President Joe Biden’s plan to tax the profits corporations report to investors will likely distort financial reporting incentives, provide shareholders will less transparency, and raise difficult implementation questions.
Biden’s infrastructure proposal would apply a 15% minimum tax on the earnings corporations publicly report on their financial statements, referred to as “book income.” The aim of the proposal—which is similar to legislation previously backed by Sen. Elizabeth Warren (D-Mass.)—is to tax companies, such as Amazon.com Inc., that report large profits to investors but pay little to no federal income tax.
But tax and accounting professionals said often companies’ taxable ...