Name: Tech, defense giants lobbying for tax break that would save them billions
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Tech, defense giants lobbying for tax break that would save them billions

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AdvertisementBy Orlando SentinelJun 24, 2020 at 8:12 amSome of the world’s largest companies are lobbying Congress to preserve a lucrative tax break that saves them billions of dollars a year, even as the federal budget deficit swells amid efforts to contain the coronavirus and revive the sagging economy.Aerospace and defense contractors Lockheed Martin Corp. and Raytheon Technologies Corp. would save $2 billion each in 2022 if lawmakers agree to keep the soon-to-expire corporate tax break, at .AdvertisementAirplane manufacturer Boeing Co. would save about $2.5 billion, according to estimates by analysts at investment bank UBS. One of Florida’s biggest companies — Brevard County-based defense firm L3Harris Inc. — would save an estimated $550 million.Tech giants like . would likely reap enormous savings, as well.AdvertisementPreserving the tax break would save companies — and cost taxpayers — $40 billion in 2022, according to , a business-backed think tank whose members include Microsoft.Many companies would benefit from continuing the break. But the savings would be heavily concentrated in a small number of big corporations: Lockheed Martin and Raytheon alone could account for 10 percent of the estimated impact in 2022.By contrast, a similarly expensive tax break that Congress is also considering — an expansion of the Child Tax Credit — would steer nearly two-thirds of the savings to households making less than $91,000, .Industry executives say preserving the corporate tax break would leave them more money to spend investing in their businesses and hiring new workers — and also buying back stock and paying dividends to shareholders.“If that were to happen, I think that would be a major win for industry,” Lockheed Martin Chief Financial Officer Ken Possenriede earlier this month. “A major win because it would allow us to make more investments going forward, employ more people and generate more cash for our investments and for our shareholders from a cash deployment standpoint.”Lockheed, which has approximately 8,000 employees across Central Florida, turned last year on revenues of nearly $60 billion. The company spent more than half of the cash it generated for the year on share repurchases and dividend payments.At issue is the way the companies write off their spending on research and development, such as the salaries of engineers or the materials and supplies used in labs.Since the mid-1950s, the U.S. has allowed companies to deduct all of their R&amp;D costs at once, which is known as “expensing.” The tax break was expanded in the late 1960s to let companies expense software development costs, too.AdvertisementR&amp;D expensing has since ballooned into a major tax break, used by everyone from boat builders to video-game designers.Fast forward to 2017. The then-Republican-controlled Congress and the Trump administration wanted to pass an enormous package of tax cuts that included slashing the corporate income tax rate from 35 percent to 21 percent.But in order to pass the bill through a narrowly divided U.S. Senate without having to win over any Democratic lawmakers, Republicans had to find ways to soften the total budget hit of the tax cuts.They decided to narrow or eliminate a number of existing tax breaks — including R&amp;D expensing. As a result, starting in 2022, companies will no longer be able to write off their R&amp;D costs immediately but will instead have to spread them out over at least five years.“It was part of a tradeoff,” said George Callas, a Washington lobbyist who was senior tax counsel to former U.S. House Speaker Paul Ryan, R-Wis. “It was really about raising a lot of revenue in a way that was less objectionable because the bulk of the revenue tends to come from some very large multinationals who are getting a significant corporate rate cut.”But now, after booking big savings from that rate cut and other provisions in the 2017 tax law, companies want to get that R&amp;D change rescinded before it can take effect.Advertisement“This is definitely having your cake and eating it, too,” said Reuven Avi-Yonah, a law professor and the director of the international tax program at the University of Michigan’s law schoolAvi-Yonah said expensing amounts to a big public subsidy for corporations. And he said it is one of the main reasons so many highly profitable corporations are able to claim paper losses on their tax returns.“We could just give them money directly without doing it through the tax code. That way at least you’re in the budget as an outlay and it’ll be significantly more visible to the public,” Avi-Yonah said. “But that’s exactly why the politicians don’t like doing it that way.”Corporate executives and other advocates say eliminating the favorable tax treatment could lead to lower investment in R&amp;D, which, they say, creates high-paying jobs and can lead to technological advances that have broader societal benefits.“At the end of the day, you are talking about a meaningful impact and increase in terms of the costs associated with doing R&amp;D,” said David Eiselsberg, the senior director for tax policy for the National Association of Manufacturers, includes executives from Microsoft and Raytheon, among others.WeeklyA weekly update on health news in Florida. &gt; The change would hit hardest on companies that are continually increasing the amount they spend on research and development, said Mitchell Kopelman, the co-chair of the tax practice at consulting firm Aprio.Advertisement“This is going to be very costly for any growing company, whether it’s an early stage company or a mature public company,” Kopelman said.The COVID-19 pandemic, which has triggered a recession and the worst unemployment crisis since the Great Depression, has complicated the lobbying campaign. But it has also provided a potential hook: Lobbyists for the companies are warning Congress that allowing the R&amp;D tax break to expire would hinder the economic recovery.An assortment of industry-funded groups — including and the — have asked congressional leaders to include continued R&amp;D expensing in an economic stimulus package.“This crisis coupled with the change in the tax treatment of R&amp;D spending will impact business cash flows as well as decisions on how to most efficiently allocate spending to projects such as those supporting transformative innovation and research,” Sharon Heck, the treasurer and chief tax officer at Intel, in March.If the tax break doesn’t make into COVID-19 stimulus, lobbyists say they’ll push Congress to take the issue up later in the year — possibly in a lame-duck session after the November elections but before new members of Congress are sworn in.; @Jason_Garcia Advertisement

AdvertisementBy Orlando SentinelJun 24, 2020 at 8:12 amSome of the world’s largest companies are lobbying Congress to preserve a lucrative tax break that saves them billions of dollars a year, even as the federal budget deficit swells amid efforts to contain the coronavirus and revive the sagging economy.Aerospace and defense contractors Lockheed Martin Corp. and Raytheon Technologies Corp. would save $2 billion each in 2022 if lawmakers agree to keep the soon-to-expire corporate tax break, at .AdvertisementAirplane manufacturer Boeing Co. would save about $2.5 billion, according to...

Tech, defense giants lobbying for tax break that would save them billions

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