Thursday, May 30, 2013

Tax Loophole

Reuters is reporting:
The story of the "check the box" loophole, which allows U.S. companies to choose for themselves how to classify their subsidiaries for tax purposes, and a companion policy known as the "look-through" rule, shows how Washington bureaucrats, lobbyists and politicians have worked together — sometimes wittingly - to save money for American corporations and deprive the federal government of billions in tax revenue each year.
What began in 1996 as an effort by the Treasury Department to simplify the U.S. tax code mistakenly ended up as a massive tax loophole for corporate America, which seized upon it and has never let go.
Besides fueling an explosion in earnings that U.S. companies keep abroad - now more than $1.8 trillion, the Commerce Department estimates, double the amount from less than a decade ago - the loophole has become a symbol of how difficult it can be to repeal a tax benefit once it becomes entrenched.
But that's not the reason I posted this story.

It has to do with ObamaCare.

This bill is 2,700 pages long, too long for the Supreme Court justices to read, but you can bet corporations and unions are reading every page looking for loopholes, and they will find them. 

It's happened before:
The section of the Internal Revenue Code that made 401(k) plans possible was enacted into law in 1978. It was intended to allow taxpayers a break on taxes on deferred income. In 1980, a benefits consultant named Ted Benna took note of the previously obscure provision and figured out that it could be used to create a simple, tax-advantaged way to save for retirement. The client he was working for at the time chose not to create a 401(k) plan.
It's my understanding that some employers have already found a loophole in ObamaCare that is extremely good news for employers; very bad news for employees.  Except they will be able to keep their jobs.

With regard to the original story linked:
Two of Apple's most aggressive questioners, Democratic Senator Carl Levin of Michigan and Republican Senator John McCain of Arizona, have called for closing the "check the box" loophole. But even they have voted to keep it alive several times in recent years when it has been inserted into other legislation.
Levin's office did not respond to requests for a comment. McCain declined to comment for this story.
I guess they voted for it, before they voted against it.

By the way, President Obama's economic adviser, GE/CEO loves the loophole, at least according to the linked story. I can't make this stuff up.

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