H.R. 995: No Tax Breaks for Outsourcing Act

For most of the last decade, the U.S. tax code has charged a lower rate on profits earned overseas than on profits earned at home. The 2017 tax overhaul created a new category for foreign-subsidiary earnings and layered on a special deduction that effectively cut the rate well below the 21% domestic corporate rate. A similar discount applies to certain foreign-derived income earned by U.S. companies.

H.R. 995, the No Tax Breaks for Outsourcing Act, scraps that deduction outright. It also tightens the math two ways. First, it removes the rule that exempts a 'deemed return' on tangible foreign assets — a carve-out critics say rewards companies for placing plants and equipment overseas. Second, it forces multinationals to calculate offshore taxes country by country, rather than pooling high-tax and low-tax foreign income together to wash out the U.S. bill on the low-tax side.

The bill also tightens three back-end rules. It caps interest deductions for U.S. members of international groups that report more than $100 million in average annual receipts. It hardens the rules on corporate inversions — the maneuver where a U.S. firm reincorporates abroad by merging with a smaller foreign company — by adding a stricter test that catches deals where former U.S. owners keep more than 50% or where the merged firm is still managed from the U.S. And it treats foreign corporations 'managed and controlled' from the United States, with at least $50 million in assets, as domestic for tax purposes — closing a structure common in offshore investment funds.

The sponsor is Rep. Lloyd Doggett (D-Texas). The bill carries 134 House cosponsors, all Democrats, and is endorsed by the Congressional Labor Caucus. With Republicans controlling the House Ways and Means Committee, the bill is unlikely to advance on its own — but its provisions are the kind of revenue-raisers Democrats often push to fold into broader tax packages.