New Bipartisan Bill Shows Key Senate Committee May Not Be Sympathetic to Dorgan’s Fiscal Protectionism

In a positive development, the Democratic Chairman of the Senate Finance Committee and a senior Republican on the Committee have introduced legislation to make “deferral” permanent for U.S. financial services companies that compete in global markets. This is not nearly as good as pure territorial taxation, but it is a step in the right direction. Equally important, it shows that the Finance Committee may not be very receptive to the protectionist and discriminatory Dorgan legislation - which would end deferral and impose immediate worldwide taxation on American companies with operations in selected low-tax jurisdictions. Tax-news.com reports:

Senators Max Baucus (D-Mont.) and Orrin Hatch (R-Utah) have introduced legislation which they say will protect the jobs that US financial services companies have created in the US, by keeping the industry on an equal tax footing with its international competitors. When foreign financial services companies earn income abroad, it’s not subject to taxation until the money is brought back to the parent company at home. The law giving American companies this tax treatment here at home is set to expire next year. The Senators’ bill would make the ‘Subpart F’ exception for active financing income permanent, so that US firms and their workers are not disadvantaged by tax burdens their competitors don’t face. “We need to make sure that US tax rules don’t make financial services companies less competitive in the world arena, and less able to keep good-paying jobs here at home,” Baucus stated. …“America’s tax laws shouldn’t handicap companies striving to lead in a very competitive global marketplace,” Hatch added. …“When we tax US companies working overseas, we increase their overhead and allow their competitors to undercut them,” Hatch noted. “That hurts American workers, business, our influence abroad, and – ultimately – the tax revenue we’re able to collect. Renewing legislation that puts our top-notch financial companies on competitive footing is good for business and good for our country.”