Warren Buffett, who has criticized businesses for complaining about tax rates, showed last week how adept he is at lowering his company’s payments to the U.S.
Berkshire Hathaway Inc. plans to limit taxes on more than $1 billion of gains in Graham Holdings Co. stock by swapping the shares for assets owned by the former Washington Post publisher, according to a March 12 regulatory filing outlining terms. Either side can cancel the agreement if lawyers determine it doesn’t qualify for the intended tax treatment.
The deal highlights how Buffett works to reduce obligations to the government at Omaha, Nebraska-based Berkshire. The billionaire chairman and chief executive officer used Internal Revenue Service rules to benefit his shareholders in transactions including a swap with White Mountains Insurance Group Ltd. and the sale of ConocoPhillips stock.
“He has been a student of the tax code really all his adult life,” said Jeff Matthews, a Berkshire shareholder and author of books on the company. “His knowledge is encyclopedic, and he’s always used it to his financial advantage.”
Buffett has cited Berkshire’s tax bill as a point of pride. The billionaire wrote a decade ago that he hopes “the rest of Corporate America antes up along with us” and he continued his critique as his company’s contribution climbed. Its effective tax rate was 31 percent last year, according to data in the most recent annual filing.
‘Complaining Enormously’
“American business is complaining enormously about the level of the corporate income tax,” Buffett said at Berkshire’s annual meeting in Omaha last year. “I would have you take that with a grain of salt.”
In the Graham deal, known as a cash-rich split-off, Berkshire agreed to hand over about $1.09 billion in shares of Graham, which rose more than 100-fold since Buffett bought the stake in the 1970s. Graham will give up a Miami television station, stock it holds in Buffett’s company and about $328 million in cash.
Berkshire owns 1.7 million shares in Graham’s publicly traded Class B stock, more than triple the stake of any other investor. Selling the holding on the open market would trigger capital gains taxes at a 35 percent rate.
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