Looks like progressive billionaire George Soros may finally get to pay the gargantuan tax bill he’s always wanted to send to the IRS.
In an article we published on April 29 illustrating how House Speaker Michael Madigan (D-Chicago) and the public sector unions have had far more clout, and for far longer, than newcomer Gov. Bruce Rauner (R-Ill.), we received quite a lot of click-throughs, shares and comments from readers – one of which even claimed that the often vilified Koch brothers are the “sugar daddy” behind Rauner with a Huffington Post link discussing Charles and David Koch’s net worth.
Suffice it to say, one look at the Illinois State Board of Elections campaign filings reveals no financial support for Rauner from Charles and David Koch.
But what we also revealed in Wednesday’s article is how progressive billionaires like Michael Bloomberg, George Soros, Tom Steyer, James Simons and Illinois’ own Fred Eychaner collectively outspent their Republican counterparts $108.2 million to $31.5 million in the last election cycle according to the Sunlight Foundation. (Click to enlarge)
On the heels of that comes a breaking story that’s received coverage on Bloomberg, Forbes and Fox News thus far detailing how Soros may have to pay the Internal Revenue Service (IRS) up to $6.7 billion (yes, billion with a “b”) in owed taxes.
George Soros may soon face a monumental tax bill — of nearly $7 billion — after years of playing hard-to-get with the IRS.
Despite Soros having advocated for higher taxes on the wealthy, the liberal billionaire reportedly has delayed paying his own for years thanks to a loophole in U.S. law.
That loophole was closed by Congress in 2008. But before that, Bloomberg reports, Soros used it to defer taxes on client fees. Instead, he reinvested them in his own fund, and they grew tax-free.
Bloomberg, citing Irish regulatory filings, reported that Soros has made $13.3 billion in this way. Factoring in the various tax rates that would apply, one tax expert estimated this would leave Soros with a roughly $6.7 billion bill.
While Soros did not comment on the estimate, Bloomberg reported that Soros deferred his taxes for so many years by reinvesting client fees. While he technically was able to do this for U.S.-based funds, offshore funds were apparently preferred because otherwise clients would face negative tax implications.
Congress closed that loophole in 2008, ordering fund managers to pay up by 2017.
According to Bloomberg, Soros moved assets shortly before the change to Ireland, seen as a possible shelter from the law. But tax attorneys told Bloomberg they don’t know of a way for money managers to avoid the bill in 2017.
Soros, evidently, allocated $7.2 billion of operating income to investors as distributions on profit participation notes through his company, Quantum Ireland, which is based in the country that serves as the biggest corporate tax haven in the world with a mere 12.5% corporate tax rate. Most, if not all, of the notes were held by Soros’s tax-exempt Open Society foundations. Last year, Soros shut down Quantum Ireland and moved the deferred income to a new entity incorporated in the Cayman Islands.
By the time the new company in the Caymans was set up, Soros had reportedly deferred $13.3 billion in fees. If tax on those fees actually does come due in 2017, as it should by statute, Soros’ tax bill would hit nearly $7 billion. That’s assuming a top marginal rate of 39.6%, plus that pesky 3.8% net income investment tax (NIIT), plus state and local taxes. Of course, that’s also assuming all of the deferred fees hit the U.S. at the same time without further reductions.
The irony here is palpable, considering Soros has funded countless liberal think tanks and non-profits that demand the rich “pay their fair share” in taxes.
We’ll continue to monitor the media coverage on this, particularly to see if the broadcast TV news networks (whose audiences are growing) bother to mention any of this as often as they’ve spotlighted political donations from conservative billionaires like the Koch brothers or Sheldon Adelson.