In yesterday's editions, The Washington Post decribed Tax Analysts and Advocates as a tax lobby. The organization describes itself as a public interest research group and law firm. A separate, but companion organization, Taxation with Representation calls itself a taxpayers lobby.

Bethlehem Steel Corp. won't know for sure if it actually lost $477 million in the third quarter of 1977 until it makes the last pension payment to the last worker it permanently laid off in a cost-cutting drive.

Even though the company won't make some of those pension payments until 1999 or thereafter, conservative accounting practices say the company had to pretend to incur them all at once .

The $477 million net loss figure is the result of a mixture of pluses and minuses and assumptions, to whit:

The costs of shutting down production facilities in Johnstown. Pa., and Lackawanna, N.Y., are estimated to be $750 million. That figure includes $483 million for employee benefits (mostly penion), $167 million worth of undepreciated equipment it will have to scrap, and $100 million worth of other costs such as cancelling long-term contracts.

The loss of $104 million it suffered when production cost outran revenues in the third quarter.

The costs of cleaning up and restoring its Johnstown plant after a devastating flood last summer reached $40 million.

Before income taxes then, Bethlehem Steel had a loss totalling $894 million. But it will be able to get some income tax credits back from the federal government - worth $417 million - to reduce its net loss to $477 million.

Of course, if the nation's second biggest steel maker is wrong about the amount of pension benefits it will owe its employees as a result of the closedowns, its $477 million loss would be either understated or overstated.

While Bethlehem takes account of all the costs of the Johnstown and Lackawanna shutdowns in its third quarter statement, it will not actually shell out cash for many of the bills until years in the future. It is a procedure analogous to making a deduction in one's checkbook today for a bill not due until next month so the money does not get spent in the meantime.

There is a caveat, of course.Presumably the check writer knows how big his bill will be. In Bethlehem's case, an army of acountants has made a guess about the size of the bill, but they could be wrong.

If they have overstated the loss, at some point in the future an item will show up on Bethlehem's statements making an adjustment to eliminate some reserves earmarked for the plant shutdowns.

If Bethlehem underestimated the costs of the shutdowns, it will have to take a loss on some future income in order to increase its reserves for the plant curtailments.

But a conservative accounting principle requires Bethlehem to do its best to figure out everything it will have to spend to shut down those facilities.

According to Henry Bubel of Tax Analysts and Advocates, a public interest tax lobby, the principle is simply:

"Recognize losses immediately, even if you have to estimate them. Conversely, you don't recognize income until you receive it."

Since the overwhelming portion of Bethlehem's third quarter loss is related to shutting down large portions of the steelmaking capacity at Johnstown and Lackawanna (both mills will continue to run in a toned down capacity) and permanently laying off 7,300 workers, estimates play a big role in that $477 million loss.

Nearly two-thirds of the $750 million bill the company expects to foot in shutting down the Johnstown and Lackawanna facilities is for employee benefits, primarily pension benefits. The company estimates that terminated employees will received $483 million as a result of the closings.

It bases that estimate on a host of actuarial factors including which employees will be laid off, and how long the employees will collect benefits.

The company declines to comment on any of the assumptions it made in coming up with the $483 million estimate.

In response to formal questions Bethlehem would only reply to questions posed to a public relations representative to which it replied in writing), the company said merely, "In determining the amount of the charge, management has considered all factors it believes to be relevant."

Besides the $483 million at estimates it will pay employees, Bethlehem also figures to lose anothe $267 million in equipment and other charges associated with shutting down.

When a company buys a machine or builds a facility, tax law does not permit the company count the cost of the equipment as a deduction from income in the year it is purchased. Instead, the company must depreciate the machine over a number of years. The machine is treated as an investment that is used up over a period of years.

After its first year of use, the company would have an asset worth $9 million.

According to Bethlehem's books, the steel maker has $167 million worth of assets at Johnstown and Lackawanna that it can no longer use to make steel (actually the book value may be higher, but Bethlehem may be able to sell some of the machines to someone else or use them itself as scrap material).

As a result, the company must write them off all at once as an expense.

Similarly, the company faces other shut-down costs. If it has long-term contracts with suppliers, it must pay penalties to terminate them. Some of the goods it has in inventory may be worth less because of the shutdown, and it would have to deduct the decline in the value of the inventories.

The shutdown of the facilities is nearing completion. If Bethlehem has done the right thing, the remaining producing facilities it has should produce steel at a lower cost per ton, thereby making it more competitive and more profitable.


Third Quarter 1977 (ending Sept. 30)

(in maillions of dollars)(TABLE) REVENUES(COLUMN) Sales (nearly all from steel(COLUMN) making operations)(COLUMN)$1,286.4 Interest, dividends, other in-(COLUMN) come(COLUMN) .7 (COLUMN)$1,287.1 COSTS AND EXPENSES(COLUMN) Cost of sales (raw materials,(COLUMN) commissions, energy bills,(COLUMN) and the like)(COLUMN)$1,222.9 Depreciation(COLUMN) 76.1 Selling, administrative and(COLUMN) other expenses (such as(COLUMN) auditing, billing, advertis-(COLUMN) ing, legal)(COLUMN) 71.1 Interest and debt charges(COLUMN) 21.0 Shutting down Lackawanna(COLUMN) and Johnstown(COLUMN) Employee benefits 483.0(COLUMN) Facility Writeoff 167.0(COLUMN) Closing operations 100.0(COLUMN) 750.0(COLUMN) 750.0 Flood at Johnstown(COLUMN) 40.0 (COLUMN)$2,181.1 Loss before taxes on Income(COLUMN)[894.0] TAX CREDITS(COLUMN)$417.0 NET LOSS(COLUMN)[477.0](END TABLE)