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Cahill committee didn’t pay state tax

Campaign amends years of returns

By Frank Phillips
Globe Staff / September 1, 2010

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State Treasurer Timothy P. Cahill acknowledged last night that his campaign committee failed to pay an estimated $15,000 in state income taxes over the past decade, as required by law.

Cahill’s campaign made the admission in an unusual written statement following a Globe inquiry yesterday afternoon about why there was no record of checks to the state to cover taxes on interest the campaign committee’s account has earned from investments it made in certificates of deposit.

Cahill, who was evidently caught off-guard by the lapse, vowed to pay the taxes immediately. But the delinquency is a source of embarrassment for the two-term treasurer, who has sought to promote an image as a prudent watchdog of public dollars and guardian of the public Treasury.

A former Democrat who left the party last year to run for governor as an independent, Cahill has built his gubernatorial campaign around his embrace of fiscally conservative positions, attacking Governor Deval Patrick for raising taxes and accusing him of mismanaging state government and freely spending taxpayers’ money.

In the statement, Adam Meldrum, Cahill’s campaign manager, referred to “recent internal audits by campaign staff with the guidance from the state campaign finance officials’’ at the Office of Campaign and Political Finance. “As of today the campaign has filed amended returns to the state of Massachusetts and a good faith estimate on taxes owed to the state relating to interest earned from our investments,’’ Meldrum said. He did not say how much the committee sent to the Department of Revenue.

“We will be working with all necessary parties over the next few days to ensure the exact amount is paid in full,’’ he said.

Meldrum also said Cahill had relied on others to oversee and audit his political account.

“Over the last eight years Treasurer Cahill’s campaign committee has rigorously maintained and complied with several successful audits and has had numerous tax professionals assist the committee in preparing our tax filings,’’ Meldrum said.

“Treasurer Cahill has been informed of the campaign’s findings and is extremely adamant that we get to the bottom of the situation and any and all amounts be paid in full as soon as possible,’’ Meldrum added.

Though it failed to meet state tax requirements, records of the Cahill committee, filed with state regulators, show that it did meet its federal tax obligations. Cahill’s campaign said it has paid, in all, about $102,000 in federal taxes on the interest the account has earned since 2002. The federal tax rate is 35 percent on the interest. The state levy is pegged at 5.3 percent.

Over the years, Cahill has raised millions of dollars to further his political career. At times he has raised money from people with an interest in business before the Treasury.

Cahill’s campaign account balance reached a peak of about $3.2 million, much of which was invested in bank CDs. His aggressive fund-raising has allowed him to mount a viable independent bid for governor.

Cahill is not the first political figure to be tripped up by the law requiring political committees to pay federal and state income taxes on interest. Two decades ago, the issue flared up when a slew of Beacon Hill leaders, who had invested some of their sizable war chests in savings accounts, violated the law by not filing income tax returns for their committees.

Several major political figures were forced to file back returns for their committees and also pay fines for the tax delinquencies.

Frank Phillips can be reached at phillips@globe.com.

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