A group of current and former executives at pioneering hedge fund Renaissance Technologies have agreed to pay up to $7 billion in back taxes, interest, and penalties, the company told investors Thursday. The settlement ends a long dispute with the Internal Revenue Service over how some Renaissance funds booked short-term gains for tax purposes. It is one of the biggest tax settlement in U.S. history, if not the largest, The Wall Street Journal reports.
Among those paying the IRS are Renaissance founder James Simons, a mathematician and former code-breaker who used algorithms to find and exploit lucrative short-term patterns in financial markets, and former co-CEO Robert Mercer. Simons will make an additional "settlement payment" of $670 million on top of his back taxes. The settlement covers tax payments from the firm's hugely successful Medallion fund between 2005 and 2015, when the IRS changed its reporting rules. Because Medallion only invests the money of employees, their families, and select friends, outside investors aren't involved in the settlement, the Journal says.
The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
The type of tax scheme used by Renaissance caught the attention of Congress, which helped push the IRS to change how hedge funds pay taxes on short-term gains. Sen. Carl Levin (D-Mich.), who died over the summer, led a 2014 hearing focused on Renaissance's tax strategy. "I wish Sen. Levin were here, seven years after he first exposed its outrageous tax scam, to see RenTec finally held accountable," said Elise Bean, a former aide to the senator. "It's good to see that, despite a yearslong, knock-down, bare-knuckles battle, the IRS prevailed in compelling at least one set of billionaires to pay the taxes they owe."
The settlement shows what the IRS could do with more enforcement staff and funding, Steve Rosenthal at the Tax Policy Center tells the Journal. "The IRS is so resource-constrained that they often can't pursue difficult matters. But here they hung tight and they were vindicated."
-
How to financially prepare for divorceThe Explainer Facing ‘irreconcilable differences’ does not have to be financially devastating
-
Why it’s important to shop around for a mortgage and what to look forThe Explainer You can save big by comparing different mortgage offers
-
4 ways to save on rising health care costsThe Explainer Health care expenses are part of an overall increase in the cost of living for Americans
-
Israel approves new West Bank settlementsSpeed Read The ‘Israeli onslaught has all but vanquished a free Palestinian existence in the West Bank’
-
US offers Ukraine NATO-like security pact, with caveatsSpeed Read The Trump administration has offered Ukraine security guarantees similar to those it would receive from NATO
-
Hong Kong court convicts democracy advocate LaiSpeed Read Former Hong Kong media mogul Jimmy Lai was convicted in a landmark national security trial
-
Australia weighs new gun laws after antisemitic attackSpeed Read A father and son opened fire on Jewish families at Sydney’s Bondi Beach, killing at least 15
-
How Bulgaria’s government fell amid mass protestsThe Explainer The country’s prime minister resigned as part of the fallout
-
Benin thwarts coup attemptSpeed Read President Patrice Talon condemned an attempted coup that was foiled by the West African country’s army
-
Femicide: Italy’s newest crimeThe Explainer Landmark law to criminalise murder of a woman as an ‘act of hatred’ or ‘subjugation’ but critics say Italy is still deeply patriarchal
-
Brazil’s Bolsonaro behind bars after appeals run outSpeed Read He will serve 27 years in prison
