Shapiro tax filing shows a steep loss

The amended return for the Carl & Ruth Shapiro Family Foundation, a copy of which was obtained by the Globe, is for the tax year 2005. It was filed with the Internal Revenue Service May 20 - five months after Madoff first confessed to running a Ponzi scheme. A spokeswoman for the foundation declined to say whether the foundation would amend more recent tax returns.

In a statement, the Shapiros said the amended tax statement “reflects the Shapiro Family Foundation’s diminished financial position due to the revelations associated with the Madoff fraud. The Foundation will fulfill all its existing commitments.’’

Well known in Boston for its support of prominent institutions such as Brigham & Women’s Hospital and Brandeis University, the Shapiro foundation had previously said it lost nearly half its 2007 assets, or about $145 million, in the Madoff scandal. The foundation has said it will not make new grants but will make good on past promises of support.

The 2005 restatement erases $100 million in government bonds and notes previously reported as investments, as well as $41 million in stocks. The writedowns reduced the foundation’s assets in 2005 to $51.3 million from $194.4 million. The Shapiro family would not say what the foundation’s current assets are. Its most recent tax filing, for 2007, listed assets of $324 million.

A spokeswoman for the Shapiro Foundation, Geri Denterlein, said the re statement was to recoup excise taxes it now believes it overpaid. Foundations pay 2 percent of their annual investment income to the IRS. The new Shapiro filing reflected a 74 percent drop in income, to $1.2 million, without the Madoff gains. Under the new filing, it would have owed $24,000 in excise tax, instead of $94,180. The foundation will almost certainly have to amend its 2006 and 2007 returns, tax specialists said, because its reported assets dropped so significantly.

The Shapiro Foundation’s restatement of taxes comes as New York authorities are examining whether the family and other significant, long-term Madoff clients received more in supposed “profits’’ from the convicted swindler than they originally invested. For example, the trustee in the Madoff bankruptcy case has sued philanthropist Jeffry M. Picower Ltd., who allegedly made more than $5 billion with Madoff, to recoup funds for other investors. Picower has said he was a Madoff victim and had to close his foundation after the scandal.

The Shapiros have acknowledged losing at least $400 million in personal funds, on top of the foundation losses; it’s unknown how much of that was false profits versus the principal amount that Carl Shapiro and his family entrusted to Madoff.

The Globe reported in July that Carl and Ruth Shapiro donated $196 million to their foundation over the most recent 10-year period, according to the charity’s tax returns. Most of that money, $111.5 million, was given in 2007; meanwhile, in 2005 three family trusts donated $14.1 million to the foundation.

Accounting specialists said the writedown is an aggressive move, given that the IRS has yet to issue guidance to nonprofits on how to handle their Madoff losses. Bruce R. Hopkins, an attorney who specializes in nonprofits at the law firm Polsinelli Shalton Flanigan Suelthaus in Kansas City, Mo., said it’s unclear whether foundations that lost money with Madoff can go back and reconstruct their financial condition over multiple years of tax filings; it’s more typical to reflect such losses in the year in which they are discovered - in this case, 2008.

“It’s an aggressive approach to preparing the returns,’’ Hopkins said of the Shapiros’ amended filing. It makes sense for foundations to refile the returns, he said, if they want to show they paid out more than the required 5 percent of assets in donations, given that they didn’t really have as much money as they thought.

The IRS hasn’t helped the post-Madoff confusion for nonprofits, Hopkins said: “They’ve been completely silent on that.’’

The IRS acknowledged as much. Spokesman Bruce Friedland said the tax agency has received numerous questions from the nonprofit world since Madoff’s $60 billion scam became public in December.

The Shapiro Foundation hired a new accountant to handle the amended return - Caras and Shulman in Burlington. The Shapiros recently fired their previous accounting firm, Konigsberg, Wolf & Co., a firm Madoff recommended to many clients.

Beth Healy can be reached at bhealy@globe.com.