Mitt Romney served on the board of directors of Marriott International Inc. from 1993-2002, and from 2009-2011. From 1993-1998, he was head of the board’s audit committee. While Romney was on the board, Marriott engaged in a number of corporate tax avoidance schemes—including one of the largest and costliest tax schemes in U.S. history. Here are four ways Romney’s corporate experience paid off for Marriott:
Son of Boss tax shelter: Marriott executed a Son of Boss trade in mid-1994—a scheme that manufactures “a gigantic tax loss out of thin air” to offset actual gains “without any economic risk, cost, or loss.” Marriott later filed a return claiming an artificial loss to lower the company’s taxable income. Son of Boss schemes were notorious, involving about 1,800 people and costing the IRS an estimated $6 billion, and was described as “perhaps the largest tax avoidance scheme in history.”
“Spray and pray”: Marriott purchased four synthetic fuel plants in 2001 in order to benefit from federal tax credits for synthetic fuels, a strategy which was dubbed “spray and pray”. In 2002, the company legally claimed $159 million of those credits, reducing their effective tax rate to just 6.8 percent—far below the normal corporate rate of 35%. Even Sen. John McCain criticized Marriott’s behavior: “One of the greatest beneficiaries of this tax shelter—and that is all that it is, a tax shelter—is a very profitable hotel chain: Marriott.’’
Profit-shifting to Luxembourg: In 2009, Marriott collected $229 million in revenue—primarily from royalty, licensing and franchising fees—at its Luxembourg subsidiary, Global Hospitality Licensing S.à.r.l. The subsidiary reported having only one employee. By the end of 2011, the company $451 million in offshore earnings that it left overseas to delay paying US income taxes. Under Romney’s proposed corporate tax plan, Marriott would never have to pay U.S. taxes on those earnings.
Questionable deductions: The IRS challenged $1 billion in deductions Marriott took related to an employee stock ownership program from 2000 to 2002. The company eventually agreed to pay about $220 million of what it owed in income taxes, excise taxes, and interest to the IRS and a number of states.