Software Exports May Win Tax Break

Microsoft Corp., Apple Corp., Adobe Systems Inc. and other software companies won President Bill Clinton’s support for an export tax break.

The president will include the break in the fiscal 1998 budget he submits to Congress Thursday. The idea has some Republican support.

Software companies have been trying to convince the president and U.S. lawmakers that they qualify for a credit that permits companies that ship products overseas to exempt from taxation about 15 percent of their foreign export income.

The IRS decided in 1987 that companies that ship master copies of films, tapes, and compact disks overseas for reproduction abroad qualify for the exemption, but that software companies do not.

Microsoft filed a petition with the U.S. Tax Court last August challenging the existing IRS regulation. In the meantime, the software industry made it a top lobbying priority.

Republican Rep. Jennifer Dunn, who hails from Microsoft’s home state of Washington, has already introduced legislation that would extend the credit to the industry.

In 1994, software companies recorded $74 billion in revenue, according to the Business Software Alliance, the leading interest group for the industry. The change in the export exemption rules would cost the U.S. government $560 million over five years, according to the Treasury Department.

High technology will loom large in the budget proposal Clinton will submit to Congress on Thursday. He’ll include renewal of a $450 million R&D tax credit. Indeed, the priority Clinton puts on the technology industry is his way of trying to seal a strong economic legacy. Hightechnology products, he says, are to the 21st Century what highways and railroads were to the 20th: “the core of America’s competitiveness.”