Tax deferral to be tackled in reform talks

“I think the likelihood is that issue will be considered next year and it will be part of looking at tax reform,” he told reporters.

Tax deferral refers to provisions that delay the payment of U.S. taxes on income earned by American companies in foreign lands. They are considered invaluable by many because they can greatly reduce the amount of taxes owed to the IRS.  

Levin and others have repeatedly said that deferral would be modified in the context of overall tax reform, which is why many were surprised when the Senate sought to limit deferral in legislation reducing the number of jobs outsourced to other countries. 

The bill, the Creating American Jobs and End Offshoring Act, granted a two-year payroll tax holiday for companies that hired new employees to perform services in the U.S. that were once done abroad. It also prevented companies from using deferral that moved operations offshore then imported products back into the U.S.

The Offshoring Act was not considered a tax reform proposal by any stretch of the imagination, and several within the tax community thought it signaled that deferral was a viable offset for other bills. 

Levin on Thursday appeared to rule that possibility out. He even discounted using deferral to pay for an extension of the George W. Bush-era tax cuts for wealthier individuals. 

“I just think that we need to take each of those on their own merits,” he said, indicating that the Bush tax cuts and deferral would be tackled separately.

If Levin retains the title of chairman come January, tax reform hearings will begin early in the year with the intent of completing work on the issue before the 2012 campaign season ramps up. 

“I think it’s best to do [reform] in a non-campaign year,” he told reporters last week.