Why Is Boeing Worried About the New IRS Tax Break?


The Internal Revenue Service has revamped its plan for federal tax deductions, applicable to company research and development — and Boeing Co. (NYSE:BA) is less than happy with the changes. The new rules might make it so Boeing is unable to deduct costs for groundwork on airplanes with different engine parts being upgraded. Changes to said tax break were made with the intention of aiding companies, by making deductions available for a greater number of companies’ work — covering greater portions of manufacturing expenses.

A lawyer from Boeing told Reuters recently that Boeing may be ready to take the situation to court, a major change from the initial reaction most companies in relevant industries had. As was likely intended, most first saw the change as an aid to companies — now though, questions on the details are beginning to crop up.

“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,” Duane Webber, Boeing’s lawyer from Baker & McKenzie, told Reuters.

Boeing isn’t alone in calling for the IRS’s reconsideration, and a spokesperson with Ernst & Young LLP told Reuters that it had a number of manufacturing clients who are asking the IRS to leave the tax break rules as they are.

A Treasury Department official said that before the department gave it the green light the IRS would consider problems companies have been voicing. “That will probably be our number one thing to discuss — seeing whether it applies in a way that we didn’t intend,” said Alexa Claybon, lawyer with the Treasury Office of Tax Policy, to Reuters. She also noted that the IRS had a goal of making final decisions on the changes by June of this year.

The tax break is coming at a strange time for Boeing, which has had a lot on its plate recently — what with the battery fires in its Boeing 787 Dreamliners, and the indecision and union action over its new factory location.