Treasury Chief Quietly Settles Long-Running IRS Tax Dispute

Treasury Secretary Scott Bessent has quietly resolved a yearslong tax dispute with the IRS tied to a hedge fund maneuver that reduced his Medicare taxes, according to a person familiar with the matter. As a fund manager before joining President Trump's Cabinet, Bessent used a structure that let him treat much of his income as business earnings not subject to the 3.8% Medicare levy, reports the New York Times. Senate Democrats previously estimated the tactic shrank his tax bill by $910,000 over three years, a figure that Bessent challenged, while still pledging to reserve money in case courts sided with the IRS. An appeals court did just that last month, prompting Democrats to press Bessent on whether he'd pay up.

How much he ultimately paid, and when, remains unknown, even as a weakened IRS has stepped back from broader action on the strategy. "The rules are complicated, but the Treasury Department and IRS in recent years have taken the position that certain 'limited partners' in a business should still face self-employment taxes if it can be shown that they actively participated in running the business," Roll Call previously noted, with Dem arguments being that Bessent was indeed "actively involved" in the Key Square Group he founded and helmed. Meanwhile, Dr. Mehmet Oz, the administrator for the Centers for Medicare and Medicaid Services, has also reportedly used the same loophole as Bessent to get out of paying certain taxes, including Medicare taxes, per the Daily Beast.