Mitt Romney Tax Returns May Have Employed Legally Dubious Maneuvers, Tax Experts Say

[onehandle]

Source: Huffington Post

WASHINGTON -- Tax experts who have begun to examine the Bain Capital documents released Thursday by Gawker are raising questions as to whether presumptive GOP presidential nominee Mitt Romney has paid all the taxes he owed. At issue are two tax-avoidance techniques employed by Bain Capital, the firm founded by Romney, which have been commonly used in the private equity world but have come under increasing legal scrutiny.

The first scheme involves owning U.S. dividend-paying stocks in an offshore account and pretending, for accounting purposes, not to own the stock. Instead, the taxpayer tells the Internal Revenue Service that he owns a derivative product that is identical in every way to the stock -- except it isn't the stock, so therefore no U.S. taxes are owed. It's called a "total return equity swap," because the buyer still gets the benefit -- the "total return" -- of owning the stock, or equity.

"This use of total return equity swaps, such as to avoid the U.S. dividend withholding tax, was very widespread for more than a decade, and may not be dead yet, although the IRS issued a shot-across-the-bow Notice concerning the practice in 2010," writes Daniel Shaviro, the Wayne Perry Professor of Taxation at New York University School of Law. "But taxpayers who engaged in it to avoid the dividend withholding tax were coming perilously close to committing tax fraud, in cases where the economic equivalence to direct ownership was too great."

The second technique is "not legal," according to Victor Fleischer, a tax expert and professor of law at the University of Colorado. A taxpayer saves substantial amounts of money by pretending that regular income received as a management fee for running a private equity firm is not income, but is instead a capital gain. That drops the tax rate on that income from 35 percent to 15 percent.

Read more: http://www.huffingtonpost.com/2012/08/24/mitt-romney-tax-returns_n_1827632.html

[liberal N proud]

1. How would we know?

Show us the tax returns Romney!

[mgarr]

20. tax returns, if you please

What is the only issue for which Mr. Romney has not flip-flopped? He stands firm on not releasing his tax returns. Why so firm on this issue?

Mr. Romney is running for President of the United States.
This is a position of Trust.
Ronald Reagan said, "Trust but Verify."
Mr. Romney has said, "Trust me," re his tax returns.
It is not unreasonable for voters to want to "Verify.

It is not just liberals who want to see Romney's tax returns.
It is 63% of American voters who do.

The longer Mr. Romney delays, the more suspicious it appears.

Obama released 8 years of tax returns
GW Bush 10 years
Clinton 12 years
GHW Bush 14 years
George Romney 12 years.

What is the problem, Mr. Romney? Release your tax returns.

[valerief]

2. Mitt looks fabulous in orange. nt

[pinto]

3. Drip, drip, drip -

Romney: Big business is fine, helped by tax havens
Source: AP

http://www.democraticunderground.com/1014205720

[Qutzupalotl]

10. Maybe he meant to say "fined." n/t

[tclambert]

16. My guess on the secret returns is that he already paid fines for tax violations.

And THAT is what he's determined to hide.

[Qutzupalotl]

19. That would sink him. Even taking an amnesty would look bad.

I don't think we'll see the actual returns before the election, so we might as well keep pounding him.

[wordpix]

4. Many thanks to the tax experts who are sifting through. Looking forward to more drip, drip leaks

Keep it coming!

As for the total return equity swaps, this sounds like absolute tax fraud.

[corkhead]

5. I'll bet Rmoney has already purchased the limosine he will throw his bean-counters under

when he blames them for him not paying what he actually owed

a bus?, pshaw - buses are only used by the little people.

[wordpix]

7. so far his claim is that he was not in charge & his trust is blind but this is debunked here:

snip:

But did Romney himself benefit from these maneuvers? And is Romney responsible for the legally dubious tax avoidance strategies Bain employed? Yes, Fleischer concludes:

Yes, Romney left Bain in 1999 or 2002. But as part of his severance agreement, he continues to receive interests in these funds, which he has reported on his financial disclosures. In the usual case, a departing partner would receive an economic stake in the GP (Bain Capital Partners X, LP), rather than an economic stake in the LP (Bain Capital Fund X, LP) — representing a payment for the management services he provided in the past. Indeed, because he filed an 83(b) election, we can be sure that he received GP interests as part of his severance agreement, and that he therefore benefited personally from management fee conversions.
[snip]

Romney here is not like a passive mutual fund investor. He helped engineer the funds in the first place. For at least some of the funds, the fee conversion was set in place at the time of the fund’s formation — in the case of Fund VII, when Romney was the sole shareholder of the management company that actually waived the fees (2000). It seems reasonable to infer that fee conversions were in place for earlier vintages of Bain Capital funds as well. I haven’t yet reviewed all of the Gawker documents, but we are talking hundreds of millions of dollars in tax liability on these funds — one hundred million in Fund IX alone (20% of the $500 million converted), another $70 million in fund X. It is unthinkable that in the 1990s through 2002, when Romney was putting together funds, that he was unaware of the fee conversion strategy, or that he was unaware that he continued to benefit from it today.

[Roy Rolling]

6. The Challenge

Though everyone on DU and many people consider such accounting tricks unethical at best and illegal at worst, those are not the people who support Republicans and the Tea Party.

For those folks, it's a badge of honor to outmaneuver the government and find loopholes to every tax law. Why? Not because they don't think it's exploitation of the tax code for personal benefit, they just think that ONE DAY they will be filthy rich and be able to benefit from those strategies, too.

Someone, please, tell them that 99% of people will never even come close to sitting at the table with fellow Plutocrats. Oh yeah, they've been told and still don't give a rats ass.

[Indydem]

8. Actually, they just hate the government

Anything anyone is able to do to keep from paying "big brother" another dollar is fine with them.

[heaven05]

9. thank you

truth i was also responding to 'onehandle'

[Laura PourMeADrink]

11. Error on this post title

"May Have" :&gt

[wordpix]

12. exactly, experts say it's out & out tax cheating

If Rmoney gets away with this, then any of us can claim our ordinary income is a capital gain and should be taxed at the 15% rate. I would then propose a class action suit against the gov. to return 15% of past ordinary income taxes paid at 30%, retroactively. It's especially apropos since R&R are talking about all kinds of retroactive actions.

[Laura PourMeADrink]

14. let's do it !! I sure do hope in the debates that they ask a pointed question about his finances

and not some stupid "will you release your tax returns." I like, "Mr Romney, do you think it's fair that
people can deposit money in other countries instead of investing it in America?" He would hem and haw
about how it is PERFECTLY legal -or- that it is in a blind trust. But, then you have to follow up and say
"Do you think it's fair? Would you move to change it?"

[firehorse]

13. IRS should audit him for the last 15 years.

[oldsarge54]

15. Republican Attitude

it's legal. Anyone with enough money can do this. Oh, you don't have that sort of money? Then you must be an Obama voting moocher and parasite.

[bushisanidiot]

17. Legality and morality are not one and the same.

Romney doesn't seem to understand that at all.

That being said, I have no doubt that Romney, at one time or another, broke the law in order to evade paying taxes.

[lsewpershad]

18. If this guy

is not prosecuted [eventually] will convince me that justice is truely blind when it comes to republicans as opposed to dems,a la Don "Siegelman" [spelling]