Levin could close international tax breaks outside of tax reform

Acting Ways and Means Chairman Sandy Levin (D-Mich.) told The Hill on Wednesday that international tax breaks could be closed independent of efforts to reform the tax code.

“There are some that are more susceptible now and outside of tax reform,” he said.

Ending tax breaks that benefit U.S. multinational companies aligns with President Obama’s budget proposal to clamp down on international provisions that shift jobs overseas or hide money from the IRS.

But former Ways and Means Chairman Charles Rangel (D-N.Y.) and Senate Finance Chairman Max Baucus (D-Mont.) both agreed to increase taxes on overseas income only within the context of comprehensive tax reform, where the corporate tax rate would likely be lowered to accommodate companies that suddenly owe taxes on foreign profits.

The possibility that Levin may not honor that agreement will likely increase lobbying efforts to defend these provisions.

The pro-business PACE Coalition (Promote America's Competitive Edge) sent a letter to lawmakers on Tuesday citing job creation as the number one reason why Congress should reject the Obama’s plan to clamp down on international tax breaks, which it contends would amount to a $122 billion tax increase on U.S. multinational companies over the next decade.

“To keep good jobs and decent wages here in America, and spur the creation of quality new U.S. jobs, Congress must ensure that the U.S. tax code keeps worldwide American companies competitive,” the letter stated, adding, “The current proposals, however, would move in the opposite direction, putting U.S. employers at a competitive disadvantage.”

Ways and Means members will also likely resist tax increases on multinational companies.

“I haven’t backed away from my position and that is you link it [closing international tax breaks] to hearings and link them all to a proposal on the corporate rate,” said Rep. Richard Neal (D-Mass.), a senior Ways and Means member who sources say might challenge Levin for the chairmanship later this year.

Obama proposed limiting the use of foreign tax credits, and ending the deferral of taxation on certain income earned offshore. Last year, he also called for no longer permitting “check the box” rules that give multinational companies the ability to shift income between subsidiaries and avoid U.S. taxes. This year, the president omitted closing check the box from his budget proposal since it didn’t raise enough money, Treasury sources said.

Of the three, the check the box provision is most vulnerable since many liberal-leaning lawmakers consider it legal tax evasion. Levin would not comment on the provision’s fate, but said deferral would be addressed in the context of overall tax reform.

“I think deferral is an example of what needs to be part of reform discussions,” Levin said.

If Levin opens a review on international tax breaks, those that impair domestic job creation or deemed abusive could be used to offset legislation extending several expired tax breaks that recently passed by the Senate.

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