WASHINGTON, March 31 General Electric Co has lobbied more aggressively than any other corporation to preserve a tax loophole that lets multinationals shelter offshore financial profits from U.S. taxes, an activist group said on Monday.
As Congress considers the annual renewal of scores of tax breaks, Americans for Tax Fairness released a study focused on the "active financing exception (AFE)," enacted in 1997, which U.S. companies use to avoid taxes on offshore financial income.
"No company has lobbied more aggressively on the AFE or benefits more handsomely than General Electric," said the group, which is backed by labor unions and progressive political organizations, in the 25-page study.
GE spokesman Seth Martin said, "This report distorts the facts and reflects a politically motivated agenda from its authors. The truth is that active financing applies the same rules to financial services that permanently apply to every other U.S. business sector."
He said: "Lawmakers on both sides of the aisle and respected third-party experts agree that these rules should be a permanent feature of the tax code."
Every year, Congress gears up to renew about 55 "temporary" tax breaks known as the "extenders" list. These include the active financing exception and scores of other provisions.
The Americans for Tax Fairness study analyzed tax lobbying activity in Congress between January 2011 and September 2013, using data from the Center for Responsive Politics, a non-partisan watchdog group on campaign finance and lobbying.
The study said that over the 33-month period, 1,359 individual lobbyists reported doing work on Capitol Hill related to tax extenders for 373 companies and trade associations. That was equal to about 2.5 lobbyists for each member of Congress on the extenders issue alone, the study said.
GE employed 48 lobbyists over the study period to work on tax extenders and the AFE, "more than any other corporation or trade association in both cases," the study said.
Americans for Tax Fairness said other businesses that lobby on behalf of the exception include banks, insurers and financial firms. Citigroup, for instance, employed 29 lobbyists on the same issue, the second-most after GE, the study found.
A Citigroup spokeswoman declined to comment.
Written into law in 1997, the active financing exception deals with certain types of corporate income derived from "the active conduct of a banking or financing business," according to the Joint Committee on Taxation of Congress.
Under the tax code, businesses with overseas profits do not have to pay income tax on those profits until they are brought into the United States, as long as they are "active," or derived from actively managed businesses, as opposed to "passive."
The active financing exception exempts from immediate taxation certain types of income that could otherwise be treated as passive, including dividends, interest, rents and royalties received by one corporate unit from another.
Corporations that use the AFE defend it as a valid carve-out for profits that are the result of strategic business decisions and that help U.S. businesses compete against foreign rivals. Critics call the AFE a loophole for financial interests.
Both the Senate Finance Committee and the House of Representatives Ways & Means Committee, which deal with taxes, have begun to discuss dealing with the "extenders," including the AFE, which technically expired at the end of last year.
But no conclusive action on them is expected until after the mid-term congressional elections in November, policy analysts said. The items on the list are often renewed retroactively after expiring. (Editing by Howard Goller and David Gregorio)