Gov. Chris Christie failed to report as income or pay taxes on $380,000 in expense allowances he received from the state, according to a New Jersey Watchdog examination of Treasury data and the governor’s tax returns.
By not declaring the allowances on their joint returns, Christie and his wife, Mary Pat, avoided roughly $152,000 in federal income taxes over four years.
Despite an exchange of emails, Christie’s press office did not offer comment.
In addition to his $175,000 a year salary, Christie gets a $95,000 a year expense account. In the state budget, it’s described as an “allowance to the governor of funds not otherwise appropriated, for official reception on behalf of the state, operations of an official residence, and other expenses.”
The governor is not required to provide receipts, refund surpluses or provide information to the state on how the money is used. But failure to report a “non-accountable” allowance to the Internal Revenue Service is a different matter.
Contrary to IRS rules, Christie did not declare the allowances as income on federal returns for 2010, 2011, 2012 or 2013. The 2014 return is due Wednesday, but Christie typically receives six-month filing extensions.
The allowance is a New Jersey tradition that began in the mid-1970s. The original purpose was to provide funds to the state’s chief executive to run the governor’s mansion, now at Drumthwacket in Princeton, and hold official events there.
The expense account was originally $55,000 a year. It was increased to $75,000 in 1986, then hiked to $95,000 in 2000.
Times have changed, along with the need for the allowance. Recent New Jersey governors have chosen not to reside at Drumthwacket.
Christie lives at his private home in Mendham, 35 miles away. The cost of maintaining Drumthwacket, a 20-room Greek revival mansion on a nine-acre estate, is now primarily funded by a non-profit foundation.
So Christie is free to use the allowance however he wishes – and he doesn’t have to tell taxpayers how he spends the money.
Other New Jersey governors paid taxes on their allowances. One example is former Gov. Jim Florio, who disclosed it on his tax returns, the Associated Press reported in 1992. The AP story noted the expense account “must be declared as personal income.”
In contrast, Christie did not report the allowances in the 740 pages of tax returns he voluntarily released to the public as governor. (Follow the links to the governor’s filings for 2010, 2011, 2012 and 2013).
Under IRS regulations, if an employee gets an expense allowance but is not required to provide receipts or return any surplus, the arrangement is deemed non-accountable. Non-accountable allowances must be reported as supplemental wages subject to income tax, plus taxes for Social Security, Medicare and unemployment insurance.
From 2010 to 2013, Christie declared his state salary minus his pre-tax contribution to a retirement account, but not the $95,000 annual allowances. Most of the family’s other income came from his wife’s financial service jobs at Cantor Fitzgerald, LP and Angelo, Gordon & Co. in Manhattan.
New Jersey’s Watchdog’s analysis found:
- For 2013, the Christies paid $182,058 in federal income tax on $593,309 of reported taxable income. If the allowance had been declared, their tax bill would have been $220,216, an increase of $38,158.
- In 2012, they paid the IRS $90,377 on $350,438 of reported income. Counting the allowance, the bill would have been $125,403.
- The Christies’ 2011 reported income of $436,405 resulted in a $109,130 tax. The allowance would have raised their tax by $46,733.
- For 2010, the Christies reported taxable income of $327,170. If they had declared the allowance, their tax would have been $118,067, instead of $85,481.
In addition, the Christies dodged roughly $33,000 in New Jersey income tax by not reporting the allowances on their state returns. It raises intriguing questions about how the governor’s own administration might handle a possible violation of state tax law by their boss.
State Treasurer Andrew Sidamon-Eristoff, the official in charge of New Jersey’s tax collection efforts, is a Christie appointee, who serves at the pleasure of the governor. The Treasury is also the agency that disbursed the allowances to Christie and should have included the payments on the W-2 forms it shares with the IRS.
Spokesmen for Sidamon-Eristoff did not respond to New Jersey Watchdog’s request for information about the governor’s expense allowance.
The IRS has a wide range of options and discretion in pursuing wayward taxpayers. On one end of the spectrum, there is a one half-percent per month assessment for late payments plus the amount owed. As the severity of violation increases — negligence, civil fraud, criminal tax evasion and more — so do the consequences. The maximum penalty is five years in prison and a $250,000 fine.