As Hurricane Sandy barreled down on the East Coast, there was another storm brewing that quietly made landfall.
Senator Harry Reid (D-Nevada), accused GOP presidential candidate, Mitt Romney, of tax evasion “for over 10 years” on the Senate floor in August, but the intense speculation around his statement simmered down after Mittens released two years of tax returns — though they showed legal holdings in Bermuda, Cayman Islands and Switzerland.
On October 28, Bloomberg.com, dropped the bombshell that Reid was right:
Mitt Romney used the tax-exempt status of a charity — the Mormon Church of Latter Day Saints– to avoid paying taxes for over 15 years.
A maneuver that I’m sure former President Bill Clinton would call tricky “arithmetic.”
Bloomberg’s Jesse Rucker reports:
Romney used the tax-exempt status of a charity — the Mormon Church, according to a 2007 filing — to defer taxes for more than 15 years. At the same time he is benefiting, the trust will probably leave the church with less than what current law requires, according to tax returns obtained by Bloomberg this month through a Freedom of Information Act request.
In general, charities don’t owe capital gains taxes when they sell assets for a profit. Trusts like Romney’s permit funders to benefit from that tax-free treatment, said Jonathan Blattmachr, a trusts and estates lawyer who set up hundreds of such vehicles in the 1990s.
“The main benefit from a charitable remainder trust is the renting from your favorite charity of its exemption from taxation,” Blattmachr said. Despite the name, giving a gift or getting a charitable deduction “is just a throwaway,” he said. “I used to structure them so the value dedicated to charity was as close to zero as possible without being zero.”
Congress aggressively cracked down on this rich man scheme in 1997, but according to Bloomberg, Romney was grandfathered in because he established the tax shelter in 1996 while he was an executive at Bain Capital.
In short, Romney “rented” tax-exempt status from the Mormon Church, setting up a Charitable Remainder Unitrust (CRUT), that paid him yearly dividends, while donating a miniscule amount to the church. The trade-off is at his death, the balance of the trust is gifted to the Mormon Church of Latter Day Saints.
Romney is under no legal obligation to release the trust’s tax returns, but a campaign spokesperson said that all activity pertaining to the shelter has operated within the law.
Knowledgeable observers watching as Romney refused to release his returns made clear that he must have weighed the pros and cons of doing so and found it less damaging to ignore the criticism and keep them under lock and key. They were right.
In August of this year, Romney told FOX’s Sean Hannity that Senator Reid needed to “put up or shut up” when it came to accusing him of not paying taxes:
“Well, it’s time for Harry to put up or shut up. Harry’s going to have to describe who it is he spoke with because of course, that’s totally and completely wrong,” Romney told Hannity in a radio interview. “It’s untrue, dishonest, and inaccurate. It’s wrong. So I’m looking forward to have Harry reveal his sources and we’ll probably find out it’s the White House.
Maybe it’s time that the former governor takes his own advice — and a look in the mirror to see who’s really being “dishonest.”
Still, as explosive as this revelation has the potential to be, the important question is will it have any effect on the outcome of the election?