Congressional leaders and the Trump administration have seized on a historic opportunity to reform the U.S. income tax law and attempt to improve the global competitiveness of U.S. manufacturers. We at CF Industries, a global leader in the manufacture and distribution of nitrogen fertilizer, applaud these efforts.
Unfortunately, the current Senate tax bill - The Tax Cuts and Jobs Act would not achieve this goal despite a proposed lower corporate tax rate. That's because it includes a provision that would severely limit the ability of capital-intensive businesses such as ours to make the significant investments that create thousands of jobs at a time.
Today, companies can deduct the interest on loans used to finance their business in computing their taxable income. It's just like the deduction you take for your home mortgage interest. That deduction makes it more affordable for you to invest in your largest purchase your home just as the business interest deduction makes it more affordable to invest billions in expanding our business.
For example, we recently invested approximately $2.5 billion at our Port Neal facility in rural Sergeant Bluff, Iowa. This expansion project, one of the largest capital investments in Iowa's history, created thousands of contract jobs, an estimated 700 jobs in related industries, and over 100 permanent jobs on-site. Now that the project is complete, we are providing Iowa farmers with a reliable supply of domestically produced nitrogen fertilizer. We financed those expansion projects just like many other manufacturers do: largely through long-term debt with the expectation that we would be able to deduct the interest from those loans.
As part of tax reform discussions, the Senate has proposed to, among other things, limit the amount of interest businesses are allowed to deduct in computing their taxable income. The way the Senate crafted this provision reduces our available cash flow and makes it more expensive and thus more unlikely that we and other manufacturers would invest in big projects similar to what we undertook at Port Neal. The unfortunate result will be fewer new contractor and permanent jobs here in the future.
In fact, lowering the corporate rate to 20 percent, which we strongly support, does not offset the impact of limiting interest deductions. Our internal analysis shows our effective tax rate in the first few years following enactment of the bill will actually be closer to and in some years even higher than - the current 35 percent corporate tax rate.
Fortunately, the tax bill (H.R. 1) just passed by the House of Representatives contains an interest deductibility provision that, when coupled with a lower corporate tax rate, will help capital-intensive manufacturers like CF continue to do their part to boost the U.S. economy. We urge legislators in both the House and the Senate to include this language in the final tax package.
At CF, we have a "Do it Right" culture that permeates every area of our operations from our safety strategy to our environmental impact to our relationship with the communities in which we operate. While we know that time is of the essence in getting a tax bill across the finish line, we urge Congress to adopt our "Do it Right" approach to ensure that the final package helps U.S. manufacturers create high-paying jobs in Iowa and other areas where they are needed the most. - Tony Will, president and chief executive officer of CF Industries, and Nick DeRoos, general manager of CF Industries' Port Neal Nitrogen Complex
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