WASHINGTON — Credit card issuer Capital One Financial Corp. could benefit from a corporate tax item inserted into a Senate bill at the behest of Virginia Sens. Jim Webb and John Warner.

Capital One would receive relief from a corporate revenue-raising item that postpones for at least 10 years a tax break for U.S. multinational firms. Under current law, companies can begin claiming the break next year.

Senate Finance Committee Chairman Max Baucus, D-Mont., added language to a bill that would temporarily preserve the tax break for U.S. firms whose foreign assets make up less than 3% of their total worldwide assets. That was a change sought by Capital One, according to Senate aides who spoke on condition they wouldn't be named.

The House version of the tax measure, by contrast, wouldn't benefit Capital One and doesn't preserve the tax break. Webb, a Democrat, and Warner, a Republican, support the change for Capital One, which is headquartered in their home state.

Capital One's efforts have gone against the grain of the broader financial services lobbying community, which has tacitly embraced the delay in the tax break with the hope it will ensure passage of the broader tax bill.

Baucus has been hunting for votes for the tax package, which has stalled in the Senate due to Republican opposition. The bill would extend tax breaks for wind, solar and other alternative energy sources and renew expired tax cuts, such as the research credit and the state sales tax deduction, at a cost of $56 billion over 10 years.

The latest Senate Democratic effort to limit debate on the bill failed June 17 on a 52-44 vote, well short of the 60 votes needed. Warner voted with most Republicans against the bill on the procedural vote. Webb voted with Democrats in favor of it.

Jessica Smith, a spokeswoman for Webb, said the senator's staff "made preliminary inquiries with the Finance Committee on behalf of Capital One" about the effect of delaying the tax break. Warner's staff also has had conversations with Finance Committee staff, Senate aides said.

Capital One is somewhat unique among large banks in that it does not have a large overseas presence. It has some operations in Canada and the U.K.

Democrats proposed to delay the so-called worldwide interest allocation rules until 2018, in order to raise $29.96 billion over 10 years. This revenue would offset the cost of tax cut extensions and allow the tax bill to meet congressional pay-as-you-go budgeting rules.

The Senate provision, with the carve-out for Capital One, would raise about $320 million less than the House version, according to the Joint Committee on Taxation. It is not clear whether those estimators took into account the extent to which firms other than Capital One would benefit from the exception.

A Baucus aide said the exception was added so as not to discourage firms that are just getting a foothold overseas from expanding.

"Larger multinationals with established overseas operations can more easily adapt to the delayed effective date. Companies who are selling their products and services overseas on a more limited basis will have a more difficult time adjusting to the delay," the aide said.

Capital One Director of Federal Relations Richard Olson referred a reporter's call to a company spokesperson. That spokesperson didn't return calls seeking comment.

The proposed delay in the corporate tax break has become a rallying point against the bill for Senate Republicans, led by Sen. Charles Grassley, R-Iowa.

The new rules were part of the 2004 corporate tax law, but do not take effect until 2009. They are designed to help U.S. multinational firms lower their tax burden by allowing them to use more of their foreign tax credits.

"The current rules actually penalize domestic manufacturers that compete in global markets by making it more likely they will be double-taxed on their foreign income," Grassley said in a Senate floor statement June 10.

Grassley's opposition has stoked tensions with business lobbyists, many of whom say they are willing to accept a delay in the interest allocation rules in exchange for other tax benefits in the bill. For example, the bill would extend for one year U.S. banks' ability to defer taxes on so-called active financing income.

Financial firms including American Express Co., Citigroup Inc. and Merrill Lynch & Co. are backing the House-passed bill that includes the delay in the interest rules. While they haven't specifically expressed support for the delay, they haven't actively opposed it either.

Ken Kies, managing director of Clark Consulting's Federal Policy Group, is making the case to lawmakers that delaying the interest allocation rules will harm virtually no U.S. firms. That is surprising mainly because Kies lobbied for and helped enact the new rules in the 2004 law.

But Kies said the changing international tax landscape has made the new rules irrelevant. In an interview, he said that since the 35% U.S. corporate tax rate is higher than most jurisdictions abroad, multinational firms are much more likely to keep their debt in the U.S. That means the current limitations on the use of foreign tax credits have less bite.

"As best I can tell, I cannot identify any taxpayer that is hurt by a delay in the interest allocation rules other than Capital One," Kies said.

Philip West, a partner at law firm Steptoe & Johnson and former Treasury Department international tax counsel, said it is possible that for some companies the new interest allocation rules are not as desirable as they once were.

But he added that tax rates are not the only factor for a firm in deciding where their debt is held. Interest rates and the location of the entity that is servicing the debt also come into play, he said.

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