Corporations Seek Tax-Credit Cash-out in Next Coronavirus Relief Plan
20 Julho 2020 - 06:59AM
Dow Jones News
By Richard Rubin
WASHINGTON -- Many large U.S. corporations are sitting on piles
of tax credits they may not be able to use for years. They want
Congress to let them have the money now.
Duke Energy Corp., Ford Motor Co., Occidental Petroleum Corp.
and others could benefit if Congress includes a tax credit cash-out
proposal in its next economic-relief legislation. Such a move,
which is among ideas being considered by lawmakers and the Trump
administration, could improve corporate cash flow by tens of
billions of dollars.
Duke has been unable to use all the corporate-research and
renewable-energy credits it accumulated because it has been using
accelerated tax deductions for capital investments to lower its
taxable income, said Dwight Jacobs, the company's chief accounting
officer. That bumped it up against tax-code rules that limit tax
credits, leaving $1.8 billion in unused credits on Duke's books.
Under the proposal, the company could get that within months
instead of years.
The proposal "would give us more cash today and that would cause
us to avoid borrowing money that we would otherwise have to
borrow," said Mr. Jacobs. He said that Duke isn't counting on the
money and that much of the benefits would flow to the regulated
utility's customers over time through lower rates.
But the continuing backlash over business tax breaks in March's
economic-relief law could make the idea a tough sell as lawmakers
wrangle through competing priorities. With expanded unemployment
insurance scheduled to lapse July 31, senators are returning to
Washington, poised to debate the next government response to the
coronavirus pandemic and economic slowdown.
The tax proposal's backers, which include the National
Association of Manufacturers, Rep. Jodey Arrington (R., Texas) and
a coalition organized by accounting firm PwC LLP, see reasons for
optimism. Many credits in question have broad bipartisan support
because they subsidize activities Democrats favor, including
renewable energy and affordable housing. The net long-run cost to
the government of accelerating the credits would be smaller than
the immediate cash infusion for companies, because the plan would
largely move tax credits from later years up to 2020.
"You don't have to stand up a new program," said David
Eiselsberg, senior director of tax policy at the manufacturers'
group. "This is something that companies would ultimately be
using."
Still, the idea of handing money out to struggling companies
with few strings attached is already drawing criticism. Earlier
this month, more than 100 congressional Democrats urged legislative
leaders to resist new business tax breaks, saying companies had
already benefited from tax cuts enacted in 2017 and urging a focus
instead on assistance to households.
"Part of why large businesses seek refundability or what they
call monetizing their tax credits is because so many corporations
have little or no tax liability following the historic
deficit-financed giveaways they received under the Trump tax law,"
wrote the lawmakers, led by Rep. Lloyd Doggett of Texas and Sen.
Sherrod Brown of Ohio.
The House's economic-relief bill, passed in May, moved in the
opposite direction. It would curtail some of March's tax breaks for
money-losing companies. That law accelerated deductions for losses
but didn't touch the tax credits at issue now.
"This is not well-targeted relief for businesses that are
struggling during the pandemic and recession," Samantha Jacoby,
senior tax legal analyst at the progressive Center on Budget and
Policy Priorities, said of the tax-credit proposal. "If the desire
is to encourage hiring, the incentive could be targeted to
that."
Under the tax code, companies can claim credits for activities
encouraged by the government. Among the largest are credits for
conducting corporate research, funding low-income housing and
producing renewable energy. The American Council on Renewable
Energy supports making credits temporarily payable to companies --
even if they don't owe income taxes.
Unlike deductions, which lower taxable income, credits reduce a
company's tax bill directly. But there are limits. Companies can
generally offset only 75% of the taxes they owe by using credits.
Any leftover credits can be used for one previous year or up to 20
years in the future.
Those rules mean many companies carry tax credits on their
books, then use them when they have enough tax liability. There's
no recent comprehensive data, but Internal Revenue Service
statistics show that companies brought $81 billion of so-called
general business credits into 2016.
The stash of unusable credits varies across companies, depending
on their ability to generate tax breaks and deploy them.
Duke, which is part of the PwC coalition, had $1.8 billion in
unused credits as of Dec. 31. NextEra Energy Inc., a large producer
of renewable energy, had $3.1 billion. Citigroup Inc. had $2.5
billion, though it may be likely to generate enough profits that it
can use those credits relatively soon even without the
proposal.
Theo Francis contributed to this article.
Write to Richard Rubin at richard.rubin@wsj.com
(END) Dow Jones Newswires
July 20, 2020 05:44 ET (09:44 GMT)
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