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How Two Sentences in Tax Plan May Help Unleash $1 Billion in Lobbying

The sweeping tax rewrite unveiled by President Trump and Republican lawmakers this past week leaves many of the details to Congress, but two sentences in the nine-page framework have Washington lobbyists salivating over a payday that some industry experts predict could top $1 billion.

Tucked away on Page 8, the sentences refer vaguely to plans to repeal or roll back “numerous” exclusions and deductions, and to “modernize” tax rules affecting specific industries “to ensure that the tax code better reflects economic reality and that such rules provide little opportunity for tax avoidance.”

That language has prompted concerns among a wide range of businesses and industries about the prospect of losing valuable tax breaks — from preferential tax treatment for insurers to credits for renewable energy to a prized tax treatment used by the commercial real estate industry.

And those fears are being stoked by lobbyists, who are urging clients and prospective clients to get out in front of any changes that could eliminate or weaken sections of the tax code that benefit them.

“You’re either going to be at the table, or you’re going to be on the table,” said Thomas M. Reynolds, a former Republican congressman from New York who served on the tax-writing Ways and Means Committee and is now a lobbyist at Holland & Knight focusing on tax issues. Most businesses that could be affected by the tax overhaul “will not have to be encouraged to engage,” Mr. Reynolds said.

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Continue reading the main story

“Everybody is beginning to pay attention, and there is going to be a flurry of people looking for representation,” he added.

The spike in tax-related lobbying is already well underway, prompted by Mr. Trump’s campaign-trail pledge that fundamentally overhauling the tax code would be one of his top priorities in the White House. Companies and trade associations have submitted nearly 450 filings to lobby on tax issues from the beginning of the year through the end of last week, compared with fewer than 265 filings for all of 2016, according to congressional lobbying disclosures.

There is some irony in Mr. Trump’s setting off a surge in lobbying spending, given his campaign promise to “drain the swamp” in the nation’s capital, partly by taking on special interests. But there is perhaps no federal law that has been lobbied as assiduously as the tax code. Its thousands of pages contain countless provisions inserted at the behest of specific groups that have an interest in protecting their benefits.

“People have been expecting this all year. But the feeling that specific provisions could be put in play is now more real, and all of those provisions have a constituency and a lobbyist,” said Randolf H. Hardock, a tax lobbyist at Davis & Harman. “Some of it is just keeping clients informed, even if they don’t ultimately engage, because there are issues that could come up right at the end, where if you’re not paying attention, you could miss them.”

In 1986 — the last time Congress overhauled the tax code — Mr. Hardock served as tax counsel for the Senate Finance Committee. That legislation, the Tax Reform Act of 1986, became the subject of such intense lobbying activity from interest groups and individual companies that it was jokingly referred to on K Street as the Lobbyists’ Relief Act of 1986.

Lobbying has expanded and evolved drastically since then: It’s now a $3 billion industry with a sophisticated war-room approach that goes beyond simply buttonholing lawmakers to include comprehensive marketing and pressure campaigns.

Those costly campaigns can pay off, as they did for those fighting a proposed tax on imports championed by many Republicans, including the House speaker, Paul D. Ryan of Wisconsin. A coalition of major retailers such as Wal-Mart, retail trade associations and manufacturers including Koch Industries banded together earlier this year with the single goal of killing the so-called border adjustment tax.

The group, Americans for Affordable Products, spent heavily on research, slick television ads and constituent visits to key lawmakers in the first few months of the year. In April, the Trump administration backed away from the tax, which was not included in Wednesday’s blueprint.

But while the tax on imports was a clear target, the paucity of details in the new blueprint has created anxiety in corporate suites across the country, despite the overwhelming support in the business community for its proposed reduction in the corporate tax rate to 20 percent from 35 percent.

Lobbyists are potentially facing two rounds of business-development opportunities: one in which they capitalize on the fear of getting attacked, and another when specific industries come under attack.

Meanwhile, the details revealed so far are creating fissures within industries, such as real estate, as trade groups battle one another in an effort to strip out or protect various provisions under consideration.

The National Association of Realtors is already out in force, criticizing aspects of the plan as dealing a devastating blow to the housing market and United States economy. While the framework specifically protects the mortgage interest deduction, real estate agents say the proposal to double the standard deduction and eliminate the state and local tax deduction would make buying a home less valuable.

The National Association of Home Builders, by contrast, has come out in favor of the framework, saying the lower corporate tax rate, a new 25 percent tax rate for “pass through” businesses, and protection of the low-income housing tax credit will help builders, whose businesses benefit from both renters and home buyers.

“By lowering the pass-through rate, the plan will reduce the tax bill of thousands of small businesses and help to spur job and economic growth,” the chairman of the home builders association, Granger MacDonald, said in a statement. “More importantly, the blueprint maintains the low-income housing tax credit, the most indispensable tool to help produce affordable rental housing.”

Meredith McGehee, the chief of policy at Issue One, a nonprofit group that works to reduce the influence of deep-pocketed special interests in politics and government, said that “the estimate of $1 billion in lobbying expenditures is probably conservative.”

Ms. McGehee, who has been both tracking lobbying and actually lobbying since 1987, predicted that many of the efforts to influence the details of the tax overhaul would not be disclosed under congressional lobbying rules because they would fall outside the scope of the direct contacts with federal government officials that prompt disclosure requirements.

Several tax lobbyists said businesses and trade groups concerned about whether they could be in jeopardy as the plan develops should look to a tax reform bill released in 2014 by the House Ways and Means Committee under its then-chairman, Representative Dave Camp of Michigan, a Republican who retired in 2015. That bill proposed ending all manner of loopholes and credits, including for insurance companies and research and experimentation.

“You have to be out there working to make the case now, because everybody knows what the menu includes,” said James Gould, a tax lobbyist who worked as a Senate tax aide during the 1986 reform effort.

But Mr. Hardock said there might be some benefit in trying to stay out of the debate for companies or trade groups in industries that aren’t being openly discussed as targets for revenue generation.

“There are some industries that probably don’t want to put their heads too far up, because that might draw unwelcome notice,” he said.

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