Saturday, October 4, 2008
Gov. Palin Releases Opinion Letter Justifying Not Reporting Per Diem Expense Reimbursements as Income
[Updated and moved to the top]: After releasing her 2006 and 2007 tax returns and financial disclosure form, Gov. Palin has released this opinion letter from Washington D.C. tax lawyer Roger M. Olsen stating that she was entitled to rely on Alaska's determination that her per diem expense reimbursements do not constitute income to her:
Unless employees have reason to know that the W-2 is incorrect, the IRS expects employees to rely on the employer's W-2 as prepared & filed with the IRS, as Governor Palin did. The income tax aspects of fringe benefits are complex and highly technical, and not subject to second-guessing by laymen. The State of Alaska is confident that its position is correct. Its employees were entitled to rely on that determination, So was Governor Palin.
Finally, under State law, the spouse of the Governor (or other family members on occasion) is entitled to payment of travel costs by the state when conducting official State business. I find no reason or rule of law that would lead me to a different conclusion as to his receipt of such State payments. Such payments for family members traveling on state business would not properly be included as taxable income on Governor Palin's federal tax returns.
Both conclusions seem problematic. If an employer mistakingly fails to include an item of income from an employee's W-2, does that really relieve en employee of her obligation to report the income on her tax return? How does Mr. Olsen's conclusion regarding the reimbursement for expenses of the Governor's spouse and children square with § 274(m)(3)? Undoubtedly the most amazing (brazen?) aspect of Mr. Olsen's opinion letter is that he cites absolutely no law in the four pages to support his conclusions -- no code or regulation sections, cases, or rulings.
Another discrepancy is the $196,531.50 income as Governor reported on her financial disclosure form (with the notation "[a]s reported to filer by State of Alaska"), compared to the $107,987 wages, tips, other compensation and $122,401.43 Medicare wages and tips reported by the state of Alaska on the W-2 attached to her tax return.
(Mr. Olsen has a tax LL.M. from George Washington and is a former Assistant Attorney General of the Department of Justice's Tax Division under President Reagan.)
Press and blogosphere coverage:
- ABC News
- Associated Press
- Daily Kos
- Huffington Post
- L.A. Times
- New York Times
- Wall Street Journal
- Wall Street Journal Law Blog
- Washington Post