Federal lawmakers grilled executives from Setauket-based Renaissance Technologies over allegations it evaded some $6 billion in taxes over the last 14 years.
A report by the Senate's Permanent Subcommittee on Investigations says Renaissance makes more than 300,000 trades each day which would normally be taxed at the short term capital gains tax, 39%. But Renaissance essentially created a holding company that could disguise those short-term trades as long term trades. Doing so reduced Renaissance's tax rate to 20%.
At the hearing Renaissance executives told lawmakers that they knew the IRS issued a memo directing companies not to exploit this loophole. But they said the IRS memo was not law.
Peter Brown, Renaissance co-CEO went on to criticize the tax code.
“If there were no rate differential between long term and short term capital gains the tax code would be far simpler, far more certain, and far more fair.”
Committee chairman Carl Levin (D-Michgan) said Renaissance created multiple "fictions" that made ordinary Americans shoulder more of the tax burden.
Renaissance founder James Simons is a former math professor at Stony Brook University. He has donated to a number of local charitable projects including giving nearly $100 million to Stony Brook University and building the nature preserve Avalon Park.