美国国税局长期以来一直认为，文艺复兴对其旗舰基金Medallion的利润进行了错误描述，使用了一种复杂的期权安排，将短期资本利得转化为长期利得，后者的税率较低。
Jim Simons, founder of Renaissance Technologies, a hedge fund and one of the world's most successful investors, has just suffered a rare setback.
Under a settlement between Renaissance Technology and the Internal Revenue Service (IRS), Simmons and several of his colleagues will pay billions of dollars in taxes, interest and fines to settle one of the biggest tax disputes in US history.
The settlement was disclosed by Renaissance CEO Peter Peter Brown on Thursday in a letter to investors. Although the settlement was not disclosed, US Senate investigators determined in 2014 that the case had unpaid taxes of as much as $6.8 billion before interest and fines.
The IRS has long argued that the Renaissance misrepresented the profits of its flagship fund, Medallion, using a complex option arrangement to convert short-term capital gains into long-term gains, which are taxed at a low rate.
Medallion is one of the best-performing funds in history, with annualised returns of about 40 per cent since its inception in 1988. The fund is owned almost entirely by current and former Renaissance employees. Funds open to the outside world, such as Renaissance institutional equity funds, are not within the scope of the tax dispute.
Under the terms of the agreement, Simmons and six other current and former Renaissance board members will pay a 100% surtax if they describe the gains as short-term capital gains as required by the IRS.
These include Renaissance CEO Brown and former CEO Robert Mercer (Robert Mercer), a well-known conservative political donor and a key supporter of former US President Donald Trump. Renaissance board members will also pay interest and fines for an unknown amount.
Other Medallion investors will pay an 80 per cent surtax and interest on short-term capital gains.
In addition, Simmons paid an additional $670 million to the IRS to settle another problem the IRS found in the Renaissance option arrangement, involving withholding tax on dividends.
In the letter, Brown wrote that the Renaissance board chose to settle, "rather than risking lawsuits that could lead to worse outcomes, including harsher terms and penalties." He said the company spent years dealing with the IRS appellate office. If taxpayers cannot reach a settlement there, the dispute is usually transferred to the United States tax court or other federal court.
