The Washington Post reported incorrectly yesterday that while an attorney for the Internal Revenue Service, Gerald Rock helped draft a ruling favorable to E. F. Hutton & Co., the brokerage firm. Rock, who has since left the government for the law firm of Kutak, Rock and Huie, which does work for E. F. Hutton, did not do so. The Post also erred in describing Kutak, Rock and Huie as a New York-Omaha firm - it has no New York offices - and in saying Rock has left the firm.He has not.
Three months ago the Senate Finance Committee reported out an innocuous little bill "to suspend until. . . June 30, 1978, the duty on concentrate of poppy straw" used in producing codeine and morphine.
The bill had an amendment attached, but no one paid it much attention.
Yesterday, however, with the bill near a vote on the Senate floor and Finance Chairman Russell B. Long (D-La.) padding around the Capitol with two more amendments in his pocket, the poppy straw bill had become a point of controversy.
The amendment the committee added back in May, it seems, would give Texas International Airlines an estimated $1 million this year in the form of tax reductions.
As for the two amendments in Long's pocket, one was for the benefit of Williams H. Sullivan Jr., owner of the New England Patriots football team. The other was for E. F. Hutton & Co., the brokerage firm.
Long for years has waited until times like this, when the Senate wants only to get out of town, to bring up minor and miscellaneous tax bills that often have very specific beneficiaries. The Senate has usually passed these bills without discussion or dissent in its haste to go home.
But this time, due in part of the efforts of tax "reforms" groups, there are senators ready to fight when the little bills come up, which they may do today.
The first amendment to the poppy straw bill would permit airlines with unused investment tax credits that otherwise would have expired at the end of last year to use them to help offset tax bills in 1978.
Nearly all the nation's airlines - which had operating losses in many of the early years of this decade - were beneficiaries of a similar tax law change in 1976. And to read yesterday's amendment, all airlines again would benefit from a further liberalization of the use of investment tax credits received for buying airplanes.
But in fact, only Texas International, now trying to buy the much larger terms of the amendment. The finance Committee estimated that it would cost the Treasury $1 million this year and next and could eventually cost another $7 million.
At one time owners of sports acted to reduce sharply the tax write offs owners could take by depreciating their players. The provisions, however, applied only to those who purchased sports franchises after 1976. those who owned their teams before 1976 could follow the old procedures, although the Internal Revenue Service has been challenging them anyway.
Using the jargon of tax writers, the continuing owners were "grandfathered." An amendment to the poppy straw bill would adjust the 1976 act so that it did not apply to someone who was both the majority stockholder of the company selling a team and was at principal shareholder of a company buying the team.
Apparently only New England Patriots owner Sullivan, who bought out his minority partners in 1976, will benefit. One tax "reform" lobbyist estimates that Sullivan could reduce his tax liability as much as $3 million a year.
The grandfather clause is often used in tax laws. It simply says that if a taxpayer concluded a deal under one set of laws, that deal should not be effected by a change in the law.
When Congress tightened the rules on tax-free industrial development bonds in 1969, it grandfathered those development bonds that were outstanding. It is that the interest purchasers earn on those bonds - sold by governments to attract industry - could remain tax-free.
Last year the Treasury ruled that if a new set of industrial development bonds were issued to "refund" an issue of bonds that was maturing, the new bonds also would be grandfathered from the provision of the 1969 tax law.
Last November the Treasury revoked that ruling and said the interest from the new bonds would be taxable.
In the interim between the two Treasury rulings, E. F. Hutton, a major brokerage house, with the help of the New York-Omaha law firm of Kutak, Rock and Huie, went across the country to convince governments to issue tax free industrial development bonds to refund those that were maturing or would mature. Estimates as to how many refunds were arranged stretch from $500 million $700 million.
With the door closed by the Treasury before most of the issues could be sold, E. F. Hutton stood to lose many millions of dollars in commissions.
Curiously, the Treasury lawyers involved in drafting the first ruling that grandfathered these issues - Gerald Rock and Mitchell Bragin - left the Treasury Department to join the Omaha-New York law firm. Rock has since left the firm.