Hedge fund manager Daniel Loeb was singled out for criticism by labor leaders who are urging the U.S. to limit investors’ ability to lower tax obligations through offshore reinsurance ventures.

“When just one hedge fund takes advantage of this loophole, it means hundreds of millions of dollars are lost that would otherwise support quality public schools,” Randi Weingarten, president of the American Federation of Teachers, said in a statement Thursday, using Loeb’s Bermuda-based Third Point Reinsurance Ltd. as an example. “This unconscionable tax avoidance scheme must end.”

Almost 100,000 public comments were delivered to the U.S. Internal Revenue Service from the teachers’ association, the AFL-CIO and Credo Action, Weingarten’s group said. The IRS issued a proposal in April to tighten rules for hedge fund-linked insurers and asked for public comment within 90 days—a deadline that expired Thursday night.

Third Point Re saved about a quarter of a billion dollars, then an additional $25 million annually, Weingarten said in the statement. The AFT said the figures are based on research by Peter Conti-Brown, who is an assistant professor at the University of Pennsylvania’s Wharton School. He calculated the difference between regular rates on short-term trading profits and the capital gains rate enjoyed by some offshore insurers.

‘Outmoded Laws’

The letters extend a clash that public school teachers’ unions have had with Loeb, who has pushed to expand charter schools and get tax credits for private-school donations. Charter schools are publicly financed but privately operated.

Loeb’s Third Point LLC was named on a “watch list” of money managers who support groups that the AFT says are hostile to public pensions. He is a board member of StudentsFirstNY, a group that says on its website that “outmoded laws, regulations and union contracts governing New York’s schools do nothing to put a premium on teacher quality.”

Loeb has joined money managers John Paulson and JPMorgan Chase & Co.’s Highbridge Capital Management in forming insurance ventures that provide a tax advantage and premiums to invest. The IRS proposed in April that the favorable tax treatment enjoyed by hedge fund-linked insurers shouldn’t extend to companies that borrow their insurance executives from another firm.

‘Financially Robust’

A representative of the Reinsurance Association of America wrote a letter dated July 20 to the IRS requesting a hearing on the proposed regulations. The RAA said it is “committed to promoting a regulatory environment that ensures the industry remains globally competitive and financially robust.”

Third Point Re Chief Financial Officer Chris Coleman said in March that there were some significant flaws to possible regulations that were under discussion and that his firm is more than just an investing vehicle.

“Anyone that spent a day in our office would clearly see that we’re a real insurance company,” Coleman said at a conference.

The reinsurer, which counts Loeb as a co-founder, recently opened an office in Short Hills, N.J. The company has said the subsidiary there will be subject to U.S. federal income tax. Manoj Gupta, a representative of Third Point Re, didn’t immediately return a message seeking comment.