Review of Palin and tax return issue

by reader rollomotasi, lifted from comments with slight corrections for readability and links:

I’ve been following the Tax Prof on Palin’s tax problems (they are indeed problems), and theataxingmatter site boils down the key issues very well, getting the “tax home” issue as close to right as I’ve seen with her point 1., and her last point (5.) being possibly the most important one: that the McCains’ and Palin’s release of their tax returns has been much more limited than their opponents, and possibly even selective. (Cindy McCain has released the front two pages of her 2006 return and no 2007 return to date.) A few other points re: Palin’s taxes:

1.) No one outside of a few who cannot distinguish between erroneous and fraudulent returns is claiming the Palin’s are committing tax fraud, although it appears they were being at least very agressive. Ken Houghton made a great point that the lesson to be derived is “don’t let H&R Block do your taxes” (to which I would only add, “particularly when you are a governor, VP candidate or anyone else filing more than the basic Form 1040 and Schedules A or B”). Although Troopergate was significantly more egregious in terms of abuse of power imo, Time Magazine’s description of the Palin administration’s approach to Troopergate as shockingly amateurish fits well here.

2.) The Palins signed their return, which was on extension, 9/3/08, the day of her VP nomination acceptance speech. They had until 10/15 (next Wednesday) to file timely under the extension. I thought this was one of the strongest examples of the lack of vetting Palin, if one wants to include under the definition of vetting any activity that could prevent political trouble down the road. Why they didn’t take a better look at the returns before filing them (not to mention releasing them to the public) baffles me. The tax issues raised, while admittedly complicated in some instances, are not unusual and any necessary changes could have been made without controversy and sound tax positions and arguments developed as necessary by any number of certified, experienced tax professionals.

3.) Most of the discussions have centered on Palin’s tax problems, but she may have a more fundamental problem with the State of Alaska regarding reimbursements for travel by her husband and children totaling $43,000. According to this Washington Post 9/9/08 article (Page 3), the policy since the 1990’s generally has been not to pay for (reimburse) family members’ travel, with the spouse getting somewhat more favorable treatment due to some involvement in state business. The WaPo articles cites an attorney general opinion on spousal travel – rendered in 2004 but re-released by Palin without change in early 2007 – which states, “At present, spouses of administration officials may accompany the officials on the King Air if they reimburse the state the cost of the flight at the lowest coach fare available on a commercial flight for that trip.”

4.) Alaska Administrative Manual – Sec. 320.100 states, “The State of Alaska operates under an accountable plan for travel expenses as is defined in IRS Publication 463.” However, Alaska Statute – Sec. 39.20.060 states, “Notwithstanding the provisions of any other law, the governor and lieutenant governor are not considered employees of the state for the purpose of state personnel laws relating to hours of employment, annual leave, sick leave, overtime, compensatory time, and travel allowances. This section does not deprive the governor and lieutenant governor of the right to participate in the state retirement system or in state group insurance plans.” This is probably fodder for attorneys, but it would seem that none of the Palin’s reimbursements as governor would fall under Alaska’s accountable plan and thus all of her per diem reimbursements and her family’s travel reimbursements should have been included as compensation on her W-2 (with Schedule A itemized deductions still available to her for the portion of the reimbursements representing legitimate business expenses).
rollotomasi | | Email | 10.12.08 – 1:54 pm | #