Lobbyists had a big win for the hospitality and gambling business as the year drew to a close. With the retention of a tax loophole, they were able to dodge a bullet even as Congress drew up a massive tax and spending bill.
Billions at stake
Announced earlier this month, a loophole which has until now permitted hotels, restaurant chains as well as casinos, to generate billions in cash through spinning of real estate investment trusts (REITs) from their own buildings, was due to be stemmed with a new real estate provision. As a result of the loophole, these businesses could set up an REIT for properties that they owned without incurring any kind of capital gains taxes. This nature of transaction has occurred an estimated 15 times since 2010, and some estimates suggest this generated over USD 21.7 billion in returns.
Proposal sends industry into lobbying overdrive
Frantic activity began after a December 7th announcement of a proposal that could see billions at stake for some well connected bigger players in the industry. Hotels, restaurants as well as gambling businesses took swift action even as Congressional leaders charted a whopping 2000 pager of a spending and tax bill. What’s made all the difference though, is a tiny section of just over 50 words, that retains a loophole that benefits those in the sector. This little tweak will potentially cost the government about a billion dollars or more of possible future federal tax payments.
Powerful backing helps their cause
Besides the investors from Wall Street with their billions behind them, lobbyists also benefited from the support of senior politicians like Harry Reid, the top Senate Democrat. The Nevada native had been the focus of efforts from casino company executives in the state. As major employers in the state, they yield significant political leverage as well. Many of the bigger players in the industry who would have borne the brunt of the new bill, are significant contributors to the Reid campaign.
The particular bill, owing to its direct impact on businesses, has seen the heavy involvement of well connected corporate lobbyists. Due to the small number of corporations impacted, this time lobbyists actually joined forces strengthening their case. In fact, as things played out, the language used in the actual draft was derived from what was put together by the lobbyists themselves. Lawmakers were given a mere 72 hours to review the mammoth document, as the draft was put to vote.