Grassley Angered Over ACJA's Failure To Prevent Use Of Tax Shelter

by Leroy Baker, Tax-News.com, New York

19 April 2005

Senate Finance Committee Chairman Charles Grassley has criticized tax legislation which he helped to write for allowing firms to take advantage of tax loopholes for an extra year.

During a committee hearing focusing on the US 'tax gap,' which is estimated at $312 billion, Grassley expressed frustration that the "watered down" final version of the American Jobs Creation Act has permitted firms to continue exploiting large depreciation allowances in leasing arrangements with state and local governments known as LILOs and SILOs (lease in lease out, and sale in lease out).

In particular, Grassley was angered by a provision allowing existing leasing arrangements to proceed if they had been submitted for approval by the Federal Transit Administration after June 30, 2003, and before March 13, 2004.

"Incredibly, this provides shelter promoters another full year to get their deals approved by the FTA. Treasury's has been forced to grandfather in these rotten deals because of the bill's effective dates," Grassley remarked.

The Senate version of the bill called for the tax shelters to be closed down with effect from November 17, 2003, in a measure which would have raised more than $40 billion in revenues over ten years.

However, Grassley went on to argue that: "There's no way these deals deserve another year."

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