Harris and Trump on Tax: Top 5 Tax Issues for Companies To Watch

With a new President entering office in January 2025 and many key Tax Cuts and Jobs Act provisions expiring (TCJA) on December 31, 2025, both sides of the aisle are teeing up a massive effort to renew, extend, roll back, or make permanent various provisions of former President Trump’s signature tax bill and President Biden’s signature climate bill. Just about every business sector will be impacted by how Congress and the new administration approach TCJA and other tax issues. Here is a sneak peek into the top five issues our tax and policy experts expect to come up in that debate based on the campaign positions of Vice President Harris and former President Trump.

1. Change in the Corporate Tax Rate. Both the Harris and Trump campaigns have proposed changes to the corporate tax rate. Trump recently proposed reducing the statutory corporate income tax rate from 21% to 15%, but his view on changes to the corporate alternative minimum tax rate is unknown at this time. The Harris campaign has proposed raising the corporate statutory interest rate to 28% and the corporate alternative minimum tax rate to 21%. The Congressional appetite for this change largely depends on who controls Congress. Republicans are expected to support the Trump campaign’s proposal. Democrats, while expected to support the Harris campaign, have expressed some concern with rate changes.
2. Research and Development Expensing. In 2017, Congress changed the longstanding tax treatment for research and development expenditures. Beginning in tax year 2022, companies were required to capitalize R&D costs and amortize them over a five-year period for domestic research and over 15 years for foreign research. Prior to the 2017 law change, companies could deduct 100% of research and development expenses in the year the expenses were incurred. Both Democrats and Republicans have expressed support for restoring full R&D expensing—a Senate bill that would do this has 43 bipartisan cosponsors. There is a good chance this change could be included in future tax packages.
3. International TCJA Provisions and International Tax Reform. International tax reform is expected to be front and center on both parties’ agendas due to upcoming changes to Global Intangible Low-Taxed Income (GILTI), Foreign-Derived Intangible Income (FDII), and Base Erosion and Anti-Abuse Tax (BEAT) rates and a deadline to align GILTI with Pillar 2. The Biden administration proposed increasing the GILTI rate from 21%, repealing the FDII deduction, and replacing BEAT with the OECD Pillar 2 untaxed profits rule. The Harris campaign hasn’t specifically addressed this issue yet, but is expected to take a similar approach. The Republicans are expected to push for a reduction in the GILTI rate to 12.5%, a change in the FDII effective rate to 15%, and an increase to the BEAT rate to 12.5%.
4. Inflation Reduction Act Clean Energy Tax Credits. The 2022 Inflation Reduction Act (IRA) created new and enhanced tax credits to incentive investment in renewable energy projects and technologies, as well as providing new ways to monetize the tax credits. While many Republicans have vowed to fully repeal the IRA, more recently lawmakers have indicated that they support cutting some parts of the IRA while keeping others. On the other hand, a Democratic majority would keep and try to expand some of the IRA provisions.
5. IRS Compliance and Enforcement Efforts. The IRA provided the IRS with supplemental funding, which is being used to increase compliance and enforcement actions, update antiquated IRS computer systems, and improve IRS customer service. The IRS has focused some of its IRA resources on strengthening its enforcement efforts to pursue complex partnerships, large corporations and high-income, high-wealth individuals. A Democratic majority would likely do everything in its power to keep what is left of the $80 billion of IRS funding under the IRA. Republicans, on the other hand, may try to clawback the funds as the Republican led House of Representatives proposed earlier this year. The difficulty with the Republican’s proposal is that the Congressional Budget Office (CBO) estimated clawing back $25 billion in enforcement money would actually end up costing up to $12.5 billion because it would reduce tax enforcement efforts and ultimately tax collection.

It is unclear how Trump would approach this issue. In his previous administration, Trump initially expressed support for reducing IRS enforcement funding, but in later budgets, proposed modest increases in IRS funding. If Trump considers Republican proposals to claw back or reduce IRS funding, he will need to weigh the revenue implications of cutting IRS funding against other priorities like his desired tax cuts.

Key Takeaways

Both Democrats and Republicans will face pressure to find ways to pay for these tax revisions, which calls into question which tax programs will be on the table for potential repeal. Trump has proposed offsetting some of the costs for his tax cuts with tariffs. Some Republicans in Congress appear open to that idea, but others are skeptical of the approach. Harris would pay for her tax proposals by increasing corporate and individual tax rates in various ways.

While multiple election outcomes are possible, it is likely that we will continue to see divided governmental control and the need for bipartisan agreement to move these tax initiatives forward. The Crowell team stands ready to help you further your company’s business interests in the tax and other policy arenas in these continuously changing and opportunistic times.

Please register here to join our Government Affairs team live on October 24th at our 38th Annual Managing Tax Audits and Appeals Seminar on October 24th where we will continue to discuss possible election outcomes and tax policy changes. The seminar will feature our tax controversy team, who will cover hot topics in IRS audits and disputes.