The set-up involving the Quantum Fund was arrived at via a circuitous route. The United States lost its appeal for Soros in 2008, when legislation was introduced to stop tax avoidance using offshore entities. According to Bloombergestimates, he would have to pay billions in federal and local taxes, plus Affordable Care Act (Obamacare) contributions, when the mandatory health care insurance became law.
Hedge fund managers had until late 2017 to comply with this new tax obligation, but – according to Bloomberg – Soros moved part of his investment portfolio to Ireland in 2008. At the time it seemed that this way he would be able to evade the tax obligation, which turned out not to be the case.
The businessman was put under further pressure by the American government in 2011, when new rules were introduced to force hedge funds to be more transparent subsequent to the banking crisis.
In order to avoid being subjected to these rules, Soros no longer accepted external investors and transformed the Quantum Fund into a family fund. In 2013 he transferred the portfolio of the Open Society Foundations to the Cayman Islands.
With the 2017 deadline in the offing, meaning that Soros would have to pay his tax liabilities in the United States, he donated a major portion of his own assets to the Open Society Foundations. Since such donations are partially deductible, this helped to ease the tax burden.
Opacity
Thanks to the way in which Soros has structured the finances of the Open Society Foundations, it is entirely unclear how the Quantum Fund currently invests the donations it receives.