For the second year in a row, a bill aimed at recovering more than $100 million in tax revenue from Colorado businesses that stash funds in overseas “tax havens” failed to pass the Colorado Senate.
And for the second year in a row, state and national business organizations teamed up to oppose the suggested legislation — dubbed HB 1275 — claiming the bill would create “uncertainty” for corporate taxpayers with legitimate business activities in foreign jurisdictions. Opponents also claimed the legislation would grant too much discretion to the Colorado Department of Revenue to make decisions on what constitutes a legitimate business practice and which countries would be considered tax havens.
While business organizations were quick to discuss the bill’s supposed negative impacts on multi-national corporations operating in Colorado, the effects the bill would have on the state’s small businesses seemed to be missing from the main argument against the legislation.
Spearheading the opposition against 1275 was the Colorado Association of Commerce & Industry (CACI), a private nonprofit, funded solely by its members. CACI’s board of directors includes the CEO of Miller International, the Colorado president of AT&T, and other employees of businesses such as Lockheed Martin Space Systems, Xcel Energy and The Boeing Company.
Other organizations opposing HB 1275 included oil and gas industry groups, like the American Petroleum Institute/ Colorado Petroleum Council, the Colorado Oil & Gas Association and the Colorado Petroleum Association. There were also groups representing pharmaceutical and biotechnology industries, including the Colorado BioScience Association and PhRMA (Pharmaceutical Research and Manufacturers of America), as well as multi-national companies with Colorado offices like NESTLE, Siemens, Johnson and Johnson and Takeda Pharmaceuticals.
When asked about how this bill had any negative impact on small business in Colorado, Loren Furman, CACI’s senior vice president of state and federal relations, simply responds that her organization wasn’t alone in opposing 1275.
“Well, I will tell you the National Federation of Independent Business (NFIB) opposed this bill,” she says. “NFIB represents, I believe, 90,000 small business across the state, so it wasn’t just CACI and our representation of every-size employers but also the organization that represents small employers that had concerns with this bill.”
NFIB, for the record, is a conservative lobbying organization based out of Nashville, Tennessee. The group has a listing on the Center for Media and Democracy’s SourceWatch, an online encyclopedia profiling the people, organizations and issues currently shaping the public agenda.
“ … [T]he group has been shown to lobby on issues that favor large corporate interests and run counter to the interests of small businesses,” the listing reads, citing two sources to backup this claim: an investigative piece from the Washington Post from 2005, and a survey of small business owners from 2012. “News reports have also found that NFIB, which tells the IRS it is a ‘non-partisan’ service organization, engages in partisan politics, and receives millions in hidden contributions.”
Hidden contributions aside, NFIB’s publically disclosed contributions are enough to raise eyebrows. The group has accepted more than $4 million since 2010 from Crossroads GPS, a group affiliated with Republican political operative Karl Rove that overwhelmingly endorses and financially supports Republican candidates. They also received $1.5 million in 2012 from Freedom Partners, an organization run by Koch brothers’ loyalists that Politico described in 2013 as the “Koch brothers’ secret bank.”
While CACI and the NFIB stand firmly behind the idea that HB 1275 was bad for all business, other research tells a different story.
In 2015, the U.S. Public Interest Research Group (U.S. PIRG) released a study looking at the potential impact of corporate tax dodging on America’s small businesses.
“Small business owners are hit twice by the effects of tax dodging by large multinational corporations,” the report states. “Since they almost never have the kind of subsidiaries in the Cayman Islands or armies of tax lawyers and accountants to exploit tax haven loopholes that their multinational rivals do, small businesses are routinely placed at a competitive disadvantage in the market place. In addition, small businesses, like average taxpayers, end up picking up the tab for offshore tax avoidance in the form of higher taxes, cuts to public services, or increases to the federal debt.”
The report estimates that corporate tax haven abuse costs state governments an estimated $20 billion in lost tax revenue each year, and the federal government $90 billion. To make up the total gap, each small business in Colorado would need to pay an average of $3,165 in additional taxes if they were to pick up the tab for income lost to tax haven exploitation.
As to the question of whether such tax loopholes create an unfair disadvantage for smaller businesses, Furman says, “CACI hasn’t heard that claim from any of our small businesses, nor has NFIB heard that claim from any of their small businesses.”
The federal and Colorado chapters of PIRG supported a similar tax haven bill last year, HB 1346. Furman pointed out that a U.S. PIRG report from October 2015 “specifically targeted … companies that our governor himself had recruited to come here.”
Among those targeted companies were Newmont Mining in Greenwood Village (an at-large executive committee member of CACI works as a state government affairs manager for Newmont Mining), Arrow Electronics in Centennial, CH2M Hill in Englewood, Davita in Denver, Level Three Communications in Broomfield and Western Union in Meridian.
“These are companies that come here and employ hundreds and hundreds of employees,” Furman says. “How is it that one organization (U.S. PIRG) is going to be targeting the same companies that the governor has been trying to bring here, the governor whose priority is economic development for our state? Why is there a belief that these companies are now holding millions of dollars in tax havens?”
Because it’s all too probable that is the case, as tax avoidance or “planning” as it is sometimes called, is completely legal unless laws such as 1275 are passed, and “shell” companies often hide the names of individuals and businesses hiding money. In January of this year, Newmont Mining told Colorado Public Radio that while there were “inaccuracies” in the U.S. PIRG report regarding the details of their offshore business, they do hold one entity in Cypress, eight in the Netherlands and two in Bermuda. They claimed they do not use those countries as tax havens.
One of the HB 1275’s sponsors, Representative Mike Foote (D-Longmont), has stated he will introduce a similar bill next session.
Perhaps the third time’s the charm.