Beloit billionaire pays zero in 2010 state income tax bill

The goose egg in 2010 was the first zero obligation posted by the Beloit billionaire since at least 2002, according to records from the state Department of Revenue and ABC Supply Inc., the nation's largest wholesale distributor of roofing, windows and siding and owned by Hendricks. She had a seven-figure Wisconsin tax bill in four of the previous five years, the records show.

Hendricks was thrust into the spotlight last month when a videotape showing her talking with Gov. Scott Walker about strategies to fight unions was released. In the tape, which is part of a documentary under production, Walker talked about using a "divide and conquer" strategy toward unions through his budget-adjustment bill, which curtailed most collective bar gaining for most public employee unions and created a political uproar that will culminate with Tuesday's recall election.

An active financial supporter of conservative causes, Hendricks has given Walker's campaign more than $500,000, making her Walker's largest donor.

Her state tax obligation dropped from $2.26 million for 2009 to zero for 2010 because of a change in the corporate structure of ABC Supply said Scott Bianchini, ABC tax director. The company paid taxes of $373,671 for the second half of 2010, the records show.

Bianchini explained that before 2010, ABC Supply was an "S" corporation, meaning the profits and the tax obligation flowed to Hendricks as the owner of the firm. In 2010, the company changed its structure so the profits and the tax obligation stay with the company.

"Now ABC is paying taxes on its own," Bianchini said.

Hendricks' March net worth was estimated by Forbes Magazine to be $2.8 billion - some $300 million more than Helen Johnson-Leipold, chief executive of Johnson Outdoors Inc. The magazine last year listed Hendricks as No. 188 on its ranking of the wealthiest people in America, a spot that had her as the financial equal of William Randolph Hearst III.

Bianchini declined to comment when asked whether Hendricks, who is chairman of ABC, had other income such as salary or dividends that could have been taxed in 2010.

He also declined to say why ABC's tax bill in 2010 was so low compared with what Hendricks had paid on its behalf in prior years, when its profits flowed to her bottom line.

"Diane is not willing to divulge any more," Bianchini said. "ABC converted to a 'C' corporation - that's a substantial part of why there's no 2010 tax liability (for Hendricks)."

He added that there were other reasons Hendricks paid zero state income taxes in 2010.

"We're just not willing to get into it," Bianchini said. "It's just digging, in our opinion, too deep into her taxes."

Hendricks, who worked with her husband, Kenneth, in building ABC, became chairman of the company after her husband died in 2007. The company now posts annual revenue of more than $4 billion.

Jon Peacock, research director of the Wisconsin Council on Children and Families - a liberal-leaning advocacy group - said the lack of a 2010 tax liability can make people question the fairness of the state tax code.

"It creates a suspicion that there is some gaming of the tax system going on," Peacock said.

Todd Berry, president of the nonpartisan Wisconsin Taxpayers Alliance, said legislators, not wealthy taxpayers, are to blame.

"If the legislators choose to create all sort of deductions, credits and exclusions to state tax law, then you're going to create strange situations," Berry said. "Both sides of the aisle have used the tax laws as a Christmas tree to hang all sorts of things on."

Bianchini said that despite the 2010 bills, ABC and Hendricks have paid their fair share in taxes.

"Diane Hendricks and Ken Hendricks paid $10 million in (state income) taxes since 2005," Bianchini said, adding that focusing on the tax bill of zero in 2010 is "meaningless and minutiae."

Besides, he said, ABC is a national company, and Hendricks and the company have paid millions of dollars in taxes in other states.

In addition, Bianchini provided records showing that the company paid Wisconsin income taxes of more than $1 million last year and said that Hendricks' 2011 income tax liability is "substantial." He declined to provide more specific information.

Hendricks declined to be interviewed, and the company declined to disclose any information about federal taxes paid by ABC or Hendricks.

The Journal Sentinel purchased from the Revenue Department records showing how much the company paid in taxes from 2006-2010 and the amount Hendricks paid from 2008-2010. ABC supplied information for prior years.

Above is from:  Beloit billionaire pays zero in 2010 state income tax bill