Legislative update: Senate Finance hearing on corporate integration

U.S. Senate Finance hearing on corporate integration

The Senate Finance Committee today held a hearing to examine corporate integration, with a specific focus on the possibility of allowing corporations to deduct dividends paid. Among the issues discussed were the possible imposition of withholding taxes on dividends and interest paid, and the effect on pension plans and tax-exempt entities.

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The Joint Committee on Taxation (JCT) prepared a report providing an overview to corporate integration approaches in conjunction with the hearing.

Opening statements

In his opening statement, Finance Chairman Orrin Hatch (R-UT) highlighted problems and distortions that arise under the current system of taxation for C corporations and explained the benefits of achieving an integrated system by allowing a dividends paid deduction. Chairman Hatch, in part, said:


To hopefully take advantage of these and other benefits, I’ve been working for over a year now on a tax reform proposal that would eliminate double taxation of corporate income by providing this type of deduction.  While I plan to unveil that proposal here in the next several weeks, I’m hoping we can inform this ongoing effort by having a more detailed discussion of these concepts and others during the course of today’s hearing.

Before I conclude, I want to acknowledge that some groups – including tax-exempt entities and retirement plans – may have some concerns with a dividends paid deduction. However, at the end of the day, I believe we can craft a system where these parties will be treated in  manner that is comparable to current law, in fact, in many cases will be better off.  And, at the same time, our overall tax system will, in the opinion of many, be very much improved.

Still, I want everyone to know that, as I am preparing my integration proposal, I am aware of the concerns that these and other groups might raise and I am studying them very closely. Today, and going forward, we seek your comments and suggestions. 


In his opening statement, ranking member Ron Wyden (D-OR) raised questions about how corporate integration might affect retirement savings and how it might affect different kinds of businesses.

Witness statements

Witnesses at the hearing were:

  • Michael Graetz, Columbia University
  • Judy A. Miller, American Society of Pension Professionals & Actuaries (ASPPA), ASPPA College of Pension Actuaries
  • Steven M. Rosenthal, Urban-Brookings Tax Policy Center, Urban Institute
  • Bret Wells, University of Houston

The witnesses’ written statements are posted on the Finance Committee’s website.  

What's next?

The Senate Finance Committee today announced that the next hearing concerning corporate integration, with the hearing to address the topic of debt versus equity, is scheduled for Tuesday, May 24, 2016.

The Joint Committee on Taxation released, in advance of the May 24 hearing, a report that presents an overview of federal income tax rules relating to debt and equity; some of the statutory limitations on the tax benefits of each; and the tax incentives created by present-law tax treatment of debt and equity. Read JCX-45-16.


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