Taxes

A GOP Loophole May Allow Trump to Never Pay Taxes on Foreign Income

JM Ashby
Written by JM Ashby

Congressional Republicans effectively cut taxes for rich individuals when they passed their tax cuts for corporations as the package included generous tax cuts for pass-through income and S corporations.

The Trump Organization, for example, is one such corporation. The GOP's tax cuts were a massive tax cut for Trump himself and his family, but there's a loophole within the new law that could allow Trump to avoid paying any taxes at all on a significant portion of his business.

Citizens for Responsibility and Ethics in Washington (CREW) have identified a new loophole that could allow the Trump Organization and similar businesses to defer taxes on foreign income indefinitely or until the corporation is dissolved.

But, another lucrative loophole, one designed precisely for businesses that are organized as pass-throughs and make money abroad, has largely escaped notice. President Trump has numerous foreign-based entities, such as DJ Aerospace Limited incorporated in Bermuda, Turnberry Scotland LLC incorporated in Turnberry, Scotland, TIGL Ireland Enterprises Limited incorporated in Doonbeg, Ireland, and THC Barra Hotelaria TLDA incorporated in Brazil, are likely Subchapter S Corporations, which means that this loophole will almost certainly directly benefit him.

This new loophole allows shareholders of pass-through entities to pay zero tax indefinitely on their foreign income. This is even more generous than the terms afforded to Subchapter C Corporations, the corporate form commonly used by publicly traded companies, whose income is taxed at the corporate level. Under the new tax bill, C Corporations receive a not-too-stingy eight years to spread out the tax liability for foreign income. Rather than spreading out payment of income tax over eight years, Shareholders of S Corporations pay not a penny in tax on unlimited amounts of foreign income until an indefinite point in the future when the S Corporation dissolves, the S Corporation liquidates substantially all of its assets, or until the shareholder decides to transfer the shares or dies.

It's the last provision in this that really catches my attention.

According to CREW, even the death of the primary shareholder may not trigger taxes on foreign income. If the heir of the company assumes control, the heir or new majority shareholder may continue deferring taxes indefinitely.

So, using Trump and his family as an example, Trump could pass ownership to Ivanka and never have to pay taxes on any of their foreign income. Ever.

That catches my attention because the New York Times just recently reported that Trump's father passed over a billion dollars to his children through illegal schemes that sheltered the money from taxes. In this case, Trump could pass money to his children without paying taxes on it using a loophole passed into law by congressional Republicans.

They've legalized a scheme that made Trump rich in first place.

Every single talking point Trump or the GOP have ever uttered about "the elites" really comes down to this: they've created all new tax shelters for the elite.

  • Badgerite

    This is precisely why foreign looking and sounding scapegoats must be found. And why when it comes to the gop, trump is their guy. He will not dog whistle, he will literally attack and blame immigrants or minorities or women. Whatever it takes to deflect attention and blame from what the gop is doing to the country’s finances over time.

    • Scopedog

      “Hmmmm. The gop always leaves wreckage. Always. And this wreckage will be monumental.”

      Yep. Anyone looking back over the past forty years would see that. The proof is there.

      But….the purists keep popping up with the “both parties are the same!!” screed. And the MSM still insists that the GOP is the party that really, really the party of economic fidelity.

      • Badgerite

        Well, the MSM seems to have a problem telling the difference between a criminal trial and a confirmation process for a seat on the Supreme Court so I’m not surprised about that.

  • muselet

    S corporations aren’t evil (screenwriters and others who create works made for hire almost all have them, for example), but the relevant laws and IRS regulations are easily gamed, which is why the Trump Organization can pretend to be a small business for tax purposes.

    I doubt these shiny new loopholes were put into the Rs’ tax deform legislation specifically to benefit Donald Trump; that was probably a happy accident. My guess is that congressional Rs cribbed the idea from the experiment with zero corporate taxes out of Kansas, even though said experiment helped ruin the state’s economy.

    To be overly polite, I think “overly generous” sums up the reworked Subchapter S.

    –alopecia

  • katanahamon

    Torches and pitchforks time. Thanks for this story..we need to pass it along, and get other people to shout it from the rooftops. It’s stories like this the average redhat needs to see, but probably won’t. Infuriating that the right gets away with their lying ass propaganda and is doing exactly the thing they accuse others of doing. Wake the f up, America!

    • Scopedog

      “Torches and pitchforks time.”

      I agree. It’s also time to kick the “both parties are the same!” crowd to the fucking curb or just roll right over them. Enough is enough–Democrats would never pass anything like this, and anyone howling about how “Obama was on the side of the rich!!” is just plain fucking wrong.