Congress is in recess. The Daily Deduction will return to its regular schedule on Monday, September 8. Until then: We’ll see you every Monday morning. Don’t like corporate inversions? If the Administration wants to stop them, it can. TPC’s Steve Rosenthal explains: Treasury has the authority to treat a corporation’s interest payments on debt to a foreign affiliate as equity, not debt. Interest payments would no longer be deductible, and such “earnings stripping” transactions would be far less attractive. Steve suggests that new Treasury regulations “might be limited, initially, to obligations to foreign affiliates in inverted groups but, eventually, to foreign affiliates in any group.” Should it stop REITs, too? Assets shifted to a REIT, or real estate investment trust, are not taxed at the corporate level. The number of REITs in the US has more than doubled since 2008, and that doesn’t bode well for the corporate tax base. Consider The Boston Globe’s report that the IRS definition includes steel racking structures—including those used by one company, Iron Mountain, to store customer records. With real estate like that, who needs land? Meanwhile, state tax revenues declined. The Rockefeller Institute of Government’s State Revenue Report says that state tax collections declined by 0.3 percent in the first quarter of 2014 following four years of uninterrupted growth. Tax collections were higher in 2013, when many taxpayers shifted income to tax year 2012 due to fiscal cliff concerns. Most of the decline is driven by California: Personal income tax collections declined by $2 billion, or 11.1 percent, due to the impact of the fiscal cliff and California’s legislative changes, including California’s Proposition 30, passed in 2012. But California wants to quadruple tax subsidies for filmmaking in California. The state’s Senate Finance Committee just passed a $400 million program in an effort to keep filmmakers in the state. It would offer a tax credit for up to 25 percent of specific production expenses including set construction and crew salaries, and eliminate a tax credit lottery system. Instead, the proposal would grade tax credit applicants by a “job-creation ratio:” Employee compensation divided by the amount of a company’s requested tax credit. If the bill passes, will California see an economic boost? Studies say probably not. And a Michigan gubernatorial candidate wants to repeal a tax. Michigan’s narrowly passed tax code revamp of 2011 cut business taxes by $1.75 billion, mostly paid for by a $1.5 billion increase in individual taxes—including the taxation of pension income for younger retirees. Republican Governor Rick Snyder has argued the revamp balances the tax burden between Michigan’s aging population and its younger wage earners. Democratic opponent Mark Schauer vows to repeal the pension tax—which will raise an estimated $355 million in this fiscal year. Interested in subscribing to The Daily Deduction, the Tax Policy Center summary of the day’s tax news? Sign-up here for free access. If you’d like to tell us about a new research paper or have any comments about our new feature, write us at [email protected].