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REFILE-FACTBOX-Corporate alternative minimum tax threat hits pharma, tech
December 6, 2017 / 8:48 PM / 5 days ago

REFILE-FACTBOX-Corporate alternative minimum tax threat hits pharma, tech

 (Refiles to fix spelling of FACTBOX in headline)
    Dec 6 (Reuters) - The tax overhaul legislation passed by the
U.S. Senate jettisoned a long-held Republican goal of repealing
the corporate alternative minimum tax (AMT), a move seen as
hurting companies that invest heavily in research and
development.
    The Senate's inclusion of the AMT puts the bill, passed
narrowly last Saturday, on a collision course with Republicans
in the House of Representatives, whose version would repeal the
corporate AMT. House Republicans are calling for the tax to be
eliminated in final legislation to be hammered out by a
House-Senate conference committee.
    Orrin Hatch, chairman of the tax-writing Senate Finance
Committee, said on Wednesday a final tax bill that congressional
Republicans hope to get to President Donald Trump for his
signature by the Dec. 25 Christmas holiday likely will not
retain the AMT.
    Here are some details on the impact of the AMT and which
companies and industries invest the most in R&D.
    
    -- The 20 percent corporate AMT is an alternative to the
regular corporate income tax in computing taxes owed, designed
to limit the benefit of deductions and tax credits, including
credits for R&D that are popular with Silicon Valley.
    -- With the top corporate rate now at 35 percent, few wind
up paying the AMT. But since congressional Republicans want to
cut the tax rate to 20 percent, the AMT could affect many
companies. 
    -- "Retaining the AMT in reform is even more harmful than it
is in its present form," the U.S. Chamber of Commerce business
lobby group said on its website. "This cannot be the intended
impact from a Congress who has worked for years to enact a more
globally competitive tax code."
    -- Companies in the U.S. pharmaceutical and medical research
industry plowed about 17 percent of total revenue into R&D in
their most recent fiscal year, according to Thomson Reuters
data.
    -- The software industry and IT services invested 14 percent
of revenue in R&D while technology and equipment companies
invested 12 percent of their revenue in R&D.
    -- The healthcare services and equipment sector spent 5.6
percent of its revenue on R&D in the most recent fiscal year.
    -- Manufacturers also invest significantly in R&D, with
Boeing investing 5 percent of its revenue in R&D last
year.
    -- "Research and development is the lifeblood of
manufacturing. The NAM supports pro-growth tax reform, and is
working with key policymakers to ensure the final bill does not
inadvertently harm manufacturing," said Chris Netram, vice
president for tax and domestic economic policy at the National
Association of Manufacturers lobby group.
    
    Below are the S&P 500's top spenders on R&D as a proportion
of revenue in their past fiscal year, and their stock
performance since the Senate passed its bill:
    
 Company             Industry              R&D/Rev   Stock move
                                                     this week
 Vertex Pharma       Pharmaceuticals       62 pct    -2.4 pct
                                                     
 Incyte              Biopharmaceuticals    53 pct    -4.7 pct
 Regeneron Pharma    Pharmaceuticals       42 pct    -0.8 pct
                                                     
 Cadence Design      Software              40 pct    -2.4 pct
 Systems                                             
 Celgene             biopharmaceutical     40 pct    -0.6 pct
 Autodesk            Software              38 pct    -0.3 pct
                                    Source: Thomson Reuters Data
 
 (Compiled by Noel Randewich in San Francisco; Editing by Will
Dunham)
  

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