Revenue Service based on that pool.

Writing comprehensive tax rules that encourages large U.S. countries to pay more taxes domestically has been a conundrum for policymakers for decades as creative tax lawyers for large companies have been able to exploit lower tax rates in other countries, including Bermuda and Ireland. More than 130 countries signed onto an agreement earlier this year that seeks to reverse this trend by instating a 15% minimum corporate tax rate worldwide. The deal is slated to be finalized at the Group of 20 meeting this October, but could take years to implement.

There’s a compressed schedule to finish the text-writing in Congress. The budget resolution that advanced through the Senate and House setting up the reconciliation process set a Sept. 15 deadline for committees to finish their work.

Wyden’s counterpart, House Ways and Means Chairman Richard Neal, said he plans to begin considering his version of the tax legislation as soon as Sept. 9, after which the Senate Finance panel could move on its package. The Constitution requires that tax legislation begin in the House.

This article was provided by Bloomberg News.

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