GE Lobbyists Mold Tax Bill

Firm Saw Subsidy Repeal as Chance to Pay Less

No company in the nation had more to lose than General Electric Co. when the World Trade Organization decreed in 2002 that U.S. tax laws violated international treaties. The multinational conglomerate was saving hundreds of millions of dollars a year in taxes from the export subsidies that the United States had to discard.

But in a two-year campaign, fueled as much by brains as political brawn, GE has shaped the legislation that would replace the old export-promotion law in ways that would allow it to save as much, if not more, in taxes, according to both GE lobbyists and congressional aides. In pursuing its financial interest, the company may also have turned the U.S. corporate tax code away from domestic manufacturing and toward expansion of operations abroad.

"The bill is truly amazing," said Michael J. McIntyre, a tax law professor at Wayne State University and an expert on international corporate tax issues. "We had an incentive for exports that was illegal and had to be repealed. Now Congress takes the money saved by the repeal and uses it to reduce taxes on the income earned by U.S. companies in foreign countries, thereby making foreign investment more attractive than U.S. investment."

Advocates and detractors alike say such concerns -- broadly shared -- make GE's lobbying feat more remarkable. House and Senate negotiators are expected to begin final talks on the corporate tax bill this week or next. GE's final push is about to begin.

GE was far from alone in trying to fashion what has become the most important corporate tax bill in nearly 20 years. Lobbyists for the nation's biggest companies have dusted off their favorite tax benefits and tried to sell them as part of the legislation. As a result, the measure, which began as a simple repeal of the $5-billion-a-year export subsidy, has swollen to include more than $140 billion in tax breaks over the next 10 years.

But GE's clout stands out. Of one provision eventually worth $2 billion a year, GE will reap an "overwhelming percentage," said John Buckley, chief tax counsel for the Democratic staff of the House Ways and Means Committee.

"They're getting a lot more out of this than they ever had" from the export subsidy, Buckley said.

A GE spokesman declined to comment.

The lobbying battle began in earnest soon after the WTO declared the U.S. international tax regimen illegal. The international trade enforcement organization said the laws unfairly subsidized American exports and had to be repealed to conform with trade accords. Many exporting companies saw the ruling as a disaster, but GE, one of the most experienced and successful firms in the rough-and-tumble world of tax legislation, viewed it as a chance to revise the tax code to its liking, its Washington representatives said.

Since the Tax Reform Act of 1986, GE tax lobbyists have hunted for an opening to insert into law two new statutes. The first would simplify the way companies could use the taxes they paid overseas to reduce their U.S. tax bill. The second would allow companies to defer indefinitely paying taxes on their overseas leasing businesses, especially the profits from the leasing of commercial aircraft, a business in which GE is a world leader.