The IRS has some bizarre tax incentives on the books. Here are the ones experts consider the worst.
The federal tax code contains about 4 million words, according to multiple estimates, and people who have taken time to dig into it have found some really weird stuff.
For instance, Section 45 of the code describes a tax credit for using renewable resources to create energy. Tax Policy Center director Len Burman told CNNMoney that includes burning chicken poop.
Laws already prohibit poultry producers from polluting water with that “resource,” so it makes sense for them — if not in general. That tax break (including many more common forms of qualified energy production) is worth $9.7 billion over five years, CNN says.
Here are some of the other strange tax breaks CNN’s experts came up with:
- 9 percent of the cost of “qualified manufacturing expenses” is tax-deductible, and “manufacturing” has been stretched to include things like making hamburgers and making movies.
- Businesses can write off the cost of equipment and computer software that lose value over time, which is fine in theory, but CNN’s experts say Congress keeps extending and expanding depreciation deductions.
Major U.S. corporations, including Apple, shift profits offshore through subsidiary companies so they can’t be taxed at the higher U.S. rate even when the money is held in the U.S. Companies can then borrow money from their foreign subsidiaries and get a tax break on the interest, while the subsidiary enjoys the lower tax rate on the payments from its parent.
Do you think these tax breaks make sense, or should they be eliminated? What other crazy tax breaks have you heard of? Let us know on Facebook.