Senate Approves Tech Corporate Tax Break


A key provision favored by U.S.-based multi-nationals in a corporate
bill has survived a final vote by the U.S. Senate.

Part of a much
broader, complex bill aimed at halting European Union (EU) trade
sanctions,
the provision enacted late Tuesday reduces foreign dividend taxes from 35
percent to 5.25 percent for one year.


Tech proponents say the tax break will “repatriate” more than $300
billion
into the U.S. economy and create as many as a half million new jobs.
Critics
of the provision say it rewards companies for shipping jobs overseas.


The tech tax break has drawn the outspoken support of TechNet, the
influential political lobbying group of CEOs and senior partners whose
members include Intel , Cisco ,
Hewlett-Packard and Microsoft .


The bill now moves to the House of Representatives, which has its own
version of the legislation that does not include the foreign dividends
tax
relief. Two weeks ago, the Senate sent a limited Internet access tax
moratorium bill to the House, which favors a permanent moratorium.


Senate and House staff members close to both pieces of legislation told
internetnews.com no compromise has been reached on either bill.


“We are very pleased this legislation has passed the Senate. The bill
contains several provisions that are critical to the information
technology
sector and continued innovation and economic growth,” Rhett Dawson,
president and CEO of Information Technology Industry Council, said a
statement.


The overall bill passed by the Senate Tuesday — the Jumpstart Our
Business
Strength (JOBS) Act — is aimed at addressing The sanctions that went
into
effect March 1, when the EU began collecting a five percent penalty
tariff
on a wide variety of U.S. goods. The penalty increases by one percent
per
month over the next year.


The sanctions followed a ruling last year by the World Trade
Organization
(WTO) that called an annual $5 billion tax break given to U.S.
exporters an
illegal export subsidy. The WTO set a March 1 deadline for Washington
to
change its tax code or be penalized. The Senate fix is the JOBS Act,
which
alters portions of the corporate tax code in order to satisfy the WTO
and
redistribute the tax breaks.


Democrats attempted to attach a number of amendments to the Senate bill
to
underscore their concern over offshore outsourcing. Last week, Bob
Graham
(D-Fla.) moved to substitute payroll tax cuts for the foreign dividends
tax
break and Diane Feinstein (D-Calif.) pushed for an amendment to “ensure
the
repatriated tax breaks would be used for job creation.” Both efforts
were
defeated.


In March, Democrat Christopher Dodd of Connecticut used the same
legislation
to win an amendment prohibiting federal contractors from moving
government-funded IT contracts overseas. If ever actually enacted, the
amendment extends indefinitely a congressional moratorium requiring
that
government jobs shifted to private contractors have to stay in the
United
States.


However, significant exemptions allow federal contractors to continue
offshoring with the 28 European Union and Pacific Rim nations that are
members of the WTO’s government procurement code. Neither India nor
China is
a member of the WTO code.


In addition, waivers are included for contracts involving national
defense
and homeland security, since some military systems incorporate parts
made
overseas. In any event, Republicans insisted on and won language
requiring
the Commerce Department to prove the amendment won’t harm the economy
or
lead to more job losses before it can be enacted.

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