Even With Big Money at Stake on Extenders, Lobbyists, Companies Still Prefer Tax Revamp

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By Aaron E. Lorenzoand Jonathan Nicholson

Oct. 31 — Despite the amount of money involved in obtaining and protecting short-term tax breaks known as “extenders,” industries with an interest in them say they would prefer an overhauled tax system and K Street representatives say they wouldn't miss extenders as a business-generating issue.

A Bloomberg BNA analysis of disclosure reports from 2009 through 2012 of the companies, trade associations and other groups most interested in the temporary tax provisions called extenders found $742.9 million was spent on lobbying that included, though was not limited to, extenders.

For lobbying firms, such activity generated about $19 million in receipts during that same time frame.

But if extenders were dealt with permanently, as is envisioned in most ideas to redraw the U.S. tax system, one prominent lobbyist and one corporate tax expert for a major company said it would have little impact on their lobbying efforts.

Ken Kies, managing director of Federal Policy Group LLC, said clients retain his services for broad purposes, not just extenders or revamping the tax code.

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“Whether the extenders get done permanently or not, those demands are still going to exist,” said Kies, the top lobbyist donor to House Ways and Means and Senate Finance Committee members for the 2012 election cycle, based on the Bloomberg BNA analysis.

“The day that tax reform got signed there would be new efforts to change tax law, because issues arise, cases get decided, people discover things that they didn't realize were there,” Kies said.

A Fraction of Lobbying Outlays 

That happened following the last overhaul of the tax code in 1986, he said, recalling his time as a top Ways and Means aide back then. Washington's tax lobbyists were hardly out of work in 1987, said Kies, whose donations to tax writers amounted to about one-fifth of his total reported $135,000 in 2011 and 2012.

Spending on extenders-related lobbying represents a “small fraction” of overall lobbying outlays, said a corporate sector tax expert for a company tracked in the Dow Jones Industrial Average who requested anonymity to speak freely.

Though extenders are “the only game in town” now that lawmakers are poised to revisit the matter when the post-election, lame-duck session starts Nov. 12, he said companies hardly devote the bulk of their expenditures and legislative activities for the whole year on extenders.

“I think there's very few companies where taxes or tax extenders are their main focus,” he said. “I think the core business is the generally the main focus.”

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Trying to Protect ‘Loopholes'?

In contrast, some campaign finance and lobbying analysts said such monetary totals demonstrate spending to ensure inaction—payments for maintaining status quo—and guarantee access within the halls of Congress.

Despite all the talk of reshaping U.S. tax laws into a more streamlined code characterized by lower rates, corporate interests and others would seem to prefer to keep their breaks rather than sacrifice them at the altar of simplicity, the analysts said.

“If we're talking about a big overhaul of the tax code, a big constituency there is going to be lobbyists for all the corporations that have a stake there and might want to shut down debate,” said Stephen Spaulding, policy counsel for Common Cause.

Whether tax extenders get done permanently or not, demands for changes to the tax code will still exist, says Federal Policy Group's Ken Kies.

His opinion is not unique.

“When you're talking about fundamental tax reform, even though many corporations would like to see a lower tax rate, obviously, at the same time they really want to protect their loopholes that they have written into the current tax law, and that's where much of the money is going,” said Craig Holman, Public Citizen's government affairs lobbyist on ethics, lobbying and campaign finance rules.

The unnamed tax adviser disagreed, although he conceded the heavy focus on extenders at present given legislators' pending agenda. He said the temporary provisions should serve as a bridge to reworking the tax code, echoing a favorite phrase of Senate Finance Committee Chairman Ron Wyden (D-Ore.).

Nevertheless, Holman said he expects spending on tax-related lobbying to continue climbing through the current election cycle, given the spotlight put on remaking tax law by House Ways and Means Committee Chairman Dave Camp (R-Mich.).

His draft legislation to redraw the tax code, unveiled in February, was built on a number of potential changes such as longer depreciation schedules for business equipment purchases, the elimination of an accounting method popular in the oil and gas industry, and reduced deductions for advertising, among other proposals.

Negative blowback was swift, even though Camp is retiring at the end of this year and the draft never advanced, because it is nonetheless considered a blueprint for carrying the matter forward.

“I think, bottom line, that the status quo and the inability to enact comprehensive tax reform has certainly a lot to do with money from regulated industries,” Spaulding said.

Reform Still Preferred 

But some companies and trade groups that represent them disagreed, pointing out that they want a new tax code, not business as usual.

The U.S. Chamber of Commerce, for example, which spent more on lobbying than any other entity in the Bloomberg BNA analysis, is funding an ad campaign in support of revamping tax law.

Its lobbying disclosures for the third quarter of 2014 counted spending on that and broader campaign tactics beyond traditional paid media like social media, get-out-the-vote efforts, and more sophisticated polling and targeting of key constituencies, said the group's executive director of media relations, Blair Latoff Holmes.

She declined to comment on whether the Chamber's spending on lobbying, advocacy and grass-roots campaigns over the 2012 and 2010 cycles, which was nearly $363 million according to Bloomberg BNA calculations, could have played a role in hindering a tax overhaul since rewriting the tax code is seen as obviating the need for renewing extenders altogether. Latoff Holmes simply reiterated that the Chamber continues to push for revising the tax code.

Along the same lines, a spokesperson for General Electric Co. said the company also wants change.

“We support closing loopholes and adopting a competitive international system, even if it means higher taxes for companies like GE,” said Dominic McMullan, senior manager in public relations for GE, which spent $111 million on all lobbying over the 2012 and 2010 cycles based on Bloomberg BNA's analysis. “We believe fundamental reform would increase domestic investment, create high-quality jobs and encourage U.S. multinationals to reinvest more overseas earnings in the U.S.”

Tax Extenders Needed

In the meantime, the need to yet again revisit extenders is undeniable, said Matt Miller, vice president of tax policy at Business Roundtable, a group pushing lawmakers to renew the temporary tax provisions.

“Many of these expired policies or extenders are long-standing features of the U.S. tax system that have a profound impact on business investment, economic growth and job creation,” he said. “Accordingly, their expiration is already negatively impacting business investment and hiring decisions. Business Roundtable urges Congress to pass tax extenders legislation before the end of the year.”

But not all those tied to extenders-specific lobbying were as forthcoming.

Principals at Capitol Tax Partners LLP, the firm that earned the most for lobbying on extenders based on Bloomberg BNA's research, declined to comment. It received at least $3.2 million for lobbying on extenders and other tax issues over the two cycles, less than one-tenth of the nearly $44.5 million in its total lobbying income from 2009 through 2012, according to the Center for Responsive Politics.

The firm's website describes it as the largest independent tax advocacy group in Washington.

Former Senate Majority Leader Trent Lott of Breaux-Lott Leadership Group, which earned the second-highest extenders-related total of $1.9 million over the two cycles, didn't return a call requesting comment. Breaux-Lott had $22.7 million in total income for 2009 and 2010 before becoming part of Patton Boggs LLP, which had $93.5 million in total lobbying income in 2011 and 2012, according to CRP data.

To contact the reporters on this story: Aaron E. Lorenzo in Washington at aaron@bna.com and Jonathan Nicholson in Washington at jnicholson@bna.com

To contact the editor responsible for this story: Brett Ferguson at bferguson@bna.com


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