Federal tax policy must keep corporate tax rates low, end double taxation and encourage research and development so U.S. chemistry industry companies can innovate, create jobs and compete globally.
Many chemistry companies operate in multiple countries and make decisions every day about where to site facilities and grow their businesses. Existing tax policy punishes U.S. manufacturers by taxing income from earnings abroad—after those earning already have been taxed by the host country. This double taxation puts U.S. companies at a competitive disadvantage.
Some in Congress propose reinstating Superfund taxes on America’s chemical makers to pay for cleanup of hazardous waste sites. Chemical manufacturing facilities constituted less than nine percent of superfund sites, and virtually all have been cleaned up, so new taxes would target companies that are not responsible for creating the sites.
Another tax proposal would rescind the tax deductibility of certain environmental, health and safety compliance costs through a puzzling change in the definition of “compliance.”
ACC’s Policy Position
Federal tax policy must minimize cost and reduce complexity, and any changes to the tax code must be fair and promote U.S. competitiveness.
Low corporate tax rates are critical to allowing American chemistry companies and other manufacturers to compete effectively in global markets.
Ending double taxation of foreign subsidiaries of U.S. companies would help level the global playing field and keep chemistry production and jobs here at home. Two approaches would help: defer or eliminate taxes on the foreign operating income of foreign subsidiaries of U.S. companies, or fully credit U.S. companies for the taxes they pay to foreign governments for earnings in those countries.
ACC supports current or liberalized tax rules on deductibility of intercompany debt. The funds generated by the deduction are used to capitalize U.S. subsidiaries of foreign companies. Removing or lessening this deduction would reduce capital investment and job creation in the United States.
Reinstating Superfund taxes on America’s chemical makers to help pay for hazardous waste site cleanup would unfairly target companies that did not create the sites. The taxes would not increase the pace of cleanup, would erode American companies’ ability to compete globally and would conflict with the President Obama’s goal of doubling U.S. exports.
Existing tax policy appropriately allows deduction of company costs to comply with environmental, health and safety laws and no deduction for fines and penalties stemming from legal violations. Legislative proposals that would redefine certain compliance costs as “fines or penalties” are unfair when no legal violations have occurred.
To help promote innovation in the business of chemistry and overall U.S. manufacturing, tax policy must advance research and development and protect America’s intellectual and technological capital.