Washington Lawmakers Will Haggle Over Corporate Tax Credits In Next COVID-19 Relief Package

When the federal government unveils its next expected COVID-19 stimulus package, some large corporations stand to prosper if Congress includes tax credits as part of the relief deal.

The Wall Street Journal reported that one of those companies that would benefit is Duke Energy (DUK) which has been unable to use its accumulated corporate-research and renewable-energy credits since it has instead been using accelerated tax deductions for capital investments in order to lower its taxable income.

As a result, Dwight Jacobs, Duke’s chief accounting officer, said the company had to deal with tax-code rules which limit tax credits – thereby placing about $1.8 billion in unused credits on the company’s books as of Dec. 31, 2019.

Under a new tax proposal, the Charlotte, N.C.-based firm may receive those credits within a few months rather than years.

It “would give us more cash today and that would cause us to avoid borrowing money that we would otherwise have to borrow,” Jacobs said.

But Jacobs noted that the benefits of those tax credits would be transferred to the utility’s through lower rates.

However, it’s unclear if Congress will actually approve such tax credits for big corporations, given the backlash over tax breaks provided in the relief measures introduced in April.

The National Association of Manufacturers, Rep. Jodey Arrington (R.-Texas) and a group led by accounting firm PwC LLP all support the new tax proposal and are optimistic it will pass since some credits on the table enjoy bipartisan support.

However, in early July, more than 100 Democrats in congress asked party leaders to reject new tax breaks for big corporations.

“Part of why large businesses seek refundability or what they call monetizing their tax credits is because so many corporations have little or no tax liability following the historic deficit-financed giveaways they received under the Trump tax law [of 2017],” wrote Democrat lawmakers led by Rep. Lloyd Doggett of Texas and Sen. Sherrod Brown of Ohio.

“Because Congress is so skilled at rewarding corporate lobbies, our tax code has become more and more skewed to benefit multinationals over small businesses, the wealthy over the working poor,” said Congressman Doggett. “We must halt the misuse of this crisis as a way to secure even more special privileges and tax advantages for the powerful. The pandemic has already worsened our country’s racial and economic disparities; at the very least, new tax breaks should not be permitted to further widen the gap.”

Senator Brown said: “There is no reason corporations need yet another tax break in the next relief package. Workers are struggling to figure out how to pay their bills, stay in their homes, and keep their families safe while Republicans are looking out for their wealthy friends. We need to invest in workers, struggling families and small businesses harmed amid COVID-19, not give more tax windfalls to corporations.”

Samantha Jacoby, senior tax legal analyst at the Center on Budget and Policy Priorities, similarly said: “This [proposal] is not well-targeted relief for businesses that are struggling during the pandemic and recession. If the desire is to encourage hiring, the incentive could be targeted to that.”