Chairman Camp's proposal to bring the money home.

• Author: Lapsevic, Karen
• Position: WASHINGTON BEAT - Dave Camp

Veterans of the Tax Reform Act of 1986 are quick to point out that enactment of that landmark law took time. They also advise that future legislation should be done with broad bipartisan support. Offering last year's GOP-led effort to repeal the Patient Protection and Affordable Care Act of 2010 as an example, they say that would forestall subsequent efforts to repeal or make wholesale changes to the law.

It is tempting for the ruling party to push through legislation on high-profile, controversial issues such as Oba-maCare with minimal disclosure when it has the votes. Former House Speaker Nancy Pelosi (D-Calif.) famously said, "We have to pass the health care] bill so you can find out what's in it." On the other hand, too much exposure can kill a bill.

While Congress marks time until November's elections, Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee, is taking the high road by putting forth for public comment a proposal for one component of comprehensive tax reform legislation. The Oct. 26 discussion draft would lower the top corporate tax rate to 25 percent and adopt a territorial tax system (i.e., a participation exemption system). The plan responds to calls to make American companies and the U.S. more competitive in the global marketplace, where most competitors adhere to lower corporate tax rates and territorial lax systems. Still, a 25 percent nominal tax rate puts the U.S. in the middle of the pack.

The discussion draft would provide a 95 percent dividends-received deduction for dividends paid out of the foreign-source income. This deduction would apply to a controlled foreign corporation (CFC) of a U.S. shareholder that is a C corporation and has owned 10 percent or more of CFC stock for a consecutive 365-day period in which the dividend was paid. The resulting tax rate on qualifying dividends would be 1.25 percent. U.S. shareholders may elect to treat a 10 percent-owned, non-controlled foreign company (i.e., 1 0/50 corporation) as a CFC. First-tier foreign branches also would be deemed CFCs.

No foreign tax credits are allowed with respect to dividends (hat qualify for the deduction and withholding would be neither deductable nor creditable. A simple example shows that $100 of foreign income in a country with a 20 percent tax rate would result in a $10 tax savings.

The Camp plan, however, would require that $10 lost to the U.S. Treasury be made up elsewhere. Summary documents state that the discussion...