Another Cabinet Appointment, Another Tax Issue

The latest to be stung by a tax controversy is Health and Human Services nominee Kathleen Sebelius, who has now corrected three years of tax returns and paid more than $7,000 in back taxes after finding “unintentional errors”, according to the Associated Press.  

The Kansas governor explained the changes to senators in a letter dated Tuesday that was obtained by The AP.   She and her husband paid a total of $7,040 in back taxes and $878 in interest to amend returns from 2005-2007. The HHS position was originally slated to go to former senator Thomas A. Daschle, who withdrew from consideration last month over his failure to pay $146,000 in back taxes and interest (see  Daschle Drops Out ).  Tax questions have also arisen during the nomination process for now-Secretary of Labor Hilda Solis (see Confirmation of Solis for DoL Held Up as Husband Pays Back Taxes)   and Treasury Secretary Timothy Geithner.

However, Finance Committee Chairman Max Baucus (D-Montana) subsequently issued a  statement supporting Sebelius’ nomination. “Congress is going to need a strong partner at the Department of Health and Human Services to achieve comprehensive health reform this year, and we have that partner in Gov. Sebelius,” Baucus said. “There is absolutely no doubt in my mind that Gov. Sebelius has the political experience, determination, and bipartisan work ethic to get the job done with Congress this year. She’s the right person for the job.”

Sebelius, who was nominated earlier this month (see  is to appear tomorrow before Baucus’ committee, which will vote on sending her nomination to the full Senate. She testified yesterday before the Senate’s Health, Education, Labor and Pensions Committee before the tax issue became public.

Errors Outlined

In her letter to Baucus and the top Finance Committee Republican, Sen. Chuck Grassley of Iowa, Sebelius wrote that the errors were discovered after she and her husband, Gary, a federal magistrate judge in Kansas, hired an accountant to review her returns in preparation for her confirmation hearing. According to the AP, the accountant discovered these errors:

• Charitable contributions over $250 are supposed to include an acknowledgment letter from the charity in order for a deduction to be taken. Out of 49 charitable contributions made, three letters couldn’t be found.
• Sebelius and her husband sold their home in 2006 and then took a mistaken deduction for mortgage interest.
• Insufficient documentation was found for some business expense deductions.

The AP noted that an administration official said Sebelius filed the amended returns before her nomination papers were sent to the Senate Finance Committee. Sebelius advised the committee of the mistakes, and senators requested an explanation, according to the AP, citing the official, who spoke to them on condition of anonymity.