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, from a review of these Big Corps' income tax footnotes, below here are the related Deferred Income Tax Liabilities Related to Leasing at Dec 31, 2011 and at Dec 31, 2010 for a handful of the many Big Corps that use tax-advantaged lease financing.
The Deferred Income Tax Liability is the cumulative tax benefit of the difference between the tax-advantaged 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 audited US GAAP requires.
Deferred Income Tax Liability on Leasing Transactions
| 12-31-11 | 12-31-10 | ||
| mils of $s | mils of $s | ||
| Big Financial Corps | |||
| GE Capital | 11,779 | 10,963 | |
| Toyota Motor Credit US | 6,379 | 6,061 | |
| Wells Fargo | 4,344 | 3,703 | |
| Bank of America | 3,048 | 2,269 | |
| US Bancorp | 3,042 | 2,957 | |
| JPMorgan Chase | 2,569 | 2,160 | |
| Boeing Capital | 2,052 | 1,545 | |
| Ally Financial | 1,391 | 1,551 | |
| PNC Financial Services | 1,361 | 1,325 | |
| Bank of NY Mellon | 1,150 | 1,153 | |
| Key Corp | 1,064 | 685 | |
| Fifth Third Bancorp | 1,040 | 1,093 | |
| SunTrust Banks | 985 | 1,033 | |
| CIT Group | 925 | 928 | |
| State Street Corp | 853 | 801 | |
| Northern Trust | 728 | 701 | |
| Regions Financial | 701 | 597 | |
| M&T Bank | 497 | 546 | |
| Comerica | 398 | 382 | |
| BB&T | 397 | 463 | |
| UnionBancal | 346 | 340 | |
| John Deere Capital | 315 | 303 | |
| Caterpillar Financial Services | 294 | 295 | |
| Citigroup | 267 | 211 | |
| Ford Motor Credit | 262 | 287 | |
| Total 25 Big Financial Corps | 46,187 | 42,352 | |
| Non-Financial Corps | |||
| Verizon Communications | 2,149 | 1,950 | |
| IBM | 1,569 | 1,980 | |
| Dell | 423 | 481 | |
| Pitney Bowes | 220 | 49 | |
| Grand Total of all 29 Corps | 50,548 | 46,812 | +8% |
There are many other large companies, including REITS, that use tax-advantaged lease accounting, but they didn't disclose separately in their income tax footnotes the amount of the related Deferred Income Tax Liability. Instead, theses amounts were buried in other of their Deferred Income Tax Liability categories, or these tax benefits were passed through to the individual income tax level.
Given that this very quick review resulted in 29 Big Corps taking advantage of this existing tax-advantaged lease accounting tax loophole, which amounted to $50.5 bil at 2011 year end, which was up 8% in just one year, the positive CBO scoring to the US Government over the next ten years from eliminating this egregious tax loophole for all large companies using it will amount to substantially more than $200 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 taxable income for these leasing transactions will be the same over the long run, it's just that it will be higher in the earlier years than it is presently. 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-advantaged leasing loophole should clearly be closed.
And all of the money raised here should be used to reduce the US Debt.
