The White House has released a Fact Sheet on President Obama’s “Blueprint for an America Built to Last” proposal (a tag line we will see often leading up to the election) to encourage companies to create U.S. manufacturing jobs rather than shipping those jobs overseas, as laid out in his State of the Union address.
We do not believe Congress will act before the elections, but these initiatives outline the tone for the corporate tax debate we expect to see later this year. The following six proposals form a revenue-neutral reform package to support manufacturing, discourage outsourcing, and encourage insourcing:
- Deny moving expense deductions to companies moving operations overseas and allow a new 20% credit for the expenses of moving operations back to the U.S. (Revenue neutral)
- Target the domestic production activity deduction on manufacturers who create jobs in the U.S. and doubling the deduction for advanced manufacturing technologies from 9% to 18%. (Revenue neutral)
- Create a new Manufacturing Communities Tax Credit ($2 billion per year in incentives for three years) for qualified investments that help finance projects in communities that have suffered a “major job loss event”—i.e., where a military base closes or a major employer closes or substantially reduces a facility or operating unit, resulting in permanent mass layoffs. (Cost $6 billion)
- Extend the Advanced Energy Manufacturing Tax Credit for investments in clean energy manufacturing in the U.S. (Cost $5 billion)
- Provide 100% expensing of investment in plants and equipment. (Cost $4 billion)
- Close a loophole that allows companies to shift profits overseas from intangible property created in the U.S. (Raises $23 billion)
Corporate tax reform. President Obama also proposed a framework for corporate tax reform to encourage greater U.S. investment and eliminate tax advantages for outsourcing by making companies pay a minimum tax for overseas profits; making permanent an expanded research and experimentation tax credit; and simplifying the Code and closing loopholes
We will keep you posted as the tax debate intensifies this year. If you have any questions regarding the current tax code or the above proposals, please do not hesitate to contact us.