Cabinet nominee owed $128,000 in back taxes

WASHINGTON – Tom Daschle, nominated to be secretary of the Department of Health and Human Services, failed to pay more than $128,000 in taxes over three years, a revelation that poses a potential obstacle to his pending Senate confirmation.

The back taxes plus $12,000 in interest and penalties involved unreported consulting fees, questionable charitable contributions and a car and driver provided by a private equity firm run by entrepreneur and longtime Democratic Party donor Leo Hindery Jr., according to a “confidential draft” report prepared by Senate Finance Committee staff.

A spokeswoman for Daschle confirmed Friday night that he recently paid back taxes in excess of $100,000 but did not disclose the extent of Daschle’s tax errors and the timeline of when he and others addressed those issues.

Daschle paid the back taxes after being alerted to the error by the presidential transition team just six days before his first Senate confirmation hearing, the report said.

Daschle failed to report more than $83,000 in consulting fees in 2007 and has not provided sufficient documentation relating to a total of $15,000 in charitable contributions over three years, according to the Finance Committee report.

Daschle has been called to appear before the committee in a closed-door session Monday, committee staff said. As yet, Daschle has failed to provide adequate documentation relating to charitable contributions he claimed for the past three years, and staff is reviewing whether free trips he took should be reported as income.

Additionally, Daschle intends to amend his tax returns a second time because he failed to pay Medicare taxes related to his employment of the driver of the car service. The lapse was discovered by Finance Committee staff.

In addition to earning $2 million from the law firm Alston & Bird, the former Senate majority leader has also been on the payroll of Hindery’s private equity firm, InterMedia Advisors, since he left the Senate in 2005, earning $2 million last year, according to documents filed with the Office of Government Ethics.

Daschle’s spokeswoman, revealing only the back payments for the car service, said he “naively” believed it was “nothing more than a generous offer from a friend.” The spokeswoman, Jenny Backus, said that last June Daschle asked his accountant whether the car could be construed as a reportable gift or payment. The accountant intended to correct the error with Daschle’s 2008 tax filing, she said.

According to the Senate committee, Daschle used the car service just 20 percent of the time for work purposes. That service was deemed worth more than $255,000 in unreported income, according to the committee report.

Under tax law, not reporting compensation – including free services such as air travel or a car service – can be a crime. But such lapses must be “willful and intentional” in order to be prosecuted, according to a tax expert.