James Gorman, Morgan Stanley's chief executive, wrote a note to his 16,000 employees this week to urge them to pressure their elected congressional representatives to pursue a compromise to avert the looming financial budgetary crisis known as the "fiscal cliff."
But even as he called for a "balanced solution," lobbyists who represent Gorman's bank were fighting to preserve an exemption that allows the company to enjoy a lucrative tax break unavailable to most Americans.
Morgan Stanley is one of about two dozen companies -- mostly banks, but also large U.S.-based multinational companies with financing arms such as Ford Motor Co. and General Electric -- that support a little-noticed tax exemption that allows businesses that earn interest on overseas lending to defer paying U.S. taxes on that income indefinitely. This "active financing" exemption technically expired at the end of 2011, but Congress, at the urging of bank lobbyists, is expected to extend it once again. The two-year cost of extending the tax break is an estimated $11.2 billion, according to the Joint Committee on Taxation.
Morgan Stanley did not respond to a request for comment. On its website, the bank describes the exemption as necessary "to maintain the competitiveness of U.S.-based global financial service firms such as Morgan Stanley." According to lobbying disclosure forms, the bank spent about $2.6 million on lobbying activity in the first three quarters of 2012 on a wide range of topics, including in support of a bill that would permanently enshrine the active financing exemption into tax code.
Tax policy groups decry the exemption as a giveaway that allows companies that already pay artificially low tax rates to exploit another offshore tax loophole. It also encourages overseas lending at the expense of domestic lending, they say.
"Not extending those provisions would level the playing field for businesses that can't use high-priced tax lawyers and offshore subsidiaries to dodge their taxes," said Phineas Baxandall, the senior analyst for tax and budget policy at the U.S. Public Interest Research Group, in a statement issued several months ago after the Senate Finance Committee voted to pass through an extension of the break.
In an interview, Baxandall said that he doesn't have much sympathy for the financial services industry, which already pays lower taxes than almost any other group of businesses. "They have nothing to complain about," be said.
Source: Huffington Post | Ben Hallman