GE lobbies hard for tax loophole, groups say
Washington – How much is a tax loophole worth to a company?
A new report says that one in particular is so important to Fairfield-based General Electric that the company has deployed a small army of lobbyists to save it.
Congress will soon be deciding how many of the tax breaks that expired at the end of last year should be renewed; and according to a new report by two liberal-leaning advocacy groups, the impending debate has put in motion a tsunami of lobbying led by General Electric.
“Corporate Lobbying on Tax Extenders and the ‘GE Loophole,’” a report by Americans for Tax Fairness and Public Campaign, says GE has deployed 48 lobbyists to urge Congress to renew a tax break called the Active Financing Exception, or AFE. The provision enables multinational corporations like GE to avoid paying federal income taxes on financial income that is generated offshore.
The groups say GE Financial is one of the biggest beneficiaries of this tax break now under consideration by Congress in a package of dozens. Collectively, these breaks are known as “extenders” because they are not a permanent part of the tax code and must be periodically renewed.
“An army of corporate lobbyists has converged on Congress to convince lawmakers to pass the ’GE Loophole’ and the entire tax extender package,” said Frank Clemente, executive director of Americans for Tax Fairness. “The general of this army is General Electric….”
The GE Loophole report says that, between 2008 and 2012, GE has claimed refunds from the U.S. Treasury totaling $3.1 billion, despite making $27.5 billion in profits. This information came from another liberal group, Citizens for Tax Justice, which determined GE’s tax liability from an analysis of the company’s annual reports. (GE’s tax filings to the Internal Revenue Service are protected from public inspection by privacy laws.)
Liberal groups want an end to the AFE because they think if corporations pay more taxes, citizens will receive greater and better services from their government.
GE Financial, which employs about 4,500 people in Connecticut, said the report “distorts the facts and reflects a politically motivated agenda from its authors.”
“The truth is that active financing applies the same rules to financial services that permanently apply to every other U.S. business sector,” said GE spokesman Seth Martin.
Martin also said, “the report is also wrong about GE tax payments.”
“We did not receive a net refund for any of the years cited, and in fact paid billions in tax payments to U.S. federal, state and local governments,” he said.
Harry Gural, co-author of the report, insisted that GE paid low tax rates for some years and received refunds for others. He also said GE’s dismissal of the report as politically motivated has no merit.
“When someone says you’re crazy or you’re stupid means you have run out of arguments,” Gural said.
There’s no question, however, that GE has lobbied heavily to include the AFE in a package of tax extenders under consideration by the Senate Finance Committee.
The GE Loophole report said GE hired 48 lobbyists to persuade lawmakers to renew the AFE, spending more than $61 million in lobbying fees on the issue.
A survey of Senate lobbying disclosure reports shows that GE has hired some of the most prestigious lobbying firms in Washington, including one established by former Sens. Trent Lott, R-Miss., and John Breaux, D-La., and that it has spent millions of dollars on in-house lobbyists to work on the AFE issue. But these influence peddlers worked on other issues, too.
Other financial companies, including Citigroup, Goldman Sachs, Morgan Stanley, Prudential and American Express, also lobbied lawmakers on the AFE.
The companies won the first round in this lobbying fight.
On Thursday, the Senate Finance Committee included the AFE in a tax extender bill that also contained dozens of other tax breaks for individuals and corporations. These include the money teachers spend out of their pockets for supplies for their classrooms, commuting expenses, mortgage interest premiums and tuition expenses. The Senate bill would also allow taxpayers to continue to deduct the money paid in state and local taxes on their federal tax forms. It also re-establishes – and expands for small businesses – a research and development tax credit that benefits many Connecticut companies.
But GE and other companies will continue to lobby to make sure the House of Representatives also renews their tax breaks. The House hopes to start work on a tax extender package next week.
The GE Loophole report said 1,359 lobbyists representing 373 corporations pressed Congress on tax extender legislation between January 2011 and September 2013.
Martin, the GE spokesman, said the long-term goal of his company and others is to end the temporary nature of these tax breaks.
“Lawmakers on both sides of the aisle and respected third-party experts agree that these rules should be a permanent feature of the tax code,” he said.
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