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By Jonathan Nicholson and Aaron Lorenzo
Oct. 31 — When lawmakers return to Washington later this month, one of their top priorities will be deciding whether and which expiring tax provisions known as extenders to renew again.
And if recent history is an indication, they will have more than a little advice on that from K Street lobbyists.
An analysis by Bloomberg BNA of the last two campaign cycles where the tax extenders were dealt with showed a small group of lobbyists representing companies and groups most interested in the provisions gave hundreds of thousands of dollars in campaign contributions to tax writers.
For both the 2010 and 2012 cycles, the average lobbyist who worked on tax extenders for those companies and groups ponied up about $4,500 to members of the House and Senate tax-writing committees.
At the same time, dealing with extenders appears to be a lucrative line of business for lobbying shops.
Over the 2010 and 2012 cycles, according to lobbying disclosure reports, spending on lobbying that included extenders—but wasn't limited to them—totaled almost three-quarters of a billion dollars by the companies and entities most interested in tax extenders.
Lobbyist Ken Kies, managing director of the Federal Policy Group LLC, said there is an old—and untrue—joke about lobbying and tax extenders that has been repeated around Washington for decades.
It goes that the second-worst thing that could happen would be a failure to get the extenders renewed temporarily yet again. “The worst thing that could happen is they be made permanent,” he joked in an interview with Bloomberg BNA.
Lawmakers interviewed by Bloomberg BNA said the donations by lobbyists don't affect their willingness to move ahead on a tax overhaul and Kies said the amounts of donations involved were miniscule in comparison to overall campaign contributions.
But the donations raise the question as Congress looks ahead to a possible 2015 tax overhaul debate—does the status quo of temporary tax provisions that are extended every few years actually serve both K Street's and lawmakers' interests? Would a tax overhaul that cleared out the underbrush of the temporary provisions also deprive lobbyists of a significant source of income and lawmakers of a ready source of campaign donations?
For the 2010 cycle, Bloomberg BNA found a total of only 154 extenders lobbyists employed by the 20 companies and groups most interested in tax extenders donated a total of $700,852 to members of the tax-writing House Ways and Means and Senate Finance committees. Both amounts rose in 2012, to 171 extenders lobbyists that gave $781,417, Bloomberg BNA found.
In 2010, Democrats controlled both chambers of Congress, while in 2012, Republicans controlled the House and Democrats controlled the Senate. In both years, as is expected to happen this year, extenders weren't dealt with until after the November elections.
In 2010, the lawmaker who received the most donations from the group of extenders lobbyists was Sen. Blanche Lincoln (D-Ark.), then engaged in an ultimately unsuccessful bid for re-election. She received $75,800, while the runner-up, Sen. Charles E. Schumer (D-N.Y.), received $60,400.
In the 2012 election cycle, 171 extenders lobbyists gave $781,417 to members of the tax-writing committees, Bloomberg BNA found.
In 2012, the top recipients from the extenders lobbyists were Sen. Orrin G. Hatch (R-Utah), ranking member of the Finance Committee, with $66,600, and Sen. Robert Menendez (D-N.J.), with $51,908.
Among the extenders lobbyists for those companies, the most prolific donor in the 2010 campaign cycle was Jonathan Talisman, with Capitol Tax Partners and a former assistant secretary for tax policy in the Clinton-era Treasury Department.
Talisman gave $23,800 to tax writers in the 2010 cycle, according to donor data compiled by Bloomberg Government. Other lobbyists of Capitol Tax Partners, Lindsay Hooper and Joseph Mikrut, were also among the top 10 extenders donors for the 2010 cycle.
The second-biggest 2010 cycle donor was David Jory, whose Capitol Hill Consulting Group firm worked on behalf of telecom giant Verizon Communications Inc. Jory gave $19,525 to tax writers in that cycle.
For the 2012 cycle, the biggest donor among the extenders lobbyists for the companies most active in the expiring tax provisions was Federal Policy Group's Kies, who gave $24,000 to 11 tax writers. The second-largest donor was Gregory Nickerson of Washington Tax Group, who gave $19,750 to tax writers.
In doing its analysis, Bloomberg BNA used data from the nonpartisan Center on Responsive Politics' OpenSecrets.org website, as well as from a Bloomberg Government search of lobbyist campaign donations (see box in this story on data gathering).
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Taking the top 20 companies and entities that listed “tax extenders” as one of their lobbying issues in federally required disclosure reports from the CRP site, Bloomberg BNA then combed through those entities' quarterly lobbying reports from 2009 through 2012 to identify individual lobbyists listed as having worked on tax extenders or the specific bills that carried tax extenders in 2010 and 2012.
The method likely understates the amount of donations in some ways. The search for reports to compile the lobbyist list didn't include individual expiring tax provisions that weren't noted as being extended. For example, a lobbying report that listed “wind production power credit,” which is considered an extender, wouldn't have shown up, while a report that listed “extending the research and development credit” would have.
Offsetting that narrowness somewhat, however, is that lobbying disclosure records typically list all activities a lobbyist is engaged in. So while the lobbyists were listed as having worked on extenders and often other issues, the reports did not specify how much of their time was engaged exclusively on extenders or which individual lobbyists in a group of lobbyists listed dealt with extenders and which did not.
Lobbyists Nickerson, Jory and Talisman declined to comment for this story or didn't respond to requests for comment. But Kies said his pattern of political giving didn't change during years when tax extenders were under consideration and downplayed the donation amounts involved.
“I would say that's a teeny number,” Kies said. He noted the estimated value of the extenders, put by the nonpartisan Congressional Budget Office at $897 billion over 10 years in August, was huge in comparison.
“If it were true that those political contributions generated the extenders, which it isn't, but if it were true, that's one hell of a deal,” he said. “That's a return on investment that would make anybody on Wall Street just salivate.”
Lawmakers also rejected the idea that the status quo of temporary extenders was influenced by contributions.
“I think people who support me support me because I've taken strong positions on so many issues. They know where I'm at, and I'm not going to change just because I've been financially supported by them,” said Hatch. “I couldn't do this job and be happy with it if I thought I could be bought. I get support because they know what I do,” he said.
Oct. 29 — The Bloomberg BNA analysis of tax extenders lobbying and campaign donations relies on data from two main sources: the nonpartisan Center for Responsive Politics and a search of federal campaign contribution records by Bloomberg Government.
The process began by determining which entities had exhibited the most interest and activity on tax extenders.
Using the CRP's OpenSecrets.org website's ability to search federal lobbying disclosure reports by specific issues, the 20 entities whose reports had contained the most mentions of “tax extenders” since 2006 were chosen. Those entities ran a wide gamut, from major multinational companies to companies with a focus on renewable energy to business groups to individual U.S. states.
The 20 entities with the most “tax extenders” mentions in their reports, in no order, were the Business Roundtable, the U.S. Chamber of Commerce, the Financial Services Roundtable, GE, Halliburton, Hewlett-Packard, Koch Industries, Lennox International, Massachusetts Mutual Life Insurance, Microsoft, Roche Holdings, Pfizer, Smithfield Foods, Verizon Communications, Wal-Mart, National Grid, Renewable Biofuels, Imperium Renewables and the states of Iowa and Kansas.
From the quarterly lobbying disclosure reports filed by those entities, instances were included in which lobbying had occurred on tax extenders or the specific bills in 2010 and 2012 that addressed extenders in those years.
The search for instances of lobbying on extenders was narrowly focused on instances where variations of “extend,” “extension” or “extender” showed up in relation to a tax item considered among the approximately 60 provisions known as tax extenders and only in the report's section detailing tax-related lobbying.
This approach meant instances where a provision not identified in the tax lobbying section of the report or not identified in conjunction with extension wording were passed over. For example, a lobbying report that mentioned the wind production tax credit, which is considered an extender, would be passed over either because it was in the energy lobbying section of the report or because it wasn't mentioned in conjunction with being extended.
From those reports where extenders lobbying was identified, the individual lobbyists' names were collected. The reports didn't break out how much time was allocated to extenders-related lobbying in addition to other tax-related lobbying.
Also, when a group of lobbyists was identified, the reports didn't break out whether extenders-related lobbying in that quarter was limited to specific lobbyists or was an activity of all those listed. In short, the reports showed lobbying activity that included, but wasn't necessarily limited to, extenders-related lobbying.
The names of the lobbyists listed in the reports with extenders-related lobbying were then used in a search of campaign contribution records conducted by Bloomberg Government. The search didn't include lobbyist contributions to lawmakers' leadership political action committees or donations made by their family members.
The results were then analyzed by Bloomberg BNA and put into spreadsheet form, matching them with lawmakers they gave to and broken out by the 2010 and 2012 election cycles.
The data on companies' spending on extenders-related lobbying was also drawn from the quarterly disclosure reports. The figures were aggregated from data on either money spent on lobbying by companies and groups that did their lobbying in-house, or receipts from companies that had been hired to lobby on behalf of an entity.
In cases where both in-house and external lobbyists were used, the spending and receipt figures from the reports were added together for that entity.
One limitation of the reports' spending figures, however, is they disclose only overall lobbying costs and they don't break out spending by subject area, like taxes, much less by a specific subset of that area, like extenders. However, only quarterly reports that included instances of extenders lobbying were tallied.
The lobbying shops' receipts data was also taken from the quarterly reports. In some instances, lobby shops worked for more than one entity over the time period examined. The data for both entities' lobbying spending and lobbying shops' receipts was analyzed and put into spreadsheet form by Bloomberg BNA.
House Ways and Means Committee Chairman Dave Camp (R-Mich.) said, “I would just say that we've gotten into this pattern where they are extended backwards and forwards. What we really need to do is have a permanent policy.”
“I think it's almost become a default position to do extenders the way we've been doing them. That's how I would describe it,” Camp said.
Some lawmakers say the energy spent dealing with extenders actually drags down efforts at a comprehensive tax overhaul.
Sen. Ben Cardin (D-Md.), a member of the Finance Committee, said, “Getting extenders passed is looked upon as a nuisance and it prevents interest groups from spending more time on policy changes which would be great business for lobbyists but also more productive for our country.”
Rep. Kevin Brady (R-Texas), who is challenging Rep. Paul D. Ryan (R-Wis.) to lead the Ways and Means Committee in the next Congress, said, “Extenders are an impediment to tax reform because they suck up all the oxygen and require all this work, both by legislators and the lobby community, merely to extend them another year or two.”
“All of that energy could be focused on actually fixing the tax code,” Brady said.
Campaign finance and good government groups say lobbyists' donations to lawmakers they lobby helps with access to those lawmakers and gives at least the appearance of a conflict of interest.
“There's certainly an appearance of he who pays the piper calls the tune,” said Stephen Spaulding, policy counsel for Common Cause.
The numbers could actually undercount the influence of lobbyists and corporations because of more opaque giving channels, he said.
“They can also give to entities post-Citizens United that don't have to disclose their donors at all. They can give to sham 501(c)(4) organizations that are under no obligation to disclose where that money came from, which raises all kinds of questions because it's not out of the realm of possibility that, behind closed doors, members of Congress know exactly where that money is coming from,” he said.
Craig Holman, who lobbies on ethics, lobbying and campaign finance rules for Public Citizen, said lobbyists give to try to influence lawmakers.
“That's why they're doing this. They're not making campaign contributions based on ideology or party. They're making contributions to incumbents who have the authority to affect their business,” he said.
Kies, the Federal Policy Group lobbyist, denied that was the case.
“I don't know why other people make political contributions. I make political contributions because I support people who happen to line up ideologically with me and my clients. Whether extenders are around or not, I'm probably going to be doing the same thing,” he said.
The reason extenders have been temporary, Kies said, is the price tag associated with making them permanent. “It's the costs,” he said.
According to the Center for Responsive Politics, Kies in the 2012 cycle gave a total of $135,449 to federal candidates and political action committees. All but $500 to Rep. Richard E. Neal (D-Mass.), a Ways and Means member, went to Republicans.
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Sarah Bryner, research director for the Center for Responsive Politics, said the amounts in question supported Kies' contention that donated amounts would make little difference to candidates.
“I don't think these numbers look alarmingly high,” she said. “I think the appearance of a conflict of interest is certainly something that is reasonable for people to be concerned about in this case, but I wouldn't jump to say there's anything that looks nefarious or unusual about these totals, because it's a large group donating, it's a large group of people receiving the money and it's a fairly large, but not earth-shattering, amount of money going to these members,” she said.
According to the CRP, for the current 2014 election cycle, the average Senate incumbent running for re-election has raised about $6.5 million from individual contributors, while the average House incumbent has raised about $731,000.
However, Bryner said direct donations were often seen as having more impact than PAC or spousal donations, which weren't tabulated in the Bloomberg BNA analysis.
“I think of all those kinds of donations, the most influential is from lobbyists to members' campaigns directly. So even if you're missing a not-insignificant hunk of money, the most impactful money would be included in your analysis,” she said.
Earl Pomeroy has seen the issue from both Capitol Hill and K Street. Now senior counsel at Alston & Bird LLP, Pomeroy was a member of the Ways and Means Committee before losing his re-election bid in 2010.
While he doesn't lobby on extenders, Pomeroy said he agrees that their temporary nature makes them a hassle for lawmakers and lobbyists.
“You don't want to keep rolling that same stone uphill again and again and again,” he said.
But he also said the final shape of a tax overhaul could make some nervous if it were to scrap long-held provisions in the name of getting overall rates down.
“They'd be very anxious about that proposition. It's not as though you're going to find the extender crowd all that excited about broad-based tax reform that might repeal their provision altogether,” he said.
Finance Chairman Ron Wyden (R-Ore.) appeared to acknowledge the danger that a successful clearing out of targeted tax breaks could be only a temporary victory.
“There's a funny story about '86 tax reform, where someone apparently said, ‘I voted for 1986 tax reform, because now that we've drained the swamp, I can start adding stuff back in,'” he said.
“I made it clear that I'm going to do everything I possibly can as part of real tax reform to make it hard for lobbyists to try and unravel it,” Wyden said.
To contact the editor responsible for this story: Brett Ferguson at firstname.lastname@example.org
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