Lapsed Tax Breaks Risk Corporate Profits

Companies and analysts speak out on frustration around unpredictability of tax rates, as Congress allows breaks to expire, only to later renew them retroactively.

The tax credit for corporate research and 54 other breaks in the U.S. tax code expired Dec. 31. They’ve been replaced by confusion and frustration.

As U.S. corporations such as Intel Corp. and General Electric Co. report earnings this month, they’re warning shareholders and analysts that they can’t assume Congress will reinstate lapsed breaks retroactively, though lawmakers have done just that four times in the past eight years.

The disclosures will begin appearing in companies’ earnings guidance for 2014 and will be part of earnings reports for the year’s first quarter.

Intel, based in Santa Clara, California, used the research credit to lower its effective tax rate by 1 percentage point in 2011 and then couldn’t use it at all for 2012. The company, the world’s largest chipmaker, took five quarters’ worth of credits at the start of 2013. That lowered its quarterly tax rate to 16.3 percent, down from 28.2 percent in the same period of 2012.

Page 2 of 2

Copyright 2016 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Comments

Advertisement. Closing in 15 seconds.