When a “moderate” Republican loses Channel 7’s Andy Hiller this early in an election cycle, it can’t be good for the GOP. And that appears to be what just happened. Hiller is, well, livid over Gomez’s refusal to acknowledge that there might be something just the teensy-weensiest bit shady about claiming a tax write-off of nearly $300,000 for promising not to do something that you were already legally prohibited from doing. Hiller’s report is really quite good – it concisely explains that the problem isn’t the historic preservation tax break itself, but the manner in which Gomez took advantage of it.
Here are a couple of the highlights – these are direct quotes from Hiller:
It isn’t clear whether Gomez broke the law, but it’s crystal clear he got a giant tax break that doesn’t pass the smell test….
Memo to Gabriel Gomez: this is not something to be proud of, if you’re running for political office.
Why?
Because it makes you look like a rich person taking advantage of tax laws very few people know about.
Because it can make voters wonder about your values and ethics.
And because it sounds like a scam, even if it’s not.
Oof. Add to that the ongoing hilarity of Gomez’s refusing to release any information about how much financial benefit this tax break gave him, and you’ve got a serious political problem brewing. Why won’t he release the information from his 2005 tax return? Because “I have nothing to hide.” Aha.
Newbie candidates like Gomez never seem to believe that the old “cover-up is worse than the crime” maxim (and no, nobody’s alleging a “crime” here, it’s just an expression so lighten up) applies to them, just like it does to everyone else. But it does. If Gomez had any sense, he would immediately (a) release the information showing how much the deduction benefited him, and (b) request that the IRS review the details of his deduction, and promise that if they found it improper, he would repay the benefit plus interest. He can afford it, and it’s the right thing to do.
There was a thread yesterday in which a comment was made that questioned whether Ed Markey would be receiving the same criticism from progressives. If you look at an example from last fall where there was a tax issue with a Democrat that was questionable, progressives were the first to criticize. That person immediately, did something comparable to what David is suggesting here. The tax in question was paid.
Not last fall, but the 2010 cycle.
of everyone who made a big stink about Kerry’s yacht taxes, and ask them their position on Gomez’s taxes.
pay as if he bought and docked it in Massachusetts – and did so – and this was completely ignored by the right wing who still say he didn’t. (Not to mention, as it was owned by a company where Teresa was the primary owner, there was nothing remotely illegal or unethical about docking a boat – that they chartered out when not using – in Newport where it was maintained. )
but people who live on the Islands, and in Southeastern MA (New Bedford, Dartmouth, Westport for eg) routinely conduct their affairs in Rhode Island, especially boating business. This was not unusual, at all. I read Providence papers before Boston ones when I lived in Dartmouth, and I watched Providence TV stations and listened to Providence radio stations. Boston was an afterthought for us, much like it is for the Berkshires.
Here’s how I’m guessing conservative Republicans might see it: It was wrong for Kerry to do the yacht registration/berthing in Rhode Island, because he’s a Democrat and Democrats favor more taxation. If Kerry wants other people to to pay more taxes, so should he. He’s a hypocrite.
Republicans are against taxes. So when a Republican does whatever he/she can to evade taxes, it is in line with their philosophy and so isn’t hypocritical.
Kind of like it bugs me more when “family values” Republicans turn out to be cheating on their wives (“sanctity of marriage.” “Newt Gingrich.”) It’s not just the act, it’s the sheer gall of trying to preach morality to me while you do whatever you please.
I don’t agree with the Republicans charge that Democrats are “pro-taxation” any more than I believe Democrats spend more than Republicans when in power (if anything, that’s the other way ’round).
But Democrats do generally believe that we have some communal responsibility toward each other and people ought to pay their fair share — which is in line with my own political philosophy. So that’s why it may superficially look worse when a Democrat is seen not to be paying his or her fair share.
But here’s the problem I see for Gomez. That Republican view may play very well with other Republicans, but I’m not sure it’s going to go over well with centrist voters in this state. I don’t think the political center here has much enthusiasm these days for “I’ve got mine too bad for you” Romney Republicanism. Shoring up your Republican base in Massachusetts isn’t a wise strategy if it alienates the center.
but Andy Hiller’s report is pretty damning.
Gomez:
“I’m not apologizing for any success I had”
No was is knocking any success you have had.
“I am proud if everything I have done”
As Hiller noted this is about his shady tax practices, being proud of that is probably not the best approach to take.
He is NOT answering the question – which does not address his wealth. His hostility is incredibly raw towards the reporter. Not a pretty picture.
I’m reminded of another man with tax problems, Flavor Flav of Public Enemy. From their album “It takes a Nation of Millions to Hold Us Back”…
“You’re quite hostile.”
“I got a right to be hostile, man, my people been persecuted!”
Who else owns these so-called historic homes. Let them paint them pink or neon-green, put in a above ground pool, and a BBQ pit on the front lawn, and even vinyl siding over the cedar shingles. Not my problem or business and we should not be federally subsidizing rich folks to live in old homes.
missed. By a mile.
But nice try!
If we accept, and it probably is, a legitimate deduction, then the political question is posed. Turning a tax deduction meant to preserve our heritage into an advantage not foreseen by the original law, would he work to close this loophole, and should there be limits on the amount if preservation not prescribed by local law is allowed? Obviously the law was abused and decreased needed tax revenue. So Mr. Gomez, would you repeal or highly restrict this IRS regulation or just leave it as it is? It’s a voter’s question.
It really is not at all clear, that regardless of local law, that the IRS would actually allow this deduction if he was audited.
In any case, the fact that he took it singles him out as yet another super-privileged rich guy who thinks he can same the system in a way that regular citizens cannot. I think this one issue is going to ruin his chances at winning this Senate seat, because he is never going to be able to come up with a justification that regular voters will accept and Markey can continue to hit him on it in debates and ads.
“In any case, the fact that he took it singles him out as yet another super-privileged rich guy who thinks he can game the system in a way that regular citizens cannot.”
Didn’t affect progressives’ fealty to John Kerry and Ted Kennedy.
Besides, the issue with John Kerry’s boat was that it was spotted in Nantucket before it was in Newport, and thus eligible to pay MA sales tax.
In this case, there are strong questions about whether his deduction was “legitimate.” Three issues as I see this one:
First, if you’re already subject to the same restrictions (and I understand the restrictions in the easement essentially already existed under the historic district regs), you’ve got no cause to take 15% of the value of your home as a deduction for “reduced value.” Your resale value didn’t go down, let alone by 15%. That appears to be a strong possibility in the Gomez case.
Second, I believe federal law caps the deduction at 15% of prior home value, and many people claim the maximum amount or close as a deduction, without reliable assessment showing such a large decrease in resale value. Gomez appears to have done so.
Third, and this is a general policy issue not relating to Gomez’s case, the structure is a little fishy. This easement is treated the same as a cash donation for income tax purposes, and (as this case illustrates) people are deducting huge amounts as “charitable donations” to the orgs in whose favor the easement is granted. But they have not made a cash donation. Any actual decrease in resale value does not hit until you sell. In the short run, it might save you money; if the town agrees the value went down, your assessment for property taxes might go down as well. I support preservation strongly, but someone’s gotta keep an eye on this to prevent abuse and there might be a better way of doing it.
On November 16, 2004, this beautiful home in Cohasset’s historic district sold for $2.1 million, subject to all the restrictions established by the Town of Cohasset. In the subsequent year, Mr. Gomez granted an easement to the National Architectural Trust, claiming a $281,500 charitable deduction based on a loss of value of his home.
So, was there a corresponding loss of home value? Massachusetts law requires property to be assessed based on the actual value of the home, so I wonder if the good folks at the Cohasset assessors’ office recognized this drop in the value of Mr. Gomez’ property. I would think such a dramatic decrease in value would be reflected in his assessment and his local property taxes, because that $2.1 million home was only worth around $1.8 million after the easement was granted.
Cohasset’s assessment records are not listed online, but I am sure a local journalist could easily research the assessment history for this property. It also sounds like Mitt Gomez is also the sort who would file for a property tax abatement if his home was assessed for $281,500 more than its market value.
This story also has another profound impact on the Gomez brand. How many Navy Seals can afford to buy a $2.1 million home? How many Navy Seals claim a specious $281,500 easement as a tax deduction?
I would also guess that the GOP will lose all interest in 7 Townsend Street in Malden, as any talks of Ed Markey’s home will be quickly compared to a $2.1 million home with a $281,500 easement in Cohasset.
And, who knows, maybe Mitt Gomez will need to start talking about issues, as a distraction from his personal story.
available to me and anyone else in that district, and I took advantage of the opportunity. You would, too.” an acceptable response? It’s embarrassing, and smacks of elitism, and Gomez knows it, hence the tap dance around it. It reminds me of the tax credit Romney took in Utah when he was running the Olympics. First it was “I was unaware of it”, then “It was my primary residence”, and finally after needing to claim MA residence, just “oops” and he got away with it. The rest is history.
just to pass it on (full credit to David and BMG, of course) and it’s hit the rec list. Hoping that will generate some visits over here.
…Then that hardly seems to be Gomez’s fault here. I’m a card-carrying Democratic activist, but I’m also a lawyer who has had clients take advantage of Historic Preservation Easements. There’s a reason people get a tax break for this – you give up the right to make certain changes to the exterior of your home in order to preserve your town’s local character and image. That, in and of itself, is not necessarily a positive thing, particularly if you go to sell later on. If Cohasset prevents you from making changes to the exterior anyway, that’s a little eyebrow raising. But then again, Cohasset could also always change its by-laws or historic district regulations in the future.
In the end, this seems less about Gomez than it does about the wisdom of this particular tax deduction.
The deduction is legitimate, and defensible as policy in my view, if (and ONLY if) there was an actual decrease in market value. Every indication is that Gomez’s house’s value did not decrease as a result of the easement.
If your clients’ homes did go down in value, no problem. If they did not, your clients shouldn’t have been taking the deduction either. That’s the only question here.
I’d also venture it’s much more likely that the trust fails to enforce its easement rights (or even to track what happens with his house) than it is that Cohasset decides to eliminate its historic district regulations at some future date.
… you’re unlikely to find an appraiser to state with any degree of certainty what the actual diminution of value is based upon a hypothetical future sale. Hey, maybe the Historic Preservation Easement has to go, and maybe preservation of local community character is a job best left for local historic districts. But I can’t get exercised about Gomez’s use of what seems, at face value, like a legitmate deduction.
Did Mr. Gomez supply this easement to Cohasset for a related reduction in his assessed property value? After all, if it’s good for Uncle Sam, it’s good for the Assessor of Cohasset, no?
I have no idea if he did or didn’t. I suspect that he didn’t, though it’s easy enough to find out, since it is a matter of public record. I suspect that if Mr. Gomez had asked Cohasset for a reduction in assessed value due to the easement [based on fair market value in MA!], they’d have strained their sides laughing him out of the room. And therein would be the strongest evidence in my view that he knew it was improper… that he didn’t try to use the same easement to reduce his local property tax obligation by ~$3k a year indefinitely. If Cohasset says no way, it’s far more difficult for him to assert that it’s proper, no?
Gomez’s house was assessed in 2005, then assessed again a second time the same year for $232K less. I thought for a moment that was due to the easement, but I looked at some other homes in the town that are not historic (e.g. a 1950s ranch, a 2002 contemporary, a 1970s split-level). All the houses I looked at, no matter what age and style, had two assessments in 2005, the second being considerably lower than the first. In the next year, 2006, Gomez’s assessment jumped quite a bit. It continued to rise, topping 2 million in 2008, and has been the same for several years now.
I agree 100% that, if the deduction were proper, he should have appealed his local property tax assessment. I find it funny that the counselor says there’s no easy way to measure impact on a home’s value but has no problem with a $281,500 valuation assigned to the easement on personal income taxes. People claiming that the easement was worth “X” because their home went down by that amount should be prepared to back up the claim. If they can’t, then perhaps we do have a policy problem.
First, thus…
..and, after, thus…
Um… if you are unlikely to find an appraiser to accurately determine the change in value, per your first argument, then Gomez himself is even less likely to put a legitimate valuation to his deduction. Maybe it’s $5? Maybe it’s $281,000? Maybe it’s $4,000,000,000,000,000.00? Who knows? If an appraiser can’t put a value on it, why can Gomez?
That’s the way it works. The federal government, for whatever reason, puts some value on preserving properties recognized by national historic registries to be historical. So, they incentivize it. I’m not sure how they come to the number they do, but that’s not really the point. They attach some value to it.
You don’t have to like it, but it’s a perfectly legit deduction. Plenty of wealthy liberals living in historic Massachusetts properties do the same thing, which is probably why this particular hue and cry is going nowhere. In fact, Gomez would be kind of dumb *not* to take this deduction. If the IRS doesn’t like it, they should work to eliminate it. Otherwise, there it is, waiting to be taken advantage of.
does not come to any number at all. The taxpayer determines the cash “value” of the donated easement by claiming that the new restrictions reduced the value of his home. If the value claimed is a legit reduction in the value of the home, then the deduction is legit. If not, it is not. What is so hard to understand about this? You seem to be missing the point deliberately.
If Massachusetts liberals are taking the deduction and the amount they claim does not correspond to any actual reduction in market value, they are equally wrong. And I’d love to know from where you conclude that the issue is “going nowhere.”
This is why I stopped participating in these boards a while ago. The tilting at the windmills is tedious. So, now the argument is you’re disputing *the amount* of the deduction? Well, good luck with that. I have no information as to whether the amount claimed was excessive or not. Neither, I suspect, do you. “If the value claimed is a legit reduction in the value of the home, then the deduction is legit. If not, it is not.” I’m not disagreeing with you here. Don’t be an ass.
I thought the point of the thread was the deduction was suspect given Cohasset’s already existing prohibition on altering the property. If that’s the argument you want to have, I’m game. If not, I’m done.
You correctly surmise that the point of the thread is that “the deduction was suspect given Cohasset’s already existing prohibition on altering the property”. In comments like this, it seems clear enough to me that the dispute is about whether or not Mr. Gomez actually suffered any loss at all. That is both an argument about the validity of the deduction (for which you write that you are “game” and also about the amount of the deduction.
So why the snark?
No snark intended. I’m trying to be as matter-of-fact about this as possible. A guy takes a deduction the seems frowned upon by the IRS, for which they threaten imprisonment and fines in 2005. And yet, in 2012, the tax break is still available, with no apparent change in its application? Either it’s available or it’s not.
If I were arguing for the government, I’d say that Gomez applied for a preservation easement knowing that he was already forbidden from altering his property’s facade and was thus unjustly enriched. He should, therefore, repay the money and a hefty fine.
If I were arguing for Gomez, I’d say that the law is the law, and that until such time as they change the availability of the HPE to exclude its availability in municipalities that already restrict facade changes in historic districts, then he did nothing wrong. (My understanding of the process is that you have to apply to a national historic registry to have your property recognized as sufficiently “historic”, and then have the easement approved by your local governing board. If the facade is already protected by local zoning, the process probably ought to end right there.) I would go further in arguing that the municipality can always change its zoning by-laws, and thus the HPE grants added protection.
My conclusion: It’s shady, but not entirely shady. Gomez’s on-camera reaction tells me that he probably had no idea that the IRS would take issue with it. If the IRS investigates him and fines him, then it’s a story. Until then… I’m having a hard time getting lathered up over it. But I guess that’s just me.
sets forth the method generally used to calculate the value of this non-cash donation: the value of the easement (and thus the proper deduction) is “equal to the difference between the fair market value of the property it encumbers before the granting of the restriction and the fair market value of the encumbered property after the granting of the restriction.”
The IRS has noted: “It is possible that the grant of an
easement will have no significant effect on the value of the property, particularly if the easement is not more restrictive than local ordinances already in effect.”
That seems like as perfect a description of Gomez’s situation as possible. Voters’ ability to determine if his action was right or wrong is not contingent on the IRS having sufficient enforcement budget to go after every single improper deduction.
So, now a senate election should hinge on determinations by arm-chair property appraisers that a candidate’s deduction was too large? Fantastic.
Not at all.
First: did Gomez play games with the truth? He presents one face to Cohasett and another to the Feds. Either he agreed to abide by Cohasetts laws and misled the Feds about the valuation of his house or he misled Cohasett about his intentions… Do you think that’s Senatorial timber there??
Second: the charitable organization to which Gomez donated the easement did not receive so much as a dollar. It received a piece of paper with a made up number printed upon it. This is clearly abuse of charitable organizations both in the letter and the spirit of the law.
Thirdly: the charitable organization to which Gomez gave this piece of paper isn’t even in Massachusetts. Are there no historic societies in Massachusetts who would take it? I bet that the answer is a clear NO. In a state silly with history, he has to go OUT OF STATE to get his money’s worth…? The “charitable organization” It is in DC and, from all appearances, is merely an advanced form of shelter for charitable organization abuse. It was spanked recently by the Feds for this type of thing.
Fourth: historic districting has the effect of RAISING property values and does not restrict proper maintenance and upkeep. There is NO reason to believe, AT ALL, that the value of the house would drop by so much as a penny under the local regulations and many reasons to believe that it would only go up.
Fifth: anybody, be they “Massachusetts liberals” (your words) or lawyers and other troglodytes, who engage in this practice ought to be condemned as strongly as I am willing to condemn Gomez. Bring them to me and I’ll let them have it just I’m giving it to Gomez.
requires filing a $500 fee along with an appraisal for this deduction. If his house value really went down $300K, let him say so and produce something indicating that.
If I have a policy problem with the deduction at all, it’s precisely this potential for abuse. As petr points out, no cash is donated. Any decrease in the home’s value is meaningless until the donor wants to sell. Yet you’re willing to let people identify the value of their easements with little oversight at all. This isn’t priceline.
Deductions for cash contributions to charitable organizations are “available.” But if I have $281K in Monopoly money and I send it to the Jimmy Fund, I can’t take a deduction for that. The reason’s not that such deductions aren’t available, it’s that my contribution had no real value.
IS that the deduction is suspect because the already-existing prohibition. It strongly appears that the appropriate deduction would be zero, since there’s no evidence the home’s value went down at all and there was no application for a property tax reduction.
There is a second argument that the amount is problematic because, even if there was SOME impact on the home’s market value (a possibility I’m OK with contemplating), it was minimal and not $281K. So Gomez either should not have claimed the deduction at all, or he should have claimed a much smaller deduction.
You keep repeating “the deduction’s legit” like a magic shibboleth. That does not seem to be so in this particular case. As I see it, the deduction as a matter of policy is OK but it is not OK in Gomez’s specific case. Nor is it OK for anyone else to claim a deduction when the house value didn’t go down, or to overstate dramatically the “value” of the donated easement.
You say “good luck with that.” I’m not prosecuting Gomez for tax evasion. We’re talking about how it looks in the context of a political campaign. And it looks rotten.
…to you. To me it looks like a guy applied for and received a tax break that he may or may not have qualified for, which makes him no different than anyone else who walks into an H&R Block every April. Except he has more money.
The difference between me and you is that I’m purposely *not* looking at it through the lense of how it appears in a political campaign. I’m tired of that perspective. I think the world has had enough of that perspective. Tax questions should be looked at through the lense of whether they’re legitimate or not in the eyes of the law, and we should let that determination effect the campaign, rather than vice-versa.
There are a million other reasons not to like Gomez. For me, this isn’t one of them. Sorry, I just don’t drink the cool-aid on each and every Massachusetts liberal talking point.
…If you’re tired of “that perspective” you’ve come to the wrong place, friend.
A man who would take such a stance and such a ‘shady deal’ is not getting my vote to be a United States Senator. SImple as that.
Perhaps there ARE a million other reasons not to like him, but this one seems particularly telling as it deals with facades and fronts, shelters and dodges and tells us that Gomez is comfortable saying one thing to one entity, Cohasett, and an entirely different thing to another entity, the Federales…
“…If you’re tired of “that perspective” you’ve come to the wrong place, friend.”
That’s really too bad. These boards used to herald “reality-based” commentary. Maybe that time has passed. Political campaigns often distort reality, which tends to divorce ordinary people from the process by which they are governed.
.. What a peculiar notion. As though reality were, somehow, perspective free.
YOU said you were tired of the perspective. I said that, if tired, this is not the right place for you. You counter with the absurd notion that looking at things from a certain perspective must mean a distort reality. That’s decidedly odd.
I was thinking that “reality based” meant understanding and digging into the perspectives that exist in, well, the real world. Recognizing them doesn’t mean I’m in thrall to them. Maybe it does for you and thus you are frightened of them. But I wrestle with perspective all the time in my efforts to be well and truly reality based.
Indeed, this whole kerfuffle is ABOUT PERSPECTIVE and how Gabriel Gomez can square that circle and remain coherent.
But that’s a straw man argument. When a U.S. Senate candidate takes a deduction that’s much larger than the average household in the state, and the IRS has identified that very deduction as one of its “Dirty Dozen” tax scams, that guy is open to scrutiny. Particularly in an era when the wealthiest people in the country are taking all the income gains in the economy and paying historically low tax rates to begin with.
All I’m hearing out of you is: “Rich people I know take this deduction and some of them are Democrats, so there’s nothing to see here.” I don’t agree. It’s not my fault that nobody in his campaign can offer the simple defense that “the deduction is legit because it corresponds to the decrease in value my house suffered due to loss of control over the facade.” It’s not a “Massachusetts liberal talking point” if there’s nothing out there to suggest the value of the house went down one cent due to this easement.
You want to raise other issues about Gomez, go right ahead. But if you’re not interested in how things play out in political campaigns, you might be on the wrong blog.
Glad to see you dumped the words “elitist,” “suspicious,” “sneaky,” and “unethical” for a straight up-and-down as a matter of tax law. Either the deduction is legitimate, or it isn’t.
Why hasn’t a reporter asked the IRS for guidance on this? They have an army of experts to answer these exact questions.
If the deduction is legitimate, then that’s that. If it was wrongly taken, then Gomez needs to explain — “I relied on my accountant and tax attorney” blah blah blah — and let the voters decide whether it diminishes his ability to be a US Senator. Also, pay the tax, penalty, and accrued interest.
I would say Markey’s kiting his House checking account is a more serious moral lapse. In the real world, it’s a felony.
Since you didn’t reply to this argument earlier, I’ll repost it here:
From the IRS in 2005:
“Abuse of Charitable Organizations and Deductions. The IRS has observed an increase in the use of tax-exempt organizations to improperly shield income or assets from taxation. This can occur, for example, when a taxpayer moves assets or income to a tax-exempt supporting organization or donor-advised fund but maintains control over the assets or income, thereby obtaining a tax deduction without transferring a commensurate benefit to charity. A “contribution” of a historic facade easement to a tax-exempt conservation organization is another example. In many cases, local historic preservation laws already prohibit alteration of the home’s facade, making the contributed easement superfluous. Even if the facade could be altered, the deduction claimed for the easement contribution may far exceed the easement’s impact on the value of the property.”
It’s pretty darn clear cut. And dried. And cut and dried again. The only way it could be more clear cut and drier is if they actually used Gabriel Gomez picture as a cautionary note.