Taxes Blog

Finance Blogs » Taxes » Romney and illegal tax shelter

Romney and illegal tax shelter

By Kay Bell · Bankrate.com
Thursday, February 23, 2012
Posted: 4 pm ET

Corporate taxation is getting a lot of attention thanks to President Barack Obama's release of his plan to revamp how businesses pay taxes.

But the man he likely will face in the battle for the White House also is getting some unwanted spotlight because of a tax break used by a corporation upon whose board he served.

Republican presidential hopeful Mitt Romney has sat on the Marriott International board for 11 of the past 19 years, including six as chairman of the audit committee. During Romney's tenure, reports Bloomberg, the hotel giant repeatedly utilized complex tax-avoidance maneuvers and tangled at least twice with the Internal Revenue Service.

A key confrontation was over a tax shelter known as "Son of BOSS." According to the IRS, "Son of Boss was an abusive transaction aggressively marketed in the late 1990s and 2000 primarily to wealthy individuals." It was designed to create phony capital losses that then were used to offset capital gains.

The IRS reached a deal with many Son of BOSS participants in 2005, collecting $3.2 billion in taxes, interest and penalties from almost 200 taxpayers who participated in the settlement initiative.

As for Marriott, the Son of BOSS shelter reportedly helped one of the hotel's subsidiaries sell about $81 million of mortgage notes while simultaneously reporting a tax loss of roughly $71 million. The IRS challenged the Marriott move. The hotel sued.

Uncle Sam's position was affirmed by a 2009 federal appeals court ruling that invalidated the maneuver. The court sided with the Justice Department and called Marriott's transaction and attempted tax benefits "fictitious," "artificial," "spectral," an "illusion" and a "scheme."

Sounds like the appellate judges got a new thesaurus.

Romney's camp is not talking about his stint at Marriott and the tax techniques used then. Instead, his office is telling questioners that "for details of Marriott's tax planning, we refer you to Marriott."

But you can bet the questions will persist, coming from the other Republicans who want their party's nomination and then from the Obama campaign if Romney does get the GOP nod.

Do you think the questions about Marriott are fair? Does Romney's connection to the hotel and the illegal tax shelter it used at that time cause you any concern?

Get the latest tax news and filing tips by subscribing to Bankrate's free tax newsletters. You can sign up to get a Daily Tax Tip. Or if you prefer a more consolidated collection, subscribe to the Weekly Tax Tip newsletter. Or sign up for both.

You also can follow me on Twitter @taxtweet.

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
2 Comments
Sally Bean
February 26, 2012 at 1:55 pm

This is a salient example of why we must reform the tax system. Most small business firms do not have the legal and accounting resources available to use certain deductions which have already been instituted. And certainly be unable to afford to appeal an adverse IRS ruling.

But if we did, indeed, reform tax laws and perhaps even utilize a flat tax design, that would a) remove an incentive for various trade organizations to contribute to political coffers and b) remove the ability to wage "class warfare" in political campaigns.

What a thought!

Roy J. Meidinger
February 25, 2012 at 11:43 pm

2/22/12
Honorable President Obama
My goal has always been to bring the health care industry in line with what it gives to society and what it costs society. To this end I have worked to reduce the overall costs of health care by a trillion dollars a year for both private and public expenditures and move these funds into the manufacturing sector of our country. Along the way I have uncovered many harmful financial practices.
When the Medicare/Medicaid programs first started the health care costs represented 6.5% of our GDP; the health care costs have now moved to 18% of GDP. I find it completely unacceptable that one of the largest industries was able to grow this big because it has received special treatment by the Federal and State governments, by not enforcing our antitrust laws. To stop this in the future the McCarran-Ferguson Act must be repealed.
When the Social Security System was first introduced the original policy was to keep all the trust funds separate from the general tax funds. This policy did not last long and the funds were co-mingled with other federal income taxes and utilized to pay for the government’s expenditures. We now owe over $3.6 trillion to this fund and the only way to make up this obligation is to tax the same financial groups which originally paid into the fund. Although these obligations are owed for future payments, we should write off this $3.6 trillion and only tax our citizens for what is need for immediate distribution. Over a long period of time, the tax has become a tremendous burden on the middle class, with the actual results of wiping out a great portion of the Middle class.
This is completely unacceptable; the Social Security tax has to be converted from a regressive tax to at least a flat tax and have the higher income individuals pay their fair share; Keep in mind the higher income individuals benefited more when the Social Security funds were utilized to run our government, defend our country and secure our freedom. The benefits of such a tax are to lessen the burden on the middle class and lessen the burden on employees, place larger sums of money in the groups which will spend them.
I have also found it incredible that in the private health care sector the premiums charged by the health insurance companies are determined by what the health care providers charge. The hospitals in this country are now writing off 85% of the patients’ billed amounts, but the insurance companies determine their premiums on what is billed rather than on the actual 15% paid. If the health care providers were to bill the actual amounts collected, the health insurance premiums would be lowered by 85%. This tremendous reduction would not lower the quality of care received by the individual but give businesses a tremendous reduction of employee costs.
Respectfully yours,