U.S. Tax: Perriello Votes to Close Tax Loophole for Corporations That Ship Jobs Overseas

Also Votes to Extend Unemployment Benefits, Invest in Research and Innovation

29 May 2010 -- Congressman Tom Perriello stood up for American workers by voting to close the tax loophole that allows corporations to ship jobs overseas. He also voted to extend unemployment benefits and invest in research and innovation that will create the advanced manufacturing jobs of the future.

The American Jobs and Closing Tax Loopholes Act, H.R. 4213, will close the tax loopholes that incentivize companies to move jobs overseas and boost American job creation. Southern Virginia has faced devastating job losses for over a decade, largely because of textile and furniture manufacturing moving operations offshore.

"Today, we scored a victory for American workers by closing tax loopholes for companies that ship our jobs overseas. For too long, both parties have asked taxpayers to subsidize the very outsourcing that has devastated Southern Virginia and so many working families across America," said Rep. Perriello. "This bold step puts the American worker first and invests in the next generation of advanced manufacturing."

In addition to boosting American job creation, The American Jobs and Closing Tax Loopholes Act also extends unemployment benefits through November 30, 2010; without this action, benefits would expire for approximately 1.2 million Americans by the end of June. Providing unemployment benefits are critical for those who have been hit hardest by the recession and are looking for work.

The America COMPETES Reauthorization Act of 2010, H.R. 5116 which Rep. Perriello also supported today, will help create research and manufacturing jobs in Virginia by benefitting research centers like Virginia Tech and the University of Virginia, and create the next generation of entrepreneurs by improving science, math, technology, and engineering education at all levels.


Background Information on the Foreign Tax Credit Loophole

The foreign tax credit is designed to prevent double taxation (i.e., full taxation by both a foreign country and by the United States) of income earned abroad. However, companies have devised schemes to lower their U.S. tax liability by outsourcing investments and claiming the foreign tax credit, essentially shifting the burden of their foreign income tax onto the U.S. Federal government. These transactions enable companies to operate offshore with essentially little or no tax liability to either the U.S. or the foreign government.

This abuse of the foreign tax credit encourages companies to move jobs offshore to avoid U.S. taxation. Foreign tax credit abuse is among the IRS's top compliance concerns for large corporate taxpayers. In 2004, U.S. multinational corporations paid an effective U.S. tax rate of just 2% on their $700 billion of foreign active earnings. The measure adopted today would crack down on corporations that split foreign tax credits from the income subject to foreign tax. The bill targets abusive techniques and does not affect timing differences that result from normal tax accounting differences between foreign and U.S. tax rules.