Court: Anschutz Owes Taxes

A federal appeals on Tuesday agreed with a tax court that determined Colorado billionaire Philip Anschutz owed at least $17.3 million in taxes.

The 10th U.S. Circuit Court of Appeals in Denver upheld the tax court’s 2010 ruling. The court said the Anschutz Co., which Anschutz owns, is also liable for at least $77 million in taxes.

Anschutz spokesman Jim Monaghan said Anschutz already paid the taxes but appealed that he owed them. Anschutz’s wife, Nancy, was also named in the case because they file tax returns jointly.

The taxes are from stock transactions in 2000 and 2001.

At issue were stock deals that were structured to spread the tax liability out over several years. Judges agreed with tax regulators that that the transactions were sales, and not pending transactions as Anschutz argued.

Such transactions executed through so called variable prepaid forward contracts and share-lending agreements are a fairly common practice by large shareholders hoping to raise money while deferring taxes, according to Robert Willens, a former Lehman Brothers director who now heads a Wall Street tax and accounting firm.

According to the court documents, the Internal Revenue Service in 2003 issued guidance on how the transactions should be structured to avoid taxes, but Willens said the IRS in 2006 issued another letter warning that the arrangements could result in taxable income. In a friend-of-the-court filing in the case, Liberty Media Corp. argued the transactions amount to loans, not sales, and that they provide an important way for companies to raise money and create jobs.

Liberty said it raised money through derivative transactions, including variable forward contracts, to invest $400 million in Sirius XM Radio Inc. and save the satellite radio provider from bankruptcy. Liberty also noted that Anschutz used money raised from his transactions to assemble Regal Entertainment Group, the world’s largest motion picture exhibitor.

Anschutz argued that the transactions followed the IRS guidance to the letter, but the judges disagreed and ruled that the transactions were sales partly because the stocks were sold shortly after Anschutz transferred them to a securities firm.

“The IRS making its ruling retroactive caught us in the 2000 timeframe by surprise,” Monaghan said. “The IRS took the position that this is just a tax maneuver. … It’s a bona fide business procedure in which we raise capital.”

Monaghan said no decision has been made whether to appeal the court’s ruling.

“It’s pretty much over,” Willens said. “Those transactions will be treated as sales, the gain from the sale will be recognized as soon as the year it was entered into. The IRS will be attempting to locate those taxpayers and incidents of similar arrangements.”

Oklahoma City-based IRS spokesman David Stell declined to comment on the ruling.

Anschutz is one-time oil wildcatter from Kansas who has built an empire over four decades with an instinct for turning underdeveloped areas into successes.

He’s invested in railroads, real estate, sports teams and founded Qwest Communications, which was recently acquired by CenturyLink Inc.