With the Senate set to take up consideration of a package of over 50 tax breaks, the FACT (Financial Accountability and Corporate Transparency) Coalition is reminding the American people of two of the more egregious breaks included in the bill and of their impact on this country.
The two tax breaks are the “active financing exception,” which would cost $58.8 billion if extended for ten years, and the controlled foreign corporation (CFC) “Look-Through Rule,” which would cost $20.3 billion over ten years. (The estimates come from the Joint Committee on Taxation and can be found here and here.)
The active financing exception rule has allowed corporations to avoid paying taxes to any nation on the financial income they earn in foreign countries, provided these profits remain officially offshore. This is one reason that General Electric was able to receive a $3.1 billion federal tax refund despite posting profits of $27.5 billion between 2008 and 2012. (Source: Citizens for Tax Justice)
The CFC Look-Through Rule is a tax break that allows U.S. multinationals to create transactions purely for “earnings stripping” – to create dividends, interest, rents, and royalties to strip income out of high-tax countries and move it into low-tax or no-tax countries without incurring any U.S. tax liability (or any tax liability anywhere).
“Subsidizing highly profitable corporations comes at the expense of ordinary American taxpayers, who shoulder their cost through cuts to programs or higher taxes,” said Nick Jacobs, Communications Director for FACT.
“These break expired at the end of last year, and Congress would be well advised just to forget about them and move on,” continued Jacobs. “Otherwise, some companies will continue to see an incentive to move jobs and profits offshore.”