For a little more than half a million dollars in lobbying, U.S. banks and multinational corporations have won themselves a $9 billion tax break from Congress.

 

Slipped into the mammoth tax compromise bill passed before Christmas, the tax deal allows financial services firms and manufacturers to defer U.S. taxes on overseas income from a type of financial transaction known as “active financing.” The term applies to certain kinds of insurance and banking income, as well as income from financing the sale of products overseas. As an example, a U.S. company can create a foreign subsidiary to finance the sale of its products overseas and thus avoid paying U.S. corporate taxes.

 

The active financing exemption was repealed in 1986, but reinstated in 1997 on a “temporary” basis that has been extended ever since.

 

Those in favor of deferring taxes on “active financing” included General Electric, JPMorgan Chase and Caterpillar.

 

Watchdog groups and labor unions have opposed the tax break, arguing that it encourages companies to offshore American jobs to other countries.

-Noel Brinkerhoff

 

'Active Financing' Exemption for Some Businesses to Cost Taxpayers $9 Billion (by Dan Eggen, Washington Post)