Senate Democrats

Democrats Are On Your Side: Creating Jobs, Protecting the Middle Class, and Closing Tax Loopholes

U.S.-based multinational companies should be subject to fair and balanced tax laws, just like hard-working American families.  These big corporations should not be rewarded for shipping millions of jobs overseas.  The American Jobs Act would close existing tax loopholes that allow big corporations to abuse the tax credit system and would put an end to tax breaks for companies that eliminate American jobs.  All told, it would close over $14 billion of foreign tax loopholes, most of which relate to foreign tax credits.  The bill would also give tax incentives to small businesses so they could create jobs in the United States and cut taxes for middle-class families.  

Instead of helping families and small businesses, Republicans are blocking passage of this critical job-creating legislation.  They are protecting big corporate interests and rewarding companies for shipping American jobs overseas.

The American Jobs Act would create jobs, protect middle-class families, and close tax loopholes for big corporations. 

Tax Cuts for American Families and Workers

·         Tax Cut for College Tuition – This bill extends a tax deduction for qualified education expenses including college tuition and fees, so Americans can get the world-class education they deserve without going bankrupt in the process.

·         Property Tax Deduction – This bill extends the additional standard deduction for state and local property taxes to save families money on their federal tax returns.  This deduction allows taxpayers who do not itemize their tax deductions to receive property tax relief as a standard deduction of $500 for single filers and $1,000 for joint filers.

·         Tax Cut for School Teachers – This bill extends a $250 tax deduction for teachers who buy classroom supplies out of their own pockets, so teachers can continue to provide a quality education for tomorrow’s workforce.

·         Sales Tax Deduction – This bill extends the option for taxpayers to deduct state and local sales tax on their federal tax returns, so families can continue to save money with the tax deductions they count on.

·         Tax Cut to Improve Home Energy Efficiency – This bill updates the eligibility for tax credits for energy-efficient windows, so even more families across the country can take advantage of this tax cut. 

Tax Cuts for American Business to Create Jobs

·         Tax Cut for Payments to Activated Military Reservists – The bill extends a tax cut for small businesses that continue to pay employees who have been called to active duty, so these businesses can continue to support these jobs.

·         Research and Development Tax Credit – The bill extends a tax cut for research and development to help American businesses spur innovation and grow.

·         Tax Credit for Equipment Investments – The legislation allows companies to receive tax refunds on a portion of their Alternative Minimum Tax (AMT) credits if they invest in capital equipment for use in the United States. 

·         Tax Benefits for Capital Investments – The legislation extends a tax cut to allow restaurant owners to depreciate new construction and improvements and retail store owners to depreciate improvements over 15 years rather than 39.5 years, supporting construction jobs, encouraging economic development and saving these businesses money they can use to reinvest in their companies and hire new workers.

·         Tax Cut for Investing in Low-Income Communities – The bill extends the New Markets Tax Credit, a tax cut for private investment in low-income communities, bolstering local economies and creating jobs where they are needed the most.

·         Biodiesel and Renewable Diesel Tax Credits – The bill extends a tax cut for businesses that produce biodiesel and renewable diesel, which supports energy independence and creates jobs.

Closing Foreign Tax Loopholes

The American Jobs Act includes a package of provisions developed jointly by the Treasury Department, the House Committee on Ways and Means and the Senate Finance Committee to curtail various loopholes, mostly abuses of the U.S. foreign tax credit system.  The $14 billion of foreign loopholes the bill eliminates includes:

·         Splitting Foreign Tax Credits From Income – This bill implements a matching rule that would suspend the recognition of foreign tax credits until the related foreign income is taken into account for U.S. tax purposes.  The bill targets abusive techniques and does not affect timing differences that result from normal tax accounting differences.  It is estimated that the proposal would raise over $6 billion over 10 years.

·         Covered Asset Acquisitions – The bill prevents taxpayers from claiming the foreign tax credit with respect to foreign income that is never subject to U.S. taxation because of a covered asset acquisition.  It is estimated that the proposal would raise over $4 billion over 10 years.

·         Tax Treaties -The bill prevents taxpayers from using U.S. treaties to artificially inflate their foreign sources of income and reduce their taxes beyond what is needed to avoid double taxation.  It is estimated that the proposal would raise over $250 million over 10 years.

·         Redemptions by Foreign Subsidiaries – The American Jobs Act ensures that earnings from the sales of stock between U.S. companies and their foreign subsidiaries would remain subject to U.S. tax when repatriated to a foreign parent corporation as a dividend.  It is estimated that the proposal would raise over $250 million over 10 years.