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Bramwell's Lunch Beat: Extenders Update, Innovation Box, Carbon Tax

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Dec 1st 2015
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US bipartisan talks aimed at making tax breaks permanent
Lawmakers are nearing a deal to make several lapsed and expiring tax breaks permanent, seeking a bipartisan accord that would provide certainty to households and businesses but also widen the budget deficit by more than $500 billion over the next decade, wrote Richard Rubin of the Wall Street Journal. A deal hasn't been announced, and the talks could still collapse or change significantly in the final days before Congress adjourns for the year. Republicans could win permanent extensions of the research and development tax credit, the deductibility of state sales taxes, and a handful of other business tax breaks that expired at the end of 2014. The GOP would also get an extension, though perhaps not permanent, of bonus depreciation. Democrats would get permanent extensions of tax credits for low-income families that are expiring at the end of 2017. They could also get an extension of the solar energy tax credit.

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Group calls for ‘innovation' tax break
Congress should give corporations a tax break on profits generated through creative activity in the United States in order to increase economic competitiveness, according to a report released on Monday by the Information Technology and Innovation Foundation (ITIF), wrote Naomi Jagoda of The Hill. The group urged Congress to add an “innovation box” to the tax code that corporations could check on their tax forms to receive the lower rate for activities such as research. The ITIF said that a number of companies have adopted some type of innovation box in the past decade, but a US innovation box should be tied to economic activity in this country. The report noted that there is some support for an innovation box from members of Congress. In July, Reps. Charles Boustany (R-LA) and Richard Neal (D-MA) released a draft innovation box bill that would allow corporations to deduct 71 percent of their eligible profits from their taxable income.

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Pfizer merger shows need for US tax overhaul, Boustany says
Speaking of Mr. Boustany, he said on Tuesday that Pfizer Inc.'s plan to merge with Ireland-based Allergan PLC shows the “critical and urgent need” to overhaul US taxes, according to an article by Kathleen Miller of Bloomberg. The United States is “forcing companies to relocate to countries with more business-friendly tax regimes,” said Boustany, who leads the House Ways and Means subcommittee that oversees tax policy, during a hearing in Washington. “This is not the first, nor will it be the last, foreign acquisition pushed over the line by the US tax code. This must be a Congress of action regarding tax reform.” Pfizer announced on Nov. 23 it would move its tax address to Ireland as part of a $160 billion combination with Allergan. The deal would be the largest so-called corporate inversion, in which US companies use a merger to take a foreign address and cut their tax rates.

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Carbon tax debate brings together unusual allies
Sarah Kent and Justin Scheck of the Wall Street Journal wrote that several big oil companies have fallen into unlikely alignment with environmental groups calling for new taxes on air polluters, like coal-burning power plants. One key reason: Those taxes are probably good for their natural-gas businesses. Energy giants, including Royal Dutch Shell PLC and BP PLC, hope a so-called carbon tax – which would force companies to pay for their emissions and likely increase oil producers' costs – also would increase demand for natural gas, an increasingly significant part of their output. The companies are part of a collection of business interests, environmental activists, and economists that have urged negotiators meeting at a UN climate-change summit in Paris over the next two weeks to consider potential carbon pricing policies as a tool to curb emissions. Such programs could open new markets in China and elsewhere for gas to displace coal.

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