Some U.S. companies may have a stake in the New York subway system or the city's sewer system, but a new proposal by the Bush administration seeks to halt the tax breaks that result from their financial stake in public works and properties.
The administration hopes to close some controversial tax loopholes with the set of proposals introduced Tuesday, which could impact the finances of cities that have struck deals involving billions of dollars' in public property, the New York Times reported.
The proposals also seek to stop the inflated value sometimes given to items such as cars when they are donated to charities; stricter disclosure rules for taxpayers and tax-shelter promoters; and a new restriction on tax-exempt casualty insurance companies, the Times reported.
Treasury estimates show that stopping the leasing agreements would generate $34 billion to the federal tax coffers over the next decade that is now being lost when companies buy into public property and then benefit from the tax write-offs that become available when the property is depreciated. Bush's proposals would be retroactive to January 2004 but would not affect deals that existed before then.
Federal officials say these leasing deals were designed entirely to avoid federal taxes. "We find very little financial activity going on in these transactions," Pamela F. Olson, assistant secretary of the Treasury in charge of tax policy, told the Times. "There is very little to be said in support of these transactions."
Proponents of the deals say they pump badly needed funds into states and localities that might otherwise not be able to keep their aging systems running.
"These are transactions that benefit the municipalities that allow them to raise needed capital for important infrastructure," Michael Geffrard, president of the Liati Group, a company in New York City that has arranged scores of leasing deals in New York, Chicago and other parts of the country, told the Times. "It allows them to raise money for capital improvements without raising taxes at the local level."