Baucus and his counterpart in the House, Rep. Dave Camp, R-Mich., chairman of the tax-writing House Ways and Means Committee, have committed to drafting comprehensive tax reform legislation this year after making joint appearances around the country this year to listen to taxpayer concerns.

Tax All Foreign Income of U.S. Companies Immediately or Not at All. The staff discussion draft ends the lock-out effect and replaces the deferral system with a new, more competitive system under which all income of foreign subsidiaries of U.S. companies is taxed immediately when earned or is exempt from U.S. tax, after which no additional U.S. tax is due.

Specifically:

• Passive and highly-mobile income is taxed annually at full U.S. rates
• Income from selling products and providing services to U.S. customers is taxed annually at full U.S. rates with limited exceptions 
• The staff discussion draft includes two options for taxing income from products and services sold into foreign markets: 
• A minimum tax that immediately taxes all such income at [80%] of the U.S. corporate tax rate with full foreign tax credits, coupled with a full exemption for foreign earnings upon repatriation 
• A minimum tax that immediately taxes all such income at [60%] of the U.S. corporate rate if derived from active business operations but at the full U.S. rate if not, coupled with a full exemption for foreign earnings upon repatriation
• Earnings of foreign subsidiaries from periods before the effective date of the proposal that have not been subject to U.S. tax are subject to a one-time tax at a reduced rate of, for example, 20%, payable over eight years 
• Unless otherwise noted, credits are allowed for taxes paid to foreign jurisdictions to the extent the associated income is subject to U.S. tax 

 Eliminate Opportunities to Avoid U.S. Tax on U.S. Income. The staff discussion draft:  

• Limits interest deductions for domestic companies to the extent that the earnings of their foreign subsidiaries are exempt from U.S. tax and to the extent that the domestic companies are over-leveraged when compared to their foreign subsidiaries
• Limits income shifting through intangible property transfers 
• Denies deductions for related party payments arising in a base erosion arrangement 
• Repeals the domestic international sales corporations rules 
• Limits the extent to which foreign tax credits can eliminate U.S. tax on income from investments in foreign companies that are not controlled foreign corporations 
• Restores withholding taxes on interest paid by domestic corporations to residents of countries not providing similar benefits for U.S. investors 
• Prevents foreign investors from using partnerships to avoid U.S. taxation 

• Eliminates parts of the "check-the-box" rule under which U.S. multinationals can disregard certain foreign subsidiaries for U.S. tax purposes, but does not change the domestic application of the "check-the-box" rules 
• Simplifies the foreign tax credit rules 
• Apportions interest expense on a worldwide basis for purposes of matching interest expense to income generated by borrowed funds 
• Modernizes the rules applying to overseas banking and insurance businesses 
• Simplifies the rules for taxing passive foreign investment companies 
• Modernizes the rules addressing foreign investment in U.S. real estate 

However, the prospects for passing a tax reform package appear increasingly unlikely in the current atmosphere of partisan rancor and gridlock in Congress. But 2013 is seen as a better year to try to enact a tax overhaul than 2014, when lawmakers will be focused on the elections.

However, it is our opinion based upon past legislation, once something is in the form of the tax bill even where it doesn't pass in the year it's drafted it eventually will continue to make it to the floor until it does pass.

An example of this is the expatriation rules which first surfaced in 1997 and eventually  was passed as originally drafted in 2008!

Source:

AccountingToday