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Insourcing Bill Reintroduced In US Senate

by Mike Godfrey,, Washington

16 July 2014

The Bring Jobs Home Act, which would close a tax break for companies moving operations abroad, and extend tax credits to companies that "return jobs" to the United States, has been reintroduced in the Senate.

Companies that bring business activities back to the US would be eligible for a tax credit equal to 20 percent of the "eligible insourcing expenses" associated with the relocation. However, the tax credit would not be granted unless a company's full-time US employees increased.

Allowable expenses would mean costs incurred by the taxpayer in connection with the elimination of any of its business units (or of any of its affiliates) located outside the US, as well as those incurred by the taxpayer in connection with the establishment of a new business unit to be located in the US.

On the other hand, the Act would deny businesses any allowance, provided in the current US tax code, to deduct the cost of moving expenses when they outsource by eliminating a business unit in the US and establishing a new business unit abroad. In addition, a company would not be able to charge to capital account or amortize those outsourcing expenses that are deemed to be non-deductible.

One of the Act's Democrat sponsors, Chris Coons (D – Delaware), a member of the Senate Appropriations, Foreign Relations, Budget and Judiciary Committees, stated that "Congress should not be rewarding American companies for shipping jobs overseas. Unfortunately, our current tax code allows businesses to deduct the cost of moving expenses when they export jobs abroad. There are better ways to invest American tax dollars, and we should be using them to support our growing manufacturing sector and help companies create good jobs here at home."

Another sponsor, Dick Durbin (D – Illinois), the Senate's Majority Whip, pointed out that "our tax code should reward companies that keep their operations on America soil, and not those that ship jobs overseas," while Debbie Stabenow (D – Michigan), a member of the Senate Finance Committee, noted that, "at a time when we need to be creating more jobs here at home, it's outrageous that taxpayers are footing the bill when companies move jobs overseas."

Two years ago, the previous version of the bill did not receive Senate approval, largely due to Republican opposition. This time, the Tax Foundation (TF) has already accused the legislation's sponsors of "ignoring reality."

TF's data has shown that, "for years 2008 to 2010, relocations (shifting jobs from one location to another) comprised between 3 and 4 percent of total mass layoffs (layoffs of 50 workers or more). Among the small amount of layoffs that can actually be attributed to relocation, the majority of moves happened between states, not countries."

"While the second iteration of the Bring Jobs Home Act may still play well politically," it concluded that "there is little reason for the tax credit the Act would create. In fact, the credit would likely result in a windfall for companies that claim the credit for jobs they planned to create without it. Instead of political gimmicks, policymakers should focus on real reforms that grow the economy and create jobs here at home."

TAGS: individuals | compliance | Finance | tax | business | law | employees | tax credits | legislation | United States | Tax

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