Businesses to gain from tax breaks in stimulus legislation

WASHINGTON -- High-tech companies, old-line manufacturers and commercial property owners could get generous new tax breaks as part of an economic stimulus bill heading into final negotiations.

It appears less and less likely that Congress will go along with President Bush's wish to repeal the corporate alternative minimum tax and immediately refund billions of dollars to dozens of companies, at a cost of $24 billion over 10 years.

More probable, lawmakers and aides say, is a compromise that temporarily exempts some companies from the complex tax.

Still, the legislation would have much to offer corporate America.

Business large and small

Items in the legislation with the broadest support provide tax benefits for companies large and small, which Bush and members of Congress of both parties say is crucial to reviving the economy.

Negotiations broke down Friday as Democrats and Republicans accused each other of political gamesmanship. Leaders of both sides, however, said they remained committed to reaching agreement.

Large manufacturers, high-tech companies and others are lobbying for a provision that would allow a percentage of the costs of assets and investments -- new factory machinery, for example -- to be written off immediately instead of deducted gradually.

The Republican House-passed $100 billion stimulus bill set a 30 percent figure over three years; the Democratic Senate Finance Committee bill included only 10 percent. Corporate representatives, not surprisingly, say the House version is superior.

"You need 30 percent to be effective, to be an actual incentive to get people moving," said Dorothy Coleman, director of tax policy at the National Association of Manufacturers. "You want people to act now, and move quickly, on things they would be otherwise waiting a year or two to do."

Sen. Charles Grassley, ranking Republican on the Finance Committee and a stimulus bill negotiator, said 20 percent to 25 percent could be a compromise figure, especially because Democrats want more of the package focused on aid to the unemployed.

"That could be the middle ground," said Grassley, R-Iowa.

For small companies, support appears strong to raise the amount of business costs that can be written off immediately, from $24,000 to $35,000 for up to two years.

Because many small businesses pay individual rather than corporate income taxes, they also support Bush's push to accelerate some of the future rate cuts from the just-enacted tax relief bill so they take effect in 2002.

Deducting losses

An additional item with widespread backing would temporarily allow businesses to deduct current losses against taxes paid as long as five years ago, compared with two years under current law. This essentially means companies that are losing money would get a refund based on taxes they paid during profitable times.

"Allowing small businesses to apply for refunds on taxes paid in past years will provide them with cash to run their business when they encounter difficult times," said Dan Danner of the National Federation of Independent Business.