APNewsBreak: RI gov candidate Chafee’s old Senate campaign owes $18,000 in taxes, penalties

By Michelle R. Smith, AP
Thursday, October 7, 2010

APNewsBreak: Chafee camp didn’t pay RI, fed taxes

PROVIDENCE, R.I. — Independent Rhode Island gubernatorial Lincoln Chafee’s old Senate campaign committee failed to pay federal and state taxes for five years and owes an estimated $18,400 in taxes and penalties, a campaign aide told The Associated Press on Thursday.

Mike Trainor, deputy campaign manager for Chafee’s gubernatorial campaign, said the Senate committee failed to pay taxes on approximately $64,400 of investment income from 2004 through 2008. The failure came to light after an inquiry by the AP.

Chafee in a written statement called it an honest misunderstanding. Trainor said it happened because two Chafee campaign treasurers did not understand Internal Revenue Service regulations for campaigns.

“I sincerely regret that the error was made,” Chafee said. “I stand accountable and will take full and personal responsibility for paying all monies owed to the Internal Revenue Service and the Rhode Island Division of Taxation.

Trainor said the campaign planned to notify the IRS Friday. He said the IRS would determine how much interest was owed on the federal taxes and penalties, which amount to an estimated $15,900. The state tax owed was $2,500 for the period, or $500 per year, Trainor said.

Trainor said he was not aware of any tax problems with Chafee’s gubernatorial campaign, but the campaign was checking following the AP’s inquiry.

Chafee is a former Republican U.S. senator who lost re-election in 2006 to Democrat Sheldon Whitehouse. Trainor said most of the interest was earned in the period leading up to the 2006 Senate race, when Chafee had stockpiled millions of dollars in preparation for the campaign.

His main opponent in the governor’s race, Democratic General Treasurer Frank Caprio, has paid both state and federal taxes since the 2005 tax year, according to filings his campaign made with the state Board of Elections. The campaigns of his other opponents, Republican John Robitaille and Moderate Ken Block, said their money is kept in interest-free accounts, and therefore they do not have to pay taxes.

The four men are vying to replace term-limited Republican Gov. Don Carcieri. Block is an entrepreneur and Robitaille is a former top Carcieri aide. Neither has held elected office. The election is Nov. 2.

Trainor said the two treasurers, Robert Tingle, a financial investment counselor, and William Facente, a city government worker, had both attended seminars held by the Federal Elections Commission and walked away with the understanding that interest earned by political campaigns could be offset on a tax bill by fundraising expenses.

“Since the cost of raising money was so high, it clearly outpaced the investment income. They concluded that no income tax was due,” Trainor said.

The Chafee for Senate organization was disbanded in 2009, so Chafee will pay out of his pocket, Trainor said.

In Massachusetts, independent gubernatorial candidate Tim Cahill, who is the state treasurer, acknowledged in August that his campaign had failed to pay state tax on interest for the past eight years.

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