Senate passes bill rewriting corporate tax code

The Senate last week passed a bill to repeal a controversial business tax break and to overhaul the corporate tax code. The measure (S. 1637) would eliminate a provision that allows companies to exclude a portion of their foreign sales income from federal taxes--which benefits many exporters of chemicals. The European Union had successfully challenged this tax break at the World Trade Organization and is hitting many U.S. exports with tariffs to offset the provision. These tariffs are rising by 1% per month, a situation that is motivating some in Congress to overturn the controversial provision quickly and replace it with other types of tax breaks for businesses. In addition, the bill would extend and strengthen the corporate research and development tax credit, which expires on June 30. Also added to the bill were more than $13 billion in tax credits that would go to oil, coal, natural gas, renewable, and other energy providers. The provisions were part of comprehensive energy legislation that has stalled in the Senate. The bill also limits deductibility of charitable contributions for patents, which is popular with chemical companies and universities. It is unclear how this measure will fare in the deeply divided House during an election year.