Republican presidential nominee Mitt Romney reportedly used a loophole via the Mormon church’s tax exemption status and deferred paying taxes for 15 years, according to report by Bloomberg News.
According to some of Romney's tax returns, obtained by Bloomberg News through a Freedom of Information Act, Romney set up a charitable remainder unitrust (CRUT) in June 1996 just before Congress ended the loophole in 1997.
Bloomberg News reports:
The CRUT allows individuals to “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.”
Popular VideoEveryone, meet Madeline Stuart. She's the first-ever professional model with Down Syndrome, and she's inspiring millions of people around the world:
In this instance, Romney used the tax-exempt status of a charity — the Mormon Church, according to a 2007 filing — to defer taxes for more than 15 years. At the same time he is benefitting, the trust will probably leave the church with less than what current law requires.
In 1997, Congress cracked down on a popular tax shelter that allowed rich people to take advantage of the exempt status of charities without actually giving away much money.
Individuals who had already set up these vehicles were allowed to keep them. That included Mitt Romney, then the chief executive officer of Bain Capital, who had just established such an arrangement in June 1996.
Romney’s trust benefits from the Mormon church’s exempt status because charities don’t pay capital gains taxes when they make a profit from sales. The Romney campaign declined to answer questions frm Bloomberg News about the trust.