Telecoms seek tax changes on operating losses

A group of phone companies was in Washington D.C. this week to lobby for loosened tax rules to allow them to raise equity capital without losing tax benefits, including deductions for net operating losses.

Level 3 CEO James Crowe met with senators this week to lobby for the change in the law. Other firms seeking the move include Fibernet Telecom, RCN and PAETEC

The firms want to be able to issue new shares without the risk of having strict limits placed on deductions for net operating losses. A section of the tax code limits net operating loss deductions after an ownership change, and the limits are trigged when at least 50 percent of a company changes hands within a three-year period.

Phone companies say stock market swings make the threshold much easier to reach and want the threshold increased to 80 percent in 2008 and 2009.

Senator Jay Rockefeller proposed the change as an amendment to the Senate version of the economic stimulus legislation, but didn't put it up for a vote in committee on Tuesday. With the stimulus package moving to a full Senate vote next week, there are fewer chances to insert changes in the bill.

Some are skeptical of making the rule change because the rules already include broad exceptions on cash-for-stock exchanges. There have also been changes made by the Treasury Department under Bush to ease limits on the use of loss deductions arising because of an ownership change.

For more:
- Dow Jones via CNN Money. Article [1].