Senate Panel Targets Tax Deductions on Existing Foreign Leases

CNN.com - Senate panel targets�tax deductions tied to foreign leases - Apr 6, 2004

American companies that leased foreign dams, bridges and subways stand to lose billions of dollars in tax deductions beginning next year under a proposal advanced by Senate tax writers. The House and Senate have advanced bills effectively blocking future leases, but critics said the Senate Finance Committee's new proposal goes further by penalizing companies that entered legal leases years ago, long before debate erupted on Capitol Hill.

The committee started investigating the lease transactions after an anonymous witness testified to their widespread use last fall. "This scheme is so pervasive that much of the old and new infrastructure throughout Europe has been leased to, and leased back from, American corporations," said the witness. "The sole purpose of this scheme is to generate a tax shelter for U.S. corporations that invest in these schemes."

In the typical lease under scrutiny, a local government leases public infrastructure, such as a bridge built or bought with public funds, to a private company to raise revenue. The private company claims a tax break for the depreciated value of the infrastructure while the local government retains control of it.

U.S. companies hunting for new tax deductions have leased as much as $750 billion worth of bridges, subways and other public works in the United States and abroad over the past four years, according to the Treasury Department. Sphere: Related Content