<html><head></head><body style="word-wrap: break-word; -webkit-nbsp-mode: space; -webkit-line-break: after-white-space; "><div style="margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; font: normal normal normal 24px/normal Georgia; ">Private Jet as Security Write-Off? 10 Most Insane Tax Loopholes</div><div style="margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; font: normal normal normal 16px/normal Georgia; "><i>For corporations and the 1 percent, tax season offers plenty of ways to dodge Uncle Sam.</i></div><div style="margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; font: normal normal normal 14px/normal Arial; min-height: 16px; "><br></div><div style="margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; font: normal normal normal 14px/normal Georgia; color: rgb(133, 143, 62); "><span style="color: #565451"><a href="http://www.alternet.org/">AlterNet</a></span><span style="color: #000000"> / <i>By</i> <a href="http://www.alternet.org/authors/lynn-stuart-parramore"><i>Lynn Stuart Parramore</i></a></span></div><div style="margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; font: normal normal normal 14px/normal Georgia; "><i>March 1, 2013</i> | </div><p style="margin: 0.0px 0.0px 0.0px 0.0px; font: 14.0px Arial"> </p><div style="margin-top: 0px; margin-right: 0px; margin-bottom: 0px; margin-left: 0px; font: normal normal normal 14px/normal Arial; "> With the national tax filing deadline fast approaching, Americans are once again plopping down with pen, paper and potentially Turbotax to determine just how much they owe their state and federal governments. But while the popular refrain posits that nothing in life is certain but death and taxes, for many corporations and wealthy individuals, having to pay a tax bill is anything but a certainty.</div><p style="margin: 0.0px 0.0px 22.0px 0.0px; font: 14.0px Arial">Due to the proliferation of loopholes, deductions, credits, and the growing use of offshore tax evasion, many rich Americans and corporations are able to dodge the bulk of, if not all, their taxes. Between 2008 and 2011, 26 major American corporations <a href="http://thinkprogress.org/economy/2012/04/09/460519/major-corporations-no-taxes-four-year/"><span style="color: #858f3e">paid nothing</span></a> in federal corporate income tax, despite making $205 billion in pretax profits. In 2011 (the last year in which data is available), corporations paid just a 12.1 percent effective tax rate, <a href="http://thinkprogress.org/economy/2012/02/03/418171/corporate-taxes-40-year-low/"><span style="color: #858f3e">the lowest in four decades</span></a>. Many wealthy individuals, meanwhile, are able to drive their tax rates <a href="http://thinkprogress.org/economy/2011/10/13/342705/report-25-percent-millionaires-lower-taxes/"><span style="color: #858f3e">down below the rate</span></a> paid by middle-class families. Some drive it <a href="http://abcnews.go.com/blogs/politics/2012/06/big-paychecks-tiny-tax-burdens-how-21000-wealthy-americans-avoided-paying-income-tax/"><span style="color: #858f3e">all the way down to zero</span></a>.</p><p style="margin: 0.0px 0.0px 22.0px 0.0px; font: 14.0px Arial">There are certainly large, systemic reasons for these disparities. But part of the problem is that the rich and the biggest companies have access to a slew of tax breaks from which the average household or small business derives very little benefit. Here are 10 of the most ridiculous.</p>
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<li style="margin: 0.0px 0.0px 0.0px 0.0px; font: 14.0px Arial"><b>CEO “private security.”</b> A “<a href="http://dealbook.nytimes.com/2012/04/10/for-some-corporate-chiefs-private-security-is-a-tax-break/"><span style="color: #858f3e">common corporate tax trick</span></a>,” according to the <i>New York Times</i>, is corporate boards paying for private jets and other perks for their CEOs under the guise of security. As Steven Davidoff reported, typically CEOs would have to pay taxes on these benefits, but if the benefit is classified as necessary for security purposes, “the chief executive will pay a reduced tax bill or <a href="http://dealbook.nytimes.com/2012/04/10/for-some-corporate-chiefs-private-security-is-a-tax-break/"><span style="color: #858f3e">sometimes no tax at all</span></a>.”</li>
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<li style="margin: 0.0px 0.0px 0.0px 0.0px; font: 14.0px Arial"><b>Florida cow scam.</b>In Florida, wealthy developers, lawmakers and even some corporations game the tax code by <a href="http://www.theatlantic.com/business/archive/2012/04/americas-dumbest-tax-loophole-the-florida-rent-a-cow-scam/255874/"><span style="color: #858f3e">placing cows on their land</span></a> for a limited amount of time each year, thereby qualifying for agricultural tax breaks. Sen. Ben Nelson (D-FL) <a href="http://www.alternet.org/story/154567/holy_cow!_how_senators_and_movie_stars_use_livestock_to_game_the_tax_code"><span style="color: #858f3e">has benefited</span></a> from this absurd loophole for years, <a href="http://www.theatlantic.com/business/archive/2012/04/americas-dumbest-tax-loophole-the-florida-rent-a-cow-scam/255874/"><span style="color: #858f3e">as has Disney World</span></a>. But Florida isn’t the only offender. From rock stars in New Jersey <a href="http://www.alternet.org/story/154567/holy_cow!_how_senators_and_movie_stars_use_livestock_to_game_the_tax_code"><span style="color: #858f3e">to movie stars in Colorado</span></a>, tax breaks meant for farmers get gamed by the most privileged, using everything from sheep to beehives.</li>
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<li style="margin: 0.0px 0.0px 0.0px 0.0px; font: 14.0px Arial"><b>Facebook stock options.</b>The social media giant Facebook made more than $1 billion in profits last year, but <a href="http://thinkprogress.org/economy/2013/02/14/1597741/facebook-pays-no-taxes/"><span style="color: #858f3e">paid no corporate tax</span></a> thanks to a huge write-off after its initial public offering. In fact, the company received a refund of $451 million. As Citizens for Tax Justice, explained, “Facebook’s income tax refunds stem from the company’s <a href="http://ctj.org/pdf/facebookexcess.pdf"><span style="color: #858f3e">use of a single tax break</span></a>, the tax deductibility of executive stock options.” This loophole will also allow Facebook to avoid more than $2 billion in taxes in future years. LinkedIn used the same gimmick to <a href="http://is.gd/AqQ3mM"><span style="color: #858f3e">pay no federal taxes</span></a> for the last three years.</li>
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<li style="margin: 0.0px 0.0px 0.0px 0.0px; font: 14.0px Arial"><b>Bluegrass boondoggle.</b> This tax break, created by Senate Minority Leader Mitch McConnell (R-Kentucky) in 2008, gives wealthy horse owners a break <a href="http://thinkprogress.org/economy/2012/05/05/478681/on-derby-day-how-republicans-help-millionaire-horse-owners-pay-less-in-taxes/"><span style="color: #858f3e">worth $126 million over 10 years</span></a> by allowing faster depreciation (quicker tax write-offs) of race horses. McConnell has defended the break by claiming it helps Kentucky’s “<a href="http://www.rollcall.com/issues/56_148/mitch-mcconnell-horse-racing-tax-break-206938-1.html"><span style="color: #858f3e">farm economy</span></a>.”</li>
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<li style="margin: 0.0px 0.0px 0.0px 0.0px; font: 14.0px Arial"><b>Sheryl Crow loophole.</b>Low tax rates on investment income are one of the main reasons the wealthy are able to pay lower taxes than those in the middle-class (and are also a <a href="http://thinkprogress.org/economy/2013/02/20/1616651/capital-gains-tax-cuts-by-far-the-biggest-contributor-to-growth-in-income-inequality-study-finds/"><span style="color: #858f3e">prime driver of income inequality</span></a>). Lawmakers from America’s heartland felt it was necessary to let super-wealthy musicians get in on the action, and so “passed a law allowing songwriters to avoid income taxes and sell their publishing catalogs <a href="http://www.sfweekly.com/2012-10-10/news/taxes-tax-breaks-1-percent-corporations-loopholes-government-congress-corruption-mitt-romney/2/"><span style="color: #858f3e">at capital gains rates</span></a>.” As <i>San Francisco Weekly</i>’s Chris Parker noted, “Three years later, Sheryl Crow sold her publishing rights to one of Australia's largest banks for nearly $10 million. Her estimated savings courtesy of this congressional giveaway: <a href="http://www.sfweekly.com/2012-10-10/news/taxes-tax-breaks-1-percent-corporations-loopholes-government-congress-corruption-mitt-romney/2/"><span style="color: #858f3e">$2 million</span></a>.”</li>
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<li style="margin: 0.0px 0.0px 0.0px 0.0px; font: 14.0px Arial"><b>NASCAR tax break.</b>Thanks to a provision in the 2008 bank bailout, owners of NASCAR tracks are able to write off the costs of their facilities over seven years, rather than “<a href="http://www.forbes.com/sites/investopedia/2012/05/16/americas-most-outrageous-tax-loopholes/"><span style="color: #858f3e">over the 39 years</span></a> that the government estimates it will take for the tracks to depreciate.” This particular loophole costs the government $40 million per year, but Congress reauthorizes it <a href="http://thinkprogress.org/economy/2013/01/02/1384551/fiscal-cliff-nascar-rum/"><span style="color: #858f3e">over</span></a> <a href="http://thinkprogress.org/economy/2012/08/06/638851/senate-tax-breaks-nascar-rum/"><span style="color: #858f3e">and over</span></a> again.</li>
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<li style="margin: 0.0px 0.0px 0.0px 0.0px; font: 14.0px Arial"><b>John Edwards/Newt Gingrich loophole.</b> Both the former presidential candidate and the former Speaker of the House have taken advantage of a provision allowing them to dodge payroll taxes. By forming “S corporations,” Edwards and Gingrich are able to classify the money they receive from various ventures as “business profits,” rather than payments for services rendered, which <a href="http://thinkprogress.org/economy/2010/06/17/173329/snow-pill/"><span style="color: #858f3e">exempts that money from the payroll tax</span></a>. This loophole is regularly abused by lawyers, doctors and accountants, who can count the work they do every day as part of operating a “small business” that consists only of themselves. As tax expert Seth Hanlon noted, “<a href="http://www.americanprogress.org/issues/tax-reform/report/2013/01/22/50198/next-round-of-deficit-reduction-must-tackle-hidden-spending-in-the-tax-code/"><span style="color: #858f3e">Regular wage-earners can’t do this</span></a>, and neither can the owners of other kinds of small businesses.”</li>
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<li style="margin: 0.0px 0.0px 0.0px 0.0px; font: 14.0px Arial"><b>Tax breaks for vacation homes and yachts.</b>The mortgage interest deduction, which is supposed to boost homeownership, can be used on second homes, or even yachts, so long as they are large enough to accommodate a bathroom, along with a cooking and sleeping space. Limiting the deduction to primary residences would <a href="http://www.americanprogress.org/issues/tax-reform/report/2013/01/22/50198/next-round-of-deficit-reduction-must-tackle-hidden-spending-in-the-tax-code/"><span style="color: #858f3e">raise $1 billion per year</span></a> in revenue.</li>
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<li style="margin: 0.0px 0.0px 0.0px 0.0px; font: 14.0px Arial"><b>“Double Irish” and “Dutch Sandwich.</b>” Many companies, from Google to Amazon to Starbucks, use offshore tax havens to drive down their corporate tax rates, sometimes <a href="http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html"><span style="color: #858f3e">down into the single digits</span></a>. Some of the inventive strategies they’ve used include routing profits through Ireland, the Netherlands, Bermuda, or Luxembourg, using tax tricks with cheeky names like the <a href="http://www.nytimes.com/interactive/2012/04/28/business/Double-Irish-With-A-Dutch-Sandwich.html"><span style="color: #858f3e">“Double Irish” and the “Dutch sandwich.”</span></a> European countries have recently <a href="http://arstechnica.com/business/2012/11/dutch-sandwich-with-a-side-of-tax-relief-may-soon-be-off-googles-menu/"><span style="color: #858f3e">attempted to crack down</span></a> on some of the more flagrant abuses.</li>
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<li style="margin: 0.0px 0.0px 0.0px 0.0px; font: 14.0px Arial"><b>Large SUV’s.</b>We’ve already discussed the yacht tax break, but going out and purchasing a large SUV will get a member of the 1 percent another write-off. As Bloomberg News noted, the tax code’s restrictions on write-offs for luxury vehicles don’t apply to those “rated at 6,000 pounds unloaded gross vehicle weight or more.” This means that “purchasing a large SUV <a href="http://www.bloomberg.com/money-gallery/2012-06-20/golf-carts-to-island-divorces-10-notorious-tax-loopholes.html#slide8"><span style="color: #858f3e">often provides faster writeoffs</span></a> than similar but smaller vehicles.”</li>
</ol><p style="margin: 0.0px 0.0px 22.0px 0.0px; font: 14.0px Arial">Closing these loopholes would certainly not fix the tax code’s much larger problems or put a huge dent in the federal deficit. But they would at least get rid of some of the more egregious giveaways that plague the American tax system, while raising some money that can go to providing the critical services upon which many Americans depend.</p><p style="margin: 0.0px 0.0px 22.0px 0.0px; font: 14.0px Georgia"><i>Lynn Parramore is an AlterNet senior editor. She is cofounder of Recessionwire, founding editor of New Deal 2.0, and author of 'Reading the Sphinx: Ancient Egypt in Nineteenth-Century Literary Culture.' She received her Ph.d in English and Cultural Theory from NYU, where she has taught essay writing and semiotics. She is the Director of AlterNet's New Economic Dialogue Project. Follow her on Twitter @LynnParramore.</i></p></body></html>