Former Massachusetts Governor Mitt Romney is attempting to delay releasing his Tax returns so as to prevent his Mormon faith from becoming an election issue. I actually agree and support the former Governor in his approach and reasoning, largely because of what happened to Al Smith, a Catholic who lost the 1928 presidential election largely due to ignorance and false suspicions over his religious affiliation.
In a common practice all legal under U.S. law, Romney adopted a practice that made him eligible for large tax deductions, giving the Mormon church substantial stock holdings that he obtained through his private equity firm, according to documents filed with the U.S. government and to Romney associates.
The method used by Romney to help meet his Mormon obligation of “tithing” – in which members donate 10 percent of their income to the church – is a common way for wealthy Americans to make large donations to charities, tax specialists say.
But against the backdrop of a Republican presidential campaign in which Romney is being pressured to reveal his tax returns and further details on his vast wealth, the donations shed light on the tax strategies of Romney and others at Bain Capital, the private equity firm he co-founded in 1984.
Romney, a former Massachusetts governor, is the early frontrunner in the state-by-state contest to pick a Republican candidate to run against Democrat Barack Obama in the November presidential election.
Filings with the U.S. Securities and Exchange Commission indicate that Romney and others at Bain have given “appreciated stock” to the church and various charities, which gives the donors potentially generous tax benefits.
The SEC records, which cover a period from 1997 to 2008, reveal several donations worth millions of dollars of stock in Bain deals to the Church of Jesus Christ of Latter-day Saints.
The records do not say precisely how much was donated by Romney. He left Bain in 1999 but continued to have ties to some of the firm’s deals because part of his estimated $270 million fortune is invested in funds linked to Bain.
His staff acknowledges that Romney, who has been active in the Mormon Church, has donated stock from Bain deals to the church but would not say how much.
The SEC filings indicate that donations to the church in stock from Bain deals reached well into the millions of dollars.
They include a gift of nearly $2 million in Burger King stock in February 2007 generated by a Bain deal.
In another donation, the Mormon Church received what SEC filings and stock pricing records indicate was $1.3 million of stock in a company called Innophos Holdings in June 2008.
The church received an estimated $1 million in Domino’s Pizza stock in 2004, in yet another donation.
Tax analysts said churches and charities who receive such stock donations usually sell them, tax-free, for cash shortly after receiving them. Mormon Church officials indicated this was the church’s practice.
Tax analysts said the donation method used by Romney and Bain generally worked like this:
Romney was eligible to invest in the stock of companies that were being restructured by Bain. Romney and other Bain investors usually were able to purchase the stock at very low prices.
Through the years, such stock may appreciate in value, sometimes considerably.
The analysts said that if Romney and others at Bain got a stock cheap and eventually donated it to a church or charity without cashing in the stock, then they could get two tax benefits.
First, they would not have to pay capital gains tax on the appreciated value of the stock, which they would have to do if they sold the stock and either pocketed or donated the proceeds.
Second, they might be able to deduct all, or at least part of, the value of the donated stock from their taxable income.
Such a move can save wealthy donors millions of dollars, the analysts said.
The great American invention in charitable giving, which is slowly catching on in the rest of the world, is the concept of giving appreciated property, commonly soon-to-be-publicly traded stock, to charity.
The SEC filings show shares in Bain deals being given to Corporation of the President of the Church of Jesus Christ of Latter-day Saints.
Spokesmen for Romney’s campaign and the Mormon Church said Romney was not the only Mormon who worked at Bain and who donated appreciated stock to the church.
Not all the shares you see (in SEC filings) can be attributed to Mitt, as there are other Mormon members of the firm who may also have been making donations to the church of personal shares owned by them. Some of Romney’s donations to the church went through the Tyler Charitable Foundation, a Romney family charity that has donated millions of dollars to the church during the past five years.
Other contributions to the church have been donations of stock through Bain. These are personal donations (Tithes), not payments from Bain.
A stock donation to the Mormon Church during the 1990s – when Romney was in charge at Bain Capital – shows how the donor might have booked significant tax savings.
In the transaction, the church received 93,668 shares of Wesley Jessen VisionCare Inc, a contact lens company.
The church sold the shares for $22.325 each, after an underwriting commission, according to a Wesley Jessen prospectus dated Aug. 19, 1997. The shares had appreciated more than 50-fold since being acquired by Bain Capital Funds two years earlier at a cost of 43.4 cents a share, according to data in a Wesley Jessen prospectus filed with the SEC on Feb. 13, 1997.
If Romney or another Bain partner or employee had cashed in the shares, they would have been taxed on the $21.89 per share gain, or $2.05 million.
Instead, the donor of the shares to the Mormon Church avoided tax on the substantial capital gain and would have been able to count some or all of the $2.09 million of stock given to the church as a tax-deductible charitable contribution.
I have no objection or issue over Governor Romney’s business record or success, actually, I praise his success and success should not be something that should be held up as a bad thing. The only thing that should matter in the race for the President of the United States is competence and ability to lead; in this I believe Governor Romney and two of the other candidates are more than amply suitable and qualified.