Bush urged to head off abuse of tax benefit

WASHINGTON – Senate Finance Committee Chairman Charles Grassley, R-Iowa, and the committee’s ranking Democrat, Sen. Max Baucus of Montana, on Friday urged President Bush to help shut down a tax loophole that allowed his secretary of Health and Human Services to claim more than $1 million in tax deductions for “gifts” that have been used to further his family’s interests.

Grassley and Baucus, responding to a report in Friday’s Washington Post, wrote Bush to ask for his support in saving a provision in an embattled pension bill that would rein in what they called an abuse of the charity tax code. And they said the issue could be taken care of through regulatory changes that are in the Bush administration’s control.

“Your IRS Commissioner, Mark Everson, has done a fine job of highlighting these problems, but now the rest of your administration needs to pitch in and rewrite these regulations and end the abuse,” Grassley and Baucus wrote. “We ask that you direct Treasury and (the Office of Management and Budget) to make a priority of rewriting these regulations in the next six months.”

The issue received new attention this week when it was revealed that Health and Human Services Secretary Mike Leavitt and his family have claimed millions of dollars in tax deductions for contributions to a family foundation that until recently has given little to charity. Instead, through loans and investments, the Dixie and Anne Leavitt Foundation has used its $9 million fortune to further the family’s real estate holdings, insurance interests, and even the Leavitt family genealogical society.

In 2002, the foundation loaned $332,000 to Leavitt Land and Investment Inc., in which the secretary owns a significant stake. That same year, Leavitt Land and Investment extended an interest-free loan to Leavitt in the form of stock valued at between $250,001 and $500,000, according to a recent financial disclosure.

Everson has labeled such transactions one of the IRS’ “dirty dozen” top tax dodges, and a provision under negotiation in a major pension bill would curb them. Under the provision, entities such as Leavitt’s, known as Type III supporting organizations, would be prohibited from offering loans to parties related to the fund, and would have to give away 5 percent of their assets each year, just as standard foundations are required to do.

Leavitt released a statement Friday defending his actions and noting that the foundation has increased its giving substantially, from $52,312 in 2003 to $691,221 so far this year.