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WASHINGTON - Health and Human Services Secretary Mike Leavitt and his relatives have claimed millions of dollars in tax deductions through a type of charitable foundation they created that until recently paid out very little in actual charity, tax records show.
Instead, much of the foundation's money has been invested or lent to the family's business interests and real estate holdings, or contributed to the Leavitt family genealogical society.
The Leavitts used nearly $9 million of their assets to set up the foundation in 2000 under an obscure provision of the federal tax code. In 2002, 2003 and 2004, the Leavitt organization donated less than 1 percent of its assets. The donations jumped to 6.3 percent of total assets last year, after the sale of family water interests that also allowed the foundation to increase its lending to Leavitt business interests.
While Mike Leavitt alone has claimed about $1.2 million in tax write-offs since 2000, the foundation gave away only $49,000 in 2002 and $52,000 the next year, according to tax returns and other documents filed by the foundation. Meanwhile, the foundation's assets have been used for a $332,000 loan to Leavitt Land and Investment Inc., in which the secretary owns a significant stake, and other secured loans for insurance and real estate deals, said Alan Jones, a trustee of the organization.
Leavitt Land and Investment, in turn, extended an interest-free loan to Leavitt in 2002 valued at more than $250,001, according to a recent financial disclosure.
''The foundation's activities are totally legal and proper,'' Christina Pearson, an HHS spokeswoman, said this week on the secretary's behalf.
But Rick Cohen, executive director of the National Committee for Responsive Philanthropy, said that ''the Leavitts are using the foundation as a personal piggy bank, and that's not what the public - or Congress - ought to tolerate.'' Cohen reviewed the family foundation's records and tax returns at the request of The Washington Post.
The tax structure used to create the foundation is called a Type III supporting organization. The use of that tax structure could be significantly reined in under a tax provision that was inserted into pension reform legislation passed by the Senate and now under negotiation with the House.
Leavitt and his brother Dane have defended the family's actions as both legal and ethical.
Dane Leavitt said his family would change the operations of the foundation if Congress enacts the legislative changes.
''That's a public policy decision,'' Dane Leavitt said. ''If Congress makes that decision, we will abide by it.''
In August 2000, Leavitt's parents, Dixie L. and Anne O. Leavitt, established the supporting organization under their names. The family then donated nearly $8.1 million worth of water rights that it was using to irrigate its land in southern Nevada. It donated another $540,000 in stock from the Leavitt Group.
Under the regulations governing Type III supporting organizations, the Leavitts could then claim huge charitable deductions from their taxes using the fair market value of those assets. As owner of roughly 15 percent of the water rights, Mike Leavitt was entitled to around $1.2 million in tax write-offs, Jones said.
According to tax documents, the Leavitt Foundation donated $49,087 of its $9 million trust - or 0.5 percent - in 2002 and $52,312 - or 0.6 percent - in 2003, the only years of tax data available.
''They're basically sitting on all this money, getting a charitable write-off and doing nothing with it,'' Cohen said.
The small percentage used for donations went largely to causes closely tied to the Leavitts, such as the Southern Utah Foundation, under rules set out by the Leavitts under what is known as a donor-advised fund.
The foundation maintains its holdings in the Leavitt Group, but last year it sold off the family's water rights to the Las Vegas Valley Water District for $11.9 million, Jones said - substantially more than the $8.1 million originally claimed as a charitable deduction. The proceeds from the sale should earn $800,000 in income, 85 percent of which will go to charities to ''do some significant good,'' Dane Leavitt said. The giving has increased substantially this year.
But selling the water rights opened the foundation to a new criticism. Jones said some of the proceeds have been farmed out to secured loans to Leavitt-related interests, such as real estate investments and insurance businesses.