Dave Camp Archives - Shopfloor

Trial Lawyers Still Lobbying for Their $1.6 Billion Tax Break

By | Briefly Legal, Taxation | No Comments

The latest lobbying disclosure report from American Association for Justice reveals the trial lawyers to still be working Congress and the Treasury Department to finagle a $1.6 billion tax break for its members, a sort of stimulus bill for suing people.

The AAJ’s first quarter lobbying report filed April 15 lists the U.S. House and Senate as targets on the issue, “Lobbying with regard to the deduction of attorney-advanced expenses and court costs in contigency [sic] fee cases.” (The AAJ reported $850,000 in lobbying expenses for the period, down from the $910,000 reported in the fourth quarter of 2010.)

We last wrote about the issue in October, so to recap: Under current law, the IRS does not permit lawyers to deduct expenses advanced to clients in contingency suits — “we only get paid if you win!” — because the agency considers the money a loan. Deductions are only permitted after the case comes to end, either with a judgment or settlement, or if the client loses the case and default on the loan. These kind of arrangements allow lawyers to front cases even though most states outlaw “champerty,” i.e., direct financing of suits. (For more on champerty, see this discussion by Barry Barnett.)

This special interest tax break erupted into controversy in 2009 when Legal Newsline reported that the AAJ’s top lobbyist, Linda Lipsen, told members the group hoped to sneak the tax break through Congress by quietly “tucking it into” another bill. When the publicity worked against the legislation the AAJ moved to a backup plan: just having the Treasury Department grant the tax break through a tax interpretation or other action.

A widespread outcry greeted news of the Treasury maneuver, but the AAJ continues to pursue it. In the first quarter, the AAJ paid the tax specialists at the Washington Tax Group to work the issue, not just with Congress but also the Treasury Department. The $10,000 reported lobbying expenditures for the quarter is down from the $40,000 the previous quarter.

No tax-lawyer-tax-break bill has been introduced yet in the 112th Congress, and one suspects members will be reluctant to sponsor the legislation. After all, last session’s Democratic sponsors, Rep. Artur Davis of Alabama (H.R. 2519) and Sen. Arlen Specter of Pennsylvania (S. 437) both lost elections and are out of Congress.

So the Treasury remains the lobbying target. We trust the House Ways and Means Committee will continue to pay close attention to the issue. The last thing the economy needs is tax subsidies for more speculative lawsuits.

Earlier Shopfloor.org reporting here.

Rep. Camp Highlights Business Support for Tax Compromise

By | Economy, Taxation | No Comments

Rep. Dave Camp (R-MI), the next chairman of the tax-writing House Ways & Means Committee, kindly mentioned the National Association of Manufacturers and other business trade associations in his floor remarks Thursday in support of H.R. 4853, the tax compromise. Excerpt:

Let’s be clear – this is a bill about taxes – long standing tax policy for that matter – and preventing a tax hike. It isn’t about spending. Over 90 percent of this bill is tax policy – and that policy is aimed at preventing a tax hike for families and employers or providing direct tax relief to American workers.

It also protects family farms, ranches and businesses from being hit by a destructive “Death Tax” that will go as high as 55 percent next year. Instead, this bill reduces that rate to 35 percent while increasing the exemption amount from $1 million to $5 million.

Now, I know $1 million sounds like a lot of money – and it is. But think about the family farmers in your districts, think about the cost of the big machinery it takes to operate and manage their lands – some of the combines I see every day in my district cost a quarter-million dollars each! That isn’t cash in the bank; that is equipment in the field and the federal government has no right to take half of it when mom or dad passes on. While I support a total repeal of the Death Tax, at least this bill makes significant improvements to the Estate and Gift taxes, and it deserves our support.

Members should also know and the American people should know that this bill does not contain “new” policy. New provisions were not snuck in late at night or behind closed doors. We took a firm stand against new policy. As a result, over 70 provisions – some of them my own – were excluded from this bill – well over $100 billion worth.

NPR interviewed Camp earlier this week, “New Chairman Of House Tax Panel Seeks Spending Cuts.”

Tax Extensions, Tax Permanence, Tax Competitiveness

By | Taxation | 2 Comments

John Engler, president of the National Association of Manufacturers, participated in a conference call with NAM members from small- and medium-sized companiess on Tuesday. Taxes were Topic No. 1, and while the NAM welcomes the agreement between President Obama and Congress on extending the current tax rates, there’s more that needs to be done.

Engler spoke the larger issues and had a few things to say about Rep. David Camp (R-MI), incoming chairman of the House Ways & Means Committee, as well. Excerpt:

Congressman David Camp from Michigan, who’s going to chair the Ways & Means Committee, one of the things that he really has a keen appreciation for, is the importance of having permanence in some of these provisions and rates. We have got to get away from this practice where everything is expiring every year or two.

No one can do proper estate planning, if you’re talking about the estate tax, or business planning – if you’re talking about what dividends and capital gains rates are – or investment strategies. I think Dave Camp, who is really going to be a superb chair, is really thinking about how to do we get some of these locked down – we cannot have so many moving parts. Read More

Overcooked Duck?

By | Taxation | No Comments

If you’re a tax lobbyist, virtually every phone call and meeting these days is centered around predicting the outcome of the lame duck session.  Will Congress finally take responsibility and fix the tax mess?  What’s so remarkable about this situation is that we’ve gotten to this point in the first place, after all, Congress has known about this expiration date for a decade.

Congressman Dave Camp, who will likely be the next Chairman of the Ways and Means Committee, said it perfectly today, “Frankly, it is ridiculous and irresponsible for this problem to have lingered this long.  The continued practice of dealing with expired and expiring tax policies after the leaves have begun to fall isn’t fair to taxpayers and doesn’t inspire much confidence in Washington.”

Proposals from the Administration that would treat some tax rates more favorably than others – the so-called “decoupling” compromise also don’t inspire confidence.  It’s too late in the game to be playing politics.  We’re down to the wire now and that means Congress needs to take care of this in the simplest manner possible – extend current tax rates for as long as possible.

Raising Costs of Global Business Undermines U.S. Job Creation

By | Economy, Human Resources, Taxation, Trade | No Comments

Page One, Washington Times, “Bill raises cost of global business“:

With their usual sources for money drying up, lawmakers on Capitol Hill have started tapping the wallets of foreign workers and international businesses to pay for their pre-election wish list – moves that have put them at odds with the U.S. Chamber of Commerce, the Indian government and possibly the World Trade Organization.

On Thursday, Congress passed a spending bill that raises visa fees on companies that bring in a large number of foreign workers, and earlier this week President Obama signed a second spending package that raises $10 billion in additional taxes on multinational companies that call the U.S. home.

The article ends with the remarks by U.S. Rep. Dave Camp (R-MI) from the House debate Tuesday, citing the National Association of Manufacturers’ “Key Vote” letter on H.R. 1586, objecting to the $9.6 billion in tax increases the legislation imposes on U.S. businesses with overseas operations:

“Most of these [changes] have never been the subject of any committee hearing or markup,” said Rep. Dave Camp, the ranking Republican on the House Ways and Means Committee.

Mr. Camp said the changes could make sense as part of a larger reform of the tax code to make U.S. firms more competitive in the global marketplace.

“But we never got the opportunity to hear from American employers or to offer any amendments,” he said.

Right. Camp was reinforcing the point made in the NAM’s letter:

We are disappointed that many of the legislation’s proposed tax increases have not been adequately scrutinized during congressional hearings. In many cases, taxpayers have relied on these longstanding tax provisions in structuring their businesses. Changing the rules without fair and adequate hearings will cost in terms of jobs, investment and manufacturers’ ability to compete overseas.

Manufacturers believe strongly that changes to our international tax laws should be considered in the broader context of tax reform that makes the United States more competitive – not as “pay fors” for unrelated policy initiatives. Moreover, targeting some international tax law changes in advance of the tax reform debate would make the goal of pro-growth, pro-competitiveness reform that much more difficult, if not impossible, to achieve.

Too Bad House Gave Short Shrift to Tax Competitiveness

By | Economy, Education and Training, General, Taxation | One Comment

The House on Tuesday passed H.R. 1586, which supporters called the Education Jobs and Medicaid Assistance Act, by a vote of 247-161. The text of the bill is available in The Congressional Record starting at page H6604.

The National Association of Manufacturers did not take a position on additional federal spending for the states in the bill, but in a “Key Vote” letter objected to the tax increases the legislation imposes on U.S. corporations with foreign earnings.

Rep. Bob Goodlatte (R-VA) and Rep. Dave Camp (R-MI) cited the NAM’s letter in their floor remarks, and we thank them. Goodlatte’s remarks start at page H6611, and Rep. Camp’s begin on age H6615. Rep. Camp is Ranking Member of the tax-writing House Ways & Means Committee, and his comments noted not just the NAM’s arguments, but also the larger competitive point that U.S. corporate tax rates will soon be the highest in the world. In addition, Congress is raising taxes on manufacturers in the U.S. on an ad hoc basis, never holding a committee hearing to discuss in public the broader context. Camp:

These tax increases are a mistake, and, as I noted during the debate 2 weeks ago, most of these have never been the subject of any committee hearing or markup. It is possible that, upon review, some of these provisions might make sense if packaged with other changes to address the fact that our corporate tax rate is soon to be the highest among all industrialized nations. Our international tax system is deeply flawed, and our tax code is increasingly putting our companies and their employees at a tremendous competitive disadvantage.

Unfortunately, the canard about greedy corporations using “tax loopholes to ship American jobs overseas” has become a standard talking point in Congress and political campaigns. Committee hearings to examine the U.S. tax structure and competitiveness might help dispell the myths and encourage substantive debate.

Until those hearings are scheduled, we refer readers to page 5 of the NAM’s “Manufacturing Strategy for Jobs and a Competitive America,” for a broad overview of how tax policy affects U.S. competitiveness and a summary of the NAM’s recommendations.

And we append Rep. Camp’s remarks, which were a substantive, measured critique of H.R. 1586 and Congressional action on tax policy.

Mr. CAMP. Madam Speaker, last Friday we learned the unemployment rate is still at 9 1/2 percent, and it would be much higher if the official calculations also looked at the fast-growing number of Americans who have become so discouraged that they have given up looking for work. So while Congress should be here trying to find ways to get

Americans back to work, we’re here instead to complete action on another extension of stimulus that will also do nothing to reduce the unemployment rate in this country. In fact, this bill and the tax increases in it will hurt job creation. Read More

Policy or Politics, Tax Break for Trial Lawyers a Loser

By | Briefly Legal, Taxation | One Comment

Here and there the American Association for Justice has tried to defend its claim for a $1.6 billion federal tax break by arguing that trial lawyers want to be treated just like any other business. One AAJ spokesperson made the claim in a recent interview with The Hill, but apparently refused to be identified. Talk about the courage of your convictions.

As issue is the attempt to deduct loans extended in support of contingency fee litigation as business expenses. Bills to accomplish that goal have died in Congress, so the trial lawyers quietly appealed to the U.S. Treasury for a special-interest tax intepretation.

But what about the point? Is it really just about fairness?

A Washington Times editorial this week refuted the claim. From “Pushback on trial-lawyer tax breaks“:

“The Treasury is looking to clarify a provision in the tax code that prohibits trial lawyers from deducting expenses for contingency cases in the year they are incurred,” according to The Hill. “Instead, these expenses can only be deducted after the case has concluded. The [lawyers] seek to make it so trial lawyers can deduct these expense in the year they are paid. … Currently, expenses incurred by trial lawyers for contingency cases are considered to be loans that the client will eventually repay.”

Victor Schwartz, author of a prominent textbook on tort law and a leading opponent of jackpot-justice lawsuits, has estimated for about 25 years without contradiction that plaintiffs’ lawyers win at least some money by judgment or settlement from some 95 percent of their cases. In other words, these are loans for which repayment is quite likely. As the Heritage Foundation’s Jack Park explains, “When a carmaker or dealer, [or] a furniture company … makes a loan to the buyer by selling over time, those loans are part of a related business, not a deductible business expense. In fact, those loans generally do not become deductible unless and until there is a default. Why shouldn’t the trial lawyers wait until there is a default to deduct their loans like everyone else?”

The difference is important because if the lawyers get the tax subsidy, the Treasury will be floating the lawyers’ interest costs.

The Times noted the July 22 letter to Treasury from the ranking Republicans on the tax-writing committees, Sen. Grassley of Senate Finance and Rep. Dave Camp of House Ways and Mean, that made a clear case that the tax break was not justified and would circumvent the policymaking branch of government, Congress.

Twenty-four Senate Republicans added their opposition in a letter Thursday to Treasury Secretary Geithner on Thursday, recognizing — we assume — how politically repellant this kind of lawsuit-subsidizing, special interest tax break would be to most Americans. From the letter organized by Sen. John Thune (R-SD): Read More

House Push for $11.5B Tax Increase Stalls, As Does GDP

By | Economy, Taxation, Trade | No Comments

The House had a full debate on the floor Thursday on H.R. 5893, the Investing in American Jobs and Closing Tax Loopholes Act. By “Closing Tax Loopholes,” supporters mean raising taxes on U.S. businesses with global operations, and the National Association of Manufacturers sent a Key Vote letter opposing the bill.

The final vote on the bill was postponed, postponed, and as the floor session continued into Friday morning, postponed. It was never held, and so far there’s no sign of a vote today, and the House is scheduled to leave soon for its August recess.

It may be that a majority of House members recognized that raising taxes on manufacturers and other businesses — jobs creators — is a terrible idea. Today’s Commerce Department announcement that second quarter 2010 GDP growth was just 2.4 percent, indicating a slowing recovery, should give Representatives further reason for restraint. (BLS news release, Los Angles Times, Economy slows sharply in second quarter.”)

The floor debate on H.R. 5893 started on page H6355 of The Congressional Record. Rep. Dave Camp (R-MI), the ranking member of the House Ways & Means Committee, cited the NAM’s letter on page H6367.

UPDATE (10:45 a.m.): Rep. Camp just said the bill did not come to a vote because the Republicans had a motion to recommit that would have passed. The House is now debating H.R. 5982, which appears to be a bill that also has tax increases on businesses with overseas operations. Rep. Scott Murphy (D-NY) calls it the “Small Business Tax Relief Act,” says it would repeal the additional IRS 1099 reporting required under the new health care law. Bill was just introduced today.

Message to Treasury: Don’t Give Trial Lawyers that Tax Break

By | Briefly Legal, General, Taxation | 2 Comments

The ranking Republicans on the Senate and House’s tax-writing committees have written U.S. Treasury Secretary Geithner, urging him not to allow Treasury to circumvent Congress by letting trial lawyers deduct loans to clients in contingency litigation as business expenses.

Sen. Charles Grassley (R-IA) of the Senate Finance Committee and Rep. Dave Camp of the House Ways & Means Committee sent Geithner the letter late Thursday, the Chamber-backed Legal Newsline reported. The letter is available online here.

According to their joint news release, “Camp, Grassley Question Whether Executive Branch is Again Bypassing Congress to Impose Tax Policy“:

Grassley and Camp said they are concerned that Treasury might be establishing a pattern of unilaterally making tax changes in contravention of congressional intent. In November 2008, Treasury and the IRS came under fire from Grassley and others for giving a tax break that allowed banks to acquire one another. The Treasury ruling helped to accommodate the sale of the Wachovia Corporation to Wells Fargo. Grassley questioned whether Treasury had the authority to bestow such a tax break independently of congressional action.

Regarding the legal expenses issue, Camp and Grassley noted:

  • No other Circuit Court has affirmed the Ninth Circuit decision;
  • On other matters, the IRS has maintained its policies despite unfavorable decisions from multiple Circuit Courts; and
  • Despite the introduction of provisions in both the House and Senate to affirm the Ninth Circuit Court decision, Congress has failed to enact such a law.

The two also demanded relevant documents from Treasury, including any that would explain why action was so urgent considering the issue wasn’t mentioned in the latest update of Treasury’s 2009-2010 Priority Guidance Plan.

The American Association for Justice, the trial lawyer lobby, has lobbied two successive Congresses for legislation to make the expenses deductible. Making the expenses deductible would be worth $1.57 billion over 10 years, the Joint Committee on Taxation estimated in May 2008. (Page 6, “Uniform treatment of attorney-advanced expenses and court costs in contingency fee cases.”)

It’s tough to sell a trial lawyer bailout in a time of soaring federal debt, and the sponsors of this year’s bills, Rep. Artur Davis of Alabama and Sen. Arlen Specter of Pennsylvania, lost clout after they were defeated in Democratic primaries. So the trial lawyers’ lobbying strategy became more recondite. The AAJ had been lobbying Treasury and the IRS along with Congress, according to page 12 of its first quarter 2010 lobbying disclosure form, but the association dropped its executive branch contacts in the second quarter. (Page 15 of the latest disclosure form.)

Instead, the AAJ hired the specialists at the Washington Tax Group to lobby the issue to the tune of $60,000 so far in 2010. (Lobbying disclosure forms show $20,000 in the first quarter and $40,000 in the second quarter report.) Patton Boggs also started lobbying Treasury for the AAJ in the second quarter for the deduction (but not in the first quarter). Well, there’s nothing wrong with turning to the experts.

What’s wrong is the policy itself that the AAJ is trying to achieve via Treasury. Read More