Rex Tillerson has departed as Secretary of State after a year, but he gets to keep one giant perk: a multimillion tax break he received when he left his job as CEO of ExxonMobil to join the Trump Administration.
The tax break — more accurately a tax deferral — came as Tillerson sold his stake in ExxonMobil to avoid a conflict of interest when entering the Administration and likely worked as a significant boost to his net worth, estimated at $330 million by Forbes.
The move allowed him to take advantage of a provision of the federal tax code that permits incoming public officials to sell an asset that poses a potential conflict of interest without paying capital gains tax if the money is invested in a one of a few select places like a diversified mutual fund or a Treasury bond. That investment is only taxable if and when it’s sold.
This means that last January Tillerson was able to sell the $54 million stake in ExxonMobil that he owned fully without paying any capital gains tax. The $180 million payout he was set to in deferred compensation is a little more complicated. That compensation, which was originally intended to be paid in ExxonMobil stock, was moved into a trust that will vest over time.
The move allowed Tillerson to avoid paying an estimated $71 million in capital gains tax up front, though he will still need to pay taxes as he gains access over time. And thanks to Trump’s tax reform the total he will end up paying on that sum will likely be lower than it would have been a year ago.
Beyond the tax break, Tillerson’s deal when he entered office wound up helping the former CEO avoid ExxonMobil’s lagging stock. Shares in the oil and gas giant are current trading at $95, a small decline from around $100 a year ago. But the larger market — which Tillerson likely invested in — has grown significantly with the Dow Jones Industrial Average up nearly 20% in the past year.
There’s at least one big drawback to the deal Tillerson struck with ExxonMobil: he can’t work in the oil and gas industry without losing some of his $170 million payout. With his government career cut short and the energy industry off limits, Tillerson may need to try something entirely new if he decides not to retire.