New York AG investigating Bain Capital, other firms for tax evasion

New York AG investigating Bain Capital, other firms for tax evasion

New York Attorney General Eric Schneiderman has launched an investigation into whether some large private equity firms—among them Bain Capital, the firm founded by Republican presidential candidate Mitt Romney—took advantage of a tax loophole to avoid paying hundreds of millions of dollars in taxes.

According to the New York Times, who first reported the story, executives with knowledge of the investigation said Schneiderman had subpoenaed around a dozen firms in the past few weeks seeking any documents that could shed light on their tax-writing procedures. At issue is whether those firms used a shady, legally-dubious practice of labeling certain fees as investments, thus allowing them to be taxed at a far lower rate to produce huge savings over the long run.

Last month, Gawker obtained and posted nearly one thousand pages of Bain’s finances, revealing that the firm utilized the controversial tax strategy to classify at least $1 billion in fees as capital gains-producing investments. While the fees could have been taxed at up to a 35 percent rate, as investments they were subject to a more modest 15 percent rate, saving Bain around $200 million.