Corporate coalition pressing to limit taxation of offshore profits

By Bernie Becker - 03/14/13 03:19 PM ET

A newly formed coalition featuring several big business heavyweights is pushing to limit U.S. taxation of offshore corporate profits.

The Let’s Invest for Tomorrow – LIFT – coalition says that the current U.S. international tax system is vastly outdated, and that installing a so-called territorial system could help make American companies more competitive.

According to LIFT, a set-up that shielded offshore profits from U.S. taxation could also be implemented without allowing corporations to game the tax system, or by encouraging corporations to shift more profits outside of America’s borders.

“When compared to other industrialized countries, the U.S. has one of the least competitive, most out-dated international tax systems in the world – hurting American companies and workers in an already difficult economic environment,” Claire Buchan Parker, a spokeswoman for LIFT who worked in the George W. Bush administration, said in a statement.

With their launch, the LIFT coalition becomes the latest group to wade into international taxation, a thorny issue that has divided Democrats and Republicans.

Caterpillar, Cisco, Hewlett-Packard, IBM and Coca-Cola are among the at least 20 companies or trade groups in the LIFT coalition.

Under the current system, U.S. corporations owe taxes on profits they make anywhere in the world – but can defer paying until those profits are brought to the U.S., and can get credits for taxes paid to foreign governments.

Most industrialized countries use some sort of territorial system, and LIFT’s statement says the U.S. framework in place now is locking out as much as $1.7 trillion from being invested domestically.

GOP officials have especially pushed for a territorial system, with Ways and Means Chairman Dave Camp (R-Mich.) releasing a draft proposal on the idea in October 2011.

The Obama administration reportedly sounded open to a territorial system at times during deficit negotiations in 2011.

But while the administration has vowed to work with Republicans on corporate tax reform, the White House has also pushed for a minimum tax on offshore profits, and President Obama and other top officials slammed the territorial tax system during last year’s campaign with Mitt Romney.

In addition to LIFT, the RATE coalition is another group of businesses working on corporate tax reform issues. RATE’s driving mission is for a tax rewrite to lower corporate tax rates.

The WIN America campaign had previously pushed to temporarily lower the tax rates multinational corporations would have to pay when bring profits home.

But the push for a corporate tax holiday fizzled, at least in part because some top policymakers wanted to deal with the issue in the broader context of tax reform.