user: Input: 3 tax lawyers say Gingrich avoided Medicare tax
After reviewing the 2010 federal tax return Gingrich released last week, the tax experts said he may have left himself open to an IRS challenge.

"That could be the type of return that would be flagged for an audit," said one of the experts, Robert McKenzie, a tax attorney at the Arnstein & Lehr law firm in Chicago.

The experts, who also included Bryan Skarlatos, of Kostelanetz & Fink in New York, and Martin Press, of the Gunster law firm in Fort Lauderdale, said it would be difficult to pinpoint the amount of Medicare tax that went unpaid without additional financial detail. But they estimated it could amount to tens of thousands of dollars.

In a written response to questions on Monday, Gingrich's campaign spokesman Joe DeSantis said "the salary and distribution were handled properly and legally."

He declined to allow an interview with Gingrich's tax preparer.

The questioning about the former House speaker's use of the tax strategy arose after he released his tax return in a strategic bid to pressure presidential rival Mitt Romney into doing the same. Romney, who had consistently declined to disclose his tax returns, is expected to release two years of his filings on Tuesday.

Gingrich's strategy involved a so-called S Corporation, an entity that has increasingly been used by attorneys, entrepreneurs, contractors and self-employed professionals. The IRS received 4.4 million such returns in 2010, agency records show.

The IRS defines S corporations as entities that pass corporate income, losses, deductions and credit through to their shareholders for federal tax purposes. The shareholders report the income and losses on their personal tax returns and are assessed tax at their individual income tax rates.

S Corporations don't pay corporate income taxes, so business owners who use them instead of a regular corporation avoid double taxation.

Gingrich's tax return shows his S Corporation, Gingrich Holdings, accounted for the bulk of his $3,142,066 adjusted gross income in 2010. The corporation paid him nearly $2.5 million in distributions beyond his salary and wages total of $252,500, his tax return and 2011 federal financial disclosure filing show.

Non-salary distributions from S Corporations are not subject to the 2.9% Medicare tax rate, half paid by the corporation and half by the employee.

But the IRS requires S corporations to pay "reasonable" salary compensation to employees for their services before paying non-wage distributions. That's designed to prevent the corporations from avoiding Medicare taxes by issuing disproportionate payments in distributions, rather than wages.

An IRS publication about S Corporations states that if most of the gross receipts and profits are associated with an employee's personal services, "then most of the profit distribution should be allocated as compensation."

DeSantis said the candidate's speaking engagements and television appearances produced the bulk of the payments received by Gingrich Holdings.

McKenzie said the IRS would typically ask how much investment an S corporation filer put into her or his business. Gingrich Holdings was renamed Gingrich Productions last year, corporate records in Georgia show and his spokesman confirmed. Gingrich's federal financial disclosure report, filed in July, lists Gingrich Productions as an asset valued at between $500,001 and $1 million.

"The general rule of thumb they'll usually apply is they don't view anything greater than a 20% return on investment as reasonable. The rest should be paid as salary," said McKenzie.

"The IRS might make the case his salary should have been substantially larger" and subject to Medicare tax, said Skarlatos. "They could challenge it, if they wished."

"Mr Gingrich received a salary from (Gingrich) Holdings which management felt was in line with similar salaries," DeSantis said. "Since we believe his salary was fair, nothing was saved" in Medicare tax.

Several court rulings have upheld the IRS' authority to reclassify any S-Corporation payments deemed to be excessive as salary, subjecting those earnings to Medicare taxation.

At least one other prominent political figure — 2004 Democratic vice presidential nominee John Edwards— faced controversy over S Corporation earnings.

Income figures released during the unsuccessful campaign with presidential nominee John Kerry showed that Edwards' similar tax break enabled him to avoid paying more than $591,000 in Medicare tax.

The Kerry-Edwards campaign released a letter from a Washington law firm that Edwards and his wife asked to review 10 years of their tax filings. The letter stated that the structure was lawful, ethical and proper.
What was this article about?
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It's about: Tax lawyers who reviewed Gingrich's return say tax strategy may have saved tens of thousands of dollars


Input: D.C. councilman to introduce bill legalizing marijuana
Legalized pot in the nation's capital is no pipe dream.

D.C. councilman David Grosso plans to introduce legislation Sept. 17 that would legalize the recreational use of marijuana in the city — with a dance with Mary Jane possibly replacing the played-out Potomac two-step.

"If we're going to have alcohol legal in this country, I don't see any reason why we couldn't have marijuana legal," Grosso said — bluntly.

RELATED: URUGUAY BURNS CLOSER TO LEGALIZING POT PRODUCTION

The bill will outline a plan for regulating and taxing marijuana sales and create licensing requirements for the Alcoholic Beverage Regulation Administration, Grosso told The Washington Times.

It will also reportedly enable pot smokers to grow small amount of cannabis on their property.

Grosso, who is still working on the bill, thinks a few attempts might be needed before the legislation passes, but hopes this first round will spark a debate.

RELATED: JAMAICA BOASTS TOURS OF POT FARMS

Ten of the District's 13 council members already support a bill to decriminalize possession of small amount of pot, practically ensuring some type of reform.

But just because they support decriminalization does not mean they condone legalization.

D.C. Council member Tommy Wells, who sponsors the decriminalization bill, said that the initiatives are fundamentally different.

RELATED: BRONCO'S STADIUM BILLBOARD URGES NFL TO RETHINK POT STANCE

"The motivation for decriminalization simply has been the issue of the war on drugs and the disproportionate impact on African-American youths getting criminal records," Wells told The Washington Times.

Black people are 3.7 times more likely to be arrested for marijuana possession than white people with comparable usage, according to an American Civil Liberties Union report released in June.

"D.C. is one of the worst offenders of this," said Morgan Fox, communications manager for the Marijuana Policy Project reform group.

"We need to start concentrating on actual violent crimes," Fox told the Daily News. "By arresting people for something that is safer than alcohol, you are slapping them with a criminal record … which is related to cycles of poverty."
What was this article about?
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It's about: Legalized pot in the nation's capital is no pipe dream. D.C. councilman David Grosso plans to introduce legislation Sept. 17 that would legalize the recreational use of marijuana in the city — so a dance with Mary Jane possibly replacing the played-out Potomac two-step.


Input: G20
Obama’s trip marks the end of his transition from symbol of change to a man with a job to do, says Robin Shepherd of the Henry Jackson Society. Commentary

Lena Komileva of Tullett Prebon looks at what options the G20 has to unfreeze credit markets and limit the cost of bailouts. Commentary

IMF reform is among the most pressing G20 issues, writes Johannes Linn of the Wolfensohn Center for Development. Commentary

Asia’s rising powers want global capital flows to remain unchecked, says Standard Chartered Bank CEO Jaspal Bindra. Commentary

Minimizing damage to trade should be the overarching goal, argues Paul Blurstein of the Brookings Institution. Commentary

Coordinating action to ensure demand recovers is a big task, says Stephany Griffith-Jones of the Initiative for Policy Dialogue. Commentary
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It's about:

assistant: Full coverage of the Group of Twenty Finance Ministers and Central Bank Governors and all G20 events and summits.