Under the guidance of FEI’s Advocacy Committees, its Government Affairs staff seeks to advance the interests of FEI’s members with Congress, the Administration and key industry regulators. In 2012, FEI is focusing its advocacy resources on advancing the following twelve issues, in order to move our members’ agenda forward, while securing a better economic future for the country.
- Alleviate uncertainty in the U.S. Tax Code for private companies. Protect the interests of private companies by enacting corporate and individual tax reform concurrently, while making the current individual and estate tax rates permanent. If individual tax rates are allowed to increase for privately-held and family-owned businesses, while tax credits, exemptions, deductions and subsidies -- many of which are currently used by private as well as public companies -- are eliminated, private companies will find themselves significantly disadvantaged by corporate tax reform. Given that as much as 70% of national business income and 54% of employment is generated by pass through entities (S-Corps., partnerships and sole proprietorships), one-sided reform will divert much needed capital away from hiring and investment.
- Enact corporate tax reform that lowers the statutory corporate income tax rate, adopts a territorial tax system, and avoids industry-specific revenue offsets. The U.S. has one of the highest statutory corporate income tax rates among our major trading partners, and we will soon have the highest. High corporate tax rates act as a disincentive for both domestic capital investment and inbound foreign direct investment. Further, high U.S. corporate income tax rates applied to the worldwide profits of U.S. multinationals place them at a tax disadvantage compared to businesses based in countries that have both a lower corporate tax rate and a tax exemption for repatriated foreign earnings.
- Achieve pension funding stabilization and avoid significant Pension Benefit Guarantee Corporation (PBGC) premium increases. Historically low interest rates are creating higher calculated pension plan liabilities, adding pension funding pressures on companies who offer defined benefit plans to their employees. Proposals to significantly increase the PBGC premiums charged to these companies also add significant stress to the system. Instead of increasing this tax on companies offering pension plans, lawmakers should provide pension funding stabilization through measures that better reflect the long-term nature of pension plan liabilities.
- Immediately reenact the tax extender provisions that expired at the end of 2011. These tax provisions benefit a wide range of taxpayers and are important to U.S. jobs and the broader economy. Important tax extenders for the business community include 100% bonus depreciation, subpart F exemption for active financing, and CFC look-through.
- Preserve tax treatment of employer-provided retirement plans. As lawmakers work to reduce the deficit and reform the tax code, it is important to remember that taxes on retirement savings are deferred, not excluded, i.e. revenue flows to the U.S. Treasury as individuals retire. Preserving the tax treatment and contribution levels for employer-provided retirement plans is critical to achieving greater retirement security for millions of Americans.
- Enact a permanent research and development credit and strengthen the “alternative simplified credit” formula to 20%. First enacted in 1981, the R&D credit expired for the 15th time on December 31, 2011. In addition to this uncertainty, other countries are moving ahead of us by offering stronger innovation tax incentives to attract R&D. In 2009, the U.S. ranked 24th out of 38 industrialized countries in the strength of its R&D tax incentives. A permanent credit would create a powerful incentive for research jobs to be located in the U.S. and advance U.S. leadership in the competition for global R&D investment dollars.
Financial Reform Issues
- Enact legislation preserving derivatives end-user exemptions. Codify legislative intent in the Dodd-Frank Act to exempt commercial end-users who utilize derivatives to hedge business risk from margin requirements, and exempt internal inter-affiliate swaps from margin and real-time reporting requirements. Without a clear exemption, non-financial companies would have to divert billions of dollars away from much-needed investments, such as business expansion and job creation.
- Avoid regulatory overreach in Money Market Fund (MMF) reforms. The SEC is considering additional reforms to MMFs, beyond those enacted after the financial crisis. Since MMFs are critical tools for short-term financing and investing, it is vital that these reforms do not compromise their usefulness.
- Prevent unintended Volcker Rule consequences for non-financial companies. Commercial businesses could soon be facing unintended consequences as a result of regulators’ efforts to implement the Volcker rule, a provision included in the Dodd-Frank Act to prohibit bank proprietary trading. As a result, however, non-financial companies could soon be feeling the effects of reduced liquidity in the markets they utilize for raising capital.
Government Reform Issues
- Reform the federal acquisition process, including efforts to streamline costly duplicative and unnecessary procedures. In the context of a tightening budget environment, FEI recommends reforms to reduce costs inherent in the federal acquisition process through the elimination of redundancies and unnecessary compliance and reporting procedures. These reforms should also provide for the recovery of sound and appropriate business expenses by federal contractors.
- Protect contractor intellectual property and proprietary business and technical data. Under evolving law and regulations, government contractors are facing the unenviable choice of either not recovering the R&D costs of products sold to the Federal Government or granting the Government unlimited rights to the underlying technologies, thereby losing any competitive advantage gained from that R&D. FEI encourages the Federal Government to return to practices that support innovation and competition.
- Improve the transparency of companies and the United States government by adopting the use of XBRL (eXtensible Business Reporting Language). The adoption of XBRL would enable efficiencies in the recording and reporting of financial information, while reducing compliance and reporting costs for both the federal government and the private sector.
Financial Executives International is the leading advocate for the views of corporate financial management. Its 15,000 members hold policy-making positions as chief financial officers, treasurers and controllers at companies from every major industry. FEI enhances member professional development through peer networking, career management services, conferences, teleconferences and publications. Members participate in the activities of 86 chapters, 74 in the U.S., 11 in Canada and 1 in Japan. FEI is headquartered in Morristown, NJ, with additional offices in Washington, D.C. and Toronto. Visit www.financialexecutives.org for more information.
“The President’s Framework for Business Tax Reform”, The White House and Treasury Department (February 2012), p. 7; Robert Carroll and Gerald Prante, “The Flow-Through Business Sector and Tax Reform”, Ernst and Young (April 2011), p. 1.