Apr 19, 2012

Love at First Sight: Buchanan and a Tax Code That Benefits Him

As Floridians filed their taxes this week, Congressman Vern Buchanan (FL-16), a member of the tax-writing Ways and Means Committee, will be reaping the benefits of the complicated tax code. The Sarasota Tribune Herald and the Tampa Bay Times have reported that Vern Buchanan has a long history utilizing the tax code in his own favor including: (1) using offshore accounts to increase profits; (2) utilizing the capital gain tax rate to reduce his tax burden; and (3) cutting a deal to avoided $300,000 in state and federal taxes. According to the New York Times, Congressman Buchanan is currently under investigation by the House Ethics Committee for failing to disclose income and is under investigation by the IRS.

“Congressman Vern Buchanan has helped protect special interest tax breaks and loopholes that benefitted himself, special interests and his campaign – all while he’s under investigation by the IRS,” said Stephanie Formas of the Democratic Congressional Campaign Committee. “Buchanan has already used offshore companies and structured business deals in order to reduce his tax burden. Florida families who pay their fair share of taxes deserve to know of the other ways Congressman Buchanan is scheming middle class families.”

Background

Buchanan Used Offshore Reinsurance Companies to Reduce Tax Burden. According to the Herald Tribune, Vern Buchanan has used offshore reinsurance companies in Bermuda and the Turks and Caicos Islands to reduce the tax burden for auto dealerships that he owns. The offshore companies do not do not occupy any office space and do not employ anyone on the island nations where they are licensed. They are managed from the U.S., and basically provide insurance to insurance companies. [Sarasota Tribune Herald, 10/31/06]

Buchanan Used the Capital Gains Tax Rate to Save $260,000. From 1999-2002, Buchanan was involved in a controversial development project of the Ritz Carlton. In 2002, Buchanan settled the deal in an “unusual fashion” and saved $260,000 by paying capital gains taxes opposed to income taxes. “In 1999, the developers of a Ritz-Carlton hotel and condos in Sarasota agreed to give Buchanan an interest in the project if he could obtain financing by that Aug. 31. He didn't meet the deadline, the developers arranged their own financing and Buchanan sued. The case was settled in unusual fashion. In 2002, Buchanan bought a Ritz penthouse for $5-million from a relative of co-developer Robert Buford and sold it back to another Buford relative for $6.35-million just more than a year later. As the Sarasota Herald-Tribune reported shortly before the 2006 election, the deal was good for both sides. Buchanan got the $1.35-million he originally sought but saved about $260,000 by paying capital gains taxes at the 20 percent rate instead of income taxes at the 39.6 percent rate.” [Tampa Bay Times, 9/21/08]

Buchanan Cut a Deal That Avoided $300,000 In Federal and State Taxes. In 2008, the Tampa Bay Times reported that Buchanan structured a real estate deal to avoid paying taxes on more than $300,000 to the federal and state government. “A multimillionaire with vast business holdings, Buchanan cut his own taxes on two real estate deals that experts say were structured to avoid paying more than $300,000 to the federal and state government.” [Tampa Bay Times, 9/21/08]

Buchanan is Under Investigation by The FBI, IRS, a Federal Grand Jury and the House Ethics Committee. The Federal Bureau of Investigation, Internal Revenue Service and a federal grand jury in Tampa are all investigating Vern Buchanan’s role in schemes to reimburse his employees for contributions made to his congressional campaign. Additionally, the House Ethics Committee is examining Buchanan’s failing to disclose financial interests, income and management positions he held at 17 different businesses and organizations. [New York Times, 2/24/12]

Buchanan Was Forced to Pay the IRS $2.5 million. From 1994-2002, Buchanan was involved in an eight year tax fight with the IRS and by the end of his fight, Buchanan ended up paying the IRS $2.5 million.  “Buchanan has said he originally sent in a $1.2 million check for his 1992 taxes, but the IRS sent it back and said he owed more. Buchanan said he decided to dispute the IRS's claim that he owed another $1 million in taxes. It took eight years of court battles, but by 2002 the parties had settled and Buchanan paid the $1.2 million he always insisted was the real amount he owed. But during the time he fought the tax, penalties and interest piled up and the IRS charged him another $1.3 million.” [Sarasota Tribune Herald, 7/1/08]

Buchanan’s Fundraising Comes from Ways and Means Committee Membership. Buchanan’s fundraising “comes from his year-old membership on the powerful House Ways and Means Committee, which has opened a pipeline of money from political action committees connected to some of the nation’s biggest companies and special interest groups […] Because the Ways and Means Committee has wide jurisdiction and writes all of the nation’s tax policies, nearly every special interest group pays close attention to the panel, said center spokeswoman Viveca Novak.” [Sarasota Tribune Herald, 2/19/12]

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