Mitt Romney’s financial disclosure showed he has an Individual Retirement Account worth somewhere between $20 million and $101 million – but the annual contribution limits for IRAs during most of Romney’s time at Bain Capital ranged from $2,000 to $30,000.
It would take about 666 years – no biblical meaning intended – for a $30,000 annual contribution to add up to $20 million, although IRA funds can be invested in certain ways.
And so Rep. George Miller, D-Martinez, the Education and the Workforce Committee’s ranking Democrat; Rep. Sandy Levin, D-Mich., the Ways and Means Committee’s ranking Democrat; and Rep. Chris Van Hollen, D-Md., the Budget Committee’s ranking Democrat, wrote a letter yesterday to the Treasury and Labor departments asking how this can be.
“The purpose for tax-preferred retirement accounts and plans are to encourage Americans to save for retirement,” they wrote. “The accounts and plans are clearly not intended to serve as tax shelters for wealthy individuals to shield vast sums of money. As you can imagine, given the sacrifices that middle-class families have made in recent years, we are alarmed to learn that wealthy taxpayers may be taking advantage of a tax subsidy that is designed to provide for retirement to instead accumulate massive amounts of tax-sheltered assets.”
Miller yesterday cited recent news reports indicating that Bain Capital allowed service partners and employees to co-invest in investment deals via tax-preferred retirement accounts and plans, providing in some cases a fourth of the total capital in the investment deals. It’s possible the investments made through these accounts and plans may have been assigned a nominal value that was significantly lower than the fair market value of the investments, creating an end-run around the annual contribution limits.
Follow us after the jump for the specific questions the lawmakers posed to the federal officials…
What are the current standards related to the valuation of assets that are purchased by tax-preferred retirement accounts and plans? Is fair market value the standard, or are other valuations permissible? Is a liquidation valuation permissible?
What proof are taxpayers required to submit if they are examined with respect to the value of assets held by tax-preferred accounts and plans when such assets are not publicly traded or the value cannot be established by reference to an established market?
How many audits has the Internal Revenue Service conducted over the last 3 years regarding the valuation of assets held by tax-preferred retirement accounts and plans? Has the DOL engaged in any examination activity in this area, and if so, pursuant to what rules under ERISA?
Does Treasury have an estimate of the “tax gap” that is attributable to low valuations of assets held by tax-preferred retirement accounts and plans?
What safeguards are in place to avoid the mis-valuation of assets held in tax- preferred retirement accounts and plans when those assets are not publicly traded or valuation cannot be established by reference to an established market?
What are your policy recommendations for addressing this issue?