How is the taxation process as related to income earned through foreign subsidiaries? Is the following appropriate?The tax code is written in a way...

This has to do with regulations that allow US corporations
to claim tax credits.

If a company has paid the taxes on
the income it has earned through its subsidiaries in a foreign country, it is allowed a
tax credit so it doesn't have to pay income tax on the same amount in the US again. This
benefits the corporation though it reduces US revenue.

In
the example you have provided, the company earns $100 million abroad and pays an income
tax of $20 million in the foreign country. When the income is transferred to the US, it
pays a tax at the rate of 35% prevailing in the US and then can take credit for the $20
million that have already been paid. The net income tax paid in the US to the IRS is $15
million.

As can be seen, on the whole, the company had to
pay a total income tax at the rate of 35%, but 20% were paid in the country its
subsidiary is based in and the rest in the US. This makes sense as the foreign
subsidiary has not used any infrastructure or other resources of the US, so it does not
have these kinds of obligations towards the US. Tax credits "influence the magnitude of
foreign investment" as well as implementing "tax avoidance activities of investors" in
foreign business (James R.
Hines Jr., University of Michigan and NBER).