Investigation 'casts fresh doubt' about the validity of Harlan Crow’s yacht tax deductions

A key congressional committee is pressuring billionaire Harlan Crow for answers after investigators turned up additional evidence that he misrepresented his yacht as a business to score a tax break.

The inquiry is part of the ongoing congressional investigations of Justice Clarence Thomas’ gifts from billionaires. Crow was perhaps Thomas’ greatest patron, often hosting the justice on his private jet and his 162-foot yacht, the Michaela Rose.

ProPublica reported last July that Crow had taken millions in questionable tax deductions related to his yacht. In a letter Monday, Senate Finance Committee Chair Ron Wyden, D-Ore. asked Crow to justify those deductions, especially in light of new information turned up by his committee.

“Any effort to mischaracterize a yacht used as a pleasure craft as a business is a run of the mill tax scam, plain and simple,” Wyden wrote.

Drawing on the trove of leaked tax data that was the basis of our “Secret IRS Files” series, ProPublica reported that, from 2003 to 2015, Crow and his father reported nearly $8 million in net losses from operating the ship, with about half flowing to Harlan Crow.

In response to an inquiry about the letter, Crow’s office said in a statement: “Mr. Crow engages professional accounting firms to prepare his tax returns and complies with tax law in good faith. Any suggestion to the contrary is baseless and defamatory.” Crow will respond to the committee to “correct the record,” it said.

Yacht owners who regularly lease out their ships can write off losses related to chartering, but ProPublica could find no evidence of the Michaela Rose being chartered. In fact, former crew members said the ship was used solely by Crow’s family, friends and executives of his company, along with their guests.

Congressional investigators found the same thing when they spoke to former crew members, Wyden wrote. One crew member noted that the ship didn’t even have “the appropriate registrations” to operate commercially. The letter says the committee’s inquiry “casts fresh doubt on the validity of reported deductions from purported yacht charter losses” and “raises serious concerns regarding the tax treatment of Mr. Crow’s luxury assets.”

The committee’s investigators were able to confirm that the ship lacked the proper registrations. “Michaela Rose is not legally licensed to be chartered out for the transportation of passengers for hire in the United States and is only registered as a pleasure boat for Mr. Crow’s personal use,” Wyden wrote. The ship is flagged in the United Kingdom, but there, too, the registration has long been for a “pleasure yacht.” In both countries, a commercial registration is required for chartering and comes with additional costs and regulations.

Meanwhile, not only has Crow represented to the IRS that the boat is used commercially, but, in a bid to obtain a trademark for the Michaela Rose name and icon, his company argued the same to the U.S. Patent and Trademark Office. In his letter, Wyden noted that it is a crime to deliberately mislead either agency.

Wyden’s investigation into Crow’s gifts to Thomas first launched after ProPublica’s story last April detailing that relationship. Since then, the Senate Finance Committee and Crow have exchanged multiple letters, with Crow generally refusing to provide more detail about the gifts and travel. Similar exchanges between Crow and the Senate Judiciary Committee resulted in that committee authorizing a subpoena to Crow last November.

Wyden’s latest letter asks Crow to reply to a list of questions about Crow’s use of the yacht by the end of February.