Introducion of Active Financing Bill

Floor Speech

INTRODUCTION OF ACTIVE FINANCING BILL

* Mr. NEAL of Massachusetts. Madam Speaker, today I am pleased to join my friend and Committee colleague Representative DAVE CAMP in introducing legislation to make permanent the Subpart F provision for active financial services income. It is time to end the temporary extensions of this important incentive and finally make this a permanent part of the tax code. In the Senate today, Chairman Baucus and Senator Hatch will also be filing identical legislation.

* The U.S. financial services industry employs workers all across the U.S. The continued health and vitality of this industry depends on the level of success of these U.S. companies in the global market. However, one important incentive expires at the end of next year, which allows these companies to defer U.S. tax on the active business financial services income earned by foreign subsidiaries of U.S. financial services companies. Other active U.S. businesses enjoy this deferral for active business operations, so it just makes sense that financial services companies should as well. The deferred tax would be triggered when that income is sent back as a dividend to the U.S. parent.

* While the U.S. financial services industry is a global leader, the market is fiercely competitive with every company searching for some advantage over another. If U.S. financial services companies are unable to compete in global markets, foreign firms will fill the void. In that case, the thousands of jobs necessary to support a global financial services operation will be lost to foreign companies.

* Current law includes stringent safeguards to ensure that the income eligible for deferral of U.S. tax is real business income and is earned by local operations serving local markets. Importantly, a qualifying business cannot be one that is based in a tax haven to serve other markets. To qualify, a company must be actively engaged in a financial services trade or business and must predominantly serve customers in the country in which it is located. These common-sense requirements ensure that this exception works as intended.

* Deferral for active financial services income has been the law for most of the history of the corporate income tax. However, since 1997, it has only been a temporary provision in the code and extended many times. It is time for Congress to once again make this exception a permanent part of the code providing the stability our U.S. financial services indistry needs to remain the global leader. I urge you to join U.S. in this effort.

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