quorum call:

quorum call:

mr. merkley: mr. president? the presiding officer: the senator from oregon. mr. merkley: i ask that the quorum call be lifted.

the presiding officer: without objection. mr. merkley: thank you, mr. president. i ask unanimous consent the senate proceed to a period of morning business with senators permitted to speak for up to 10 minutes each. the presiding officer: without objection. mr. merkley: i ask unanimous consent the senate proceed to consideration of h.r. 4120, which was received from the house and is at the desk. the presiding officer: the clerk will report. the clerk: h.r. 4120, an act to amend the national law enforcement museum act to extend the termination date. the presiding officer: without objection, the senate will proceed to the measure. mr. merkley: i ask unanimous consent the bill be read three times and passed, and the motion to reconsider be considered made and laid upon the table with no intervening action or debate. the presiding officer: without objection. mr. merkley: i ask unanimous consent the senate proceed to consideration of senate resolution 437, which was submitted earlier today. the presiding officer: the clerk will report.

the clerk: s. res. 437, recognizing the historic significance of the mexican holiday of cinco de mayo. the presiding officer: without objection, the senate will proceed to the measure. mr. merkley: i ask unanimous consent the resolution be agreed, to the' ambl the preambe agreed to and the motion to reconsider be laid on the table with no intervening action or debate. the presiding officer: without objection. mr. merkley: mr. president, i ask unanimous consent the help committee be discharged from further consideration of senate resolution 102 and the senate proceed to its immediate consideration. the presiding officer: the clerk will report. the clerk: s. res. 102, expressing support for the designation of st. louis, missouri, as the national chess capital of the united states and so forth. the presiding officer: without objection, the committee is discharged and the senate will proceed to the measure.

mr. merkley: i further ask that the resolution be agreed to, the preamble be agreed to, and the motions to reconsider be considered made and laid upon the table with no intervening action or debate. the presiding officer: without objection. mr. merkley: mr. president, i understand that senate bill 2280 is at the desk and due for its second reading. the presiding officer: the clerk will read the title of the bill for the second time. the clerk: s. 2280, a bill to approve the keystone x.l. pipeline. mr. merkley: i would object to any further proceedings with respect to the bill. the presiding officer: objection is heard. the bill will be placed on the calendar. mr. merkley: i ask unanimous consent that when the senate completes its business today, it adjourn until 10:00 a.m. on tuesday, may 6, 2014. that following the prayer and pledge, the morning hour be deemed expired, the journal of proceedings be approved to date

and the time for the two leaders be reserved for their use later in the day. that following any leader remarks, the time until 11:00 a.m. be equally divided and controlled between the two leaders or their designees prior to a cloture vote on the motion to proceed to s. 2262, the energy savings and industrial competitiveness act. and that the senate recess at 12:30 p.m. subject to the call of the chair to allow for the weekly caucus meetings and the official photograph of the 113th congress. and if cloture is invoked on the motion to proceed to s. 2262, the time during the recess count postcloture. the presiding officer: without objection. mr. merkley: there will be a roll call vote at 11:00 a.m. tomorrow. additionally, the official photograph of 113th congress will be at 2:15 p.m. tomorrow. if there is no further business to come before the senate, i ask that it adjourn under the previous order. the presiding officer: the

senate stands adjourned until senate stands adjourned until >> working again broadband plan to if you take that 150 number the incentive option and the age blog you need to figure out what comes next in the 2018/2019/2028 toronto and identify the

spectrum needs to start right now. reference the cisco projections, they are staggering. cisco projects that between now and 2018 the demand for mobile wireless will increase eightfold if you thought traffic in washington was going to increase eightfold between now in five years from now you would say we need some new roads. we need more spectrum. the auctions will help and infrastructure investment will help and new technology will help that we probably also ought to be working to figure out what that next roger is after the incentive auction.

>> host: each week in the segment of the "washington journal" we take a look at how jar money is at work in a different federal program. this week we are continuing our focus on tax breaks being considered by congress. we have already looked into clean energy tax breaks, housing tax breaks and today we focus on tax breaks aimed at corporations. our guest today is david kotter of american university. david waters on the tax breaks we have been talking about today in this segment of your money?

>> guest: there are about 60 provisions that expire at the end of december 31 of last year and there are four big ones that affect businesses. the research and development, expensing provision which allows small businesses to write off certain amounts of investment in capital equipment and to foreign provisions that affect what are called controlled foreign corporations and active financing exception and a look through provision. so we can go in to little more detail on what those really mean if you would like. >> host: yes. i want to start with a look through provision. he talks about research and development. what's the look through? >> guest: the look through involves the section of the tax law that requires u.s. shareholders of foreign corporation called controlled foreign corporations basically a foreign corporation with the u.s. shareholder owning 10% of the stock to pick up the income,

certain types of interest dissidents, royalties and rents. whether or not those amounts are paid to the u.s. shareholder. another were to have u.s. corporation that holds 10% or more before an company. that foreign company is interested victims, around and come, rent income and maybe even insurance income. you as shareholder are required to pick that share of those foreign earnings up and its it's u.s. taxable income even though it doesn't receive any cash from a foreign subsidiary. the look through provision fault a u.s. company that has got to foreign subsidiaries. let's say one has a lot of cash and one needs cash. if the company that needs -- the foreign company that needs cash borrows from the company that has the cash it will pay the foreign subsidiary that has cash interest. that interest would be attached to u.s. parents whether or not that interested remitted to the u.s. parent.

what this look through provision does is it looks through to the source of that interesting, and a foreign subsidiary and provides that if he interesting, and the lending for subsidiary is from a related subsidiary then you don't have to pick up that interest income currently and subjected to u.s. tax, little bit complicated. >> host: we have plenty of time to go through it in the segment of your money on the "washington journal." for radio listeners here's a chart which showed viewers about these for tax extenders for corporations we will be talking about in today's segment of. the research and development tax extender $155 billion a look through rule we were just talking about. small business depreciation $73 billion over 10 years active financing exemption $58 billion over 10 years. we are using the term tax extender. explain that term.

why is congress going back to possible extend these? >> guest: there are series of provisions, about 60 in total that are temporary part of the tax law. so they are in the tax law for a year or two years at a time. and at the end of their time, they expire is part of the tax law and taxpayers can no longer take advantage. so these 60 as i said expired december 31 of last year. the original extender was the r&d tax credit which was enacted in 1981. that has been temporary for 33 years now and it's gathered a lot of friends in the 33 years that traveled with it because these extenders tend to travel as a herd. >> host: there are some members of congress who want to stop being temporary here and make these permanent. correct? >> guest: that's exactly right and you see that in the

different approaches between the senate finance committee and the ways & means committee. the senate finance committee approach this year has been the same as the traditional which is it reported out a bill that temporarily expense these provisions for two years through 2015. the chairman of the finance committee wyden has said he expects this to be the last temporary extension that congress ought to decide one way or another whether these provisions should be a permanent part of the law. the ways & means has gone down a completely different road. ways & means is using a much more detailed deliberative and extensive approach examining each provision one by one in determining whether should be made at permanent part of the law or whether it should be allowed to expire permanently. last week, ways & means reported out six provisions. before we mention into others involving what we call s

corporations and recommended that they be permanently made part of the internal revenue code. there was supposedly a vote scheduled for this week on one of those six provisions which would make the research tax credit permanent. >> host: we are talking with david kautter of american university. as we discuss tax breaks for corporations, some of the tax extenders being debated on capitol hill. if you have questions or comments the phone numbers are democrats two are democrats (202)585-3880 and republicans (202)585-3881 independence (202)585-3882 and outside the u.s. it's 202585383. you talked about the ways & means committee reporting out this bill but it wasn't without some debate that broke down along partisan lines there. what are the positives and negatives of both sides see as making the specifically research and development tax credit permanent? >> guest: the heart of its

bait on extenders has been whether they should be paid for. in other words if they would reduce federal revenue over the period of the temporary extensions should revenue be raised in other parts of the tax law to pay for those extenders? traditionally they have not been paid for. this year the republicans take the position in both the house on the senate that they do not need to be paid for. the democrats have split. the democrats in the senate who control the finance committee have said they don't think these provisions need to be paid for and the democrats on the ways & means committee which is what you are talking about, have basically said we think these provision should be paid for. it's not that we oppose them and it's not that we think they are bad policy. it's that we think there should be some way to pay for those and without a so-called pay for. they opposed reporting those provisions out of the ways & means committee. >> host: here's one of those

democrats on capitol hill. the house minority whip steny hoyer talking about the research and development tax credit and his concerns about this issue is not providing a means to pay for it. >> so that all of your republican colleagues are being asked to vote for a 155 billion-dollar increase in the deficit. which they all say they want to bring down. i'm sure they will get up and rationalize as they did in 1981 and 2001, 2003,, that those tax cuts would magically grow the economy so that they would not exacerbate the deficit. in the 33 years i have been in congress that has not been our experience. >> host: here's a story from the hill newspaper on the same topic talking about this bill that cleared some of these tax break extensions that cleared

the house ways & means committee. quoting congressman camp republican congressman camp, he said we need to get out of this trap of that temporarily extending policy and then letting it expire. that's the worst of all worlds and i'm going to do everything i can to try to move this issue forward. camp said more permanent extensions and tax breaks would catch the u.s. up with global competitors that don't allow incentives for the research and other key tax breaks to expire. again some quotes from the hill newspaper story on some of this. david kautter on this debate going back and forth on capitol hill. >> guest: one of the basic principles for business is certainty. they like to be able to know what the rules will be when they make an investment decision. part of the problem with the temporary nature of these provisions especially things research and development tax credit, the foreign work for

rules and the finest exception and the write-offs under section section 179 the primary problem is you can't plan them. .. years. mostly people believe that these provisions will be extended and bet the r&d credit will around and they can rely on it even though it is not part of the law currently. bey are expecting it to retroactively extended, which congress has done regularly. on the other hand, when you start the plan as a business, you are not just looking at next year, especially with research and development. you are looking out 10 years or 15 years. it is helpful to a business to be able to plan for an e xtended period instead of from one year to the next. host: corporations are interested in these tax

extenders, this is from americans for tax justice. a list of the corporations by lobbying for some of these tax breaks. including the research and development tax break. some of the money spent on million. ge, $61 among the top 30 organizations, according to the chart from mericans for tax justice, $828 million spent on lobbying to keep the tax extenders from january 2011 to september 2013. of americanr university, managing director of the kogod tax center. we talk about tax breaks for corporations. jim in ohio on our line for independents. good morning. caller: good morning. i have a comment and a question.

we reallyt is, do need all these tax breaks when our country is in such poor physical condition? i also had a question about a look through. provisionhrough sounds like it might be a money-laundering types game. -- type scheme. when you take a corporation that has so much money and gives it to another corporation that does not have much cash, that sounds like laundering money. is that laundering money to avoid paying taxes? to help to bankrupt america, what is it? guest: sure. the look through provision temporarily defers, as opposed to permanently eliminates, u.s. tax, on those amounts moves from one corporation to another. the way the u.s. rules work,

when amounts are earned abroad by foreign subsidiaries, there are certain types of income that flows immediately to the u.s. shareholders. is allowed to stay abroad and not be subject to u.s. tax until it is paid in cash to the u.s. parent. that are moved from one subsidiary to another would ultimately be subject to u.s. tax. having said that, there is an ability to move money through this technique on a high tax -- from a high tax foreign jurisdiction to a low tax foreign jurisdiction. let's say the company that has money is in a low tax jurisdiction. the company that needs cash is in a higher tax company. by borrowing the higher tax company, foreign subsidiary, gets a deduction at the 30% rate

in the country where it is resident. and the lending subsidiary will only have to pick up the income and say a 12% rate. it is possible to have rate arbitrage by moving money around. in theory, when that money is paid back to the u.s. parent, it is subject to tax. the look through is really deferral as opposed to illumination. host: comments on twitter. "american corporations have never been stronger." one other comments from twitter. let's go to aneddy in north carolina on our line for republicans. caller: my question or comment, you hear a lot of people on the

left talking about subsidies to oil corporations. they are not receiving any subsidies. what they are doing is they are getting depreciated value on their costs for drilling. where another corporation would have to take it over an extended period. guest: that is correct, there are a series of provisions in the fossil fuel industry that became part of the tax law over the years. special breaks for intangible drilling expenses and other expenses that would have to be capitalized. that the internal revenue code allows to be written off more quickly than if they were written off over their economic life. in that sense, accelerating deductions is a tax benefit. on the other hand, a lot of the green energy initiatives are also funded through tax incentives in the internal

revenue code. there is a debate between the fossil fuel folks and the green energy folks as to whether those breaks are equivalent, the breaks for the fossil fuel industry should be whittled back or limited. substantial profits, many fossil fuel companies. the green energy companies are not quite so profitable. it is a debate that has gone on now for years. hasy year, the president proposed in his budget to eliminate most of those incentives for the fossil fuels. so far, they have not been illuminated. host: we talked about the research and development tax credit, the look through rule. talk about the active financing exemption that would cost a rejected $58 billion over 10 years. guest: the active financing exemption works on roles in the tax law. 10% u.s. shareholder owns

or more of a foreign controlled corporation, the shareholder has to include in income certain types of income, interest dividends, rents, royalties, and insurance income. whether that income is remitted or paid to the u.s. parent or not. hat the active financing exception provides is that if there is a foreign subsidiary actively engaged in producing interest income, dividend income, right income, royalty income, the u.s. shareholder does not have to currently pick up that income in its u.s. taxable income. it differs picking that up until those amounts are actually paid to the u.s. shareholder. in that sense, it works out the same as we talked about with respect to the look through rules. with david kautter american university. director of the kogod tax

center. taking your calls and questions as we talk about tax breaks for corporations for the next 20 minutes or so in our "your money" segment of "washington journal." tom in arizona, independent. good morning. caller: good morning. there should be no taxes on corporations whatsoever. let all of that extra money flow to the american economic system. for that matter, to the world economic system. let jobs be created. to there be heaven on earth not tax corporations. guest: thank you for that question. it is surprising when people find out how much of the total tax paid in the country are paid by corporations. in the1% of all taxes u.s. are paid by corporations.

when you look at the business world, about half of all people employed by businesses in the u.s. are employed by what are called pass-through entities. proprietorship, partnership -- the earnings flow through to the owner and there is no corporate level tax. the other 45% of people employed here in the u.s. are employed by corporations,d c those are subject to corporate level tax. when you look at the u.s. tax rates compared to our trading artners, the oecd is collection of major economies in the world. among those companies, the u.s. has a highest corporate tax rate. much of the discussion you care about tax reform is an effort to get the corporate rate down to a level that is more consistent

with our major trading partners. the average corporate tax rate is in the upper 20%, 27%. 10%.are as low as corporate tax has been controversial since it was enacted and it will be until it is repealed, if ever. host: on twitter. "if we eliminated corporate income tax, when we become a tax haven for the world?" guest: we probably world. there is only one country with a zero corporate tax rate, in the middle east. places like ireland have become tax havens. other major economies have as they havevens reduced their corporate tax rates. it would attract more investment, more capital.

you the question is could run the economy, could you raise the amount of revenue needed -- run the government with the amount of revenue that you would raise if you eliminate the corporate tax. as i said, it still raises about 10% or 11% of all the taxes in the country. host: talking about corporate tax provisions that are being debated by congress and whether to extend them or not. we are joined by david kautter of american university. kim in santa cruz, california on our line for independents. good morning. you with us? caller: yes! yeah. i think they need to close their tax loopholes. anyindustry does not pay tax in california, i don't think that is right. hi -- host: kim, we heard your comment and are going to let david

kautter jump in. do you have any thoughts on the oil industry? in totale oil industry pays a lot of taxes. and it pays federal taxes. in many states, it pays estate tax. there are a lot of people who think whatever it pays it is not enough, it should be a multiple of what it pays. and there are others who think whatever it pays is way too much. again, just like the corporate income tax we talked about, it is an issue where people have differing views. i will say that as an industry, oil and gas pays a fair amount of tax. host: jim on twitter. "can you explain why allowing immediate right off generates more revenue?" the immediate impact, if you look at the way the government keeps its books. if you immediately write off an

asset, it reduces federal receipts. if you just to the strict bookkeeping. instead of the ducting, let's say you got something for $100. if you depreciated, you would the duct $10 this year. by being able to expense it, you deduct 100. your taxable income goes by 100 instead of 10 and you pay less tax than you would've. is him ofde of that the business that purchased the asset now pays less tax and has more money of its own left to invest in other revenue producing activities. reducingis that by taxes today versus over 10 years, you will have lower taxes today and the businesses will take that money and reinvest in growing their businesses and hiring and creating jobs. host: back to the research and development tax credit. talking about your background on

capitol hill. guest: it is interesting. i worked on capitol hill in the late 1970's and early 1980's from john danforth. senator danforth propose a 10% credit on research and development. it started in 1979. the treasury department opposed the enactment of the r&d credit. for two reasons. they said a straight 10% across-the-board credit would reward behavior that would have occurred anyway. so senator danforth amended the proposal so it became an incremental credit, you only get the credit as you increase your recent endowment spending. -- your research and develop a spending. the second objection was it is difficult to define research and development. treasury testified that they looked at this in 1969 and could not come up with a definition.

between 1969 and 1981, when the provision was enacted, the financial accounting standards board came out with a definition of research and development for accounting purposes. interesting, senator danforth but to the treasury department the question is a possible accountants can define research but attorneys can not? it was decided to include the research and development tax credit in the 1981 bill. a little bit of political intrigue. theressman dan kelsey -- chairman of the ways and means committee and senator danforth were not friends. senator rostenkowski was chair of the group that put together the house bill. jimmy carter described the internal revenue code as a disgrace to the human race and soposed it be sunset every

often so congress would have to reenact everything. congress been wafting caskey -- congressman rostenkowski proposed that maybe we should use that r&d credit as an experiment on how sunsetting the code would work. it was enacted and became effective in june of 1981, expired at the end of 1985. and it has been temporarily extended ever since. interestingly, over those 30 years, the treasury department has completely changed its view. if you look at the studies out of the treasury department, they conclude that the research and develop a tax credit is very beneficial and encouraging businesses to maintain technological advantage. host: to get there is still concern about the research and development tax credit from groups like citizens for tax justice. i want to get your thoughts on what they wrote last year. some of the criticism about the r&d tax credit. the white -- accounting giant

deloitte openly advertises its services to help the food credit industry get credits. guest: there are several points in there. one of the basic points to realize with respect to the racers are middlemen tax credit is that it is restrictive in terms of what qualifies as research for computing the credit.

but the research has to be technological in nature. it has to be designed towards either establishing or improving a business component and it has to be focused on experimentation that improves functional aspects, performance, quality, or reliability. it is not available for cosmetic changes. to doautomaker wanted some research on whether a rounded headlight looks better and was more appealing to a potential buyer than a square todlight, that is not going qualify for the research and development credit because it is not technological in nature. the headlight works whether it is round or square. it is limited when it comes to the definition. on the other hand, the major area of controversy, from the day that credit was enacted, is what is research?

at times the irs has been openly hostile to the research and development credit and has actively audited things that were clearly allowable as research. that is not to say that there are not some businesses who skirt the edges and try to claim the credit for types of activities that are ineligible. for a fewave time more calls. we talk about tax breaks being considered for corporations in this "your money" segment of the "washington journal." detroit, michigan, democrat. caller: good morning. disingenuous for your guests to speak of the 35% tax without immediately mentioning the fact that corporations truly do not pay that. you know, they are hoarding money. talk about the trickle down.

ok, you save corporations taxes and they will hire more people. they are hoarding money and then suppressing the wages of workers. no sympathy for corporations trying to get lower taxes. they are not putting that money back into the economy. they are hoarding money. michigan.etroit, guest: where you see the hoarding of the money, if it is a genuine issue, is u.s. corporations have somewhere between $1 trillion and $2 trillion of untaxed foreign earnings sitting abroad. when that money is brought back to the u.s., they have to pay tax at the u.s. rate. which is, going back to the comment about 35%, the top rate is 35%. they get a credit for foreign taxes paid on that income. let's say they paid 12% foreign tax in ireland.

they bring it back to the u.s. and pay tax at 35, they get a credit for 12. onessence, they paid 23% those repatriated earnings. there is an enormous amount of cash sitting abroad held by u.s. corporations that is not being repatriated because of the u.s. tax rules work. u.s. is the only major economy in the world that taxes do.usinesses the way we everyone else uses what is called a territorial system. which is foreign earnings are taxed in the foreign country and not in the home country of the parent. we use a worldwide system. we do have a different system, we do have a lot of money that is untaxed by the u.s. taxing system. no question about it. as to the 35% rate, that is clearly a statutory rate. corporations get deductions and credits that reduce that rate.

generally, what they pay is called the effective tax rate, which is the amount of taxes paid divided by their income. that is almost invariably less than 35%. effect ofwitter, the corporate tax rate on some of the big corporations like ge and exxon. do we know what those numbers work out to? guest: i don't have that off the top of my head but i believe it was a year or two ago general electric, there were some stories that general electric paid no u.s. tax. that is hard for me to believe. it is possible. part of that, the way the u.s. tax law works, if you have losses and part of your business and income in another part, you get to offset the income and the losses. the tends to drive down amount of tax paid. those numbers are freely available. i just do not have them on the

tip of my fingers. host: let's go to jessup, georgia on our line for democrats. caller: the morning. you sit there and you have all the admiration for companies that basically are getting away with murder, they are not paying taxes. almostd at a company for 40 years. in the last eight or 10 years, they were paying about $8 million a year in taxes to the county. today, they are paying less than $3 million. i went from paying $100 a year on a 40 year house i bought when i was 20 years old to paying almost $700 today. that is robin hood in reverse. another thing, you are talking about credit, gas credit. since the year 2008, they have less workers today than they had in the year 2000.

they are not adding jobs, they are decreasing jobs. but they are still getting subsidies. will you please explain that to the audience? host: david kautter is more of an academic institution at american university in d.c. at the kogod tax center. guest: it is a fair question. center is actually focus on small businesses. most of the job creation, going to one of the issues the colleges is raised, most of the jobs created in the u.s. economy are created by small businesses. the estimates are anywhere from 65% to 85% of all the net new economy overin the the last 20 years have been created by small businesses. now, that number comes basically from the department of labor study and from the small business association. and the small business administration. it is not a privately funded

study. economymism in the tends to be in those small businesses. the entrepreneurs and the start up businesses. that is what our tax center is focused on, how do you get the tax laws to encourage those businesses to be formed and survive questio? no question that is where most jobs are created. host: dorothy and baltimore, maryland, on our line for independents. caller: good morning. i just wanted to say, the thing i think that is not going on. the politicians are going to try to get this solution, let me explain. to give ated corporation tax breaks and it can go -- this is what has to be done. i will say something ronald reagan said, "trust but verify." the more they higher, the cheaper their taxes.

that is what you do, you cannot -- they can still hold onto their money. if you make it so that when they a tax break. get it can go down to zero the more people you hire. second thing, about all companies. ll company -- oil companies, they sell us oil off our own land at whatever price they want to charge us. that is no incentive for us but politicians -- and we cannot control the price. oilicans are paying for to make someone else rich. host: i want to give kautter a chance to respond. think the point about reducing federal taxes if someone does additional hiring does exist in certain parts of the internal revenue code.

there is the work opportunity tax credit, that reduces the tax liability of a business to the extent that it hires certain, defined types of workers. has ald be somebody who criminal record. somebody who has been disadvantaged. there are certain pieces of the existing tax law that reduce tax liability for hiring. with respect to the oil companies, that is a debate which i do not know has ever been or will ever be settled. you can find studies that talk about how the price of oil is globally determined. it is not determined by the u.s. production. and i think i think the oil and gas companies do pay taxes, in fact i know i do. were some people, is it enough? for some it won't ever be enough

and for some it will be too much. host: if you want to learn more about the kogod tax center -- kautter

>> remarks by attorney general eric holder on ratio disparties in criminal sentencing later on. >> c-span2, created by america's cable companies 35 years a