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How Randy Boyd’s company avoided paying millions in taxes using a ‘double Irish’ loophole

By Dave Boucher From Nashville Tennessean

A business founded by a Tennessee Republican gubernatorial candidate avoided paying millions in U.S. and international taxes thanks to a controversial corporate structure with a funny name.

The private company, Radio Systems Corporation, deployed a tax technique generally known as a “double Irish,” according to two experts.

Used in the past by massive corporations such as Apple, Facebook and Microsoft, the structure creates something of a corporate shell game that allows businesses to avoid paying U.S. taxes — in some cases millions or even billions of dollars.

At the same time Radio Systems avoided paying some U.S. taxes, company founder and GOP gubernatorial contender Randy Boyd served Tennessee in a role designed to bring business and tax revenue into the state.

Randy Boyd has collected more than $90,000 in campaign donations from individuals linked to companies that received state grants. Angela Gosnell, Knoxville News Sentinel

From December 2014 through January 2017, Boyd served as commissioner of the Department of Economic and Community Development. A campaign spokeswoman did not clarify what role Boyd had with his company during his tenure with the state. Today, he is the company’s executive chairman.

From 2014 to 2016, the company sheltered millions of dollars in European profits from any taxes because of this corporate structure, according to two experts who analyzed Radio System’s Irish tax records obtained by the USA TODAY NETWORK – Tennessee.

The company used two Irish subsidiaries — one of which had a business address in the well-known tax haven of the Cayman Islands — to create the tax avoidance structure, said James Stewart, an adjunct professor in finance in the Business School at Trinity College in Dublin, Ireland.

“It is safe to say that the tax strategy is a fairly typical ‘double Irish’ tax strategy,” Stewart said. “It is also safe to say that the tax bill has been reduced by several million.”

The company paid substantially less in taxes than it would have if it met the legal requirements for the U.S. corporate tax rate of the time, which was 35 percent.

Analyzing the company’s tax records, University of California-Irvine School of Law professor Omri Marian estimated the company paid an effective tax rate of a little more than 1 percent.

He agreed with Stewart that the structure is similar to a traditional “double Irish,” stressing the structure is not illegal.

“The outrage here would be a moral one rather than a legal one,” he said.

In a statement, the Boyd campaign did not dispute establishing the tax avoidance structure or the potential amount of taxes avoided.

“(Radio Systems) selected Ireland in 2013 as its European hub to better serve its rapidly growing customer base in Europe. But with 85 percent of the company’s total sales still in the U.S, the company pays millions of dollars each year in U.S. taxes,” Boyd campaign spokeswoman Laine Arnold said.

“As ECD commissioner, Randy’s experience as an international businessman helped him successfully court a record-breaking 50,000 new job commitments and more than $11 billion in capital investment in just two years.”

Radio Systems Corporation makes more than 4,600 pet products under brand names Pet Safe, SportDOG and Invisible Fence. Invisible fencing is a system that uses radio waves to deliver a shock to a pet’s collar if the animal walks over a cable buried in the owner’s yard.

Business is good: during a campaign stop Friday in Franklin, Boyd said the company employs more than 725 people and tops $480 million in annual sales. Arnold said more than 400 of the company’s employees are in Tennessee.

Boyd founded what was then called Radio Fence Corporation in 1991. He and his wife, Jenny, reported earning $42.5 million from 2015 to 2016 in income from business investments. They received a taxable income of $30.2 million, paying $8.6 million in state and federal taxes during the same time period, according to tax returns the Boyd campaign provided the USA TODAY NETWORK-Tennessee in December 2017.

The Boyd campaign also said the couple donated more than $10 million to “charitable and non-profit causes” in 2015 and 2016.

Randy Boyd also operates several minor league baseball teams, including the Tennessee Smokies, a Knoxville affiliate of the Chicago Cubs.

Radio Systems is based in Knoxville, but like many large companies it is incorporated in Delaware. The state is a tax haven, allowing companies to pay a lower tax rate than if they incorporated in other states.

Fellow GOP gubernatorial candidate Bill Lee runs a plumbing and HVAC company formed in Tennessee. The spouse of Tennessee House Speaker Beth Harwell runs a toy company also incorporated in Tennessee.

The spouse of U.S. Rep. Diane Black previously ran a medical services company. At one point, the company was incorporated in Delaware, according to records from the Tennessee Secretary of State. But the company has been registered in Tennessee since 2006.

Radio Systems manufacturers the majority of its products in China, a common practice for many businesses but also for companies that use the “double Irish” structure.

The structure involves running profits through two Irish entities, one of which has a business address in the Cayman Islands.

“From the point of view of the U.S., it’s a resident of Ireland for tax purposes, but from the point of view of Ireland, it’s a resident of the Caymans for tax purposes,” Marian said.

“So neither the U.S. nor Ireland declare this company to be a resident.”

‘Double Irish’ on the outs, but other loopholes remain

Facing considerable push back in light of stories about Apple and Google avoiding billions in taxes, Ireland In 2015 disallowed the use of the “double Irish” structure for new companies. But companies already using the structure could continue to do so until 2020.

There are many other common tax avoidance structures involving Ireland, including the once popular “double Irish with a Dutch sandwich.” In that situation, companies send profits from one of the Irish companies through the Netherlands. Ireland has a treaty with the Netherlands and many European countries that render intra-European money transfers tax free.

Another tactic, referred to in the Irish Times newspaper as a “single malt,” involves a company using Malta instead of the Cayman Islands to avoid taxes. Ireland has a tax arrangement with Malta, and the island nation in the Mediterranean Sea has loopholes that can allow a company to pay no or little corporate tax, according to the Times.

“The partial ending of the ‘double Irish’ tax strategy has resulted and is likely to result in further tax strategies,” Stewart said.

IMAGE: Randy Boyd, founder, president and chairman of Radio Fence Corp. in Knoxville, watches a dog named Carroll eat from the company’s new electronic feeding system May 9, 2001. The machine allows pet owners to program full meals and small treats for their pets throughout the day (Photo: Wade Payne / AP)

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