The following article was first published in the Insights section of Marcum’s website. It is republished here with permission.

The outcome of the upcoming presidential election can have a significant impact on federal corporate income tax changes that will be made during the next presidential term.

The success of the next president in passing concrete legislation will depend largely on the composition of the next Congress.

On November 5, 2024, in addition to the office of the president, all 435 seats in the U.S. House of Representatives and 34 seats – 33 of which are held by Democrats or independents – in the U.S. Senate will be up for election.

The results of this election and the upcoming presidential election will determine whether we will have a divided federal government.

Voters are trying to figure out where the presidential candidates stand on taxes. This article only considers former President Donald Trump and Vice President Kamala Harris. Third-party or independent candidates are not considered.

Tax positions

Harris, whose presidential campaign was only recently launched, has not yet revealed much information about her policies and her proposals for changes to tax laws.

She has promised that if elected, she will not raise taxes on people earning less than $400,000 a year.

If Harris is elected, it is possible – but not certain – that her policies and proposals to change the federal income tax on corporations will be similar to those in the 2025 federal budget that President Joe Biden presented to Congress last March.

Changes to the federal corporate income tax proposed in the 2025 budget include the following:

• Increase in the corporate tax rate to 28% (from 21%)
• Increase the rate of the alternative minimum tax on the adjusted annual profit of large companies whose average adjusted annual profit over three years exceeds USD 1 billion to 21% (from 15%)
• Extending the deductibility limitation for employee compensation over $1 million
• Increase in the effective tax rate on foreign profits of multinational C corporations to 21% (from 10.5%)
• Eliminate the deduction for foreign-earned intangible income and redirect the tax revenue generated by the elimination to support research and development in the United States.
• Increase in non-deductible consumption tax on buybacks of corporate shares of certain listed companies
• Limit the deferral of gains from exchanges of like properties to $500,000 (or $1 million if married couples file jointly).
• Require that the gain from the sale of depreciable real property held for more than one year be reclaimed as ordinary income, provided that the gain does not exceed the previously allowed or permissible depreciation.

Trump has proposed cutting the corporate tax rate to 20 percent and taxing large private university endowments.

He has promised to cut taxes if he wins the 2024 presidential election, but has not provided any details.

Some voters believe that large corporations and wealthy individuals would benefit most from such tax cuts.

Trump has also stated that he would consider replacing the federal income tax with a national consumption tax, such as a sales tax, or with tariffs.

Interest expense limits

Federal income tax laws that took effect in 2017 set limits on the amount of net interest expense that companies can deduct.

They also require that research and experimentation expenditures be capitalized and recovered through depreciation over several years, rather than allowing a current deduction.

In addition, the laws provide that the additional depreciation deduction in the first year (“bonus depreciation”) will be gradually abolished by the end of 2026.

If Republicans retake the White House and control both houses of Congress, one or more of these laws could be repealed and old laws restored.

We need to keep a close eye on the tax policies and tax law changes that each of the presidential candidates proposes in the coming months.

About the author: Bonnie Wassall is a senior manager of tax and corporate services at Marcum LLP.