Republicans confront new snag for corporate tax cut

Republicans confront new  snag for corporate tax cut
© Greg Nash

Republican senators are wrestling with how to handle the corporate alternative minimum tax (AMT) in the final tax-cut bill.

Senators had initially proposed repealing the corporate AMT. But not long before the chamber passed its tax bill early Saturday morning, they reinstated it to help offset other tax provisions.

The late addition has roiled business groups, who warn that keeping the corporate AMT would be harmful and dampen the economic benefits of the legislation. 

Many Republicans say they want to repeal the tax or mitigate its impact. But there are challenges to doing so because lawmakers will have to find other ways to raise revenue.


“It would be nice if we could eliminate the AMT. However, I’d like to see what the pay-for would be,” Sen. Mike RoundsMarion (Mike) Michael RoundsGOP senators skeptical of DACA deal in funding bill Overnight Cybersecurity: Fallout from Tillerson's ouster at State | Trump blocks Broadcom deal | Military officials push for aggressive cyber stance Top officials: U.S. must shift to more aggressive cyber approach MORE (R-S.D.) told reporters Wednesday.

When asked if the corporate AMT would be in the final bill, Senate Finance Committee Chairman Orrin HatchOrrin Grant HatchOmnibus includes search-and-seize provision New kid on the tech block Senate GOP: Legislation to protect Mueller not needed MORE (R-Utah) said, “Right now it doesn’t look like it, but you never know.” 

The corporate AMT is a parallel tax code with a rate of 20 percent and a tax base that takes away many tax preferences.

Because the Senate tax bill would lower the regular corporate tax rate to 20 percent, matching the AMT rate, it would effectively eliminate the research and development tax credit and other tax preferences for many businesses.

The Joint Committee on Taxation, Congress’s official tax scorekeeper, estimated that including the corporate AMT in the bill would raise about $40 billion over 10 years. Some tax experts suggest that number should be even higher.

Businesses have argued that including the corporate AMT could make the tax bill less conducive to fostering economic growth.

“Research and development is the lifeblood of manufacturing. The [National Association of Manufacturers] supports pro-growth tax reform, and is working with key policymakers to ensure the final bill does not inadvertently harm manufacturing,” said Chris Netram, vice president for tax and domestic economic policy at the National Association of Manufacturers.

Joe Pasetti, senior director of government affairs at the Semiconductor Industry Association, said that keeping the corporate AMT “effectively repeals the [research and development] credit and potentially undermines several major international reforms.”  

“As a highly research-intensive industry with over 80 percent of sales abroad, [the Semiconductor Industry Association] is gravely concerned about the impact of the AMT on domestic semiconductor research, and we have urged conferees to adopt the House position of full corporate AMT repeal,” he said in a blog post on the group’s website.

Several Senate Republicans said they would prefer that the corporate AMT be eliminated. 

“I think it’s better policy,” Sen. Rob PortmanRobert (Rob) Jones PortmanOvernight Tech: Zuckerberg breaks silence on Cambridge Analytica controversy | Senate passes sex trafficking bill | EU pushes new tax on tech | YouTube toughens rules on gun videos Senate passes controversial online sex trafficking bill GOP leaders to Trump: Leave Mueller alone MORE (R-Ohio) told reporters Wednesday.

House Republicans would eliminate the corporate AMT in their bill and continue to believe it should be eliminated.

Ways and Means Committee Chairman Kevin BradyKevin Patrick BradyRepublicans open to targeted China tariffs despite steel flap GOP pushes for 'phase two' of tax cuts Lighthizer, Ross set to talk trade on Capitol Hill next week MORE (R-Texas) told reporters Wednesday the cost of complexity associated with the AMT “actually undermines some of the pro-growth provisions that we kept in the tax code, such as the research and development tax credit.”

He said House Republicans “feel strongly that the House position [in conference] should be to repeal permanently both the individual and the corporate AMT.”

The issue for Republicans is that if they repeal the corporate AMT, they may need to find another way to pay for part of their tax cuts. Under the Republican budget resolution, the tax bill can’t add more than $1.5 trillion to the deficit.

It’s possible that Republicans may not end up fully repealing the corporate AMT but instead scale it back.

Sen. John ThuneJohn Randolph ThuneSpending package extends FAA through September Senate passes controversial online sex trafficking bill Co-founder of WhatsApp: 'It is time. #deletefacebook' MORE (R-S.D.) said there are “different ways you could structure a repeal or a partial repeal.” For example, the rate could be lowered.

But Portman said lawmakers could just decide to repeal the corporate AMT and try to make up the revenue elsewhere.

Ultimately, it’s up to a House-Senate conference committee to resolve the issue. The Senate voted on Wednesday to go to conference, after the House did so on Monday.

“People are letting us know their concerns, and we’ll just have to take that into account,” Senate Majority Whip John CornynJohn CornynWhite House officials expect short-term funding bill to avert shutdown Spending bill delay raises risk of partial government shutdown support GOP leaders to Trump: Leave Mueller alone MORE (R-Texas) said.

Besides the corporate AMT, the conference committee will have to determine the fate of the alternative minimum tax for individuals. The House bill would do away with the individual AMT, while the Senate bill keeps it but increases the exemption amounts.

When asked about the AMT on Wednesday by radio host Hugh Hewitt, Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellCollins: 'Extremely disappointing' ObamaCare fix left out of spending deal House poised to vote on .3T spending bill Budowsky: Stop Trump from firing Mueller MORE (R-Ky.) said that repealing it was the “original goal” and is “one of the dials that has to be twisted.”

McConnell also said that he couldn’t say what the final bill will look like because there are many moving parts.

“It’s just impossible for me on your program, or frankly to anybody else at this point, to predict exactly how the final product turns out,” McConnell told Hewitt.