Grassley Keeping Options Open on Telecom Tax Breaks
Senate Finance Committee Chmn. Grassley (R-Ia.) is open to requests by Senate Finance Committee members that BellSouth and other telecom firms get a multi-year tax break to help defray costs of rebuilding after Hurricane Katrina, he told us Thurs. Senators disagreed on the likelihood telecom carriers will get tax relief.
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Grassley expects to have a Katrina tax bill before the committee in mid-Oct., he said. “What we've got to make sure we do here is do those things that are directly related to getting the economy up and running, particularly with emphasis on small business,” Grassley said. “The reason why I don’t have a more specific answer to your question is because maybe some members of the committee will bring that to our attention and I'll have to see how other members react to it.”
Sen. Lott (R-Miss.) told us he will push tax breaks for BellSouth and the region’s other major service providers. “We're going to get this done,” Lott said. “BellSouth had a lot of damage, as did other utilities, and this is a time when we are going to make sure that the tax incentives go also to the corporations because we need them to rebuild and employ the people.”
BellSouth, which pegs its post-Katrina costs at $400- $600 million, wants a 3-year series of tax cuts -- a 20% investment tax credit the first year, with lesser breaks the 2nd and 3rd years. The hit to BellSouth’s bottom line isn’t expected to have a major effect on the firm’s overall financial health. Storm costs must be balanced against BellSouth’s $11 billion in operating costs this year and its $3 billion in CAPEX.
But BellSouth could face an uphill fight, given historical resistance to targeted tax credits and skepticism arising from credits granted after 9/11. Some on the Hill question whether tax credits tied to rebuilding N.Y. after the WTC attack met Congressional goals.
Sen. Santorum (R-Pa.), Republican conference chmn., has philosophical questions about tax credits for telecom carriers, he said. “I'd have to look at the situation,” Santorum said. “When it comes to business losses as well as other private losses the general understanding is that private insurance should be there to provide for the repair and rebuilding of those assets. Most members of Congress I think would be rather reticent to look at specific tax treatment dedicated to a particular industry.”
Tax credits for BellSouth and other service providers could help as Miss. rebuilds critical infrastructure lost during Katrina, said Miss. Treasurer Tate Reeves. “Clearly direct tax credits would be something that would help those businesses significantly in the rebuilding process,” Reeves said. “We need help from Congress. There’s no question about that,” he said. “There should be support. If you look at the amount of damage that was done and the scope and size of the geographic area affected, there’s a need.”