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* From a Bruce Rauner campaign press release…
In his desperate attempt to distract voters from his 67% income tax hike, record job losses, skyrocketing property taxes and multiple criminal investigations, Pat Quinn has painted himself into a corner.
The governor’s own pension fund — just like the state pension fund for teachers and all state workers — is heavily invested overseas, including in the Cayman Islands.
Pat Quinn either needs to apologize to Bruce Rauner for lying about the facts or apologize to Illinois teachers and state workers for calling them unpatriotic. If Pat Quinn refuses to apologize and tell the truth, he should immediately move to divest all state investments from companies and funds domiciled overseas, including in the Cayman Islands.
Individual teachers and state workers didn’t make those particular investment decisions, so that’s a stretch.
I do agree, however, that Quinn calling Rauner “unpatriotic” yesterday was a new low in this campaign. Questioning your opponent’s patriotism is a despicable act. And nothing good ever comes of it.
* Anyway, some examples…
Pat Quinn Is A Member Of The General Assembly Retirement System, Which Is Managed By The Illinois State Board Of Investment. “The Illinois State Board of Investment (ISBI or Board) has fiduciary responsibility for managing the pension assets of the General Assembly Retirement System, the Judges’ Retirement System of Illinois and the State Employees’ Retirement System of Illinois.”(http://www2.illinois.gov/isbi/Pages/default.aspx)
The Illinois State Board Of Investment Had $2.3 Billion Invested In Overseas Companies As Of March 31, 2014. (“Statements of Net Assets,” Illinois State Board Of Investment, 3/31/14)
The Illinois State Board Of Investment Invests With Advent International GPE VI-A, Which Is Domiciled In The Caymans. (“Consultants, Investment Advisers, and Other Contractors,” Illinois State Board of Investments, Accessed 8/5/14)
* And…
The Illinois Teachers Retirement System Invests $8.3 Billion In Companies Based Overseas. (Comprehensive Annual Financial Report – FY2013, Teachers Retirement System, p.38)
The Illinois Teachers Retirement System Has $433.5 Million Invested In Private Equity Funds That Are Domiciled In The Caymans.
…Adding… From the Rauner campaign…
Quinn appoints 6 members of the TRS Board and 5 members of the ISBI.
Click here for all the documenting links and more.
…Adding More… 47th Ward makes a valid point…
Pension funds aren’t subject to income taxes. Individuals and corporations are. No comparison. Apples and bowling balls, etc.
Unfortunately I think Rauner will be able to muddy this enough so that the truth remains obscured. It’s another false equivalence, which is the same as lying. But it’s a neat trick if you can get away with it.
…Adding still more… Rauner campaign regarding the above comment…
Pension funds can be subject to taxes, which is one reason why they may be in some place like the Caymans. Caymans can help pension funds on tax issues but they don’t provide individuals with tax advantages.
*** UPDATE *** The Quinn campaign response…
“This is a total canard by a Republican billionaire who has chosen the Cayman Islands as a place to stash his money and is hiding his tax records from voters.
“The Governor’s future pension is fixed and the payout won’t be impacted by the performance of any individual investments. State pension boards are also completely independent.
“By contrast, Mr. Rauner has personally funneled millions of dollars to funds in the Cayman Islands to avoid taxes.
“We’d love to reply with specific numbers but unfortunately we can’t because Mr. Rauner has not released his income tax records, including schedules. We have no idea what his sources of income are, what investments he has, and what loopholes he’s used to drastically lower his tax burden by more than half.
“Governor Quinn’s bank accounts are all located in Illinois, United States of America.”
Additional Background:
As those familiar with state government know, the Governor of Illinois makes no policy decisions related to any pension boards nor the firms selected to manage investments. These boards are independent by law and the Governor of Illinois has no involvement whatsoever in their investment decisions, as required by law.
Furthermore, Governor Quinn signed a pension board reform law to clean up corruption after swindler Stuart Levine - who Mr. Rauner had on his payroll - corrupted the system.
Unlike Governor Quinn, Bruce Rauner personally makes his own investment decisions. Rauner’s investments are NOT managed by a blind trustee, which even Mitt Romney had.
posted by Rich Miller
Wednesday, Aug 6, 14 @ 11:35 am
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If it’s good enough for the state to invest in, it should be acceptable for anyone to invest in.
Comment by Formerly Known As... Wednesday, Aug 6, 14 @ 11:37 am
===Questioning your opponent’s patriotism is a despicable act.===
+1
Comment by 47th Ward Wednesday, Aug 6, 14 @ 11:38 am
Well that’s different, duh….
I would suspect the Quinn campaign is ready for this counter argument, right….
Comment by OneMan Wednesday, Aug 6, 14 @ 11:41 am
Did Quinn’s campaign staff not know Illinois pensions, etc, are invested in the Cayman Islands? Did the campaign staff think that Rauner wouldn’t pick up on it?
Comment by dupage dan Wednesday, Aug 6, 14 @ 11:45 am
Touche!
Comment by Wally Wednesday, Aug 6, 14 @ 11:45 am
–Questioning your opponent’s patriotism is a despicable act. And nothing good ever comes of it.–
Well said although I suspect it will seem tame by November.
Comment by Mason born Wednesday, Aug 6, 14 @ 11:46 am
The pension funds aren’t trying to dodge US/IL taxes so no one care where they invest….we do care where FLIP and his plane pal, Mr. ReBoot, stash their cash.
Comment by CircularFiringSquad Wednesday, Aug 6, 14 @ 11:46 am
It is all about sound bites, and not substance.
Comment by facts are stubborn things Wednesday, Aug 6, 14 @ 11:47 am
When attacking an opponent, it is just not good to cut to the bone like Quinn did.
Yesterday I saw a need for Rauner to demand an apology, which is what he did ask for today.
However -
How much better it would have been for QUINN to have began this morning by apologizing to Rauner for questioning his patriotism? That would have been so cool for Quinn to have done that without being asked.
This could have been a win-win for Quinn by doing that. Instead he got a win-lose out of it.
Comment by VanillaMan Wednesday, Aug 6, 14 @ 11:47 am
Well, I think the big difference here is the motivation. Rauner’s is tax avoidance, first and foremost. The Investment Funds interest is asset diversification and income.
Comment by PublicServant Wednesday, Aug 6, 14 @ 11:48 am
We should move all of the state’s money and teachers to the Cayman Islands. I hope they’re ready for us, WE’RE COMING!!!
Comment by The Captain Wednesday, Aug 6, 14 @ 11:49 am
==The pension funds aren’t trying to dodge US/IL taxes so no one care where they invest….we do care where FLIP and his plane pal, Mr. ReBoot, stash their cash.===
Actually, pension funds ARE trying to avoid taxes by operating in the Caymans. Specifically the UBIT or Unrelated Business Income Tax. See: http://taxvox.taxpolicycenter.org/2012/01/20/why-do-u-s-investment-funds-operate-in-tax-havens/
Comment by so... Wednesday, Aug 6, 14 @ 11:51 am
===The pension funds aren’t trying to dodge US/IL taxes so no one care where they invest===
The sometimes indecipherable CFS hits the nail on the head. Pension funds aren’t subject to income taxes. Individuals and corporations are. No comparison. Apples and bowling balls, etc.
Unfortunately I think Rauner will be able to muddy this enough so that the truth remains obscured. It’s another false equivalence, which is the same as lying. But it’s a neat trick if you can get away with it.
Comment by 47th Ward Wednesday, Aug 6, 14 @ 11:51 am
No offense public but those same reasons for sers apply to Rauner. Do you have tape of him stating that??
Comment by Mason born Wednesday, Aug 6, 14 @ 11:52 am
==Well, I think the big difference here is the motivation. Rauner’s is tax avoidance, first and foremost. The Investment Funds interest is asset diversification and income.==
Nope, and nope. Rauner doesn’t avoid any taxes by investing in the Caymans. He has to pay taxes on his worldwide income. But pension funds absolutely avoid taxes by operating in the Caymans. See this link from my previous comment: http://taxvox.taxpolicycenter.org/2012/01/20/why-do-u-s-investment-funds-operate-in-tax-havens/
Comment by so... Wednesday, Aug 6, 14 @ 11:52 am
==== The pension funds aren’t trying to dodge US/IL taxes so no one care where they invest ==
So let me get this right, you can argue that an investment vehicle is designed to avoid taxes and that is wrong and causes problems for the state due to reduced revenues and the like…
However, if you don’t pay taxes it’s then perfectly fine to invest in those same investments..
Yep, makes perfect sense to me….
Comment by OneMan Wednesday, Aug 6, 14 @ 11:56 am
I’m very impressed with this response.
I don’t think anyone on Team Quinn had a clue about these foreign investments.
This is what happens when you have a ultra liberal chief strategist as Quinn does.
Comment by Cassiopeia Wednesday, Aug 6, 14 @ 12:00 pm
==47th Ward makes a valid point…==
Maybe not in the way he or she intended. The fact that foreign investments look good to a tax-exempt investor is evidence against the claim that Rauner’s fully disclosed foreign investments were just tax dodges rather .
Comment by Anon. Wednesday, Aug 6, 14 @ 12:00 pm
== I would suspect the Quinn campaign is ready for this counter argument, right ==
They should be if they read the Capfax comments https://capitolfax.com/2014/08/04/sun-times-uncovers-cayman-islands-investments-by-rauner-rauners-firm-and-rauners-charity/#comment-11584701
https://capitolfax.com/2014/08/04/sun-times-uncovers-cayman-islands-investments-by-rauner-rauners-firm-and-rauners-charity/#comment-11584722
The most surprising thing about this is that a campaign normally so efficient in responding didn’t have something out until day 2 or 3 of this attack. That, plus the fact the Quinnsters haven’t found a way to completely bungle the issue yet.
Comment by Formerly Known As... Wednesday, Aug 6, 14 @ 12:00 pm
No, sorry I don’t think it is a legitimate point.
If the argument is that an investment is questionable/bad/whatever because it is structured to avoid taxes but it is ok for an entity, one of the same that is being potentially ‘denied’ taxes to invest in because it is avoiding taxes.
It would be like complaining that he was a majority shareholder in a tobacco company and that was bad, but it is ok for the state to own shares in that same firm because pension funds don’t smoke even though the state is subject to the costs associated with smoking.
or
In even a simpler form, complaining because a guy doesn’t mow his lawn and it hurts your property values but also not mowing your own lawn and that is ok, because it is only your own property value you are impacting.
Comment by OneMan Wednesday, Aug 6, 14 @ 12:03 pm
Betting against America is the better, simple theme. Worked against Mitt.
Comment by too obvious Wednesday, Aug 6, 14 @ 12:05 pm
===The fact that foreign investments look good to a tax-exempt investor is evidence against the claim that Rauner’s fully disclosed foreign investments were just tax dodges rather===
Well OK then. And thanks to the secrecy provided by the banking laws in the Cayman’s, we’ll just have to take an investor’s word for how much he or she earned. You know, voluntary self-reporting of income and assets. The IRS has no ability to audit these accounts, so it’s up to the investor to fully disclose every dollar earned.
And I’m not calling Bruce Rauner a tax cheat or a liar, either. I believe he reports every nickel he’s earned to the IRS, just like I do, heck just like all of us.
Comment by 47th Ward Wednesday, Aug 6, 14 @ 12:06 pm
So, if the those pension funds had invested their billions in cash in Illinois instead of the Cayman Islands, would the Illinois economy been better off? Would a bunch of local banks that went under (see Giannoulias’ bank) been saved and still around if that cash was placed in those banks instead of Cayman banks? Would more jobs have been created? More corporations created hiring more individuals? More sales taxes collected from increased consumer consumption?
Nice to turn some of those anti-Rauner arguments from yesterday back around. How’s that old expression go? When you point one accusatory finger at someone, the remaining three point back at you?
The unpatriotic stuff has got to stop. Quinn’s campaign needs to sincerely apologize for starting that ugliness and move on, otherwise things will only get worse with an already ugly campaign this year.
Comment by Louis G. Atsaves Wednesday, Aug 6, 14 @ 12:07 pm
If you play poker in Chicago, in the Cayman Islands, in France and in Australia and win in each place and are a US citizen, you pay taxes on your winnings.
Comment by Wally Wednesday, Aug 6, 14 @ 12:07 pm
Also legitimate to say Rauner is not doing what he could be doing to create jobs here and to improve Illinois. He wants people to suffer as much as possible because he thinks will help him politically. Rauner complains about the mess but won’t lift a finger to help. Same reason he lobbied hard against the only serious pension reform on the table.
Comment by too obvious Wednesday, Aug 6, 14 @ 12:08 pm
Also legitimate to say
Raunerthe pension fundsisare not doing whathecould be doing to create jobs here and to improve Illinois.Why yes, obviously any dollar being invested by the pension funds that are not direct investments in Illinois are not necessarily producing jobs here in Illinois. It seems that they are focused on extending the suffering of those in Illinois, for example the pension funds could invest 100% in Illinois public debt both at the state and local levels, reducing borrowing costs for government at all levels freeing up more tax dollars to do things that create jobs.
Just so I get your argument too obvious, your beef is he isn’t 100% invested in Illinois?
Comment by OneMan Wednesday, Aug 6, 14 @ 12:26 pm
Look how muddy things are on this thread here where people pay an incredible amount of attention. Imagine how much more unclear it is out in voterland. All they know now is that Rauner and our Pension funds utilize the Cayman Islands for their funds and the pension funds may have even more invested. It’s a wash, until an out of touch Governor calls him “unpatriotic” for utilizing the same facility the state does.
Bad Research. Bad move Governor.
Calling someone Unpatriotic in the mainstream news is even worse than calling someone a “dope” on CF. A million times worse!
Comment by A guy... Wednesday, Aug 6, 14 @ 12:27 pm
However how much the state needs to pay into the systems will be directly impacted by the performance of the investments and it is the payments into the system that are the crux of the pension challenge in Illinois are they not?
Comment by OneMan Wednesday, Aug 6, 14 @ 12:29 pm
==Well OK then. And thanks to the secrecy provided by the banking laws in the Cayman’s, we’ll just have to take an investor’s word for how much he or she earned. You know, voluntary self-reporting of income and assets. The IRS has no ability to audit these accounts, so it’s up to the investor to fully disclose every dollar earned.==
Actually, now that you bring it up, the Caymans reports U.S.-tied earnings to the IRS. See: http://www.forbes.com/sites/robertwood/2013/11/29/caymans-costa-rica-sign-u-s-tax-evasion-pact-fatca-gets-even-fatter/
Comment by so... Wednesday, Aug 6, 14 @ 12:29 pm
If you have accounts outside the US that have more than $10k, I believe, in them you have to file an annual report with the IRS outlining the details where they are located. So much for the secrecy.
Comment by Wally Wednesday, Aug 6, 14 @ 12:31 pm
==Just so I get your argument too obvious, your beef is he isn’t 100% invested in Illinois?==
His beef is simply that he hates Rauner
Comment by Anonymoiis Wednesday, Aug 6, 14 @ 12:31 pm
–3. It takes investment dollars out of the Illinois economy - leading to a loss in potential growth here.–
https://capitolfax.com/2014/08/06/quinns-animated-internet-video-explains-rauners-cayman-islands-investments/
Pat how are the pension funds helping il economy?
Even if no tax impact for the investments PQ went overboard equating foreign investment with unpatriotic activities. Now it’s fair to ask how the states investments are “patriotic” when an individuals are not.
Gov. Appoints the majority of the ISBI and .46% of TRS seems like that is some considerable influence.
Comment by Mason born Wednesday, Aug 6, 14 @ 12:32 pm
===Rauner doesn’t avoid any taxes by investing in the Caymans. He has to pay taxes on his worldwide income.===
And we just have to trust him when he reports on the capital gains he’s made huh? He’d never under report those gains even though there’s no way to verify them huh? Got it.
Comment by PublicServant Wednesday, Aug 6, 14 @ 12:34 pm
== Betting against America is the better, simple theme ==
The State of Illinois is “betting against America” by “unpatriotically” “stashing money” in the Caymans?
Glass houses on this one.
Like I said yesterday, both parties are hypocrites on this issue. Just look at the differing reactions from each party to Penny Pritzker, Bruce Rauner, or any number of others.
Comment by Formerly Known As... Wednesday, Aug 6, 14 @ 12:35 pm
Public Servant, might I suggest you read
http://www.forbes.com/sites/robertwood/2013/11/29/caymans-costa-rica-sign-u-s-tax-evasion-pact-fatca-gets-even-fatter/
Comment by OneMan Wednesday, Aug 6, 14 @ 12:37 pm
Also if your two arguments are ‘he only appoints some of the board members’ and ‘he doesn’t personally profit’ than heck he can get out of all sorts of stuff.
I mean it wasn’t like he was running the safe neighborhood program….
Comment by OneMan Wednesday, Aug 6, 14 @ 12:47 pm
- Anonymoiis -,
How about address the issue, not have a drive-by attack of another commenter…
It’s like Rauner supporters here can’t win the argument and make it about the commenter.
Comment by Oswego Willy Wednesday, Aug 6, 14 @ 12:51 pm
Didn’t Penny Pritzker get rich by saving S&H Green Stamps?
Hey - isn’t that a blast from the past!
Yeah - when we really step back from the politibabble being thrown around, there are as many rich Democrats would will end up getting cut up just as bad as Republicans by the canned hash being pumped out by the class warriors!
Hey Penny - what’s in your wallet?
Your political friends want more of it!
Comment by VanillaMan Wednesday, Aug 6, 14 @ 12:51 pm
Doesn’t Madigan’s firm specialize in avoiding real estate tax?
Comment by Old Hippy Wednesday, Aug 6, 14 @ 12:52 pm
Ok the OW…
So what is Too Obvious’ argument then.
That by not being completely invested in Illinois Rauner is harming Illinois?
Then logically if that is the argument, couldn’t you then argue the same of Illinois’ pension funds?
Comment by OneMan Wednesday, Aug 6, 14 @ 12:54 pm
“It’s like Rauner supporters here can’t win the argument and make it about the commenter.”
Too funny. Have yet to read one comment that’s pro-Quinn rather than Anit-Rauner.
Comment by Aaron62287 Wednesday, Aug 6, 14 @ 12:59 pm
47, see “so’s” posts above. UBTI is a major issue for public pensions and other tax-exempt investors. Even with US investments, a poorly executed corporate structure for investments like hotels or shopping malls (where there is an ongoing business operated by the investor “inside” its real estate investment) can bring UBTI penalties to tax-exempt investors.
Let’s also remember that when the ISBI signed up with Advent Capital as mentioned above, that ain’t stashing money in a Cayman Islands bank. PE firms minimize uninvested cash on hand.
Comment by Arthur Andersen Wednesday, Aug 6, 14 @ 1:00 pm
===It’s like Rauner supporters here can’t win the argument and make it about the commenter.===
Give it a rest Willie. The victim stuff is beyond old. Make your argument, even 50 times. Leave the pejorative stuff out. It cheapens you
Comment by A guy... Wednesday, Aug 6, 14 @ 1:00 pm
Public servent.
And we just have to trust him when he reports on the capital gains he’s made huh? He’d never under report those gains even though there’s no way to verify them huh? Got it
Kind of like were supposed to trust Quinn on his Violence/vote getting inititive. You know the one Quinn refuses to discuss, refused to testify in front of the state committee investigating it. The one the feds are investigating.
Comment by fed up Wednesday, Aug 6, 14 @ 1:03 pm
“The sometimes indecipherable CFS”
Huh?
One just needs to get used to the nicknames and a few typos — it is a blog.
Today’s lesson remains the true need for Flip Rauner to study the breath taking backflip by Walgreen’s who after months of prep, like millions of spending walked away from the inversion scheme. For that scheme to go south as quickly as it did says Walgreen caught help from rank and file customers and sensed the millions dodged in taxes would not out weigh losses from customers nationwide.
Failing to learn anything from the Mitt Romney disaster shows just how poorly Flip spends money and takes advice.
Comment by CircularFiringSquad Wednesday, Aug 6, 14 @ 1:03 pm
===That by not being completely invested in Illinois Rauner is harming Illinois?===
I have no idea what - too obvious -’s argument is…
However…
===Then logically if that is the argument, couldn’t you then argue the same of Illinois’ pension funds?===
I think - 47th Ward - makes the case…
=Pension funds aren’t subject to income taxes. Individuals and corporations are. No comparison. Apples and bowling balls, etc.
Unfortunately I think Rauner will be able to muddy this enough so that the truth remains obscured. It’s another false equivalence, which is the same as lying. But it’s a neat trick if you can get away with it.===
If - Anonymoiis - wants to go down that road…
For me, it’s the political optics of a possible Romney/Rauner, versus Rauner trying to use the false equivalence.
If Rauner wanted the Romney comparison, we would have heard that already.
All good, - OneMan -
Comment by Oswego Willy Wednesday, Aug 6, 14 @ 1:05 pm
===Give it a rest Willie. The victim stuff is beyond old. Make your argument, even 50 times. Leave the pejorative stuff out. It cheapens you.===
There’s the Tom Hagen Rauner I know and love;
“Be quiet, or get steamrolled. We’re louder, and louder wins.”
lol
Comment by Oswego Willy Wednesday, Aug 6, 14 @ 1:08 pm
You need to be a tax lawyer or an accountant to understand any of this. Most people are simply shaking their heads and have no earthly idea what anybody is talking about. Neither one can explain their side of the argument in an easy to understand way. I’m starting to hear the “wah, wah, wah” of the Charlie Brown teacher every time this subject comes up.
Comment by Demoralized Wednesday, Aug 6, 14 @ 1:08 pm
Demoralized
I think you hit it on the head. Which i think is why this response from Rauner will work. If we boil it down it appears (assuming of course BR can get it out there) PQ says BR invests in the Caymans and that is bad but PQ does it too. Kind of makes PQ look the hypocrite.
Comment by Mason born Wednesday, Aug 6, 14 @ 1:13 pm
===…apologize to Illinois teachers and state workers for calling them unpatriotic.===
Bruce forgot to add that some of his best friends were teachers and state workers. /s
I’m surprised the Quinn camp hasn’t made more out of Bruce lying to the Tribune Board.
Comment by jocko Wednesday, Aug 6, 14 @ 1:13 pm
Quite to the contrary Demoralized, several have explained things very well and included links to support their positions.
Comment by Wally Wednesday, Aug 6, 14 @ 1:16 pm
It’s already backfired on Quinn. AGAIN, are his people secretly working for Rauner??! How do you question someones patriotism, and a day later the fund you are overseeing is in the same country? Anybody who tries to muddy this beyond a major PQ gaffe is not being objective at all. Rauner does not need to muddy this. I think earlier this week when Rauners team was chided for the first gaffe… I think this answers that. Well played.
Comment by Walter Mitty Wednesday, Aug 6, 14 @ 1:17 pm
@Wally:
Nobody in the general public is looking at links. And if they’ve explained it well then I’ve missed it. They may have explained it so somebody who already has an idea about these things understands. But I guarantee you that my parents wouldn’t have a clue what they are talking about. My parents are the average voters they need to worry about.
Comment by Demoralized Wednesday, Aug 6, 14 @ 1:24 pm
@Wally:
Also, I think you are suffering from the “facts” syndrome some fall into. It’s something I talked about in relation to VMan’s comments on low information voters yesterday. You can’t just say you have the “facts” and then look in disbelief when somebody doesn’t respond. If you aren’t dealing with the emotion of this and explaining things in simple terms then you are losing the political battle.
Comment by Demoralized Wednesday, Aug 6, 14 @ 1:28 pm
==Well OK then. And thanks to the secrecy provided by the banking laws in the Cayman’s, we’ll just have to take an investor’s word for how much he or she earned.==
Wordslinger: FATCA
Comment by Anon. Wednesday, Aug 6, 14 @ 1:37 pm
===UBTI is a major issue for public pensions===
AA, you’re the CPA, not me. Help me understand though, is UBIT the only tax levied on pension funds, is that what Rauner’s response was referring to?
Unrelated Business Income Taxes. Can you give me an example of how a pension fund might find itself generating unrelated business income? Can anyone help me understand how common (or uncommon) this is?
Because I’m not buying this notion that pension funds with Cayman Island accounts are the same thing as individual or corporate investors with Cayman Island accounts. They aren’t the same at all, yet Rauner and his team would have us believe otherwise, as if Quinn is doing exactly what Rauner is doing.
You can fool some of the people some of the time…but not me.
Comment by 47th Ward Wednesday, Aug 6, 14 @ 1:39 pm
Guidelines for complying with FATCA in the Caymans came out all of two weeks ago. Let’s see how it goes.
Comment by wordslinger Wednesday, Aug 6, 14 @ 1:53 pm
Bring out the caged chickens!
Comment by VanillaMan Wednesday, Aug 6, 14 @ 1:58 pm
======UBTI is a major issue for public pensions===
AA, you’re the CPA, not me. Help me understand though, is UBIT the only tax levied on pension funds, is that what Rauner’s response was referring to?
Unrelated Business Income Taxes. Can you give me an example of how a pension fund might find itself generating unrelated business income? Can anyone help me understand how common (or uncommon) this is?
Because I’m not buying this notion that pension funds with Cayman Island accounts are the same thing as individual or corporate investors with Cayman Island accounts. They aren’t the same at all, yet Rauner and his team would have us believe otherwise, as if Quinn is doing exactly what Rauner is doing.
You can fool some of the people some of the time…but not me.===
Basically it is when a tax-exempt entity, such as a pension fund, engages in the operation of a business that is unrelated to the entity’s purpose. For example, if a pension fund owned and operated a pizza place.
The reason the UBIT tax exists is to prevent tax exempt entities from unfairly competing with taxable companies.
If a pension fund were just investing in stocks, it wouldn’t be a problem. But since pension funds frequently invest in private equity funds, which own and operate companies, UBIT can often be incurred.
There is a much more in depth primer here: http://www.mcguirewoods.com/news-resources/publications/taxation/Overview%20Unrelated%20Business%20Income%20Tax.pdf
Comment by so... Wednesday, Aug 6, 14 @ 2:14 pm
If it’s “not patriotic” to invest (stash) funds in the Caymen Islands then the State isn’t patriotic either.
If it’s “not patriotic” to avoid taxes by investing in the Caymen Islands then fix the tax code.
Comment by Phenomynous Wednesday, Aug 6, 14 @ 2:15 pm
47, AA is no CPA, handle notwithstanding. I know a little bit about investments, though. UBIT is the only Federal tax I am aware of that a public pension fund may be subject to.
Again, “so” above has a link that gives a great overview of the issue for pensions and guys like Rauner.
My favorite UBIT example is domestic. Pension fund buys a hotel and operates it under one entity. IRS wants UBIT on the income from the operations of the hotel as it is an “unrelated business” to the pension’s investing in assets to pay future benefits. To avoid UBIT, an operating entity separate from the equity investment in the hotel must be created, without ownership by the pension fund. (Simplified for brevity.)
Comment by Arthur Andersen Wednesday, Aug 6, 14 @ 2:35 pm
When I did my long comment on the Sun Times story the other day I indicated that the Caymen Island was going to get way too complex to yield much benefit to the Quinn campaign. Its happening already. I am not a Rauner supporter, but in this situation Rauner has done nothing either illegal or unethical.
Neither Pat Quinn nor Bruce Rauner served in the US military, so this stuff about patriotism rings a little shallow coming from both sides. Neither of these two heroes gave up any part of their lives to defend this nation, it would be wise if they both left the argument over who is more patriotic out of this race.
Comment by Rod Wednesday, Aug 6, 14 @ 3:18 pm
Why does Rauner deserve any attention on comments concerning the investment of tax revenue for which he doesn’t pay into? It isn’t his money since he avoids and dodges it; it is our money, since we pay into it, and we would all like to see the largest return on that investment.
If doing so means investing in companies in countries that won’t tax the return of those investments, on one end, from funds that are not taxed on the other end, then so be it; I applaud the fiscal and economic wisdom of the independent board making that decision.
Sure, we all want money invested in companies here in the US, but if those companies aren’t yielding the greater return on the investment, whether it is because it is taxed or it fails to create new jobs here in IL, then such investments are not providing the maximum utility of those funds.
But, none the less, if Rauner has an issue with this, I have a suggestion: How about he offers the State a large donation of his personal wealth, similar to the offer he extended to the Credit Unions recently, in order to match the tax-free return on those investments and offset what we would lose from divestment…and then, we can all call it even for him legally-exploiting the system to avoid carrying his weight for the services that are so important to our citizens, including IL veterans and retired law enforcement, our state’s economy, in particular it transportation system, and the needs of the IL’s youth and underprivileged, who incase he hasn’t noticed have all been hurt since the recession.
Quinn may have flaws, but at least he is a genuine guy. At least he cares about the State and makes a good-faith effort. They say, “the devil you know (and I by no means think Gov. Quinn is a devil, quite the contrary in fact) is better than the devil you don’t.”
People would be wise to remember issues like these that demonstrate Rauner’s desire for personal advantage and gain, and compare that with the selflessness and dedication of the current Gov., regardless of the State’s current difficulties.
Gov. Quinn is a guy who doesn’t always seek media attention, especially through deceit and misdirects; rather, as most don’t know, he is the guy who shows up at every IL Veteran’s funeral unannounced and without media hype, or paid “watchers.” Despite a busy schedule and pressing issues, the guy has made a commitment to this simple and selfless, but ever so meaningful, routine for for his State’s sons and daughters and their families since the start of our most recent wars and before any other public official–in the country–was doing it. That’s integrity and character–”doing what is right when no one is watching” and not drawing attention to yourself for your own gain.
I will choose that candidate, and all his flaws and mishaps, over someone who intentionally distorts an issue and misleads the public on matters of his own personal gain. I have no use for that guy…especially, in civic affairs.
Comment by ... Wednesday, Aug 6, 14 @ 3:28 pm
Rod
Also not a fan of either but i don’t think Rauner ever addressed PQ’s Patriotism. If he did I don’t think Rich covered it.
Comment by Mason born Wednesday, Aug 6, 14 @ 3:30 pm
“The Governor’s future pension is fixed and the payout won’t be impacted by the performance of any individual investments. State pension boards are also completely independent.
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Isn’t this why the state of Illinois is in such a mess and the Supreme Court is hearing cases about Pension reform?
The payout is fixed. That’s the problem. When the fund doesn’t perform, the tax-payers are on the hook. I think that the governor needs to evaluate the staff that are allowed to reply on his behalf. This response adds gas to the fire that is the current state of funding pensions in Illinois which is where Quinn is weakest with the current and retired state employees.
Comment by Pete Wednesday, Aug 6, 14 @ 4:12 pm
== Questioning your opponent’s patriotism is a despicable act. ==
As usual, I seem to be out of touch here. I thought of ‘patriotism’ immediately when reading the Cayman Islands post here.
pa·tri·ot·ism:
. devoted love, support, and defense of one’s country; national loyalty.
. nationalism devotion to one’s own country and concern for its defense.
It connects with me; I have no problem with Quinn’s remarks and here’s why.
Clearly, I’m not a 1%’er or above and am not ‘offshore investments’ and taxes smart like many commentators here seem to be. And I clearly see significant differences between a public entity investments like the IL pension system investments, and a private citizen 1%’ers investments, like a Rauner.
So, I, as what I consider an ‘average bloke’, wonder why many 1%’er types have offshore accounts in places like the Caymans. And many/most/all of us ‘average blokes’ don’t. The 1%’ers are the folks who have relatively unlimited access to high-priced, smart accountants and lawyers. So, I suspect that these folks are doing these investments not just because they love the Cayman Islands. I do suspect some ulterior motive.
Please.
Comment by sal-says Wednesday, Aug 6, 14 @ 4:13 pm
==But, none the less, if Rauner has an issue with this, ==
I think this and your entire post missed the point and argument of this whole thing. Rauner isn’t the one raising an issue over funds being invested overseas, he’s pointing out the hypocrisy of Quinn having an issue with it
Comment by Anonymoiis Wednesday, Aug 6, 14 @ 4:13 pm
Why does Rauner deserve any attention on comments concerning the investment of tax revenue for which he doesn’t pay into? It isn’t his money since he avoids and dodges it; it is our money, since we pay into it, and we would all like to see the largest return on that investment.
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Right. So as OUR elected official he needs to comment on it. It’s not about Quinn or Rauner, it’s about their plan to deal with the government that we are electing them to lead.
Comment by Pete Wednesday, Aug 6, 14 @ 4:15 pm
“Buy American” is patriotic.
“Buy Cayman” is not.
Does that make Rauner unpatriotic? no.
It is simply an example of him putting his personal interests ahead of the interests of his country and it’s citizens.
The trouble for Rauner is that it is the latest in a string of examples.
And frankly, bringing us back to pensions to remind everyone that you made millions of the pension system and extending the free media on this one baffles me.
“Rauner defends overseas investments” is not a great headline.
Comment by Yellow Dog Democrat Wednesday, Aug 6, 14 @ 4:53 pm