(Updates with Reid’s comments starting in the first paragraph.)
Oct. 5 (Bloomberg) -- U.S. Senate Majority Leader Harry Reid said a corporate repatriation proposal by Senators Kay Hagan and John McCain won’t pass the Senate as a stand-alone bill and needs to be coupled with infrastructure improvement efforts.
“It won’t just be simply repatriation,” the Nevada Democrat said. Corporate tax holiday legislation “will be part of an infrastructure program,” Reid said in a brief interview today. Reid declined to provide details. McCain and Hagan said they would introduce the legislation tomorrow.
New York Senator Charles Schumer, the chamber’s No. 3 Democrat, said in June that Senate Democrats might be open to using the short-term revenue provided by a corporate tax holiday to finance an infrastructure bank.
Hagan, a Democrat from North Carolina, and McCain, an Arizona Republican, said today they will sponsor a bill to let U.S. companies bring home as much as $1.4 trillion of overseas profits at a reduced tax rate.
Large multinational companies including Pfizer Inc., Apple Inc. and Cisco Systems Inc. have been lobbying Congress to let them return overseas profits to the U.S. at a lower rate. The companies say the infusion of cash would boost the economy and lead to increased employment. Corporate profits now are taxed at a top rate of 35 percent.
The congressional Joint Committee on Taxation has estimated that a tax holiday would cost the Treasury $78.8 billion in forgone revenue over 10 years.
Linking repatriation to infrastructure would address a concern of congressional Democrats that the tax break should promote job creation. Independent studies showed that when a tax holiday was last offered, in 2004, the lower tax rate for returning profits spurred little hiring or domestic investment. Most of the money was used to buy back stock.
Using proceeds of a tax holiday to fund infrastructure projects also would mark a difference between Senate Democrats and the Obama administration on the issue. The administration has said repatriation should be considered in the context of a broader overhaul of the tax code.
Companies advocating repatriation have mounted an intensive lobbying campaign, working individually and through a group called the WIN America Coalition.
A Hagan-McCain bill would be at least the fourth measure addressing repatriation in Congress.
A bill sponsored by Representative Kevin Brady, a Texas Republican, would give businesses one year to bring home profits at a 5.25 percent rate.
Legislation proposed by Representative Shelley Berkley, a Democrat from Nevada, would allow companies to return offshore profits at a 25 percent tax rate, and lower if they increase their payrolls.
Senator Mike Lee, a Utah Republican, has proposed an amendment to a currency bill now being considered that would lower the tax rate for returning profits to the U.S.
--With assistance from Steven Sloan in Washington. Editors: Jodi Schneider, Jim Rubin.
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