Milliken fortune eludes tax

Roger Milliken

WASHINGTON — South Carolina textile tycoon Roger Milliken ducked the taxman upon his death almost a century after his grandfather lost a landmark legal fight with the federal government over sheltering a fortune from the estate tax.

The 95-year-old Milliken, chairman of Milliken & Co., one of the world's largest closely held textile, chemical and floor-covering manufacturers, died in a Spartanburg hospice Dec. 30, less than 48 hours before a temporarily lapsed federal

tax on multimillion-dollar estates was to be reinstated.

Milliken's fortune now will pass to his heirs with no estate tax.

'The timing of his death surely benefited his heirs and the company,' said Jock Nash, Milliken's Washington lobbyist on trade issues for 25 years. 'His timing was impeccable.'

In 1916, his grandfather, company co-founder Seth Milliken, sought to avoid the newly created estate levy by giving shares of the company to his children. He died in 1920. The Supreme Court in 1931 ruled that Seth Milliken's gifts were subject to the estate tax.

'These are people who have made efforts to avoid estate taxes for nearly a century,' Columbia University law professor Michael Graetz said. His 2006 book, 'Death by a Thousand Cuts: The Fight Over Taxing Inherited Wealth,' chronicles efforts to abolish the estate tax that resulted in a one-year hiatus of the levy for 2010.

The federal estate tax was reinstated this year. Had Roger Milliken died Jan. 1, he would have faced a top rate of 35 percent after a $5 million tax-free allowance. His fortune peaked at $1 billion in 2003, according to Forbes magazine. It has declined since, along with the U.S. textile industry.

Jenni Gregory, an administrative assistant for the Spartanburg County Coroner's Office, said Milliken died of natural causes.

Nash said Milliken's estate planning 'had been going on for decades. Milliken & Co. will survive regardless of when he died.'

Under a law enacted Dec. 17, Milliken's heirs can choose not to pay the estate tax because he died in 2010. Under a substitute system, his heirs would owe capital gains taxes of between 15 percent and 28 percent on any inherited assets they sell. Cash would be bequeathed tax-free. South Carolina doesn't have an additional estate tax.

The heirs would have to use the original cost basis on inherited assets to determine what they owe in capital gains. That means if Roger Milliken paid $1 for a share of stock worth $100 when sold, the heir would pay 15 percent tax on $99, or $14.85. If the assets aren't sold, no tax is paid.

At least five billionaires died in 2010, including New York Yankees owner George Steinbrenner on July 13 and Texas natural-gas tycoon Dan Duncan on March 28. A statement in October from the Duncan family's closely held Enterprise Products GP said Duncan's heirs 'are not materially benefitting from the lapse in the federal estate tax' because Duncan transferred interests in his company to his children long before his death.

Nash said Milliken's health 'took a downward spiral around Thanksgiving' and declined further at Christmas.

Milliken, who once had a weekend home at the exclusive Yeamans Hall golf club in Hanahan, became president of the company in 1947 at age 32 after his father died. His heirs include five children and nine grandchildren. His wife of 55 years died in 2003.

His father, Gerrish Milliken, was the executor of his grandfather's estate and one of the plaintiffs in the 1931 Supreme Court decision.

That case drew attention last year after lawmakers, including Senate Finance Committee Chairman Max Baucus, vowed to retroactively reinstate the estate tax for 2010 after it expired at the end of 2009 for the first time since 1916.

Legal experts said the case provided a precedent for a retroactive estate tax because the court ruled the government could tax the gifts of company stock Seth Milliken gave his children in 1916.

Estate-tax rules generally prohibit deathbed gifts of assets and the Supreme Court ruled Seth Milliken had made a gift in 'contemplation' of his death. The court ruled that even though Milliken made the gifts in 1916, they were subject to higher tax rates set in 1918.

Richard Rubin and Peter Cohn of Bloomberg News contributed to this report.