Hedge-fund magnate backs group attacking IRS

  • By Zachary Mider Bloomberg News
  • Tuesday, February 16, 2016 1:39pm
  • Business

Mercer’s family foundation gave $500,000 in 2014 to a group called Citizens for Self Governance, according to a new filing obtained by Bloomberg this month. Run by the activist Mark Meckler, Citizens for Self Governance has been financing a federal class-action lawsuit since 2013 over the targeting of tea party organizations by the IRS.

Over the past few years, Mercer has emerged as one of the biggest patrons of conservative causes in the country. He’s the top donor in the U.S. presidential race so far, having pumped $11 million into a super PAC backing Sen. Ted Cruz of Texas. He’s also the co-chief executive officer of Renaissance Technologies LLC, a Long Island-based hedge-fund management firm that has generated billions of dollars in profits with computer-driven trading strategies.

There’s no sign that Mercer’s support for Citizens for Self Governance is related to his hedge fund’s tax dispute, and the group supports several other projects, such as advocating for changes to the Constitution to limit the role of the federal government. Jonathan Gasthalter, a spokesman for Mercer, declined to comment.

The IRS’s scrutiny of Renaissance involves a series of trades known as “basket options” that the hedge fund made with banks between 1999 and 2013. According to a 2014 report by the Senate Permanent Subcommittee on Investigations, Renaissance used them to claim a lower tax rate on an estimated $34 billion in profits from the firm’s flagship fund, cutting investors’ taxes by more than $6 billion. The fund is open only to Renaissance employees.

In 2012, the IRS challenged the treatment of some of the trades and demanded more taxes. Renaissance says the transactions were proper and weren’t tax-motivated. The dispute ended up in an internal IRS appeals process that can take many years to resolve.

A Northern California lawyer and former herbal-supplements salesman, Meckler co-founded Tea Party Patriots, one of the largest tea party groups, in 2009. He left in 2012 after an internal power struggle.

Later that year, Meckler joined Citizens for Self Governance, then a small Texas nonprofit that is also known as the John Hancock Committee for the States. He quickly boosted fundraising, to $4.8 million in 2014 from $1.2 million in 2012. “Washington, D.C., is broken and will not be fixed by the ruling elite,” reads the donation page on its website, which solicits gifts as small as $5. “Your donation to Citizens for Self-Governance will enable us to win the fight against an out-of-control government.”

In 2013, a Treasury Department inspector general disclosed that the IRS had been subjecting tea party and other conservative groups to enhanced scrutiny when they applied for nonprofit status. Although not a party to the case, Citizens for Self Governance is paying for a federal lawsuit on behalf of targeted conservative groups, paying the plaintiffs’ lead law firm $969,000 in 2014 alone.

In January, a judge in Ohio allowed the plaintiffs to bring the suit as a class action. “CSG has nothing financial to gain in this case,” Meckler said in a statement announcing the victory. “We fund it because it’s the right thing to do. Someone had to stand up for the patriots who had been targeted, abused and discriminated against by their own government.”

In an email, Meckler said he doesn’t know anything about the Renaissance tax dispute and can’t comment on donors.

The Mercer Family Foundation didn’t report any contributions to Citizens for Self Governance prior to 2014. Its 2015 giving isn’t required to be disclosed until around the end of this year.

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