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 Warning of possible costly legal fights ahead, a lawyer for the
aerospace company said Boeing Co <BA.N> is worried the changes as
proposed could prevent it from deducting the R&D costs for an
airplane if, for example, separate engine parts were upgraded.
First proposed in September, the IRS' rewrite of the R&D tax break
for companies would make it applicable to a wider array of expenses,
including more manufacturing process-oriented costs.
The proposal was initially seen by many manufacturers and food
processors as helpful, but some have since found problems they want
addressed.
"This proposed regulation ... in the hands of an (IRS) revenue agent
might become the next challenge that Boeing will have to spend
hundreds of thousands of dollars on defending," said Duane Webber, a
lawyer with Baker & McKenzie for Boeing.
A spokesman for accounting firm Ernst & Young LLP, which was
representing some undisclosed manufacturing clients, also asked the
IRS to drop plans to change eligibility requirements.
An official from the Treasury Department, which must approve final
rule changes, said the IRS will weigh the concerns of companies.
"That will probably be our number one thing to discuss ... seeing
whether it applies in a way that we didn't intend," Alexa Claybon, a
lawyer in Treasury's Office of Tax Policy, told Reuters after the
hearing.
She said the IRS's goal is to finish the rules by June.
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TWO TYPES OF R&D TAX BREAKS
There are two R&D tax breaks. One is a deduction and the other is a
credit. A business must claim the deduction, which has been on the
books longer, before it can claim the credit, which has more
stringent eligibility requirements.
The credit has been a source of frequent court disputes between the
IRS and companies such as Lockheed Martin Corp <LMT.N>, Dow Chemical
Co <DOW.N> and Bayer AG <BAYGn.DE>.
Boeing previously said it liked the IRS's proposed rules. In a
quarterly regulatory filing in October, Boeing said: "The
regulations are generally taxpayer favorable and provide clarity."
A spokeswoman for Boeing declined to comment on Wednesday.
(Editing by Kevin Drawbaugh and
Andre Grenon)
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