John McManus, one of Ireland’s richest, has a $5.22 million problem.
The 64-year-old Irish businessman is going after the United States government that he claimed has “wrongfully withheld” $5.22 million to cover the taxes of his $17.4 million gambling winnings.
Website Law360 reported that McManus filed a complaint at the U.S. Court of Federal Claims last Monday. In the complaint, McManus alleged the person who owed him his winnings had “erroneously withheld the money and the Internal Revenue Service has agreed to refund it but has been dragging its feet.”
The story went like this: McManus won the money in 2012, but the payer mistakenly sent $5.22 million to the IRS as withholding. So the businessman filed a non-resident U.S. federal income tax return, in which he emphasized that he is entitled to a refund because of a tax treaty between the U.S. and Ireland.
Fast forward to 2014. Forbes reported that the IRS had already approved the Irish man’s refund claim in August last year. But the claim was remanded to another department for review, and then silence.
So with the IRS failing to act on the claim, McManus resorted to a lawsuit. His lawyer, Terry Giles, told Forbes that they didn’t have a choice because “if the IRS stonewalls you, you have no resort but to take this action.”
Income from gambling is taxable in the United States, but McManus claimed his winnings are exempt from U.S. taxation because he is a resident and a citizen of Ireland. In 1997, the two countries signed a treaty that paved the way “for avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income and capital games.”
Under Ireland’s provincial tax structure, any income earned outside the country is not subjected to tax. Instead, McManus must pay a flat tax of €200,000 under the domicile levy.
Aside from the tax refund, McManus also wants the U.S. government to pay the pre-judgment and post-judgment interest, as well as the court costs and lawyer fees, among other things. The IRS has until Oct. 30 to respond or file for an extension.
Waiting a little longer for his refund probably won’t affect McManus that much. Last year, the businessman ranked 12th at the list, with an estimated fortune of £550 million. A considerable portion of that money was earned through his studs in Limerick and Newmarket, but McManus also has investments with John Magnier and Dermot Desmond.
By the way, that $17.4 million? McManus won that measly sum in a game of “either backgammon or poker,” according to Giles.