House Ways and Means Committee Set to Consider Enshrining “CFC Look-Through Rule” and “Active Financing Exemption” Thursday
Unpaid-for Corporate Giveaways to Cost American Taxpayers $100 Billion
WASHINGTON, DC – The Financial Accountability and Corporate Transparency (FACT) Coalition called on Members of Congress today to strongly reject pending legislation that would cost American taxpayers $100 billion over the next decade by enshrining egregious tax loopholes which reward multinational companies for artificially shifting profits overseas.
“It’s high time Congress takes a stand against multinational corporations that shift their profits offshore and avoid paying their fair share of taxes,” said Rebecca Wilkins, Executive Director of the FACT Coalition, which unites over 100 leading small business, faith-based, human rights, anti-corruption, public-interest, government watchdog, labor, and global development organizations. “When Congress incentivizes multinational corporations to continue avoiding their taxes by manipulating their tax bills, small businesses and average American taxpayers have to pick up the tab in the form of cuts to public programs, higher taxes, and bigger government deficits.”
The U.S. House of Representatives’ Ways and Means Committee is expected to consider bills on Thursday to make permanent two temporary tax provisions — 1) the CFC Look-Through Rule [H.R. 1430], and 2) the Active Financing Exemption [H.R.961] — which, when combined, would cost U.S. taxpayers an estimated $99.8 billion over the next ten years.
The temporary loopholes — which expired in December 2014 — are part of a larger package of more than 50 tax breaks, known as the “tax extenders”, that have generally been considered together as a group and renewed (or extended) on a temporary basis. Members of the Ways and Means Committee have plucked out what are considered to be the two most egregious tax loopholes, and will consider enshrining the measures in the U.S. tax code without paying for them.
“Naturally, we urge all Members of the Ways and Means Committee to support the interests of the American people and reject these unpaid-for corporate giveaways,” added Wilkins.
The first provision being considered by the Committee is known as the CFC Look-Through Rule, which allows corporations to create “stateless income” by treating income (at least for tax purposes) as having been earned in a foreign low- or no-tax country, where the company may have no employees, no operations, and no real economic activity taking place. Indeed, many of these “Controlled Foreign Corporations” are nothing more than a mailbox in a tax haven.
The Active Financing Exception is the second offshore loophole. While passive income (interest, dividends, royalties, etc.) is meant to be taxable even if it is kept offshore, the Active Financing Exception allows multinationals to perpetually defer paying tax on interest booked in foreign subsidiaries, providing another method in which multinationals can manipulate their tax bills and thus avoid paying their U.S. taxes.
“We should end each and every loophole that allows a set of larger companies to play a rigged game,” said Nathan Proctor, National Campaign Director with Fair Share. “Instead, Congress wants to renew tax loopholes that allow companies to hide profits in offshore tax havens, and, in addition, make them permanent. That’s a permanent outrage. We think it’s time that everyone played by the same set of rules.”
“Our economic progress is undermined when the tax code rewards financial manipulation rather than innovation and productive investment,” said David Levine, CEO and Co-founder of the American Sustainable Business Council. “National polling of small business owners found that 91% think U.S. multinational corporations’ use of accounting loopholes to shift profits to offshore subsidiaries to avoid taxes is a problem.”
“Loopholes shouldn’t be the status quo. We must ensure that our tax system is fair, transparent and benefits all of us,” said Eric LeCompte, Executive Director of Jubilee USA Network.
Notes to Editors:
- Click here to read an HTML version of this press release on our website.
- The Joint Economic Committee has scored the “Permanent CFC Look-Through Act Of 2015” [H.R. 1430] as costing U.S. taxpayers $ 79 billion over the decade from 2016-2025. For the full text of H.R. 1430, click here.
- The Joint Economic Committee has scored the “Permanent Active Financing Exception Act of 2015” [H.R. 961] as costing U.S. taxpayers $78.01 billion over the decade from 2016-2025. For the full text of H.R. 961, click here.
Founded in 2011, the Financial Accountability and Corporate Transparency (FACT) Coalition unites civil society representatives from small business, labor, government watchdog, faith-based, human rights, anti-corruption, public-interest, and international development organizations. We seek an honest and fair corporate tax code, greater transparency in corporate ownership and operations, and commonsense policies to combat the facilitation of money laundering and other criminal activity by the financial system. For more information, visit www.thefactcoalition.org