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Equipment Leasing Association Weighs in on PBS Television Show Frontline’s “Tax Me If You Can”

Arlington, VA—February 20, 2004—The Equipment Leasing Association (ELA), the non-profit association representing the $218 billion equipment leasing and finance industry, today released a statement in response to a segment on the PBS television show Frontline called "Tax Me If You Can," which aired Thursday, February 19.

“We were taken aback by some of the language used in the Frontline segment and ELA wishes to clarify some of the statements used,” said Michael Fleming, ELA President. “The industry welcomes a policy discussion around the appropriate role for leasing to tax-exempts. But, calling a legal business practice a scheme or fraud that is inappropriate. Inflammatory statements, such as the ones made in the television segment, make it difficult for policy makers and an industry to address a very serious policy subject.”

Fleming points out that the equipment leasing and finance industry provides significant, much-needed capital and jobs across many different industries, companies and organizations.

“Calling an industry that contributes so much ‘a bunch of hucksters’, isn’t appropriate,” said Fleming. “If current law doesn’t work, then let’s have a civil discussion about what would work. We certainly are willing to address the issues.”

Critics of leasing have attempted to depict some finance leasing to tax-exempt entities negatively to justify efforts to change longstanding and well-established tax principles surrounding the leasing industry.

“Leasing levels the economic playing field between profitable taxable entities and non profitable or tax-exempt entities with regard to the cost of acquiring equipment,” notes Fleming, citing that for decades Congress has encouraged investment in capital goods through tax depreciation. “Tax depreciation allows an entity to recover the investment made in an asset. Congress and the courts have affirmatively provided for lessors to utilize tax depreciation when leasing to taxable corporations as well as tax-exempt entities.”

The current policy debate on lease financing to tax-exempts has focused increasingly on the nature of the asset, the geographic location of the asset and the nature of the lessee, as was the focus of the Frontline segment.

“However, all of these considerations have been and should remain unimportant under well established legal and tax principles,” said Fleming. “The appropriate tax treatment of a sale and lease of a transit facility by a governmental entity in Frankfurt, Germany, for example, should be no different than the sale and lease of a transit facility by a governmental entity in Frankfurt, Kentucky.”

Contrary to what the PBS story depicted, the leasing industry is not opposed to the doctrine of economic substance, asserts Fleming. The economic substance doctrine is already the law, established by regulation and court decisions and is enforced through the IRS. The industry, said Fleming, is opposed to the statutory codification of the doctrine, not to the doctrine itself, because it will make the doctrine too rigid and create enforcement headaches. This opposition to codification is shared by the United States Treasury Department.

Editor’s note: Please visit ELA’s Leasing4USA site (www.ELAOnline.com/Leasing4USA) to learn more about the equipment leasing industry. Additionally, visit http://www.elaonline.com/GovtRelations/Federal/TreasuryBudget.cfm to access related ELA Reports as well as an article on the economics behind tax exempt leasing by Lawrence Lindsey, former director of the National Economic Council under President George W. Bush, at http://www.elaonline.com/GovtRelations/Federal/pdfs/lindsey.pdf

About The Equipment Leasing Association
Organized in 1961, the Equipment Leasing Association (ELA) is the premier non-profit association representing companies involved in the dynamic equipment leasing and finance industry to the business community, government and media. As the voice of the leasing industry, ELA promotes the estimated $218 billion industry as a major source of funds for capital investment in the United States and abroad.

ELA provides its members with comprehensive services, assists in the resolution of industry issues, educates financial decision-makers on the benefits of leasing and promotes high standards of business practices within the industry. ELA maintains an informational portal for financial decision-makers to learn more about leasing and find a leasing company at http://www.LeaseAssistant.org. Headquartered in Arlington, Va., ELA has more than 800 member companies and a staff of 25 professionals. For more information on ELA, please visit ELA Online at http://www.ELAOnline.com.

CONTACT:
Amy Holmes, CAE
Equipment Leasing Association
703-516-8367
aholmes@elamail.com


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