By Kevin Drawbaugh and Patrick Temple-West
WASHINGTON (Reuters) - Taxation of large U.S. multinational corporations would be dramatically overhauled by a raft of initial proposals unveiled on Tuesday by the U.S. Senate's top tax writer, though there is broad skepticism that they could become law anytime soon.
Democratic Senator Max Baucus issued a "discussion draft" that called for, among other things, repealing the present tax code provision that allows U.S. multinationals to park hundreds of billions of dollars in foreign profits offshore tax-free.
In place of this provision, known as offshore corporate income tax deferral, Baucus would impose immediate taxation of some foreign profits, though far from all of them.
Much foreign income earned by U.S. companies would be exempt entirely from taxation under Baucus' plan, which would also allow corporations to bring home their billions of dollars in profits already stored offshore at a low 20-percent tax rate.
The top U.S. corporate income tax rate is 35 percent, though few multinationals pay it thanks to an abundance of loopholes.
The proposals also include the idea of a global minimum tax for U.S.-based corporations, with various distinctions made between active and passive income, as well as income derived from goods and services sold into U.S. markets and into foreign markets.
Baucus said the proposals were not a final plan and were meant to spark discussion.
"This is just a first step," he said. "We'll figure out the next steps after we get through all the reactions."
He did not say when he might offer his plan as legislation. He said in April he will not seek re-election next year.
Robert Willens, a noted corporate tax and accounting analyst, said was difficult to see tax-reform proposals "getting through such a fractious Congress."
"Congress has great difficulty agreeing on matters that are much less controversial and complex than comprehensive tax reform is likely to be," said Willens.
The Obama administration recently called on Congress to engage it on tax reform, saying plans being considered by lawmakers "share much in common" with White House ideas.
But many analysts doubt a substantial agreement is possible before mid-term congressional elections in November 2014.
Nonetheless, like Baucus, Republican Representative Dave Camp, who chairs the tax-writing House of Representatives Ways and Means Committee, has continued to discuss options.
"In the House, Republican leaders would prefer to hammer away on Obamacare; why stir a hornets' nest, they argue, by talking about killing popular tax breaks," said Greg Valliere, chief political strategist at analysis group Potomac Research.
"In the Senate, there's never been great enthusiasm for tax reform ... Why spend time on a complex bill when there's gridlock on the key issue - whether the bill should raise revenues or be revenue-neutral?
"So I think Baucus and Camp know this is a process, and they want to see what initially wins support and what encounters resistance. This is a marathon, not a sprint."
(Editing by Philip Barbara)