Section 197 Intangible Assets include a multitude of items, including Goodwill, Going Concern Value, Trademarks, Trade Names, Workforce in Place, Information Base, Customer Lists, Patents, Copyrights, License, and Franchises. And the amounts of Company Intangible Assets on corporate balance sheets have been growing like the weeds in my woods.
These Section 197 Intangible Assets are now tax deductible for federal income tax purposes over a 15 year period.
Many of these intangible assets have economic benefits to the business far beyond 15 years, and thus there is clearly a Corporate Tax Loophole here that, in all fairness, needs to be closed, particularly given the massive amount of US Debt that we have.
And why in the world should the US government be giving substantial tax incentives for companies to make acquisitions, like they clearly are with this 15 year tax life for Intangible Assets? Nearly always, jobs are lost when acquisitions are made. The US Government should be giving tax incentives to create jobs, not to reduce jobs.
I think the Feds should revisit this 15 year tax life for all of these Intangible Assets. And they should compare it with the economic lives of the various intangible assets actually being used by companies in their audited financial statements.
Clearly, for Intangible assets that companies are not amortizing at all on their books due to US generally accepted accounting principles, this 15 year tax life makes no economic sense. It is flat out wrong. It should be significantly lengthened.
And for the Intangible assets that companies are amortizing on their books due to US generally accepted accounting principles, I think that for federal income tax purposes, it makes much more sense to use the economic life actually being used in its audited financial statements, rather than this artificial 15 year tax life.
I would only require this change for really Big Corps, with total Intangible Assets of at least $1 bil.
I also wouldn’t start making this Intangible Asset Life change until Intangible Asset additions made starting in say 2013 or 2014, after the country has gotten out of its horrible job situation.
The economic damage to Big Corps from this proposal is substantially softened here due to this corporate tax loophole closer being treated as a Temporary Tax Difference under US generally accepted accounting principles. The total federal income tax deductions for these Intangible Asset expenditures will be the same over the long run. Thus, there will be no income tax charge to the income statements of these Big Corps from my proposal here.
There will be significantly positive CBO scoring to the US Government from this proposal, for the next 10 years and for many years thereafter.
