Governor Palin, your tax return, please
According to Mapquest, the distance from Juneau, the capital of Alaska, to the town of Wasilla is 817 miles. It is a 20-hour drive that crosses the Canadian border and then comes back into Alaska. Most people who need to make this trek don't drive it if they don't have to. They fly from Juneau to Anchorage; Wasilla is about 50 miles and an hour's drive from the Anchorage airport.
When Sarah Palin became the state's governor, she became entitled to live in the governor's mansion in Juneau. Palin has apparently never really moved to Juneau, however. She and her family still spend most of their time in Wasilla. For example, all of the colorful recent events involving Palin babies happened in Wasilla or thereabouts. But the various Palins often fly to Juneau so that the governor can go to work there; other times, she works out of a state building in Anchorage and stays in her Wasilla residence, which is not state property.
The trips back and forth between the two locales certainly appear to be the Palins' personal choice. They could live entirely in Juneau, but apparently they prefer the life they have in Wasilla, and so they engage in long-distance commuting. All well and good. It's a free country.
What gets interesting is the fact that the State of Alaska pays the Palins "per diem" allowances for time they spend in Wasilla, according to reports published yesterday. The Washington Post wrote:
Alaska Gov. Sarah Palin has billed taxpayers for 312 nights spent in her own home during her first 19 months in office, charging a "per diem" allowance intended to cover meals and incidental expenses while traveling on state business.Whether these charges were legitimate under Alaska rules and regulations, I haven't a clue. Certainly there are questions about their propriety. (Perhaps we could track down Emilie Boyles and see what she thinks.) But I do know something about the federal income tax consequences of fringe benefits, and it certainly appears to me based on the published reports that some, if not most, of these "per diems" should have been included as income on the Palins' federal income tax return. If they weren't, something's wrong.
The governor also has charged the state for travel expenses to take her children on official out-of-town missions. And her husband, Todd, has billed the state for expenses and a daily allowance for trips he makes on official business for his wife.
Palin, who earns $125,000 a year, claimed and received $16,951 as her allowance, which officials say was permitted because her official "duty station" is Juneau, according to an analysis of her travel documents by The Washington Post.
The governor's daughters and husband charged the state $43,490 to travel, and many of the trips were between their house in Wasilla and Juneau, the capital city 600 miles away, the documents show.
"Per diem" allowances received by an employee can legally be omitted from her gross income if they constitute reimbursements for amounts that the employee could have deducted as business expenses had the employee paid for them out-of-pocket and not been reimbursed. Thus, for Palin, the tax question would appear to boil down to whether, had she not been reimbursed for the $60,441 of travel, meals, and lodging expenses, she could have legitimately taken business deductions for them.
It does not appear that such deductions would have been allowable for any amounts attributable to travel by her husband and children. Section 274(m)(3) of the Internal Revenue Code strictly forbids deductions for bringing spouses and dependents along on business travel unless the spouses and dependents (a) are employees of the taxpayer (here, the taxpayer is the governor), (b) are travelling for a bona fide business purpose, and (c) would otherwise be entitled to deduct the travel on their own tax returns. Unless Palin's spouse and kids are also her employees and she can show that they were away on their own businesses, their expenses would not be deductible by the governor. And therefore she cannot exclude from income any per diems attributable to any of them. (By the way, since she's the employee, the income would be required to be reported on her own return, not her kids'.)
As for her own travel, Palin could also run into tax problems. Only travel "away from home" qualifies for tax exclusion (or deduction), and for this purpose, one's "home" is generally the principal place of one's business. In this case, the governor reportedly works out of offices in both Anchorage and Juneau, but since she has only one state job, she can declare only one of those as her tax "home." If Juneau is her tax "home" (which would seem to be the case, since that's the capital), she cannot exclude or deduct meals and lodging expenses incurred in Juneau, and if Anchorage is her tax "home," she cannot exclude or deduct such expenses incurred in Anchorage or Wasilla. If she got per diem reimbursements for stays in both places, stays in only one place would appear to be excludible or deductible. And perhaps more importantly, the cost of regular commuting between one's residence and one's tax "home" is not deductible at all, no matter how long the distance between them; it is certainly possible that Palin's treks between the two locales are simply long-distance commuting for tax purposes.
I am sure our right-wing brethren will cite the questions being raised here as another "smear" on Palin. But you know what? Reporting all your income on your tax return is totally, totally relevant to one's fitness for office. I said so about Charlie Rangel just last week, and I'll say it again here with reference to Governor Palin.
And so it's time for her to produce the tax return and show us whether she did the right thing.
UPDATE, 10/5, 11:56 a.m.: The Palins' returns have been released, and they did not report any of the travel reimbursements as income. We have revised our legal analysis in an update post here, but we still conclude that a large part, if not all, of the travel money should have been included on the return.