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Income Is Reinvested in Factories and Equipment-Not Cash

WASHINGTON (July 9, 2015) - The American Chemistry Council (ACC) issued the following statement in response to legislative proposals that would tax historical earnings of foreign subsidiary corporations. Such proposals have been offered in the context of international tax reform and as a potential revenue source for the Highway Trust Fund, whose authorization runs out at the end of July .

"We strongly oppose proposals to tax historical foreign earnings, which reflect a failure to consider how manufacturers invest their income. In the chemical industry, companies generally reinvest foreign earnings in plants and equipment, not cash. Except for a small amount of working capital used to meet current businesses expenses, a cache of funds to be 'repatriated' simply does not exist.

"We are particularly concerned about how taxation of foreign earnings could affect manufacturing investment and job creation in the United States. With minimal foreign cash available, parent companies will be forced to borrow money to pay the tax bill, reducing the availability of capital for domestic investment. Our industry has budgeted more than $145 billion for new and expanded U.S. facilities to take advantage of shale gas resources.

"Chemical manufacturing is among the largest U.S. exporting industries. Short-sighted tax proposals such as 'deemed repatriation' could limit exports and the expansion of foreign markets that support American economic growth.

"Deemed repatriation proposals are especially egregious without international business tax reform. America is already at a significant disadvantage in international taxation, and attempts to tap U.S. companies' permanently reinvested earnings overseas would make the situation worse by draining U.S. operating assets.

"We look forward to working with lawmakers to explain the complexities and very real consequences of recent tax proposals for the manufacturing sector, the chemical industry and the U.S. economy."

» View ACC's statement for the record

» Learn more about tax policy


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