\-\-\-\--Original Message\-\-\-\--

From: Pasetti, Joe
\[[[mailto:JPasetti@itic.org]{.underline}](mailto:JPasetti@itic.org)\]

Sent: Tuesday, March 15, 2005 11:32 AM

To: comments

Subject: ITI Tax Reform Submission

Please find attached the comments of the Information Technology Industry
Council regarding tax reform. Please feel free to contact me if you
would like more information on our group or it\'s comments. Thank you.

Regards,

Joe Pasetti

Director, Government Relations

Information Technology Industry Council (ITI)

1250 Eye St., NW Suite 200

Washington, DC 20005

\(202\) 626-5732 - phone

\(202\) 638-4922 - fax

\<\<ITITaxReformSubmission.pdf\>\> \<\<ITI tax reform
submission4.doc\>\>

**1250 Eye Street, NW Suite 200**

**Washington, DC 20005**

**202-737-8888 www.itic.org**

**CHAIRMAN**

Dennis Roberson

Motorola

**PAST CHAIRMAN**

Tom Green

Dell

**OFFICERS**

Rhett Dawson

President

Ralph Hellmann

Senior Vice President

Helga Sayadian

Vice President

*The association of leading IT companies*

**Accenture • Agilent Technologies • Apple • Canon USA • Cisco • Corning
• Dell • Eastman Kodak •eBay**

**EMC Corporation • Hewlett Packard • Honeywell • IBM • Intel • Lexmark
• Microsoft • National Semiconductor • NCR • Oracle**

**Panasonic • SAP • Sony • Sun Microsystems • Symbol Technologies •
Tektronix • Time Warner • Unisys**

March 15, 2005

Jeffrey Kupfer

Executive Director

President\'s Advisory Panel on Federal Tax Reform

1440 New York Avenue NW

Suite 2100

Washington, DC 20220

Dear Mr. Kupfer:

The Information Technology Industry Council (ITI) appreciates the
opportunity to

provide comments on the goals of tax reform, as stated in the notice
issued February 16, 2005.

The Information Technology Industry Council represents the leading U.S.
providers of

information technology products and services. ITI member companies
employ more than one

million people in the United States and produce over \$668 billion in
worldwide revenues.

Numerous studies and reports have documented the importance of
information

technology (IT) to the U.S economy, most recently the 2005 Economic
Report of the President.

**1250 Eye Street, NW Suite 200**

**Washington, DC 20005**

**202-737-8888 www.itic.org**

**CHAIRMAN**

Dennis Roberson

Motorola

**PAST CHAIRMAN**

Tom Green

Dell

**OFFICERS**

Rhett Dawson

President

Ralph Hellmann

Senior Vice President

Helga Sayadian

Vice President

*The association of leading IT companies*

**Accenture • Agilent Technologies • Apple • Canon USA • Cisco • Corning
• Dell • Eastman Kodak •eBay**

**EMC Corporation • Hewlett Packard • Honeywell • IBM • Intel • Lexmark
• Microsoft • National Semiconductor • NCR • Oracle**

**Panasonic • SAP • Sony • Sun Microsystems • Symbol Technologies •
Tektronix • Time Warner • Unisys**

Almost three-quarters of productivity growth from 1996 through 2001 has
been attributed to IT

capital accumulation and use. Nearly one-third of real gross domestic
product (GDP) growth in

2003 was related to IT investment and use. Information technology is
therefore a key component

of continuing growth in the U.S. economy and any tax reform must be
coupled with a

recognition of the unique importance of IT.

A central goal of tax reform must be to enact pro-growth policies that
will increase the

competitiveness of U.S companies in the global marketplace. The IT
industry operates globally,

both in sourcing and sales, and faces stiff competition from IT
companies all over the world.

Tax reform should endeavor to increase the competitive position of U.S.
companies. Several

studies have documented the high tax burden on U.S. companies relative
to their competitors

from other OECD nations. This tax burden differential is even larger
compared to many other

countries outside the OECD. This higher tax burden puts U.S companies at
a disadvantage in the

global marketplace. Tax reform efforts should reduce this disparity, and
must not result in a net

tax increase on U.S. corporations. We hope that corporate taxes are
walled off from individual

taxes such that corporate taxes are not increased to offset reductions
in taxes on individuals.

Simplification and reducing compliance costs should be an important goal
of any tax

reform effort. The cost of tax compliance in 2002 was estimated at
nearly \$200 billion, more

**1250 Eye Street, NW Suite 200**

**Washington, DC 20005**

**202-737-8888 www.itic.org**

**CHAIRMAN**

Dennis Roberson

Motorola

**PAST CHAIRMAN**

Tom Green

Dell

**OFFICERS**

Rhett Dawson

President

Ralph Hellmann

Senior Vice President

Helga Sayadian

Vice President

*The association of leading IT companies*

**Accenture • Agilent Technologies • Apple • Canon USA • Cisco • Corning
• Dell • Eastman Kodak •eBay**

**EMC Corporation • Hewlett Packard • Honeywell • IBM • Intel • Lexmark
• Microsoft • National Semiconductor • NCR • Oracle**

**Panasonic • SAP • Sony • Sun Microsystems • Symbol Technologies •
Tektronix • Time Warner • Unisys**

than half of which was borne by U.S. businesses. This cost is a drag on
more productive, jobcreating

activities and should be reduced. The alternative minimum tax (AMT) is a
prime source

of complexity and should be eliminated or reformed. Another example is
the backwards

ordering rule for applying foreign tax credits, which complicates the
use of credits from prior

years, burdens the substantiation process, and should conform instead to
the \"first-in, first-out\"

rule for other tax attributes.

Innovation, research and development (R&D) are critical drivers of the
IT industry, and

are the primary sources of the technological leadership that is central
to U.S. economic growth.

Tax reform must recognize the economic importance of R&D and should
include incentives to

continue and expand this activity in the U.S. Moreover, reform efforts
must recognize the nature

of R&D incentives offered by other countries, and strive to keep U.S.
incentives to R&D and

innovation competitive with those offered by other nations. In this
regard, the repetitive shortterm

extensions of the U.S. research credit prevent it from having its
maximum impact on R&D

planning and activities in the U.S. The current R&D credit must be
strengthened by including

the Alternative Simplified R&D Credit and made a permanent part of the
tax code.

Finally, any tax reform effort must include appropriate transition
periods to ensure that

positive reforms do not have unintended, negative impacts. Corporations
must plan their

**1250 Eye Street, NW Suite 200**

**Washington, DC 20005**

**202-737-8888 www.itic.org**

**CHAIRMAN**

Dennis Roberson

Motorola

**PAST CHAIRMAN**

Tom Green

Dell

**OFFICERS**

Rhett Dawson

President

Ralph Hellmann

Senior Vice President

Helga Sayadian

Vice President

*The association of leading IT companies*

**Accenture • Agilent Technologies • Apple • Canon USA • Cisco • Corning
• Dell • Eastman Kodak •eBay**

**EMC Corporation • Hewlett Packard • Honeywell • IBM • Intel • Lexmark
• Microsoft • National Semiconductor • NCR • Oracle**

**Panasonic • SAP • Sony • Sun Microsystems • Symbol Technologies •
Tektronix • Time Warner • Unisys**

business activities several years into the future. The tax consequences
of those activities are

estimated well in advance, and that information is utilized to derive
revenue and profit forecasts

that are shared with investors. Appropriate transition periods are
essential to allow businesses to

adapt to any significant tax changes by making appropriate changes to
business models, as well

as revenue and profit forecasts.

Thank you for this opportunity to provide comments on the goals of tax
reform. We look

forward to working with you to enact pro-growth tax policies that will
strengthen the U.S.

economy.

March 15, 2005

> Jeffrey Kupfer
>
> Executive Director
>
> President\'s Advisory Panel on Federal Tax Reform\
> 1440 New York Avenue NW\
> Suite 2100\
> Washington, DC 20220
>
> Dear Mr. Kupfer:
>
> The Information Technology Industry Council (ITI) appreciates the
> opportunity to provide comments on the goals of tax reform, as stated
> in the notice issued February 16, 2005. The Information Technology
> Industry Council represents the leading U.S. providers of information
> technology products and services. ITI member companies employ more
> than one million people in the United States and produce over \$668
> billion in worldwide revenues.
>
> Numerous studies and reports have documented the importance of
> information technology (IT) to the U.S economy, most recently the 2005
> Economic Report of the President. Almost three-quarters of
> productivity growth from 1996 through 2001 has been attributed to IT
> capital accumulation and use. Nearly one-third of real gross domestic
> product (GDP) growth in 2003 was related to IT investment and use.
> Information technology is therefore a key component of continuing
> growth in the U.S. economy and any tax reform must be coupled with a
> recognition of the unique importance of IT.
>
> A central goal of tax reform must be to enact pro-growth policies that
> will increase the competitiveness of U.S companies in the global
> marketplace. The IT industry operates globally, both in sourcing and
> sales, and faces stiff competition from IT companies all over the
> world. Tax reform should endeavor to increase the competitive position
> of U.S. companies. Several studies have documented the high tax burden
> on U.S. companies relative to their competitors from other OECD
> nations. This tax burden differential is even larger compared to many
> other countries outside the OECD. This higher tax burden puts U.S
> companies at a disadvantage in the global marketplace. Tax reform
> efforts should reduce this disparity, and must not result in a net tax
> increase on U.S. corporations. We hope that corporate taxes are walled
> off from individual taxes such that corporate taxes are not increased
> to offset reductions in taxes on individuals.
>
> Simplification and reducing compliance costs should be an important
> goal of any tax reform effort. The cost of tax compliance in 2002 was
> estimated at nearly \$200 billion, more than half of which was borne
> by U.S. businesses. This cost is a drag on more productive,
> job-creating activities and should be reduced. The alternative minimum
> tax (AMT) is a prime source of complexity and should be eliminated or
> reformed. Another example is the backwards ordering rule for applying
> foreign tax credits, which complicates the use of credits from prior
> years, burdens the substantiation process, and should conform instead
> to the \"first-in, first-out\" rule for other tax attributes.
>
> Innovation, research and development (R&D) are critical drivers of the
> IT industry, and are the primary sources of the technological
> leadership that is central to U.S. economic growth. Tax reform must
> recognize the economic importance of R&D and should include incentives
> to continue and expand this activity in the U.S. Moreover, reform
> efforts must recognize the nature of R&D incentives offered by other
> countries, and strive to keep U.S. incentives to R&D and innovation
> competitive with those offered by other nations. In this regard, the
> repetitive short-term extensions of the U.S. research credit prevent
> it from having its maximum impact on R&D planning and activities in
> the U.S. The current R&D credit must be strengthened by including the
> Alternative Simplified R&D Credit and made a permanent part of the tax
> code.
>
> Finally, any tax reform effort must include appropriate transition
> periods to ensure that positive reforms do not have unintended,
> negative impacts. Corporations must plan their business activities
> several years into the future. The tax consequences of those
> activities are estimated well in advance, and that information is
> utilized to derive revenue and profit forecasts that are shared with
> investors. Appropriate transition periods are essential to allow
> businesses to adapt to any significant tax changes by making
> appropriate changes to business models, as well as revenue and profit
> forecasts.
>
> Thank you for this opportunity to provide comments on the goals of tax
> reform. We look forward to working with you to enact pro-growth tax
> policies that will strengthen the U.S. economy.