Tuesday, April 20, 2010

Senate Considers Proposal to Curb Foreign-Tax Credits

From the Wall Street Journal.com:

Senate Finance Committee staff is considering banning a questionable use of foreign tax credits by multinational companies, the latest potential revenue source that could pay for extending a range of popular but expired tax breaks.

The foreign tax break proposal has been put forward by President Barack Obama in his budget proposals two years running. The Joint Committee on Taxation estimates it would raise $9.5 billion over 10 years.

Perhaps uncharacteristically, no business lobbyists are stepping forward to defend the foreign tax credit practice, according to Senate aides and lobbyist sources. That makes it an easy target for lawmakers who see it as an abuse of the U.S. tax system and are also eager to use the revenue to pay for extending expired tax benefits.

But some business officials are voicing worry about using one of Mr. Obama's international tax proposals to pay for unrelated tax measures. They have sought to postpone action on those proposals until there is broader tax overhaul legislation, in the hopes of using them to leverage a cut in the corporate tax rate.

"The existing U.S. international tax system has evolved over time," wrote U.S. Chamber of Commerce Executive Vice President R. Bruce Josten in a letter last week to lawmakers. "Changes to these provisions . . . cannot be considered lightly or in isolation."

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