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View Diary: NASCAR, Wall Street, Goldman Sachs, Hollywood get some fiscal cliff love (14 comments)

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  •  Actually...... (4+ / 0-)
    Recommended by:
    nextstep, Susan G in MN, Onomastic, VClib
    9 billion for a provision that "allows manufacturers and banks to defer taxes when they engage in a special type of financial transactions known as 'active financing.'"
    This piece of the code treats loans that are part & parcel of an active business as any other active business.  So, say there's a car company operating overseas.  As we all know, these days car companies get revenue from the actual car sales and also get a big chunk of revenue from financing their sales.  So any given sale has two interrelated income streams: the sale, and the interest on the financing.  The sale revenue is an active trade or business, so it can be deferred by the foreign subsidiary until it's dividended back to the parent company.  W/o the active financing exception, though, the interest income on the financing would be immediately taxable to the parent company as "Subpart F" income, which was designed to prevent deferral of passive income that's accrued on assets stashed in bank accounts overseas and the likes.  As is pretty evident, the auto financing isn't passive income, it's part and parcel of the active trade or business; accordingly, the active financing exception just puts an important part of the business on the same tax footing as any other active trade or business.

    And I don't see how that "encourages firms to create jobs overseas."

    •  (I suppose the argument would be that, (0+ / 0-)

      but for the exception, more companies would locate their financing centers in the US parent company?)

    •  No, "actually..." (2+ / 0-)
      Recommended by:
      badger, chuckvw

      ...it's a massive tax break for firms like GE (Finance) and Citi, and JPMC, Apple, etc. And, they're financing a lot more than cars. And, these are about jobs overseas, and those firms parking their profits overseas (which all of these firms do, as well, when it suits them). So, on the one hand, we have Washington "bemoaning" they can't control the multinationals and the TBTF's, as they get bigger and bigger and bigger (under Obama, too). And, on the other hand, taxpayers are directly supporting this crap via subsidies just like this.

      Heads, they win. Tails, we lose.

      The last thing taxpayers need are folks telling us: "This isn't so bad."

      When, in fact, it's exactly due to programs like this that we're at where we are, as a country, today.

      Record cash-on-hand at these co's; and, far lower ACTUAL taxes paid than the numbers trumpeted by their p.r. firms and the rightwing, in general. (i.e.: GE paid nominal taxes in 2010--they did pay some taxes, but very little--on over $5 billion in net income, in the U.S., alone). To posit that these firms aren't creating jobs overseas is just....ridiculous.

      "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

      by bobswern on Wed Jan 02, 2013 at 12:37:41 PM PST

      [ Parent ]

      •  It's certainly not a loophole; (3+ / 0-)
        Recommended by:
        nextstep, Onomastic, VClib

        what it does is harmonize tax treatment of companies that make money by lending as part of their business.

        If you want to say that companies like that should be singled for special tax hikes, then say it, but claiming this is a loophole is just ignorance.

      •  bob - the US is the only G20 country that tries (1+ / 0-)
        Recommended by:
        nextstep

        to tax worldwide income for its resident corporations. Why don't we just join the rest of the developed world and tax corporations only on their domestic profits?

        "let's talk about that"

        by VClib on Thu Jan 03, 2013 at 10:19:14 AM PST

        [ Parent ]

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