hezbollah or clearly the syrian regime's close connections with hezbollah can give rise to concerns about what may happen in lebanon if this situation continues in syria. we're very alert to this issue. my hohn yourable friend can nor assured of that. >> impending elections in russia, mr. putin came clean to bolster the domestic upon polls for a show of strength. there is one possible explanation for the use of the russian veet yto. >> this may be a factor in the russian veto. they are coming up to elections. i think a stronger factor is that they have had a long alliance with the assad regime. they do have, as i mentioned earlier, a naval base there. they have sold large quantities of arms there. they do feel committed to support the assad regime. that is something that they should change their mind b

circumstances have changed. and so we'll continue to work on them on that whether or not it's before or after their election on march 4th. >> mr. jay johnson? >> mr. speaker, it's welcomed news that india came off the fence in support of the resolution marking an end to three decades of that country's ties with the assad family. but what extent did new delhi dilute the text so they make any mention of automatic measures in the event of noncompliance? >> like my honorable friend, i welcome the fact that india voted for this resolution. and it is true that several countries on the security council did want to see a resolution which didn't go beyond the draft resolution as put to the vote on saturday. certainly india is one of the countries that wouldn't have wanted a stronger resolution or the authorization of sanctions or other measures. but i stress there were prime

negotiations and was always with russia. and the objections raised and amendments before it were from russia primarily rather than from india or south africa or pakistan. >> mr. speaker, i very much welcome the statement by the foreign secretary. the foreign secretary will know that there are over 30 opposition parties in syria from the national council, from the national coordination committee, justice party, kurdish party. and the work has been going on for a very long time to unite them. how close are we in temperatures of uniting the opposition? because unless the opposition are united, the future for syria looks bleak. >> the answer is many have come together under the table. i think it's very important that all in their own interest, all are coming together. there is a national emergency. as i put it to them actually when i met them in this country

which is a thriving democracy, whether we face a threat, all parties come together. >> they should come together for this period. so we'll continue to give them that advice. they haven't all managed it yet. >> thank you, mr. speaker. i can press the foreign secretary on another aspect of duel nationality? and that is the fact that many of the most energetic supporters and members of this barbaric syrian regime have duel syrian and british nationality. this includes members of president assad's own immediate family. can i ask the foreign secretary to commit to look into this and consider ways that we might be able to usefully frustrate this blatant abuse of british nationality and use of the convenience? >> well, my honorable friend mshgs people share my honorable

friend's view about views expressed by duel nationals in this country. however, views expressed are no grounds for depriving anyone of their national. and so if i was to tell that to my friend the home secretary, i'm sure she would be very clear about it. i can't hold out any hope to my honorable friend that we'll be able to act in the way that he would like us to. >> mr. philip halabone. >> what role can jordan play in helping to resolve this crisis? >> jordan is playing a strong and constructive role. i discussed this with nasa juda a couple hours ago, the foreign minister of jordan. and they support the work of the arab league. and they're energetic sponsors of the arab league. they co-sponsored the resolution put together by the u.n. security council. so we welcome active participation. >> this weekend on c-spannews makers, senator jeff bingaman

will answer questions from reporters about the agenda and congress for energy and environmental policy. you can watch news makers on sunday on c-span at 10:00 a.m. and 6:00 p.m. eastern. this is c-span3 with politics and public affairs programming throughout the week and every weekend 48 hours of people and events telling the american story on american history tv. get our schedules and see past programs on our web sites. and you can join in the conversation on social media sites. >> executives with fedex and time warn they are week said they would favor eliminating all special tax credits and tax deductions for corporations if the overall corporate tax rate were lowered to about 25%. they made the comments while testifying before a house ways and means committee hearing on financial accounting and corporate taxes. congressman dave camp of michigan chaired this 2 1/2 hour

hearing. >> good morning. today we're continuing our series of hearings on comprehensive tax reform. a later hearing will look at the special challenges faced by small and closely held business that's might be less concerned with gap but must confront tremendous complexity in dealing with tax accounting and related rules such as choice of entity. during today's hearing, though, we'll consider how public companies evaluate tax policy options in light of financial accounting or book considerations. and as such, we'll examine whether tax legislation works as intended when congress does not consider the effects of

financial accounting. when companies report profits in financial statements, the primary purpose is to convey information about a company's financial condition to investors and creditors. the purpose of tax accounting is to measure income for levying the federal income tax. these two functions are not necessarily consistent and in some cases may even be at odds. the effective tax policy on eshgs per share is not well understood. as a recent tax notes article suggests, when present wtd an option between targeted tax benefits and lower corporate rates, many publicly traded companies might prefer a lower corporate rate over those tax benefits because of the book treatment. similarly, tax provision that's provide cash benefits might not have their desired effect on

behavior due to a less favorable book treatment. the high rate is it an important factor for gpz that use gap or international accounting standards. if the rate is too high, the companies will allocate capital to a location that provides a more favorable tax treatment. the top income tax rate in the united states is 35% and the average combined federal state corporate income tax rate is 39.1%. second only to japan's 39.5% rate. however, in fewer than 60 days effective april 1st, 2012, gentleman panel lower the court rate to 38%. that leaves the united states with the highest corporate tax rate in the entire industrialized world. this dubious zunkstion makes it that much more challenging to attract businesses at home where we need jobs. however, not all employers have

the same tax profile. the impact of federal tax policy on certain key book calculations can diverge significantly from the impact of the same policy on a company's cash tax liability. we need to understand better how public companies respond to tax policies when such divergences occur. if the goal is as i believe to transform the code and create a climate right for hiring an investment, then we must solicit input and insight from the very job creators who do the hiring and investing. properly designing tax reform requires an understanding of the financial accounting rules and how those rules might influence the investment decisions of public companies. i'm pleased to have some of the businesses here today along with members of the academic community who have done extensive research on how financial accounting affects corporate behavior and i look ard to hearing from them all.with that, i yield to the ranking member for purposes of an opening statement. >> thank you very much. welcome. when this hearing was scheduled

on the interaction of tax and financial accounting on tax reform, i thought i would take out my accounting book from law school. i remember the course taught by a brilliant teacher and it taught me i never wanted to be an accountant. that's what i learned from his brillian brilliance. it's useful to have this hearing to discuss these various techniques important as they are. and their impact on tax reform. i do think we need to continue to talk about tax reform and always to keep our eye on the ball. and that is what is -- what are

the purposes of tax reform and what would be the impact on what our needs are? and this is why i think it's so essential that we not jump to conclusions or essentially embrace i think rather simplify alternatives. as we know, we asked joint tax to take a look at the code and to determine if the rate were lowered to a certain level, what would be the impact? and they came back with the conclusion that even if we eliminated all of these provisions, it would not bring the rate down to 25%. and i think that the challenge is now intensified because at

long last we're beginning to understand fully the importance of manufacturing in the american economy. i think we somewhat lost that understanding. and now i think with the return of the auto industry with the help of the federal government, not to run the companies but to get to all of them back on their feet, i think it has helped to highlight how as we proceed as we must talking about tax reform we keep our eyes on the ball. and here i want to quote what the president said just a few weeks ago. if you're an american manufacturer -- this was his part -- part of his plea that we continue to help american manufacturing get fully back on its feet.

"if you're an american manufacturer, you should get a bigger tax cut. if you're a hired tech manufacturer, we should double the tax deduction you get for making your products here. and if you want to relocate in a community that was hard hit when a factory left town, you should get help financing a new plant, equipment or training for new workers." the chairman and i, that's the end of the quote, for years have tried to expand to strengthen the r & d tax credit and here we are many, many months into this new session, a year plus month now and the r & d tax credit seems to be in jeopardy. so i think we very much welcome the testimony. i think at first some of us were somewhat perplexed whether we would ever understand what

you're talking about. we'll try. i yield back. >> thank you. we're pleased to welcome our panel of experts all of whom bring a wealth of experience from academia or the private sector. i believe that their experience and insight will be helpful as we focus on the interaction of tax policy and financial accounting rules. first, i'd like to welcome and introduce michael it from, the corporate vice president for tax for the fedex corporation. mr. frit has spent last 30 years as a tax attorney for different corporations and comes to us today from fedex's headquarters in memphis, tennessee. second we'll hear from mark shiktel, senior vice president and chief tax officer for time warner cable. he's responsible for all areas of tax at time warner cable including policy planning, financial reporting and compliance. third, we welcome michelle hanlon, a professor of accounting at the massachusetts institute of technology sloan school of management.

her research focuses on taxation and financial accounting. fourth, we'll hear from the national director of quantitative economics and statistics for earnst and young llp and the former director and chief economist for the treasury office of tax analysis. he leads a group of 24 quantitative anlive who's assist clients with tax and economic policy issues. and finally, we welcome mr. timothy heenan, the vice president for treasury and tax at praxair, inc. they provide the largest amount of gases for north and south american. he joined them from 2004 from . thank you all very much for your time today. the committee has received each of your written statements. they'll be made part of the formal hearing record. each of you will be recognized for five minutes for your oral remarks so mr. frit, we'll begin with you. you're recognized for five minutes.

>> thank you. >> good morning. chairman camp, ranking member levin, i very much appreciate this opportunity to appear before you to day to discuss the importance of tax reform to fed fedex. we believe that reducing the u.s. corporate tax rate significantly to be more in line with the rest of the developed world is essential to overall economic and job growth and will help our company continue to invest in critical infrastructure to compete and grow. before i delve into the details of how we analyze tax reform, i'd like to make a couple points about fedex and our business and our tax profile. with respect to our business, through our global expedited transportation network, we connect more than 90% of the world's gdp in 48 hours or less. so, if a business of any size wants to send its product from beijing to billings or cleveland to cologne, we can do that for them without them having to invest billions of dollars to

build their own networks. our business is based on this global network. if our global network is competitive, it will grow. so will we both around the world and in the united states. with respect to our tax profile, we are a full rate taxpayer. our effective tax rate is not below 35% in more than 20 years. this is a real competitive disadvantage for us. we are also troubled by other aspects of the current corporate tax code. it creates distortions and economic decision making. it diverts capital from the most efficient and effective use. and it leads to lower wages and employment. like many of you in congress, our company has also been evaluating and even modelling some of the tax reform proposals. we look at these from the perspective of both what is good for our country and what is good for our company. overall, we believe the ideal corporate tax system would include a materially lower tax

rate, something at least close to the average oecd rate along with capital investment incentives such as 100% expensing. we have also said, however, that if tax reform must be revenue neutral, so be it. we are willing to put all base broadeners including accelerated depreciation p on the table. however, doing so would come with a cost. macro economically and to our company. strong capital cost incentives like expensing generate new investment in new productive assets in the united states. and it's reflected in the chart, this chart that, i attached to my written testimony. there is an almost perfect correlation between new investment and jobs in this country. from our company's perspective, we would generally expect a lower tax rate to increase our cash flow, bottom line earnings, and earnings per share.

reducing capital incentives would have a greater adverse effect on our cash flow. this is important because as is often said, cash is the life blood of any business. our investors pay close attention to our cash flow as well as to our bottom line earnings and earnings per share and they routinely quiz our ceo and cfo about all three. one of our biggest cash outflows that gets a lot of attention is capital expenditures. $4.2 billion in our current year, for example, up from 3.4 billion last year. so while there are other factors, assuming business tax reform must be revenue neutral, the most critical analysis from my company's perspective is a comparison of the cash flow detriment from slowing capital cost recovery versus the earnings and cash flow benefits of lower tax rate. if a tax reform package cannot get us to a materially lower tax rate, it will not address our competitiveness issues,

particularly of capital cost incentives are reduced as part of the deal. one other thing that needs to be considered in the mix of tax reform is tax reform is simplification. this is difficult, if not possible, to measure. but its value should not be underestimated. in closing, we commend the recent tax reform discussion draft released by you, chairman camp. we think it is an excellent starting point. we urge that you continue your efforts to lower the corporate tax rate to be consistent with the oecd average and to simplify. we need to get back to the basics where businesses compete on the basis of the merits of their products and services, not on the basis of what the tax code says. thank you. >> thank you very much, mr. fryt. mr. schichtel, you have five minutes. >> thaupg. chairman camp, ranking member levin and members of the committee, thank you very much for inviting me to share our views on corporate tax reform. i'm the senior vice president and chief tax officer for time warner cable.

i'd like to first tell you about our business and the impact of taxes and tax policy on time warner cable. then i'll explain why we believe that less complexity and a lower rate will benefit our investors, employees and customers as well as the overall economy and americans at large. time warner cable is a fortune 150 capital intensive domestic company that provides high speed data, video and voice services to over 14.5 million customers. we have over 48,000 employees in 29 states. we offer our workers secure jobs and wages and benefit packages that are competitive and that support families, dreams and retirements. last year we hired over 7,300 people including hundreds of veterans. we are part of our nation's

communications backbone that enables domestic companies to compete regionally, nationally and globally. we help small and medium-size businesses grow and drive. time warner cable spends about $3 billion a year on capital improvements, a third of which goes to wages. in 2012, we're continuing to extend our network to even more businesses and families. our investments also support a national network of suppliers, including nearly a a quarter of a billion dollars spent annually with minority and female owned businesses. our effective tax rate is historically around 39% while our cash taxes paid are lower, driven by temporary incentives such as bonus depreciation, the benefits of which are now reversing. taxes are a significant business cost ranking among our largest in terms of magnitude, along with our programming, employee,

financing and capital outlays. although difficult to quantify and allocate, these taxes are ultimately borne by our investors, workers and customers through lower returns in wages. we are strongly influenced by tax policies that impact our net income, effective tax rate and earnings per share. given our capital intensity, however, we currently rely even more heavily on timing incentives that don't impact gap financial accounting such as expensing and accelerated depreciation which significantly enhance our cash flows and ability to invest in our people, technology and network infratruckture. these policies have and continue to support our business.

over the decades well pension intentioned policy choices have helped produce a tax code and related regulations that are read in small print and measured in volumes. each enacted policy objective is accompanied by nuanced rules needed to implement, clarify and limit potential abuse. it's not just the complexity that burdens our economy. it's the year after year starts, fits, stops, changes and uncertainty that frustrate business leaders, analysts and investors a like. often the benefits are very large. swaying or thwarting decisions of what, when or where to invest. subtle changes from one year to the next intentionally or unintentionally deny one company a benefit while often heaping on an extra helping for another. it's time for american businesses to put aside our industry specific wish list and to work collectively to support

a more coherent and equitable tax policy and corporate taxation structure. we recognize that competing priorities and deficit reduction efforts likely mean that corporate tax reform will need to be revenue neutral. as a member of the ray coalitiocoalitioko -- rate coalition, we're willing to put all our tax incentives on the table and broaden the base to bring america's corporate tax rate in line with the rest of the developed world. we advocate for a significantly lower rate, a simpler code and a predictable, consistent set of tax rules on which businesses can make long-term decisions. america has so many business advantages, yes we are saddled with an inefficient tax structure and uncompetitive tax rate. we are pleased that there's growing consensus for reform that significantly reduces the

corporate tax rate. we want to commend chairman camp and this committee for its leadership in this regard. we would welcome the opportunity to work with the committee and its members and staff in dealing with these issues as tax reform progresses. once again, i want to thank chairman camp, ranking member levin and the members of this committee for inviting me today. i very much appreciate this opportunity to testify and would be happy to answer any questions you might have. thank you. >> thank you, mr. schichtel. ms. hanlon, you're recognized for five minutes. >> thank you. chairman camp, ranking member levin and distinguished members of this committee, thank you for the opportunity to testify before you today. the main point of my testimony is that the responsiveness to tax policies can be affected by the financial implications of those policies. i would like to first offer some general examples of the importance of financial accounting to managers of publicly traded companies. one example is found in a study of companies accused by the sec

of fraudulently overstating accounting earnings. it turns out that these companies also overstated their income to the irs and paid taxes on their inflated accounting income. this suggests that these companies were willing to pay substantial sums of cash in order to report higher accounting earnings. a second example is found in a recent survey of tax executives of publicly traded companies. 85% of the tax executives said that top management at their company using the accounting effective tax rate as being at least as or more important than the actual cash taxes paid. my written testimony discusses three current tax poll sicies related to investment. the u.s. has one of the highest statutory corporate tax rates in the world with a top rate of 35%. rather than reducing our corporate rates, our policies have instead included targeted tax provisions such as bonus depreciation in section 199 in

attempts to reduce effective economic tax rates and promote investment. in addition to high corporate statutory tax rates in the u.s., we have a worldwide tax system with deferral which has, in part, led to multinational u.s. companies holding a great deal of cash overseas. financial accounting has affected responses in each of these cases. because the details can become technical quickly, i will discuss only one of these in detail today. accelerated depreciation, including bonus depreciation. accounting earnings are computed using the accrual method of accounting. this means expensions are recorded in financial statements when incurred, regardless of when the actual cash is paid. the same method of accounting accounts for the accounting for income tax expense. in the case of depreciation most companies use straight line depreciation for book purposes and ak celt rated depreciation for tax purposes. the tax deduction for depreciation is larger than the depreciation it expends for -- however, this is only temporary

in nature because the same amount will be depreciated for financial accounting and tax purposes over the life of the asset. the deduction per tax is faster than the expense per book. to compute the income tax expense for financial accounting purposes in this case, the accounting rules require expensing not only the cash taxes actually paid but also accruing and expensing the future taxes that will be paid because a company used that tax shield early. thus, accelerated or bonus depreciation does not reduce a firm's accounting income tax expense. it will not reduce their reported effective tax rate and -- relative to a world without accelerated depreciation for tax purposes. when asked, corporate management will often reveal a preference for a rate cut over bonus depreciation for several reasons. one of which is that there is no reduction in income tax expense on the income statement but there would be with a rate cut. in addition,