Warren Buffett’s Company Owes Nearly $1 Billion in Taxes

Update: Warren Buffetts Company Owes Nearly $1 Billion in Taxes

On Monday, The Blaze reported that Warren Buffett’s company, Berkshire Hathaway, owes back taxes dating to 2002. The news is significant because in a recent op-ed column for the New York Times, Buffett, one of President Obama’s staunchest supporters, stated that, to now, the “super wealthy” have been coddled and deserve to be taxed at an even higher rate than they currently are.

When Buffett made his revelation earlier in the month, most assumed his company was up-t0-date on its taxes. That assumption has turned out to be incorrect, however — and to a substantial degree perhaps.

According to Berkshire’s 2010 annual report, the company has been in a near decade-long struggle with the IRS over its own taxes. Using public documents, a certified public accountant detailed Berkshire’s tax problems to Americans for Limited Government researcher Richard McCarty, revealing the damage could be close to $1 billion. Netright Daily adds:

According to page 56 of the company report, “At December 31, 2010… net unrecognized tax benefits were $1,005 million”, or about $1 billion. McCarty explained, “Unrecognized tax benefits represent the company’s potential future obligation to the IRS and other taxing authorities.  They have to be recorded in the company’s financial statements.”

He added, “The notation means that Berkshire Hathaway’s own auditors have probably said that $1 billion is more likely than not owed to the government.”

$1 billion is not an insignificant chunk of change, even for Buffett, representing about 0.2 percent of the company’s $372 billion in total assets.

The annual report goes on to state: “We anticipate that we will resolve all adjustments proposed by the U.S. Internal Revenue Service (‘IRS’) for the 2002 through 2004 tax years at the IRS Appeals Division within the next 12 months. The IRS has completed its examination of our consolidated U.S. federal income tax returns for the 2005 and 2006 tax years and the proposed adjustments are currently being reviewed by the IRS Appeals Division process. The IRS is currently auditing our consolidated U.S. federal income tax returns for the 2007 through 2009 tax years.”

Meanwhile, McCarty believes Berkshire‘s current issues may be consistent with the company’s long-time history regarding taxes, noting,  “this is not the first time that Berkshire Hathaway has tangled with the IRS.”

“They fought a 14-year battle over the dividends received deduction. That case was just resolved in 2005,” McCarty said.

Before knowing just how much Buffett’s company owed, the press were quick to blast the mogul for his apparent hypocrisy.

On Monday the New York Post reported:

Obvious question: If Buffett really thinks he and his “mega-rich friends” should pay higher taxes, why doesn’t his firm fork over what it already owes under current rates?

Likely answer: He cares more about shilling for President Obama — who’s practically made socking “millionaires and billionaires” his re-election theme song — than about kicking in more himself.

While the site Mogulite jumped into the fray:

Ironic, isn’t it? When Warren Buffett penned that op-ed demanding he be taxed more, we assumed that meant he had actually paid his taxes. Not quite the case. Buffett’s famed company, Berkshire Hathaway, owes taxes that are nearly a decade old.

[...] They promise they’ll work it out with the IRS within the next year. Can’t Buffett just take a little out of his piggybank and pay up? For a man who so actively preaches honesty and integrity, we’re a little baffled as to why Berkshire won’t just fork over what it owes.

If the press came down hard on Buffett before — for merely learning his company owed back taxes at all — one can only imagine how the tycoon might be disparaged now that we’ve learned just how much his company could owe the IRS.

Interesting, especially since he wants to raise taxes on others. Maybe he should pay his own tax bill first?

The beauty of free market capitalism

On Saturday, Carbonite CEO David Friend released a statement on his company’s website declaring that Carbonite had decided to “withdraw” advertising from Rush Limbaugh’s radio show in the wake of his controversial remarks involving Georgetown Law student Sandra Fluke because it will “ultimately contribute to a more civilized public discourse”:

Even though Mr. Limbaugh has now issued an apology, we have nonetheless decided to withdraw our advertising from his show. We hope that our action, along with the other advertisers who have already withdrawn their ads, will ultimately contribute to a more civilized public discourse.

However, it hasn’t done much to contribute to his company’s stock price. Since the market opened on Monday through its close today, Carbonite stock (NASDAQ:CARB) has plummeted nearly 12 percent, outpacing the drop of the NASDAQ index in that same time period by nine-and-a-half points. It was also one of the biggest decliners on the NASDAQ on Tuesday.
Capitalism at its finest.

Government waste (and personal examples)

Our government is wasteful, and it permeates throughout all levels. (If you don't believe me, just do a Google search on the topic or read this.)

I have two minor, personal examples, one at the federal level and one at the local level.


Last year, I sent the IRS a letter contesting my taxes. Months later, I received a letter back that essentially said, "We received your inquiry. We haven't had a chance to read it yet, so we'll send you another letter once we do."

Not helpful. A waste of paper, envelope, and probably a stamp.

Here's my most recent example.

City Citation

A couple weeks ago, I got a ticket for an expired tag on my license. I mailed my check the last possible day I could, just because I like to hang onto my money as long as I possibly can. Today I received a follow-up letter telling me my ticket was still unpaid. So I logged into their payment processing website (another total scam - they probably take half of all payments in processing fees) to find my payment was actually received on time.

What happened? My payment was probably received the same day their follow-up letter went out. Had they waited a day, they would have processed my payment. It would have saved another letter, envelope, and probably a stamp.

Multiply these pointless letters, envelopes and stamps by the hundreds of thousands, plus add in the cost of the people we pay to stuff these letter, the ink used for these notices, the energy used by the printers, and the extra resources it takes the Postal Service to deliver these letters, and it all adds up.

I'm so tired of paying the ridiculous taxes I do when it goes to crap like this.

One day, I will fight to eliminate this kind of government waste.

Until then, I'll just complain about it.

What the 99% protestors fail to understand

The 99% protests going on around the country over the past few months have focused on a few specific points, one of which is the complaint that the amount of money CEOs of large companies make is "unfair" compared to the janitors for the same companies.

I recently heard a quote from the founder of Staples on John Stossel's program, and it summarized so perfectly what these protestors fail to understand:

Hard work should be rewarded. And generally speaking, if you meet the people who run these companies, they work their butts off. The perception of the public is these guys are flying around in private jets going from golf tournaments to fancy dinners. The reality is these are 80-hour-a-week - and these days in the internet age - 24x7 jobs with huge stress and... if anything good happens to you where you might get a bonus, you're subject to scrutinty in the media.