Mike Leavitt: Millionaire Tax Cheat

From Holden:

Health and Human Services Secretary Mike Leavitt uses his family’s “charitable” trust to avoid taxes and give himself no-interest loans.

Health and Human Services Secretary Mike Leavitt and his relatives have claimed millions of dollars in tax deductions through a type of charitable foundation they created that until recently paid out very little in actual charity, tax records show.

Instead, much of the foundation’s money has been invested or lent to the family’s business interests and real estate holdings, or contributed to the Leavitt family genealogical society.

The Leavitts used nearly $9 million of their assets to set up the foundation in 2000 under an obscure provision of the federal tax code. But unlike standard private foundations, which are required to give away at least 5 percent of their assets to charitable causes, the Leavitt organization donated less than 1 percent of its assets in 2002, 2003 and 2004. The donations jumped to 6.3 percent of total assets last year, after the sale of family water interests that also allowed the foundation to increase its lending to Leavitt business interests.

While Mike Leavitt alone has claimed about $1.2 million in tax write-offs since 2000, the foundation gave away only $49,000 in 2002 and $52,000 the next year, according to tax returns and other documents filed by the foundation. Meanwhile, the foundation’s assets have been used for a $332,000 loan to Leavitt Land and Investment Inc., in which the secretary owns a significant stake, and other secured loans for insurance and real estate deals, said Alan A. Jones, a trustee of the organization.

Leavitt Land and Investment, in turn, extended an interest-free loan to Leavitt in 2002 valued at more than $250,001, according to a recent financial disclosure.

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Rick Cohen, executive director of the National Committee for Responsive Philanthropy, said that “the Leavitts are using the foundation as a personal piggy bank, and that’s not what the public — or Congress — ought to tolerate.” Cohen reviewed the family foundation’s records and tax returns at the request of The Washington Post.

The tax structure used to create the foundation is called a Type III supporting organization. The Internal Revenue Service has said the category is rife with abuse, designating “supporting organizations” this year as one of its “Dirty Dozen” top tax scams, along with Internet identity theft and offshore banks.

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According to tax documents, the Leavitt Foundation donated $49,087 of its $9 million trust — or 0.5 percent — in 2002 and $52,312 — or 0.6 percent — in 2003, the only years of tax data available.

“They’re basically sitting on all this money, getting a charitable write-off and doing nothing with it,” Cohen said.

The small percentage used for donations went largely to causes closely tied to the Leavitts.

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Mike Leavitt’s stake in Leavitt Land and Investment — which owns commercial and residential buildings, land and livestock — was valued at $1 million to $5 million in his 2005 financial disclosure form. In the same year that the foundation made its loan to the company, the company gave Leavitt an interest-free loan valued at $250,001 to $500,000, the disclosure form states.

Dane Leavitt, the chief executive of the Leavitt Group, insisted it was not a loan but a promissory note from each of the six Leavitt brothers pledging to give the company funds and was “completely unrelated” to the loan the foundation gave the company that year.

Such loans — from a family foundation ostensibly set up for charity to the family’s business interests — are precisely what IRS Commissioner Mark W. Everson labeled as an abuse last year when he excoriated Type III supporting organizations as personal piggy banks for the rich.

“Some promoters in this area have encouraged individuals to establish and operate supporting organizations . . . that they can control for their own benefit,” Everson said. “There are a variety of methods of abuse, but a common theme is a ‘charitable’ donation of an amount to the supporting organization, and a return of the donated amount to the donor, often in the form of a purported loan that may never be repaid.”