Senate Kill Proposed Legislation Seeking Tax Code Changes to Encourage “Insourcing” and PenalizeOffshoring
Amid escalating election year tension between Republicans and Democrats on the issue of offshore outsourcing, on July 19, 2012 the Senate killed a White House-supported bill aimed at encouraging U.S. companies to bring overseas jobs back to the United States. The Bring Jobs Home Act, introduced on July 9, 2012, by Sen. Debbie Stabenow (D-Mich.), a member of the Senate Finance Committee, failed to obtain (by a vote of 56 to 42) the 60 votes required to end the Senate debate on the bill and put the bill to a final vote. The voting proceeded almost entirely along partisan lines, with only four Republican senators voting in favor of the bill.
The Bring Jobs Home Act would have amended the Internal Revenue Code by eliminating a provision that allows the cost of relocating equipment and personnel to a new location to be treated as a business expense in those cases in which the relocation is from the U.S. to an overseas location. The bill also would have created a tax credit of 20 percent of “eligible insourcing expenses” incurred in connection with the elimination of a business unit located overseas and the relocation of that business unit and the associated jobs to the U.S. These expenses would have included those already eligible as a deduction under the Code, as well as additional expenses specified in the bill. The proposed bill would have also required that the expenses be related to a written plan for insourcing, and companies would not have been entitled to a tax credit under the proposed bill unless the number of full-time equivalent employees performing work in the U.S.in the year for which they seek the expense credit exceeded the previous year’s number. The bill would not have been retroactive, and would have only applied to costs paid or incurred following its enactment.
In a statement on the Senate floor, Sen. Orrin Hatch (R-Utah), Ranking Member of the Senate Finance Committee, criticized the bill, calling it a joke and a waste of time. “As sound bites go, the President’s reelection campaign and the Senate Democratic leadership have apparently decided that they can make some political hay with this proposal,” Hatch said, creating a sound bite of his own. “But as substantive tax policy goes, this proposal is a joke.”
“We should be pursuing laws that will help, not harm, businesses and middle class taxpayers. And, the bill we are discussing on the floor today is not going to help,” added Hatch, alluding to the report by the Joint Committee on Taxation that the bill’s deduction disallowance provision will only raise about $14 million per year.
Rep. Bill Pascrell, Jr. (D-N.J.), a member of the House Ways and Means Committee introduced an identical bill in the House. The House bill was co-sponsored by 36 representatives, including House Ways and Means Committee ranking member Sandy Levin (D-Mich.). The Senate bill was co-sponsored by Sens. Sherrod Brown (D-Ohio) and Sheldon Whitehouse (D-R.I.), along with Senators Schumer (D-N.Y.), Coons (D-Del.), Durbin (D-Ill.), and Merkley (D-Ore.).
For further information on this alert, please contact Steve Semerdjian, a partner in Loeb & Loeb LLP’s Technology and Outsourcing Practice Group, at firstname.lastname@example.org or 212.407.4218.