Biden's minimum book tax could hurt private pensions: Here's how Biden's proposed tax on book income could target 'phantom income,' expert warns

President Biden has endorsed a minimum tax on income that well-off corporations report to investors in order to help fund his sweeping Build Back Better plan.

The proposed minimum tax on book income would impose a 15% minimum on corporations based on profits they publicly report on their financial statements to shareholders. The levy would only apply to companies that reported more than $1 billion in income for three straight years.


It would preserve "the value of business credits – including R&D, clean energy, and housing tax credits – and include some flexibilities for companies to carry forward losses, utilize foreign tax credits, and claim a minimum tax credit against regular tax in future years," according to the three Democrats – Sens. Elizabeth Warren of Massachusetts, Angus King of Maine and Ron Wyden of Oregon – who proposed the tax.

The Congressional Budget Office determined last week that the tax would generate about $319 billion over the next decade, which would go toward paying for Biden's social spending and climate change plan.

But a new analysis by the nonpartisan Tax Foundation shows how the measure could inadvertently hurt private pensions.

By relying on measures of income reported on company financial statements, the proposed minimum tax could "fall harder on companies that use mark-to-market accounting for their pension plans," Tax Foundation economist Erika York wrote in a recent blog post.

Pensions, which offer guaranteed retirement benefits for employees, are less common today due to the rise of defined-contribution plans such as 401(k)s. But many companies still have legacy plans that offer large sums to employees and retirees; in many cases,...

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