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Sunday, March 1, 2009

Cohen: Obama's Chief Vetter Does Not Have a Tax Problem

Yesterday, I blogged the Gawker story, Obama's Chief Vetter Has His Own Tax Problem, reporting that White House general counsel Gregory Craig, brought in to run the Obama Administration's vetting process after the controversy over the tax problems of nominees Tom Daschle, Tim Geithner, Nancy Killefer, and Hilda Solis, may have a tax problem of his own:

Derry Noyes, Craig's wife, runs Noyes Graphics, a design business, out of the couple's home in northwest Washington. ... Operating a business out of one's home in D.C. requires a home occupation permit and registration with the city's division of corporations. Additionally, the government has instituted a new requirement for business license permits. A spokesman at the Washington D.C. Department of Consumer and Regulatory Affairs told Gawker that no one has ever sought any kind of permit or registration for a business under the name of Noyes Graphics or at the Craigs' home address. By not registering Craig may have avoided local business taxes.

Tax Prof Stephen Cohen (Georgetown) says that the Gawker story misstates the Washington, D.C. law and complains that I did not verify Gawker's allegations before blogging them:

First some disclosure. Gregory Craig is an old friend of mine. We worked closely together in the late 1960s and early 1970s opposing the Vietnam War policy of the Untied States and have been friends ever since.

Second my complaint. TaxProf's reference to the blog about Greg -- repeating [Gawker's] inflammatory headline -- illustrates the abuse which the internet commits when it uncritically spreads false allegations made by others. The headline refers to possible tax avoidance but there is not one line in the body of the article indicating a tax problem. In fact, Derry Noyes Graphics was neither subject to the Washington, D.C. business franchise tax, nor required to have registered as a business in Washington, D.C.

The D-30 Business Franchise Tax Form for Washington, D.C. has an exemption for a business for which at least 80% of revenues come from "personal services actually rendered by owners or members of the business." GIven the graphic design nature of Derry Noyes' business, this requirement for exemption is undoubtedly met. ...

[The] new DC licensing requirement of a General Business License ... went into effect on Deceber 31, 2008. Although Derry Noyes' Graphics may be subject to this requirement, the business is located in zip code 20008 and therefore has until April 30, 2009 to register under this new requirement. ...

[T]he DC requirement of a Basic Business Licence ... does not apply to a graphics design business because such a business is not among the listed categories required to register. You will note that the categories are of businesses for which there is regulation for reasons of public health or safety. Graphic design is not among the listed categories, nor does it affect public health or safety in the same way as a restaurant, funeral home, pharmacy, or general contractor.

Academics have a particular responsibility to verify allegations that may be false before spreading them. I am disappointed that TaxProf did not do minimal checking in this instance. It took me seconds to verify that Derry Noyes Graphics has been exempt from D.C. business registration and franchise tax requirements. TaxProf has wrongly besmirched, Gregory Craig, a dedicated and honest public servant.

Update: More from Stephen Cohen:

When I wrote to you previously, I had not yet talked to Derry Noyes. I just have

She tells me that, notwithstanding possible exemptions, her business is registered in Washington, D.C. and she does pay the business franchise tax.

I think this information reinforces the idea that it's risky and imprudent to retransmit flimsy gotcha allegations from questionable sources.

http://taxprof.typepad.com/taxprof_blog/2009/03/cohen-obamas-chief-vetter-does.html

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Comments

I have a problem with Stephen Cohen. In his undoubted haste to exonerate his buddy he makes two contradictory statements. The first:

"In fact, Derry Noyes Graphics was neither subject to the Washington, D.C. business franchise tax, nor required to have registered as a business in Washington, D.C."

In his follow up he states that,

"She tells me that, notwithstanding possible exemptions, her business is registered in Washington, D.C. and she does pay the business franchise tax."

Ummmm, I am not a lawyer (and I don't play one on TV) but two plain English statements that are 180 degrees at odds with each other certainly leave me doubting his credibility.

Instead of telling you that it is " risky and imprudent" to transmit information from the internet, I would suggest to Mr Cohen that it is " risky and imprudent" to get his alibis wrong. If this was a case on "Law and Order" his client would be in the Big House at 59 past the hour.

And, Mr Cohen, just because somebody tells you something doesn't make it true. Perhaps she pays some of the tax, but not the full amount required. I bet Charlie Rangel, Tim Geithner, Hilda Solis ad infinitum pay some, but not all of their fair share. Paying some, but not all, makes one a tax cheat.

Posted by: swift boater | Mar 1, 2009 1:32:35 PM

"She tells me that, notwithstanding possible exemptions, her business is registered in Washington, D.C. and she does pay the business franchise tax."

Well one has to ask a question -- whose lying? If you believe the Gawker story they supposedly validated with the DC authorities that there was no registration of Noyes' Graphics on file. That is the nut of the whole issue.

Posted by: JohnMc | Mar 1, 2009 1:34:45 PM

Whew! That's a relief!!!

Posted by: bolitha | Mar 1, 2009 1:48:08 PM

Holy Crap. This is such a fast tap dance my eyes can't keep up......

Posted by: Robin | Mar 1, 2009 2:15:25 PM

"...it's risky and imprudent to retransmit flimsy gotcha allegations from questionable sources." So true. Unless it's about those rotten, conniving Republicans.

Posted by: Dan | Mar 1, 2009 2:27:03 PM

Mr Cohen states that Mr Craig is an old friend from the Vietnam War protest movement. To me this removes the chance that either has a shred of integrity.

Posted by: Ken Hahn | Mar 1, 2009 3:09:15 PM

Why would someone pay a tax that she is "undoubtedly" not subject to?

Posted by: Alessio | Mar 1, 2009 5:02:03 PM

I can't get past this:

"We worked closely together in the late 1960s and early 1970s opposing the Vietnam War policy of the Untied [sic] States and have been friends ever since."

Untied? Freudian slip, purposeful statement, or mistake?

Posted by: asdf | Mar 1, 2009 6:18:24 PM

I don't know what happened here, but I don't believe the taxpayer's say-so constitutes substantial authority for a position under either Federal or local tax law. On the other hand, it is nice to see that the Obama strategy of attempting to intimidate anyone who raises issues about the integrity of his Administration--an Administration which is calling for the largest tax increase in history while several of its members apparently have difficulty paying their own taxes--remains intact.

Posted by: mike livingston | Mar 1, 2009 7:33:50 PM

Cohen's self-righteousness in his update makes him seem silly.

He should just admit he was wrong in his rush to exonerate his friend.

Posted by: Rob | Mar 2, 2009 6:10:02 AM

I would be interested to know how many of the people who posted comments have ever actually prepared a D-30 for a client who has business in the District? Or for that matter, has ever prepared anything for anyone who has to file any form in the District? As someone who actually does prepare DC tax returns I could easily imagine a scenario where everyone involved is telling the truth, and there are no contradictions.

First, Mr. Cohen's analysis of the DC tax law and the instructions of the DC-30 is correct.

Second, Ms. Noyes probably does file a D-30 as a safeguard against the District deciding she doesn't meet the 80% test. When in doubt, file the return - unless you like to play the lottery.

Lastly, The DC spokesman probably could not find a record. It would not surprise me in the least that a government entity - particularly the District - had no record of Ms. Noyes business license (they often have no record of payments either). That doesn't mean the license doesn't exist. It usually means the District has to look harder for it.

Posted by: gcwright | Mar 2, 2009 10:17:26 AM

This is why I trust Gawker and Taxprof more than other media sources. Would a correction like this show up on the front page of the New York Times?

Posted by: TaxRascal | Mar 2, 2009 2:39:24 PM