On March 25, 2022, Senator Bernie Sanders (I-VT) introduced a new bill, “Ending Corporate Greed Act”, which coincides close in time with the release of Treasury’s Green Book, “General Explanations of the Administration’s Fiscal Year 2023 Revenue Proposals”.  The two proposals have different approaches to increasing revenue, and it seems unlikely that both could be supported by Democrats in the Senate.

Ending Corporate Greed Act

The Ending Corporate Greed Act, is at its base a proposal to strip corporations of excess profits by taking excess profits at an annual rate of 95% with a limitation of 75% of modified taxable income of the taxpayer.  (See Ending Corporate Greed Act, Section 59B(a) and (b)).  Excess profits are the modified taxable income in a current year over the average of “inflation adjusted modified taxable income” of the taxpayer for years beginning in 2015 through 2019. (See Id. (c)(1)).  “Inflation adjusted modified taxable income” is income from the applicable year modified to take into account inflation. (See Id. (c)(2)).  For example, the 2015 inflation adjusted modified taxable income of a corporation would be the 2015 adjusted gross income multiplied by a cost of living adjustment.

The Ending Corporate Greed Act does not seem to take into account companies which may operate in a loss position for some years before returning to profitability. For example, mining enterprises or even oil and gas companies may generate significant losses for several years before changing market conditions create significant profits. In other words, some enterprises function in highly volatile markets, or markets that require significant investments in capital before returns are generated.  Mechanically, under the Ending Corporate Greed Act, such companies would be deemed to have a windfall with excess profits in the year in which significant profits are finally earned.

Notably the proposal in the Ending Corporate Greed Act is only applicable to companies with annual gross receipts over the past three years of at $500 million (See Id. (e)(1)(B)).  It is difficult to say how many companies have gross receipts above $500 million annually, but it is safe to say that they would likely be among the largest publicly-traded enterprises or largest privately-held enterprises.  The act does not apply to RICs, REITs, or S corporations, however.

Build Back Better Act

All told, the Ending Corporate Greed Act is unlikely to generate much support in the Senate, when compared to Treasury’s release, also in March 2022, of its Green Book, “General Explanations of the Administration’s Fiscal Year 2023 Revenue Proposals”, which provides new proposals from the Biden administration to raise revenue. The Green Book purports to be aimed at modifying (or kickstarting momentum for) the Build Back Better Act which was passed by the House of Representatives in November of 2021, but appeared to be dropped as politicians on the hill appeared to turn focus to the conflict in Ukraine.

Any Hope for Bernie?

The two proposals, Ending Corporate Greed Act and Build Back Better Act, share very little in common by way of mechanics or approach. The proposal from Bernie Sanders is most likely to appeal to Democrats, who will be under pressure to support the Biden administration’s approach to tax reform.

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