About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 Scott A. Hodge, Oil Today, Fatty Foods and Sugary Drinks Tomorrow: The Administration's Assault on the Manufacturing Deduction for Oil Companies 1 (2010)

handle is hein.taxfoundation/ffcdhxz0001 and id is 1 raw text is: AugustA2 2010 No. 237 Oil Today, Fatty Foods and Sugary Drinks Tomorrow: The Administration's Assault on the Manufacturing Deduction for Oil Companies By Scott A. Hodge The oil industry is the favorite political tax target of Congress and the Administration right now, thanks to the BP spill. But if there's any such thing as a sure bet in Washington, it's that when the next big story puts a different industry in a bad light - probably another industry that allegedly makes us unhealthy - the picadors in Congress and the Administration will stick the offending industry with a raft of new corporate tax hikes. But oil is the target right now, and one of the so-called corporate loophole closers that the Administration is promoting is the repeal for oil companies of the Domestic Manufacturing Activities Deduction, which tax professionals simply refer to by its tax code number, the Section 199 deduction. So, what is the 199 deduction, how does it benefit manufacturers, and why is it wrong for the administration to want to repeal it for a specific industry? The 199 deduction was enacted in 2004 to replace another tax deduction meant solely for U.S. exporters called the Extraterritorial Income Exclusion (ETI). The World Trade Organization had ruled this tax break in violation of international trade laws for unfairly subsidizing U.S. exporters and demanded that Washington either repeal ETI outright or replace it with something that did not violate international trade rules. But rather than cut the 35 percent U.S. corporate income tax rate in order to benefit all American companies, Congress instead chose to create a new tax credit available only to domestic manufacturers - even those that do not export. Lawmakers believed that this approach would avoid further WTO challenges. The credit allows companies to deduct up to 9 percent of their net income from domestic manufacturing activities. This has the effect of reducing their tax on these activities from 35 percent to 32 percent. While the credit, in our mind, unfairly excludes companies engaged in other economically worthwhile activities such as services, finance, and information technology, it is available to a broad swath of manufacturing activities and taxpayers, be they individuals, C corporations, farmers, estates, or owners of S corporations. Scott A. Hodge is president of the Tax Foundation.

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most