Alaska says Palin owes back taxes on per diem expenses

Review of state policy determines payments must count as income

Posted: Thursday, February 19, 2009

Gov. Sarah Palin will have to pay back taxes on nearly $18,000 in expenses she charged the state for living in her home instead of the state capital, officials said Wednesday.

A review of state policy and Internal Revenue Service tax laws determined the per diems should be treated as income, Department of Administration Commissioner Annette Kreitzer said.

The practice came to light after Palin was named John McCain's running mate on the Republican presidential ticket late last August and became a campaign issue after she was presented to the nation as a fiscal conservative.

"These issues were raised during the national campaign and as a result of the national campaign the governor asked us to look into this. So it was a result of that," Kreitzer said.

"(The per diem) has to be treated as income and that requires a revision of the W-2 forms," Kreitzer said.

Palin's spokesman Bill McAllister on Wednesday said he didn't know if Palin, who makes $125,000 a year, is still collecting per diem or if she would continue to do so.

"If she does collect per diem it will be a public record but I don't see any need to announce whether she is going to do it or not in the future. She will make that determination on her own at some point," he said.

McAllister said her taxes are a personal matter and wouldn't disclose how much she owes. However, he said Palin would pay the amount required.

Palin had collected nearly $17,000 in per diem payments before she was named to the Republican ticket. The expenses were paid for more than 300 nights she slept at her suburban home and commuted 40 miles to her Anchorage office instead of living in the Governor's Mansion in Juneau, the state capital, since she took office in December 2006. The practice started up again shortly after last fall's general election.

Palin returned to work on Nov. 7 - three days after McCain's loss to Barack Obama in the general election. From then until Dec. 14 - the last date for which records were available - she continued to charge the state for meals and incidentals, amounting to $1,168, an Associated Press review of records show. The state released Palin's expenses for the first two weeks of December on Wednesday.

According to the travel authorizations, Palin spent most of her first week back in state in interviews for "Entertainment Tonight," the New York Times, Fox News and NBC's "Today Show" before she left for the Republican Governors Association conference in Miami on Nov. 11.

She settled into a more predictable routine the rest of the month with budget and energy plan meetings, a Thanksgiving turkey pardon and photo opportunities at the Great Alaska Shootout college basketball tournament in Anchorage.

She requested the full $60 a day for all but three of the 19 per diem requests. For example, on Nov. 14 when she attended a formal dinner in Anchorage celebrating the state's 50th anniversary, she requested only $28 for breakfast and lunch.

Per diem payments are meant for meals and incidental expenses while traveling on state business. State officials have said her claims were permitted because her "duty station" is Juneau, and she was in Wasilla 600 miles away.

Palin spends little time at the governor's mansion in Juneau when the Legislature is out of session. Instead, she prefers to live at her lakeside home in Wasilla.

Kreitzer said other state employees would be affected by the new policy as well, but declined to provide names.

Palin also previously charged the state for her children to travel with her - amounting to $21,012 for her three daughters' 64 one-way and 12 round-trip commercial flights since she took office through last fall. She also charged for hotel rooms for the girls in some cases.

Her office has claimed the girls were acting on state business, and Kreitzer said the state did not review the matter further.

"That is a decision that has been made for many years by the governor's administrative services section and the governor's office essentially as to what constitutes business travel. My understanding is that all of the travel that's been paid for the family has been for a business purpose," Kreitzer said.

A Washington attorney, hired by the Palins to review their tax statements, said state law allows the children's travel expenses to be reimbursed and not taxed when they conduct official state business. But in some cases, event organizers said they were surprised when the Palin children showed up uninvited.

Palin is not the only Alaska politician who has faced having to pay back taxes.

Responding to a survey by political Web site and newspaper Politico, newly-elected U.S. Sen. Mark Begich recently revealed that he had to pay back taxes after reporting mistakes to the IRS,

The Democrat told Politico that he was issued a city vehicle when he served as Anchorage mayor, a routine perk for mayors nationwide. "Then the IRS issued a new ruling that use of this car was taxable, so I paid the back taxes owed on the 'benefit' for the years I utilized the vehicle. I then got rid of the city vehicle and bought my own car to use for city business," Begich said in the survey.

It's reminiscent of the situation involving former U.S. Sen. Tom Daschle, who was forced to step down as President Obama's selection for Health and Human Services secretary, having failed to pay income taxes due on a car and driver.

It's unknown how much Begich paid in back taxes, if he paid a penalty, and how the mistake was discovered. His office didn't immediately return a phone call Wednesday.

Republican Sen. Lisa Murkowski, the state's senior senator, didn't respond to the survey.

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