Governor Blagojevich: Close Corporate Loopholes, But My Private Trips Are Not Income

December 17, 2007

It turns out that Illinois Governor Rod Blagojevich, the man who vehemently argued earlier this year that corporations are avoiding paying their fair share in taxes to the State of Illinois, may be avoiding paying his fair share — to the IRS. An AP article cites how Blagojevich has used large sums of state-funded travel since taking the governorship in 2003, some of which could be considered part of adjusted gross income according to federal tax law. Here’s the story from The Rockford Register Star:

On Memorial Day, Gov. Rod Blagojevich huddled with legislative leaders in his Capitol office in what turned out to be another futile attempt to negotiate a state budget deal.

Then Blagojevich did what millions of people do after work: He went home. The difference is that the governor flew 150 miles to Chicago on a state plane, then used it to return to Springfield the next day.

That trip and dozens of other flights over the past five years could create tax headaches for Blagojevich and wind up costing Illinois taxpayers tens of thousands of dollars, according to an Associated Press analysis and interviews with tax experts.

The problem? The Internal Revenue Service might consider Blagojevich’s flights to be personal trips and a taxable fringe benefit.

The AP analysis covers nearly 1,000 flights on state aircraft by Blagojevich, his family and guests. It found per-sonal travel that could be considered extra income to the governor of at least $225,000, based on the cost of hiring private planes in Illinois.

The additional income could mean a $60,000 tax bill for Blagojevich, according to the analysis. And unless he amends his past tax returns and pays the sum, the state could be penalized for not reporting the travel, according to tax law. The penalty could exceed $40,000, the AP review shows.

Blagojevich has an office in Chicago and may travel there for business without repercussion. Otherwise, the travel is taxable, said Marianna Dyson, an employment and fringe-benefits lawyer with Miller & Chevalier in Washington, D.C.

Meanwhile, one of Blagojevich’s advisers was indicted on federal tax charges last week. Here’s that story from the Chicago Tribune:

Christopher Kelly, a close adviser to Gov. Rod Blagojevich and chief fundraiser on his two campaigns for governor, was indicted today on federal tax fraud charges, accused of understating more than $1.3 million in personal and business income on tax returns for five years, federal authorities said.

The indictment charged that Kelly concealed his use of corporate funds to pay for personal expenses such as gambling debts to sports bookmakers.

The wealthy roofing contractor has been one of the governor’s most trusted confidants and acted as Blagojevich’s campaign chairman from 2004 until summer 2005.

Recall this Blagojevich quote from a press release back in March:

We’re going to keep working hard to make sure the public has access to the facts about how the current tax system is stacked against individuals and families – and how our Tax Fairness plan makes sure Illinois businesses stay competitive while requiring all entities that conduct business in our state to help support education and healthcare.

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