Wyden Letter Questions Harlan Crow’s Pleasure Yacht Tax Deductions
Crow Reportedly Claimed Nearly $8M in Tax Deductions for Yacht Business Losses, Yet Finance Committee Investigation Indicates Crow’s Superyacht Was Never Registered for Charter
Washington, D.C. – Continuing his work investigating the tax practices of ultra-high net worth individuals, Senate Finance Committee Chair Ron Wyden, D-Ore., sent a letter today to an attorney representing billionaire Republican donor Harlan Crow seeking records related to the registration, use and tax treatment of Crow’s superyacht, the Michaela Rose.
Months of investigation by the Finance Committee have found that the Michaela Rose appears to be registered with U.S. and international maritime authorities only as a pleasure yacht for recreational use--not as a commercial vessel engaged in trade such as transportation of passengers for hire. New information obtained by the committee indicates that Crow has represented to maritime authorities that his yacht is being used exclusively as a “pleasure boat” for private recreational use and not for charter. Interviews with former crew members also indicated that the yacht was used only by Mr. Crow, his friends, family and guests.
According to press reports, however, an entity that Mr. Crow created to own and operate the Michaela Rose represented on federal tax filings that the yacht was used in a for-profit business. It reported a total of nearly $8 million in losses between 2003 and 2015, nearly half of which flowed to Crow personally, substantially reducing the taxes he owed over those years.
“The tax code makes abundantly clear that the use of a superyacht for personal purposes is not a legitimate business use and therefore any related costs cannot be claimed as a deduction. Any effort to mischaracterize a yacht used as a pleasure craft as a business is a run of the mill tax scam, plain and simple,” Senator Wyden wrote. “Unfortunately, your prior responses to the Committee have done nothing to address the Committee’s concerns that personal trips to host friends such as Justice Thomas aboard Michaela Rose may have been used to help Mr. Crow avoid or evade paying federal taxes. Additionally, the Committee has obtained significant new evidence that Michaela Rose was not registered with the appropriate maritime authorities as a yacht engaged in trade and transporting charter passengers for hire. This directly undermines claims Mr. Crow has made to various branches of the federal government that Michaela Rose was a commercial vessel engaged in for-profit yacht chartering activities.”
In 2019, the company Crow organized to own and operate the yacht sought to obtain a trademark for Michaela Rose. The U.S. Patent and Trademark Office denied the trademark registration multiple times because Crow’s company was unable to provide documentation or any other evidence to prove that the yacht had in fact been chartered.
Mr. Crow’s attorney also made conflicting statements regarding Supreme Court Justice Clarence Thomas’s use of the yacht. He described those trips as “personal hospitality,” yet stated that “charter rates or reimbursement at rates prescribed by law were paid to the Crow family entities holding or operating those assets.” It is unclear how those rates were determined and who or what entity made those payments.
A copy of Senator Wyden’s letter to Crow’s attorney is available here. The questions included in today’s letter to Crow’s attorney are below:
1. For tax years 2010 – 2022, please provide a list of all instances in which Michaela Rose was chartered for hire. For each of these transactions, please include the daily or weekly rate that customers were charged to charter Michaela Rose. This list should not include any instances where Michaela Rose was chartered to Mr. Crow or any entities he owns or controls.
2. Please provide a list of Rochelle Charter’s paying customers for yacht charter services from 2010 – 2022. For each customer, provide the number of times they chartered Michaela Rose, the duration of each voyage, and the amount paid for Rochelle Charter Inc. or Mr. Crow directly for each voyage.
3. For each tax year from 2010 – 2022 please provide the annual income, expenses and losses reported on federal tax filings for Rochelle Charter. Please also provide a copy of Rochelle Charter’s Form 1120-S (if applicable) and Mr. Crow’s Schedule C and E for each tax year between 2010 – 2022.
4. For each tax year from 2010 – 2022, please provide the dollar value of the losses from Rochelle Charter that Mr. Crow used to reduce his taxable income.
5. For tax years 2010 – 2022, please provide the total dollar value of losses from Rochelle Charter or any other entities related to Michaela Rose that Mr. Crow has used to reduce his taxable income. Please specify the exact amount in losses from Rochelle Charter’s activities that Mr. Crow offset against his taxable income for each tax year.
6. Are public reports that Rochelle Charter reported a $1.8 million loss on federal tax filings in 2014 accurate? If so, how much of that loss was related to expenses incurred from upgrades and renovations done to Michaela Rose?
7. Between tax years 2010 – 2022, how much in federal tax deductions has Mr. Crow claimed from expenses related to the use of Michaela Rose? (This is understood to mean ALL deductions claimed by Mr. Crow from any expenses incurred from the use of Michaela Rose).
8. Has Mr. Crow ever been asked by the IRS to provide proof that Michaela Rose was actually being engaged in for-profit yacht chartering activities? If so, please provide a copy of documentation and records provided to the IRS substantiating that Michaela Rose was being chartered to paying customers for the purpose of the transportation of passengers for hire.
9. Has Mr. Crow or Rochelle Charter ever been audited by the IRS regarding Internal Revenue Code Section 183 in connection with the purported business activities of Michaela Rose?
10. Why has Michaela Rose never registered as a “commercial yacht” with the UK ship register? Please explain to the Committee why Michaela Rose has only registered as a Pleasure Yacht under Part 1 of the UK Ship Register and never as a Commercial Yacht under Part 1 of the UK Ship register.
11. Has Michaela Rose ever obtained a large yacht certificate from the UK Ship Register? If so, please provide a copy of all large yacht certificates obtained for Michaela Rose between 2000 and 2022. Please also provide copies of all Charter Yacht Certificates and Letters of Compliance issued for Michaela Rose by the UK Ship Register. If none exists, please explain why not.
12. Please provide a list of instances in which Michaela Rose was chartered out through superyachts.com, liveyachting.com or any other yacht charter websites. Please also provide any registrations, documentation or licenses to superyachts.com or liveyachting.com that Michaela Rose was legally allowed to be chartered out for hire to paying customers.
13. Has Michaela Rose ever obtained insurance for the purpose of commercial activities, including yacht charter services? Specifically, has Michaela Rose ever been insured to engage in trade for the transportation of passengers for hire?
14. Why has Michaela Rose never obtained a Certificate of Documentation for a coastwise enforcement from any U.S. maritime authorities? (To include the U.S. Coast Guard, the U.S. Maritime Administration, and U.S. Customs and Border Protection)
15. Why has Michaela Rose never sought an exemption or waiver to the Passenger Vessel Services Act or the Jones Act?
16. Please explain why Rochelle Charter was unable to or declined to provide the USPTO examples of instances where Michaela Rose was chartered out for hire to paying customers. Do these records exist? If so, please provide them to the Committee.
17. The USPTO claimed that there was “no indication that the yachting services are provided” in response to Michaela Rose’s trademark application. Why did Rochelle Charter only provide marketing materials and brochures to the USPTO instead of records or documentation of Michaela Rose being chartered to customers? Please provide the Committee records of Michaela Rose’s yacht chartering activities, including schedules for paying customers.
18. Please provide examples of Michaela Rose being engaged in a lawful U.S. business, including invoices to paying customers for yacht chartering activities or other business activities.
19. Please provide a detailed list of all instances in which Justice Clarence Thomas has been a guest aboard Mr. Crow’s superyacht, Michaela Rose. For each of these trips, please include the following information:
a. The date, location and duration of stay for each instance in which Justice Thomas was a guest aboard Michaela Rose.
b. The cost of purported chartering Michaela Rose for each instance in which Justice Thomas was a guest aboard Michaela Rose.
c. Whether Justice Thomas ever provided any monetary consideration for stays aboard Michaela Rose to Mr. Crow or any entities in which Mr. Crow is a partner, director or officer, including Crow Holdings or subsidiaries.
d. For each instance in which Justice Thomas traveled aboard Michaela Rose, please indicate whether any trade or business:
i. Included the value of the use of the yacht as a taxable fringe benefit to the owner(s),
ii. Depreciated the yacht to the extent of qualified business use,
iii. Deducted operating costs (e.g., fuel, labor, food, etc.) attributable to these particular trips; or,
iv. For yacht uses that are for personal reasons as well as mixed use reasons (i.e., both personal and business reasons), whether logs were being kept to determine and substantiate proper income inclusion (e.g., all employee travelers, number of family members or guests accompanying the employee, distance traveled, hours used, etc.).
e. For each instance in which Justice Thomas did not provide full payment for his stay aboard Michaela Rose, please indicate the value of the stay, whether you included the value of these stays on your gift tax return, how much of your unified lifetime gift and estate tax credit (or exemption) was applied to the gift (if any), and how much gift tax you paid with respect to the gift. If you did not report the amount on your gift tax return, pay gift tax, or reduce your unified lifetime gift and estate tax credit (or exemption), please explain why not.
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