TEI comments on House tax bill: June 3, 2004.

• Position: Tax Executives Institute

On June 3, 2004, Tax Executives Institute filed the following comments with the House Ways and Means Committee on the impending tax bill. The comments follow up on a March 10, 2004 letter to the House and Senate tax-writing committees.

Earlier this month, the Senate passed S. 1637, the Jumpstart Our Business Strength (JOBS) Act, which would repeal the foreign sales company/extraterritorial income (FSC/ETI) provisions of the Internal Revenue Code, reform and simplify many international tax provisions, and enact various domestic and administrative provisions. The House is now set to consider its own business tax package.

As the preeminent association of in-house business tax professionals, Tax Executives Institute commends Congress for the progress that has been made to comply with the World Trade Organization's decision, which necessitates the repeal of the FSC/ETI provisions, and to enact meaningful reform and simplification of the international tax provisions. TEI represents a cross-section of the business community, and our members know first hand the complexities of the U.S. tax laws and those around the world.

1. Provisions that Should Be Included in the House Bill

   S. 1637 includes many provisions that would enhance the competitiveness of U.S. businesses operating here and abroad. Thus, the Institute supports provisions that would--

   * provide an election to allocate interest on a worldwide basis;

   * expand the de minimis rule under Subpart F;

   * increase the foreign tax credit carryover to 20 years;

   * permit the recapture of overall domestic losses (similar to section 904(f)'s recharacterization of overall foreign losses);

   * eliminate the 90-percent limitation on the use of the foreign tax credit against the alternative minimum tax;

   * provide look-through treatment for dividends from noncontrolled section 902 companies;

   * permit an election not to use the average exchange rate for foreign tax paid in a nonfunctional currency;

   * limit the application of the uniform capitalization rules to foreign persons;

   * permit the repatriation of foreign earnings for a limited time;

   * revise section 163(j)'s limitations on the deductibility of interest to be more focused; and

   * repeal the foreign personal holding company and foreign investment company rules.

   These provisions, together with the treatment of the European Union as one country for Subpart F purposes, will effect meaningful reform.

   On the domestic side, TEI supports provisions in S. 1637...