Hillary's Tax Returns & Hidden Offshore Income

Ben Smith of the Politico quotes Howard Wolfson as saying that Hillary's tax returns will be out in a day or two.  When they're released, just about everyone will look at the returns as an accurate disclosure of the Clintons' income. But the Clintons' tax returns will only show income that's taxable in the United States.  If the Clintons earned income outside of the United States, it's possible that they've kept some or all of that income offshore. If so, that income need not appear on their tax returns.

Let's say the Clintons earned several million dollars in, oh, I don't know, Kyrgyzstan. If they keep that income offshore, they won't need to pay U.S. income tax on that income. If they don't pay tax on that income, it won't appear on their tax returns.

It's perfectly legal and lots of individuals and corporations with substantial foreign income do it because the income tax rate in the Cayman Islands, or Nevis, or wherever is effectively zero.  So you keep your foreign income offshore, invest it, and only pay tax when you domesticate it (i.e., bring it into the U.S.).

As a result, the Clintons' tax returns may need to be taken with a huge grain of salt.  Whatever income they show from domestic speaking fees, book sales, etc. may not include income that is generated overseas.

My guess is that 98% of Americans know nothing about offshore accounts and no one, including the media, will think to ask about it.

The Clintons will have carefully thought out how much foreign income to declare and therefore reveal. I think we should be aware that there may be a lot more money offshore, which is generally protected by bank secrecy laws and which the Clintons will have all sorts of reasons not to disclose (e.g., they have an obligation to partners to keep it confidential, etc.).

There was a diary on this earlier today that has scrolled off. Commenters there made the point that simply having offshore accounts like the Clintons do is a political liability even if the accounts are perfectly legal.

•  The first act Barack Obama should do as President

  is invade the Cayman Islands and declare them US property.  Our national debt would be history.

  by jalapeno on Thu Apr 03, 2008 at 05:16:29 PM PDT

  •  He can justify it

    ...as part of the "War on Terra."   That trumps any objection, right?

    by Randomfactor on Thu Apr 03, 2008 at 05:27:40 PM PDT

    •  cayman tea party. n/t

      by jalapeno on Thu Apr 03, 2008 at 05:32:36 PM PDT

•  Tips? (I won't declare them on my tax return)

  by kosophile on Thu Apr 03, 2008 at 05:23:30 PM PDT

  •  Dude--whatever you're smoking...

    It's rude not to share it. I'm just sayin'....

    by homogenius on Thu Apr 03, 2008 at 06:07:48 PM PDT

  •  Look, I'm deducting the tip on my returns

    give me your social security number, bank and credit account numbers and any passwords please.

    I didn't think about offshore accounts, don't understand how it works but if that is the case why the delay?
    I didn't think of them being very careful, although I knew they should be, because Bill seems to have been so reckless in the setting up of foundation finances  and the intersection between those donors, political donors and suppliers of his personal income and assets...as well as the people and situations he was associated with.
    I know he is not running but as the spouse it still presents a conflict of interests
    As noted in December 20, 2007 article by the NY Times entitled In Charity and Politics, Clinton Donors Overlap

    Over the last decade, former President Bill Clinton has raised more than $500 million for his foundation, (snip)The foundation has closely guarded the identities of its donors — including one who gave $31.3 million last year.

    Now, the secrecy surrounding the William J. Clinton Foundation has become a campaign issue as Senator Hillary Rodham Clinton seeks the Democratic presidential nomination with her husband as a prime source of strategy and star power. Some of her rivals argue that donors could use presidential foundations to circumvent campaign finance laws intended to limit political influence.

    Mr. Clinton himself echoed those concerns this fall when he pledged to make public future donors if Mrs. Clinton was elected president. While disclosure is not legally required, failure to do so, Mr. Clinton said, would raise "all these questions about whether people would try to win favor with her by giving money to me."

    Even so, past donors should remain private, he insisted, "unless there is some conflict of which I am aware, and there is not."
    

    Seriously...reveal future donors AFTER she is president and others only if he thinks there is a conflict? Really? That is suppose to go over well?
    The aticle notes some of the donor list was revealed and there were many potential problems.

    It's harder to justify keeping that donor list secret from the public when Clinton Library Sells Secret Donor List
    It rather undercuts all the reasons these donors names must be kept anonymous. Oddly they sold them to one of the donors/companies that is one of Bill's more troublesome "employers". Some of that income and stocks should have been cleared by the companies 2007 annual report but they delayed that (so are being considered for downgrading of their debt rating)
    The filing was delayed because of a SEC investigation and stockholders lawsuit that have also been being put off that would also reveal financial information about the Clinton's.
    They're investigating infoUSA founder Vin Gupta using private corporate jets to fly Bill and Hillary Clinton on business, personal and campaign trips (est at $950,000 worth) and questions Gupta paying Bill Clinton a $3.3 million consulting contract and if stock options granted to Bill Clinton were approved improperly.

    Feb 4, 2008 Issue NEWSWEEK Here an F.O.B., There an F.O.B. mention three of the more troublesome connections like the above noted Gupta/infoUSA (and their scandal bilking the elderly) and Burkle/Yucaipa and Pinchuk and Kazakhstan, uranium and Giustra. It talks about some of the difficulties with all the swirling financial questions and his attempt to unweave so as not to hurt the presidential run.

    OK so all of that is to try to show Bill has been an ass. He knew she would run and those foundation records should have been so transparent and his connections so clean that it wouldn't raise a single question. There's nothing wrong with him getting rich but you don't do it in ways that raise questions if your wife is running for president,

    I know these issues haven't caught on but if the republicans read NY and Washington papers or new magazines you can bet they are waiting to use the stories that can be made to sound ugly without even lying and they will lie besides.

    Is their accounting more careful? I wondered why the delay in taxes and wondered if it's possible to have some reason to file amended returns and in the amended ones do "married filing separately" so his income isn't on them at all. Don't know if you can.

    by joynow on Thu Apr 03, 2008 at 06:49:04 PM PDT

•  I am curious as to what kind of sparkly

  consulting Bill did for Ron Burkle that was worth the reported 20 mil?  hmmmmmm.

  by dotster on Thu Apr 03, 2008 at 05:24:58 PM PDT

•  switcheroo

  "If you had two companies in Pittsburgh that both were going to expand capacity and create 100 jobs, our tax code puts the company who chooses to put the plant in Pittsburgh at a competitive disadvantage over the company that chooses to move to a tax haven," says former White House economist Gene Sperling, a Clinton adviser.

  http://www.usatoday.com/...

  there's logical equivalence here somewhere... hmm.

  by fivefouranonymous on Thu Apr 03, 2008 at 05:25:04 PM PDT

•  It's the foundation 3 billion foundation, that

  should be audited...

  I've heard some numbers thrown around by my wing-nut uncle in-law.  I ignored it bc you know I was totally into the Clintons.

  However, when I read the borat-gate thing and I learned that the foundation has 3 billion dollars, that seemed to jive w/the 300 million my wing-nut uncle spoke about.
  You know a little of the top, and who would audit a former president who is helping AIDS orphans?

  Trip to Africa anyone? : P

  by Shhs on Thu Apr 03, 2008 at 05:31:30 PM PDT

  •  They audited every year.

    Have you checked the site for their audited financials?

    by burrow owl on Thu Apr 03, 2008 at 05:45:50 PM PDT

•  This Could Not Be more Fantastic

  Rather than wait for the tax returns to come out, then accuse the Clintons of secretly being in the back pocket of everyone who has ever paid bill to make a speech, just INVENT imaginary income hidden in "offshore accounts" and accuse them of being beholden to those nefarious masters instead.  This way no matter what they reveal, they can still be influence peddling sith lords even after they reveal their... you know... 'Acutal' income.

  I say we start telling people the money in offshore accounts is from... hm... Castro!  No wait Gargamel!  NO WAIT OMG OMG U GUYZ!!!! SATAN!  

  The Clintons have offshore money from SATAN!!

  I am TOTES going to write a letter to the editor TONIGHT about these shady secret keeping Clintons and their trillions in Upsidaisium futures from the iron-fisted ruled of Pottsylvania.

  by TooFolkGR on Thu Apr 03, 2008 at 05:31:47 PM PDT

  •  . . . question

    For example, an examination of the records reveals her husband is a partner in an investment fund, Yucaipa Global Partnership, registered in the Cayman Islands, and was paid "guaranteed payments to partner." Sen. Clinton's forms do not list the exact amount of her husband's payments, only that they totaled more than $1,000 over four years.

    "No average person has interest and funds in the Cayman Islands. This is all the above-average, non-tax-paying, super rich," said Jack Blum, an attorney and leading expert on offshore tax havens.

    Jay Carson, a spokesperson for Sen. Clinton's presidential campaign, said the Yucaipa global fund was organized in the Cayman Islands to attract foreign investors. "Each investor or partner in the fund pays the taxes they owe in their home country. For U.S. citizens like Bill Clinton, that means he pays U.S. taxes on his income from this fund, which he does," said Carson.

    http://abcnews.go.com/...

    obviously he pays taxes on his income, but does the fund pay taxes on its account?

    by fivefouranonymous on Thu Apr 03, 2008 at 05:52:10 PM PDT

    •  If it's a partnership, it doesn't pay taxes.

      All the income and expenses "pass through" to the partners.

      by burrow owl on Thu Apr 03, 2008 at 05:56:15 PM PDT

      •  thanks, good to know. nt

        by fivefouranonymous on Thu Apr 03, 2008 at 05:57:03 PM PDT

  •  TooFolkGR, I rec'd you ...

    ... for bringing the funny. Good snark should be rewarded, wherever!  

    As for the diary, I am happy to report that I am now part of a majority -- and what a majority it is! 98% percent is huge. As part of the great tax-know-nothing majority, I would like to begin oppressing the tax accountants as soon as possible. When can we start?

    Serious question:

    If there is a legal tax loophole to keep money offshore, then why wouldn't smart people use it? Besides avoiding the tax consequences, there is also the avoidance of the loaded political questions -- in the case of the Clintons.    

    P.S. I'm no tax attorney, so I have no idea if the procedure outlined by the diarist is even legal.

    by Tortmaster on Thu Apr 03, 2008 at 06:36:34 PM PDT

•  Whoever Said This...

  If the Clintons earned income outside of the United States, it's possible that they've kept some or all of that income offshore. If so, that income need not appear on their tax returns.

  ....could not be more full of shit.

  by Pluto on Thu Apr 03, 2008 at 05:38:44 PM PDT

  •  Sticking to One's Knitting = Good

    Agreed. It seems that the author of this diary does not understand international taxation. Not that there's anything wrong with such ignorance, but this diary isn't helpful.

    by ZizzerZazzerZuzz on Thu Apr 03, 2008 at 06:27:21 PM PDT

  •  I agree with Pluto

    I am an Obama supporter, but assuming that the Clintons are not evading taxes, the only way that statement can be true is if they have a legal entity in the foreign country.

    If Clinton received money as an individual, then that counts as part of their income.

    U.S. tax law allows the first US$80,000 to be "tax-free" via the "Foreign Earned Income Tax Credit."  Above that amount, depending on where the income was earned, the IRS wants its cut.

    If the Clintons earned money abroad and are not paying taxes for the amount above US$80,000, then they would be evading taxes.

    by TheOpinionGuy on Thu Apr 03, 2008 at 06:30:08 PM PDT

    •  Clarification on the Exclusion

      The exclusion was $80,000 until 2006, now it's $85,700.
      And it only applies to foreign earned income where the taxpayer was away from the United States, in a foreign country, for at least 330 days during the year. So this isn't an issue for the Clintons.

      There's actually a bunch of court cases where scientists in Antarctica are claiming this exclusion, and losing, since the courts do not consider Antarctica to be a "foreign country" under the statute.

      Yes, I'm a tax geek.  

      by ZizzerZazzerZuzz on Thu Apr 03, 2008 at 06:51:50 PM PDT

      •  AFAIK, it's all done through blocker corps.

        So it's not like the Clintons make money abroad and then try to exclude it.  It's that they have an investment in a foreign entity, which in turn has investments in other related entities.  (the first entity is the blocker corporation, because it blocks the pass through character)  Then you just manipulate the timing of the payments from the underlying funds to the blocker corp.  

        by burrow owl on Thu Apr 03, 2008 at 07:14:40 PM PDT

•  Joint filing?

  I'm curious to see if Hillary and Bill filed separate returns this year.  I would not be surprised if that was the case given Team Clinton's penchant for withholding information.

  The off-shoring angle is something else to look for.

  by NotGeorgeWill on Thu Apr 03, 2008 at 05:40:23 PM PDT

•  Then there's cash . . .

  I live in Japan, where the favored medium for making, er, contributions to political figures is with cash. That way the recipient doesn't have to worry about pesky filing requirements.

  I hope our former presidents haven't been receiving undeclared income of this sort. Even if they have, we're unlikely to find out about it, so it comes down to a matter of their morals and our trust in them. One more reason why it's important to elect people we can believe in.

  by jwhipple on Thu Apr 03, 2008 at 05:51:19 PM PDT

  •  Then there's Dalmatian puppy skins.

    I hope she hasn't been taking undeclared income in the form of the skins of cute, cuddly dalmation puppies like that evil person in that movie.

    HILLARY CLINTON--HAVE YOU STOPPED SKINNING LIVE DALMATION PUPPIES?

    And another thing--how do we know that wasn't her? Have you ever seen Hillary and Cruella in the same place at the same time?

    HILLARY CLINTON--PROVE THAT YOU'RE NOT THE SAME PERSON AS CRUELLA DEVILLE!!!

    One more reason why it's important to elect people we don't think are evil puppy skinning monsters.

    WE'RE WAITING, HILLARY--JUST ANSWER THE QUESTION!!!

    / snark

    by homogenius on Thu Apr 03, 2008 at 06:05:24 PM PDT

•  Hooey: this isn't how US law works

  Clinton is a US citizen, as is Bill.

  This means they are taxed on worldwide income.  If they made money in Krgyzystan, they have to disclose it on their US tax return.  Failure to do so is tax fraud.

  The only exception?  If they own an interest in an overseas corporation or trust, that corporation or trust doesn't have to report its income in the US, as long as it doesn't distribute it back to the Clintons.  However, they have to report a complete list of such interests, and it's pretty easy to spot a trust or corporation.  The list is mailed to the Treasury each year and a box is checked at the bottom of Schedule B.

  I've looked into this because I'm hoping to open a (fully legal and US-taxed) offshore account in order to deal with the collapsing dollar.

  by neroden on Thu Apr 03, 2008 at 05:53:24 PM PDT

  •  Or, in other words

    They could easily have money tied up in partnerships in the Caymans -- and in fact they apparently do -- but it's going to show up on their tax returns anyway.  You can then investigate those partnerships yourself to see if they're abusive.

    by neroden on Thu Apr 03, 2008 at 05:56:06 PM PDT

  •  I Know the Facts...

    ...for exactly the same reason.

    (It's like peoople are going, "Hey! Maybe Hillary didn't know she was going to run for office -- so she fucked up on her tax returns -- for the first time in 40 years.")

    Braindead logic.

    by Pluto on Thu Apr 03, 2008 at 06:11:28 PM PDT

•  This diary is wrong, wrong, wrong

  Let's say the Clintons earned several million dollars in, oh, I don't know, Kyrgyzstan. If they keep that income offshore, they won't need to pay U.S. income tax on that income.

  If a US citizen (or resident) earns income offshore they are required to disclose it and pay taxes on it.

  It is sometimes possible to defer (not avoid) taxes by setting up a foreign corporation in a tax haven, but it is extremely difficult to do this if your only purpose is avoidance of taxes. The foreign personal holding company rules reach through the foreign company and tax the US holder.

  I'm an Obama supporter, but this is just a misguided or malignant slur of Clinton based on an incorrect understanding of the (admittedly complex) tax code.

  by newton123 on Thu Apr 03, 2008 at 05:54:06 PM PDT

  •  Malignant

    by denise b on Thu Apr 03, 2008 at 06:03:35 PM PDT

  •  Thanks from a Fellow Tax Geek

    I'm also an Obama supporter, and I fully agree with your comment.

    by ZizzerZazzerZuzz on Thu Apr 03, 2008 at 06:34:54 PM PDT

•  Don't expect much....all hidden.

  There won't be much there unfortunately. I hope I am wrong. They probably went back and filed separately so Bill's activities will not be evident. Or, they started to file separately from Day 1 in 2000 when she ran for Senate (don't expect more than 5-7 years). Then, you can't tell a lot from simple tax returns....You need all the supporting details which I guarantee they will not release. So, I predict that we will see a very benign tax return(s) that show some modest income for Hillary from salary and books and speaking fees, and then the Clintonista Machine will spin this as if it looks just like Barack's! You will see none of the machinations that are behind the Clinton Foundation, etc.  

  If this was anything else, they would not be doing this at this time.  

  by Don Enrique on Thu Apr 03, 2008 at 06:14:35 PM PDT