WASHINGTON Jan 8 Boeing Co and other
manufacturers asked the U.S. Internal Revenue Service on
Wednesday to scrap parts of a proposed rewrite of the federal
tax deduction for corporate research and development that they
said could make it harder to claim it.
Warning of possible costly legal fights ahead, a lawyer for
the aerospace company said Boeing Co is worried the
changes as proposed could prevent it from deducting the R&D
costs for an airplane if, for example, separate engine parts
First proposed in September, the IRS' rewrite of the R&D tax
break for companies would make it applicable to a wider array of
expenses, including more manufacturing process-oriented costs.
The proposal was initially seen by many manufacturers and
food processors as helpful, but some have since found problems
they want addressed.
"This proposed regulation ... in the hands of an (IRS)
revenue agent might become the next challenge that Boeing will
have to spend hundreds of thousands of dollars on defending,"
said Duane Webber, a lawyer with Baker & McKenzie for Boeing.
A spokesman for accounting firm Ernst & Young LLP, which was
representing some undisclosed manufacturing clients, also asked
the IRS to drop plans to change eligibility requirements.
An official from the Treasury Department, which must approve
final rule changes, said the IRS will weigh the concerns of
"That will probably be our number one thing to discuss ...
seeing whether it applies in a way that we didn't intend," Alexa
Claybon, a lawyer in Treasury's Office of Tax Policy, told
Reuters after the hearing.
She said the IRS's goal is to finish the rules by June.
TWO TYPES OF R&D TAX BREAKS
There are two R&D tax breaks. One is a deduction and the
other is a credit. A business must claim the deduction, which
has been on the books longer, before it can claim the credit,
which has more stringent eligibility requirements.
The credit has been a source of frequent court disputes
between the IRS and companies such as Lockheed Martin Corp
, Dow Chemical Co and Bayer AG.
Boeing previously said it liked the IRS's proposed rules. In
a quarterly regulatory filing in October, Boeing said: "The
regulations are generally taxpayer favorable and provide
A spokeswoman for Boeing declined to comment on Wednesday.