Senator John Kerry Faces Troubled Water in Boating Tax Scandal

July 28, 2010 | By: TaxCure Staff

John-Kerry-Boat-TaxOn Monday, Massachusetts Senator John Kerry found himself under fire and faced serious allegations of attempted tax avoidance. Ironically, Kerry is also known to be favorable towards taxes and has voted to raise them while in Congress on multiple occasions. The controversy surrounds Senator Kerry’s $7 million yacht, which was dubbed the name Isabel. While Kerry’s summer home is located in Nantucket, Massachusetts, Isabel was purchased and resides in Rhode Island. The case gets fishy when comparing the tax rates that the two states. While Rhode Island does not apply a boat sales or use tax, if Kerry instead chose to dock the boat in his home state of Massachusetts he would have easily racked up a tax bill nearing $500,000.

Sen. Kerry’s spokesperson David Wade commented, “The boat was designed by 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.” Despite this statement, it is hard to argue that the half a million dollars saved was not a factor in choosing a dock, and had it not been Kerry should consider new advisers.

What may first seem like a smart financial decision becomes questionable when you examine the law further. While there is nothing wrong with docking 76-foot beauty Isabel in Newport, Rhode Island, the law does state that if you bring the property into the state of primary residence within the first six months after purchase, it would be susceptible to the sales tax outlined there. Isabel was spotted docked in Massachusetts on the fourth of July, violating this rule. The Nantucket Boat Basin has also confirmed that she has been docked there on several occasions.

Senator John Kerry has released numerous statements since claiming that the issue has been blown out of proportion and has been handled. “Whether owed or not, we intend to pay the equivalent taxes as if the boat’s home-port were currently in Massachusetts,” Kerry stated to pressing reporters. This tax scandal could not only poise problems for Kerry in his re-election which is due to take place in 2014 but could bring up other tax suspicions. For instance, Kerry’s wife, Teresa Heinz pays taxes in Pennsylvania where the income tax is 3.07% versus the 5.3% she would have to pay in Massachusetts, a difference that can have a significant impact when dealing with the millions that she is worth.