By Maxwell Murphy And Angus Loten 

A surprising number of finance chiefs could miss their corporate earnings targets if an 11th-hour deal isn't reached in Washington to retroactively reinstate more than 50 tax breaks that expired last year.

In recent weeks, dozens of companies have reaffirmed financial forecasts that include millions of dollars in tax credits and deductions. It's a risky bet as companies start to close their books on 2014. But, if history is any guide, the political drama in Congress could end with extensions and handshakes.

The House voted late last week to extend the tax breaks only through 2014. The Senate must vote on the matter before its holiday recess or the debate will drag into next year. Despite the political brinkmanship, President Barack Obama's administration has signaled he will sign the bill into law.

"It's just harder than heck to plan," said John Stephens, chief financial officer of AT&T Inc. "You're going to be more careful" about your tax assumptions and future spending plans.

Mr. Stephens didn't bake an extension into his forecasts, but he said many CFOs do because it can help investors compare results with those of prior periods.

Stryker Corp. added five cents a share to its earnings projections based on renewal of the tax breaks. Eastman Chemical Co. estimated that if talks on Capitol Hill fell apart it would crimp the company's forecasts by about a dime a share.

Johnson & Johnson said missing out on the research-and-development tax credit alone would raise its effective tax rate by half a percentage point.

The three companies made their disclosures in recent conference calls with analysts and investors, according to transcripts provided by FactSet.

Eastman Chemical wouldn't elaborate. Stryker and J&J declined to comment.

Not all market watchers are comfortable with companies banking on laws that haven't passed. "My advice to management teams is to err on the side of caution," said Mike Matson, an analyst with Needham & Co. who follows Stryker and other companies that factored a deal in Congress into their financial estimates.

If the tax measures aren't approved, Stryker might miss its earnings forecast, he said, but "there is an asterisk there. They have an excuse."

Washington typically reinstates popular tax breaks--often at the last minute and retroactively. The R&D credit has been renewed 15 times since 1981, and has sometimes lapsed for over a year. But firms have gotten the break eventually, except for a 12-month gap nearly two decades ago, according to Brian Bratten and David Hulse, professors at the University of Kentucky's Gatton College of Business and Economics.

Congress's Joint Committee on Taxation has estimated that extending the credits this year would add nearly $42 billion to the nation's deficit over the next decade.

John Gimigliano, head of the tax legislative group at KPMG LLP, called the House bill "a lowest-common-denominator deal. Everyone wanted something better than they got."

CFOs might celebrate the tax breaks, which also apply to equipment purchases and allow some profits to be shifted tax-free between international subsidiaries. But a one-year extension means they would once again be planning for next year's taxes without certainty.

Finance chiefs generally would prefer that the popular tax breaks be made permanent, as part of a broader tax overhaul. Federal, state and local taxes add up to about 40% of a company's profits, but many companies use tax incentives, foreign subsidiaries and other legal methods to pay a much lower rate.

"Make this a permanent feature of the tax code," said Tom Stueve, senior director of tax for Tennant Co., a Minneapolis-based maker of industrial cleaning equipment. "R&D is a critical part of our business," he added, and "we are almost at the whim of Congress here."

For smaller businesses, which often lack thick financial cushions, every lapse can have serious, bottom-line consequences.

Among the expired tax credits is one that allowed small companies to deduct as much as $500,000 in equipment spending. When the provision lapsed in January, the maximum deduction fell to $25,000.

Ken Barnhart, president and chief executive of Occam Group Ltd., an Edina, Minn., company that designs and hosts cloud-computer systems for businesses, said the $500,000 deduction limit gave Occam the resources to double its business. It could also pass on the tax savings to customers. When the limit fell this year, Mr. Barnhart said, "we lost a lot of business."

Making the lapsed tax provisions retroactive "won't bring back that lost business," he said, adding, "Taxes are taxes, but stop yanking this stuff around and give us a bigger window on the future. These guys need to make up their minds."

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