Harlan Crow and Clarence Thomas Are About to Learn About Gift Taxes

Photo Illustration by The Daily Beast / Getty
Photo Illustration by The Daily Beast / Getty
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Gift taxes were probably not a topic discussed on the yacht or around the campfire during the Harlan Crow-subsidized luxury vacations for Supreme Court Justice Clarence Thomas and his wife, Ginni. But maybe they should have been.

Recent reports indicate that Crow provided Thomas’ grandnephew with tuition to a pricey boarding school in the 1990s. Thomas did not report this gift from Harlan Crow as required on his annual disclosure forms. But that is nothing new. ProPublica had previously reported on multiple luxury vacations provided to Justice Thomas and his wife via Crow’s yacht and jets—including an island-hopping junket in Indonesia that ProPublica valued at $500,000.

That Thomas has made multiple lapses in ethical judgment in not reporting the receipt of such valued largesse from Crow is something for him, SCOTUS, and now Congress to muse over.

Clarence Thomas Has Some Obscenely ‘Generous’ Friends

But what about Crow’s judgment? Did he file gift tax returns and pay gift taxes on any of the gifts he provided to the Thomas family?

It is a reasonable question to ask, and Sen. Ron Wyden (D-OR) appears to have formally done so, with a reported due date of a response May 8. In lieu of gift taxes, did Crow expense the value of the trips and tuition provided the Thomases on either personal or business income tax returns? Wyden wants to know.

If Crow took business expense deductions for the above referenced “gifts,” then he can’t claim they were gifts. And if that’s the case, he wouldn’t have had to file gift tax returns which—given a potential tax rate of up to 40 percent—would represent a pretty price for the billionaire real estate magnate.

The criteria for what constitutes an untaxed gift that exceeds the limit to avoid paying tax vary by year. For example, the limit was $13,000 per recipient in 2013, but $17,000 in 2023. The Indonesian junket—valued at over $500,000 by ProPublica—would generate gift taxes of approximately $200,000 for Mr. Crow.

<div class="inline-image__caption"><p>Executive Director of MoveOn.org Rahna Epting speaks at a demonstration where MoveOn.org delivered over 1 million signatures calling for Congress to immediately investigate and impeach Clarence Thomas at the US Supreme Court on July 28, 2022 in Washington, D.C. </p></div> <div class="inline-image__credit">Jemal Countess / Getty </div>

Now, if Crow did take business deductions for the value of the luxury vacations provided to the Thomases, he would have opened up another can of worms for himself tax-wise. That’s because Crow has publicly stated he did not discuss any business before the court with Justice Thomas.

If that is true, then it is possible that Crow falsified his income tax returns by expensing the cost of the vacation provided the Thomases. It’s also possible the vacations provided the Thomas family could be viewed as income to Thomas—since he would be viewed as providing value to Crow through business discussions. To be very clear, this is speculative and none of this is proven, but the possibility alone makes it worth investigating.

What seems much more clear-cut is that Justice Thomas doesn’t seem to think he has to report gifts from wealthy businessmen, who also are generous corporate political donors, like Harlan Crow.

“Not reportable” is the phrase used by Thomas’ attorney/friend Mark Paoletta when he tweeted (incorrectly) about how the tuition payment by Crow to the school attended by the grandnephew was not reportable as a gift.

Oh my!

Now Would Be a Good Time to Investigate Ginni Thomas

Such an admission by Paoletta suggests knowledge of gift tax requirements by both Thomas and Crow going all the way back to the 1990s. It also raises additional questions. Was Justice Thomas motivated not to disclose valuable junkets provided to him and his family in order to abet his buddy Crow’s non-filing of gift tax returns and/or expensing of the value of the trips on his tax returns?

Oh me oh my!

Now, Mr. Crow may think he has insulated himself by procuring a golden passport from St. Kitts and Nevis—which is a notorious tax haven and money laundering refuge in the Caribbean. Then there’s the fact that Crow’s yacht, the Michaela Rose, has a registered ownership under an entity called Rochelle Marine Limited—a company domiciled in Guernsey, another notorious tax haven located just off the shores of the U.K.

Mr. Crow clearly has employed some clever tax accountants and lawyers over the years. And we all look forward to the answers he provides to the questions posed by Sen. Wyden but, clearly, Crow has exhibited a predisposition for tax avoidance behavior. Did he cross the line into tax fraud? That is something to contemplate and discuss around the campfire.

<div class="inline-image__caption"><p>Analilia Mejia of the Center for Popular Democracy, center, joins other activists calling for ethics reform in the U.S. Supreme Court, at the Capitol in Washington, Tuesday, May 2, 2023. Associate Justice Clarence Thomas has been criticized for accepting luxury trips nearly every year for more than two decades from Republican megadonor Harlan Crow without reporting them on financial disclosure forms.</p></div> <div class="inline-image__credit">J. Scott Applewhite / AP</div>

But why is this question even significant?

It is murky as to whether any of Crow’s business dealings were ever subject to SCOTUS review—even indirectly. What is not unclear are the heavy-duty political campaign contributions made by Harlan Crow.

Has Mr. Crow donated to dark money PACs? We don’t know, because anonymity is the whole point of dark money PACs.

What about corporate political donations?

There is no limit to those given the Citizens United decision, wherein SCOTUS bestowed personhood on corporations and concluded that limiting corporate political contributions was tantamount to limiting freedom of speech—which was unconstitutional.

Clarence Thomas Shows Why Supreme Court Justices Cannot Be Above the Law

Might that issue have ever come up when Thomas was sailing on Crow’s yacht or flying on his corporate jet? Justice Thomas voted with the majority in Citizens United, which certainly had to make corporate executives everywhere in the U.S. pleased—even if it opened the door to contributions from overseas, and not just from Caribbean tax havens, and not just from dual passport holders.

That Justice Thomas was unethical in not disclosing receipt of luxury gifts provided to him is transparently obvious, though it seems inconsequential to date. But it does raise the question as to whether those who provide wealthy gifts to civil servants that hold positions of power should face any consequences, particularly when tax responsibilities are clear.

Should wealthy corporate executives who make large political donations to obtain results favorable to their business (or make luxury gifts to powerful people) be held accountable? Bottom line—does the wealth, power, and position of the wealthy insulate them from the consequences of their actions? (Normal tax-paying citizens would certainly face such a reckoning.)

These questions are bigger than just Thomas and Crow. They speak to the integrity of our political systems, and whether ordinary Americans should have to live by different rules than the wealthy and politically powerful.

Read more at The Daily Beast.

Get the Daily Beast's biggest scoops and scandals delivered right to your inbox. Sign up now.

Stay informed and gain unlimited access to the Daily Beast's unmatched reporting. Subscribe now.