SENATE PASSES EXPORT TAX REFORM

Bill includes energy programs

The Senate has finally passed a legislative fix to the ongoing foreign sales tax problem that has resulted in European Union retaliatory tariffs on U.S. goods, and tossed in the Renewable Fuels Standard (RFS) and alternative fuel tax incentives for good measure.

The single bill approach to these two thorny issues kills two political birds with one procedural stone. The foreign sales incentive, under which exporting companies enjoyed lower income tax rates on export sales, had been deemed illegal nearly two years ago by the World Trade Organization (WTO), and when the U.S. did not move to immediately end its export subsidy program, the EU responded with a 7% retaliatory tariff on many U.S. ag products.

The sales incentive program is replaced by a series of other corporate tax breaks to offset the income tax break loss.

The RFS, along with tax incentives for ethanol and biodiesel production, was a must-have for several midwestern Senators facing tough reelection races, including Senate Minority Leader Tom Daschle. The RFS is particularly important to corn and soybean producers from whose crops ethanol and biodiesel are refined.