POLITICS

Maryland Mulls Lockheed Martin Tax Break Despite Tight Budgets

03/12/2013 12:30 pm ET | Updated Mar 13, 2013

WASHINGTON -- In an age of budget cuts and hard choices, state lawmakers in Annapolis, Md., are pushing a benefit for the world's largest defense manufacturer that would lead to lower funding for other programs in one Maryland county.

The state Senate is set to vote Tuesday on legislation pushed by leading state Senate Democrats that would retroactively exempt Lockheed Martin from paying approximately $450,000 a year in hotel taxes to Montgomery County for on-site lodging facilities at the company's Bethesda-based conference center. Because the exemption would be retroactive to 2010, the county would also have to reimburse Lockheed some $1.4 million in previously paid taxes, money that would come out of the county's already tight budget.

The bill moved out of committee rapidly on Friday, as reported by The Washington Post over the weekend. Since then, opposition has been mounting: Some Montgomery County officials have voiced their displeasure -- although others back the legislation -- and progressive groups are pressuring legislators to drop their support for a bill that the groups see as unnecessary corporate welfare.

Lockheed Martin racked up $47.2 billion in revenues and $2.7 billion in net earnings in 2012.

On Monday, the Montgomery County Council voted to oppose the legislation. Lockheed Martin had previously tried and failed to push the tax exemption through the council: Once it was included in County Executive Ike Leggett's budget, and another time Leggett (D) attempted to use state grant money to reimburse the company for past paid taxes.

"Lockheed Martin is an important company and I'm glad that they are located in Montgomery County, but this tax break is unwarranted," Montgomery County Councilman George Leventhal (D) told The Huffington Post.

"There's simply no reason why everybody else who comes to Montgomery County for a conference or a training and stays overnight should pay the lodging tax, but not people who are staying at their conference and training center," state Sen. Jamie Raskin (D), who represents parts of Montgomery County, told HuffPost.

If the legislation is enacted, the county will need to find savings in its budget immediately, according to Leventhal. "It would be $1.8 or $1.4 million [in a onetime payment] and $450,000 every year that would not go to fund Head Start, day care, police, fire and all the other functions of government," Leventhal said.

Groups including Progressive Maryland, Demand Progress and Montgomery County Peace Action mobilized opposition to the legislation over the weekend and held a demonstration in Annapolis on Monday night.

Lockheed Martin has already obtained an exemption from Maryland's state lodging tax. Therefore, the company argues, its facility should likewise be exempted from county taxes.

"Maryland state law currently recognizes that a commercial hotel tax is not appropriate for corporate training facilities with sleeping accommodations, such as Lockheed Martin's Center for Leadership Excellence," read a statement released by Lockheed Martin. "We welcome this new legislation that will ensure that the state's law is applied appropriately and justly throughout all Maryland counties."

The defense contractor also contends that it should not be subject to the county hotel tax because its conference center is almost exclusively used by its own employees. According to documents filed with the Montgomery County Council, Lockheed employees account for 99.3 percent of the conference center's hotel patrons in 2011 and 99.5 percent in the first quarter of 2012.

The 30,000-square-foot facility, built in 2009, hosts trainings and conferences for the defense manufacturer's employees and contractors. It includes a hotel for employees, whose lodging is paid for by the company. Lockheed can then seek reimbursement of those costs from the federal government as part of routine business in the execution of federal contracts.

Critics of the proposed tax exemption note that means American taxpayers are already paying for those hotel rooms.

"There is no basis to go back and give them past years' taxes back because they've already been reimbursed in part or in whole by the feds," Leventhal said.

When the exemption was previously before the Montgomery County Council for consideration, councilmembers asked Lockheed whether it was being reimbursed by the federal government for employee stays at the conference center hotel.

"There is a range of reimbursement for contract costs, depending on the contract vehicle and what the Federal Government has agreed to reimburse. That range can vary greatly -- for some contracts it's 50%, for others it might be 75% -- it depends," Lockheed Martin wrote in response to those questions.

"The fact that some percentage of those costs over time can be reimbursed by the Federal Government," the company continued, "doesn't reduce the need to lower our overhead costs whenever we can -- because that cost must still be paid by someone."

Over the past year, Lockheed Martin has doled out $30,000 in campaign contributions to Maryland state political candidates and entities, including $1,000 to state Sen. Mike Miller and $500 each to state Sen. Robert Garagiola and Del. Bill Frick, all Democratic sponsors of the legislation. The largest contribution was a $25,000 donation to the Democratic State Central Committee of Maryland.

If the bill passes the state Senate, it will move to the House of Delegates for a vote before heading to Gov. Martin O'Malley (D) to be signed into law.

CORRECTION: An earlier version of this story misstated Lockheed Martin's earnings and revenues for 2012. The company's earnings were $2.7 billion, not $12.1 billion. Its revenues were $47.2 billion, not $12.1 billion.

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