Current and past executives of hedge fund Renaissance Technologies LLC will pay up to $7 billion in back taxes, interest, and penalties to resolve a long-running dispute with the Internal Revenue Service, according to the firm, in what could be the most significant tax settlement in history. According to, James Simons, the quantitative investing pioneer who founded the business before retiring as chairman on Jan. 1, will make an additional “settlement payment” of $670 million.
Mr. Simons will also have to pay back taxes on his gains. The dispute stems from decisions made by the firm’s flagship Medallion fund between 2005 and 2015 to convert short-term trading earnings into long-term profits. Since of the vast sums involved and because Renaissance principals are among the top political donors in the United States, it has been carefully followed in the worlds of finance and politics.
Medallion, which has a $15 billion portfolio, invests the money of its employees and a few close friends and family members exclusively. As a result, the settlement excludes money managed by Renaissance for outside investors. In addition, medallion’s past returns, which outperform almost every other hedge fund, are unaffected by the settlement because it concerns the tax classification of the firm’s earnings.