BOISE - The IRS has filed nearly $300,000 in new federal tax liens against Idaho state Rep. Phil Hart in the past year, five years after Hart said he’d reached an agreement to repay $90,000 in back taxes, penalties and interest.
The new liens, filed in Kootenai County, cover the tax years from 1997 through 2003, plus 2006 and 2008. They are against anything Hart owns or has rights to, including real estate, cars, business accounts receivable and more; such liens go on credit reports and can keep a delinquent taxpayer from getting a loan, signing a lease or obtaining credit.
Hart said, “I will eventually get through this, so it’s the motivation to get through it, I’ll put it that way. It’s like running on the beach where the water’s up to your knees.”
But, he said, “I think it makes you a better legislator, to have these life experiences. … You get first-hand dealings with the bureaucracy, see how they operate, see how they interpret things, experience the process.”
Hart, R-Athol, is a third-term lawmaker who serves on the House Revenue and Taxation Committee and is unopposed for re-election in November. He proposed legislation this year to eliminate Idaho’s state income tax on all earned income, while boosting the state’s sales tax from the current 6 percent to 8.25 percent. The bill never got a hearing.
Rep. Jim Clark, R-Hayden Lake, a friend and ally of Hart who has served with him from Idaho’s 3rd District for the past six years, said he was surprised by the new liens and thought Hart’s tax problems were long settled. “I’m just surprised that he’s still fighting it and it’s getting worse,” he said.
Said Clark, “I don’t think it makes him a better legislator. I think if he solved the problem it would make him a better legislator, but if he has to keep fighting this all the time, eventually, over time, his constituency is just going to walk away from him.”
Hart stopped paying both state and federal income taxes in 1996 while he filed a lawsuit against the IRS arguing that the income tax is unconstitutional. He lost the case in 2000 when a federal tax judge in Spokane said he’d shown “an intentional disregard of the rules and regulations” and found his legal challenge “frivolous and groundless.” Hart appealed unsuccessfully, and after the U.S. Supreme Court refused to take up his case, he conceded in 2003 and began paying taxes again. In 2005, he told The Spokesman-Review he’d reached an arrangement with the IRS to pay back $90,000 in back taxes, penalties and interest.
However, according to federal court documents the government filed to enforce a summons against Hart in 2007, Hart didn’t file his tax returns for 1997 through 2002 until September of 2004, and didn’t file his 2003 taxes until May of 2005. Hart squabbled with the IRS over documents it demanded until 2007, when he said the two sides had reached agreement on that point.
Multiple tax liens also were filed against Hart in Kootenai County in and prior to 2007, but then there was a time lag, with nothing filed until May of 2009, when the IRS filed $21,703.52 in liens against Hart for an unpaid 2006 tax liability. That was followed by filings in October of 2009 for $257,947.10 for tax years 1997 through 2003, and another filing Jan. 11, 2010 for $13,266.88 owed for tax year 2008.
Hart told The Spokesman-Review on Friday, “At some point in time there’ll be a settlement. There hasn’t been yet. There are some issues that are unresolved in the audit that was done. It’s been a few years in progress now.”
In addition to filing liens, the IRS can garnish a delinquent taxpayer’s wages; Hart declined to say whether his state legislative pay is being garnished. “I’m just not going to provide that level of detail,” he said.
He said after his years of not filing returns “there was some catching up to do with the state, so I’ve been doing that also.” The state hasn’t filed any tax liens against him, he said, but he declined to say if the state Tax Commission has taken other steps, such as garnishing wages.
Hart owns no real estate in his name in Kootenai County, because his Athol home is owned by a trust he established in his daughter’s name. His engineering firm is owned by yet another trust.
However, an IRS spokeswoman said in cases where a taxpayer has conveyed property to a third party to avoid tax liability, the government still can go after it, if the delinquent taxpayer is the one who “enjoys its full use and benefit.”
Tina Jacobson, newly elected Kootenai County Republican chair, said, “I know that there are other people that are having problems with IRS liens and other deals because taxes are too high.” As for Hart’s tax woes, she said, “This is Phil’s personal business.”
Hart said although he hasn’t settled his case with the IRS, he has been paying taxes, and he said he’s paid about $20,000 a year in combined federal and state income taxes since 2006, a total of $104,017.
Still, he said his philosophical opposition to the income tax continues. “I do think that it’s grown way beyond what the original intent of the people were who debated it and added it to our Constitution,” he said.
In the May primary election, Hart was unopposed, but two candidates he recruited - Steven Vick, who defeated incumbent Sen. Mike Jorgenson, R-Hayden Lake, and Vito Barbieri, who won a four-way race to fill the seat Clark will vacate when he retires at the end of the year - won their races and face no opposition in November.
“I worked as hard on it, the couple guys I supported, as I would have had I been working on my own campaign,” Hart said.
A former Constitution Party member, Hart said he thinks the Republican Party in his area is evolving. “I think people are rediscovering our roots, and by that I mean the principles of the founding fathers and the things that made America different when it was founded as a country and caused it to become such a great country,” he said. “I think people feel like that’s slipping through our fingers, and they want to return to the values that made us great historically.”
House Speaker Lawerence Denney called Hart’s continuing tax woes “kind of a distraction for us, but it’s his personal thing.” Denney said, “I think certainly he does have experience that most of us don’t have and certainly don’t want to have. … It appears to me that the people up there love him.”