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Corporations dodged an expensive bullet last week when Congress deleted a provision from President Bush’s tax cut bill that would have eliminated $90 billion in tax deductions. The provision, included in the Senate version of the bill, consisted of a package of so-called revenue raisers intended to offset the proposed tax cut and bring it down to $350 billion. The list of 59 revenue raisers included repealing the income tax exclusion for Americans working overseas and curtailing deductions on corporate donations of intellectual property. The Senate bill evoked a lobbying blitz by certain industries, but many Capitol Hill insiders felt it wouldn’t survive given House opposition to the measure. “If you were on the inside you knew these revenue raisers would likely get stripped away in conference,” said James Fuller, a tax partner at Fenwick & West. “Nevertheless, there was a little nervousness. � Our clients were generally slightly apprehensive to see this number of provisions, many of which were not well thought out.” The package was added to the Senate bill at the urging of a few senators, including Olympia Snowe, R-Maine, and George Voinovich, R-Ohio, who told Senate Finance Committee Chairman Charles Grassley, R-Iowa, they would not vote for the bill unless the tax cut was capped at $350 billion. While the amendment was deleted during House and Senate conference, the final tax cut bill adopted by Congress last week totaled $350 billion. The Senate tacked on the revenue raisers to the tax cut bill about two weeks ago. Fuller said the most controversial provision would have repealed � 911 of the tax code, which precludes Americans working abroad from paying an income tax on the first $80,000 of income. San Francisco-based Bechtel Corp. and several other construction companies opposed the measure. The biggest source of revenue among the 59 items on the list, the repeal of the tax code is valued by the Senate Joint Committee on Taxation at $35 billion over the 11-year life of the bill. The revenue raisers included 15 provisions designed to curtail tax shelters. One provision would have disallowed deductions for settlement payments, and another would have virtually eliminated tax deductions on corporate donations of patents and other intellectual property to universities and nonprofit groups. The Intellectual Property Owners Association lobbied against the provision. It would “effectively end the donation of unused patents by U.S. industry,” association President John Williams wrote in a letter to Sen. Grassley. “A tax deduction for the donor company based on fair market value of the patents makes such donations worthwhile for the company and offsets the cost” of evaluating technologies and donations. Herbert Wamsley, the association’s executive director, said his group did not have statistics on the number of corporate donations or their value. The Senate Joint Committee on Taxation, however, scored the deductions at $4 billion over 11 years. The U.S. Chamber of Commerce, the National Association of Manufacturers, the American Chemistry Council and the Pharmaceutical Research and Manufacturers of America also opposed the Senate measure. Lawyers and their corporate clients are grateful the lobbying paid off. “All’s well that ends well,” Fuller said.

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