County, court records on 70 reveal IRS owed thousands

Two state House of Representatives candidates running in the May 20 primary owe tens of thousands of dollars in past-due income taxes and penalties to the Internal Revenue Service, tax records show.

State Rep. John Hutchison, R-Harrisburg, owes more than $40,000 to the federal government as listed in two separate IRS liens filed against him in March.

Damon D. Wallace, a Republican candidate for state representative in District 96 in Benton County, owes about $30,000 in past-due federal taxes.

Those debts were uncovered when the Arkansas Democrat-Gazette conducted public-records checks of the more than 70 candidates running in May’s contested primaries for state House and Senate seats. Reporters checked county courthouses and court databases for financial records including bankruptcies and tax liens - documents filed by the government when a person fails to pay his taxes on time.

In addition to the candidates who owe money to the IRS, Sheena Lewis, a candidate in the Democratic primary race for House District 36, has an outstanding debt with the state Department of Workforce Services, lien records show.

Altheimer Democrat Efrem Elliott, a former state representative who is running for the House District 16 seat, had a lien for $1,439.52 in past due state taxes that was paid in late March after the candidate filing period ended.

A lien serves as a notice to creditors and potential creditors that the government has a right to a debtor’s property, and the lien itself attaches not only to a person’s current assets but to assets acquired during the duration of the lien, according to the IRS.

Tax liens can affect a person’s ability to get credit, and the liens can remain even after a bankruptcy.

Reached last week, Hutchison, a retired farmer, said he knew about one of the liens for about $18,000, but he was unaware of a second lien for more than $21,000 until he was contacted by a reporter.

After reviewing copies of the liens provided by the reporter, Hutchison said he believes his unpaid taxes are only about half the amount listed on the liens. However, he said, the higher figure could be due to penalties and interest.

He said he would be working with the IRS to resolve the matter.

“It’s nothing to hide. I owe a back-debt, that’s for sure,” he said.

“I’m going to get this straight with the IRS and get on a payment plan. I’m not happy with it, but everybody has problems. It’s just something that I should have gotten taken care of before now,” he said.

When constituents head to the polls, they should focus on his voting record in the General Assembly instead of his overdue taxes, Hutchison said.

“The voter ought to go by those actions,” he said.

Hutchison is running for re-election in District 52, which borders the southern part of Jonesboro and includes Harrisburg, Waldenburg and Swifton. He faces retired state Trooper Dwight Tosh in the Republican primary. The winner will face Democrat Radius H. Baker in November.

Another candidate with liens said he’s paying off his tax debt.

Wallace, the candidate from Benton County, said last week that he has known about his back-taxes for several months and included them on his statement of financial interest form that he filed with the Arkansas secretary of state’s office when he became a candidate in February.

“It’s a debt that I owe on a payment arrangement with the IRS so it’s being taken care of. It’s pretty much a nonissue,” he said.

Wallace also owes various amounts in county taxes that at one time were as much as $4,300 in Benton County, court records show. Wallace said the county tax debt is being paid by the trustee appointed in his pending bankruptcy, and he didn’t know last week how much of the debt remained unpaid.

The Republican’s tax debt and other financial issues were first raised by Nic Horton of The Arkansas Project, a conservative policy blog that has been critical of Wallace’s candidacy.

Wallace is seeking the District 96 seat being vacated by Duncan Baird, who is leaving office because of term limits and is running for state treasurer. Wallace faces Grant Hodges in the Republican primary. The winner of that race will face Democrat Tom McClure and Libertarian Michael Kalagias in the general election in November.

After Horton’s online posts,state Sen. Bart Hester, R-Cave Springs, called for Wallace to withdraw from the race because of the unpaid taxes.

In response, Wallace appeared on Northwest Arkansas television station KXNW 5News in late March and offered an explanation for the debt. Wallace, who owns an auto-repair business, said he has paid down about half of his tax debt from a total of about $60,000 that related to tax withholdings involving his employees.

Last week, Wallace told the Democrat-Gazette that he intended to stay in the race and that he didn’t think his tax debt or his pending Chapter 13 bankruptcy would affect his ability to serve in the House.

The bankruptcy, which was filed in 2012, related to two rental properties; Wallace said he could no longer afford the payments. The bank that held the mortgage was taken over by the Federal Deposit Insurance Corp., and the loan was transferred to other companies that drastically increased his interest rate and asked for a full payoff, he said.

“There was no way out, so the interest and late fees kept going up and up until another company ended up getting the mortgage,” he said.

Wallace said he filed Chapter 13 bankruptcy - which allows a person with a regular income to come up with a plan to repay his debt - to keep from losing his auto-repair business and other rental properties.

“I knew it was going to come up in a contested race,” Wallace said, adding that “if the voters want me, they want me, if they don’t, they don’t.”

In Elliott’s case, a search of records at the Jefferson County Courthouse showed earlier this month that the Arkansas Department of Finance and Administration had filed a lien against him in November for unpaid income taxes. On Friday, Elliott provided a reporter with a receipt from the department showing that the lien had been paid and was released on March 24.

Elliott, who served one House term before running unsuccessfully for the state Senate, will face Democrats Kenneth B. Ferguson and Winfred Trafford in May. The winner will be unopposed in November.

Lewis, another candidate with liens, is one of three Little Rock Democrats running for the District 36 seat currently held by term-limited Rep. Darrin Williams, D-Little Rock.

A search of financial records showed two liens were issued against Lewis by the Arkansas Department of Workforce Services, filed in 2008 and 2012. Pulaski County Circuit Court records show that the department overpaid unemployment benefits to Lewis, but they don’t contain the dates of overpayment.

Reached by phone Wednesday, Lewis said she was shocked to learn about the liens and hadn’t realized they existed. Notices of both liens were sent to an address where Lewis has not lived for several years.

On Thursday, Lewis provided proof of a payment plan she had worked out with the department’s benefits control division. On Friday, she provided a receipt showing that the department had collected a portion of those over payments in previous years and a balance of $497.24 remained.

“I wanted to take care of the situation right away,” she said. “I haven’t received unemployment for many, many years at this point. So these are old. I own two businesses at this point, and have for six or more years.”

Lewis faces Rodney Hall and Charles Blake in May. The Democratic nominee will face no opponent in November.

A search of Little Rock Municipal District Court records showed that Blake had a lien for $2,071 placed against him by a district judge in 2013 because of a civil judgment after he defaulted on a loan from the Arkansas Education Association Credit Union.

“I’ve settled with them, and I’m working to pay that off now,” Blake said. “It’s a car loan. Right after I graduated college, I bought a Mercedes and thought I was going to be able to afford it. We live and learn. I’m making payments now, but I’d like to be clear that I don’t think that debt reflects on my ability to be fiscally responsible as an elected official.”

Front Section, Pages 1 on 04/20/2014

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