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With only one day’s notice to the public, the Senate Committee on Finance approved a package of tax “extenders” that included two provisions that will force taxpayers to pick up a $12.7 billion tab over the next two years by reinstating expired loopholes and tax preferences that allow some multinational companies to shift income offshore and avoid U.S. taxes.
“They justified today’s vote as providing businesses with ‘certainty,’ but the Committee could have created equal certainty by ending these expensive giveaways,” said Phineas Baxandall, a Senior Analyst with the U.S. Public Interest Research Group. “Not extending those provisions would also level the playing field for businesses that can’t use high-priced tax lawyers and offshore subsidiaries to dodge their taxes,” he added.
The Committee retroactively extended two tax provisions known as the “active financing exception” that will add $11.2 billion to the deficit and the “controlled foreign corporation (‘CFC’) look-through rule” that will cost $1.5 billion, according to estimates by the Senate Joint Tax Committee. Temporarily inserted into the tax code years ago and extended ever since, the two measures had expired at the end of 2011. Each rule make it easier for multinational companies to stash their U.S. earnings offshore and avoid paying tax on them. General Electric, Pfizer, Apple, Google and J.P. Morgan Chase are some prominent companies that have used these loopholes in the past.
Many other provisions approved by the committee were far less controversial, such as increasing the Alternative Minimum Tax (AMT) exemption and the deduction for teachers buying school supplies. Among the almost two dozen tax preferences not extended by the committee was a provision for ethanol producers that U.S. PIRG and many others had criticized.
Although the Committee’s vote was announced only the previous day, the Financial Accountability and Corporate Transparency (FACT) coalition, along with several organizations representing a broad range of interests and individuals from across the country, issued a letter to lawmakers criticizing the extension of the two offshore tax loopholes in the final hours before their August recess.
“We had asked for serious debate about each of these tax expenditures separately, but that didn’t happen. The lobbyists from these multinational corporations won today and taxpayers will end up picking up the tab if these provisions are ultimately extended law,” said Baxandall.
The House Ways and Means Committee is not expected to take up the tax extenders until after the November elections.
For more details on the two provisions favoring offshore tax avoidance, see the report from Citizens for Tax Justice Report “Don’t Renew the Offshore Tax Loopholes.”
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