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Westlake Legal Group > Mnuchin, Steven T

U.S. Says China Is No Longer a Currency Manipulator

Westlake Legal Group 13dc-currency1-facebookJumbo U.S. Says China Is No Longer a Currency Manipulator United States Politics and Government United States International Relations United States Trump, Donald J Treasury Department Renminbi (Currency) Mnuchin, Steven T International Trade and World Market China

WASHINGTON — The Trump administration formally removed China’s designation as a currency manipulator on Monday, offering a major concession to the Chinese government as senior officials arrived in Washington to sign a trade agreement with President Trump.

The Treasury Department released its long-delayed currency report on Monday afternoon, providing its first public analysis of China’s currency practices since it designated China a manipulator in August at the direction of Mr. Trump. The report noted that China — which Mr. Trump had accused of weakening its currency, the renminbi, to make its goods cheaper to sell overseas — had made important commitments regarding the renminbi as part of the new trade agreement and that its value had appreciated since September.

“China has made enforceable commitments to refrain from competitive devaluation, while promoting transparency and accountability,” Treasury Secretary Steven Mnuchin said in a statement.

As part of the trade deal that Mr. Trump plans to sign at the White House on Wednesday, China and the United States have agreed to avoid devaluing their currencies to achieve a competitive advantage for their exports. The Office of the United States Trade Representative said last month that the agreement would include a currency chapter that detailed “high-standard commitments to refrain from competitive devaluations” and targeting of exchange rates. The trade pact is expected to include an enforcement mechanism, which the office said would ensure that China could not use its currency practices to compete unfairly against American exporters.

Mr. Trump has long been critical of China’s currency practices, arguing that Beijing weakens the renminbi to make Chinese exports cheaper in the United States. Mr. Trump accused China of doing just that in August, when Beijing allowed its currency to weaken, saying it was an attempt to blunt the effect of tariffs he had imposed on Chinese imports.

It is a rare point of bipartisan agreement that China deserves to be labeled a currency manipulator, bringing together Democrats like Senator Chuck Schumer of New York, the minority leader, and Republicans like Senator Rick Scott of Florida.

The decision to remove the label angered those and other lawmakers, who have argued that the president has undermined the credibility of the foreign exchange report by throwing the manipulation label around loosely.

“Just because we’re negotiating a trade deal doesn’t mean we should ignore Communist China’s bad acts,” Mr. Scott said on Twitter. “They are a currency manipulator. Period.”

Mr. Schumer, who has criticized China’s currency practices for years, accused Mr. Trump of caving to China in an attempt to score a political win.

“China is a currency manipulator — that is a fact,” Mr. Schumer said. “Unfortunately, President Trump would rather cave to President Xi than stay tough on China. When it comes to the president’s stance on China, Americans are getting a lot of show and very little results.”

The currency report released on Monday said China had agreed to “publish relevant information related to exchange rates and external balances.” China will remain on the Treasury Department’s list of countries whose currency practices warrant close attention.

The United States had last labeled China a currency manipulator in 1994. The designation, while seen as a type of public shaming, is largely symbolic. The label is supposed to prompt discussions between the United States, the International Monetary Fund and the Chinese government on how China can make its currency more fairly valued. The International Monetary Fund said in a report last year that China’s currency was fairly valued.

While most economists agreed that China had been distorting the value of its currency more than a decade ago, in recent years it has been allowing market forces to play a role in letting the renminbi fluctuate within a set range. For much of last year, Chinese officials had actually been propping up the renminbi amid a weakening economy to prevent its value from falling too quickly.

“China’s foreign exchange reserves, a key indicator of the degree of foreign exchange market intervention, has been quite stable over the last year,” said Eswar Prasad, former head of the International Monetary Fund’s China division. “While China still has a sizable trade surplus with the U.S., its overall current position is near balance, further undercutting the characterization of China as a currency manipulator.”

Treasury’s currency report noted that the renminbi was trading as high as 7.18 per dollar in early September and was recently trading at 6.93 per dollar.

Mr. Trump had promised as a presidential candidate to slap the manipulator label on China. Yet Mr. Mnuchin opted not to do so in the first five reports that his department issued. The department said China did not meet the department’s criteria for currency manipulation.

As trade negotiations with China dragged on last summer, Mr. Trump grew increasingly frustrated and seized upon China’s weakening currency as another source of leverage. Despite his own resistance, Mr. Mnuchin used his discretion as Treasury secretary to impose the label at the urging of Mr. Trump.

“They did it for political reasons,” Chad P. Bown, an international trade expert at the Peterson Institute for International Economics in Washington. “Clearly there was no legal basis or really an economic basis to do so.”

Mr. Bown said that removing the label made sense now that the first phase of the trade deal is complete and that China probably was unhappy with the image of being deemed a manipulator.

Senior Chinese officials arrived in Washington on Monday to put the finishing touches on the trade agreement. In addition to the currency provision, the deal is expected to include a commitment by China to purchase more farm products and to open more of its markets, like financial services, to foreign firms. The Chinese are also expected to agree to protect American intellectual property. In exchange, the Trump administration has reduced some tariffs on $360 billion worth of Chinese goods.

Still, while the administration offered China an olive branch on its currency, it pressed ahead on Monday with new plans to scrutinize foreign investment that were devised with China in mind. The Treasury Department issued regulations to implement the Foreign Investment Risk Review Modernization Act of 2018, including exemptions for Australia, Canada and the United Kingdom from some of the more onerous requirements of the new law.

Mr. Trump’s currency ire has not been aimed solely at China. In December, the president said on Twitter that Brazil and Argentina were currency manipulators and that he would impose tariffs on their steel and aluminum imports.

Mr. Trump has since backed down from his threat to impose tariffs on Brazil and has yet to follow through with new tariffs on Argentina. Neither country was tagged as a manipulator or placed on Treasury’s monitoring list on Monday.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Treasury Says China Is No Longer a Currency Manipulator

Westlake Legal Group 13dc-currency1-facebookJumbo Treasury Says China Is No Longer a Currency Manipulator United States Trump, Donald J Treasury Department Renminbi (Currency) Mnuchin, Steven T International Trade and World Market China

WASHINGTON — The Trump administration formally removed China’s designation as a currency manipulator on Monday, offering a major concession to the Chinese government as senior officials arrived in Washington to sign a trade agreement with President Trump.

The Treasury Department released its long delayed currency report on Monday afternoon, providing its first public analysis of China’s currency practices since it designated China as a manipulator in August at the direction of Mr. Trump. The report noted that China — which Mr. Trump accused of weakening its currency to make its goods cheaper to sell overseas — had made important commitments regarding the renminbi as part of the new trade agreement and that its value has appreciated since September.

“China has made enforceable commitments to refrain from competitive devaluation, while promoting transparency and accountability,” Treasury Secretary Steven Mnuchin said in a statement.

As part of the trade deal that Mr. Trump plans to sign on Wednesday, China and the United States have agreed to avoid devaluing their currencies to achieve a competitive advantage for their exports. The United States trade representative said last month that the agreement would include a currency chapter that details “high-standard commitments to refrain from competitive devaluations” and targeting of exchange rates. The trade pact is expected to include an enforcement mechanism, which U.S.T.R. said would ensure that China cannot use its currency practices to compete unfairly against American exporters.

Mr. Trump has long been critical of China’s currency practices, arguing that Beijing weakens the renminbi to make Chinese exports cheaper in the United States. Mr. Trump accused China of doing just that in August, when Beijing allowed its currency to weaken, saying it was an attempt to blunt the impact of tariffs he imposed on Chinese imports.

It is a rare point of bipartisan agreement, with Democrats like Chuck Schumer, the New York Senator, and Republicans like Senator Rick Scott of Florida agreeing that China deserves to be labeled a currency manipulator.

The decision to remove the label angered those and other lawmakers, who have argued that the president has undermined the credibility of the foreign exchange report by throwing the manipulation label around loosely.

“Just because we’re negotiating a trade deal doesn’t mean we should ignore Communist China’s bad acts,” Mr. Scott said on Twitter. “They are a currency manipulator. Period.”

Mr. Schumer, who has criticized China’s currency practices for years, accused Mr. Trump of caving to China in an attempt to score a political win.

“China is a currency manipulator — that is a fact,” Mr. Schumer said. “Unfortunately, President Trump would rather cave to President Xi than stay tough on China. When it comes to the president’s stance on China, Americans are getting a lot of show and very little results.”

The currency report released on Monday said that China had agreed to “publish relevant information related to exchange rates and external balances.” China will remain on Treasury’s watchlist of country’s whose currency practices warrant close attention.

The United States last labeled China as a currency manipulator in 1994. The designation, while seen as a type of public shaming, is largely a symbolic action. The label is supposed to trigger discussions between the United States, the International Monetary Fund and the Chinese government on how China can make its currency more fairly valued. The I.M.F. said in a report released last year that China’s currency was fairly valued.

While most economists agreed that China had been distorting the value of its currency more than a decade ago, in recent years it has been allowing market forces to play a role in letting the renminbi fluctuate within a set range. For much of last year, Chinese officials had actually been propping up the renminbi amid a weakening economy to prevent its value from falling too quickly.

“China’s foreign exchange reserves, a key indicator of the degree of foreign exchange market intervention, has been quite stable over the last year, said Eswar Prasad, former head of the International Monetary Fund’s China division. “While China still has a sizable trade surplus with the U.S., its overall current position is near balance, further undercutting the characterization of China as a currency manipulator.”

Treasury’s currency report noted that the renminbi was trading at 7.18 per dollar in early September and is now trading at 6.93 per dollar.

China’s currency practices have long captured the attention of Mr. Trump, who promised as a presidential candidate to slap the manipulator label on China. Yet Mr. Mnuchin opted not to do so in the first five reports that his department issued. The department said China did not meet Treasury’s criteria for currency manipulation.

As trade negotiations with China dragged on last summer, Mr. Trump grew increasingly frustrated and seized upon China’s weakening currency as another source of leverage. Despite his own resistance, Mr. Mnuchin used his discretion as Treasury Secretary to impose the label at the urging of Mr. Trump.

“They did it for political reasons,” Chad P. Bown, an international trade expert at the Peterson Institute for International Economics in Washington. “Clearly there was no legal basis or really an economic basis to so.”

Mr. Bown said that removing the label made sense now that the first phase of the trade deal is complete and that China probably was unhappy with the optics of being deemed a manipulator.

Senior Chinese officials arrived in Washington on Monday to put the finishing touches on the trade agreement, which will be signed at the White House on Wednesday. In addition to the currency provision, the deal is expected to include a commitment by China to purchase more farm products and to open more of its markets, like financial services, to foreign firms. The Chinese are also expected to agree to protect American intellectual property. In exchange, the Trump administration has reduced some tariffs on $360 billion worth of Chinese goods.

Still, while the administration offered China an olive branch on its currency, it pressed ahead on Monday with new plans to scrutinize foreign investment that were designed with China in mind. The Treasury Department issued regulations to implement the 2018 Foreign Investment Risk Review Modernization Act that included exemptions for Australia, Canada and the United Kingdom from some of the more onerous requirements of the new law.

Mr. Trump’s currency ire has not been solely aimed at China. In December, the president said on Twitter that Brazil and Argentina were currency manipulators and that he would impose tariffs on their steel and aluminum imports.

Mr. Trump has since backed down from his threat to impose tariffs on Brazil and has yet to follow through with new tariffs on Argentina. Neither country tagged as a manipulator or placed on Treasury’s monitoring list on Monday.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

How Big Companies Won New Tax Breaks From the Trump Administration

The overhaul of the federal tax law in 2017 was the signature legislative achievement of Donald J. Trump’s presidency.

The biggest change to the tax code in three decades, the law slashed taxes for big companies, part of an effort to coax them to invest more in the United States and to discourage them from stashing profits in overseas tax havens.

Corporate executives, major investors and the wealthiest Americans hailed the tax cuts as a once-in-a-generation boon not only to their own fortunes but also to the United States economy.

But big companies wanted more — and, not long after the bill became law in December 2017, the Trump administration began transforming the tax package into a greater windfall for the world’s largest corporations and their shareholders. The tax bills of many big companies have ended up even smaller than what was anticipated when the president signed the bill.

One consequence is that the federal government may collect hundreds of billions of dollars less over the coming decade than previously projected. The budget deficit has jumped more than 50 percent since Mr. Trump took office and is expected to top $1 trillion in 2020, partly as a result of the tax law.

Laws like the 2017 tax cuts are carried out by federal agencies that first must formalize them via rules and regulations. The process of writing the rules, conducted largely out of public view, can determine who wins and who loses.

Starting in early 2018, senior officials in President Trump’s Treasury Department were swarmed by lobbyists seeking to insulate companies from the few parts of the tax law that would have required them to pay more. The crush of meetings was so intense that some top Treasury officials had little time to do their jobs, according to two people familiar with the process.

The lobbyists targeted a pair of major new taxes that were supposed to raise hundreds of billions of dollars from companies that had been avoiding taxes in part by claiming their profits were earned outside the United States.

The blitz was led by a cross section of the world’s largest companies, including Anheuser-Busch, Credit Suisse, General Electric, United Technologies, Barclays, Coca-Cola, Bank of America, UBS, IBM, Kraft Heinz, Kimberly-Clark, News Corporation, Chubb, ConocoPhillips, HSBC and the American International Group.

Thanks in part to the chaotic manner in which the bill was rushed through Congress — a situation that gave the Treasury Department extra latitude to interpret a law that was, by all accounts, sloppily written — the corporate lobbying campaign was a resounding success.

ImageWestlake Legal Group merlin_130895553_4ce98faa-e477-440f-b670-73e9bce61508-articleLarge How Big Companies Won New Tax Breaks From the Trump Administration United States Politics and Government Trump, Donald J Treasury Department Taxation Tax Shelters Tax Cuts and Jobs Act (2017) Tax Credits, Deductions and Exemptions Procter&Gamble Co Mnuchin, Steven T Internal Revenue Service Income Tax General Electric Company Federal Taxes (US) Credit Suisse Group AG Corporate Taxes Anheuser-Busch InBev NV

A section of the Senate bill. Congress gave final approval to the Tax Cuts and Jobs Act on Dec. 20, 2017.Credit…Jon Elswick/Associated Press

Through a series of obscure regulations, the Treasury carved out exceptions to the law that mean many leading American and foreign companies will owe little or nothing in new taxes on offshore profits, according to a review of the Treasury’s rules, government lobbying records, and interviews with federal policymakers and tax experts. Companies were effectively let off the hook for tens if not hundreds of billions of taxes that they would have been required to pay.

“Treasury is gutting the new law,” said Bret Wells, a tax law professor at the University of Houston. “It is largely the top 1 percent that will disproportionately benefit — the wealthiest people in the world.”

It is the latest example of the benefits of the Republican tax package flowing disproportionately to the richest of the rich. Even a tax break that was supposed to aid poor communities — an initiative called “opportunity zones” — is being used in part to finance high-end developments in affluent neighborhoods, at times benefiting those with ties to the Trump administration.

Of course, companies didn’t get everything they wanted, and Brian Morgenstern, a Treasury spokesman, defended the department’s handling of the tax rules. “No particular taxpayer or group had any undue influence at any time in the process,” he said.

Ever since the birth of the modern federal income tax in 1913, companies have been concocting ways to avoid it.

In the late 1990s, American companies accelerated their efforts to claim that trillions of dollars of profits they earned in high-tax places like the United States, Japan or Germany were actually earned in low- or no-tax places like Luxembourg, Bermuda or Ireland.

Google, Apple, Cisco, Pfizer, Merck, Coca-Cola, Facebook and many others have deployed elaborate techniques that let the companies pay taxes at far less than the 35 percent corporate tax rate in the United States that existed before the 2017 changes. Their playful nicknames — like Double Irish and Dutch Sandwich — made them sound benign.

The Obama administration and lawmakers from both parties have tried to combat this profit shifting, but their efforts mostly stalled.

When President Trump and congressional Republicans assembled an enormous tax-cut package in 2017, they pitched it in part as a grand bargain: Companies would get the deep tax cuts that they had spent years clamoring for, but the law would also represent a long-overdue effort to fight corporate tax avoidance and the shipment of jobs overseas.

“The situation where companies are actually encouraged to move overseas and keep their profits overseas makes no sense,” Senator Rob Portman, an Ohio Republican, said on the Senate floor in November 2017.

Republicans were racing to secure a legislative victory during Mr. Trump’s first year in office — a period marked by the administration’s failure to repeal Obamacare and an embarrassing procession of political blunders. Sweeping tax cuts could give Republicans a jolt of much-needed momentum heading into the 2018 midterm elections.

To speed things along, Republicans used a congressional process known as “budget reconciliation,” which blocked Democrats from filibustering and allowed Republicans to pass the bill with a simple majority. But to qualify for that parliamentary green light, the net cost of the bill — after accounting for different tax cuts and tax increases — had to be less than $1.5 trillion over 10 years.

The bill’s cuts totaled $5.5 trillion. The corporate income tax rate shrank to 21 percent from 35 percent, and companies also won a tax break on the trillions in profits brought home from offshore.

To close the gap between the $5.5 trillion in cuts and the maximum price tag of $1.5 trillion, the package sought to raise new revenue by eliminating deductions and introducing new taxes.

Two of the biggest new taxes were supposed to apply to multinational corporations, and lawmakers bestowed them with easy-to-pronounce acronyms — BEAT and GILTI — that belie their complexity.

BEAT stands for the base erosion and anti-abuse tax. It was aimed largely at foreign companies with major operations in the United States, some of which had for years minimized their United States tax bills by shifting money between American subsidiaries and their foreign parent companies.

Instead of paying taxes in the United States, companies send the profits to countries with lower tax rates.

The BEAT aimed to make that less lucrative. Some payments that companies sent to their foreign affiliates would face a new 10 percent tax.

The other big measure was called GILTI: global intangible low-taxed income.

To reduce the benefit companies reaped by claiming that their profits were earned in tax havens, the law imposed an additional tax of up to 10.5 percent on some offshore earnings.

The Joint Committee on Taxation, the congressional panel that estimates the impacts of tax changes, predicted that the BEAT and GILTI would bring in $262 billion over a decade — roughly enough to fund the Treasury Department, the Environmental Protection Agency and the National Cancer Institute for 10 years.

Sitting in the Oval Office on Dec. 22, 2017, Mr. Trump signed the tax cuts into law. It was — and remains — the president’s most significant legislative achievement.

From the start, the new taxes were pocked with loopholes.

In the BEAT, for example, Senate Republicans hoped to avoid a revolt by large companies. They wrote the law so that any payments an American company made to a foreign affiliate for something that went into a product — as opposed to, say, interest payments on loans — were excluded from the tax.

Let’s say an American pharmaceutical company sells pills in the United States. The pills are manufactured by a subsidiary in Ireland, and the American parent pays the Irish unit for the pills before they are sold to the public. Those payments mean that the company’s profits in the United States, where taxes are relatively high, go down; profits in tax-friendly Ireland go up.

Because such payments to Ireland wouldn’t be taxed, some companies that had been the most aggressive at shifting profits into offshore havens were spared the full brunt of the BEAT.

Other companies, like General Electric, were surprised to be hit by the new tax, thinking it applied only to foreign multinationals, according to Pat Brown, who had been G.E.’s top tax expert.

Mr. Brown, now the head of international tax policy at the accounting and consulting firm PwC, said on a podcast this year that the Trump administration should bridge the gap between expectations about the tax law and how it was playing out in reality. He lobbied the Treasury on behalf of G.E.

“The question,” he said, “is how creative and how expansive is Treasury and the I.R.S. able to be.”

Almost immediately after Mr. Trump signed the bill, companies and their lobbyists — including G.E.’s Mr. Brown — began a full-court pressure campaign to try to shield themselves from the BEAT and GILTI.

The Treasury Department had to figure out how to carry out the hastily written law, which lacked crucial details.

Chip Harter was the Treasury official in charge of writing the rules for the BEAT and GILTI. He had spent decades at PwC and the law firm Baker McKenzie, counseling companies on the same sorts of tax-avoidance arrangements that the new law was supposed to discourage.

Starting in January 2018, he and his colleagues found themselves in nonstop meetings — roughly 10 a week at times — with lobbyists for companies and industry groups.

The Organization for International Investment — a powerful trade group for foreign multinationals like the Swiss food company Nestlé and the Dutch chemical maker LyondellBasell — objected to a Treasury proposal that would have prevented companies from using a complex currency-accounting maneuver to avoid the BEAT.

The group’s lobbyists were from PwC and Baker McKenzie, Mr. Harter’s former firms, according to public lobbying disclosures. One of them, Pam Olson, was the top Treasury tax official in the George W. Bush administration. (Mr. Morgenstern, the Treasury spokesman, said Mr. Harter didn’t meet with PwC while the rules were being written.)

This month, the Treasury issued the final version of some of the BEAT regulations. The Organization for International Investment got what it wanted.

One of the most effective campaigns, with the greatest financial consequence, was led by a small group of large foreign banks, including Credit Suisse and Barclays.

American regulators require international banks to ensure that their United States divisions are financially equipped to absorb big losses in a crisis. To meet those requirements, foreign banks lend the money to their American outposts. Those loans accrue interest. Under the BEAT, the interest that the American units paid to their European parents would often be taxed.

“Foreign banks should not be penalized by the U.S. tax laws for complying” with regulations, said Briget Polichene, chief executive of the Institute of International Bankers, whose members include many of the world’s largest banks.

Banks flooded the Treasury Department with lobbyists and letters.

Late last year, Mr. Harter went to Treasury Secretary Steven Mnuchin and told him about the plan to give the banks a break. Mr. Mnuchin — a longtime banking executive before joining the Trump administration — signed off on the new exemptions, according to a person familiar with the matter.

A few months later, the tax-policy office handed another victory to the foreign banks, ruling that an even wider range of bank payments would be exempted.

Among the lobbyists who successfully pushed the banks’ case in private meetings with senior Treasury officials was Erika Nijenhuis of the law firm Cleary Gottlieb. Her client was the Institute of International Bankers.

In September 2019, Ms. Nijenhuis took off her lobbying hat and joined the Treasury’s Office of Tax Policy, which was still writing the rules governing the tax law.

Some tax experts said that the Treasury had no legal authority to exempt the bank payments from the BEAT; only Congress had that power. The Trump administration created the exception “out of whole cloth,” said Mr. Wells, the University of Houston professor.

Even inside the Treasury, the ruling was controversial. Some officials told Mr. Harter — the senior official in charge of the international rules — that the department lacked the power, according to people familiar with the discussions. Mr. Harter dismissed the objections.

Officials at the Joint Committee on Taxation have calculated that the exemptions for international banks could reduce by up to $50 billion the revenue raised by the BEAT.

Over all, the BEAT is likely to collect “a small fraction” of the $150 billion of new tax revenue that was originally projected by Congress, said Thomas Horst, who advises companies on their overseas tax arrangements. He came to that conclusion after reviewing the tax disclosures in more than 140 annual reports filed by multinationals.

Mr. Morgenstern, the Treasury spokesman, said: “We thoroughly reviewed these issues internally and are fully comfortable that we have the legal authority for the conclusions reached in these regulations.” He said Ms. Nijenhuis was not involved in crafting the BEAT rules.

He also said the Treasury decided that changing the rules for foreign banks was appropriate.

“We were responsive to job creators,” he said.

The lobbying surrounding the GILTI was equally intense — and, once again, large companies won valuable concessions.

Back in 2017, Republicans said the GILTI was meant to prevent companies from avoiding American taxes by moving their intellectual property overseas.

In the pharmaceutical and tech industries in particular, profits are often tied to patents. Companies had sold the rights to their patents to subsidiaries in offshore tax havens. The companies then imposed steep licensing fees on their American units. The sleight-of-hand transactions reduced profits in the United States and left them in places like Bermuda and the British Virgin Islands.

But after the law was enacted, large multinationals in industries like consumer products discovered that the GILTI tax applied to them, too. That threatened to cut into their windfalls from the corporate tax rate’s falling to 21 percent from 35 percent.

Lobbyists for Procter & Gamble and other companies turned to lawmakers for help. They asked members of the Senate Finance Committee to tell Treasury officials that they hadn’t intended the GILTI to affect their industries. It was a simple but powerful strategy: Because the Treasury was required to consider congressional intent when writing the tax rules, such explanations could sway the outcome.

Several senators then met with Mr. Mnuchin to discuss the rules.

One lobbyist, Michael Caballero, had been a senior Treasury official in the Obama administration. His clients included Credit Suisse and the industrial conglomerate United Technologies. He met repeatedly with Treasury and White House officials and pushed them to modify the rules so that big companies hit by the GILTI wouldn’t lose certain tax deductions.

In essence, the “high-tax exception” that Mr. Caballero was proposing would allow companies to deduct expenses that they incurred in their overseas operations from their American profits — lowering their United States tax bills.

Other companies jumped on the bandwagon. News Corporation, Liberty Mutual, Anheuser-Busch, Comcast and P.&G. wrote letters or dispatched lobbyists to argue for the high-tax exception.

After months of meetings with lobbyists, the Treasury announced in June 2019 that it was creating a version of the exception that the companies had sought.

Two years after the tax cuts became law, their impact is becoming clear.

Companies continue to shift hundreds of billions of dollars to overseas tax havens, ensuring that huge sums of corporate profits remain out of reach of the United States government.

The Internal Revenue Service is collecting tens of billions of dollars less in corporate taxes than Congress projected, inflating the tax law’s 13-figure price tag.

This month, the Organization for Economic Cooperation and Development calculated that the United States in 2018 experienced the largest drop in tax revenue of any of the group’s 36 member countries. The United States also had by far the largest budget deficit of any of those countries.

In the coming days, the Treasury is likely to complete its last round of rules carrying out the tax cuts. Big companies have spent this fall trying to win more.

In September, Chris D. Trunck, the vice president for tax at Owens Corning, the maker of insulation and roofing materials, wrote to the I.R.S. He pushed the Treasury to tinker with the GILTI rules in a way that would preserve hundreds of millions of dollars of tax benefits that Owens Corning had accumulated from settling claims that it poisoned employees and others with asbestos.

The same month, the underwear manufacturer Hanes sent its own letter to Mr. Mnuchin. The letter, from Bryant Purvis, Hanes’s vice president of global tax, urged Mr. Mnuchin to broaden the high-tax exception so that more companies could take advantage of it.

Otherwise, Mr. Purvis warned, “the GILTI regime will become an impediment to U.S. companies and their ability to not only compete globally as a general matter, but also their ability to remain U.S.-headquartered if they are to maintain the overall fiscal health of their business.”

The implied threat was clear: If the Treasury didn’t further chip away at the new tax, companies like Hanes, based in Winston-Salem, N.C., might have no choice but to move their headquarters overseas.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

How Big Companies Won New Tax Breaks From the Trump Administration

The overhaul of the federal tax law in 2017 was the signature legislative achievement of Donald J. Trump’s presidency.

The biggest change to the tax code in three decades, the law slashed taxes for big companies, part of an effort to coax them to invest more in the United States and to discourage them from stashing profits in overseas tax havens.

Corporate executives, major investors and the wealthiest Americans hailed the tax cuts as a once-in-a-generation boon not only to their own fortunes but also to the United States economy.

But big companies wanted more — and, not long after the bill became law in December 2017, the Trump administration began transforming the tax package into a greater windfall for the world’s largest corporations and their shareholders. The tax bills of many big companies have ended up even smaller than what was anticipated when the president signed the bill.

One consequence is that the federal government may collect hundreds of billions of dollars less over the coming decade than previously projected. The budget deficit has jumped more than 50 percent since Mr. Trump took office and is expected to top $1 trillion in 2020, partly as a result of the tax law.

Laws like the 2017 tax cuts are carried out by federal agencies that first must formalize them via rules and regulations. The process of writing the rules, conducted largely out of public view, can determine who wins and who loses.

Starting in early 2018, senior officials in President Trump’s Treasury Department were swarmed by lobbyists seeking to insulate companies from the few parts of the tax law that would have required them to pay more. The crush of meetings was so intense that some top Treasury officials had little time to do their jobs, according to two people familiar with the process.

The lobbyists targeted a pair of major new taxes that were supposed to raise hundreds of billions of dollars from companies that had been avoiding taxes in part by claiming their profits were earned outside the United States.

The blitz was led by a cross section of the world’s largest companies, including Anheuser-Busch, Credit Suisse, General Electric, United Technologies, Barclays, Coca-Cola, Bank of America, UBS, IBM, Kraft Heinz, Kimberly-Clark, News Corporation, Chubb, ConocoPhillips, HSBC and the American International Group.

Thanks in part to the chaotic manner in which the bill was rushed through Congress — a situation that gave the Treasury Department extra latitude to interpret a law that was, by all accounts, sloppily written — the corporate lobbying campaign was a resounding success.

ImageWestlake Legal Group merlin_130895553_4ce98faa-e477-440f-b670-73e9bce61508-articleLarge How Big Companies Won New Tax Breaks From the Trump Administration United States Politics and Government Trump, Donald J Treasury Department Taxation Tax Shelters Tax Cuts and Jobs Act (2017) Tax Credits, Deductions and Exemptions Procter&Gamble Co Mnuchin, Steven T Internal Revenue Service Income Tax Hanesbrands Inc General Electric Company Federal Taxes (US) Credit Suisse Group AG Corporate Taxes Anheuser-Busch InBev NV

A section of the Senate bill. Congress gave final approval to the Tax Cuts and Jobs Act on Dec. 20, 2017.Credit…Jon Elswick/Associated Press

Through a series of obscure regulations, the Treasury carved out exceptions to the law that mean many leading American and foreign companies will owe little or nothing in new taxes on offshore profits, according to a review of the Treasury’s rules, government lobbying records, and interviews with federal policymakers and tax experts. Companies were effectively let off the hook for tens if not hundreds of billions of taxes that they would have been required to pay.

“Treasury is gutting the new law,” said Bret Wells, a tax law professor at the University of Houston. “It is largely the top 1 percent that will disproportionately benefit — the wealthiest people in the world.”

It is the latest example of the benefits of the Republican tax package flowing disproportionately to the richest of the rich. Even a tax break that was supposed to aid poor communities — an initiative called “opportunity zones” — is being used in part to finance high-end developments in affluent neighborhoods, at times benefiting those with ties to the Trump administration.

Of course, companies didn’t get everything they wanted, and Brian Morgenstern, a Treasury spokesman, defended the department’s handling of the tax rules. “No particular taxpayer or group had any undue influence at any time in the process,” he said.

Ever since the birth of the modern federal income tax in 1913, companies have been concocting ways to avoid it.

In the late 1990s, American companies accelerated their efforts to claim that trillions of dollars of profits they earned in high-tax places like the United States, Japan or Germany were actually earned in low- or no-tax places like Luxembourg, Bermuda or Ireland.

Google, Apple, Cisco, Pfizer, Merck, Coca-Cola, Facebook and many others have deployed elaborate techniques that let the companies pay taxes at far less than the 35 percent corporate tax rate in the United States that existed before the 2017 changes. Their playful nicknames — like Double Irish and Dutch Sandwich — made them sound benign.

The Obama administration and lawmakers from both parties have tried to combat this profit shifting, but their efforts mostly stalled.

When President Trump and congressional Republicans assembled an enormous tax-cut package in 2017, they pitched it in part as a grand bargain: Companies would get the deep tax cuts that they had spent years clamoring for, but the law would also represent a long-overdue effort to fight corporate tax avoidance and the shipment of jobs overseas.

“The situation where companies are actually encouraged to move overseas and keep their profits overseas makes no sense,” Senator Rob Portman, an Ohio Republican, said on the Senate floor in November 2017.

Republicans were racing to secure a legislative victory during Mr. Trump’s first year in office — a period marked by the administration’s failure to repeal Obamacare and an embarrassing procession of political blunders. Sweeping tax cuts could give Republicans a jolt of much-needed momentum heading into the 2018 midterm elections.

To speed things along, Republicans used a congressional process known as “budget reconciliation,” which blocked Democrats from filibustering and allowed Republicans to pass the bill with a simple majority. But to qualify for that parliamentary green light, the net cost of the bill — after accounting for different tax cuts and tax increases — had to be less than $1.5 trillion over 10 years.

The bill’s cuts totaled $5.5 trillion. The corporate income tax rate shrank to 21 percent from 35 percent, and companies also won a tax break on the trillions in profits brought home from offshore.

To close the gap between the $5.5 trillion in cuts and the maximum price tag of $1.5 trillion, the package sought to raise new revenue by eliminating deductions and introducing new taxes.

Two of the biggest new taxes were supposed to apply to multinational corporations, and lawmakers bestowed them with easy-to-pronounce acronyms — BEAT and GILTI — that belie their complexity.

BEAT stands for the base erosion and anti-abuse tax. It was aimed largely at foreign companies with major operations in the United States, some of which had for years minimized their United States tax bills by shifting money between American subsidiaries and their foreign parent companies.

Instead of paying taxes in the United States, companies send the profits to countries with lower tax rates.

The BEAT aimed to make that less lucrative. Some payments that companies sent to their foreign affiliates would face a new 10 percent tax.

The other big measure was called GILTI: global intangible low-taxed income.

To reduce the benefit companies reaped by claiming that their profits were earned in tax havens, the law imposed an additional tax of up to 10.5 percent on some offshore earnings.

The Joint Committee on Taxation, the congressional panel that estimates the impacts of tax changes, predicted that the BEAT and GILTI would bring in $262 billion over a decade — roughly enough to fund the Treasury Department, the Environmental Protection Agency and the National Cancer Institute for 10 years.

Sitting in the Oval Office on Dec. 22, 2017, Mr. Trump signed the tax cuts into law. It was — and remains — the president’s most significant legislative achievement.

From the start, the new taxes were pocked with loopholes.

In the BEAT, for example, Senate Republicans hoped to avoid a revolt by large companies. They wrote the law so that any payments an American company made to a foreign affiliate for something that went into a product — as opposed to, say, interest payments on loans — were excluded from the tax.

Let’s say an American pharmaceutical company sells pills in the United States. The pills are manufactured by a subsidiary in Ireland, and the American parent pays the Irish unit for the pills before they are sold to the public. Those payments mean that the company’s profits in the United States, where taxes are relatively high, go down; profits in tax-friendly Ireland go up.

Because such payments to Ireland wouldn’t be taxed, some companies that had been the most aggressive at shifting profits into offshore havens were spared the full brunt of the BEAT.

Other companies, like General Electric, were surprised to be hit by the new tax, thinking it applied only to foreign multinationals, according to Pat Brown, who had been G.E.’s top tax expert.

Mr. Brown, now the head of international tax policy at the accounting and consulting firm PwC, said on a podcast this year that the Trump administration should bridge the gap between expectations about the tax law and how it was playing out in reality. He lobbied the Treasury on behalf of G.E.

“The question,” he said, “is how creative and how expansive is Treasury and the I.R.S. able to be.”

Almost immediately after Mr. Trump signed the bill, companies and their lobbyists — including G.E.’s Mr. Brown — began a full-court pressure campaign to try to shield themselves from the BEAT and GILTI.

The Treasury Department had to figure out how to carry out the hastily written law, which lacked crucial details.

Chip Harter was the Treasury official in charge of writing the rules for the BEAT and GILTI. He had spent decades at PwC and the law firm Baker McKenzie, counseling companies on the same sorts of tax-avoidance arrangements that the new law was supposed to discourage.

Starting in January 2018, he and his colleagues found themselves in nonstop meetings — roughly 10 a week at times — with lobbyists for companies and industry groups.

The Organization for International Investment — a powerful trade group for foreign multinationals like the Swiss food company Nestlé and the Dutch chemical maker LyondellBasell — objected to a Treasury proposal that would have prevented companies from using a complex currency-accounting maneuver to avoid the BEAT.

The group’s lobbyists were from PwC and Baker McKenzie, Mr. Harter’s former firms, according to public lobbying disclosures. One of them, Pam Olson, was the top Treasury tax official in the George W. Bush administration. (Mr. Morgenstern, the Treasury spokesman, said Mr. Harter didn’t meet with PwC while the rules were being written.)

This month, the Treasury issued the final version of some of the BEAT regulations. The Organization for International Investment got what it wanted.

One of the most effective campaigns, with the greatest financial consequence, was led by a small group of large foreign banks, including Credit Suisse and Barclays.

American regulators require international banks to ensure that their United States divisions are financially equipped to absorb big losses in a crisis. To meet those requirements, foreign banks lend the money to their American outposts. Those loans accrue interest. Under the BEAT, the interest that the American units paid to their European parents would often be taxed.

“Foreign banks should not be penalized by the U.S. tax laws for complying” with regulations, said Briget Polichene, chief executive of the Institute of International Bankers, whose members include many of the world’s largest banks.

Banks flooded the Treasury Department with lobbyists and letters.

Late last year, Mr. Harter went to Treasury Secretary Steven Mnuchin and told him about the plan to give the banks a break. Mr. Mnuchin — a longtime banking executive before joining the Trump administration — signed off on the new exemptions, according to a person familiar with the matter.

A few months later, the tax-policy office handed another victory to the foreign banks, ruling that an even wider range of bank payments would be exempted.

Among the lobbyists who successfully pushed the banks’ case in private meetings with senior Treasury officials was Erika Nijenhuis of the law firm Cleary Gottlieb. Her client was the Institute of International Bankers.

In September 2019, Ms. Nijenhuis took off her lobbying hat and joined the Treasury’s Office of Tax Policy, which was still writing the rules governing the tax law.

Some tax experts said that the Treasury had no legal authority to exempt the bank payments from the BEAT; only Congress had that power. The Trump administration created the exception “out of whole cloth,” said Mr. Wells, the University of Houston professor.

Even inside the Treasury, the ruling was controversial. Some officials told Mr. Harter — the senior official in charge of the international rules — that the department lacked the power, according to people familiar with the discussions. Mr. Harter dismissed the objections.

Officials at the Joint Committee on Taxation have calculated that the exemptions for international banks could reduce by up to $50 billion the revenue raised by the BEAT.

Over all, the BEAT is likely to collect “a small fraction” of the $150 billion of new tax revenue that was originally projected by Congress, said Thomas Horst, who advises companies on their overseas tax arrangements. He came to that conclusion after reviewing the tax disclosures in more than 140 annual reports filed by multinationals.

Mr. Morgenstern, the Treasury spokesman, said: “We thoroughly reviewed these issues internally and are fully comfortable that we have the legal authority for the conclusions reached in these regulations.” He said Ms. Nijenhuis was not involved in crafting the BEAT rules.

He also said the Treasury decided that changing the rules for foreign banks was appropriate.

“We were responsive to job creators,” he said.

The lobbying surrounding the GILTI was equally intense — and, once again, large companies won valuable concessions.

Back in 2017, Republicans said the GILTI was meant to prevent companies from avoiding American taxes by moving their intellectual property overseas.

In the pharmaceutical and tech industries in particular, profits are often tied to patents. Companies had sold the rights to their patents to subsidiaries in offshore tax havens. The companies then imposed steep licensing fees on their American units. The sleight-of-hand transactions reduced profits in the United States and left them in places like Bermuda and the British Virgin Islands.

But after the law was enacted, large multinationals in industries like consumer products discovered that the GILTI tax applied to them, too. That threatened to cut into their windfalls from the corporate tax rate’s falling to 21 percent from 35 percent.

Lobbyists for Procter & Gamble and other companies turned to lawmakers for help. They asked members of the Senate Finance Committee to tell Treasury officials that they hadn’t intended the GILTI to affect their industries. It was a simple but powerful strategy: Because the Treasury was required to consider congressional intent when writing the tax rules, such explanations could sway the outcome.

Several senators then met with Mr. Mnuchin to discuss the rules.

One lobbyist, Michael Caballero, had been a senior Treasury official in the Obama administration. His clients included Credit Suisse and the industrial conglomerate United Technologies. He met repeatedly with Treasury and White House officials and pushed them to modify the rules so that big companies hit by the GILTI wouldn’t lose certain tax deductions.

In essence, the “high-tax exception” that Mr. Caballero was proposing would allow companies to deduct expenses that they incurred in their overseas operations from their American profits — lowering their United States tax bills.

Other companies jumped on the bandwagon. News Corporation, Liberty Mutual, Anheuser-Busch, Comcast and P.&G. wrote letters or dispatched lobbyists to argue for the high-tax exception.

After months of meetings with lobbyists, the Treasury announced in June 2019 that it was creating a version of the exception that the companies had sought.

Two years after the tax cuts became law, their impact is becoming clear.

Companies continue to shift hundreds of billions of dollars to overseas tax havens, ensuring that huge sums of corporate profits remain out of reach of the United States government.

The Internal Revenue Service is collecting tens of billions of dollars less in corporate taxes than Congress projected, inflating the tax law’s 13-figure price tag.

This month, the Organization for Economic Cooperation and Development calculated that the United States in 2018 experienced the largest drop in tax revenue of any of the group’s 36 member countries. The United States also had by far the largest budget deficit of any of those countries.

In the coming days, the Treasury is likely to complete its last round of rules carrying out the tax cuts. Big companies have spent this fall trying to win more.

In September, Chris D. Trunck, the vice president for tax at Owens Corning, the maker of insulation and roofing materials, wrote to the I.R.S. He pushed the Treasury to tinker with the GILTI rules in a way that would preserve hundreds of millions of dollars of tax benefits that Owens Corning had accumulated from settling claims that it poisoned employees and others with asbestos.

The same month, the underwear manufacturer Hanes sent its own letter to Mr. Mnuchin. The letter, from Bryant Purvis, Hanes’s vice president of global tax, urged Mr. Mnuchin to broaden the high-tax exception so that more companies could take advantage of it.

Otherwise, Mr. Purvis warned, “the GILTI regime will become an impediment to U.S. companies and their ability to not only compete globally as a general matter, but also their ability to remain U.S.-headquartered if they are to maintain the overall fiscal health of their business.”

The implied threat was clear: If the Treasury didn’t further chip away at the new tax, companies like Hanes, based in Winston-Salem, N.C., might have no choice but to move their headquarters overseas.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

How Big Companies Won New Tax Breaks From the Trump Administration

The overhaul of the federal tax law in 2017 was the signature legislative achievement of Donald J. Trump’s presidency.

The biggest change to the tax code in three decades, the law slashed taxes for big companies, part of an effort to coax them to invest more in the United States and to discourage them from stashing profits in overseas tax havens.

Corporate executives, major investors and the wealthiest Americans hailed the tax cuts as a once-in-a-generation boon not only to their own fortunes but also to the United States economy.

But big companies wanted more — and, not long after the bill became law in December 2017, the Trump administration began transforming the tax package into a greater windfall for the world’s largest corporations and their shareholders. The tax bills of many big companies have ended up even smaller than what was anticipated when the president signed the bill.

One consequence is that the federal government may collect hundreds of billions of dollars less over the coming decade than previously projected. The budget deficit has jumped more than 50 percent since Mr. Trump took office and is expected to top $1 trillion in 2020, partly as a result of the tax law.

Laws like the 2017 tax cuts are carried out by federal agencies that first must formalize them via rules and regulations. The process of writing the rules, conducted largely out of public view, can determine who wins and who loses.

Starting in early 2018, senior officials in President Trump’s Treasury Department were swarmed by lobbyists seeking to insulate companies from the few parts of the tax law that would have required them to pay more. The crush of meetings was so intense that some top Treasury officials had little time to do their jobs, according to two people familiar with the process.

The lobbyists targeted a pair of major new taxes that were supposed to raise hundreds of billions of dollars from companies that had been avoiding taxes in part by claiming their profits were earned outside the United States.

The blitz was led by a cross section of the world’s largest companies, including Anheuser-Busch, Credit Suisse, General Electric, United Technologies, Barclays, Coca-Cola, Bank of America, UBS, IBM, Kraft Heinz, Kimberly-Clark, News Corporation, Chubb, ConocoPhillips, HSBC and the American International Group.

Thanks in part to the chaotic manner in which the bill was rushed through Congress — a situation that gave the Treasury Department extra latitude to interpret a law that was, by all accounts, sloppily written — the corporate lobbying campaign was a resounding success.

ImageWestlake Legal Group merlin_130895553_4ce98faa-e477-440f-b670-73e9bce61508-articleLarge How Big Companies Won New Tax Breaks From the Trump Administration United States Politics and Government Trump, Donald J Treasury Department Taxation Tax Shelters Tax Cuts and Jobs Act (2017) Tax Credits, Deductions and Exemptions Procter&Gamble Co Mnuchin, Steven T Internal Revenue Service Income Tax Hanesbrands Inc General Electric Company Federal Taxes (US) Credit Suisse Group AG Corporate Taxes Anheuser-Busch InBev NV

A section of the Senate bill. Congress gave final approval to the Tax Cuts and Jobs Act on Dec. 20, 2017.Credit…Jon Elswick/Associated Press

Through a series of obscure regulations, the Treasury carved out exceptions to the law that mean many leading American and foreign companies will owe little or nothing in new taxes on offshore profits, according to a review of the Treasury’s rules, government lobbying records, and interviews with federal policymakers and tax experts. Companies were effectively let off the hook for tens if not hundreds of billions of taxes that they would have been required to pay.

“Treasury is gutting the new law,” said Bret Wells, a tax law professor at the University of Houston. “It is largely the top 1 percent that will disproportionately benefit — the wealthiest people in the world.”

It is the latest example of the benefits of the Republican tax package flowing disproportionately to the richest of the rich. Even a tax break that was supposed to aid poor communities — an initiative called “opportunity zones” — is being used in part to finance high-end developments in affluent neighborhoods, at times benefiting those with ties to the Trump administration.

Of course, companies didn’t get everything they wanted, and Brian Morgenstern, a Treasury spokesman, defended the department’s handling of the tax rules. “No particular taxpayer or group had any undue influence at any time in the process,” he said.

Ever since the birth of the modern federal income tax in 1913, companies have been concocting ways to avoid it.

In the late 1990s, American companies accelerated their efforts to claim that trillions of dollars of profits they earned in high-tax places like the United States, Japan or Germany were actually earned in low- or no-tax places like Luxembourg, Bermuda or Ireland.

Google, Apple, Cisco, Pfizer, Merck, Coca-Cola, Facebook and many others have deployed elaborate techniques that let the companies pay taxes at far less than the 35 percent corporate tax rate in the United States that existed before the 2017 changes. Their playful nicknames — like Double Irish and Dutch Sandwich — made them sound benign.

The Obama administration and lawmakers from both parties have tried to combat this profit shifting, but their efforts mostly stalled.

When President Trump and congressional Republicans assembled an enormous tax-cut package in 2017, they pitched it in part as a grand bargain: Companies would get the deep tax cuts that they had spent years clamoring for, but the law would also represent a long-overdue effort to fight corporate tax avoidance and the shipment of jobs overseas.

“The situation where companies are actually encouraged to move overseas and keep their profits overseas makes no sense,” Senator Rob Portman, an Ohio Republican, said on the Senate floor in November 2017.

Republicans were racing to secure a legislative victory during Mr. Trump’s first year in office — a period marked by the administration’s failure to repeal Obamacare and an embarrassing procession of political blunders. Sweeping tax cuts could give Republicans a jolt of much-needed momentum heading into the 2018 midterm elections.

To speed things along, Republicans used a congressional process known as “budget reconciliation,” which blocked Democrats from filibustering and allowed Republicans to pass the bill with a simple majority. But to qualify for that parliamentary green light, the net cost of the bill — after accounting for different tax cuts and tax increases — had to be less than $1.5 trillion over 10 years.

The bill’s cuts totaled $5.5 trillion. The corporate income tax rate shrank to 21 percent from 35 percent, and companies also won a tax break on the trillions in profits brought home from offshore.

To close the gap between the $5.5 trillion in cuts and the maximum price tag of $1.5 trillion, the package sought to raise new revenue by eliminating deductions and introducing new taxes.

Two of the biggest new taxes were supposed to apply to multinational corporations, and lawmakers bestowed them with easy-to-pronounce acronyms — BEAT and GILTI — that belie their complexity.

BEAT stands for the base erosion and anti-abuse tax. It was aimed largely at foreign companies with major operations in the United States, some of which had for years minimized their United States tax bills by shifting money between American subsidiaries and their foreign parent companies.

Instead of paying taxes in the United States, companies send the profits to countries with lower tax rates.

The BEAT aimed to make that less lucrative. Some payments that companies sent to their foreign affiliates would face a new 10 percent tax.

The other big measure was called GILTI: global intangible low-taxed income.

To reduce the benefit companies reaped by claiming that their profits were earned in tax havens, the law imposed an additional tax of up to 10.5 percent on some offshore earnings.

The Joint Committee on Taxation, the congressional panel that estimates the impacts of tax changes, predicted that the BEAT and GILTI would bring in $262 billion over a decade — roughly enough to fund the Treasury Department, the Environmental Protection Agency and the National Cancer Institute for 10 years.

Sitting in the Oval Office on Dec. 22, 2017, Mr. Trump signed the tax cuts into law. It was — and remains — the president’s most significant legislative achievement.

From the start, the new taxes were pocked with loopholes.

In the BEAT, for example, Senate Republicans hoped to avoid a revolt by large companies. They wrote the law so that any payments an American company made to a foreign affiliate for something that went into a product — as opposed to, say, interest payments on loans — were excluded from the tax.

Let’s say an American pharmaceutical company sells pills in the United States. The pills are manufactured by a subsidiary in Ireland, and the American parent pays the Irish unit for the pills before they are sold to the public. Those payments mean that the company’s profits in the United States, where taxes are relatively high, go down; profits in tax-friendly Ireland go up.

Because such payments to Ireland wouldn’t be taxed, some companies that had been the most aggressive at shifting profits into offshore havens were spared the full brunt of the BEAT.

Other companies, like General Electric, were surprised to be hit by the new tax, thinking it applied only to foreign multinationals, according to Pat Brown, who had been G.E.’s top tax expert.

Mr. Brown, now the head of international tax policy at the accounting and consulting firm PwC, said on a podcast this year that the Trump administration should bridge the gap between expectations about the tax law and how it was playing out in reality. He lobbied the Treasury on behalf of G.E.

“The question,” he said, “is how creative and how expansive is Treasury and the I.R.S. able to be.”

Almost immediately after Mr. Trump signed the bill, companies and their lobbyists — including G.E.’s Mr. Brown — began a full-court pressure campaign to try to shield themselves from the BEAT and GILTI.

The Treasury Department had to figure out how to carry out the hastily written law, which lacked crucial details.

Chip Harter was the Treasury official in charge of writing the rules for the BEAT and GILTI. He had spent decades at PwC and the law firm Baker McKenzie, counseling companies on the same sorts of tax-avoidance arrangements that the new law was supposed to discourage.

Starting in January 2018, he and his colleagues found themselves in nonstop meetings — roughly 10 a week at times — with lobbyists for companies and industry groups.

The Organization for International Investment — a powerful trade group for foreign multinationals like the Swiss food company Nestlé and the Dutch chemical maker LyondellBasell — objected to a Treasury proposal that would have prevented companies from using a complex currency-accounting maneuver to avoid the BEAT.

The group’s lobbyists were from PwC and Baker McKenzie, Mr. Harter’s former firms, according to public lobbying disclosures. One of them, Pam Olson, was the top Treasury tax official in the George W. Bush administration. (Mr. Morgenstern, the Treasury spokesman, said Mr. Harter didn’t meet with PwC while the rules were being written.)

This month, the Treasury issued the final version of some of the BEAT regulations. The Organization for International Investment got what it wanted.

One of the most effective campaigns, with the greatest financial consequence, was led by a small group of large foreign banks, including Credit Suisse and Barclays.

American regulators require international banks to ensure that their United States divisions are financially equipped to absorb big losses in a crisis. To meet those requirements, foreign banks lend the money to their American outposts. Those loans accrue interest. Under the BEAT, the interest that the American units paid to their European parents would often be taxed.

“Foreign banks should not be penalized by the U.S. tax laws for complying” with regulations, said Briget Polichene, chief executive of the Institute of International Bankers, whose members include many of the world’s largest banks.

Banks flooded the Treasury Department with lobbyists and letters.

Late last year, Mr. Harter went to Treasury Secretary Steven Mnuchin and told him about the plan to give the banks a break. Mr. Mnuchin — a longtime banking executive before joining the Trump administration — signed off on the new exemptions, according to a person familiar with the matter.

A few months later, the tax-policy office handed another victory to the foreign banks, ruling that an even wider range of bank payments would be exempted.

Among the lobbyists who successfully pushed the banks’ case in private meetings with senior Treasury officials was Erika Nijenhuis of the law firm Cleary Gottlieb. Her client was the Institute of International Bankers.

In September 2019, Ms. Nijenhuis took off her lobbying hat and joined the Treasury’s Office of Tax Policy, which was still writing the rules governing the tax law.

Some tax experts said that the Treasury had no legal authority to exempt the bank payments from the BEAT; only Congress had that power. The Trump administration created the exception “out of whole cloth,” said Mr. Wells, the University of Houston professor.

Even inside the Treasury, the ruling was controversial. Some officials told Mr. Harter — the senior official in charge of the international rules — that the department lacked the power, according to people familiar with the discussions. Mr. Harter dismissed the objections.

Officials at the Joint Committee on Taxation have calculated that the exemptions for international banks could reduce by up to $50 billion the revenue raised by the BEAT.

Over all, the BEAT is likely to collect “a small fraction” of the $150 billion of new tax revenue that was originally projected by Congress, said Thomas Horst, who advises companies on their overseas tax arrangements. He came to that conclusion after reviewing the tax disclosures in more than 140 annual reports filed by multinationals.

Mr. Morgenstern, the Treasury spokesman, said: “We thoroughly reviewed these issues internally and are fully comfortable that we have the legal authority for the conclusions reached in these regulations.” He said Ms. Nijenhuis was not involved in crafting the BEAT rules.

He also said the Treasury decided that changing the rules for foreign banks was appropriate.

“We were responsive to job creators,” he said.

The lobbying surrounding the GILTI was equally intense — and, once again, large companies won valuable concessions.

Back in 2017, Republicans said the GILTI was meant to prevent companies from avoiding American taxes by moving their intellectual property overseas.

In the pharmaceutical and tech industries in particular, profits are often tied to patents. Companies had sold the rights to their patents to subsidiaries in offshore tax havens. The companies then imposed steep licensing fees on their American units. The sleight-of-hand transactions reduced profits in the United States and left them in places like Bermuda and the British Virgin Islands.

But after the law was enacted, large multinationals in industries like consumer products discovered that the GILTI tax applied to them, too. That threatened to cut into their windfalls from the corporate tax rate’s falling to 21 percent from 35 percent.

Lobbyists for Procter & Gamble and other companies turned to lawmakers for help. They asked members of the Senate Finance Committee to tell Treasury officials that they hadn’t intended the GILTI to affect their industries. It was a simple but powerful strategy: Because the Treasury was required to consider congressional intent when writing the tax rules, such explanations could sway the outcome.

Several senators then met with Mr. Mnuchin to discuss the rules.

One lobbyist, Michael Caballero, had been a senior Treasury official in the Obama administration. His clients included Credit Suisse and the industrial conglomerate United Technologies. He met repeatedly with Treasury and White House officials and pushed them to modify the rules so that big companies hit by the GILTI wouldn’t lose certain tax deductions.

In essence, the “high-tax exception” that Mr. Caballero was proposing would allow companies to deduct expenses that they incurred in their overseas operations from their American profits — lowering their United States tax bills.

Other companies jumped on the bandwagon. News Corporation, Liberty Mutual, Anheuser-Busch, Comcast and P.&G. wrote letters or dispatched lobbyists to argue for the high-tax exception.

After months of meetings with lobbyists, the Treasury announced in June 2019 that it was creating a version of the exception that the companies had sought.

Two years after the tax cuts became law, their impact is becoming clear.

Companies continue to shift hundreds of billions of dollars to overseas tax havens, ensuring that huge sums of corporate profits remain out of reach of the United States government.

The Internal Revenue Service is collecting tens of billions of dollars less in corporate taxes than Congress projected, inflating the tax law’s 13-figure price tag.

This month, the Organization for Economic Cooperation and Development calculated that the United States in 2018 experienced the largest drop in tax revenue of any of the group’s 36 member countries. The United States also had by far the largest budget deficit of any of those countries.

In the coming days, the Treasury is likely to complete its last round of rules carrying out the tax cuts. Big companies have spent this fall trying to win more.

In September, Chris D. Trunck, the vice president for tax at Owens Corning, the maker of insulation and roofing materials, wrote to the I.R.S. He pushed the Treasury to tinker with the GILTI rules in a way that would preserve hundreds of millions of dollars of tax benefits that Owens Corning had accumulated from settling claims that it poisoned employees and others with asbestos.

The same month, the underwear manufacturer Hanes sent its own letter to Mr. Mnuchin. The letter, from Bryant Purvis, Hanes’s vice president of global tax, urged Mr. Mnuchin to broaden the high-tax exception so that more companies could take advantage of it.

Otherwise, Mr. Purvis warned, “the GILTI regime will become an impediment to U.S. companies and their ability to not only compete globally as a general matter, but also their ability to remain U.S.-headquartered if they are to maintain the overall fiscal health of their business.”

The implied threat was clear: If the Treasury didn’t further chip away at the new tax, companies like Hanes, based in Winston-Salem, N.C., might have no choice but to move their headquarters overseas.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Congressional Negotiators Agree to Extend Some Tax Credits and Add to Debt

Westlake Legal Group 17dc-tax-facebookJumbo Congressional Negotiators Agree to Extend Some Tax Credits and Add to Debt United States Politics and Government Tax Cuts and Jobs Act (2017) Tax Credits, Deductions and Exemptions Mnuchin, Steven T Federal Taxes (US) Federal Budget (US) Enterprise Zones Alternative and Renewable Energy

WASHINGTON — Brewers, distillers, racehorse owners, churches with parking lots and some wind energy producers won federal tax breaks in a last-hour congressional agreement on taxes and spending that was unveiled Tuesday morning.

The tax-break bonanza has become a rite of passage, transcending partisan bickering and congressional rancor and allowing lawmakers to dole out special-interest tax breaks by attaching the provisions to must-pass legislation.

The agreement reached on Tuesday capped months of contentious negotiations between lawmakers from both parties and the White House over whether to extend a series tax credits and other provisions that were set to expire or had already ended.

Among the biggest changes tucked into the broader spending agreement is the permanent repeal of taxes on medical devices, health insurers and generous health plans. Those taxes were meant to fund the Affordable Care Act, which the Trump administration has targeted for elimination.

Congressional staff and lobbyists were referring to the agreement on Tuesday as a “skinny” deal, which fell short of both Democratic and Republican ambitions for a more expansive effort that could have included additional aid to low-income families and fixes for errors written into the sweeping package of tax cuts that President Trump signed in 2017.

Still, the provisions in the deal will reward certain industries and businesses with tax breaks that could add nearly $500 billion to the federal debt over the next decade, according to some initial estimates.

“This is a gluttonous tax binge that has the desperate feel of politicians scrambling to heap political favors on powerful interest groups,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, “and there isn’t a single credible justification to defend it.”

Negotiators reached the deal hours before they were set to vote on spending legislation to keep the government fully funded through the end of the fiscal year. The package of extenders, through a procedural maneuver on the House floor, is expected to be attached to one of the spending packages up for a vote Tuesday.

It will then head to the Senate, which is expected to take up the legislation before government funding expires on Friday.

The agreement did not include the kind of dramatic increases in credits for low-income families that Democrats had hoped for and also fell short of Republicans’ hopes of correcting language in the 2017 tax law that has hurt some business owners, including a provision that accidentally reduced tax benefits for restaurant renovations.

It also violates a long-running promise by fiscal conservatives to kill expiring tax credits once and for all.

Some senators and outside groups had also hoped to include measures to improve accountability and transparency in “opportunity zones,” a creation of the 2017 law that were pitched as an effort to boost struggling communities but have at times served to enrich wealthy developers and already affluent areas. None of those measures survived in the final agreement.

Congressional staff said that a broader agreement, including the extension of more tax credits, was at hand this weekend, but that White House officials and Treasury Secretary Steven Mnuchin ultimately rejected it. Mr. Mnuchin pushed for any larger deal to include the relief for restaurant owners, they said, but Democrats were unwilling to support it without more in return on their priorities.

The deal as agreed to includes a few reversals from the 2017 law. It eliminates a tax increase that hit the children and spouses of deceased members of the military, along with a new tax that was set to hit churches and other nonprofit organizations that offer parking to their employees.

It extends tax benefits for railroad track maintenance, racehorse and racetrack ownership, hiring and investment on Native American reservations and some victims of natural disasters, among others. It extends tax advantages for winemakers, beer brewers and liquor distillers.

It also extends a handful of credits for renewable energy, such as wind production, but does not include an extended credit for the buyers of electric cars.

Gregory Wetstone, president of the American Council on Renewable Energy, called the package a “squandered opportunity” on Tuesday. “While A.C.O.R.E. supports the modest extensions in the package,” he said, “they will do little for renewable growth and next to nothing to address climate change.”

Those that advocate lower taxes said extending the special-interest tax breaks would do little to encourage investment and economic growth, in part because some of those extensions apply retroactively to tax years already gone by.

“Many of these tax provisions expired two years ago,” said Nicole Kaeding, an economist and the vice president of policy promotion at the National Taxpayers Union Foundation. “Retroactively extending these provisions doesn’t change economic behavior; we can’t change the past. All it does is provide a windfall to these companies years after their activities occurred.”

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Congressional Negotiators Agree to Extend Some Tax Credits and Add to Debt

Westlake Legal Group 17dc-tax-facebookJumbo Congressional Negotiators Agree to Extend Some Tax Credits and Add to Debt United States Politics and Government Tax Cuts and Jobs Act (2017) Tax Credits, Deductions and Exemptions Mnuchin, Steven T Federal Taxes (US) Federal Budget (US) Enterprise Zones Alternative and Renewable Energy

WASHINGTON — Brewers, distillers, racehorse owners, churches with parking lots and some wind energy producers won federal tax breaks in a last-hour congressional agreement on taxes and spending that was unveiled Tuesday morning.

The tax-break bonanza has become a rite of passage, transcending partisan bickering and congressional rancor and allowing lawmakers to dole out special-interest tax breaks by attaching the provisions to must-pass legislation.

The agreement reached on Tuesday capped months of contentious negotiations between lawmakers from both parties and the White House over whether to extend a series tax credits and other provisions that were set to expire or had already ended.

Among the biggest changes tucked into the broader spending agreement is the permanent repeal of taxes on medical devices, health insurers and generous health plans. Those taxes were meant to fund the Affordable Care Act, which the Trump administration has targeted for elimination.

Congressional staff and lobbyists were referring to the agreement on Tuesday as a “skinny” deal, which fell short of both Democratic and Republican ambitions for a more expansive effort that could have included additional aid to low-income families and fixes for errors written into the sweeping package of tax cuts that President Trump signed in 2017.

Still, the provisions in the deal will reward certain industries and businesses with tax breaks that could add nearly $500 billion to the federal debt over the next decade, according to some initial estimates.

“This is a gluttonous tax binge that has the desperate feel of politicians scrambling to heap political favors on powerful interest groups,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, “and there isn’t a single credible justification to defend it.”

Negotiators reached the deal hours before they were set to vote on spending legislation to keep the government fully funded through the end of the fiscal year. The package of extenders, through a procedural maneuver on the House floor, is expected to be attached to one of the spending packages up for a vote Tuesday.

It will then head to the Senate, which is expected to take up the legislation before government funding expires on Friday.

The agreement did not include the kind of dramatic increases in credits for low-income families that Democrats had hoped for and also fell short of Republicans’ hopes of correcting language in the 2017 tax law that has hurt some business owners, including a provision that accidentally reduced tax benefits for restaurant renovations.

It also violates a long-running promise by fiscal conservatives to kill expiring tax credits once and for all.

Some senators and outside groups had also hoped to include measures to improve accountability and transparency in “opportunity zones,” a creation of the 2017 law that were pitched as an effort to boost struggling communities but have at times served to enrich wealthy developers and already affluent areas. None of those measures survived in the final agreement.

Congressional staff said that a broader agreement, including the extension of more tax credits, was at hand this weekend, but that White House officials and Treasury Secretary Steven Mnuchin ultimately rejected it. Mr. Mnuchin pushed for any larger deal to include the relief for restaurant owners, they said, but Democrats were unwilling to support it without more in return on their priorities.

The deal as agreed to includes a few reversals from the 2017 law. It eliminates a tax increase that hit the children and spouses of deceased members of the military, along with a new tax that was set to hit churches and other nonprofit organizations that offer parking to their employees.

It extends tax benefits for railroad track maintenance, racehorse and racetrack ownership, hiring and investment on Native American reservations and some victims of natural disasters, among others. It extends tax advantages for winemakers, beer brewers and liquor distillers.

It also extends a handful of credits for renewable energy, such as wind production, but does not include an extended credit for the buyers of electric cars.

Gregory Wetstone, president of the American Council on Renewable Energy, called the package a “squandered opportunity” on Tuesday. “While A.C.O.R.E. supports the modest extensions in the package,” he said, “they will do little for renewable growth and next to nothing to address climate change.”

Those that advocate lower taxes said extending the special-interest tax breaks would do little to encourage investment and economic growth, in part because some of those extensions apply retroactively to tax years already gone by.

“Many of these tax provisions expired two years ago,” said Nicole Kaeding, an economist and the vice president of policy promotion at the National Taxpayers Union Foundation. “Retroactively extending these provisions doesn’t change economic behavior; we can’t change the past. All it does is provide a windfall to these companies years after their activities occurred.”

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Symbol of ’80s Greed Stands to Profit From Trump Tax Break for Poor Areas

Westlake Legal Group 26milken-promo-facebookJumbo Symbol of ’80s Greed Stands to Profit From Trump Tax Break for Poor Areas United States Politics and Government Trump, Donald J Treasury Department Tax Credits, Deductions and Exemptions Mnuchin, Steven T Milken, Michael R Milken Institute Federal Taxes (US) Enterprise Zones Area Planning and Renewal

RENO, Nev. — In the 1980s, Michael Milken embodied Wall Street greed. A swashbuckling financier, he was charged with playing a central role in a vast insider-trading scheme and was sent to prison for violating federal securities and tax laws. He was an inspiration for the Gordon Gekko character in the film “Wall Street.”

Mr. Milken has spent the intervening decades trying to rehabilitate his reputation through an influential nonprofit think tank, the Milken Institute, devoted to initiatives “that advance prosperity.”

These days, the Milken Institute is a leading proponent of a new federal tax break that was intended to coax wealthy investors to plow money into distressed communities known as “opportunity zones.” The institute’s leaders have helped push senior officials in the Trump administration to make the tax incentive more generous, even though it is under fire for being slanted toward the wealthy.

Mr. Milken, it turns out, is in a position to personally gain from some of the changes that his institute has urged the Trump administration to enact. In one case, the Treasury secretary, Steven Mnuchin, directly intervened in a way that benefited Mr. Milken, his longtime friend.

It is a vivid illustration of the power that Mr. Milken, who was barred from the securities industry and fined $600 million as part of his 1990 felony conviction, has amassed in President Trump’s Washington. In addition to the favorable tax-policy changes, some of Mr. Trump’s closest advisers — including Mr. Mnuchin, Jared Kushner and Rudolph W. Giuliani — have lobbied the president to pardon Mr. Milken for his crimes, or supported that effort, according to people familiar with the effort.

While the Milken Institute’s advocacy of opportunity zones is public, Mr. Milken’s financial stake in the outcome is not.

The former “junk bond king” has investments in at least two major real estate projects inside federally designated opportunity zones in Nevada, near Mr. Milken’s Lake Tahoe vacation home, according to public records reviewed by The New York Times.

One of those developments, inside an industrial park, is a nearly 700-acre site in which Mr. Milken is a major investor. Last year, after pressure from Mr. Milken’s business partner and other landowners, the Treasury Department ignored its own guidelines on how to select opportunity zones and made the area eligible for the tax break, according to people involved in the discussions and records reviewed by The Times.

The unusual decision was made at the personal instruction of Mr. Mnuchin, according to internal Treasury Department emails. It came shortly after he had spent time with Mr. Milken at an event his institute hosted.

“People were troubled,” said Annie Donovan, who previously ran the Treasury office in charge of designating areas as opportunity zones. She and two of her former colleagues said they were upset that the Treasury secretary was intervening to bend rules, though they said they didn’t realize at the time that Mr. Mnuchin’s friend stood to profit. The agency’s employees, Ms. Donovan said, “were put in a position where they had to compromise the integrity of the process.”

The opportunity zone initiative, tucked into the tax cut bill that Mr. Trump signed into law in 2017, has become one of the White House’s signature initiatives. It allows investors to delay or avoid taxes on capital gains by putting money in projects or companies in more than 8,700 federally designated opportunity zones. Mr. Trump has boasted that it will revitalize downtrodden neighborhoods.

But the incentive, also championed by some prominent Democrats, has been dogged by criticism that it is a gift to wealthy investors and real estate developers. From the start, the tax break targeted people with capital gains, the vast majority of which are held by the very richest investors. The Treasury permitted opportunity zones to encompass not only poor communities but some adjacent affluent neighborhoods. Much of the money so far has flowed to those wealthier areas, including many projects that were planned long before the new law was enacted.

Investors and others — including Mr. Milken’s institute — have been pushing the Treasury Department to write the rules governing opportunity zones in ways that would make it easier to qualify for the tax break. That campaign worked, and Mr. Milken is among the potential beneficiaries.

Geoffrey Moore, a spokesman for Mr. Milken, confirmed that Mr. Milken had investments inside opportunity zones, though they are a sliver of his overall real estate holdings. He disputed that Mr. Milken had used his institute or Washington connections to benefit his investments and said no one at the institute “has any specific knowledge of Mike’s personal investments.”

Mr. Moore added that Mr. Milken’s support for opportunity zones was based on his longstanding belief “that jobs and the democratization of ownership are the keys to helping people in economically struggling areas.”

A spokesman for the Milken Institute, Geoffrey Baum, said that “to suggest that the work of the Milken Institute is motivated by or connected to Mr. Milken’s investments is flat-out wrong.” He said the institute advocated changes that were intended to spread the benefits to more low-income communities, not to help the wealthy.

The White House declined to comment on whether Mr. Trump is considering a presidential pardon for Mr. Milken.

Mr. Milken — operating from an X-shaped trading desk in Beverly Hills, Calif. — was a Wall Street legend. He pioneered the junk bond, which enabled financially risky companies to borrow billions of dollars and ignited a wave of often-hostile corporate takeovers that came to define a go-go era. His firm, Drexel Burnham Lambert, hosted an annual event, which came to be known as the Predators’ Ball, where the era’s greatest financiers mingled. Mr. Milken became a billionaire.

Then, in 1989, federal prosecutors charged him with violating securities and tax laws and with being part of a lucrative insider-trading ring. The next year, Drexel Burnham went bankrupt.

Mr. Milken pleaded guilty and was sentenced to 10 years in prison and paid $600 million in fines. After cooperating with the government, he ended up serving about two years behind bars.

Mr. Milken emerged with a considerable fortune intact. He invested in companies in for-profit education, health care and fast food, according to securities filings and company announcements. He also acquired lots of real estate, coming to own roughly 700 properties around the United States, Mr. Moore said.

He continued to attract scrutiny from regulators, including one case in which Mr. Milken paid $47 million to resolve the Securities and Exchange Commission’s allegations that he had violated his lifetime ban from the securities industry.

Mr. Milken, however, has largely managed to restore his reputation — and his clout. His family gave tens of millions of dollars to his Milken Institute, which he founded in 1991 and whose board of directors he leads. After battling prostate cancer, he helped raise hundreds of millions of dollars to fund cancer research.

In Washington, Mr. Milken, 73, and his institute have courted influence, wooing and sometimes adding former federal officials. His family recently spent more than $85 million to buy three buildings opposite the White House and the Treasury Department, which he is transforming into his institute’s new Washington offices.

The most public display of his renewed stature comes each spring in Los Angeles when Mr. Milken presides over a glitzy gathering at the Beverly Hilton — the same venue where his famed Predators’ Balls took place three decades ago.

The Milken Institute’s annual conference attracts thousands of the world’s most powerful people — from government, finance, medicine, Hollywood and the like — for a frenzy of high-powered networking and conspicuous consumption. Recent guests have included Leon Black, the chairman of Apollo Global Management; David M. Solomon, the chief executive of Goldman Sachs; Eric Schmidt, the former chief executive of Google; and the New England Patriots quarterback Tom Brady.

Mr. Milken is the power broker at the center of the action. Onstage, he interviews famous guests. In private, he organizes exclusive dinners. Some have called the event the Davos of North America.

In the Trump era, cabinet secretaries and White House advisers have been among the event’s marquee guests, more so than in other recent administrations. Coveted speaking roles have gone to Ivanka Trump and her husband, Mr. Kushner, giving them access to an elite audience.

At last year’s event in Beverly Hills, attendees included Commerce Secretary Wilbur Ross and Mr. Mnuchin. The Treasury secretary was accompanied by several senior aides, including Daniel Kowalski, who is overseeing the department’s drafting of the opportunity zone rules.

Mr. Kowalski, who has spent months drumming up support across the country for opportunity zones, is well acquainted with the Milken Institute.

After the tax incentive became law, it was up to the Treasury, and Mr. Kowalski in particular, to put it in effect through a series of rules. Officials at the Milken Institute met repeatedly with him to try to influence that rule-writing process. The institute submitted a series of letters and presentations to the Treasury and the Internal Revenue Service, and at times directly to Mr. Mnuchin, pushing for rules that would make the tax break easier to qualify for.

“Helping to shape the rules of the road” is how the Milken Institute describes its work on opportunity zones.

The institute “is incredibly active,” Mr. Kowalski said in an interview. He said he thought he had discussed opportunity zones with Mr. Milken, although he said he could not specifically recall. He disputed that Mr. Milken or his institute exerted any special influence over the Treasury Department.

Among the Milken Institute’s proposals was for the Treasury to give investors a generous amount of time to build on opportunity zone land and to reduce the amount that investors had to spend upgrading properties to be eligible for the tax break. Those changes would make it easier for investors to reap the benefits.

The institute also asked the Treasury a question that would clarify if investors who owned land in opportunity zones before the tax law was passed were eligible to receive the benefits. The Treasury ruled that such investments were permissible, a controversial decision since the purpose of the opportunity zone initiative was to spur new investments, not reward existing projects.

Mr. Milken’s spokesman, Mr. Moore, said Mr. Milken “never attended any meeting focused on opportunity zone regulations with any federal agency, nor did he consult with any institute representatives who may have interacted with any agency.”

But Aron Betru, who led the Milken Institute’s opportunity zone efforts, told The Times in an interview that he did discuss opportunity zones with Mr. Milken, though he said he was not aware of Mr. Milken’s specific investments. And in 2018 Mr. Mnuchin and Mr. Milken attended a small, private event, sponsored by the institute, to discuss opportunity zones.

High above Reno, on a vast hillside where wild horses roam, is the site of one of Nevada’s biggest opportunity zones.

The center of this area is known as Comstock Meadows, a reference to the 1859 discovery of the so-called Comstock Lode, one of the largest deposits of silver ever found in the United States. The find generated hundreds of millions of dollars in wealth, creating a boomtown in nearby Virginia City.

Today it is home to the Tahoe-Reno Industrial Center. Lured by cheap land, Google is building a huge new complex inside the industrial park. Tesla and Switch, the data-center company, recently opened their own operations. And down the street, Mr. Milken co-owns a company that holds nearly 700 acres of empty land.

He and his partner — Chip Bowlby, president of a development company called Reno Land — planned to use that space to open a so-called tech incubator, where smaller companies could set up operations, among other possible uses.

Being inside an opportunity zone would potentially be a huge boon for the venture. It would mean that start-ups at the tech incubator could attract tax-advantaged money from outside investors.

Nevada officials wanted to nominate the census tract that included the industrial park as an opportunity zone. But in early 2018, Treasury officials had ruled that the area was ineligible because its residents were too affluent.

Major landowners at the site, including Mr. Bowlby, urged state and local officials to try to get the Treasury to reverse that ruling, said Kris Thompson, the project manager at the industrial center.

Storey County, where the industrial park is situated, deployed Jon Porter, a former House Republican from Nevada who is now a lobbyist, to push the matter. Dean Heller, at the time a Republican senator, and Brian Sandoval, then the governor, also were enlisted and had phone calls with Mr. Mnuchin around that time, according to Treasury records. Mr. Heller, Mr. Porter and Mr. Sandoval did not respond to requests for comment.

Just as that lobbying intensified in the spring of 2018, Mr. Milken opened his institute’s annual conference in Beverly Hills.

Mr. Mnuchin was a featured guest. “It’s great to be here with you and all my L.A. friends,” the Treasury secretary said in an onstage interview on April 30.

That afternoon, the institute organized an invitation-only meeting with Mr. Mnuchin and his staff to discuss opportunity zones. Other listed attendees included Sean Parker, the former Facebook president and an early advocate of opportunity zones, and Raymond J. McGuire, a top Citigroup executive. Mr. Betru was the moderator.

Within days, the Treasury Department had shifted its position and was now willing to let the state nominate the area around the Nevada industrial park as an opportunity zone.

Mr. Mnuchin told Mr. Kowalski to inform other Treasury officials that they should accept Storey County’s nomination, according to email records reviewed by The Times.

Mr. Mnuchin spoke on the phone on May 8 with Mr. Sandoval. Forty-five minutes later, Mr. Sandoval formally nominated the site to be part of an opportunity zone, email records show. And the decision was soon officially blessed by the Treasury Department. (While the Treasury’s reversal has been reported, Mr. Milken’s connection has not been previously disclosed.)

Treasury officials said the change was part of an effort to iron out inconsistencies in different Treasury rules. But the switch provoked intense protests from Treasury and I.R.S. employees.

“Failure to apply the designation standards equally across the board will call into question the legitimacy of the process by which the designations were made,” an unnamed I.R.S. employee wrote in an internal memo in May 2018. It added that the appearance of “arbitrary” Treasury standards risked “opening the door for accusations that the determination process was influenced by political considerations or bias.”

“Any such controversy would in turn taint the opportunity zones and potentially chill or cloud the incentive for investors to invest in the opportunity zones,” the memo said.

In an interview this month at an event co-sponsored by the Milken Institute in Jackson, Miss., Mr. Kowalski would not comment on whether Mr. Mnuchin had been the driving force behind the Treasury’s reversal. “I can certainly say he was apprised of the situation,” Mr. Kowalski said.

Brett Theodos, a senior fellow at the Urban Institute, which has advised state governments including Nevada on their nominations of opportunity zones, said the Treasury’s decision-making appeared problematic. “Making exceptions for the politically connected is deeply troubling,” he said.

Spokesmen for Mr. Milken and Mr. Mnuchin said the two men had never discussed the Storey County issue. Mr. Mnuchin’s spokesman, Devin O’Malley, said Mr. Mnuchin “had no knowledge of Milken’s investments in Nevada.”

In August 2018, Mr. Mnuchin and Mr. Milken met again. This time, the occasion was a small conference hosted by the Milken Institute to discuss opportunity zones. The event took place at the Hamptons home of the real estate developer Richard LeFrak, a business associate of Mr. Trump, according to the event’s agenda.

A handout from the event, which was later posted online, showed a map of all 8,764 opportunity zones in the United States, but focused on the virtues of just one specific area: Reno. The handout promoted the city as a “hub to the western United States.”

The handout did not mention that Mr. Milken was a major investor in two projects in opportunity zones in that area: the tech incubator in the industrial park and a housing, hotel and retail development on the site of an old shopping mall in Reno.

As his institute was continuing to push the Treasury to tinker with its opportunity zone rules, Mr. Milken gave Mr. Mnuchin a flight in January on his private jet to Los Angeles, where both men have homes.

Three months later, the Treasury Department heeded the institute’s request and clarified that investors could receive the opportunity zone tax benefits by simply leasing properties to themselves. As a result, investors who had long owned land inside opportunity zones were now eligible for the tax break.

In a separate round of rule changes, Treasury agreed to loosen rules governing how quickly developers had to start work on opportunity zone projects and how much money they had to spend — both revisions that the Milken Institute, among many others, had sought.

This was a potential win for Mr. Milken. His partner, Mr. Bowlby, had bought the Nevada real estate — for both the tech incubator and the residential and retail complex — before the areas were designated as opportunity zones.

Mr. Bowlby, who didn’t respond to requests for comment, said at a public event this year that he was using a lease on his Reno project with Mr. Milken “so we can still be qualified for the opportunity zone.”

The Treasury’s leasing decision has faced criticism.

“Anybody who owned property in the zone prior to 2018 would have been out of luck until these rules,” said Michelle Layser, a tax law professor at the University of Illinois College of Law. “This really opens the door.”

Mr. Moore, the spokesman for Mr. Milken, denied that he received special treatment.

“Your insinuation that Mike has reaped personal financial benefits from Milken Institute programs is outrageous,” he said. “It’s clear that you are less interested in the objective truth than in assigning to Mike Milken sinister motives that simply do not exist.”

Mr. Moore said that Mr. Milken hadn’t hidden the fact that he had investments in the Nevada opportunity zones. He said Mr. Milken had described them at the Hamptons event that Mr. Mnuchin attended. “There was nothing secretive about it,” he said.

Mr. Kowalski said he hadn’t been aware that Mr. Milken was an investor in the Nevada projects at the same time that his institute was seeking to change the rules governing opportunity zones.

Was he surprised? Mr. Kowalski paused. “Nothing surprises me anymore,” he said.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Symbol of ’80s Greed May Profit From Trump Tax Break for Poor Areas

Westlake Legal Group 26milken-promo-facebookJumbo Symbol of ’80s Greed May Profit From Trump Tax Break for Poor Areas United States Politics and Government Trump, Donald J Treasury Department Tax Credits, Deductions and Exemptions Mnuchin, Steven T Milken, Michael R Milken Institute Federal Taxes (US) Enterprise Zones Area Planning and Renewal

RENO, Nev. — In the 1980s, Michael Milken embodied Wall Street greed. A swashbuckling financier, he was charged with playing a central role in a vast insider-trading scheme and was sent to prison for violating federal securities and tax laws. He was an inspiration for the Gordon Gekko character in the film “Wall Street.”

Mr. Milken has spent the intervening decades trying to rehabilitate his reputation through an influential nonprofit think tank, the Milken Institute, devoted to initiatives “that advance prosperity.”

These days, the Milken Institute is a leading proponent of a new federal tax break that was intended to coax wealthy investors to plow money into distressed communities known as “opportunity zones.” The institute’s leaders have helped push senior officials in the Trump administration to make the tax incentive more generous, even though it is under fire for being slanted toward the wealthy.

Mr. Milken, it turns out, is in a position to personally gain from some of the changes that his institute has urged the Trump administration to enact. In one case, the Treasury secretary, Steven Mnuchin, directly intervened in a way that benefited Mr. Milken, his longtime friend.

It is a vivid illustration of the power that Mr. Milken, who was barred from the securities industry and fined $600 million as part of his 1990 felony conviction, has amassed in President Trump’s Washington. In addition to the favorable tax-policy changes, some of Mr. Trump’s closest advisers — including Mr. Mnuchin, Jared Kushner and Rudolph W. Giuliani — have lobbied the president to pardon Mr. Milken for his crimes, or supported that effort, according to people familiar with the effort.

While the Milken Institute’s advocacy of opportunity zones is public, Mr. Milken’s financial stake in the outcome is not.

The former “junk bond king” has investments in at least two major real estate projects inside federally designated opportunity zones in Nevada, near Mr. Milken’s Lake Tahoe vacation home, according to public records reviewed by The New York Times.

One of those developments, inside an industrial park, is a nearly 700-acre site in which Mr. Milken is a major investor. Last year, after pressure from Mr. Milken’s business partner and other landowners, the Treasury Department ignored its own guidelines on how to select opportunity zones and made the area eligible for the tax break, according to people involved in the discussions and records reviewed by The Times.

The unusual decision was made at the personal instruction of Mr. Mnuchin, according to internal Treasury Department emails. It came shortly after he had spent time with Mr. Milken at an event his institute hosted.

“People were troubled,” said Annie Donovan, who previously ran the Treasury office in charge of designating areas as opportunity zones. She and two of her former colleagues said they were upset that the Treasury secretary was intervening to bend rules, though they said they didn’t realize at the time that Mr. Mnuchin’s friend stood to profit. The agency’s employees, Ms. Donovan said, “were put in a position where they had to compromise the integrity of the process.”

The opportunity zone initiative, tucked into the tax cut bill that Mr. Trump signed into law in 2017, has become one of the White House’s signature initiatives. It allows investors to delay or avoid taxes on capital gains by putting money in projects or companies in more than 8,700 federally designated opportunity zones. Mr. Trump has boasted that it will revitalize downtrodden neighborhoods.

But the incentive, also championed by some prominent Democrats, has been dogged by criticism that it is a gift to wealthy investors and real estate developers. From the start, the tax break targeted people with capital gains, the vast majority of which are held by the very richest investors. The Treasury permitted opportunity zones to encompass not only poor communities but some adjacent affluent neighborhoods. Much of the money so far has flowed to those wealthier areas, including many projects that were planned long before the new law was enacted.

Investors and others — including Mr. Milken’s institute — have been pushing the Treasury Department to write the rules governing opportunity zones in ways that would make it easier to qualify for the tax break. That campaign worked, and Mr. Milken is among the potential beneficiaries.

Geoffrey Moore, a spokesman for Mr. Milken, confirmed that Mr. Milken had investments inside opportunity zones, though they are a sliver of his overall real estate holdings. He disputed that Mr. Milken had used his institute or Washington connections to benefit his investments and said no one at the institute “has any specific knowledge of Mike’s personal investments.”

Mr. Moore added that Mr. Milken’s support for opportunity zones was based on his longstanding belief “that jobs and the democratization of ownership are the keys to helping people in economically struggling areas.”

A spokesman for the Milken Institute, Geoffrey Baum, said that “to suggest that the work of the Milken Institute is motivated by or connected to Mr. Milken’s investments is flat-out wrong.” He said the institute advocated changes that were intended to spread the benefits to more low-income communities, not to help the wealthy.

The White House declined to comment on whether Mr. Trump is considering a presidential pardon for Mr. Milken.

Mr. Milken — operating from an X-shaped trading desk in Beverly Hills, Calif. — was a Wall Street legend. He pioneered the junk bond, which enabled financially risky companies to borrow billions of dollars and ignited a wave of often-hostile corporate takeovers that came to define a go-go era. His firm, Drexel Burnham Lambert, hosted an annual event, which came to be known as the Predators’ Ball, where the era’s greatest financiers mingled. Mr. Milken became a billionaire.

Then, in 1989, federal prosecutors charged him with violating securities and tax laws and with being part of a lucrative insider-trading ring. The next year, Drexel Burnham went bankrupt.

Mr. Milken pleaded guilty and was sentenced to 10 years in prison and paid $600 million in fines. After cooperating with the government, he ended up serving about two years behind bars.

Mr. Milken emerged with a considerable fortune intact. He invested in companies in for-profit education, health care and fast food, according to securities filings and company announcements. He also acquired lots of real estate, coming to own roughly 700 properties around the United States, Mr. Moore said.

He continued to attract scrutiny from regulators, including one case in which Mr. Milken paid $47 million to resolve the Securities and Exchange Commission’s allegations that he had violated his lifetime ban from the securities industry.

Mr. Milken, however, has largely managed to restore his reputation — and his clout. His family gave tens of millions of dollars to his Milken Institute, which he founded in 1991 and whose board of directors he leads. After battling prostate cancer, he helped raise hundreds of millions of dollars to fund cancer research.

In Washington, Mr. Milken, 73, and his institute have courted influence, wooing and sometimes hiring former federal officials. His family recently spent more than $85 million to buy three buildings opposite the White House and the Treasury Department, which he is transforming into his institute’s new Washington offices.

The most public display of his renewed stature comes each spring in Los Angeles when Mr. Milken presides over a glitzy gathering at the Beverly Hilton — the same venue where his famed Predators’ Balls took place three decades ago.

The Milken Institute’s annual conference attracts thousands of the world’s most powerful people — from government, finance, medicine, Hollywood and the like — for a frenzy of high-powered networking and conspicuous consumption. Recent guests have included Leon Black, the chairman of Apollo Global Management; David M. Solomon, the chief executive of Goldman Sachs; Eric Schmidt, the former chief executive of Google; and the New England Patriots quarterback Tom Brady.

Mr. Milken is the power broker at the center of the action. Onstage, he interviews famous guests. In private, he organizes exclusive dinners. Some have called the event the Davos of North America.

In the Trump era, cabinet secretaries and White House advisers have been among the event’s marquee guests, more so than in other recent administrations. Coveted speaking roles have gone to Ivanka Trump and her husband, Mr. Kushner, giving them access to an elite audience.

At last year’s event in Beverly Hills, attendees included Commerce Secretary Wilbur Ross and Mr. Mnuchin. The Treasury secretary was accompanied by several senior aides, including Daniel Kowalski, who is overseeing the department’s drafting of the opportunity zone rules.

Mr. Kowalski, who has spent months drumming up support across the country for opportunity zones, is well acquainted with the Milken Institute.

After the tax incentive became law, it was up to the Treasury, and Mr. Kowalski in particular, to put it in effect through a series of rules. Officials at the Milken Institute met repeatedly with him to try to influence that rule-writing process. The institute submitted a series of letters and presentations to the Treasury and the Internal Revenue Service, and at times directly to Mr. Mnuchin, pushing for rules that would make the tax break easier to qualify for.

“Helping to shape the rules of the road” is how the Milken Institute describes its work on opportunity zones.

The institute “is incredibly active,” Mr. Kowalski said in an interview. He said he thought he had discussed opportunity zones with Mr. Milken, although he said he could not specifically recall. He disputed that Mr. Milken or his institute exerted any special influence over the Treasury Department.

Among the Milken Institute’s proposals was for the Treasury to give investors a generous amount of time to build on opportunity zone land and to reduce the amount that investors had to spend upgrading properties to be eligible for the tax break. Those changes would make it easier for investors to reap the benefits.

The institute also asked the Treasury a question that would clarify if investors who owned land in opportunity zones before the tax law was passed were eligible to receive the benefits. The Treasury ruled that such investments were permissible, a controversial decision since the purpose of the opportunity zone initiative was to spur new investments, not reward existing projects.

Mr. Milken’s spokesman, Mr. Moore, said Mr. Milken “never attended any meeting focused on opportunity zone regulations with any federal agency, nor did he consult with any institute representatives who may have interacted with any agency.”

But Aron Betru, who led the Milken Institute’s opportunity zone efforts, told The Times in an interview that he did discuss opportunity zones with Mr. Milken, though he said he was not aware of Mr. Milken’s specific investments. And in 2018 Mr. Mnuchin and Mr. Milken attended a small, private event, sponsored by the institute, to discuss opportunity zones.

High above Reno, on a vast hillside where wild horses roam, is the site of one of Nevada’s biggest opportunity zones.

The center of this area is known as Comstock Meadows, a reference to the 1859 discovery of the so-called Comstock Lode, one of the largest deposits of silver ever found in the United States. The find generated hundreds of millions of dollars in wealth, creating a boomtown in nearby Virginia City.

Today it is home to the Tahoe-Reno Industrial Center. Lured by cheap land, Google is building a huge new complex inside the industrial park. Tesla and Switch, the data-center company, recently opened their own operations. And down the street, Mr. Milken co-owns a company that holds nearly 700 acres of empty land.

He and his partner — Chip Bowlby, president of a development company called Reno Land — planned to use that space to open a so-called tech incubator, where smaller companies could set up operations, among other possible uses.

Being inside an opportunity zone would potentially be a huge boon for the venture. It would mean that start-ups at the tech incubator could attract tax-advantaged money from outside investors.

Nevada officials wanted to nominate the census tract that included the industrial park as an opportunity zone. But in early 2018, Treasury officials had ruled that the area was ineligible because its residents were too affluent.

Major landowners at the site, including Mr. Bowlby, urged state and local officials to try to get the Treasury to reverse that ruling, said Kris Thompson, the project manager at the industrial center.

Storey County, where the industrial park is situated, deployed Jon Porter, a former House Republican from Nevada who is now a lobbyist, to push the matter. Dean Heller, at the time a Republican senator, and Brian Sandoval, then the governor, also were enlisted and had phone calls with Mr. Mnuchin around that time, according to Treasury records. Mr. Heller, Mr. Porter and Mr. Sandoval did not respond to requests for comment.

Just as that lobbying intensified in the spring of 2018, Mr. Milken opened his institute’s annual conference in Beverly Hills.

Mr. Mnuchin was a featured guest. “It’s great to be here with you and all my L.A. friends,” the Treasury secretary said in an onstage interview on April 30.

That afternoon, the institute organized an invitation-only meeting with Mr. Mnuchin and his staff to discuss opportunity zones. Other listed attendees included Sean Parker, the former Facebook president and an early advocate of opportunity zones, and Raymond J. McGuire, a top Citigroup executive. Mr. Betru was the moderator.

Within days, the Treasury Department had shifted its position and was now willing to let the state nominate the area around the Nevada industrial park as an opportunity zone.

Mr. Mnuchin told Mr. Kowalski to inform other Treasury officials that they should accept Storey County’s nomination, according to email records reviewed by The Times.

Mr. Mnuchin spoke on the phone on May 8 with Mr. Sandoval. Forty-five minutes later, Mr. Sandoval formally nominated the site to be part of an opportunity zone, email records show. And the decision was soon officially blessed by the Treasury Department. (While the Treasury’s reversal has been reported, Mr. Milken’s connection has not been previously disclosed.)

Treasury officials said the change was part of an effort to iron out inconsistencies in different Treasury rules. But the switch provoked intense protests from Treasury and I.R.S. employees.

“Failure to apply the designation standards equally across the board will call into question the legitimacy of the process by which the designations were made,” an unnamed I.R.S. employee wrote in an internal memo in May 2018. It added that the appearance of “arbitrary” Treasury standards risked “opening the door for accusations that the determination process was influenced by political considerations or bias.”

“Any such controversy would in turn taint the opportunity zones and potentially chill or cloud the incentive for investors to invest in the opportunity zones,” the memo said.

In an interview this month at an event co-sponsored by the Milken Institute in Jackson, Miss., Mr. Kowalski would not comment on whether Mr. Mnuchin had been the driving force behind the Treasury’s reversal. “I can certainly say he was apprised of the situation,” Mr. Kowalski said.

Brett Theodos, a senior fellow at the Urban Institute, which has advised state governments including Nevada on their nominations of opportunity zones, said the Treasury’s decision-making appeared problematic. “Making exceptions for the politically connected is deeply troubling,” he said.

Spokesmen for Mr. Milken and Mr. Mnuchin said the two men had never discussed the Storey County issue. Mr. Mnuchin’s spokesman, Devin O’Malley, said Mr. Mnuchin “had no knowledge of Milken’s investments in Nevada.”

In August 2018, Mr. Mnuchin and Mr. Milken met again. This time, the occasion was a small conference hosted by the Milken Institute to discuss opportunity zones. The event took place at the Hamptons home of the real estate developer Richard LeFrak, a business associate of Mr. Trump, according to the event’s agenda.

A handout from the event, which was later posted online, showed a map of all 8,764 opportunity zones in the United States, but focused on the virtues of just one specific area: Reno. The handout promoted the city as a “hub to the western United States.”

The handout did not mention that Mr. Milken was a major investor in two projects in opportunity zones in that area: the tech incubator in the industrial park and a housing, hotel and retail development on the site of an old shopping mall in Reno.

As his institute was continuing to push the Treasury to tinker with its opportunity zone rules, Mr. Milken gave Mr. Mnuchin a flight in January on his private jet to Los Angeles, where both men have homes.

Three months later, the Treasury Department heeded the institute’s request and clarified that investors could receive the opportunity zone tax benefits by simply leasing properties to themselves. As a result, investors who had long owned land inside opportunity zones were now eligible for the tax break.

In a separate round of rule changes, Treasury agreed to loosen rules governing how quickly developers had to start work on opportunity zone projects and how much money they had to spend — both revisions that the Milken Institute, among many others, had sought.

This was a potential win for Mr. Milken. His partner, Mr. Bowlby, had bought the Nevada real estate — for both the tech incubator and the residential and retail complex — before the areas were designated as opportunity zones.

Mr. Bowlby, who didn’t respond to requests for comment, said at a public event this year that he was using a lease on his Reno project with Mr. Milken “so we can still be qualified for the opportunity zone.”

The Treasury’s leasing decision has faced criticism.

“Anybody who owned property in the zone prior to 2018 would have been out of luck until these rules,” said Michelle Layser, a tax law professor at the University of Illinois College of Law. “This really opens the door.”

Mr. Moore, the spokesman for Mr. Milken, denied that he received special treatment.

“Your insinuation that Mike has reaped personal financial benefits from Milken Institute programs is outrageous,” he said. “It’s clear that you are less interested in the objective truth than in assigning to Mike Milken sinister motives that simply do not exist.”

Mr. Moore said that Mr. Milken hadn’t hidden the fact that he had investments in the Nevada opportunity zones. He said Mr. Milken had described them at the Hamptons event that Mr. Mnuchin attended. “There was nothing secretive about it,” he said.

Mr. Kowalski said he hadn’t been aware that Mr. Milken was an investor in the Nevada projects at the same time that his institute was seeking to change the rules governing opportunity zones.

Was he surprised? Mr. Kowalski paused. “Nothing surprises me anymore,” he said.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Symbol of ’80s Greed Stands to Profit From Trump Tax Break for Poor Areas

Westlake Legal Group 26milken-promo-facebookJumbo Symbol of ’80s Greed Stands to Profit From Trump Tax Break for Poor Areas United States Politics and Government Trump, Donald J Treasury Department Tax Credits, Deductions and Exemptions Mnuchin, Steven T Milken, Michael R Milken Institute Federal Taxes (US) Enterprise Zones Area Planning and Renewal

RENO, Nev. — In the 1980s, Michael Milken embodied Wall Street greed. A swashbuckling financier, he was charged with playing a central role in a vast insider-trading scheme and was sent to prison for violating federal securities and tax laws. He was an inspiration for the Gordon Gekko character in the film “Wall Street.”

Mr. Milken has spent the intervening decades trying to rehabilitate his reputation through an influential nonprofit think tank, the Milken Institute, devoted to initiatives “that advance prosperity.”

These days, the Milken Institute is a leading proponent of a new federal tax break that was intended to coax wealthy investors to plow money into distressed communities known as “opportunity zones.” The institute’s leaders have helped push senior officials in the Trump administration to make the tax incentive more generous, even though it is under fire for being slanted toward the wealthy.

Mr. Milken, it turns out, is in a position to personally gain from some of the changes that his institute has urged the Trump administration to enact. In one case, the Treasury secretary, Steven Mnuchin, directly intervened in a way that benefited Mr. Milken, his longtime friend.

It is a vivid illustration of the power that Mr. Milken, who was barred from the securities industry and fined $600 million as part of his 1990 felony conviction, has amassed in President Trump’s Washington. In addition to the favorable tax-policy changes, some of Mr. Trump’s closest advisers — including Mr. Mnuchin, Jared Kushner and Rudolph W. Giuliani — have lobbied the president to pardon Mr. Milken for his crimes, or supported that effort, according to people familiar with the effort.

While the Milken Institute’s advocacy of opportunity zones is public, Mr. Milken’s financial stake in the outcome is not.

The former “junk bond king” has investments in at least two major real estate projects inside federally designated opportunity zones in Nevada, near Mr. Milken’s Lake Tahoe vacation home, according to public records reviewed by The New York Times.

One of those developments, inside an industrial park, is a nearly 700-acre site in which Mr. Milken is a major investor. Last year, after pressure from Mr. Milken’s business partner and other landowners, the Treasury Department ignored its own guidelines on how to select opportunity zones and made the area eligible for the tax break, according to people involved in the discussions and records reviewed by The Times.

The unusual decision was made at the personal instruction of Mr. Mnuchin, according to internal Treasury Department emails. It came shortly after he had spent time with Mr. Milken at an event his institute hosted.

“People were troubled,” said Annie Donovan, who previously ran the Treasury office in charge of designating areas as opportunity zones. She and two of her former colleagues said they were upset that the Treasury secretary was intervening to bend rules, though they said they didn’t realize at the time that Mr. Mnuchin’s friend stood to profit. The agency’s employees, Ms. Donovan said, “were put in a position where they had to compromise the integrity of the process.”

The opportunity zone initiative, tucked into the tax cut bill that Mr. Trump signed into law in 2017, has become one of the White House’s signature initiatives. It allows investors to delay or avoid taxes on capital gains by putting money in projects or companies in more than 8,700 federally designated opportunity zones. Mr. Trump has boasted that it will revitalize downtrodden neighborhoods.

But the incentive, also championed by some prominent Democrats, has been dogged by criticism that it is a gift to wealthy investors and real estate developers. From the start, the tax break targeted people with capital gains, the vast majority of which are held by the very richest investors. The Treasury permitted opportunity zones to encompass not only poor communities but some adjacent affluent neighborhoods. Much of the money so far has flowed to those wealthier areas, including many projects that were planned long before the new law was enacted.

Investors and others — including Mr. Milken’s institute — have been pushing the Treasury Department to write the rules governing opportunity zones in ways that would make it easier to qualify for the tax break. That campaign worked, and Mr. Milken is among the potential beneficiaries.

Geoffrey Moore, a spokesman for Mr. Milken, confirmed that Mr. Milken had investments inside opportunity zones, though they are a sliver of his overall real estate holdings. He disputed that Mr. Milken had used his institute or Washington connections to benefit his investments and said no one at the institute “has any specific knowledge of Mike’s personal investments.”

Mr. Moore added that Mr. Milken’s support for opportunity zones was based on his longstanding belief “that jobs and the democratization of ownership are the keys to helping people in economically struggling areas.”

A spokesman for the Milken Institute, Geoffrey Baum, said that “to suggest that the work of the Milken Institute is motivated by or connected to Mr. Milken’s investments is flat-out wrong.” He said the institute advocated changes that were intended to spread the benefits to more low-income communities, not to help the wealthy.

The White House declined to comment on whether Mr. Trump is considering a presidential pardon for Mr. Milken.

Mr. Milken — operating from an X-shaped trading desk in Beverly Hills, Calif. — was a Wall Street legend. He pioneered the junk bond, which enabled financially risky companies to borrow billions of dollars and ignited a wave of often-hostile corporate takeovers that came to define a go-go era. His firm, Drexel Burnham Lambert, hosted an annual event, which came to be known as the Predators’ Ball, where the era’s greatest financiers mingled. Mr. Milken became a billionaire.

Then, in 1989, federal prosecutors charged him with violating securities and tax laws and with being part of a lucrative insider-trading ring. The next year, Drexel Burnham went bankrupt.

Mr. Milken pleaded guilty and was sentenced to 10 years in prison and paid $600 million in fines. After cooperating with the government, he ended up serving about two years behind bars.

Mr. Milken emerged with a considerable fortune intact. He invested in companies in for-profit education, health care and fast food, according to securities filings and company announcements. He also acquired lots of real estate, coming to own roughly 700 properties around the United States, Mr. Moore said.

He continued to attract scrutiny from regulators, including one case in which Mr. Milken paid $47 million to resolve the Securities and Exchange Commission’s allegations that he had violated his lifetime ban from the securities industry.

Mr. Milken, however, has largely managed to restore his reputation — and his clout. His family gave tens of millions of dollars to his Milken Institute, which he founded in 1991 and whose board of directors he leads. After battling prostate cancer, he helped raise hundreds of millions of dollars to fund cancer research.

In Washington, Mr. Milken, 73, and his institute have courted influence, wooing and sometimes adding former federal officials. His family recently spent more than $85 million to buy three buildings opposite the White House and the Treasury Department, which he is transforming into his institute’s new Washington offices.

The most public display of his renewed stature comes each spring in Los Angeles when Mr. Milken presides over a glitzy gathering at the Beverly Hilton — the same venue where his famed Predators’ Balls took place three decades ago.

The Milken Institute’s annual conference attracts thousands of the world’s most powerful people — from government, finance, medicine, Hollywood and the like — for a frenzy of high-powered networking and conspicuous consumption. Recent guests have included Leon Black, the chairman of Apollo Global Management; David M. Solomon, the chief executive of Goldman Sachs; Eric Schmidt, the former chief executive of Google; and the New England Patriots quarterback Tom Brady.

Mr. Milken is the power broker at the center of the action. Onstage, he interviews famous guests. In private, he organizes exclusive dinners. Some have called the event the Davos of North America.

In the Trump era, cabinet secretaries and White House advisers have been among the event’s marquee guests, more so than in other recent administrations. Coveted speaking roles have gone to Ivanka Trump and her husband, Mr. Kushner, giving them access to an elite audience.

At last year’s event in Beverly Hills, attendees included Commerce Secretary Wilbur Ross and Mr. Mnuchin. The Treasury secretary was accompanied by several senior aides, including Daniel Kowalski, who is overseeing the department’s drafting of the opportunity zone rules.

Mr. Kowalski, who has spent months drumming up support across the country for opportunity zones, is well acquainted with the Milken Institute.

After the tax incentive became law, it was up to the Treasury, and Mr. Kowalski in particular, to put it in effect through a series of rules. Officials at the Milken Institute met repeatedly with him to try to influence that rule-writing process. The institute submitted a series of letters and presentations to the Treasury and the Internal Revenue Service, and at times directly to Mr. Mnuchin, pushing for rules that would make the tax break easier to qualify for.

“Helping to shape the rules of the road” is how the Milken Institute describes its work on opportunity zones.

The institute “is incredibly active,” Mr. Kowalski said in an interview. He said he thought he had discussed opportunity zones with Mr. Milken, although he said he could not specifically recall. He disputed that Mr. Milken or his institute exerted any special influence over the Treasury Department.

Among the Milken Institute’s proposals was for the Treasury to give investors a generous amount of time to build on opportunity zone land and to reduce the amount that investors had to spend upgrading properties to be eligible for the tax break. Those changes would make it easier for investors to reap the benefits.

The institute also asked the Treasury a question that would clarify if investors who owned land in opportunity zones before the tax law was passed were eligible to receive the benefits. The Treasury ruled that such investments were permissible, a controversial decision since the purpose of the opportunity zone initiative was to spur new investments, not reward existing projects.

Mr. Milken’s spokesman, Mr. Moore, said Mr. Milken “never attended any meeting focused on opportunity zone regulations with any federal agency, nor did he consult with any institute representatives who may have interacted with any agency.”

But Aron Betru, who led the Milken Institute’s opportunity zone efforts, told The Times in an interview that he did discuss opportunity zones with Mr. Milken, though he said he was not aware of Mr. Milken’s specific investments. And in 2018 Mr. Mnuchin and Mr. Milken attended a small, private event, sponsored by the institute, to discuss opportunity zones.

High above Reno, on a vast hillside where wild horses roam, is the site of one of Nevada’s biggest opportunity zones.

The center of this area is known as Comstock Meadows, a reference to the 1859 discovery of the so-called Comstock Lode, one of the largest deposits of silver ever found in the United States. The find generated hundreds of millions of dollars in wealth, creating a boomtown in nearby Virginia City.

Today it is home to the Tahoe-Reno Industrial Center. Lured by cheap land, Google is building a huge new complex inside the industrial park. Tesla and Switch, the data-center company, recently opened their own operations. And down the street, Mr. Milken co-owns a company that holds nearly 700 acres of empty land.

He and his partner — Chip Bowlby, president of a development company called Reno Land — planned to use that space to open a so-called tech incubator, where smaller companies could set up operations, among other possible uses.

Being inside an opportunity zone would potentially be a huge boon for the venture. It would mean that start-ups at the tech incubator could attract tax-advantaged money from outside investors.

Nevada officials wanted to nominate the census tract that included the industrial park as an opportunity zone. But in early 2018, Treasury officials had ruled that the area was ineligible because its residents were too affluent.

Major landowners at the site, including Mr. Bowlby, urged state and local officials to try to get the Treasury to reverse that ruling, said Kris Thompson, the project manager at the industrial center.

Storey County, where the industrial park is situated, deployed Jon Porter, a former House Republican from Nevada who is now a lobbyist, to push the matter. Dean Heller, at the time a Republican senator, and Brian Sandoval, then the governor, also were enlisted and had phone calls with Mr. Mnuchin around that time, according to Treasury records. Mr. Heller, Mr. Porter and Mr. Sandoval did not respond to requests for comment.

Just as that lobbying intensified in the spring of 2018, Mr. Milken opened his institute’s annual conference in Beverly Hills.

Mr. Mnuchin was a featured guest. “It’s great to be here with you and all my L.A. friends,” the Treasury secretary said in an onstage interview on April 30.

That afternoon, the institute organized an invitation-only meeting with Mr. Mnuchin and his staff to discuss opportunity zones. Other listed attendees included Sean Parker, the former Facebook president and an early advocate of opportunity zones, and Raymond J. McGuire, a top Citigroup executive. Mr. Betru was the moderator.

Within days, the Treasury Department had shifted its position and was now willing to let the state nominate the area around the Nevada industrial park as an opportunity zone.

Mr. Mnuchin told Mr. Kowalski to inform other Treasury officials that they should accept Storey County’s nomination, according to email records reviewed by The Times.

Mr. Mnuchin spoke on the phone on May 8 with Mr. Sandoval. Forty-five minutes later, Mr. Sandoval formally nominated the site to be part of an opportunity zone, email records show. And the decision was soon officially blessed by the Treasury Department. (While the Treasury’s reversal has been reported, Mr. Milken’s connection has not been previously disclosed.)

Treasury officials said the change was part of an effort to iron out inconsistencies in different Treasury rules. But the switch provoked intense protests from Treasury and I.R.S. employees.

“Failure to apply the designation standards equally across the board will call into question the legitimacy of the process by which the designations were made,” an unnamed I.R.S. employee wrote in an internal memo in May 2018. It added that the appearance of “arbitrary” Treasury standards risked “opening the door for accusations that the determination process was influenced by political considerations or bias.”

“Any such controversy would in turn taint the opportunity zones and potentially chill or cloud the incentive for investors to invest in the opportunity zones,” the memo said.

In an interview this month at an event co-sponsored by the Milken Institute in Jackson, Miss., Mr. Kowalski would not comment on whether Mr. Mnuchin had been the driving force behind the Treasury’s reversal. “I can certainly say he was apprised of the situation,” Mr. Kowalski said.

Brett Theodos, a senior fellow at the Urban Institute, which has advised state governments including Nevada on their nominations of opportunity zones, said the Treasury’s decision-making appeared problematic. “Making exceptions for the politically connected is deeply troubling,” he said.

Spokesmen for Mr. Milken and Mr. Mnuchin said the two men had never discussed the Storey County issue. Mr. Mnuchin’s spokesman, Devin O’Malley, said Mr. Mnuchin “had no knowledge of Milken’s investments in Nevada.”

In August 2018, Mr. Mnuchin and Mr. Milken met again. This time, the occasion was a small conference hosted by the Milken Institute to discuss opportunity zones. The event took place at the Hamptons home of the real estate developer Richard LeFrak, a business associate of Mr. Trump, according to the event’s agenda.

A handout from the event, which was later posted online, showed a map of all 8,764 opportunity zones in the United States, but focused on the virtues of just one specific area: Reno. The handout promoted the city as a “hub to the western United States.”

The handout did not mention that Mr. Milken was a major investor in two projects in opportunity zones in that area: the tech incubator in the industrial park and a housing, hotel and retail development on the site of an old shopping mall in Reno.

As his institute was continuing to push the Treasury to tinker with its opportunity zone rules, Mr. Milken gave Mr. Mnuchin a flight in January on his private jet to Los Angeles, where both men have homes.

Three months later, the Treasury Department heeded the institute’s request and clarified that investors could receive the opportunity zone tax benefits by simply leasing properties to themselves. As a result, investors who had long owned land inside opportunity zones were now eligible for the tax break.

In a separate round of rule changes, Treasury agreed to loosen rules governing how quickly developers had to start work on opportunity zone projects and how much money they had to spend — both revisions that the Milken Institute, among many others, had sought.

This was a potential win for Mr. Milken. His partner, Mr. Bowlby, had bought the Nevada real estate — for both the tech incubator and the residential and retail complex — before the areas were designated as opportunity zones.

Mr. Bowlby, who didn’t respond to requests for comment, said at a public event this year that he was using a lease on his Reno project with Mr. Milken “so we can still be qualified for the opportunity zone.”

The Treasury’s leasing decision has faced criticism.

“Anybody who owned property in the zone prior to 2018 would have been out of luck until these rules,” said Michelle Layser, a tax law professor at the University of Illinois College of Law. “This really opens the door.”

Mr. Moore, the spokesman for Mr. Milken, denied that he received special treatment.

“Your insinuation that Mike has reaped personal financial benefits from Milken Institute programs is outrageous,” he said. “It’s clear that you are less interested in the objective truth than in assigning to Mike Milken sinister motives that simply do not exist.”

Mr. Moore said that Mr. Milken hadn’t hidden the fact that he had investments in the Nevada opportunity zones. He said Mr. Milken had described them at the Hamptons event that Mr. Mnuchin attended. “There was nothing secretive about it,” he said.

Mr. Kowalski said he hadn’t been aware that Mr. Milken was an investor in the Nevada projects at the same time that his institute was seeking to change the rules governing opportunity zones.

Was he surprised? Mr. Kowalski paused. “Nothing surprises me anymore,” he said.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com