Minnesota Dem introduces bill to close $1B yacht tax loophole

Rep. Tim Walz, D-Minn., introduced legislation Tuesday that would end tax subsidies for luxury yachts. The IRS provides breaks for taxpayers who own yachts that have kitchens and bathrooms and therefore could qualify as a residence — even if the taxpayers don’t live there full-time. #

“We’re going to have to make some hard decisions to tackle our national debt, but this isn’t one of them,” Walz said in a statement Tuesday. “Closing this tax loophole restores the Mortgage Interest Deduction to its original purpose: helping middle-class families realize the American Dream through home ownership.” #

Walz introduced the bill along with fellow Democratic Reps. Mike Quigley of Illinois and Gary Peters of Michigan. #

“We need to get the deficit under control, and that means simplifying the tax code and eliminating special interest tax giveaways like the Yacht Loophole,” Peters said. “Home ownership is part of the American Dream and we should encourage it, but yacht owners don’t need any special handouts, especially in the middle of a budget crisis.” #

Loopholes for yacht owners also exist in state law and, in general, Republicans have resisted efforts to close those loopholes. In California, Republicans rejected a similar effort in 2008. In 2010, in Missouri, a bipartisan bill was offered to repeal tax breaks for yacht owners, but the Republican-controlled legislature adjourned without taking up the bill. Republicans in Texas this year have proposed a tax break for yacht owners and it’s already passed key committees. #

Closing the federal loophole has been tried before: Republican Sen. John Danforth of Missouri offered a bill in 1987 to close it, but was not successful. #

A 2004 estimate of the cost of the tax breaks was more than $1 billion. #