BeamMeUpScotty
8/9/2012 6:31:00 AM
On 8/8/2012 10:42 PM, wy wrote:
> On Aug 8, 10:31 pm, David Hartung <david@hotma*l.com> wrote:
>> On 08/08/2012 03:27 PM, Sid9 wrote:
>>
>>
>>
>>
>>
>>> RRRs take note. This is a long article that will be beyond your
>>> comprehension.
>>> Read with care.
>>
>>> Did Romney enable company's abusive tax shelter?
>>
>>> By Peter C. Canellos and Edward D. Kleinbard, Special to CNN
>>
>>> updated 11:36 AM EDT, Wed August 8, 2012
>>
>>> When Mitt Romney was audit chair at Marriott International, the company
>>> engaged in a series of abusive tax shelter activities.
>>
>>> STORY HIGHLIGHTS
>>> When Mitt Romney was audit chair at Marriott, company engaged in abusive
>>> tax shelter
>>> Peter Canellos, Edward Kleinbard:
>>
>>> Marriott tie shows Romney's professional ethics
>>
>>> They say Romney displays a consistent highly aggressive attitude towards
>>> tax obligations
>>> Canellos, Kleinbard: Romney was willing to bend the rules to seek an
>>> unfair tax advantage
>>
>>> Editor's note: Peter C. Canellos, a lawyer, is former chair of the New
>>> York State Bar Association Tax Section. Edward D. Kleinbard is a
>>> professor at Gould School of Law at the University of Southern
>>> California. He is the former chief of staff of Congress's Joint
>>> Committee on Taxation.
>>
>>> (CNN) -- Mitt Romney's refusal to release tax returns in the critical
>>> years of his income accumulation has done little to dispel the
>>> legitimate concern that arises from hints buried in his scant disclosure
>>> to date: Did he augment his wealth through highly aggressive tax
>>> stratagems of questionable validity?
>>
>>> Opinion: Why won't Romney release more tax returns?
>>
>>> One relevant line of inquiry, largely ignored so far, is to examine what
>>> exists in the public record regarding his attitude toward tax compliance
>>> and tax avoidance. While this examination is hampered because his
>>> dealings through his private equity company, Bain Capital, are kept
>>> shrouded, there are other indicators.
>>
>>> A key troubling public manifestation of Romney's apparent insensitivity
>>> to tax obligations is his role in Marriott International's abusive tax
>>> shelter activity.
>>
>>> Edward D. Kleinbard
>>
>>> Romney has had a close, long-standing, personal and business connection
>>> with Marriott International and its founders. He served as a member of
>>> the Marriott board of directors for many years. From 1993 to 1998,
>>> Romney was the head of the audit committee of the Marriott board.
>>
>>> During that period, Marriott engaged in a series of complex and
>>> high-profile maneuvers, including "Son of Boss," a notoriously abusive
>>> prepackaged tax shelter that investment banks and accounting firms
>>> marketed to corporations such as Marriott. In this respect, Marriott was
>>> in the vanguard of a then-emerging corporate tax shelter bubble that
>>> substantially undermined the entire corporate tax system.
>>
>>> Son of Boss and its related shelters represented perhaps the largest tax
>>> avoidance scheme in history, costing the U.S. many billions in lost
>>> corporate tax revenues. In response, the government initiated legal
>>> challenges that resulted in complete disallowance of the losses claimed
>>> by Marriott and other corporations.
>>
>>> In addition, the Son of Boss transaction was listed by the Internal
>>> Revenue Service as an abusive transaction, requiring specific disclosure
>>> and subject to heavy penalties. Statutory penalties were also made more
>>> stringent to deter future tax shelter activity. Finally, the government
>>> brought successful criminal prosecutions against a number of individuals
>>> involved in Son of Boss and related transactions not associated with
>>> Marriott, including principals at major law and accounting firms.
>>
>>> In his key role as chairman of the Marriott board's audit committee,
>>> Romney approved the firm's reporting of fictional tax losses exceeding
>>> $70 million generated by its Son of Boss transaction. His endorsement of
>>> this stratagem provides insight into Romney's professional ethics and
>>> attitude toward tax compliance obligations.
>>
>>> Like other prepackaged corporate tax shelters of that era, Marriott's
>>> Son of Boss transaction was an entirely artificial transaction, bearing
>>> no relationship to its business. Its sole purpose was to create a
>>> gigantic tax loss out of thin air without any economic risk, cost or
>>> loss -- other than the fee Marriott paid the promoter.
>>
>>> The Son of Boss transaction was vulnerable to attack on at least two
>>> grounds.
>>
>>> First, the transaction's promoters and consumers relied on a strained
>>> technical statutory analysis. Second, the Son of Boss deal violated the
>>> fundamental tax principle that the tax law ignores transactions unless
>>> they have a motivating business purpose and a substantial nontax
>>> economic effect.
>>
>>> In the Marriott case, the IRS raised both arguments and won on the first
>>> interpretive issue.
>>
>>> The Court of Claims (affirmed by the Court of Appeals) rejected
>>> Marriott's technical analysis, finding no reliable argument or authority
>>> to support it. The court therefore did not need to reach the issue of
>>> business purpose and economic substance. In subsequent decisions,
>>> involving similar transactions but other parties, the courts have
>>> sustained the second line of attack as well, finding the claimed losses
>>> to be fictitious.
>>
>>> The complete judicial rejection of the Son of Boss tax scheme was
>>> entirely predictable. In mid-1994, for example, roughly
>>> contemporaneously with Marriott's execution of its Son of Boss trade and
>>> well before Marriott filed its return claiming the artificial loss, the
>>> highly respected Tax Section of the New York Bar Association filed a
>>> public comment with the U.S. Treasury and IRS urging rejection of the
>>> technical claims made by promoters of such schemes.
>>
>>> In his key position as head of the board's audit committee, Romney was
>>> required under the securities laws and his fiduciary duties to review
>>> the transaction. In fact, it has been publicly reported that Romney was
>>> the Marriott Board member most acquainted with the transaction and to
>>> whom the other board members turned for advice. This makes sense because
>>> aggressive tax-driven financial engineering was a large part of what
>>> Romney (and Bain) did for a living. For these reasons, it is fair to
>>> hold him accountable for Marriott's spurious tax reporting.
>>
>>> Romney's campaign staff has attempted to deflect responsibility, arguing
>>> that he relied on Marriott's tax department and advisers.
>>
>>> This claim is disingenuous. In a transaction of this magnitude,
>>> sensitivity and questionableness, the prudent step would be to secure
>>> advice to the audit committee and the board from experienced and
>>> independent tax counsel, who would certainly have cautioned that the
>>> Marriott position was risky and not supported by precedent or proper
>>> statutory interpretation.
>>
>>> Moreover, on the key issue of the business purpose and economic
>>> substance, Romney was, or should have been, aware of the facts that the
>>> transaction had its genesis solely in tax avoidance and was a "marketed"
>>> tax shelter.
>>
>>> He had an insider's perspective on the motivation and lack of substance
>>> in the transaction, as well as the financial sophistication to
>>> understand the tax avoidance involved. Romney failed in his duties to
>>> Marriott and its shareholders and acted to undermine the fairness of the
>>> tax system.
>>
>>> No one could accuse Romney of lacking the intelligence and analytical
>>> skills to have dealt with this transaction appropriately. Indeed, his
>>> strengths in this regard were the reason the other board members relied
>>> on him.
>>
>>> What emerges from this window into corporate tax compliance behavior is
>>> the picture of an executive who was willing to go to the edge, if not
>>> beyond, to bend the rules to seek an unfair advantage, and then hide
>>> behind the advice of so-called experts to deflect criticism when a
>>> scheme backfires
>>
>> As I understand the article, Romney did what he could to limit Marriot's
>> tax liability. One of his tactic was rejected by the IRS and Marriot
>> lost the appeal. Upon losing the appeal, Marriot took another route.
>>
>> Why is this a big deal? Can you honestly say that the same thing has not
>> been done many times over by the likes of Reid, Pelosi and friends?
>
> Reid, Pelosi and friends aren't running for president, Romney is. Pop
> a Ritalin and stay focused.
>
Good thing too, Reid and Pelosi refuse to show taxes and they are LIARS
too. They screwed up the economy and Obama is as dumb as both of those two.