The White House unveiled some new tax cut benefits for corporations, that Treasury Secretary Timothy Geithner says will restore balance to the US tax code. I have included a snippet from a Wall Street Journal story on the new changes, but the full text can be read here.
The White House on Monday unveiled proposals to cut tax benefits for U.S. corporations that invest overseas and to use some of the expected revenue to make permanent a tax credit for investment in research and development.
U.S. President Barack Obama hailed the proposal and another intended to crack down on individuals who use overseas accounts to dodge U.S. taxes. Collectively, the administration said two proposals and other international tax changes to be released with the administration's budget later this month would raise $210 billion over 10 years.
The proposals target the foreign profits of U.S. firms like Intel Corp. (INTC), Eastman Kodak Co. (EK), Agilent Technologies (A), Johnson & Johnson (JNJ), Motorola Inc. (MOT) and Pfizer Inc. (PFE).
U.S. Treasury Secretary Timothy Geithner, who appeared with Internal Revenue Service Commissioner Douglas Shulman alongside the president on Monday, said the administration's proposals are intended to "restore balance" and fairness to the U.S. tax code and end "indefensible tax breaks."
Obama called the proposed changes a "down payment" on reforms to ensure that U.S. companies "pay what they should."
Currently, U.S. businesses may take immediate deductions on their U.S. tax returns for expenses on overseas investments, but defer paying U.S. taxes on profits from those investments. Obama characterized the practice as part of a "broken" tax code that favors companies for investing overseas as opposed to those that invest and create jobs at home.
Under the administration's proposal, companies would be barred from taking deductions on their U.S. taxes for offshore investments until they pay taxes on their offshore profits. It calls for the change to take effect in 2011, estimating it would raise $60.1 billion from 2011 to 2019.
That is similar to a measure proposed by House Ways and Means Chairman Charles Rangel, D-N.Y. But in one difference from the Rangel proposal, the White House plan would preserve the tax benefit for U.S.-based research that is related to overseas business.
Additionally, the administration called for new limits on tax provisions that allow U.S. businesses to claim a credit against their U.S. taxes for the foreign taxes paid, saying some U.S. firms take advantage of it by inflating or accelerating foreign-tax credits. Closing such loopholes would raise $43.0 billion from 2011 to 2019, the administration said.
