Liberty Mutual, Verizon pushed tax change

LIBERTY MUTUAL AND VERIZON were two of the companies lobbying for a controversial corporate tax relief provision that appears to have nearly derailed a closeout budget bill late this year.

The provision was pushed by Gov. Charlie Baker and the House, and opposed by the Senate. The Senate position ultimately prevailed and the closeout budget was approved, but only after the stalemate went right up to and then a day beyond a deadline set by the state comptroller. The provision would have cost the state $37 million in tax revenue from affected companies.

In public, the tax provision was championed by a number of business groups, including the Massachusetts Taxpayers Foundation, the Greater Boston Chamber of Commerce, and Associated Industries of Massachusetts. Throughout the deliberations between the two branches, the actual companies that would have benefited from it remained anonymous.

When asked in a recent interview about the role of lobbying, specifically by Liberty Mutual, House Speaker Robert DeLeo acknowledged that the Boston-based insurance giant was the only company to send him a letter thanking him for including the tax provision in the House bill.

“I did get some letters from Liberty: ‘Thank you for putting that in.’ They seemed to be the only group I heard from. So I personally didn’t get a lot of lobbying per se about keeping it in and what not,” DeLeo said in a brief interview. “For me personally – it sounds crazy, but Liberty was the only one, and that was a thank you for putting it in the budget. Once it was done, I really didn’t hear anything.”

House Ways and Means Chairman Aaron Michlewitz also acknowledged that Liberty Mutual was “one of” the companies who lobbied for the tax provision. Michlewitz did not identify any other companies that lobbied for the policy.

Perhaps notably, Sen. Cindy Friedman, who was one of the Senate’s negotiators on the closeout budget, said she had not been lobbied by anyone about the tax provision, which she opposed.

“I heard from absolutely no one” about it, said Friedman in an interview where she otherwise declined to share details of the House-Senate negotiations.

Senate President Karen Spilka declined to comment.

In response to an emailed inquiry, Verizon spokesperson David Weissmann said the telecommunications and internet provider “encouraged the Legislature to decouple from the federal changes.”

Sometimes called “decoupling,” or “163(J),” by Beacon Hill policy wonks, the provision would have split state tax law from the federal tax code in one particular area that helps determine how taxes are assessed. The House-backed change would have kept the state from going along with new federal caps on the amount of debt payments that certain corporations can deduct from their taxable funds. The effect of the House proposal would have been to essentially avoid a state tax hike for indebted companies subject to the new federal cap.

Senate leaders, however, said they didn’t want to change state tax policy through the closeout budget bill, and the Senate ultimately prevailed.

Eileen McAnneny, president of the Massachusetts Taxpayers Foundation, said in an email that the provision was not specific to any one corporate sector or type of company. “It impacts any company that uses debt to finance capital investment,” she said. “Publicly traded companies can issue stock to get capital, but even they use debt sometimes for capital expansion.”

Rep. Lindsay Sabadosa, a Northampton Democrat who has a background in translating financial information, said she was “not at all surprised” to hear that Verizon and Liberty Mutual would have benefited from the provision backed by the House, which she opposed. “Both of those companies are highly profitable, and they are able to pay their fair share of taxes,” said Sabadosa.

More detail about any other companies that may have lobbied for the changes could emerge early next year. The tax provision was filed by Baker in his version of the closeout budget bill in September, and lobbying disclosures for that half of the year aren’t due until January 15, according to the secretary of state’s office.

Rep. Elizabeth Poirier, a North Attleborough Republican, filed a standalone bill that would accomplish pretty much the same thing as the budget provision adopted by the House. That bill was supported by Associated Industries of Massachusetts, which said in a communication shared by a legislative aide that decoupling is a “priority issue to many employers.”

The window has passed for the Legislature to take any actions that would affect the 2018 tax year, but tax issues are scheduled to resurface in January when the House takes up a transportation revenue bill.

Liberty Mutual referred questions about the tax change to Associated Industries and the Greater Boston Chamber. Verizon, in its latest earnings presentation, reported $109.6 billion of total gross debt, and a senior company official said that the telecommunications giant is seeking to reduce its indebtedness.

“We remain focused on reducing our unsecured debt portfolio while continuing to actively manage our near-term maturities, optimize our overall funding footprint, and lower our cost of capital,” said Verizon Chief Financial Officer Matt Ellis during an October earnings call.