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Grassley Moves To Close Leasing Tax Shelters

by Leroy Baker,, New York

21 November 2003

Charles Grassley, Chairman of the influential Senate Finance Committee, announced on Tuesday that he wants to accelerate legislation that will crack down on so-called LILO (lease in, lease out) tax shelters which have become a popular tax saving vehicle with many corporations.

The legislation was originally intended to become law on the day it was signed, but Grassley revealed this week that he wants the legislation to be effective as of Tuesday, November 19.

Under the leasing schemes, municipalities are paid an up-front accommodation fee to lease their infrastructure to a corporation. Grassley says that the cash received by the municipality, however, pales in comparison to the federal tax benefits received by the corporations, which are able to depreciate taxpayer-funded bridges, subways, and rail systems as a result of the lease.

"The shelter promoters are hiding behind the cities and are sending them to Capitol Hill to talk about what an important source of funding this is. This has nothing to do with a ‘public-private' partnership. This is just good, old-fashioned tax fraud," Grassley announced in a statement.

The Senator has also written to the Secretary of Transportation, Norman Y. Mineta, after it emerged that his department had endorsed the use of LILO transactions as a method for municipalities to raise funds. Although the Department initiated enforcement actions against these leasing arrangements under the Clinton administration in March 1999, in his letter, Grassley expressed “surprise” at the discovery in February 2000 that the Federal Transit Authority had issued guidance on the use of LILOs.

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