McMahon’s wrestling company paid $4.4 million to settle tax dispute

A leaked tax document showing Linda McMahon’s wrestling entertainment company paid a $4.4 million tax settlement to the state of Connecticut has become an issue in the Republican's U.S. Senate race against Rep. Chris Murphy (D-Conn.). The settlement was paid in April of this year but has come to light only now.

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An internal document from WWE Inc., the company McMahon helped found and headed as CEO before embarking on a political career, shows it clashed with Connecticut officials over taxes owed. It was first reported by Irvin Muchnick at ConcussionInc.net, a blog that covers the sports industry.

Murphy’s campaign pounced on the revelation ahead of a debate scheduled for Thursday in Hartford, Conn. It is their fourth debate.

“This is just the latest example highlighting Republican wrestling CEO Linda McMahon’s pattern of cheating the system to benefit herself and billionaires like her,” said Murphy campaign spokesman Eli Zupnick. “Linda McMahon tried to cheat Connecticut taxpayers, and she didn’t pay the bill until she was caught."

The Democratic Senatorial Campaign Committee (DSCC) also hit McMahon on the tax disclosure.

“These documents paint a disturbing picture of a greedy CEO who cheated the state of Connecticut out of more than $4 million and didn’t own up to her company’s financial responsibilities until caught,” said Shripal Shah, a spokesman for the DSCC.

A spokeswoman for McMahon’s campaign referred inquiries to WWE.

“We have nothing to do with that,” said Kate Duffy.

George Barrios, the chief financial officer of WWE, said the settlement represented a compromise between the company and the state over how to classify corporate revenues.

He said Murphy’s campaign has distorted it to score political points.

“I’d define the [press] release that was put out as slanderous, absolutely untrue. The state certainly doesn’t feel we were cheating on our taxes. We know we weren’t. It’s just a fairly typical process of calculating taxes across all these municipalities and also abroad,” Barrios said in a conference call with reporters.

The dispute between WWE and tax officials arose over whether the company qualified for broadcaster exemption, which would have significantly reduced its tax liabilities. Barrios said the company receives about half its revenue from broadcasting, but state officials asserted it did not qualify for the special designation.

WWE is a public company that generates $500 million annually in revenue from video games, toys, television shows, DVDs and live events.

In 2003, Connecticut created an exemption for local broadcasters requiring them to pay taxes only on income earned from sales within the state. This so-called single-factor method allowed WWE to pay a lower rate than the multi-factor calculation Connecticut officials said should have been applied.

“The definition of broadcaster is fairly broad and the way one would read it, I think, is if you’re in the business of creating content, you’re a broadcaster,” said Barrios. “The core of what WWE is is a creator of intellectual property, entertainment in this case.”

Barrios said under the settlement, WWE will classify some of its income as a broadcaster and the rest under the multi-factor method.

The settlement covers the period from 2005 to 2010. McMahon stepped down as CEO of WWE in 2009 to run unsuccessfully for Senate in 2010.

The race between Murphy and McMahon has turned out to be much closer than what Democratic leaders thought at the outset of the election cycle. The DSCC is spending more than $650,000 in Connecticut this week while Majority PAC, a pro-Democratic group, is spending $640,000, according to a strategist who tracks media buys.

The contest has been characterized by accusations of financial improprieties on both sides. McMahon gained traction earlier by hammering Murphy for failing to pay rent while serving in the Connecticut legislature and not keeping up with his mortgage payments after being elected to Congress.

Murphy admitted he “screwed up” in an interview with the Hartford Courant’s editorial board.

Murphy has slammed McMahon for the late payment of property taxes on a condominium in Stamford, Conn.