Bush Seeks to End Leasing Deals That Lead to Tax Write-Offs

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."

You may like these other stories...

IRS audits less than 1 percent of big partnershipsAccording to an April 17 report from the Government Accountability Office (GAO), the IRS audits fewer than 1 percent of large business partnerships, Stephen Ohlemacher of the...
Legislation coming out of Washington just might reduce homeowners' burden for disaster insurance. It's a topic very much on everyone's minds since the mudslide in Oso, Washington. The loss of human life was...
Divorce is hard, and the IRS isn't going to make it any easier. The IRS generally says "no" to tax deductions that might ease the pain of divorce. In certain circumstances, however, you might be able to salvage...

Upcoming CPE Webinars

Apr 22
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.
Apr 30
During the second session of a four-part series on Individual Leadership, the focus will be on time management- a critical success factor for effective leadership. Each person has 24 hours of time to spend each day; the key is making wise investments and knowing what investments yield the greatest return.