Billionaire greed is uncontrollable. How do best buds go on a luxury trip when the person who invited you is writing it off as a business expense? What kind of friend sees hospitality as a business? I guess now we know where Clarence Thomas got the idea to charge for his Christmas party. Via Vanity Fair:
According to ProPublica, whose reports on the Crow-Thomas relationship this year have intensified calls for Supreme Court reform, the real estate developer may have used his yacht trips with Thomas to lower his own tax bill—a possible violation of tax laws, experts told the outlet.
“Based on what information is available, this has the look of a textbook billionaire tax scam,” Senate Finance Committee Chair Ron Wyden told ProPublica. “These new details only raise more questions about Mr. Crow’s tax practices, which could begin to explain why he’s been stonewalling the Finance Committee’s investigation for months," added Wyden, one of several Democrats looking into Crow’s gifts to Thomas. (Crow declined ProPublica's request for comment, but he and Thomas have each previously denied wrongdoing amid scrutiny over their personal and financial relationship.)
For a yacht owner to meet the legal standard of operating a for-profit business, said Michael Kosnitzky, co-chair of the private client and family office group at the law firm Pillsbury Winthrop, “You have to be regularly chartering the yacht to third parties at fair market value,” typically through an independent charter broker.
ProPublica interviewed around a dozen former crew members of the Michaela Rose, some of whom spent years aboard the ship, and none said they were aware of the boat ever being chartered. ProPublica also reviewed cruising schedules for three different years. According to the former staff and the schedules, use of the vessel appears to have been limited to Crow’s family, friends and executives of Crow’s company, along with their guests.
According to attorney Michael Bopp, here's how the scam worked:
According to Bopp, then, whenever Crow used his yacht, Crow (or one of his businesses) would pay his own company, Rochelle Charter, and Rochelle Charter would put that down as revenue. On the other side of the ledger would go the considerable expenses of operating the yacht: maintenance, crew, fuel and other costs. If, at the end of the year, Rochelle Charter’s revenue from chartering exceeded those expenses, Crow would pay tax on that income.
So, no incentive to have a profit.
These sorts of arrangements “should be aggressively audited,” said Brian Galle, a professor at Georgetown Law and former federal prosecutor of tax crimes.
“Assuming that the uses of the yacht are mostly personal, Crow should not be able to take a deduction,” he said, calling “absurd” the idea that “the more personal use you get from the yacht, the more deduction you get to claim.”
Crow treated personal trips on his jet in a similar fashion, according to his attorney. Wealthy business owners often derive tax savings from their jets, since business-related flights are fully deductible, and the rich can often find ways to blend business and pleasure, as ProPublica has reported. The company that owns Crow’s jet is not in ProPublica’s data set, so it’s unclear if it reported net losses.
Raise their damn taxes. Ninety percent sounds about right.
