The U.S Chamber of Commerce
The U. S Chamber of Commerce, International Business Machines Corp. , Microsoft Corp. and General Electric Co. are pressing the Congress to defeat a jobs bill containing billions of dollars in taxes on their global operations. This bill would begin taxing 35% of the carried interest this year at ordinary rates. It would increase to 40% by 2013 which is three-quarters of the carried interest. Eight provisions in the bill projected to raise $14. 5 billion which serves as the reason behind the protests of many business groups especially the International Business Machines Corp.
This makes it more difficult and complicated for U. S-based companies to claim credits for the other taxes that they pay to certain government agencies. The tax credits are intended to prevent double taxation and can only be claimed when those foreign profits are repatriated to the U. S. The bill would also increase government spending due to the deficits that it may incur. Estimately, it would spend around $ 63 billion to postpone cuts in Medicare fees to doctors, $55 billion to extend unemployment benefits and $24 billion to aid state governments.
Opposition from major U. S. -based multinational corporations injects a new lobbying front into an effort to defeat the bill, which has been opposed most prominently by private-equity firms such as New York-based Blackstone Group LP and Washington-based Carlyle Group, the National Venture Capital Association and the Real Estate Roundtable. ( Donmoyer, R. Businessweek. com ). Those groups are trying to block a proposed tax increase on carried interest, the share of profits that fund executives earn as part of their compensation.
Carried interest is taxed at the lower capital-gains rate when it involves long-term gains. That rate is currently 15 percent and is scheduled to rise to 20 percent in 2011. A separate coalition, Promote America’s Competitive Edge, which counts GE; Redmond, Washington-based Microsoft; Peoria, Illinois-based Caterpillar Inc. , and Cincinnati-based Procter & Gamble Co. among its members, also protested the bill, saying the international tax changes “run contrary to the principles of fairness and due process.
” ( Donmoyer, R. Businessweek. com ) IBM, Business Groups Oppose Job Bill Over Tax Raisers By Ryan J. Donmoyer May 25, 2010 May 25 (Bloomberg) — International Business Machines Corp. and trade groups for major U. S. companies are pressing Congress to defeat a jobs bill containing billions of dollars in taxes on their global operations. The effort is led in part by the U. S. Chamber of Commerce and an alliance of companies including IBM, Microsoft Corp. and General Electric Co.
They are targeting a measure that extends aid to unemployed workers, promotes bonds for infrastructure projects and renews more than three-dozen business tax breaks, including a credit for experimental research that many of the companies support. In a letter to lawmakers yesterday, Armonk, New York-based IBM, the world’s biggest computer-services provider, told lawmakers it “strongly opposes” the legislation and would rather do without the research credit than face new taxes on overseas profits.
“Although our company has been a long-time supporter of the R&D tax credit that has enjoyed bipartisan support in Congress over many years, the pending legislation would impose significant new tax increases that will completely overwhelm any positive economic effect” of the tax credit, wrote Christopher Padilla, vice president of governmental programs for IBM. No ‘Meaningful Benefit’ IBM reduced its effective tax rate by 9 percentage points in 2009 because it was able to defer U. S. taxes on money earned in lower-tax countries, according to filings with the Securities and Exchange Commission.
The value of its research tax credits wasn’t specified. IBM, in a June 2008 policy document, said it has been “unable to derive meaningful benefit” from the research credit for “many years. ” Opposition from major U. S. -based multinational corporations injects a new lobbying front into an effort to defeat the bill, which has been opposed most prominently by private-equity firms such as New York-based Blackstone Group LP and Washington-based Carlyle Group, the National Venture Capital Association and the Real Estate Roundtable.
Those groups are trying to block a proposed tax increase on carried interest, the share of profits that fund executives earn as part of their compensation. Carried interest is taxed at the lower capital-gains rate when it involves long-term gains. That rate is currently 15 percent and is scheduled to rise to 20 percent in 2011. Ordinary Rates The bill would begin taxing half of carried interest at ordinary rates as high as 35 percent this year. By 2013, three- quarters of carried interest would be subject to ordinary rates, which are scheduled to be more than 40 percent.
IBM and the business groups are protesting eight provisions in the bill projected to raise about $14. 5 billion by making it harder for U. S. -based companies to claim credits for taxes they pay to other governments. The tax credits are intended to prevent double taxation and can only be claimed when those foreign profits are repatriated to the U. S. U. S. lawmakers, including House Ways and Means Committee Chairman Sander Levin, a Michigan Democrat, say companies are using a variety of techniques to reduce their U. S. tax bills without ever bringing their profits to the country.
Some “have used techniques to maximize the amount of money they leave overseas at the same time they’re claiming” the foreign tax credit “to avoid U. S. taxes on other income sources,” Levin told reporters on a conference call today. He called the technique a “manipulation of the tax code” that is “tilting the playing field in favor of investment overseas. ” Government Spending The bill also faces some opposition in the Senate because it would add to the deficit. It would spend $63 billion to postpone cuts in Medicare fees to doctors, $55 billion to extend unemployment benefits and $24 billion to aid state governments.
Lawyers, oil companies and businesses that use offshore tax havens would see their taxes go up. The House is scheduled to debate the broader tax measure this week, and the Senate is poised to act too. Lawmakers are under pressure to adopt the bill because the unemployment aid expires May 31. Democratic Representative Chris Van Hollen of Maryland, on the conference call with Levin, wouldn’t say how soon the bill will come to the floor. “I’m confident that we will have the votes” to pass it, he said.
Opposition to international tax provisions are complicating the effort to pass more than three-dozen tax breaks that have been popular with lawmakers in the past, even as they were criticized for bestowing narrow benefits on special interests including race track owners, makers of toy bows and arrows, restaurant operators, and tuna canners. Build America Bonds The package would also extend the Build America Bonds program and renew a provision that benefits companies such as Fairfield, Connecticut-based GE and New York-based Citigroup Inc. that sell financial products in overseas markets. The tax breaks, which generally expired Dec.
31 and must be renewed to be available this year, also include benefits for individuals, such as a $250 deduction for teachers who buy their own classroom supplies and a write-off for state and local sales taxes that primarily benefits residents of states like Texas, Alaska and Florida, which have no income taxes to deduct on federal forms. “While the economy needs an extension of expiring provisions, the chamber cannot support legislation which imposes onerous, permanent tax increases to pay for the temporary extension of these provisions,” wrote Bruce Josten, executive vice president of government affairs for the Chamber of Commerce.
‘Principles of Fairness’ A separate coalition, Promote America’s Competitive Edge, which counts GE; Redmond, Washington-based Microsoft; Peoria, Illinois-based Caterpillar Inc. , and Cincinnati-based Procter & Gamble Co. among its members, also protested the bill, saying the international tax changes “run contrary to the principles of fairness and due process. ” The National Association of Manufacturers, a Washington trade group, today urged lawmakers to strip the international tax provisions from the bill.
It said the way companies use the foreign tax credit has been “mischaracterized as loopholes. ” “NAM strongly urges policymakers to advance legislation that includes much-needed tax relief without anti-growth, anti- competitiveness revenue raisers,” the group wrote to House members. Reference Donmoyer, R. ( 2010 ). IBM, Business Groups Oppose Job Bill Over Tax Raisers. Retrieved May 31, 2010 from http://www. businessweek. com/news/2010-05-25/ibm-business-groups-oppose-job-bill-over-tax-raisers-update1-. html
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