The stories you want. The opinions that matter.
No, thanks
Tag: tax cuts and jobs act
Sen. Ron Johnson

Wisconsin Newspaper Slams Sen. Johnson For Brazen ‘Grifting’

Reprinted with permission from Alternet

A recent report by ProPublica, published on August 11, found that Sen. Ron Johnson of Wisconsin made the Tax Cuts and Jobs Act of 2017 even more generous to the ultra-rich by insisting that it include a major tax break for what are called "pass-through" companies — and by doing so, the far-right Republican made his cronies even richer. ProPublica's report is the focus of a scathing editorial by a Wisconsin-based publication: the Madison-based Capital Times, which slams Johnson as a "con artist" who "stands out as the senator whose grifting costs taxpayers — in Wisconsin and nationwide — the most."

In its report, ProPublica explained how much Johnson's cronies benefitted from his insistence that the Tax Cuts and Jobs Act include his provision for pass-through companies.

Pro-Publica reported, "Johnson's last-minute maneuver benefited two families more than almost any others in the country; both are worth billions and both are among the senator's biggest donors. Dick and Liz Uihlein of packaging giant Uline, along with roofing magnate Diane Hendricks, together had contributed around $20 million to groups backing Johnson's 2016 reelection campaign. The expanded tax break that Johnson muscled through netted them $215 million in deductions in 2018 alone, drastically reducing the income they owed taxes on."

In response to that reporting, the Capital Times' editorial board writes, "Even for the billionaire class, that's an epic windfall. Johnson, who was worth around $40 million before the pandemic, has a long record of voting for legislation that benefits the owners of so-called 'limited-liability' corporations, like the one he owns with his wife. But as the political outsider became a political careerist, he has expanded his grifting to serve the interests of those who have kept him in office up to this point."

The editorial continues, "Johnson has not announced his bid for reelection in 2022, but there are growing signals that — despite a promise to limit himself to two terms — he will run again. It will be a tough race for him, so he'll need all the billionaire backing he can get to explain away his reputation as a conspiracy theorist who embraces Trump's Big Lie about the 2020 election and rejects science when it comes to the coronavirus pandemic."

The Capital Times concludes by quoting Wisconsin Democrat Tom Nelson and agreeing with his view of Johnson: "Outagamie County Executive Tom Nelson, one of the Democrats seeking Johnson's seat, summed the sordid circumstance up best when he observed, 'Johnson took $20 million from Wisconsin's wealthiest right-wing billionaires, then fought to get them gigantic tax breaks. He's not a fiscal conservative, he's a corrupt errand boy for the ultra-rich.'"

Secret IRS Files Show How Trump Tax Cut Greased The Super-Rich

Secret IRS Files Show How Trump Tax Cut Greased The Super-Rich

Reprinted with permission from ProPublica

In November 2017, with the administration of President Donald Trump rushing to get a massive tax overhaul through Congress, Sen. Ron Johnson (R-WI) stunned his colleagues by announcing he would vote "no."

Making the rounds on cable TV, the Wisconsin Republican became the first GOP senator to declare his opposition, spooking Senate leaders who were pushing to quickly pass the tax bill with their thin majority. "If they can pass it without me, let them," Johnson declared.

Johnson's demand was simple: In exchange for his vote, the bill must sweeten the tax break for a class of companies that are known as pass-throughs, since profits pass through to their owners. Johnson praised such companies as "engines of innovation." Behind the scenes, the senator pressed top Treasury Department officials on the issue, emails and the officials' calendars show.

Within two weeks, Johnson's ultimatum produced results. Trump personally called the senator to beg for his support, and the bill's authors fattened the tax cut for these businesses. Johnson flipped to a "yes" and claimed credit for the change. The bill passed.

The Trump administration championed the pass-through provision as tax relief for "small businesses."

Confidential tax records, however, reveal that Johnson's last-minute maneuver benefited two families more than almost any others in the country — both worth billions and both among the senator's biggest donors.

Dick and Liz Uihlein of packaging giant Uline, along with roofing magnate Diane Hendricks, together had contributed around $20 million to groups backing Johnson's 2016 reelection campaign.

The expanded tax break Johnson muscled through netted them $215 million in deductions in 2018 alone, drastically reducing the income they owed taxes on. At that rate, the cut could deliver more than half a billion in tax savings for Hendricks and the Uihleins over its eight-year life.

But the tax break did more than just give a lucrative, and legal, perk to Johnson's donors. In the first year after Trump signed the legislation, just 82 ultrawealthy households collectively walked away with more than $1 billion in total savings, an analysis of confidential tax records shows. Republican and Democratic tycoons alike saw their tax bills chopped by tens of millions, among them: media magnate and former Democratic presidential candidate Michael Bloomberg; the Bechtel family, owners of the engineering firm that bears their name; and the heirs of the late Houston pipeline billionaire Dan Duncan.

Usually the scale of the riches doled out by opaque tax legislation — and the beneficiaries — remain shielded from the public. But ProPublica has obtained a trove of IRS records covering thousands of the wealthiest Americans. The records have enabled reporters this year to explore the diverse menu of options the tax code affords the ultra-wealthy to avoid paying taxes.

The drafting of the Trump law offers a unique opportunity to examine how the billionaire class is able to shape the code to its advantage, building in new ways to sidestep taxes.

The Tax Cuts and Jobs Act was the biggest rewrite of the code in decades and arguably the most consequential legislative achievement of the one-term president. Crafted largely in secret by a handful of Trump administration officials and members of Congress, the bill was rushed through the legislative process.

As draft language of the bill made its way through Congress, lawmakers friendly to billionaires and their lobbyists were able to nip and tuck and stretch the bill to accommodate a variety of special groups. The flurry of midnight deals and last-minute insertions of language resulted in a vast redistribution of wealth into the pockets of a select set of families, siphoning away billions in tax revenue from the nation's coffers. This story is based on lobbying and campaign finance disclosures, Treasury Department emails and calendars obtained through a Freedom of Information Act lawsuit, and confidential tax records.

For those who benefited from the bill's modifications, the collective millions spent on campaign donations and lobbying were minuscule compared with locking in years of enormous tax savings.

A spokesperson for the Uihleins declined to comment. Representatives for Hendricks didn't respond to questions. In response to emailed questions, Johnson did not address whether he had discussed the expanded tax break with Hendricks or the Uihleins. Instead, he wrote in a statement that his advocacy was driven by his belief that the tax code "needs to be simplified and rationalized."

"My support for 'pass-through' entities — that represent over 90% of all businesses — was guided by the necessity to keep them competitive with C-corporations and had nothing to do with any donor or discussions with them," he wrote.

Trump Tax Overhaul Showered Millions on Handful of Americans


Source: ProPublica analysis of IRS data

By the summer of 2017, it was clear that Trump's first major legislative initiative, to "repeal and replace" Obamacare, had gone up in flames, taking a marquee campaign promise with it. Looking for a win, the administration turned to tax reform.

"Getting closer and closer on the Tax Cut Bill. Shaping up even better than projected," Trump tweeted. "House and Senate working very hard and smart. End result will be not only important, but SPECIAL!"

At the top of the Republican wishlist was a deep tax cut for corporations. There was little doubt that such a cut would make it into the final legislation. But because of the complexity of the tax code, slashing the corporate tax rate doesn't actually affect most U.S. businesses.

Corporate taxes are paid by what are known in tax lingo as C corporations, which include large publicly traded firms like AT&T or Coca-Cola. Most businesses in the United States aren't C corporations, they're pass-throughs. The name comes from the fact that when one of these businesses makes money, the profits are not subject to corporate taxes. Instead, they "pass through" directly to the owners, who pay taxes on the profits on their personal returns. Unlike major shareholders in companies like Amazon, who can avoid taking income by not selling their stock, owners of successful pass-throughs typically can't avoid it.

Pass-throughs include the full gamut of American business, from small barbershops to law firms to, in the case of Uline, a packaging distributor with thousands of employees.

So alongside the corporate rate cut for the AT&Ts of the world, the Trump tax bill included a separate tax break for pass-through companies. For budgetary reasons, the tax break is not permanent, sunsetting after eight years.

Proponents touted it as boosting "small business" and "Main Street," and it's true that many small businesses got a modest tax break. But a recent study by Treasury economists found that the top one percent of Americans by income have reaped nearly 60% of the billions in tax savings created by the provision. And most of that amount went to the top 0.1%. That's because even though there are many small pass-through businesses, most of the pass-through profits in the country flow to the wealthy owners of a limited group of large companies.

Tax records show that in 2018, Bloomberg, whom Forbes ranks as the 20th wealthiest person in the world, got the largest known deduction from the new provision, slashing his tax bill by nearly $68 million. (When he briefly ran for president in 2020, Bloomberg's tax plan proposed ending the deduction, though his plan was generally friendlier to the wealthy than those of his rivals.) A spokesperson for Bloomberg declined to comment.

Americans With the Highest Income Reaped Most of the Pass-through Tax Break Benefits in 2018


Source: National Bureau of Economic Research studyCredit: Lucas Waldron/ProPublica

Johnson's intervention in November 2017 was designed to boost the bill's already generous tax break for pass-through companies. The bill had allowed for business owners to deduct up to 17.4 percent of their profits. Thanks to Johnson holding out, that figure was ultimately boosted to 20 percent.

That might seem like a small increase, but even a few extra percentage points can translate into tens of millions of dollars in extra deductions in one year alone for an ultra-wealthy family.

The mechanics are complicated but, for the rich, it generally means that a business owner gets to keep an extra seven cents on every dollar of profit. To understand the windfall, take the case of the Uihlein family.

Dick, the great-grandson of a beer magnate, and his wife, Liz, own and operate packaging giant Uline. The logo of the Pleasant Prairie, Wisconsin, firm is stamped on the bottom of countless paper bags. Uline produced nearly $1 billion in profits in 2018, according to ProPublica's analysis of tax records. Dick and Liz Uihlein, who own a majority of the company, reported more than $700 million in income that year. But they were able to slash what they owed the IRS with a $118 million deduction generated by the new tax break.

Liz Uihlein, who serves as president of Uline, has criticized high taxes in her company newsletter. The year before the tax overhaul, the couple gave generously to support Trump's 2016 presidential campaign. That same year, when Johnson faced long odds in his reelection bid against former Sen. Russ Feingold, the Uihleins gave more than $8 million to a series of political committees that blanketed the state with pro-Johnson and anti-Feingold ads. That blitz led the Milwaukee Journal Sentinel to dub the Uihleins "the Koch brothers of Wisconsin politics."

Johnson's campaign also got a boost from Hendricks, Wisconsin's richest woman and owner of roofing wholesaler ABC Supply Co. The Beloit-based billionaire has publicly pushed for tax breaks and said she wants to stop the U.S. from becoming "a socialistic ideological nation."

Hendricks has said Johnson won her over after she grilled him at a brunch meeting six years earlier. She gave about $12 million to a pair of political committees, the Reform America Fund and the Freedom Partners Action Fund, that bought ads attacking Feingold.

In the first year of the pass-through tax break, Hendricks got a $97 million deduction on income of $502 million. By reducing the income she owed taxes on, that deduction saved her around $36 million.

Even after Johnson won the expansion of the pass-through break in late 2017, the final text of the tax overhaul wasn't settled. A congressional conference committee had to iron out the differences between the Senate and House versions of the bill.

Sometime during this process, eight words that had been in neither the House nor the Senate bill were inserted: "applied without regard to the words 'engineering, architecture.'"

With that wonky bit of legalese, Congress smiled on the Bechtel clan.

The Bechtels' engineering and construction company is one of the largest and most politically connected private firms in the country. With surgical precision, the new language guaranteed the Bechtels a massive tax cut. In previous versions of the bill, construction would have been given a tax break, but engineering was one of the industries excluded from the pass-through deduction for reasons that remain murky.

When the bill, with its eight added words, took effect in 2018, three great-great-grandchildren of the company's founder, CEO Brendan Bechtel and his siblings Darren and Katherine, together netted deductions of $111 million on $679 million in income, tax records show.

And that's just one generation of Bechtels. The heirs' father, Riley, also holds a piece of the firm, as does a group of nonfamily executives and board members. In all, Bechtel Corporation produced around $2.3 billion of profit in 2018 alone — the vast majority of which appears to be eligible for the 20% deduction.

Who wrote the phrase — and which lawmaker inserted it — has been a much-discussed mystery in the tax policy world. ProPublica found that a lobbyist who worked for both Bechtel and an industry trade group has claimed credit for the alteration.

In the months leading up to the bill's passage in 2017, Bechtel had executed a full-court press in Washington, meeting with Trump administration officials and spending more than $1 million lobbying on tax issues.

Bechtel met with the Treasury's point man on the tax bill, Justin Muzinich, on pass-through issues in July 2017.

Bechtel also retained a top Washington firm to lobby specifically on pass-through business issues in the tax bill.

Bechtel hired another lobbying firm in the same period.

The chief lobbyist was Marc Gerson, a former top tax lawyer on Capitol Hill.

Amid intense industry lobbying pressure, this phrase was inserted into the bill that extended the lucrative tax break to engineering firms.

Gerson, the lobbyist, later took credit in his law firm bio for winning the tax break for engineering companies.

Thanks to the last-minute insertion into the law, Brendan Bechtel, the company CEO, netted $64 million in write-offs from the tax break in 2018 alone. (A Bechtel spokesperson didn't respond to questions.)

Marc Gerson, of the Washington law firm Miller & Chevalier, was paid to lobby on the tax bill by both Bechtel and the American Council of Engineering Companies, of which Bechtel is a member. At a presentation for the trade group's members a few weeks after Trump signed the bill into law, Gerson credited his efforts for the pass-through tax break, calling it a "major legislative victory for the engineering industry." Gerson did not respond to a request for comment.

Bechtel's push was part of a long history of lobbying for tax breaks by the company. Two decades ago, it even hired a former IRS commissioner as part of a successful bid to get "engineering and architectural services" included in one of President George W. Bush's tax cuts.

The company's lobbying on the Trump tax bill, and the tax break it received, highlight a paradox at the core of Bechtel: The family has for years showered money on anti-tax candidates even though, as The New Yorker's Jane Mayer has written, Bechtel "owed almost its entire existence to government patronage." Most famous for being one of the companies that built the Hoover Dam, in recent years it has bid on and won marquee federal projects. Among them: a healthy share of the billions spent by American taxpayers to rebuild Iraq after the war. The firm recently moved its longtime headquarters from San Francisco to Reston, Virginia, a hub for federal contractors just outside the Beltway.

A spokesperson for Bechtel Corporation didn't respond to questions about the company's lobbying. The spokesperson, as well as a representative of the family's investment office, didn't respond to requests to accept questions about the family's tax records.

Brendan Bechtel has emerged this year as a vocal critic of President Joe Biden's proposal to pay for new infrastructure with tax hikes.

"It's unfair to ask business to shoulder or cover all the additional costs of this public infrastructure investment," he said on a recent CNBC appearance.

As the landmark tax overhaul sped through the legislative process, other prosperous groups of business owners worried they would be left out. With the help of lobbyists, and sometimes after direct contact with lawmakers, they, too, were invited into what Trump dubbed his "big, beautiful tax cut."

Among the biggest winners during the final push were real estate developers.

The Senate bill included a formula that restricted the size of the new deduction based on how much a pass-through business paid in wages. Congressional Republicans framed the provision as rewarding businesses that create jobs. In effect, it meant a highly profitable business with few employees — like a real estate developer — wouldn't be able to benefit much from the break.

Developers weren't happy. Several marshaled lobbyists and prodded friendly lawmakers to turn things around.

At least two of them turned to Johnson.

"Dear Ron," Ted Kellner, a Wisconsin developer, and a colleague wrote in a letter to Johnson. "I'm concerned that the goal of a fair, efficient and growth oriented tax overhaul will not be achieved, especially for private real estate pass-through entities."

Johnson forwarded the letter from Kellner, a political donor of his, to top Republicans in the House and Senate: "All, Yesterday, I received this letter from very smart and successful businessmen in Milwaukee," adding that the legislation as it stood gave pass-throughs "widely disparate, grossly unfair" treatment.

House Ways and Means Committee Chairman Kevin Brady, R-Texas, responded with a promise to do more: "Senator — I strongly agree we should continue to improve the pass-through provisions at every step. You are a great champion for this." Congress is not subject to the Freedom of Information Act, but Treasury officials were copied on the email exchange. ProPublica obtained the exchange after suing the Treasury Department.

Kellner got his wish. In the final days of the legislative process, real estate investors were given a side door to access the full deduction. Language was added to the final legislation that allowed them to qualify if they had a large portfolio of buildings, even if they had small payrolls.

With that, some of the richest real estate developers in the country were welcomed into the fold.

The tax records obtained by ProPublica show that one of the top real estate industry winners was Donald Bren, sole owner of the Southern California-based Irvine Company and one of the wealthiest developers in the United States.

In 2018 alone, Bren personally enjoyed a deduction of $22 million because of the tax break. Bren's representatives did not respond to emails and calls from ProPublica.

His company had hired Wes Coulam, a prominent Washington lobbyist with Ernst & Young, to advocate for its interests as the bill was being hammered out. Before Coulam became a lobbyist, he worked on Capitol Hill as a tax policy adviser for Utah Sen. Orrin Hatch.

Hatch, then the Republican chair of the Senate Finance Committee, publicly took credit for the final draft of the new deduction, amid questions about the real estate carveout. Hatch's representatives did not respond to questions from ProPublica about how the carveout was added.

ProPublica's records show that other big real estate winners include Adam Portnoy, head of commercial real estate giant the RMR Group, who got a $14 million deduction in 2018. Donald Sterling, the real estate developer and disgraced former owner of the Los Angeles Clippers, won an $11 million deduction. Representatives for Portnoy and Sterling did not respond to questions from ProPublica.

Another gift to the real estate industry in the bill was a tax deduction of up to 20% on dividends from real estate investment trusts, more commonly known as REITs. These companies are essentially bundles of various real estate assets, which investors can buy chunks of. REITs make money by collecting rent from tenants and interest from loans used to finance real estate deals.

The tax cut for these investment vehicles was pushed by both the Real Estate Roundtable, a trade group for the entire industry, and the National Association of Real Estate Investment Trusts. The latter, a trade group specifically for REITs, spent more than $5 million lobbying in Washington the year the tax bill was drafted, more than it had in any year in its history.

Steven Roth, the founder of Vornado Realty Trust, a prominent REIT, is a regular donor to both groups' political committees.

Roth had close ties to the Trump administration, including advising on infrastructure and doing business with Jared Kushner's family. He became one of the biggest winners from the REIT provision in the Trump tax law.

Roth earned more than $27 million in REIT dividends in the two years after the bill passed, potentially allowing him a tax deduction of about $5 million, tax records show. Roth did not respond to requests for comment, and his representatives did not accept questions from ProPublica on his behalf.

Another carveout benefited investors of publicly traded pipeline businesses. Sen. John Cornyn, a Texas Republican, added an amendment for them to the Senate version of the bill just before it was voted on.

Without his amendment, investors who made under a certain income would have received the deduction anyway, experts told ProPublica. But for higher-income investors, a slate of restrictions kicked in. In order to qualify, they would have needed the businesses they're invested in to pay out significant wages, and these oil and gas businesses, like real estate developers, typically do not.

Cornyn's amendment cleared the way.

The trade group for these companies and one of its top members, Enterprise Products Partners, a Houston-based natural gas and crude oil pipeline company, had both lobbied on the bill. Enterprise was founded by Dan Duncan, who died in 2010.

The Trump tax bill delivered a win to Duncan's heirs. ProPublica's data shows his four children, who own stakes in the company, together claimed more than $150 million in deductions in 2018 alone. The tax provision for "small businesses" had delivered a windfall to the family Forbes ranked as the 11th richest in the country.

In a statement, an Enterprise spokesperson wrote: "The Duncan family abides by all applicable tax laws and will not comment on individual tax returns, which are a private matter." Cornyn's office did not respond to questions about the senator's amendment.

The tax break is due to expire after 2025, and a gulf has opened in Congress about the future of the provision.

In July, Senate Finance Chair Ron Wyden (D-OR)., proposed legislation that would end the tax cut early for the ultra-wealthy. In fact, anyone making over $500,000 per year would no longer get the deduction. But it would be extended to the business owners below that threshold who are currently excluded because of their industry. The bill would "make the policy more fair and less complex for middle-class business owners, while also raising billions for priorities like child care, education, and health care," Wyden said in a statement.

Meanwhile, dozens of trade groups, including the Chamber of Commerce, are pushing to make the pass-through tax cut permanent. This year, a bipartisan bill called the Main Street Tax Certainty Act was introduced in both houses of Congress to do just that.

One of the bill's sponsors, Rep. Henry Cuellar (D-TX) pitched the legislation this way: "I am committed to delivering critical relief for our nation's small businesses and the communities they serve."

Trump Tax Law Meant To Help Poor Actually Made A Billionaire Richer

Trump Tax Law Meant To Help Poor Actually Made A Billionaire Richer

Under a six-lane span of freeway leading into downtown Baltimore sit what may be the most valuable parking spaces in America.

Lying near a development project controlled by Under Armour’s billionaire CEO Kevin Plank, one of Maryland’s richest men, and Goldman Sachs, the little sliver of land will allow Plank and the other investors to claim what could amount to millions in tax breaks for the project, known as Port Covington.

They have President Donald Trump’s 2017 tax overhaul law to thank. The new law has a provision meant to spur investment into underdeveloped areas, called “opportunity zones.” The idea is to grant lucrative tax breaks to encourage new investment in poor areas around the country, carefully selected by each state’s governor.

But Port Covington, an ambitious development geared to millennials to feature offices, a hotel, apartments, and shopping, is not in a census tract that is poor. It’s not a new investment. And the census tract only became eligible to be an opportunity zone thanks to a mapping error.

As the selection process was underway, a deputy chief of staff to Maryland’s governor wrote in an email that “Port Covington does not qualify” as an opportunity zone.

Maryland’s governor chose the area for the program anyway — after his aides met with the lobbyists for Plank, who owns about 40% of the zone.

“This is a classic example of a windfall benefit,” said Robert Stoker, a George Washington University professor who has studied economic development in Baltimore for decades. “A major investment was already planned and now is in a zone where they are going to qualify for all kinds of beneficial tax treatment.”

In selecting Port Covington, the governor had to exclude another Maryland community from the opportunity zone program. In Baltimore, for example, the governor dropped part of a neighborhood that city officials recommended for the program — Brooklyn — with a median family income one-fifth that of Port Covington. Brooklyn sits just across the Patapsco river from Port Covington, in an area that suffers from one of the highest drug and alcohol death rates in Baltimore, which in turn has one of the highest drug fatality rates nationwide.

In a statement, Marc Weller, a developer who is Plank’s partner in the project, defended the opportunity zone designation. “Port Covington being part of an Opportunity Zone will attract more investors, foster more economic growth in a neglected area of the City, and directly benefit all of the surrounding communities for decades to come,” Weller said. Supporters say the Port Covington development could help several nearby struggling south Baltimore neighborhoods.

An official in the administration of Maryland’s Republican governor, Larry Hogan, said, “The success of that project is really going to go a long way to providing benefits for the whole city of Baltimore.” The official added: “The governor is a huge supporter of the development.”

A spokesperson for the state’s Department of Housing and Community Development, which was involved in the selection process, said that “due to the time limits of the federal tax incentive, the state of Maryland did purposefully select census tracts where projects were beginning to increase the odds of attracting additional private sector investment to Maryland’s opportunity zones in the near term.”

In December 2017, Trump signed the Tax Cuts and Jobs Act, his signature legislative achievement. Much criticized as a giveaway to the rich, the law includes one headline provision that backers promised would help the poor: opportunity zones. (Listen to the “Trump, Inc.” episode where we travel to an opportunity zone where the Kushner Companies owns large tracts of property.)

Supporters of the program argued it would unleash economic development in otherwise overlooked communities. “Our goal is to rebuild homes, schools, businesses and communities that need it the most,“ Trump declared at a recent event, adding, “To revitalize these areas, we’ve lowered the capital gains tax for long-term investment in opportunity zones all the way down to a very big, fat, beautiful number of zero.”

The provision has bipartisan support. “These cities are gold mines,” New Jersey Sen. Cory Booker, a 2020 presidential hopeful and main Democratic architect of the program, told real estate investors in October. “They’re domestic emerging markets that are more exciting than anything you’ll see overseas.”

Here’s how the program works. Say you’re a hedge fund manager, you purchased Google stock years ago, and are sitting on $1 billion in gains. If you sell, you’d send the IRS about $240 million, a lot less than ordinary income tax but still annoying. To avoid paying that much, you can sell the shares and put the $1 billion into an opportunity zone. That comes with three generous breaks. The first is that you defer that $240 million in capital gains tax, allowing you to invest more money up front. But if that’s not enough for you, you can hold the investment for several years and you’ll get a significant reduction in those taxes. What’s more, any additional gains from the new investment are tax-free after 10 years.

It’s impossible to predict how much the tax break will be worth to individual investors because it depends on several variables, not least whether the underlying project gains in value. But one investment pitch projected 10-year returns would jump to 91 percent from 29 percent on a hypothetical $1 million investment. That includes $284,000 in tax breaks — money the federal government would have collected from taxpayers with capital gains but for the program.

The tax code already favored real estate developers like Trump, and his overhaul made it even friendlier. Investors can put money into a range of projects in opportunity zones, but so far most of the publicly announced deals are in real estate. The tax break has led to a marketing boom, with Wall Street pitching investors to raise funds to invest in the zones. Critics argue that the program is flawed, pointing out that there’s no guarantee that the capital investment will help community residents, that the selection process was vulnerable to outside influence, and that it could be a giveaway for projects that were going to happen anyway. In a case in Chicago uncovered by the Real Deal, two tracts already slated for a major development project were selected by the governor as opportunity zones even though city officials hadn’t initially recommended them.

Under the new law, areas of the country deemed to be “low-income communities” would be eligible to be named opportunity zones. The Treasury Department determined which census tracts qualified. Then governors of each state could select one quarter of those tracts to get the tax benefit.

That governor prerogative turned out to be very useful to Kevin Plank.

In 2012, Plank-connected entities quietly began buying up waterfront property on a largely vacant and isolated peninsula south of downtown Baltimore. Often using shell companies to shield the identity of the true buyer, they ultimately spent more than $100 million acquiring much of the peninsula. Plank’s privately held Sagamore Development now controls roughly 40 percent of the area that would later be named an opportunity zone.

In early 2015, more than two and a half years before Trump’s tax law passed, Plank revealed himself as the money behind the purchases. He planned a new development and headquarters for Under Armour, the sports apparel company he started after coming up with the idea as a University of Maryland football player. Today, Under Armour employs 15,000 people. Plank has a net worth of around $2 billion.

Though the Port Covington area was cut off from downtown by I-95, Plank said he likes the location because of the visibility. “When people drive through Baltimore [on I-95] I literally want them to drive through and go, ’There’s Baltimore on the right. There’s Under Armour on the left,’” he told The Baltimore Sun.

A year later, Plank’s firm took his vision to the general public, running TV and print ads touting the new project. One of the ads, reminiscent of the Democratic presidential primary spots airing at that time, was filled with a diverse cast sharing their dreams for a new city within a city.

“We will build it. Together,” the ad begins, before running through a glittering digital rendering of contemporary urban design features. Office towers, shops, transit, parks, jobs — all of it to be anchored by a new world headquarters of the city’s most visible brand name, Under Armour. Sagamore would spearhead the project and sell land to others who would build businesses and housing.

Even before qualifying for the opportunity zone break, taxpayers were going to subsidize the development. Days after the ads touting togetherness, Plank proposed that the city float $660 million in bonds to help build what the company has said would be a $5.5 billion development. Opponents contended Plank’s proposal amounted to corporate welfare that would exacerbate the city’s stark economic and racial divides. But the company agreed to provide millions of dollars to the city and a group of nearby low-income neighborhoods to gain support for the project, and the City Council passed the measure that fall.

As Under Armour’s stock plummeted in 2017 amid slowing sales growth, progress on the Port Covington project lagged. That September, Goldman Sachs stepped in to commit $233 million from its Urban Investment Group. Hogan, himself a real estate developer, personally spoke with the then-CEO of Goldman, Lloyd Blankfein, about the deal.

In the weeks after the 2017 federal tax overhaul passed, Plank’s team spotted an opportunity.

Nick Manis, a veteran Annapolis lobbyist who has also represented the Baltimore Ravens, reached out to Hogan’s chief of staff about Port Covington, according to emails obtained by ProPublica through a public records request. The developers and their lobbyists had given at least $24,000 to Hogan’s campaigns in recent years.

But the developers had a problem.

The Friday before the meeting, a deputy chief of staff to the governor wrote in an email that “Port Covington does not qualify” for the coveted tax breaks.

The Port Covington tract, which includes a gentrified corner of South Baltimore north of the largely empty peninsula, was too wealthy to be an opportunity zone. There is a second provision of the law for wealthier tracts: A tract can qualify if it is adjacent to a low-income area. But Port Covington failed that test, too. Its median family income — nearly 160 percent of Maryland’s — exceeded the income cap even for that provision.

Port Covington was out — unless the tract could somehow be considered low-income in its own right.

On Feb. 5, the Port Covington development team arrived at the second floor of the statehouse in the opulent governor’s reception room to meet with top Hogan aides. The agenda for the meeting included opportunity zones, as well as transit and infrastructure issues. The developer’s team requested that the Port Covington tract be made an opportunity zone. The state officials “acknowledged their interest in receiving that designation,” a Hogan administration official said.

Three days after that meeting, Plank and the Port Covington developers got bad news. The Treasury Department released a list of census tracts across the country that were sufficiently poor to be included in the program. Port Covington was not included in that list.

Three weeks later, however, things turned around. The Treasury Department issued a revised list. The agency said it had left out some tracts in error. The revised list included 168 new areas across the country defined by the agency as “low-income communities.”

This time, Port Covington made the cut.

It couldn’t have qualified because its residents were poor. It couldn’t qualify because it was next to some place that was poor. But the tract could qualify under yet another provision of the law. Some tracts could make the cut if they had fewer than 2,000 people and if they were “within” what’s known as an empowerment zone. That was a Clinton-era redevelopment initiative also aimed at low-income areas.

Port Covington wasn’t actually within an empowerment zone, but it is next to one. So how did it qualify? The area met the definition of “within” because the digital map files the Treasury Department used showed that Port Covington overlapped with a neighboring tract that was designated an empowerment zone, Treasury officials told ProPublica.

That overlap: the sliver of parking lot beneath I-395. That piece of the lot is about one one-thousandth of a square mile.

There are no regulations or guidance on how to interpret the tax law’s use of “within,” said a spokesman for the Treasury Department’s Community Development Financial Institutions Fund, which compiled the maps. The agency made what it called a “technical decision” that any partial overlap with an Empowerment Zone would count as being “within” that zone — no matter how small the area, or if anyone lived there.

Or, if the overlap was even real.

Turns out, no part of Port Covington actually overlapped with the empowerment zone.

Treasury’s decision ignored a well-known problem in geographic analysis known as misalignment, mapping experts said.

Misalignment happens when the lines on digital maps made by two sources differ slightly about where things like roads and buildings lie, according to Henry Luan, a professor of geography at the University of Oregon.

For example, if a tract ends at a highway, one file might show the border on the near side of the highway while another — when zoomed all the way in — might show it a few feet away on the far side. When laid on top of each other, the two files end up with minuscule differences that don’t mean anything in the real world.

Except in this case, it had big real world consequences for Port Covington. The mapping error allowed the entire tract to qualify as an opportunity zone.

“That area of overlap is a complete artifact of” the map files Treasury used, said David Van Riper, director of spatial analysis at the Minnesota Population Center. “It’s not an actual overlap.”

Sometime in the mid-2000s, the Census Bureau used GPS devices to make its map files more accurately represent the country’s roads. One of the maps used by Treasury appeared to be based on the older, less accurate Census maps, Van Riper said.

Even accepting Treasury’s misaligned maps, the entire Port Covington tract receives tax benefits, even though less than 0.3% of it overlaps with the neighboring tract.

“Only a minimal overlap, but you make the whole Census tract benefit from the policy?” Luan said. “That doesn’t make sense to me.”

Port Covington is one of just a handful of tracts in the country that ProPublica identified that qualified through similar flaws in Treasury’s process.

Nothing indicates the Port Covington developers had any influence on the Treasury’s decision.

But the lobbying of the governor before the Treasury change appears to have paid off.

As they were lobbying, Baltimore officials were working out which parts of the city would benefit most from being opportunity zones. They petitioned the governor to pick 41 low-income city neighborhoods to get the tax break, all of them well below the program’s maximum income requirements.

The city’s list remained largely intact when the governor made his selections in April. Hogan made just four changes, three of which qualified under the main criteria without the benefit of the mapping error. But the fourth didn’t: Port Covington.

Plank’s team cheered the revision. The very thing that made Port Covington a poor candidate to be an opportunity zone — that it wasn’t a low-income area — could make it exceptionally attractive to investors. In January, they convened an opportunity zone conference at their Port Covington incubator called City Garage featuring state officials and executives from Goldman, Deloitte, and other firms.

“Port Covington kind of fits all the needs,” said Marc Weller, Plank’s partner, at the conference. “It has all the entitlements, and it has a financial partner in place as well. It’s probably the most premier piece of land in the United States that’s in an opportunity zone.”

The opportunity zone program has restrictions intended to prevent already-planned developments from benefitting. But the Port Covington developers told Bloomberg that the firm will be able to reap the benefits of the tax break because it has found new investors. Among the potential new investors who might take advantage of the tax break are Plank’s own family, one of the developers told the Baltimore Business Journal. A Port Covington spokesman denied that Plank’s family members are potential investors.

To get the maximum benefit, investments need to be made in 2019, though investments made through 2026 can take advantage of growth tax-free. Only a portion of the Port Covington project is expected to be underway by then.

A Goldman spokesman said it is “likely” that the firm will take advantage of the opportunity zone benefits in Port Covington, adding that it has “made no firm decisions about how each component will be financed.”

Margaret Anadu, the head of Goldman’s Urban Investment Group and the lead on the Port Covington investment, recently said of the opportunity zone program: “These are the same neighborhoods that have been suffering since redline started decades and decades ago, pretty much eliminating private investment. … And so we simply have to reverse that. And the only way to reverse that is to start to bring that private capital back into these neighborhoods.”

The Port Covington tract is just 4% black. For it to be included in the program, another community somewhere in Maryland had to be excluded. The ones that the city suggested that were excluded by the governor, for example, are 68% black and have a poverty rate three times higher than Port Covington’s.

There is some evidence suggesting being named an opportunity zone has already been a boon for property owners. An analysis by Zillow found that sale price gains in opportunity zones significantly outpaced gains in eligible tracts that weren’t selected. Real Capital Analytics found that sales of developable sites in the zones rose 24 percent in the year after the law passed.

Under Armour has said it’s still committed to building its new headquarters on the peninsula, but it’s not clear when that will happen.

Still, other aspects of the once-stalled project finally started moving forward in recent months. After presenting plans for the first section inside the opportunity zone this winter, the project finally got underway on a rainy day in early May of this year.

“The project is real,” Weller said at the kickoff event, which included Anadu, the Goldman Sachs executive, and city and state officials. “The project is starting. We’re open for business.”

ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for The Big Story newsletter to receive stories like this one in your inbox.

IMAGE: Artist rendering of proposed Port Covington development in Baltimore, MD.

Where The Money Is: How Trump’s Tax Cut Plundered America

Where The Money Is: How Trump’s Tax Cut Plundered America

Famed bank robber Willie Sutton once explained that he busted into banks because “that’s where the money is.” What a small-timer! Corporate thieves — including the biggest banks — know that the big scores are in the tax code and federal budget. America’s superrich establishment decided to woo Trump and his fanatical constituency to back their agenda of plutocratic plunder.

It’s working. The big legislative accomplishment of the guy who claimed to be a working-class hero was his 2017 Christmastime signing of the Tax Cuts and Jobs Act. As most Americans now realize, the tax cut was not for them but instead was a disgraceful trillion-dollar-a-year giveaway to corporate giants and their wealthiest shareholders.

According to Americans for Tax Fairness, hundreds of Trump’s corporate backers are already making a killing. In just the first three quarters of 2018, big business quietly pocketed stunning tax savings they would have — and should have — paid to support America’s public needs:

— Apple: $4.5 billion

— AT&T: $2.2 billion

— Bank of America: $2.4 billion

— Verizon: $1.75 billion

— Walmart: $1.6 billion

And what about the “jobs” part of the act? Its core promise was that CEOs would devote their huge tax gift to new jobs and pay raises for working stiffs. Indeed, in 2017, about three dozen brand-name giants funded a lobbying front, deceptively named Reforming America’s Taxes Equitably, to promote the notion that a tax break would “boost job creation.”

But ThinkProgress found that in 2018, RATE members — including AT&T, Capital One, CSX, Ford, General Dynamics, Intel, Kimberly-Clark, Lockheed Martin, Macy’s, Northrop Grumman, T-Mobile, Verizon, Viacom and Walmart — instead eliminated more than 100,000 U.S. jobs. Verizon, for instance, promptly offered a “voluntary severance package” to 44,000 employees and offshored thousands of its U.S. jobs to India. It was “an opportunity to find more efficiencies,” the CEO told workers, “and help expedite … an innovative operating model for our future.” Or, to put it more simply: It was greed.

Ah … there you have it: Forget America’s fundamental values of justice and opportunity for all and don’t expect even a modicum of honesty from rich shareholders and top executives. For example, Kevin Hassett, a far-right corporate ideologue chosen by Trump to head the White House Council of Economic Advisers, flat-out lied that the corporate gifts would spark “an immediate jump in wage growth” averaging as high as $9,000 a year.

Got yours yet?

So where did the money go? To the top. After all, only the tax giveaways were mandated — not a dime in obligations (not even thank-you notes) was written into law. With no strings attached and union voices largely hushed or marginalized, top executives and board members spent it on themselves and their big investors, hiding their grubby motives behind “stock buybacks,” an accounting gimmick that hikes the pay of bosses who do nothing to earn it. The three-step fraud:

1. Humongous Incorporated gets a $1 billion tax gift from Uncle Sam.

2. HI quickly spends the booty to buy its own stock, which inflates the shares’ value.

3. Since HI top executives are awarded big chunks of company stock — abracadabra! — they can reap huge gains by selling that stock at the inflated price.

— Two weeks after AbbVie, a pharmaceutical giant, announced a $10 billion buyback in February, its stock price soared, and eight top execs cashed in $27 million in stock.

— After Mastercard’s $4 billion stock buyback, its CEO cashed in for a personal payday of $44 million.

— After Oracle jacked up its stock price with a $12 billion buyback, its co-CEO cashed in a whopping $250 million in shares.

All is not lost. While the piggiest corporations gorge themselves at the public trough, a growing number of their corporate cousins have stood up for a better way of doing business: B Corporations. The B stands for benefit, referring to these corporations’ pledge to benefit workers, the community and the environment. The B Corp community works toward lower levels of poverty and inequality, a healthier environment, stronger communities and high-quality jobs with dignity. For more details and a list of B Corps, go to bcorporation.net.