ACA Seeks Tax Treatment Adjustment


On Aug. 10, ACA and more than 50 trade organizations from a wide-range of industries across the U.S. economy sent a letter to U.S. Treasury Secretary Steven Mnuchin on the tax treatment of offshore earnings should the U.S. move to a territorial tax system. The letter urged that a transition to a territorial system needs to include a two-rate approach in taxing foreign earnings that distinguishes between short-term cash reserves and income reinvested in other assets.

The signatories underscored that many U.S. multinationals have operated and competed overseas for decades and have both reinvested significant capital and have made acquisitions of foreign businesses or other investments. Imposing a significant tax on their overseas assets will reduce the ability of these U.S. global companies to remain competitive, ACA and others argued, stating “We support a bifurcated approach that would apply one tax rate to accumulated foreign earnings held passively in cash and cash equivalents and a separate tax rate to accumulated foreign earnings invested in other assets, recognizing that we represent a broad range of industries and the bifurcated rate should be applied fairly to all.” ACA and the other signatories also expressed support for allowing companies to pay such tax liability over a period of at least eight years with no interest charge.

Corporate tax reform is a federal priority for ACA, which has long maintained that U.S. manufacturers face higher tax costs than almost all its competitors in other countries. The corporate tax rate in America is the highest among developed nations. ACA believes the current tax system has created an uncertain environment that consistently undermines manufacturers’ ability to compete and succeed in the global marketplace.

Over the past several years, ACA has asked Congress to create a tax climate that encourages innovation and spurs investment, job creation and economic growth. ACA deems key ingredients for a comprehensive tax reform plan to include:

  • A lower Corporate Tax Rate;
  • Equitable treatment of small businesses filing under Subchapter S of the tax code in areas such as expensing of certain investments;
  • Encouraging investment by making permanent a competitive R&D tax credit;
  • A modern International Tax System that does not contain disincentives to U.S.-based manufacturing; and
  • A robust Capital Cost-Recovery System.

ACA hopes to collaborate with the current Administration and Congress to achieve these goals.

Contact ACA’s Allen Irish for more information.