In preparation for a Senate hearing on corporate integration, the Staff of the Joint Committee on Taxation has published “Overview of Approaches to Corporate Integration.” The paper is available.
The Joint Committee’s analysis covers what is familiar ground for many, suggesting systems that have been tried and abandoned in some countries and systems still in effect in others – different tax rates on distributed and undistributed earnings, distribution deductions, and shareholder credits. In each case, the suggested solution requires a corporate distribution, limiting a company’s ability to grow efficiently and placing new and expanding companies at a disadvantage relative to larger and stable (or declining) enterprises.
The report does not propose or discuss notional deductions for equity that place debt and equity on equal footing as part of the solution.
The variety of approaches to the issue of corporate integration and the changes in policies globally over time demonstrate that there is no single “perfect” solution. However, the narrowness of the discussion in the Senate on this subject to the exclusion of other pressing issues demonstrates again the need for comprehensive international tax reform in the United States.