He should be referring to the overspending legislature rather than the departing residents.
You Make $1 Billion. You Flee to Florida. Then the Tax Man Knocks.
- Thread starter dealmaker
- Start date
You Make $1 Billion. You Flee to Florida. Then the Tax Man Knocks.
Illustrations by Ben Jones
Financiers are gravitating to low-tax locales. Now authorities are fighting back.
June 13, 2018
- By Michelle Celarier
AddThis Sharing Buttons
Share to TwitterShare to FlipboardShare to More
For more than a decade, Paul Tudor Jones’s home in the Belle Haven district of Greenwich, Connecticut, hosted one of the most elaborate Christmas light shows on the East Coast. Each December, cars snaked through the secluded area, occupants craning necks to get a peek at light-sculpture angels, wise men, and stars as they burst onto the lawn of his Monticello-inspired mansion. Christmas music was even piped into the local FM radio station, including a rendition of “Oh Come All Ye Faithful” by Jones’s daughter Caroline, an aspiring country singer-songwriter.
Given the extravagant holiday tradition, it might be hard to argue that Greenwich is not where Jones’s heart lies — often a key element in determining whether one is domiciled in a state, and therefore must pay its income taxes. So, much to the chagrin of his Christmas display spectators, after Jones bought a $71 million home in Palm Beach, Florida, in 2015 and was seeking nonresidency tax status in Connecticut, he canceled the light show.
To be sure, Jones — whose net worth is estimated by Forbes at $4.5 billion — still owns his Belle Haven manse, and Tudor Investment Corp., the hedge fund firm he runs, is still headquartered in Connecticut. But Jones, who was one of the wealthiest taxpayers in Connecticut for years, no longer pays any income taxes to that state.
Whether or not Jones is required to pay Connecticut income taxes is not, as many people assume, just a question of being in the state for fewer than 183 days. To prove that requires a taxpayer to keep copious records that serve to meet a statutory residency requirement. But nonresidents can also be required to prove that their so-called domicile has changed as well — and that’s where it gets messy.
Registering to vote, opening local bank accounts, and getting a driver’s license in the new state are important, but not the end-all people think they are, say tax lawyers. Possibly even more important is proving the new residence is your true home by showing an emotional attachment and moving all your valuables and family mementos there.
Being the CEO of a business in the state one has left, as is the case for Jones, is likely to raise eyebrows, if not an audit. “Having a business connection to your prior sate is a significant impediment to proving a change of domicile,” says Joseph Lipari, a tax attorney with Roberts & Holland.
Jones is hardly alone in claiming a change in domicile — or at least wanting to do so. Changes in the tax code last year, which limit the amount of state income and property taxes individuals can deduct from their federal income taxes, have made moving to lower-taxed locales a topic of consideration for many of the metropolitan area’s wealthy.
Florida — which has no state income tax and no inheritance tax — has become a lure for several billionaire financiers who in recent years have managed to keep luxurious homes or significant business operations (or both) in the high-tax states of Connecticut, New York, and New Jersey while avoiding paying these states’ income taxes.
In addition to Jones, these men include Edward Lampert, Barry Sternlicht, and Thomas Peterffy — all current or former residents of Greenwich — and Leon Cooperman and David Tepper of New Jersey. All have changed their domicile to Florida.
Perhaps the most famous case is that of hedge fund manager Julian Robertson, a New York state resident who also has a Manhattan apartment. In 2010, Robertson won a years-long battle with the city of New York over $26,702,341 plus interest the city claimed he owed, based on the statutory requirement that led to extraordinary efforts he made to limit his days spent in the city to meet the 183-day test.
“It is a growing problem,” says Kevin Sullivan, speaking on the final day of his job as Connecticut’s commissioner of revenue services last month. “If one of the very top should go . . . that’s a noticeable blip on the radar.”
If Connecticut is feeling the loss, it should come as no surprise. Hedge funds, led by Tudor, moved to Greenwich in droves in the early 1990s to escape New York City’s high taxes. But in recent years Connecticut’s marginal tax rate on the highest earners jumped to 6.99 percent, up from 4.5 percent a few years ago. Now it’s close to New York state’s top income tax rate of 8.82 percent — though New York City residents pay an additional 3.88 percent. New Jersey’s top marginal income tax rate has also been rising and is now 8.97 percent.
The top 1 percent pay an estimated third or more of total state income taxes in these states — or at least they used to. New Jersey acknowledged it faced a budget crunch when Tepper, its wealthiest resident, who is worth $11 billion, quit paying state income taxes in 2016, reportedly costing the state hundreds of millions of dollars in income taxes. This year Tepper ranked second on Institutional Investor’s Rich List of the top hedge fund earners, earning $1.5 billion in 2017, on top of $700 million in 2016. That’s $2.2 billion that won’t get taxed by New Jersey, despite the fact that Appaloosa Management, his hedge fund firm, maintains its office in Short Hills, New Jersey. (It also opened one in Miami Beach, Florida, where Tepper lives most of the year. He declined to comment.)
As for Connecticut, Jones, Sternlicht, and Peterffy all moved their domiciles to Florida in recent years. By 2016, when they filed Connecticut nonresident tax returns, their departures were creating a problem for the state’s coffers. Alluding to their exits, Sullivan says, “In December of 2016 we woke up to a $450 million revenue shortfall because of people in that group making certain decisions.”
https://www.institutionalinvestor.c...-then-the-tax-man-knocks#.WyGIh4KIfrE.twitter
Maybe, the rich don't actually want to pay more in taxes contrary to what Warren Buffett keeps telling people in the media? The same blowhard showed his tax return to the liberal media where he showed an income of only $11 million and for which, he paid a measly sum of $1 million. Now, take note that he is worth atleast, $72 billion. At a very conservative 5% estimate on his $72 billion, he would easily earn $3.6 billion. So, where did all those monies go? Tax loopholes of course, and all legal. Of course, Warren Buffett is only paying "lip service" to the liberal media worshipping him in adoration!
Then you moved to Palm Beach because you wanted to move to Palm Beach, yes? Taxe rates would have had nothing to do with it. If you would have preferred to live in Manhattan and instead moved to Palm Beach as an extremely wealthy individual because FL has lower taxes you've pretty clearly lost perspective, IMHO.
And the liberals keep whining that the tax cuts benefit only the wealthy? Yet, the biggest whining idiots are the filthy, rich liberals with multiple McMansions and now have to pay more? Jokes on them. Not all their lies are going to change the facts! It is just hilarious when Nancy Pelosi says $1,000.00 bonus is nothing but, the $40.00 tax cut Obama gave US taxpayers was a huge tax cut! They are the biggest liars around and surprisingly, still some people vote for these ass clowns?
That's exactly my point! I understand the logic of "Florida=low tax=you die with significantly>$0 in your bank account". I just think the last step of that equation is idiotic. My equation is "more money=I get to use that money to live where I want and enjoy life and not inconvenience myself one whit on account of money=I don't care how big my bank account is when I die as long as it's >0". Just a different outlook on life, I guess.