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Reid Facilitates Billion Dollar Tax Loophole for Gaming Companies

Senate Minority Leader Harry Reid of Nevada on Capitol Hill in August. Reid helped to keep a tax loophole open that benefits casinos.
Brett Carlsen/AP

Senate Minority Leader Harry Reid of Nevada on Capitol Hill in August. Reid helped to keep a tax loophole open that benefits casinos.

Las Vegas figured prominently on the front page of the New York Times on Dec. 20. Yes, they covered the crash on the Strip. But perhaps less noticed – except by Washington insiders - was a story about lobbyists, casinos, Senator Harry Reid, and a $1 billion loophole in the omnibus budget bill.

According to The Times: “As congressional leaders were hastily braiding together a tax and spending bill of more than 2,000 pages, lobbyists swooped in to add 54 words that temporarily preserved a loophole sought by the hotel, restaurant and gambling industries, along with billionaire Wall Street investors, that allowed them to put real estate in trusts and avoid taxes.”

Eric Lipton was the co-writer of that story, along with Liz Moyer. Lipton won a Pulitzer Prize this year for his series revealing the cozy relationship lobbyists have with state lawmakers and regulators.

According to Lipton, the loophole involves real estate trusts - instruments that are intended for use by groups of people to pool their money on a piece of real estate.

About five years ago, Lipton says, corporations realized that they could "sell" their real estate properties to a different company that was wholly controlled by the same people who ran the corporation, and then avoid capital gains tax on those properties. Congress - led by Rep. Kevin Brady, Texas Republican and Chairman of the House Ways and Means Committee - wanted to close the unintended loophole.

But casinos, and at least one energy company, Dallas based Energy Future Holdings Corporation, were in the midst of real estate transactions, and wanted a grandfather clause so that they could take advantage of the loophole for those ongoing transactions.

They enlisted the help of Sen. Harry Reid, who, Lipton says, played a big role in selling the idea to his fellow senators.

Reid spokesperson Kristen Orthman, sent KNPR a statement on the issue:

"MGM, Caesars and Boyd, each headquartered in Nevada, employ nearly 150,000 workers. And hundreds of thousands of jobs - from the world class restaurants and entertainment to the airport workers and taxi drivers - support a strong and robust gaming economy in Nevada. I wouldn’t be doing my job, as Senator from Nevada and Democratic Leader of the Senate, if I didn’t do everything I could to support Nevada’s top industry. I will continue to do so for the remainder of my term."

    In the end, Rep. Brady and his colleagues relented. He told Lipton and Moyer: “We just weren’t interested, I think on both sides of the aisle, in disrupting transactions, mid-transaction.”
    Lipton joined us on KNPR to talk about this story, and his goal of shedding light on political transactions.

     

    Eric Lipton, New York Times

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    (EDITOR'S NOTE: Carrie Kaufman no longer works for KNPR News. She left in April 2018)