Thursday, February 17

Lawrence Nails Rep. Chaffetz as Tax Cheat

This has to be seen to be believed.

After getting Rep. Jason Chaffetz that he would seek to raise the Social Security retirement age, and cut the COLA for Social Security Benefits - which by the way have already been frozen for the last two years - O'Donnell closes in and Boom goes the Dynamite.

The issue Lawrence raises is the fact that Rep. Chaffetz doesn't Rent a place to sleep in Washington and instead uses his office, as a result he gains a benefit from avoiding paying that rent which he doesn't declare on his income as taxes. The issue has been raised in a letter by CREW which points out that 7 Democrats and 26 Republicans are currently having these "Sleepovers".

[U]nder the Internal Revenue Code, members who sleep in their offices are receiving a taxable benefit. The IRS treats lodging as a taxable fringe benefit unless it is offered on the employer's business premises, is for the employer's convenience, and is required as a condition of employment. As living in a House office clearly is not a condition of serving in Congress, members must pay taxes for imputed income based on the fair market value of their lodging.

Notably, members of Congress and congressional staff already have imputed taxable income based on the fair market value of their reserved parking spaces. If members must pay taxes to lodge their cars, surely they must pay taxes for their own lodging.
"Americans expect members of Congress to follow the tax laws just like everyone else. If legislators are going to treat their offices as dorm rooms, at the very least they should pay the appropriate taxes."

CREW sent their letter to the Office of Congressional Ethics which has yet to respond or rule on the matter, but it's clear this type of thing has been going on for decades.

From CBS News.

By doing this these Congressmen will save about $20,000 in Rent out of their $174,000 yearly salary.

Chaffetz sort of laughs this all off as "ridiculous", but he doesn't seem to realize that O'Donnell was the former Chief of Staff from the Senate Finance Committee so he probably knows Tax Law better than most law makers since it happens to be staffers like him who actually write the laws.

In fact O'Donnell led the Senate Staff during the consideration of President Clinton's first budget - so when Lawrence brings this up - in all likelyhood he knows what's he's talking about!

It's also not like issues like this haven't come up before.

Many members of Congress may have a Tom Daschle problem. A week after the former senator withdrew his nomination for Health and Human Services secretary because of reports he didn't pay taxes on a car and driver, lawmakers are facing their own tax questions. Some of the same lawmakers who criticized Daschle also neglected to pay taxes when they brought family members on trips paid for by outside groups, according to tax experts and a watchdog group. Most Americans pay taxes when they bring a spouse or family members on a business trip on the company's tab.

But many members of Congress have been ignoring that section of the tax code since they wrote it in 1993. It's hypocritical for some members to criticize Daschle's tax problems while ignoring their own, said Craig Holman of Public Citizen, a consumer advocacy group that filed a complaint with the IRS on this issue in 2006. "It is identical," Holman said. "It's such an obvious issue, but the IRS looks the other way." But most members of Congress don't see it that way. They don't agree that the money for spouse trips is taxable, and they don't see any comparison with Daschle's failure to pay more than $100,000 in taxes on a car and driver. "There is a clear difference between members of Congress being accompanied by a spouse in the course of official duties and a private citizen failing to pay taxes after being given a limousine and driver," said Michael Steel, spokesman for House Minority Leader John Boehner (R-Ohio). "This isn't comparing apples and oranges, it's like comparing apple juice to Dom Perignon." Boehner is one of many lawmakers who have taken their spouses on trips paid for by outside groups. Another is former Rep. Ray LaHood (R-Ill.), who has been confirmed as President Obama's secretary of Transportation.

Just as the lawmaker themselves would have to disclose a gift and pay taxes for having received it, they should have to disclose and pay taxes for the gift of a trip provided by and outside group.

And I strongly suspect, although I'm not a tax expert, that O'Donnell is also correct that lawmakers who choose to avoid paying for rent by living on government property - which is essentially accepting a gift from the American people who actually OWN that property - they should disclose it and file it on their taxes as income.

Villanova Law Professor James Edward Maule thinks they possibly should.

CREW could be correct, but it requires tax analysts to answer several difficult questions in particular ways to reach the same conclusion.

First, CREW contends that members of Congress are receiving lodging, and that it is taxable because it is not provided as a condition of employment, as required by § 119 for the lodging to qualify for exclusion from gross income. CREW points out that no member of Congress is required to live in their offices. Though this conclusion is debatable – certainly when Congress meets late into the evening or overnight, as sometimes happens, one might reasonably infer that members are required to remain on the premises – the difficulty with the analysis is that it presupposes that the government is providing “lodging” when a member of Congress stays overnight. But does an office constitute “lodging” simply because someone falls asleep therein? Or because someone takes a nap therein? [...]

If someone is specifically bringing a cot to sleep in, it's not a matter of then occasionally "taking a nap" - it's part of a deliberate plan to avoid paying for rent by squatting in their offices. And according to the CBS report and various others, saving money is exactly their goal - not just convenience.


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