Presently, many Big Financial Corps use very favorable tax-advantaged lease transactions, when they lease out all kinds of property.
This tax-advantaged leasing permits these Big Financial Corps to report taxable income from many leasing transactions substantially slower than the way these transactions are recorded in their audited financial statements under US Generally Accepted Accounting Principles (GAAP).
To show how huge this tax loophole is, below here are the related Deferred Income Tax Liabilities at Dec 31, 2010 of a handful of Big Corps that use lease financing.
The Deferred Income Tax Liability is the tax effect of the difference between the tax-advantaged finance leasing that Big Financial Corps are using to reflect these lease transactions in their federal income tax returns and the much more economically logical approach to record these leasing transactions that US GAAP requires.
Deferred Income Tax Liability on Leasing Transactions
December 31, 2010
......................................millions of dollars
Big Financial Corps
GE Capital Services...................10,980
Toyota Motor Credit Corp US......6,061
Wells Fargo.................................3,703
Bank of America..........................2,957
US Bancorp..................................2,269
JPMorgan Chase..........................2,160
Boeing Capital Corp.....................1,551
Ally Financial..............................1,545
PNC Financial Services................1,153
Bank of NY Mellon.......................1,093
Key Corp.....................................1,033
Fifth Third Bancorp........................801
SunTrust Banks..............................701
CIT Group......................................685
State Street Corp............................463
Northern Trust...............................382
Regions Financial...........................303
M&T Bank.......................................295
Comerica........................................287
BB&T...............................................211
Total 20 Big Financial Corps.......38,633
Non-Financial Corps
Verizon Communications.............1,980
IBM..............................................1,950
Ford................................................928
Grand Total of all 23 Corps..........43,491
Given that this very quick review resulted in 23 Big Corps taking advantage of this existing lease accounting tax loophole, which amounted to $43.5 bil at 2010 year end, the positive CBO scoring to the US Government over the next ten years of eliminating this egregious tax loophole will amount to clearly more than $100 bil.
The economic damage to Big Financial Corps from this proposal is substantially softened here due to this corporate tax loophole closer being treated as a Temporary Tax Difference under US GAAP. The total federal income taxable income for these leasing transactions will be the same over the long run. Thus, there will be no income tax charge to the income statements of these Big Corps from my proposal here.
Given the country's massive debt level, this tax leasing loophole should clearly be closed.
And all of the money raised here should be used to reduce the US Deficit.
