City Desk

Norton Bill Would Turn the District Into A Tax Shelter


It looks like D.C. may actually be moving toward an idea proposed by an insurance commissioner from the Mayor Anthony Williams administration, and picked up by Mayor Vince Gray earlier this year: The District can serve as a tax shelter for catastrophe insurance companies that currently keep their dollars ($60 billion of them!) offshore in countries like Bermuda where they aren't subject to federal tax.

Del. Eleanor Holmes Norton is introducing a bill this week which, according to the release, would create jobs and increased tax revenue by encouraging insurance companies to set up shop in town. Just as they do in Bermuda, insurance companies would have to open offices and hire local employees to handle administration. Norton says there would also be a bump in tertiary employment as accountants, bankers, consultants and actuaries would be needed to support the companies. And taxes would still figure into the equation. The District can collect a "modest" excise tax from the companies, and the local banks holding the funds would also be taxed on them.

The only catch? The tax shelter plan may not make statehood advocates happy, since the law only works as long as the District stays a district. Federal income tax—the thing keeping these companies offshore—can only be done away with if Congress is in full control of a jurisdiction.

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  • Skipper

    10 years after the idea is put forward, Eleanor finally introduces a bill in Congress?

    Which has better odds: This bill moving forward or Kwame doing a perp walk?

  • kpmg

    My advice if you go work at KPMG is don’t sell corporate tax shelters or engage in structuring special purpose vehicles to hide billions of banking losses.

    If you do, KPMG may turn on you to save itself and destroy yours and your family’s lives. KPMG is very good at this and retains firms like Skadden Arps to make false statements on KPMG’s behalf so bad that you will end up in prison to suffer daily beatings and worse.

    Take a look at a smattering of the corporate tax shelters KPMG was selling its best clients like BRK while at the same time negotiating a deal with the DOJ to help it indict KPMG partners and managers who worked on individual transactions.

    Bob Bennett was more than happy to cut such a deal with the DOJ on behalf of KPMG (KPMG made false statements to the DOJ about its very own Partners and Managers) apparently in exchange for allowing KPMG to continue its massive corporate tax shelter business and government audits generating hundreds of millions in fees for KPMG.

    Goodness gracious, Bob Bennett of Skadden Arps was willing to make statements to the DOJ about KPMG Partners and Managers so the DOJ could indict the Partners and Managers working on individual transactions (but not any of the massive corporate tax shelters KPMG was purveying) not withstanding an email from KPMG’s Chief Counsel Joseph Loonan to Bennett informing Bennett that the information and statements he was making to the DOJ were absolutely false.

    Oh well, at least Buffet and BRK made out, BRK has over $1 Billion accrued on its balance sheet for tax shelters, penalties and interest, yet Warren thinks we all should pay more, what a fraudster he is, just ask AIG.

    SMATTERING OF KPMG CORPORATE TAX SHELTERS (FRAUD)

    a. “Tier 1 Capital”, which allows banks to obtain deductions when raising capital using offshore tax haven Financial Asset Securitization Investment Trusts (“FASIT”);
    b. “TITUS”, which allows banks to create fraudulent income through the decrease of book tax rate;
    c. “German KG Financing Structure”, which allows corporations to avoid taxes in the U.S. and Germany;
    d. “Verdi I”, which is the use of offshore tax haven FASITS to avoid taxes;
    e. “Default Captive Insurance”, which creates phantom tax deductions for banks on their credit card receivables through the use of offshore tax haven subsidiaries”;
    f. “21% LIFECO Solution”, which is the use of reinsurance contracts by banks to create phantom tax deductions;
    g. “Price”, which is the use of offshore tax haven insurance companies by executives to avoid taxes on corporate compensation;
    h. “RIPSS2”, which is the use of foreign party and debt securitization to avoid taxes;
    i. “CARTELS”, which is an international 304 non-economic loss generating transaction;
    j. “Repatriation of Foreign Parents Profits”, which avoids U.S. taxes on distributions through triangular B Reorgs;
    k. “Securities Lending Transaction”, which allows banks to avoid U.S. taxes by creating phantom FSI;
    l. “Partnership Buy in Strategy”, which allows U.S. corporations to avoid taxes on transfers of property to foreign tax havens;
    m. “LUX CO”, which utilizes a branch in the U.S. of a Luxembourg tax haven company to avoid taxes in the U.S.;
    n. “Interest Allocation Coop”, which allows corporations to avoid taxes in 2 the U.S. and other countries;
    o. “Spared Sparing”, which provides for the avoidance of withholding taxes;
    p. “Original Issue Discount Strategy”, which allows for taking the same interest deduction twice;
    q. “956/1032 Zero Basis Solution”, which avoids U.S. taxes on the repatriation of untaxed foreign profits;
    r. “Chase Knights”, which is the use of a Luxembourg tax haven to avoid us Taxes;
    s. “Chase Squires”, which is the use of a Luxembourg finance subsidiary to avoid us taxes;
    t. “RBS”, which is the use of repossessions by banks to avoid taxes;
    u. “Caesar”, which allows banks to fraudulently raise regulatory capital and investors to avoid taxation by intentionally structuring transaction to lack earnings and profits;
    v. “Global Currency Management Program”, which allows banks to invest in sophisticated foreign currency positions which generate substantial non-economic tax losses;
    w. “SOCS”, which is an artificial loss generator for banks;
    x. “Contingent Liability Trusts”, which create artificial phantom losses for corporations;
    y. “Foreign Tax Haven Captive Insurance Companies”, which create artificial phantom losses for corporations;
    z. “Tempest”, which creates artificial phantom losses for banks;
    aa. “Contingent Liability Corporations”, which create artificial phantom losses for corporations;
    bb. “REIT Strategy”, which eliminates income for banks;
    cc. “Compensation Partnerships”, which shifts income from corporation to employees to avoid taxes;
    dd. “Guaranteed Payments”, which is the use of guaranteed payments to avoid taxes;
    ee. “BIG”, which allows corporations to sell assets and avoid taxes;
    ff. “Hamlet”, which is the fraudulent use of banking rules to avoid taxes Resulting from interest expense allocable to tax exempt securities;
    gg. “Loss Planning”, which involves using IRC § 704d to avoid taxes;
    hh. “Debt Buy Back with Quasi Related Party”, which allows for the avoidance of taxes by a corporation on the buy back of discounted debt;
    ii. “AARTS”, which is the use of inter-company tax rules to avoid taxes on the transfer of assets;
    jj. “Nine Lives”, which is the use of options to avoid gain provisions of 355;
    kk. “RAPS”, which is the use of accounting periods and REITS to avoid taxes;
    ll. “CAPPS”, which allows taxpayers to avoid tax by converting ordinary income into capital under 306;
    mm. “B-Flip”, which is the use of foreign companies to generate non-economic tax losses;
    nn. “351 Leaseback”, which is a strategy to avoid taxes on contribution to corporations;
    oo. “SZCBS”, which uses synthetic debt to avoid taxes;
    pp. “Stock Option Swap”, which is a securities transaction using options to not only avoid taxes, but to avoid Securities and Exchange Commission Rules related to insider trading;
    qq. “Project Zodiac”, which allows for capital raising and creation of phantom losses to avoid taxes all at the same time;
    rr. “Oilco”, which allows oil companies to raise capital and avoid taxes through the manipulation of basis rules on depleted properties;
    ss. “Debt Repurchase Program”, which allows corporations to avoid taxes on 2 buy back of discounted debt;
    tt. “PARTS”, which allows for the issuance of debt and avoidance of taxes;
    uu. “FAS 140”, which allows banks to avoid taxes through the manipulation of accounting rules;
    vv. “Common Trust Fund Strategy”, which avoids taxes through the manipulation of common trust fund tax rules;
    ww. “MACES”, which allows individuals to avoid taxes on ordinary income property;
    xx. “CODA”, which avoids the recognition of income on debt buy backs;
    yy. “FADS”, which creates artificial tax deductions through the use of swaps;
    zz. “Express”, which is the use of foreign parties to avoid taxes through the securitization of receivables;
    aaa. “Stars”, which is the use of a U.K. company to avoid taxes in the U.K. and U.S.;
    bbb. “Short Lease”, which avoids depreciation rules;
    ccc. “Slots”, which creates tax deductions with leases that are otherwise unavailable;
    ddd. “Employee Benefit Captive Insurance Company”, which creates otherwise unavailable tax deductions for potential employee costs through the use of off shore tax haven companies; and
    eee. “PINSCO”, which is the use of offshore tax haven insurance companies to avoid tax on the sale of assets.

  • What About We The People

    If insurance companies receive this exemption from Federal income tax, so should the citizens of the District of Columbia who have been taxed without representation for decades!

  • Southeast Ken

    Eleanor is an old hag that should have left office a long time ago. I can stand this skinny, loud mouth, bald headed woman. I would vote for Don King before I vote for Eleanor Holmes-Norton.

  • Southeast Andy

    SE Ken- That has to be in the top 5 most ignorant ass comments on this blog ever. Do you even understand what a freakin tax shelter is or even what Eleanor does. You must be like 12? Moving on...great idea for the region and Statehood is about as forseeable as the Second coming so anything that brings good money and decent jobs back into the ocuntry should be rallied behind with the appropraite amount of scrutiny. Southeast Ken, REALLY, Stupid??? LOL

  • jimbo

    EHN is useless. She's as bad as the rest of the city pols. The ones that claim to be the cleanest pigs at the trough. At the end of the day, they're still a pig and still dirty.

  • Fed Up

    EHN is nothing but a female Marion Barry. Between the two of them they have single-handedly done more damage to this city than the Brits did in 1814. They both need to go.

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  • DC Now

    Good idea but Norton needs to go. She is relic!

  • jason

    This is not the 1st time EHN introduced this bill. Good idea. The DC insurance regs should be amended to assure that DC actually benefits. i.e., local hiring, local taxes, etc.

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