* R&D; tax credit, other “extenders” are in compromise bill
* Accelerated depreciation also part of last-minute deal
* Some corporate tax breaks targeted by Obama excluded
By Kevin Drawbaugh and Kim Dixon
WASHINGTON, Jan 1 (Reuters) – The “fiscal cliff” deal that
slowly, painfully took shape in the U.S. Congress in recent days
fulfills some of corporate America’s tax policy goals, but
leaves others unmet, including a big one – meaningful deficit
and debt reduction.
The bill, which received final congressional approval late
on Tuesday on a 257-167 bipartisan vote in the House of
Representatives, would provide businesses with greater tax
certainty in the short term.
About $46 billion in business tax breaks were included in
the compromise, forged by Democratic Vice President Joe Biden
and Senate Republican leader Mitch McConnell and approved early
on Tuesday by the U.S. Senate.
President Barack Obama was expected to sign the bill soon.
The legislation contains a long list of tax “extenders,” or
temporary tax provisions that will be perpetuated for a year.
Some big-ticket items were part of that, including an
extension through 2013 of the widely claimed research and
development tax credit. Also included was a provision allowing
businesses to write off immediately half the value of new
investments, known as 50 percent bonus depreciation.
The legislation also includes a wide range of other favors
for select industries, including tax breaks for railroad track
maintenance, restaurant and retail store improvements, auto
racetracks, film and television production, and rum production
in Puerto Rico and the U.S. Virgin Islands.
WIND POWER BACKED
Numerous tax breaks for wind power production and other
alternative energy technologies were also included.
“This agreement might not be seen as perfect by everyone,
but it gives American consumers and businesses the certainty
they need to put worries over this issue behind them,” said
Matthew Shay, head of the National Retail Federation.
Washington’s army of business tax lobbyists need not fear
that the bill will leave them with nothing left to do. Just as
notable as what is in the deal is what is not, especially when
it comes to reducing the federal deficit.
The legislation postpones for two months the deep federal
spending cuts, known as the “sequester,” that were a central
worry of the “fiscal cliff.” That delay could set up another
fiscal cliff in late February, analysts said.
Corporate America has dedicated millions of dollars in
recent months to lobbying lawmakers for deficit and debt
reduction, seen as crucial to preserving the nation’s credit
standing and financial power. The legislation would do little on
that.
NO ‘TERRITORIAL’ SYSTEM
The compromise also makes no mention of setting up a new
method of taxing profits made offshore and brought into the
country by U.S. multinational corporations. Many such businesses
have been pushing for a “territorial system” that would let them
bring foreign-earned profits home with little or no taxation.
The White House did note in its summary of the legislation
that it left “substantial scope’ for “reforming corporate taxes”
and cutting the corporate tax rate to make it more competitive
with the rate in other industrialized countries.
That had been a key goal of lobbyists.
Guggenheim Partners policy analyst Chris Krueger said the
deal was “far above what was expected” for business.
He said, “On the deficit reduction side of things, it was
clearly a miss, but I suspect they will take the short-term
certainty with extenders over entitlement reform any day.”
On the other side of the business tax fence, advocates of
closing special loopholes that help certain industries had
reason to be disappointed. The legislation contains no mention
of ending key tax breaks for the oil and gas business, or for
senior managers of private equity firms and hedge funds.
Also left out was a proposal once trumpeted by Obama, in a
piece of political symbolism, to end accelerated depreciation of
corporate jets. An Obama proposal to end last-in-first-out
accounting, a cost-saving business accounting method, also was
nowhere in sight.
Those omissions from the compromise plan mean much work
remains for those wishing to overhaul the U.S. tax code. That is
a project that may or may not materialize in 2013.
