By Nanette Byrnes
(Reuters) - The ranks of lobbyists are growing in Washington again as Congress flirts with a possible overhaul of the complex U.S. tax code.
After declining for two years, the number of companies that hired a tax lobbyist, or lobbied on tax issues using in-house staff, rose modestly to 1,509 in the first three months of 2013, up from 1,487 during the same quarter a year ago, according to government filings analyzed by the nonpartisan watchdog group the Center for Responsive Politics.
Coinciding with the start of a new session of Congress, the analysis shows it is the busiest first quarter for tax lobbying since 2010, when President Barack Obama set up the bipartisan Simpson-Bowles commission to find a solution to the country's growing deficit, including changes to the tax code.
This year's climb in the tax lobbyist population comes at a time when revamping the tax code is on the minds of some decision-makers, though comprehensive legislation has yet to emerge.
Obama says he wants a tax code overhaul. So do the chairmen of Congress's two tax-writing committees - Democratic Senator Max Baucus of Montana and Republican Representative Dave Camp of Michigan who together created TaxReform.gov, a website that asks Americans to share their stories and ideas about tax reform.
Opinion polls show the public wants a simpler tax code, but political obstacles stand in the way. The last overhaul was in 1986. A lack of political consensus in Congress on whether tax reform should raise new federal revenues is a problem. So is division within the business community about changing the code.
The expanding ranks of tax lobbyists are both a result of the push for change and likely to prove one of its greatest impediments, with each lobbyist paid substantial sums of money to defend and, if possible, expand the narrow interests of their clients.
More than 2,220 organizations spent an estimated $773 million hiring as many as 6,500 lobbyists to advocate on 1,454 tax-related bills in the 2011-2012 Congress, said the non-profit Sunlight Foundation, another government influence watchdog group.
Peter Metzger, Washington-based vice chairman of executive head-hunting firm CTPartners, estimates based on what his firm is seeing in the marketplace that demand for tax lobbyists and tax lawyers in Washington is up 25 to 30 percent this year. Metzger's office specializes in recruiting government relations staff and lobbyists, among other fields.
The title of a recent client advisory from lobbying law firm K&L Gates was: "If you are not at the table, you're on the menu."
TECH GIANTS EXPAND IN D.C.
In the first three months of 2013, online retail giant Amazon.com Inc spent $1.2 million on in-house and external lobbyists who lobbied on tax, and usually other topics too, according to federal filings. That is up from $870,000 in the prior year's first quarter.
Lobbying firms generally represent their clients on multiple issues, and exactly how much of their fees relate to lobbying on taxes is not disclosed.
Amazon backed a measure that passed the U.S. Senate this month to give states the power to enforce their sales tax laws on online purchases.
Amazon employs a couple of firms which lobbied exclusively on Internet sales tax legislation, in the first quarter of this year.
Amazon paid such firms $250,000, according to lobbying reports filed in April by two firms, Patton Boggs and Forbes-Tate, with the House of Representatives and Senate. Of that, $220,000 went to lobbyists from Patton Boggs, including former senators John Breaux and Trent Lott, according to their April 20 lobbying report.
In addition, lobbying firm TwinLogic Strategies disclosed in its April 21 Amazon lobbying report that Elizabeth Frazee, a former top aide to House Judiciary Committee Chairman Bob Goodlatte, was also lobbying on the Internet sales tax legislation. The Virginia Republican's committee will be the first to consider online legislation in the House, where the legislation faces a tougher fight.
Amazon declined comment on its lobbying efforts.
Software maker Microsoft Corp has more lobbyists working on tax issues so far this year than any other company, according to an analysis of filings done by the Center for Responsive Politics.
All together, in the first quarter of 2013, Microsoft spent over $3 million on lobbyists who reported spending at least some of their time working on taxes, up from $2.2 million in the comparable period of 2012.
Microsoft, which now has $66 billion in cash sitting overseas according to its most recent quarterly filing with the Securities and Exchange Commission, was part of a coalition of companies pushing for legislation that would enable them to bring earnings home to the United States without paying the full tax on them.
It is a controversial proposal because the last such tax break, in 2004, failed to produce the domestic jobs and investment Congress had hoped for.
The company's in-house lobbying staff and eight of its outside lobbying firms list international tax reform proposals as a topic they have contacted lawmakers about in lobbying reports filed with Congress.
One of those outside firms, Ernst & Young, listed a bill by Senator Bernie Sanders, a Vermont Independent, that seeks to end the company's current ability to defer taxes on income earned abroad, as one of the bills it has been discussing on Capitol Hill.
Microsoft has reported that it would owe $19.4 billion in federal income tax if it were to bring its overseas cash to the United States at current tax rates.
The company did not respond to a request for comment on its lobbying efforts.
(Reporting by Nanette Byrnes in Chapel Hill, North Carolina; Editing by Howard Goller and Lisa Shumaker)
(This story corrects eighth paragraph to make clear 6,500 is maximum number of tax lobbyists in 2011-2012; deletes paragraph 9 on lobbyists per lawmaker)