Leasing Tax Proposals Should Concern Every Taxpayer In America, Says Lobby Group

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

21 April 2004

The Equipment Leasing Association has voiced strong concerns over a proposed amendment to the 'JOBS' international tax law bill, aimed at curtailing corporate tax write-offs through the leasing back of both domestic and foreign public infrastructure to local governments.

In a letter sent to Senate Finance Committee Chairman, Charles E. Grassley, ELA President Michael Fleming said that the amendment should “concern every individual and corporate taxpayer in America.”

Mr Fleming argued that tax policy “is being developed ‘on the fly,’ with no analysis, no inquiry, and retroactivity, all of which will further the investment crisis in America,”

According to the ELA, the most alarming component of the legislation is the retroactive element which will apply to any transaction entered into prior to November 18, 2003 done with a foreign entity for tax years beginning after December 31, 2004.

Said the ELA president: “A new effective date provision has been proposed, which appears to violate every historic principle of tax policy.”

“At no time has the Senate Finance Committee held a balanced and open hearing addressing the legal principles and technicalities underlying real sale-leaseback transactions to tax-exempt entities,” he complained.

The ELA is also protesting the different legal treatment of sale and leaseback transactions to US tax-exempt entities and those to foreign entities.

“The legal foundation is the same and the transaction structure is the same and each was done under law established by Congress,” stated Fleming. “U.S. businesses growing internationally will be put on notice by this new principle from the Senate.”

According to a recent statement by Senators Grassley and Max Baucus, ranking Democrat on the Finance Committee, leasing deals cost the federal coffers $2 for every $1 that the cities and their agencies receive in fees from the promoters of such deals.

“The US Treasury takes a double hit under leasing deals: one hit for contributing to the project construction, and another hit for federal taxes lost via such tax shelters," Grassley and Baucus observed.

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