Bush signs $136b tax relief bill

President George W. Bush signed a $136 billion corporate tax relief bill yesterday that could provide substantial savings for some of Massachusetts' biggest manufacturers, life sciences companies, and even some fishermen.

Among the largest beneficiaries would be firms with sizable foreign sales. The bill, the biggest overhaul of the corporate tax code in nearly two decades, allows companies to bring foreign revenues back home at a 5.25 percent tax rate instead of 35 percent. The window of opportunity is open for one year, and analysts expect as much as $350 billion that US companies have kept overseas to flow back to the United States.

According to an analysis by bond rating agency Standard & Poor's in New York, Boston Scientific Corp. of Natick, whose sales of cardiac stents have made it the region's biggest life-sciences company, could reduce its tax bill by $274 million if it chooses to bring home some $1.1 billion of foreign revenues that have been parked in offshore accounts and short-term investments.

Other companies with large volumes of overseas sales such as Gillette Co., Reebok Ltd., and Biogen Idec Inc. could also benefit substantially but they declined to discuss the potential windfall. The companies were among US firms that joined forces last year to urge Congress to pass the provision.

The stew of tax breaks has been criticized as a corporate giveaway. Massachusetts Democratic Senator Edward M. Kennedy, who voted against the bill, denounced the provisions on the floor of the Senate this month, saying: ''Elite corporate interests are the winners."

There was no bill-signing ceremony, a contrast to an event on Oct. 4 when Bush set up a stage in Des Moines, Iowa, to sign into law tax cuts that were popular with middle-class voters. The president briefly mentioned his action at a campaign appearance in Canton, Ohio.

''I signed a bill that's going to help our manufacturers -- that will save $77 billion over the next 10 years for the manufacturing sector of America," Bush said. ''That will help keep jobs here."

The bill started as a modest effort to repeal $5 billion of subsidies for companies that export goods abroad that had been declared illegal by the World Trade Organization.

''It ended up being a Christmas shopping expedition in the end, and a lot of different things were thrown into it," said Robert Murphy, an associate economics professor and tax-policy expert at Boston College. ''This wasn't well-designed tax policy at all."

Some conservatives who favor lower business taxes were dismayed by some of the pork-rich details. ''We moved in the right direction in an ugly way," said Daniel Mitchell, an economist at the Heritage Foundation, a conservative think tank in Washington.

Pharmaceutical, biotechnology, and medical device makers -- which do large amounts of business around the globe -- were especially favored by the reduction in taxes on foreign earnings.

''This is cheap money for them," said David Lugg, a credit analyst at S&P who analyzed the bill's impact on pharmaceutical and device firms. Boston Scientific has $1.1 billion overseas, according to Lugg's analysis. With the new provision, the company can keep about $1 billion of that if it brings it back to the United States.

Boston Scientific said it plans to plow part of the windfall back into the business. ''I expect our plan will include investing in research and development here in the United States, which means hiring scientists, engineers, and others who will help us create new products," said Boston Scientific spokesman Paul Donovan.

Pfizer Inc. of New York stands to realize a tax break of $4.6 billion if it brings home the $19.3 billion it has in liquid assets overseas, according to the S&P analysis.

For pharmaceutical firms with a significant Massachusetts presence, the potential tax advantages amount to $572 million for Abbott Laboratories Inc., $1.4 billion for Wyeth, $1.5 billion for Bristol-Myers Squibb Co., $2.5 billion for Johnson & Johnson, and $3 billion for Merck & Co., according to S&P.

The companies said they weren't sure yet what the impact would be or didn't return calls seeking comment. ''It is too early to speculate the amount or timing of any repatriation that Merck may undertake," said Merck spokesman Tony Plohoros.

Although the rating agency did not perform the same kind of analysis for technology manufacturing, analysts said they expect significant tax benefits for Massachusetts-based companies and national firms with facilities here, including EMC Corp., Intel Corp., Hewlett-Packard, and Sun Microsystems.

''It could be a significant impact for us, and we're considering how best to take advantage of this opportunity," said Jennifer Greeson, a spokeswoman at Intel, which has $7 billion of foreign revenue still overseas.

EMC declined to discuss details.

Other pieces were tailored for much narrower interests. Among the nuggets with modest impact on Massachusetts are: allowing the state's fishermen, based primarily in New Bedford and Gloucester, to average their income over three years; repealing the excise taxes on tackle boxes and sonar fish-finders; and helping mutual fund managers attract foreign investors.

The mutual fund industry fought for several provisions that eliminate barriers to foreign investment in US funds. Under old rules, foreign investors paid taxes on income from mutual funds, even though they did not pay taxes on securities they owned directly. Therefore, ''mutual funds were just not investments for non-US investors," said Robert Kester, a tax lawyer and partner at Goodwin Procter LLP in Boston. The bill repeals the tax on the mutual fund income for foreign investors.

''It's very, very important to the industry, because foreigners have been put at a very significant disadvantage by investing in a mutual fund," said Susan Johnston, head of the tax and benefits department at Ropes & Gray LLP in Boston.

But at Fidelity Investments, spokeswoman Anne Crowley said the fund management company is not sure what the impact of the new rules will be.

Geoff Bobroff, a mutual fund consultant in Rhode Island, said the conflicting signals are a byproduct of complicated tax bills.

''When one of these bills clears Congress, it takes a year for everyone to know all the features," he said. ''Because what happens is people will see something and go back and interpret it, and before you know it, a cavern has been created by a comma or a parentheses."

Christopher Rowland can be reached at crowland@globe.com.Material from The Associated Press was used in this report.