|
|
Congress Paints Leasing for the Rich by Christopher Menkin It appears Congress is on a rampage against tax shelters, and large “sale/leaseback” special utility and government leasing, including overseas. The Congressional brush is so large that it paints other leasing transactions, and to be elected this year, knock down leasing, bank loans, and there is even talk of making more changes in Small Business Administrative loans, meaning not only tightening up the money available, but changing requirements, such as guaranteeing only 50% of the loan. This is a presidential election year, promising to be not only another close one, but much dirtier than the last. The spill out is on business, who seem to always be painted the “bad guys.” We send jobs and manufacturing overseas because it is too expensive here, and all business wants to do is make a profit. Heavens forbid!!! Ralph Nader is running on this premise, pushing both Democrats and Republicans away from being “too close” to special interests ( as if “special interest” is viewed worse than any swear word; as if promoting your business or your interest is akin to stealing, or worse yet, marrying a person of your same sex.) It is true that we have several front page business trials in progress with some sensational dollar amounts and lifestyles from a Jacqueline Susann novel: Kozlowski et. el at Tyco, Worldcom, Enron, Michael J. and John J. Rigas at Adelphia, and it even appears the so-called perfect Martha Stewart was evidently caught in obstructing justice. She even bills her company for buying Starbucks coffee at a Mexican retreat!!! Not that leasing is not viewed as a “tax gimmick” or even “bad boys,” as evidenced by all the companies that took both vendors and applicants such as Commercial Money Center, MSM Capital, or the hundreds of advance rentals not returned to applicants when the the lease does not move forward ( yes, hundreds per year.) Both the U.S. Senate and Congress have been getting headlines in the major newspapers, not just the business sections, but the front page about how leasing is creating “tax shelters” for the rich. The only voice that protests seems to be Michael Fleming, president of the Equipment Leasing Association. Even the Association of Government Leasing and Finance says the transactions don't affect the great majority of their member's transaction, so evidently they want to be left out of the fray. None of the other leasing associations have taken a stand, let alone do they seem to be interested. While the Public Broadcast System does not get the TV ratings of “The Survivors,” it is viewed by those who are actively involved in the political process, and as important, the business editors, writers, and journalists interested in the PBS viewpoint. Leasing News asked its readers to watch the broadcast. Several told us they were appalled at leasing be held as a “trick” or “tax shelter for the rich.” Rosanne Wilson said her view was that the show “...cast a shadow of ‘evil” on big Banks and Lessors (leaving) the viewer wondering if we were all cheating.” Here is here e-mail: “I was glad I caught the segment on PBS last night thanks to you informing your readers earlier in the week. I watched the entire program and oh boy was that a powerful segment. It really opened my eyes. “Clearly the cases that segment focused on were obvious abuses of leasing in my opinion. I believe that there has to be "substance" in a transaction. The cases in the PBS segment definitely lacked "substance". The government will no doubt define "substance" and make this a requirement. But the PBS segment also cast a shadow of "evil" on big Banks and Lessors that left the viewer wondering if we were all cheating. That's just my take on it. “How about the rest of our viewers?? I would love more feedback.” Rosanne Wilson Friday's ELT News--- Arlington, VA—February 20, 2004—The Equipment Leasing Association (ELA), the non-profit association representing the $218 billion equipment leasing and finance industry, today released a statement in response to a segment on the PBS television show Frontline called "Tax Me If You Can," which aired Thursday, February 19. “We were taken aback by some of the language used in the Frontline segment and ELA wishes to clarify some of the statements used,” said Michael Fleming, ELA President. “The industry welcomes a policy discussion around the appropriate role for leasing to tax-exempts. But, calling a legal business practice a scheme or fraud, that is inappropriate. Inflammatory statements, such as the ones made in the television segment, make it difficult for policy makers and an industry to address a very serious policy subject.” Fleming points out that the equipment leasing and finance industry provides significant, much-needed capital and jobs across many different industries, companies and organizations. “Calling an industry that contributes so much ‘a bunch of hucksters', isn't appropriate,” said Fleming. “If current law doesn't work, then let's have a civil discussion about what would work. We certainly are willing to address the issues.” Critics of leasing have attempted to depict some finance leasing to tax-exempt entities negatively to justify efforts to change longstanding and well-established tax principles surrounding the leasing industry. “Leasing levels the economic playing field between profitable taxable entities and non profitable or tax-exempt entities with regard to the cost of acquiring equipment,” notes Fleming, citing that for decades Congress has encouraged investment in capital goods through tax depreciation. “Tax depreciation allows an entity to recover the investment made in an asset. Congress and the courts have affirmatively provided for lessors to utilize tax depreciation when leasing to taxable corporations as well as tax-exempt entities.” The current policy debate on lease financing to tax-exempts has focused increasingly on the nature of the asset, the geographic location of the asset and the nature of the lessee, as was the focus of the Frontline segment. “However, all of these considerations have been and should remain unimportant under well established legal and tax principles,” said Fleming. “The appropriate tax treatment of a sale and lease of a transit facility by a governmental entity in Frankfurt, Germany, for example, should be no different than the sale and lease of a transit facility by a governmental entity in Frankfurt, Kentucky.” Contrary to what the PBS story depicted, the leasing industry is not opposed to the doctrine of economic substance, asserts Fleming. The economic substance doctrine is already the law, established by regulation and court decisions and is enforced through the IRS. The industry, said Fleming, is opposed to the statutory codification of the doctrine, not to the doctrine itself, because it will make the doctrine too rigid and create enforcement headaches. This opposition to codification is shared by the United States Treasury Department. # # # About The Equipment Leasing Association Organized in 1961, the Equipment Leasing Association (ELA) is the premier non-profit association representing companies involved in the dynamic equipment leasing and finance industry to the business community, government and media. As the voice of the leasing industry, ELA promotes the estimated $218 billion industry as a major source of funds for capital investment in the United States and abroad. ELA provides its members with comprehensive services, assists in the resolution of industry issues, educates financial decision-makers on the benefits of leasing and promotes high standards of business practices within the industry. ELA maintains an informational portal for financial decision-makers to learn more about leasing and find a leasing company at http://www.LeaseAssistant.org. Headquartered in Arlington, Va., ELA has more than 800 member companies and a staff of 25 professionals. For more information on ELA, please visit ELA Online at http://www.ELAOnline.com. ----------------------- Others had a different take on it:
PBS Attacks Leasing Tax Shelters http://www.leasingnews.org/#pbs http://www.pbs.org/wgbh/pages/frontline/shows/tax/shelter/producer.html
|
|
