Corporate tax expenditures by function relate to

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corporate tax expenditures by function relate to accelerated depreciation, estimated at US$26 billion in FY 2003, down from US$40.7 billion in FY 2002. Tax expenditures under the title of international affairs include extra-territorial income exclusions (in replacement of the former exclusion of income of foreign sales corporations), amounting to US$5 billion; and deferral of income from U.S.- controlled foreign corporations, estimated at US$7.5 billion in FY 2003. Tax credit for research activity constituted nearly US$6 billion in tax expenditure in FY 2003. 198 4. The Federal Budget, as well as state budgets, also contain cost estimates of net financial outlays. The Federal Budget's historical tables suggest an increasing trend since 1999 in non-defence grants other than to individuals. 199 In FY 2002, these grants amounted to US$119 billion, equivalent to 1.1% of GDP. They were estimated at US$133 billion for 2003, an increase of 11%. Outlays have increased most for transportation, natural resources and the environment, and international affairs; in contrast, outlays on agriculture have declined. 200 5. The 2002 Federal Budget had as one of its priorities the reduction of corporate subsidies, but no specific measures were actually proposed or taken. In the 2003 and 2004 Budgets, a number of proposals were made to reduce funding to the following specific programmes described as providing corporate subsidies: 201 the Advanced Technology Program (ATP), created in 1988 to bolster high- technology research and development; the Manufacturing Extension Partnership, which aimed to assist manufacturing companies to operate more efficiently or to adopt new technologies; the Technology Opportunities Program, which provides grants to test the usefulness of telecommunications technologies; R&D expenditure by the Office of Fossil Energy at the Department of Energy; and federal subsidies to U.S. shipyards and shipbuilding companies to encourage private financing. According to information available in October 2003, financial obligations under the ATP have dropped from US$163 million in FY 2003 to US$13.6 million in 193 Congressional Budget Office (1995). 194 Catalog of Federal Domestic Assistance [Online]. Available at: http://www.cfda.gov/default.htm. 195 See online information. Available at: http://www.grants.gov/index.html. 196 NASDA online information. Available at: http://www.nasda.com. 197 See Budget of the United States Government, available online at: http://w3.access.gpo.gov. 198 The Budget for Fiscal Year 2004, Analytical Perspectives, Table 6.2. 199 The Budget for Fiscal Year 2004, Historical Tables, Table 6.1. 200 The Budget for Fiscal Year 2004, Historical Tables, Table 3.1. 201 Fiscal Year 2003 Federal Budget available online at: http://w3.access.gpo.gov/usbudget/fy2003/ budget.html.
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WT/TPR/S/126 Trade Policy Review Page 81 FY 2004; budgeted financial obligations under the Technology Opportunities Program were reduced to zero for FY 2003 and FY 2004. 202 6. States offer a variety of investment incentives including loan guarantees, grants, and tax credits. There is no federal legislation in place that would limit state aid that distorts or threatens to distort competition and trade between states.
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