The proposal would "refresh" Section 965 of the Internal Revenue Code, enacted in 2004 to impose a 5.25% tax rate on earnings distributed by a controlled foreign corporation to its U.S. parent.
In today's edition, Tax Notes provides additional color on the wrangling behind the legislative scenes. Representatives Jared Polis (D-Colo.) (bill co-sponsor), Loretta Sanchez (D-Calif.) and Kay Hagan (D-N.C.) argued for the repatriation incentive. Sanchez and Hagan seemed to buy into the Stern theory, discussed yesterday ('we're desperate for government revenue and repatriation can't hurt').
Fortunately, it is not a done deal:
[L]egislators remain mixed on the tax break, with some worrying that the money will not be used to spur job growth. After Congress approved a repatriation holiday as part of the American Job Creation Act of 2004, several corporations brought back billions of dollars but later laid off thousands of workers. Pfizer Inc. repatriated around $37 billion and laid off about 3,500 employees. Ford Motor Co., which repatriated $850 million, let 10,000 people go.Is Congress capable of creating "an ironclad nexus of job creation"? Let's not hold our breath on that one.
Polis said to make repatriation politically palatable, lawmakers "want to be able to point to a direct, ironclad nexus of job creation." Polis said he supports that so long as it does not interfere with the overall goal of encouraging repatriation.
Tax Notes reports that Dave Camp (R-Mich.), Ways and Means Committee Chair, does not support the proposal. I hope that Chairman Camp stays firm in his resistance to this bad idea for a sequel.
Earlier this year, Senators Ron Wyden (D-Ore.) and Dan Coates (R-Ind.) sponsored broader tax reform legislation (the Bipartisan Tax Fairness and Simplification Act of 2011, see here) which would include a repatriation incentive as a transition to a new tax system. Any repatriation incentives should be linked to comprehensive income tax reform, not enacted out of desperation to "do something."