LITTLE ROCK — Of the elected officials with state vehicles, House Speaker Robbie Wills is the only one who maintains he is exempt from paying income taxes for the benefit of driving a state-owned Chevrolet Tahoe.
House Parliamentarian Tim Massanelli said that whether people “like it or not,” legislators are different when it comes to tax law.
“Business use of a state vehicle is not a taxable benefit,” Wills said. “I have not used the state vehicle for personal use. I’ve used the vehicle for travel to and from meetings and other events when attending in my official capacity as Speaker. I have my own vehicle for personal use.”
Other elected officials - Auditor Jim Wood, Land Commissioner Mark Wilcox, Treasurer Martha Shoffner, and Secretary of State Charlie Daniels - have said in recent weeks that they will start paying taxes for present and future use and back taxes for past use of their state vehicles.
Lt. Gov. Bill Halter has said he’s paid taxes for the use of a state vehicle since he took office in 2007. Attorney General Dustin McDaniel turned in his state vehicle and paid the state about $2,900 to compensate the state for past use.
State officials and spokesmen for the Internal Revenue Service offered varying explanations concerning the taxability of state-vehicle use by legislators and mileage payments legislators receive.
Wills, an attorney, didn’t offer a legal basis as to why his travel in a state vehicle from his home in Conway to the state Capitol is considered business travel. He deferred to House staff for an explanation.
Massanelli and House Chief of Staff Bill Stovall cite examples from Publication 463 by the IRS regarding “travel, entertainment, gift and car expenses.” They don’t directly address legislative travel to the state Capitol but refer to situations with taxpayers having multiple places of businesses.
Examples from the IRS publication they cited were:
“[If] your principal place of business is in your home ... you can deduct the cost of round-trip transportation between your qualifying home office and your client’s or customer’s place of business.”
“If you regularly work at two places in one day, whether or not for the same employer, you can deduct your transportation expenses of getting from one workplace to the other.”
Massanelli and Stovall said they consider a legislator’s home a place of business. They note that the Arkansas Constitution requires legislators to live in their districts and that they do legislative work from home.
Massanelli said the other elected officials with state vehicles are different because they are elected to represent the whole state and can live wherever they want.
Whether or not a legislator conducts most of his legislative work at his home or at his place of employment, such as a law firm, doesn’t matter, they say. He represents the entire district and as such a legislator’s entire district is his place of business, Massanelli and Stovall said.
They said legislators don’t have to pay taxes on the 50 cents a mile they receive for reimbursement traveling from their home to the Capitol.
Or, in the case of Wills, taxable income isn’t withheld from his state paycheck over the fringe benefit of driving a state-provided vehicle.
Wills’ state vehicle is a 2008 Tahoe that had a purchase price of $37,000, but after rebates the price was about $30,000, Stovall said.
The multiple-place-of business rationale is the third reason given by House staff for Wills’ state vehicle use being tax-exempt.
Previously, House Legislative Services Director Buddy Johnson said that Wills was exempt as a “control” employee.
But Department of Finance and Administration officials later said that being a “control” employee doesn’t make an employee exempt from paying taxes. Instead, it requires those employees to report their taxable vehicle use in a different manner.
Later, Johnson said that Wills was speaker “24-7,” meaning all of his travel in a state vehicle was tax-exempt. The House cited no legal basis for that assertion.
Regarding the different explanations, Stovall said House staff won’t always be“as thorough” as the news media would like on every issue, “but we’re always going to tell the truth.”
Massanelli said the House has thoroughly researched the issue.
“We want to do the right thing,” he said.
When asked in June about the taxability of legislators’ state vehicles, IRS spokesman David Stell referred to regulations that treat legislators the same as other elected officials and other state employees who pay taxes on the use of state vehicles.
As to whether mileage reimbursements are taxable, Stell pointed to IRS Code 162(h) with the heading “State legislators’ travel expenses away from home.”
This allows a legislator to designate his home as his main place of business. That designation allows legislators to be paid a tax-free per diem rate for meetings at the Capitol. In Arkansas, that amount is $149 a day.
But this section is limited to legislators who live more than 50 miles from the state Capitol.
Wills’ home city of Conway is 31 miles from the Capitol.
But Stovall said that doesn’t matter because 162(h) doesn’t apply to mileage reimbursement of a state-supplied vehicle.
State Revenue Commissioner Tim Leathers agreed.
“There is nothing in there that deals with legislative mileage,” Leathers said.
He said mileage reimbursements and a state-provided vehicle for a “business purpose” would be exempt from taxation. He declined to comment as to whether legislators’ travel from their homes to the Capitol is “business travel.”
He said it would be a “factual determination” based on a review of a particular situation and he can’t comment on individual taxpayers.
“I don’t know of anything that deals specifically with those issues,” he said.
Secretary of the Senate Ann Cornwell said senators don’t pay taxes on their mileage but “I don’t have a clue” why. She said, “That’s different than a car.” She has noted that, unlike the House, the Senate doesn’t have a vehicle for its leader, the Senate president pro tempore.
Legislative Auditor Roger Norman, like Leathers, said 162(h) doesn’t have anything to do with mileage.
His office cited a 1999 IRS ruling as potentially covering legislators. It states: “If a taxpayer’s residence is the taxpayer’s principal place of business ... the taxpayer may deduct daily transportation expenses incurred in going between the residence and another work location.”
David Ferguson, director of the Bureau of Legislative Research, initially said that 162(h) applied to legislative mileage.
But after being contacted by House staff, Ferguson said he was wrong.
Stell, of Oklahoma City, and who is the IRS spokesman for Arkansas, was out of the office last week.
Another IRS spokesman, Karen Connelly of Denver, said 162(h) refers to “per diem and not commuting/ transportation expenses.”
She declined to say whether legislative mileage reimbursements or legislative use of a state vehicle was taxable.
Connelly said it’s a “good question” why the IRS addresses legislative per diem for state Capitol meetings in a specific regulation but doesn’t have a regulation specific to travel by legislators to get to those meetings. She said she would refer the issue to IRS management.