California Republican, Bill Thomas, Chairman of the House Ways and Means Committee, last week revealed details of his corporate tax cut bill that will provide tax breaks for US manufacturers whilst repealing the contentious ‘foreign sales corporation’ tax breaks which could prompt $4 billion worth of trade sanctions from the EU next year.
The main thrust of Thomas’s bill is a cut in corporate income tax on American manufacturers from 35% to 32% by 2007, which would cut taxes for manufacturing firms by $61 billion over the next ten years. The tax rate cut applies to property that is manufactured, produced, grown or extracted, including tangible personal property, agriculture, softwood timber, processed food, construction and architectural and engineering services for construction projects, extracted items, software, movies, music, and oil and gas refining and production.
The rate cut schedule is as follows: 2004-2006 34%; 2007 & after 32%.
In addition to the manufacturing and production rate cut, the bill provides a new reduced 32 percent top corporate tax rate for all corporations with less than $20 million of taxable income. According to the Joint Committee on Taxation, over 99.7 percent of corporations have taxable incomes of less than $20 million.
The small business rate schedule is as follows: 2004-2006 33% (under $1 million of taxable income); 2007-2008 32% (under $1 million of taxable income); 2009-2011 32% (under $5 million of taxable income); 2012 & after 32% (under $20 million of taxable income).
The bill incorporates a host of other measures, including provisions that greatly reduce the Alternative Minimum Tax for manufacturing companies by expanding the size of companies exempt from AMT from $7.5 million of gross receipts to $20 million of gross receipts, taking 97 percent of corporations out of the AMT. The bill also eliminates the 90 percent limitation on the use of foreign tax credits against AMT.Thomas’s bill, the American Jobs Creation Bill of 2003, is due to be presented to the House Ways and Means Committee today for a vote.
A Summary of the American Jobs Creation Bill 2003 can be found in the Tax News Resources Section.
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