FACTBOX-Obama budget likely seeks corporate tax changes

Jan 12 (Reuters) - When President Barack Obama issues his
fiscal 2011 budget proposal next month, investors will be
watching to see if he again calls for closing loopholes that
U.S.-based multinational companies use to account for profits
earned overseas.

A soaring U.S. budget deficit has experts predicting the
administration will recycle tax proposals that received a
lukewarm reception from Congress last year. Last year's
package, with corporate tax changes the White House said could
raise $210 billion over 10 years, was staunchly opposed by
multinational companies.

Following is a summary of corporate tax changes proposed
last year by the White House, and some new corporate tax ideas
that may find their way into the president's new budget
proposal. The president will send his 2011 budget plan to
Congress, which then spends months debating and modifying it
before the fiscal year begins on Oct. 1.
--------------- PROPOSALS RELEASED LAST YEAR -------------

DEFERRAL OF FOREIGN INCOME

Obama sought to revise a policy that lets U.S.-based global
companies defer U.S. tax on income earned abroad, a practice
known as deferral. The change would stop companies from
deducting expenses associated with that income until recognized
in the United States. An exception would be made for research
and development costs.

The administration said the change would raise $60 billion
over 10 years. A later estimate by the congressional joint tax
committee said the change would raise about $51 billion.

CHECK THE BOX

This proposal would revise rules that give companies the
power to "check the box" to classify foreign subsidiaries. The
administration said last year the law lets companies hide
foreign units to minimize tax.

By tightening classification rules, the White House said
about $87 billion would be raised over a decade but the
congressional joint tax panel estimated the plan would only
raise $31 billion.

FOREIGN TAX CREDITS

American companies are now taxed on the income they earn
inside and outside the U.S. To avoid double taxation, companies
use foreign tax credits to offset foreign taxes.

The administration proposed requiring companies to "pool"
foreign tax credits and to stop swapping credits between high
and low tax countries to minimize taxes. Combined with another
proposal to close a loophole related to foreign tax credits,
the plan could raise about $45 billion over a decade, according
to the Obama administration. The joint tax committee said the
change could raise $56 billion.

OIL AND GAS

Eliminating oil and natural gas tax breaks would raise an
estimated $31 billion over a decade, according to the White
House. The tax committee estimates a $25 billion savings.

CARRIED INTEREST

The U.S. House of Representatives has several times voted
to increase taxes on carried interest - compensation earned by
hedge fund and private equity fund managers for money
management.

These individuals now pay a capital gains tax of 15
percent; the proposal would treat such compensation as income
and therefore be taxed at 35 percent.

Obama included the proposal in his 2010 budget, though the
idea has failed to gain momentum in the U.S. Senate. Obama's
plan could raise $23 billion over a decade.

LAST IN, FIRST OUT ACCOUNTING

Obama proposed repealing this accounting method for
inventories in his 2010 budget. Under LIFO, companies can treat
the most recently acquired goods as having been sold during the
year, which will allow greater deductions if inventory costs
are rising.

The change could raise $61 billion over a decade, according
to Obama, or nearly $80 billion, according to the congressional
joint tax committee.

------- NEW TAXES THAT MAY APPEAR IN BUDGET PLAN -------

FEES ON BAILED-OUT BANKS

The Obama Administration has been considering new fees or
taxes on financial companies that got funds under the Treasury
Department's bailout program.

FINANCIAL TRANSACTION TAX

Some U.S. House lawmakers have called for imposing a 0.25
percent tax on over-the-counter derivatives transactions and
stock trades, which backers say could raise $150 billion
annually. House Speaker Nancy Pelosi has said such a proposal
must be embraced globally to prevent companies from moving
their businesses abroad. Such a tax would face a difficult time
in the Senate, where controversial issues need 60 votes to move
forward.

CORPORATE TAX RATE

U.S. companies complain that the top U.S. tax rate of 35
percent is among the highest in the world.

Some key Democratic congressional leaders say they would be
willing to cut the top rate in exchange for closing some of the
international tax loopholes described above. Some Obama
advisers, including Austan Goolsbee, have expressed interest in
lowering the corporate tax rate.

EMPLOYER TAX CREDIT

An idea floated by liberal policy groups and the Obama
Administration would revive a policy that gave employers tax
credits to hire new workers. The approach could help boost the
economy, but critics are not convinced such tax credits would
spur additional hiring.
(Reporting by Kim Dixon; Editing by Julie Vorman and Tim
Dobbyn)