Kerry will pay Mass. tax on R.I. yacht
The Boston Globe – Senator John F. Kerry announced yesterday that he will voluntarily pay $500,000 to Massachusetts tax collectors on his luxury yacht, a pledge made hours after state officials had begun inquiring into whether he had attempted to evade the payment by docking the boat in Rhode Island.
The state Department of Revenue had just started looking into Kerry’s use of the $7 million sloop and into reports that it had been spotted repeatedly in Massachusetts since it was registered in March. Officials could have subpoenaed the ship’s log to see where the yacht had been, according to a Department of Revenue official who declined to be identified by name because tax cases by law are confidential.
But any investigation was swiftly curtailed yesterday, after Kerry issued a statement in the late afternoon, pledging payment.
“We’ve reached out to the Massachusetts Department of Revenue and made clear that, whether owed or not, we intend to pay the equivalent taxes as if the boat’s home port were currently in Massachusetts,’’ Kerry said. “That payment is being made promptly.’’
Kerry spokeswoman Jodi Seth said state officials had not notified the senator that they had begun looking into the yacht purchase.
Navjeet Bal, commissioner of the Department of Revenue, issued a statement last night saying the department had not yet launched an official investigation.
The state’s senior US senator has been assailed by questions since the Boston Herald reported Friday that he was docking his yacht, Isabel, in Newport, R.I., allowing him to avoid hundreds of thousands of dollars in Massachusetts taxes. Rhode Island rescinded its sales and use tax on boats in 1993, creating a tax haven for yacht owners.
Residents who buy boats out of state but plan to use them in Massachusetts must file a form and pay a use tax, equivalent to the Massachusetts sales tax of 6.25 percent, by the 20th day of the month after they take possession of the boats, according to the Department of Revenue. Kerry filed no such form and paid no such tax. If he docked the yacht in Massachusetts, he would also be subject to a $70,000 annual excise tax, payable to the city or town of that home port.
Seth, Kerry’s spokeswoman, maintained yesterday that he was not trying to avoid payment and that he intended to keep the boat in Rhode Island, but said the senator is paying the use tax to eliminate any perception that he was attempting to skirt Massachusetts taxes.
“The boat was designed and purchased from a company in Rhode Island, and it’s based in Newport at the Newport Shipyard for long-term maintenance, upkeep, and charter purposes, not tax reasons,’’ Seth said.
The yacht took more than a year to construct in Whangerai, New Zealand, and arrived in the United States in March, according to the designer’s website. It was registered March 12 with a home port of Newport, records show.
The designer, Fontaine Design Group, said the 76-foot yacht features two “luxury VIP cabins’’ plus a third “well-appointed’’ cabin for “yachting mode, when the service of a captain and stewardess is preferred.’’
“The pilothouse is outfitted not only with navigation station, but also features a wet bar and cold wine storage to entertain up to six around the U-shaped settee and custom teak table,’’ the website states. “The interior joinery in every area, from the cabins to the galley to the salon and pilothouse, features ornate Edwardian-style glossy varnished teak with additional interior appointments that are as functionally perfect as they are exquisitely constructed.’’
It is officially owned by a company named Great Point LLC in Pittsburgh, a property of a trust that benefits Kerry’s wife, Heinz Ketchup heiress Teresa Heinz Kerry.
Kerry has sailed the boat in Massachusetts, according to a person with knowledge of the situation who declined to be named, although it is unclear how often. The senator has homes in Boston and on Nantucket.
State tax law specialists say that even if the senator sailed in Massachusetts “a fairly low number of times,’’ he could be liable for the taxes.
“If it was in Massachusetts two or three times, it would not surprise me if DOR went after a boat on that basis,’’ said Joe Donovan, former deputy counsel at the Department of Revenue.
Donovan said the burden would be on Kerry to prove he does not intend to use the boat in Massachusetts, and having property on Nantucket would not help his case.
“When somebody has property down on the islands, it’s natural to assume Massachusetts waters wouldn’t be avoided,’’ Donovan said.
If the senator had not volunteered to pay, Donovan said, collecting the taxes could have taken two years or longer, with all the appeals and court remedies available.
The controversy comes at a tough time for Kerry, who is under intensified scrutiny for his role in the war in Afghanistan since the release Sunday of classified reports that suggest the American-backed Pakistani government has been secretly helping the Taliban. Kerry, chairman of the Senate Foreign Relations Committee, was instrumental in developing the Afghan war policy and in securing a $7.5 billion, five-year developmental aid package to Pakistan.
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