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D.C. Sues MicroStrategy Founder for Evading $25 Million in Taxes

By: Mary Katherine Browne



Tech billionaire Michael Saylor is facing a $25 million tax evasion lawsuit in the District of Columbia in which he is accused of masquerading as a Florida resident to avoid higher taxes.

 

In an August 31 release, District of Columbia Attorney General Karl A. Racine announced that the District was suing the technology executive for failing to pay income taxes for more than 15 years. 

 

Saylor is the co-founder of MicroStrategy, a Virginia-based company that provides business intelligence, mobile software, and cloud-based services. MicroStrategy claims to be the largest holder of bitcoin among public companies on its Twitter profile. Saylor stepped down from his post as CEO August 8, but he continues to serve as chair of the board. 

 

According to a whistleblower’s recently unsealed complaint, Saylor’s net worth is about $2.3 billion.

 

In a complaint filed August 22, Racine claims that Saylor has been engaged in a fraudulent scheme to dodge the District’s income taxes by falsely claiming to be a resident of Florida, which doesn’t tax personal income.

 

The complaint alleges that Saylor spent most of his time living at a luxury penthouse on the Georgetown waterfront. Along with his Georgetown penthouse, Saylor has docked at least two yachts in the District for long periods of time. The document was accompanied by social media posts showing extensive renovations he was doing to his penthouse as proof that he considered the District to be his home.

 

Under District law, individuals are considered residents if they have homes there where they intend to remain or return to after any absences and have maintained residence in the area for at least 183 days of the year. Saylor has allegedly never spent more than 100 days at his Florida residence and has spent most of his time in the District.

 

In an unsealed whistleblower complaint, Saylor was accused of bragging to confidants about evading District income taxes.

 

“Shortly after acquiring [his Florida property] on or about the beginning of 2013, Saylor began bragging to friends and acquaintances that he had avoided District personal income taxes by purchasing a house in Florida. He even suggested that his friends from New York, California or the District were ‘fools’ if they did not evade the personal income taxes imposed by their respective states by similarly acquiring a house in Florida and spending time there,” the complaint alleges. 

 

The whistleblower complaint also alleges that Saylor has endorsed using cryptocurrency to avoid taxes.

 

“Saylor bragged in a January 24, 2021 interview that Bitcoin is an ideal tool for evading taxes, suggesting that owners of Bitcoin could tell their government to ‘go [expletive] yourself’ and claim to have lost their Bitcoin access key, daring the government to ‘tax that!’” the document says.

 

Saylor is estimated to own more than $1.1 billion in bitcoin investments.

 

MicroStrategy Named as Codefendant

The attorney general also announced that he intends to sue MicroStrategy “for conspiring to help [Saylor] evade taxes he legally owes on hundreds of millions of dollars he’s earned while living” in the District.

 

“MicroStrategy knew that Saylor was in fact a District resident, but instead of accurately reporting his address to local and federal tax authorities and correctly withholding District taxes, the company conspired with Defendant Saylor to facilitate his tax avoidance scheme,” the complaint says.

 

The complaint says the company can't justify misreporting Saylor’s residency to federal tax officials since its former CFO undertook a count of the number of days Saylor spent in Florida compared with the District. 

 

According to Racine’s Twitter account, this lawsuit is the first to be filed under the District’s recently amended False Claims Act, which encourages whistleblowers to report residents who evade taxes. The law permits the courts to punish tax evaders by imposing three times the amount of taxes evaded as damages.

Company Tax Notes
Category FREE CONTENT;ARTICLE / WHITEPAPER
Intended Audience CPA - small firm
CPA - medium firm
CPA - large firm
Published Date 09/01/2022

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