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How Romney Borrowed The Mormon Church’s Tax Exemption

How Romney Borrowed The Mormon Church’s Tax Exemption

That Mitt Romney has managed to avoid paying a staggering amount of taxes is no secret. In his defense, Romney’s supporters often cite Romney’s charitable donations. However, a new report by Bloomburg has cast an eye over Romney’s engaging in a practice that, while technically legal, has allowed Romney to exploit the Mormon Church’s tax exempt status in order to defer taxes.

A review of Mitt Romney’s tax returns by Bloomberg News, obtained through a Freedom of Information Act request, shows Romney set up a charitable remainder unitrust (CRUT) in June 1996.

The CRUT has enabled Romney to effectively borrow the Mormon Church’s tax exempt status, specifically the rule that allows a religious institution to sidestep capital gains tax when selling assets, and therein defer for 15 years paying tax on certain assets while at the same time collecting profit, all without having to give away much money at all.

Bloomberg details:

When individuals fund a charitable remainder unitrust, or “CRUT,” they defer capital gains taxes on any profit from the sale of the assets, and receive a small upfront charitable deduction and a stream of yearly cash payments. Like an individual retirement account, the trust allows money to grow tax deferred, while like an annuity it also pays Romney a steady income. After the funder’s death, the trust’s remaining assets go to a designated charity.

Now, the amount of money that is believed to be involved in the unitrust is barely a fraction of Romney’s $250 million wealth, but it does raise some interesting questions.

The Romney campaign team has so far declined to comment specifically on the CRUT, but has stressed that Romney is in full compliance with the law.

This, technically, is true but, as Bloomburg points out, the amount of money Romney’s trust will leave for a charity is unlikely to meet the legal requirements established by Congress in 1997, and it is only because Romney set up the trust prior to the rule change that it remains legal.

This is because the amount of money available to pay out to a charity or, should Romney fail to designate a beneficiary, to the Mormon Church, has dwindled from at $750,000 as of 2001, to $421,203 at the end of 2011. Romney has reportedly collected yearly cash payments from the trust without its value increasing, meaning he is still getting profit despite the cash pot dwindling.

Romney’s campaign has been dogged by questions over taxes, from how Romney has avoided taxes by playing a so-called “active role” at Bain Capital even after he had retired, to his refusal to issue what is considered a full set of tax records, and his secretly taped comments to a wealthy donor crowd in which he appeared disdainful of the 47 percent who would vote for Obama “no matter what,” whereby he implied that those among the 47 percent are the ones who pay no income tax.

There has not at any point been a suggestion that Romney has acted outside of the law, but this shows yet another example of how Romney’s creative accounting has enabled him to keep his tax costs impressively, and some would say unfairly, low.

For Romney’s critics, this will no doubt fuel their contention that a Romney presidency would favor the so-called one percent, whatever their party affiliation, at the expense of the majority of Americans who are not able to avail themselves of such tax loopholes and so face a ceiling on their own prosperity.

 

Related Reading:

10 Questions Romney Should Answer About His Taxes

Romney Would Raise Taxes on Poor, Middle Class

Romney: “I’ve Paid At Least 13%” in Taxes

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Photo credit: Gage Skidmore, Wikimedia commons.

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152 comments

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12:20PM PST on Nov 17, 2012

He is a bad, bad man!!

7:56PM PST on Nov 4, 2012

Instead of these morons demanding to see Obama's birth certifate, they should be demanding to see Mitten's tax information.

8:06AM PST on Nov 4, 2012

Did you ever notice. people in church do have Problems they talk about each other and whisper!! Is that being Godly?
He takes from the church and is that being Godly??
I don't think so it's for himself and his friends!
Be sure you go vote this man is not Capable and NOT President Material for US.
He has NO CLUE!
There are a lot of Beggars in Curches!! Claiming to be so religious!
Always with their hand out wanting to take!!
We can see thru them too! Not worth the Problems that goes with them!

10:48PM PDT on Nov 2, 2012

We can all complain but we have to vote. This election is not just about one man but all those who support and control Romney inclu G Norquist, Koch Bros, Adelsen, Fox news, Karl Rove, and the list goes on. His flip flopping is indicative of a man controlled who will do anything to get elected and has to do what he is told by all those who propped him up in the first place. Not voting will mean he wins and if he wins womens rights will go back to the 60's, LGBT equality will be thwarted, Separation of Church and State will not only be obviously affected but also Romeny has to abide by his own churches teaching on all things especially as he is also financially connected through his trusts, regulation on banks and all environmentally issues will go out the window as the Koch Bros want to continue so they do not have to clean up their pollution, and Ryans budget, thinking about the disenfranchised will be in force, and of course The Affordable Care act which has helped many of my patients will be gone, even though Romeny was the one who first worked on it, and the gap between the haves and the have nots will continue to widen. The list goes on. But one thing is sure, the right wing hate anyone other than their own kind, white, rich, and male, being in the white house. Lets keep it a house for all black, white, hispanic, rich poor, and everyone else. It is not a place just for the 1%. Please vote, get your friends to vote, and tell them this is the most important election they

6:20PM PDT on Nov 2, 2012

Screwed up that last sentence. It should have read: Of course, godly as they pretend to be, they would lie about it.

Sorry about that ~

4:35PM PDT on Nov 2, 2012

No church should have tax exempt status. And if that can't happen, then only a very, very small church with a congregation of under a specific number. Of course, godly has they pretend to be, they would like about it.

1:36PM PDT on Nov 2, 2012

Frankly...this is ridiculous...he is rich enough that he does not have to defer taxes....these churches are ridiculous....

12:44PM PDT on Nov 2, 2012

Maybe it's just me, but my income tax document is only one page, ever.
I read the first 8 paragraphs of this article over 10X and I still don't get it.

Now the Repulsivcans are telling me I shouldn't get SS and I should figure out my own retirement plan.
As a waitress, that plan only includes working til I die.

Now if I can't understand what would seem to be a simple explanation of what that man's done with his taxes, what possible hope could there be for me to try and figure out my retirement on my own? What hope for anyone who simply has trouble understanding ALL THESE DEDUCTIONS AND RULES?

I fear - - none.

3:09AM PDT on Nov 2, 2012

Romney is the product of a "cradle to the grave" upbringing down through several generations. There is no crime in that and it is the status of a great many Americans. However, he is the one seeking the presidency and as such, he will never be able to keep church and state separate. Everything he believes will overshadow his actions, no matter what.

11:40AM PDT on Nov 1, 2012

Why does this country let people get away with this disloyalty? Oh thats right..."they" make all the rules. This crap is ok for these fat kats but the IRS will hunt down, penalize or even incarcerate some poor smuck for trying to claim dry cleaning on his $25k W2's. This guy has dupped, danced and dodged paying his share on the monies he makes and I find that to be disloyal to his country and his fellow man but he portrays this squeakie clean, religiously moral character when I see only evil and deception. OBAMA OR DIE

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