Corporate Tax Payments Down 13 Percent: CBO

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By Kaustuv Basu

Aug. 23 — Corporate income tax payments are expected to decrease by $44 billion, or 13 percent, in 2016, the Congressional Budget Office said.

The drop is partly a result of tax extenders enacted in a 2015 year-end omnibus bill allowing businesses to speed up deductions on some investments, the CBO said in its summer update to the budget and economic outlook, released Aug. 23.

“Since that law’s enactment, businesses know that those tax rules will be in effect for all of 2016; as a result, many are making smaller payments for estimated taxes in 2016 than they made in 2015, when the rules had temporarily expired,” the CBO said.

Federal revenues are expected to total $3.3 trillion during the current fiscal year, about 1 percent more than in 2015, the report said.

Extenders Effect

The nonpartisan CBO said in a monthly budget review in June that business tax receipts were down about $21 billion, or 11 percent, through May compared to the same period a year ago, partly the result of extenders provisions enacted in the Protecting Americans From Tax Hikes (PATH) Act (110 DTR G-10, 6/8/16).

The tax extenders have an estimated cost of $679.6 billion over 10 years.

The CBO also repeated a forecast of a budget deficit of $590 billion for fiscal year 2016, which has increased, in part, because of the extenders.

The office said specific reasons for the 2016 drop in corporate income tax payments would become clearer as detailed information from returns becomes available.

Long-Term Numbers

Corporate income tax receipts are expected to rise to 1.8 percent of the gross domestic product in 2020 from 1.6 percent of GDP in 2016. By 2026, business tax receipts are expected to decline again to about 1.6 percent of the GDP.

The CBO expects a temporary increase in business tax receipts between 2016 and 2020 because of a gradual phaseout of a bonus depreciation provision that lets companies deduct 50 percent of the cost of investments in equipment and other properties in 2016 and 2017, 40 percent in 2018 and 30 percent in 2019.

Ways and Means Republicans have said they want to permanently extend the bonus depreciation provision as part of a tax overhaul.

To contact the reporter on this story: Kaustuv Basu in Washington at kbasu@bna.com

To contact the editor responsible for this story: Cheryl Saenz at csaenz@bna.com

For More Information

Text of the CBO budget update is at http://src.bna.com/hY7.

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