By Jonathan Weisman
Washington Post Staff Writer
Saturday, July 22, 2006; A04
Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) and the committee's ranking Democrat, Max Baucus (Mont.), urged President Bush yesterday to help shut down a tax loophole that allowed his secretary of health and human services to claim more than $1 million in tax deductions for "gifts" that have been used to further his family's interests.
Grassley and Baucus, responding to a report in yesterday's Washington Post, wrote Bush to ask for his support in saving a provision in an embattled pension bill that would rein in what they called an abuse of the charity tax code. And they said the issue could be taken care of through regulatory changes in the Bush administration's control.
"Your IRS Commissioner, Mark Everson, has done a fine job of highlighting these problems but now the rest of your administration needs to pitch in and rewrite these regulations and end the abuse," Grassley and Baucus wrote. "We ask that you direct Treasury and [the Office of Management and Budget] to make a priority of rewriting these regulations in the next six months."
The issue received new attention this week when it was revealed that Health and Human Services Secretary Mike Leavitt and his family have claimed millions of dollars in tax deductions for contributions to a family foundation that until recently has given little to charity. Instead, through loans and investments, the Dixie and Anne Leavitt Foundation has used its $9 million fortune to further the family's real estate holdings, insurance interests, and even the Leavitt family genealogical society.
In 2002, the foundation lent $332,000 to Leavitt Land and Investment Inc., in which the secretary owns a significant stake. That same year, Leavitt Land and Investment extended an interest-free loan to Leavitt in the form of stock valued at between $250,001 and $500,000, according to a recent financial disclosure.
Everson has labeled such transactions one of the IRS's "dirty dozen" top tax dodges, and a provision under negotiation in a major pension bill would curb them. Under the provision, entities such as Leavitt's, known as Type III supporting organizations, would be prohibited from offering loans to parties related to the fund, and would have to give away 5 percent of assets each year, just as standard foundations are required to do.
The Leavitt foundation has reached that threshold only twice in the six years of its existence. Leavitt released a statement yesterday, defending his actions and noting that the foundation has increased its giving substantially, from $52,312 in 2003 and $81,250 in 2004 to $567,185 in 2005 and $691,221 so far this year.
"My family and I are grateful that we have the resources to give back to our community, and the Dixie and Anne Leavitt Foundation has already contributed nearly $1.5 million to charity and will continue to make generous contributions in the years to come," he said. "We find satisfaction that many people will benefit from our giving."
The Health and Human Services press office added that the issue had been reviewed by the Finance Committee during Leavitt's confirmation hearings.
That brought a sharp response from committee aides.
"When we reviewed this, it raised serious concerns for us, particularly the lack of payout," said one Finance Committee aide, who spoke on the condition of anonymity to avoid upstaging the chairman's letter. "And matters regarding the loans were not brought to our attention at all."