When billionaire Carl Icahn revealed his new charitable organization on 1 January, he made a splash. But his move also drew a backlash from another U.S. billionaire, Warren Buffett, who asked Icahn to publicly disclose the donation within three months, pending approval from the IRS.
It took Icahn another two months to make the announcement. And Buffett’s timing proved invaluable for the IRS and, indirectly, for donors like Icahn, who enjoy a lower tax rate than most taxpayers.
Buffett publicly appealed to Icahn to detail his charitable giving at a conference on 6 January. He succeeded. Two days later, Icahn sent the IRS a letter disclosing that he has set up a charitable foundation to donate $38.5m to the World Wildlife Fund (WWF) this year, with the first donations due by the end of March.
Buffett’s action, while early, showed the IRS and Congress that it would be worthwhile for billionaires to establish small foundations that directly seek to break the legislative logjam that has stood in the way of comprehensive tax reform for years. That understanding might be transferable to tax avoidance in general.
But with 2017 drawing to a close, in a fiscal year that will likely see tax reform fail to occur, billionaire activists such as Icahn need to start figuring out how they will avoid paying higher taxes in the coming year.
So they’ve been piling on the legal strategies since the 2017 tax reform act was passed last fall.