updated 6/3/2005 7:34:36 PM ET 2005-06-03T23:34:36

WASHINGTON — Imagine a weekend at the Marriott Hotel in Washington, D.C., or the Hilton Las Vegas — a weekend of comfort, relaxation and coal. That's right; coal — at least synthetic coal — is a big side-business for companies you'd never imagine, thanks to a multibillion-dollar tax break courtesy of the U.S. Congress.

"It's a scam," says Bill Henck. "That's all it is."

Henck should know. He's an IRS attorney who says the synthetic fuels program began as a noble effort but has turned into a corporate give-away.

"These people are given the keys to the treasury," he says. "And it's very frustrating for a lot of us who have worked on these cases."

It all started during the energy crisis of the 1970s. President Jimmy Carter wanted to encourage the use of synthetic alternative fuels. So Congress offered a tax credit to anyone investing in synthetic coal plants. Over the years many big companies, like Marriott, jumped in. Synthetic coal has saved the hotel more than $400 million in taxes.

And it's all perfectly legal.

Even the company that makes Huggies diapers — Kimberly-Clark — invested in synthetic coal. None of the companies we contacted wanted to talk on camera. But the group that represents most synthetic coal producers told NBC News the tax credit has created jobs and improved the environment. In a statement, they also say, "Each company seeking to claim this credit has opened its books to the IRS."

But critics say the law does not require companies to prove synthetic coal is any better than ordinary coal. So why, they ask, is the tax credit still on the books after 25 years?

"It doesn't make the coal burn more efficiently," says Rep. Lloyd Doggett, D-Texas. "It doesn't make it burn more clean. It does generate a tax credit. It's a way of dodging taxes."

Doggett recently tried to get a key House committee to kill the tax credit. Instead, it voted to extend it.

Critics say it's just another fleecing of America, burning billions of dollars in taxpayers' money.


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