Senate Budget Committee Focuses On Leasing Tax Breaks

by Mike Godfrey, Tax-News.com, Washington

17 February 2004

The Chairman of the Senate Budget Committee Don Nickles has pledged to close down tax loopholes that allow corporations significant tax breaks, as lawmakers attempt to patch up the growing black hole in the government’s fiscal finances.

At a committee hearing last week, the Oklahoma Republican called on the Treasury Department to draw up a list of known tax loopholes so that lawmakers can attempt to jettison those tax breaks that appear abusive.

“We have a lot of problems on the spending side of the tax code,” Nickles observed. "If we can...discover some other things that are really abuse of the system, we should shut them down earlier rather than later."

Nickles placed a lot of emphasis on corporations who lease public infrastructure to municipalities, allowing the companies to take advantage of large depreciation allowances, something the Senator labelled a “shell game”.

"It may be legal, but it's abuse of the tax system," he remarked.

US Corporations have entered into leasing arrangements with foreign as well as domestic government authorities. The Treasury Department estimates that the value of these leasing arrangements is in the region of $750 billion, and calculates that $33 billion could be recouped in tax revenues if the practice was shut down.

However, these figures have been hotly disputed by the Equipment Leasing Association, a non-profit association that represents companies involved equipment leasing to the business community, government and media.

“Treasury is clearly overstating the size of these types of transactions, which account for only about 10% of all leasing transactions,” claimed the ELA’s President, Michael Fleming. “We question how Treasury came up with their number, which more closely represents the size of our entire industry,” he added.

The Equipment Leasing and Finance Foundation’s 2003 State of the Industry Report estimates the size of the entire leasing industry to be $218 billion in 2004.

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