For years, the United States had the highest corporate tax rate among industrialized nations. The system was outdated and out of step with the rest of the world. Caterpillar was among those advocating for comprehensive tax reform.
In December 2017, Congress passed, and the President signed into law, the “Tax Cuts and Jobs Act of 2017,” the first major tax reform enacted in the U.S. since 1986. This law addresses many of Caterpillar’s priorities:
- Lowers the corporate tax rate permanently to 21%, starting in 2018, which puts the U.S. right in the average of OECD countries around the world. The current average corporate rate of the major industrial countries is 24% including state/local taxes;
- Reforms pass-through rates, which is positive for our dealers and suppliers (although this expires in 2025);
- Moves the United States to a modified territorial system that should create a more level playing field for U.S.-based companies;
- Allows access to our overseas cash and helps ensure continued access;
- Eliminates the corporate Alternative Minimum Tax (AMT); and
- Allows full and immediate expensing on capital investments for five years.
Caterpillar will continue to work with lawmakers and regulators to ensure the law is implemented according to legislative intent.