Pipeline companies unhappy with tax reform, and running out of time

Add Texas pipeline companies to the ranks of those unhappy with Republicans’ tax reform legislation - a long list that includes everyone from the so-called fiscal hawks to tax-and-spend liberals.

Even as Congress nears a critical vote on legislation that would drastically shrink the overall corporate tax rate, pipeline companies are fighting to maintain tax breaks that allow them to deduct the borrowing costs on construction projects that take years to permit and build.

In a letter last week, the Interstate Natural Gas Association of America, which represents the likes of Enbridge and Kinder Morgan, asked House Republican leaders to adjust a provision within the Senate version of the bill limiting how much interest they can deduct.

“These projects often require capital investments in the billions of dollars, and as a result, significant debt must be incurred to finance these investments,” INGAA President Don Santa wrote. “Failure to address the issues below could result in a higher cost of capital for infrastructure projects in the future, resulting in higher delivered energy costs to consumers.”

But pipeline lobbyists are running out of time. Senate and House Republicans are in the middle of negotiating joint legislation they hope to send to President Donald Trump’s desk before the end of the year.

A staffer for Rep. Kevin Brady, R-The Woodlands, chairman of the House Ways and Means Committee, said the legislation is “still a work in progress.”

“The goal is to simplify the tax code and lower the rate for everyone,” he said. “We’ve heard from industries across the board on their take on tax reform.”

INGAA, which has the backing of the American Petroleum Institute, the lobbying arm of the oil and gas industry, is asking not only that the Senate provision be changed but that Congress grandfather existing projects so as not to “make it more difficult for some of our member companies to pay down the debt they already incurred.”

To what degree pipeline companies themselves would take a financial hit by the scaling down of the tax break is unclear.

Under both tax reform bills, the overall corporate tax rate would drop from 35 percent to 20 percent. At the same time Sen. John Cornyn, R-Texas, the majority whip, inserted an amendment into the Senate tax bill that would benefit shareholders in master limited partnerships, a common corporate structure in the pipeline sector.

“Nobody’s ever happy when the tax break that affects them is taken out. That’s the way it is,” said Ryan Alexander, president of Taxpayers for Common Sense, a nonprofit advocating for deficit reduction. “The big picture is, a lot of companies are happy about a significant rate reduction. That said, they’re going to fight to make sure every break that currently benefits them is preserved.”

INGAA declined to comment for this story.

But an executive at one pipeline company, who declined to be identified, said some companies would be left worse off financially than they are under the current tax structure.

“The more investment in infrastructure and equipment a company has made over the recent years, the worse it would be — kind of a penalty for companies who have already been making America great,” he said.

Losing the provision limiting interest deductions would further reduce government revenues in legislation the Congressional Budget Office already says would increase the federal deficit by $1.4 trillion over the next 10 years.

Whether Republicans would be willing to add further to that deficit remains to be seen, as party leaders press for the sort of major legislative victory that has been hard to come by in the first year of the Trump administration.

“I think by delivering tax cuts and tax relief by the end of this month we’ll see this economy take off and will benefit all Americans all across this great land,” Cornyn said.