US tax law change to shut corporate entertainment loopholes

Venues such as Fenway Park in Boston will take a hit with the change in US tax law on corporate entertainment deductions. (AFP)
Updated 17 March 2018
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US tax law change to shut corporate entertainment loopholes

WASHINGTON: Could the crackdown on tax loopholes clamp down on corporate schmoozing?
The new tax law ends a benefit prized by business for impressing customers or courting new ones. And the impact could be felt in the pricey boxes at sports stadiums. In Washington, lobbyists who helped craft the Republican tax legislation could now be pinched by it.
US companies spend hundreds of millions annually on entertaining customers and clients at sporting events, tournaments and arts venues, an expense that until this year they could partially deduct from their tax bill. But a provision in the new law eliminates the long-standing 50 percent deduction in an effort to curb the overall price tag of the legislation and streamline the tax code.
“Congress didn’t feel the government should subsidize it anymore. Firms are going to take a hard look at their entertainment budgets,” said Ryan Losi, a certified public accountant based in Glen Allen, Virginia.
The provision is one of the many under-the-radar consequences slowly emerging from the new tax legislation, the most sweeping rewrite of the tax code in three decades. Also embedded in the law are little-noticed provisions with the potential to bring major changes to mundane parts of American life — including home-buying, saving for school and divorce.
“You can believe there’s going to be more pressure on the sales people and marketing people to not go so crazy on the expenditures,” predicted Ruth Wimer, an executive compensation attorney at law firm Winston & Strawn who’s also a certified public accountant. “It’s going to be a consideration for companies — it’s going to cost them.”
Ending the deduction will save the government about $2 billion a year and $23 billion through 2027 in formerly lost revenue, Congress’ bipartisan Joint Committee on Taxation estimates.
Of course many companies will continue to spend without the tax incentive, for the benefits they get from entertaining such as the payoff in future revenue. But the tax change still could have a financial impact on sports teams and cultural institutions.
The prestigious US Open tennis tournament held for two weeks every summer in Flushing Meadows, New York, offers court-side suites. It sees around 40 percent of its revenue coming from corporate sales.
Chris Widmaier, managing director for corporate communications at the US Tennis Association, said it hasn’t seen an impact yet on ticket sales, but noted it’s still fairly early in the sales season.
“It’s a fair question,” he said.
“It is a concern,” said Kate McClanahan, director of federal affairs at Americans for the Arts, an advocacy group that coordinates local cultural organizations and business donors around the country. “It can have a negative impact on both the commercial and nonprofit arts.”
The industries that spend the most on this type of entertaining are banks and financial services, airlines, automakers, telecoms and media. This kind of organized socializing also is a staple of lobbying firms, of course. The K Street lobbyists often party with clients at Washington Nationals baseball games or Capitals hockey games. The firms may have tough decisions to make regarding spending on future outings.
“There is also the psychological impact,” said Marc Ganis, a co-founder of Sportscorp Ltd., a sports consulting firm. “When something is deductible, people think it’s less expensive; effectively the government is paying for part of it.”
Companies could fall into two camps around the impact of the tax change, experts suggest. Those that are profitable, paying taxes at the former top rate of 35 percent and using the 50 percent deduction for entertainment, were previously able to cut their tax rate to 17.5 percent. Now, with a zero deduction and a new 21 percent corporate tax rate, their tax liability would increase by only 3.5 percent, not a huge deal. By contrast, companies that are struggling or have been paying an effective tax rate below 35 percent because they were using deductions — they could see a substantial impact on their bottom line.
The irony of Washington lobbyists falling victim to their own successful work on the tax bill isn’t lost on some in the “swamp.”
Rep. Lloyd Doggett, D-Texas, a member of the tax-writing House Ways and Means Committee and a fierce critic of the tax legislation, called the end of the deduction for lobbyists’ entertaining “one positive sign in an otherwise dismal bill.”
Still, deductible or not, lobbyists and their company clients still will have “much to celebrate over fine wine and entertainment” from the legislation’s big corporate tax cuts, Doggett said.


Energy giants spent $1bn on climate lobbying, PR since Paris: watchdog

Updated 23 March 2019
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Energy giants spent $1bn on climate lobbying, PR since Paris: watchdog

  • Firms under pressure to explain how greener laws will hit business models

PARIS: The five largest publicly listed oil and gas majors have spent $1 billion since the 2015 Paris climate deal on public relations or lobbying that is “overwhelmingly in conflict” with the landmark accord’s goals, a watchdog said Friday.
Despite outwardly committing to support the Paris agreement and its aim to limit global temperature rises, ExxonMobil, Shell, Chevron, BP and Total spend a total of $200 million a year on efforts “to operate and expand fossil fuel operations,” according to InfluenceMap, a pro-transparency monitor.
Two of the companies — Shell and Chevron — said they rejected the watchdog’s findings.
“The fossil fuel sector has ramped up a quite strategic program of influencing the climate agenda,” InfluenceMap Executive Director Dylan Tanner told AFP.
“It’s a continuum of activity from their lobby trade groups attacking the details of regulations, controlling them all the way up, to controlling the way the media thinks about the oil majors and climate.”
The report comes as oil and gas giants are under increasing pressure from shareholders to come clean over how greener lawmaking will impact their business models.
As planet-warming greenhouse gas emissions hit their highest levels in human history in 2018, the five companies wracked up total profits of $55 billion.
At the same time, the International Panel on Climate Change — composed of the world’s leading climate scientists — issued a call for a radical drawdown in fossil fuel use in order to hit the 1.5C (2.7 Fahrenheit) cap laid out in the Paris accord.
InfluenceMap looked at accounts, lobbying registers and communications releases since 2015, and alleged a large gap between the climate commitments companies make and the action they take.

 

It said all five engaged in lobbying and “narrative capture” through direct contact with lawmakers and officials, spending millions on climate branding, and by employing trade associations to represent the sector’s interests in policy discussions.
“The research reveals a trend of carefully devised campaigns of positive messaging combined with negative policy lobbying on climate change,” it said.
It added that of the more than $110 billion the five had earmarked for capital investment in 2019, just $3.6bn was given over to low-carbon schemes.
The report came one day after the European Parliament was urged to strip ExxonMobil lobbyists of their access, after the US giant failed to attend a hearing where expert witnesses said the oil giant has knowingly misled the public over climate change.
“How can we accept that companies spending hundreds of millions on lobbying against the EU’s goal of reaching the Paris agreement are still granted privileged access to decision makers?” said Pascoe Sabido, Corporate Europe Observatory’s climate policy researcher, who was not involved in the InfluenceMap report.
The report said Exxon alone spent $56 million a year on “climate branding” and $41 million annually on lobbying efforts.
In 2017 the company’s shareholders voted to push it to disclose what tougher emissions policies in the wake of Paris would mean for its portfolio.
With the exception of France’s Total, each oil major had largely focused climate lobbying expenditure in the US, the report said.
Chevron alone has spent more than $28 million in US political donations since 1990, according to the report.
AFP contacted all five oil and gas companies mentioned in the report for comment.
“We disagree with the assertion that Chevron has engaged in ‘climate-related branding and lobbying’ that is ‘overwhelmingly in conflict’ with the Paris Agreement,” said a Chevron spokesman.
“We are taking action to address potential climate change risks to our business and investing in technology and low carbon business opportunities that could reduce greenhouse gas emissions.”
A spokeswoman for Shell — which the report said spends $49 million annually on climate lobbying — said it “firmly rejected” the findings.
“We are very clear about our support for the Paris Agreement, and the steps that we are taking to help meet society’s needs for more and cleaner energy,” they told AFP.
BP, ExxonMobil and Total did not provide comment to AFP.

FACTOID

$ 28m

Chevron alone has spent more than $28 million in US political donations since 1990, according to the report.