January 6, 2013
U.S.

Baucus rewards ex-staffers with tax breaks for their clients

Timothy P. Carney, Senior political columnist | The Washington Examiner | January 6, 2013 | washingtonexaminer.com

Tax breaks for Hollywood, NASCAR, windmills, algae and multinational corporations ended up in the “fiscal cliff” bill thanks to President Obama, according to Senate Republican sources. But they were spawned by a web of lobbyists, donors and staffers surrounding Democratic Sen. Max Baucus of Montana.

Baucus’ Finance Committee passed a bill in August extending 50 expiring deductions and credits for favored industries. At Obama’s insistence, the Baucus bill was cut and pasted word for word into the cliff legislation. Set aside for a moment how this contradicts Obama’s talk about “fair shares” and the need to diminish the influence of lobbyists, and look at what this raft of tax favors shows us about the Baucus Machine.

Pick any one of the special-interest tax breaks extended by the cliff deal, and you’re likely to find a former Baucus aide who lobbied for it on behalf of a large corporation or industry organization.

General Electric may have been the biggest winner from the cliff deal. GE makes more wind turbines than any other U.S. company, and it lobbied hard for extension of the wind production tax credit. But more important for the multinational conglomerate was an arcane-sounding provision that became Section 222 of Baucus’ bill and then Section 322 of the cliff bill: “Extension of subpart F exception for active financing income.”

In short, this provision allows multinationals to move profits to offshore financial subsidiaries and thus avoid paying U.S. corporate income taxes. This is a windfall for GE: The exception played a central role in GE paying $0 in U.S. corporate income tax in 2011 when it made $5.1 billion in U.S. profits.

Peter Prowitt, formerly Baucus’ chief of staff, is now an in-house lobbyist and VP at GE. GE filings show Prowitt on the lobbying teams that won wind-tax credits, electric-vehicle tax credits, and “Extension of Subpart F Deferral for Financial Services.”

Two weeks before the Finance Committee hearing during which the bill was hashed out, GE’s political action committee topped off its contributions to Baucus’ Glacier PAC with a $2,000 check, according to the PAC’s federal filings. This brought GE’s contributions to Baucus’ PAC to the legal maximum of $10,000 for the election cycle.

Baucus alumna Shannon Finley also won goodies for her clients, lobbying filings indicate. Finley was a longtime Baucus adviser, and now she’s a lobbyist at Capitol Counsel, a tax-heavy K Street firm that played a major role in crafting Baucus’ extenders bill. Finley’s clients included the American Wind Energy Association, which led the fierce yearlong push to save its tax credit.

Liquor giant Beam Inc. also hired Finley and her colleagues to protect its special tax carveouts for distilling Cruzan rum in the Virgin Islands. Other Finley clients who won with Baucus’s extenders bill include the Edison Electric Institute (various credits for plug-in electric vehicles) and Fortune Brands Home & Security (tax credit expansions for “residential energy efficient property”).

Another hub of the Baucus-K Street combine is the lobbying firm K&L Gates. Two Baucus alumni there lobbied Baucus on the tax package: former Finance Committee chief counsel and Baucus legislative director Michael Evans and Patrick Heck, who served as Baucus’ senior tax policy adviser.

Heck, according to lobbying filings, lobbied on Baucus’ bill on behalf of Burlington Northern Santa Fe Railroad, owned by billionaire Obama fundraiser Warren Buffett. Baucus’ bill extended the tax credits for railroad track maintenance, as well as for “bonus depreciation,” another lobbying priority for Heck’s team.

The algae industry (yes, there is such a thing) hired Evans, who helped extend the biofuels tax credit and expand the subsidy to include ethanol made from algae. Sapphire Energy and the Algal Biomass Organization were Evans’ clients.

Prowitt, Finley, Heck and Evans are only a few examples. Baucus’ chief counsels, legislative directors and chiefs of staff litter K Street. They make sure their clients get their tax carveouts, and they make sure their former boss gets his campaign contributions.

“He runs an old-school machine,” one K Street lobbyist told me. “They all work him for five or 10 years, and then they go downtown. They all help him get re-elected. They’re all incredibly loyal.”

Former Baucus tax counsel Roger Blauwet gave to Baucus’ Glacier PAC while lobbying to extend the research and development tax credit for drugmaker Sanofi-Aventis – including a $2,500 gift two days before Baucus’ markup. Finley gave to Glacier PAC, as did Buffett’s BNSF.

As Obama says, everyone has to pay their fair share – even if that’s a lobbying fee to someone in Max Baucus’ inner circle.