Last week, Darth Cheney released his 2005 tax return, and while this type of thing doesn’t generally make waves in the news unless it is a Democrat who is releasing the return, there was something that jumped out at me which prompted me to do a bit of digging, where I found this snippet that led me to do a bit more digging.
Being the tax geek that I am, I noticed something that caught my eye as, shall we say, “interesting” – charitable contributions in excess of $6,800,000 on income of just under $9,000,000. For those who are not familiar with tax rules, let’s just say that this is a very high, an unusually high number.
While this is not illegal, by exploiting a loophole in the Katrina tax relief laws passed regarding charitable donations, Dead Eye Dick was able to obtain a refund of at least $1,000,000 MORE than he would be able to get in any other year.
The best part? None of the charities were Katrina related at all.
More below:
As part of the overall Katrina relief laws passed, there was a clause regarding charitable donations. This obviously was to spur people to make donations that would benefit victims of Katrina, but was not overly specific. As we already know, Barbara Bush directed her donations to her son Neil’s company, which she was an investor in. According to the law passed last year we have the following:
Encourages cash donations by individuals. Under current law, individuals may deduct charitable donations up to 50 percent of their adjusted gross income. Deductions for charitable donations are further limited by the phase-out of itemized deductions. Under the proposal, cash donations to charities are exempt from the 50-percent income limitation and the phase-out of itemized deductions if the donations are made before January 2006.
What this means is that, except for last year, one could only make donations that were up to half their income. Not only that, but if your income was over $146,000, the deductions would be “phased out” until you could only deduct 20% of the donation. But for last year, there was no limit on (1) how much you could donate, and (2) there was no “phase out” of these donations.
So by looking at Dick’s return, you can see that he took these deductions for 77% of his income, and had no limit as to how much he could deduct.
The donations were from the exercise of Halliburton stock options which, back in 2001, were directed to be donated to three charities. This I don’t have a problem with (other than the fact that he has repeatedly lied about not haveing any financial ties to Halliburton), since it does (sort of) take the control of the Halliburton money out of his hands. And in any other year, while he would have received a nice size tax break from the donation, it would have been something that is available to anyone.
But, just “coincidentally” the following things happened in 2005:
- The stock options were exercised (there was no direction as to what year or when the options were exercised), resulting in nearly $7,000,000 in income to the Cheney’s;
- Darth Cheney actually wrote a personal check in December 2005 to the gift administrator in the amount of $2,331,400 in order to “maximize the charitable gifts in 2005”.
Now, while the price of Halliburton stock has gone up significantly in the past year and a half, if the income from exercising the options were donated to charity, then the timing wouldn’t matter to Cheney, other than the tax benefit. In fact, there was no rush to exercise the options, since they don’t expire until 2007, at the earliest. Not to mention the lies that Dickie has told about severing his ties to Halliburton, as you can see from the link above.
Confused yet? Well, don’t feel bad because the White House is referring questions about Cheney’s tax return to their tax lawyers.
You may think that this isn’t too unusual, but when you look at what Darth Cheney donated to charity in years past, you will see that it looks pretty sketchy, given the timing and the supposed “non-impact” on their personal financial situation.
In 2004, their donations were around $300,000, mainly from Lynne’s book proceeds.
In 2003, their donations were around $320,000, also mainly from Lynne’s book proceeds.
In 2002, their donations were around $120,000, you guessed it, mainly from Lynne’s book proceeds.
On top of that, the White House Press Release just flat out lies about this not impacting their tax situation:
To enable the gift administrator to maximize the charitable gifts in 2005, the year in which the options were exercised, the Cheneys wrote a personal check in December 2005 to the gift administrator in the amount of $2,331,400. That amount, combined with the net proceeds from the stock options, was given to the three designated charities by the gift administrator. As a consequence, the Cheneys are entitled to a refund of $1,938,930. This refund returns the Cheneys to a neutral position of no personal financial benefit or financial detriment resulting from the transactions under the Gift Administration Agreement. Thus, the Cheneys received no financial benefit from the stock options. The transactions were tax neutral to the Cheneys. The amount of taxes paid by the Cheneys from their income, other than the income from the exercise of the stock options, was the equivalent of what they would have paid if the options had not been exercised.
Technically, the part that is underlined is correct in that they would “otherwise” be in the same position financially. But there is no income to them by just holding onto stock options without exercising them. And based on a 35% tax rate, the exercise of the options and the ability to have no limit on the tax benefit from their donation for 2005 ONLY would give them a cool $1,000,000. Not to mention the fact that they would STILL get a refund of $300,000 – $400,000 on their donation in any other year.
So, other than the cool million or so that they netted, there is no financial impact to them.
Once again, lies about not benefiting financially from Halliburton. Whether they donated the money or not, they are benefiting in a big way from either a tax standpoint or from an income standpoint. Not to mention the fact that it must be nice to have over $2,000,000 sitting around so you can write a check in December in order to get a refund of pretty much all of it a couple of months later.
So, to bring this all back and to summarize, we have this:
- By exploiting a law that was meant for people to donate to Katrina relief, Cheney was able to net a $2,000,000 tax refund.
- At least half, if not more if this refund was solely due to their exploiting of this law.
- In order to do this, they had to write a personal check for over $2,000,000 at the end of 2005.
- None of the donations were to any Katrina relief organizations.
- The donations were from income related to Halliburton, which Cheney supposedly had no financial ties to.
- In any other year, they still would have received a few hundred thousand in tax refunds from this “non-financial tie” to Halliburton, if they donated the proceeds to charity.
- In each of the prior three years, their donations were never more than 4%-5% of their 2005 totals, the only year that this law applies to.
- Once again, they flat out lie in their press release by obscuring the million or so that they personally benefited from this transaction.
- The timing, while not illegal, is extremely self serving and shady, especially in light of the fact that they should not be benefiting financially from any ties to Halliburton.
I just hate him. Scheming, selfish, arrogant, lying, smug, law breaking, law exploiting war criminal.
