By Pat Garofalo on Jan 3, 2013 at 9:25 am
The deal to avert the so-called “fiscal cliff” — which President Obama signed into law yesterday — included a host of corporate tax breaks, including breaks that benefit NASCAR and rum producers. As the Financial Times reported, another break will benefit big banks that park money overseas:
US banks and other large cross-border companies will retain a key tax break covering billions of dollars in foreign income under this week’s fiscal cliff deal.
Extending the so-called “subpart F exception for active financing income” will allow multinationals to defer paying US taxes on certain financial transactions undertaken outside the US. The companies are taxed by the US on that income only when it is brought back to the country. [...]
Companies including Bank of America, Bank of New York Mellon, Citigroup, General Electric and JPMorgan Chase have banded together to form the Active Financing Working Group, to lobby for renewing the exemption in recent years.
The group has paid $1.03m to lobbying firm Elmendorf Ryan since 2009 to campaign for the tax break to be extended, according to the Center for Responsive Politics.
Extending the exemption will cost the US Treasury some $9.4bn in lost revenue in 2013, according to estimates from the Senate Joint Tax Committee.
As Citizens for Tax Justice explained, “The active financing exception makes it easier for multinationals to expand overseas, making investments and creating jobs in foreign countries rather than here in the U.S., by reducing the related tax costs.” CTJ added, “The active financing exception also plays a significant role in the ability of large U.S.-based financial institutions to pay low effective rates.”
Meanwhile, the fiscal cliff deal allowed a cut in the payroll tax to expire, raising taxes on every working American. The deal will reduce U.S. economic growth by about 1.3 percent this year.
Think Progress: Fiscal Cliff Deal Extends Measure Making It Easy For Wall Street To Avoid Taxes