Ronald Lauder - Tax Payments

Tax Payments

Lauder has arranged his financial affairs to minimize his U.S. income tax, as his lawyers acknowledge. Some tax experts believe that these arrangements are an example of policies that, while legal and widely used, are unfair because they allow the wealthy to lower their taxes.

For example, Lauder donated much of his art collection, worth more than $1 billion, to a private foundation, which qualified him for deductions worth tens of millions of dollars.

A transaction known as a variable prepaid forward, in which he contracted to sell $72 million of stock to an investment bank in 2014 for 75% of its current value in return for cash in 2011, may defer as much as $10 million in federal income tax from 2011 until 2014. Tax experts say that at that time, he can use other methods to further defer paying taxes. In 2006 the I.R.S. said it appeared to be an abusive tax shelter and issued tighter restrictions to regulate the practice. In 1988, when he ran for mayor of New York, he reported paying 30% in total federal, state and city taxes on $30 million in income.

Sheldon Cohen, a former I.R.S. commissioner, said that when used as intended, the tax code’s breaks for art collectors balance private interests with the public good. “If an art collector makes significant contributions, and the public actually gets access to the works they are donating, then the major thing the collector gets is prestige and social status.” Lauder has made his artwork available for viewing by the general public in museums including the Neue Galerie.