5:21 PM
Nov 17, 2017
 |  BioCentury  |  Politics, Policy & Law

Marginal gains

How the Senate Finance Committee take on tax reform is better for biopharmas

As tax reform legislation hurtles through Congress, provisions that would have hurt biopharma companies are being jettisoned or modified. Members of Congress have returned home for Thanksgiving, but industry lobbyists will be working overtime to solidify gains and mitigate setbacks that remain in play.

After the House of Representatives passed the Tax Cuts and Jobs Act (H.R. 1) on Nov. 16 by a vote of 227-205, the action shifted to the Senate where a slim Republican majority and parliamentary rules present far more challenges. One hurdle was overcome on the 16th when the Senate Finance Committee passed its version of tax reform legislation in a party line 14-12 vote.

Before passing H.R. 1, the House Republican leadership stripped out some language that the biopharma industry strongly opposed, including provisions on the treatment of stock options that would have had unfavorable effects on biopharma compensation practices. It also lengthened the holding period on carried interest to three years from one.

The House did not relent on the Orphan Drug tax credit, voting to eliminate it.

“The cut to 27.5% is far too much.”

Paul Melmeyer, NORD

Other measures that affect a wide range of industries, including biopharma, include a new 20% excise tax on payments from U.S. corporations to foreign affiliates, a one-time tax on mandatory repatriation of offshore profits, and reduction of the corporate tax rate to 20% from 35%.

The tax reform bill approved by the Finance Committee differs from the House bill on three key provisions relevant to the biopharma sector. It proposes to reduce rather than eliminate the Orphan Drug credit. It also would lower taxes on both payments to foreign affiliates, and repatriated profits (see “Differences of Opinion”).

The GOP leadership, which can only afford to lose two members, has already lost Sen. Ron Johnson (R-Wis.) and is scrambling to shore up support for the bill. This means that more changes may be made before the Senate votes on the tax bill. The vote could come as soon as the week of Nov. 27....

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