Bain Capital Under Investigation For Tax Avoidance-Romney Denies Any Benefit

Source: Forbes

New York Times is reporting that Bain Capital, the private equity firm founded by GOP presidential nominee Mitt Romney, is among a number of firms being investigated by New York Attorney General, Eric Schneiderman, for failing to pay taxes.

The New York AG’s Taxpayer Protection Bureau has issued subpoenas to at least twelve financial firms, including Bain, looking into whether the companies converted management fees (taxed as ordinary income) paid by investors into fund investments which are taxed at a dramatically lower rate.

The controversial tax avoidance scheme came to light last month when Bain Capital internal financial information was published online by Gawker.com , however the investigation had reportedly commenced prior to the publication and is not believed to be tied to the document dump.

According to the Times

The tax strategy — which is viewed as perfectly legal by some tax experts, aggressive by others and potentially illegal by some — came to light last month when hundreds of pages of Bain’s internal financial documents were made available online. The financial statements show that at least $1 billion in accumulated fees that otherwise would have been taxed as ordinary income for Bain executives had been converted into investments producing capital gains, which are subject to a federal tax of 15 percent, versus a top rate of 35 percent for ordinary income. That means the Bain partners saved more than $200 million in federal income taxes and more than $20 million in Medicare taxes.


Read more: http://www.forbes.com/sites/rickungar/2012/09/01/bain-capital-under-investigation-for-tax-avoidance-romney-denies-any-benefit/

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