Senate is said to avoid offshore tax that ran aground in House

The Senate tax bill that’s due to be released Thursday won’t include an excise tax on certain payments U.S. multinationals make to overseas affiliates, according to a person familiar with the legislation.

A proposal to apply a 20 percent tax to payments U.S. companies make to related units overseas surfaced in legislation that the House has been considering for the past week. The tax would apply to royalty payments and other payments for costs of goods sold that are currently tax deductible. Royalties paid for overseas intellectual property constitute a widely used method for companies to shift profit offshore to units in lower-tax jurisdictions.

Multinational companies of various sorts opposed the excise tax provision, and House Ways and Means Chairman Kevin Brady amended the bill earlier this week. That amendment effectively gutted the measure, according to a score provided by Congress’s Joint Committee on Taxation.

The Senate bill won’t include the excise tax idea, said the person, who asked not to be named because the legislation hasn’t been made public.

The U.S. Capitol
The U.S. Capitol Building stands near the Capitol Reflecting Pool in Washington, D.C., U.S., on Tuesday, July 29, 2014. Democrats in Congress are trying again to prevent the federal government from awarding contracts to companies that save taxes by moving their legal addresses outside the U.S. So-called inversions are transactions in which a U.S. company shifts its legal address to a country such as Ireland or the U.K. with a lower corporate tax rate, often through the acquisition of a smaller company abroad. Photographer: Andrew Harrer/Bloomberg

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