HHS Secretary's Fund Gave Little to Charity
Friday, July 21, 2006
Health and Human Services Secretary Mike Leavitt and his relatives have claimed millions of dollars in tax deductions through a type of charitable foundation they created that until recently paid out very little in actual charity, tax records show.
Instead, much of the foundation's money has been invested or lent to the family's business interests and real estate holdings, or contributed to the Leavitt family genealogical society.
The Leavitts used nearly $9 million of their assets to set up the foundation in 2000 under an obscure provision of the federal tax code. But unlike standard private foundations, which are required to give away at least 5 percent of their assets to charitable causes, the Leavitt organization donated less than 1 percent of its assets in 2002, 2003 and 2004. The donations jumped to 6.3 percent of total assets last year, after the sale of family water interests that also allowed the foundation to increase its lending to Leavitt business interests.
While Mike Leavitt alone has claimed about $1.2 million in tax write-offs since 2000, the foundation gave away only $49,000 in 2002 and $52,000 the next year, according to tax returns and other documents filed by the foundation. Meanwhile, the foundation's assets have been used for a $332,000 loan to Leavitt Land and Investment Inc., in which the secretary owns a significant stake, and other secured loans for insurance and real estate deals, said Alan A. Jones, a trustee of the organization.
Leavitt Land and Investment, in turn, extended an interest-free loan to Leavitt in 2002 valued at more than $250,001, according to a recent financial disclosure.
"The foundation's activities are totally legal and proper," Christina Pearson, an HHS spokeswoman, said this week on the secretary's behalf.
But Rick Cohen, executive director of the National Committee for Responsive Philanthropy, said that "the Leavitts are using the foundation as a personal piggy bank, and that's not what the public -- or Congress -- ought to tolerate." Cohen reviewed the family foundation's records and tax returns at the request of The Washington Post.
The tax structure used to create the foundation is called a Type III supporting organization. The Internal Revenue Service has said the category is rife with abuse, designating "supporting organizations" this year as one of its "Dirty Dozen" top tax scams, along with Internet identity theft and offshore banks. Use of the tax structure could be significantly reined in under a tax provision that was inserted into pension legislation passed by the Senate and now under negotiation with the House.
Leavitt and his brother Dane have defended the family's actions as both legal and ethical.
Dane Leavitt said his family would change the operations of the foundation if Congress enacted the legislative changes, which were proposed by Senate Finance Committee Chairman Charles E. Grassley (R-Iowa).
"That's a public policy decision," Dane Leavitt said. "If Congress makes that decision, we will abide by it."
From its early roots in the settlement of Utah, the Leavitt family has built up a considerable fortune in land and business. The family created the Leavitt Group and built it into one of the largest insurance brokerages in the country. Before he was elected Utah's governor in 1992, Mike Leavitt was the group's president and chief executive, amassing holdings valued at $5 million to $25 million. He sold off those assets when he joined President Bush's Cabinet.