June 11,2025

Wyden, Warner, Warnock, Welch Introduce Crackdown on “Round-Tripping” International Tax Loophole

Washington, D.C. – Senate Finance Committee Ranking Member Ron Wyden (D-Ore.) and committee members Mark Warner (D-Va.), Reverend Raphael Warnock (D-Ga.), and Peter Welch (D-Vt.) today introduced the Close the Round-Tripping Loophole Act to close an egregious international corporate tax loophole known as “round-tripping” that Republicans and the Trump administration blessed in their 2017 tax law. Round-tripping involves U.S. corporations unfairly shifting the income from their U.S. sales to foreign tax havens. By doing so, they slash their income taxes to rates lower than many middle-class families pay each year. 

“Big, profitable multinationals have been abusing this loophole for many years with the blessing of Trump and Republicans, who are now gearing up to give those corporations even bigger tax breaks in their massive budget bill,” Senator Wyden said. “I’ve spent years investigating Big Pharma’s many tax schemes, and round-tripping is one of their go-to dodges. This kind of loophole is what makes middle-class workers whose taxes come out of every paycheck feel like they’re getting ripped off, and the fact is, they’re right.”

“For too long, American corporations have been able to exploit loopholes that let them shift profits overseas and avoid paying their fair share in taxes – leaving hardworking Americans to pick up the tab,” Senator Warner said. “This bill puts a stop to one of the worst abuses in the tax code and restores some much-needed fairness for middle class families.”

“We should not be giving tax breaks to major drug companies that exploit our laws to hide their profits,” said Senator Warnock. “This critical legislation provides a commonsense fix that helps lower our deficit while forcing Big Pharma to pay their fair share. I urge my colleagues to pass this bill as quickly as possible.”

“The ‘round-tripping’ loophole is just another way large corporations and Big Pharma have schemed to rip-off taxpayers and avoid paying their fair share. They’ve been getting away with this for years now—enough’s enough,” said Senator Welch. “I’m proud to join my colleagues on this legislation to close this loophole and rein in corporate greed.”

“Round tripping by pharmaceutical companies and other multinationals — producing offshore to book profits on US sales offshore and thus avoid US corporate income tax — has reached epic proportions.  It is the main reason why the US trade deficit in pharmaceuticals now tops $150 billion — and also the main reason why these companies are hardly paying any tax out of their current earnings to the US Treasury.  It is long past time to close this tax loophole,” said Brad Setser, Whitney Shepardson senior fellow at the Council on Foreign Relations and former senior advisor to the U.S. Trade Representative. 

“I thank Senators Wyden, Warner, Rev. Warnock, and Welch for their dogged focus on closing this harmful tax loophole, and I hope Democrats and Republicans will work together on this. Our international tax system was in dire need of reform, and the purpose of GILTI was to allow U.S. companies to remain competitive abroad while discouraging the most aggressive tax haven schemes – not to allow certain multinational corporations to game the system by shifting both production and profits overseas?and then?sell those goods right back into the U.S. This ?‘round-tripping’ maneuver undercuts U.S.-based companies that manufacture domestically and pay the full 21% corporate tax rate and costs taxpayers tens of billions of dollars.” said George Callas, executive vice president of public finance at Arnold Ventures and former senior tax counsel to Speaker Paul D. Ryan. 

The introduction of the Close the Round-Tripping Loophole Act follows extensive investigation by Senator Wyden beginning in 2021 into the tax practices of the pharmaceutical industry. In 2022, he released an interim report outlining the pharma giant AbbVie’s use of offshore subsidiaries in tax avoidance. He released updated findings last year that included a JCT sector-wide analysis and information gathered in further investigations of four additional pharma giants: Abbott Laboratories, Amgen, Bristol Myers Squibb and Merck. He expanded the investigation to include Pfizer and released findings earlier this year. 

A summary of the new proposal follows below. Legislative text is available here. 

The 2017 Republican tax law created a new incentive to maximize how much income a U.S. company shifts offshore. After slashing the corporate tax rate from 35 percent to 21 – a 40 percent reduction – Republicans went even further to help boost offshore tax avoidance by large corporations. The Republican-controlled Congress and first Trump administration created the global intangible low-taxed income (GILTI) system, which cut the tax rate on foreign income of U.S. corporations down to just 10.5 percent. In addition to cutting the rate in half, the GILTI system provides an even deeper tax cut for moving assets offshore. 

While multinationals use many approaches to avoid paying their fair share, one of the most egregious is the use of “round-tripping.” In a round-tripping strategy, a U.S. company makes sales to U.S. customers and then routes the income from those sales through offshore entities, often in low-tax havens. By doing so, the corporation avoids paying the full 21 percent tax rate on that income. The 10.5 percent GILTI rate applies instead. The corporation can use the additional tax exemption for foreign assets to reduce its tax rate further. 

Corporations execute round-tripping strategies in a multitude of ways, including shifting intellectual property rights to tax havens, aggressive transfer pricing, complex partnership arrangements, use of offshore manufacturing, and others. Regardless of the specific design, the end result is the same – less income in the U.S. where customers are, more income sent offshore to low-tax havens. 

To close this loophole, the Close the Round-Tripping Loophole Act would deny round-tripped corporate income the benefit of the lower GILTI tax rate and apply the full 21 percent U.S. corporate income tax rate instead. 

Under current law, corporations take an extra deduction on foreign income to reach the 10.5 percent GILTI rate. The Close the Round-Tripping Loophole Act would calculate a “round-tripping ratio” that represents the share of a corporation’s GILTI income that is routed through offshore tax havens, and it would reduce that corporation’s tax deduction on foreign income by that ratio. 

For example, if a given corporation’s GILTI deduction was originally $100, but 75 percent of its GILTI income was actually U.S. income routed through foreign subsidiaries, its GILTI deduction would be reduced by 75 percent. The remaining deduction would be $25. The exemption for having foreign assets would also be reduced by the same 75 percent. 

No small businesses would be subject to these provisions. The proposal would only apply to corporations that average at least $100 million in annual revenue. To simplify administration, the determination of whether income is earned in the U.S. or offshore would use the test already established in the foreign-derived intangible income system. 

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