WASHINGTON — The Senate passed legislation this week on S. 1637, that would replace the Foreign Sales Corporation (FSC) tax benefit for exporters with a $170 billion, 10-year tax break package. The 92-5 vote for passage brings the U.S. closer to ending European Union (EU) tariff sanctions imposed on certain U.S. products, after the U.S. failed to end the current tax break ruled in violation of World Trade Organization (WTO) agreements.

Since all tax measures must originate in the House, the Senate bill awaits House passage of its FSC legislation. S. 1637’s core provisions remain a corporate tax cut for U.S. manufacturers tied to their U.S. production and an adjustment to reduce taxes of multinational companies producing in the U.S. and offshore. However, it took the incorporation of massive energy-related tax incentives to help speed the bill’s progress. Those provisions, part of the energy bill that failed to gain Senate passage last December, include significant consumer purchase incentives for purchases of advanced hybrid vehicles. Tax credits also are provided for fuel cell and alternative fuel vehicles.

Among its many provisions, the current bill also includes an amendment for rollback of the recently announced Bush administration’s rewrite of overtime pay rules. Democratic Senators had threatened to stop debate on the bill, unless the amendment was considered. Another controversial amendment to extend federal unemployment benefits failed by a 50-49 vote.

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