The Joint Committee on Taxation estimates the new tax will add around $222 billion to U.S. government coffers over the next 10 years.
Here are some key details on how it would work.
Until now, a wealth of deductions, credits and loopholes in the federal tax code has allowed some companies to report no income or negative income to tax authorities
while reporting strong profits to shareholders.
President Joe Biden has repeatedly singled out Amazon for paying little to no federal income tax despite billions of dollars in profits.
The new tax would likely apply to around 150 of the world's largest companies.
These include pharmaceutical companies and major corporations like Amazon, Apple, Exxon Mobil, and Nike. That's according to several think tanks that support the new tax.
Companies will have to calculate their taxes under two regimes: the 21% income tax and the 15% corporate minimum tax -- and pay the higher bill.
The tax would come into force in 2023 and affect companies that earn an average of $1 billion in book income for three consecutive years.
It would also apply to foreign companies that earn $100 million of book income in the U.S.
'Book income' refers to the profits they report to shareholders before the effects of tax deductions and credits.
There are still ways companies can claim credits and deductions under the minimum tax.
They include carrying forward prior-year losses to offset future income, or getting credits for research and development expenses.
Deductions on capital investments such as machinery, vehicles and buildings will also be preserved.
Book income is calculated based on the income companies report to shareholders.
Experts say the new tax could give companies an incentive to lower the book income they report.