Hey, remember how as part of his deal to sell the Milwaukee Bucks, former U.S. Senator and current really rich guy Herb Kohl pledged to donate $100 million to a new arena in Milwaukee? This was painted by the local media at the time as a sign of Kohl’s generosity and commitment to his home town, something that is only slightly diminished by the news that Kohl is using the gift as a tax shelter that could be worth as much as $36 million:
The [Greater Milwaukee Foundation] will simply pass-through the $100 million Kohl had already promised for a new arena to that project. And so Kohl gets a charitable write-off for money that will essentially go to benefit a private business.
“It’s a classic tax avoidance maximization approach,” says Aaron Dorfman, executive director of the Washington, D.C.-based National Committee for Responsive Philanthropy. Dorfman notes that because Kohl sold the team this year, “he needs to get the donation on the books for this tax year.” And the foundation was happy to help Kohl. “We are honored to help a dedicated philanthropist fulfill his charitable wishes,” Gilligan told Urban Milwaukee.
This is an awfully expansive definition of “charitable,” given that the money is actually earmarked to build a new arena for the private NBA team whose new owners just gave Kohl $550 million for the franchise. (The state or city will need to create a tax-exempt public authority to receive the arena gift for this to work, but that’s standard operating procedure for most new sports venues anyway.) In fact, looked at the right way, new Bucks owners Marc Lasry and Wesley Edens are effectively laundering $100 million through Kohl and the Greater Milwaukee Foundation to spend on their own arena, though it’s awfully early in the morning for me to figure out the exact tax benefits to this route vs. just spending the money and taking it as a capital expense.
Anyhoo, this has been your daily reminder that rich people don’t have to obey the same tax laws as the rest of us. Just in case you forgot.
Herb Kohl is my kind of plutocrat. The kind who unabashedly owns the citizenry and political machinery in his locale and extracts and extorts maximum value from them every day while passing himself off as philanthropic.
If I wasn’t so busy shafting my business partners and suing them, I could probably get in on that philanthropy con too, but I’m just too damned short and ugly or something. Not sure on this… our p.r. guy just sighs and says, “Please for the love of god, step back and let Mark be the face of the franchise.” But I ain’t listening, you hear!? Ha! I’m telling Mark to hire a new p.r. guy.
So according to this article, Kohl is giving $100M and receiving up to a $36M tax break. That means he still walks away with $74M less than he would have without the donation. I fail to see how this takes away from his generosity or commitment to the city.
Anybody else willing to donate $74M?
If you give me $550 million? In a second.
I think the benefit is not directly to the new owners, but it is to Kohl “laundering” this way. Reason? Somewhere along the line the Kohl Empire will get LT capital gains treatment on the Bucks sale. However, the charitable donation will be taken as an ordinary tax deduction at a higher rate than the LTCG rates for the $100 million of income.