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Capps, Maldonado Exchange Barbs Over Personal Tax Controversies

The congresswoman failed to report rental income, and her challenger is embroiled in a dispute with the IRS over a family business

The candidates to represent California’s 24th Congressional District are calling each other out for tax controversies, with longtime incumbent Rep. Lois Capps, D-Santa Barbara, accused of failing to report rental income from a staffer living in her residence, and challenger Abel Maldonado’s family farming business still in a tax dispute with the Internal Revenue Service over millions of dollars in deductions.

Capps has long asked Maldonado to release his personal tax returns because of those issues. In publishing her own returns on her campaign site, her spokesman said she found a mistake and corrected it earlier this year.

According to her office, Capps’ accountant amended four years of income tax returns this year after failing to report income from having a campaign and district office staffer rent a room in her Santa Barbara home for several years.

Jeremy Tittle, now an executive assistant for Santa Barbara County First District Supervisor Salud Carbajal, rented a room while working for Capps (from about 2001 to 2004) and afterward, but the financial relationship wasn’t disclosed to Congress until 2006 and the Internal Revenue Service until 2012.

The handwritten, amended forms appear with the rest of Capps’ personal tax return documents on her site, and accountant David Powdrell of Carpinteria wrote that the amendments were filed because: “Taxpayer omitted rental income on single room at residence. Tax preparer neglected to file amended returns when omission was discovered on Feb. 13, 2006.” Powdrell disclosed the rental agreement to Congress in 2006 with a letter to the Legislative Resource Center.

“There was never an intentional misstatement of facts, simply an oversight by Congresswoman Capps,” he wrote in that letter.

Maldonado spokesman Kurt Bardella called out Capps’ failure to report rental income and questions the six-year gap between the disclosure to Congress and the amended IRS forms.

“The lingering question is, how did Congresswoman Capps’ certified public accountant know something in 2006 that she claims to have not known until 2012?” Bardella said Monday. “If Congresswoman Capps didn’t tell the CPA about the staffer renting a room in her house, who did?”

Maldonado expressed similar sentiments on Twitter last week.

“How do you not report income you’re getting from a person on both your congressional and campaign payroll who lives in your house?” he wrote.

Capps campaign spokesman Jeff Millman said the delay in notifying the IRS was an error only found this year when preparing the tax returns for the website. Capps has had the same accountant the entire time.

“There was a mistake, and as soon as we caught it, we fixed it right away,” he said Monday.

Capps also paid the $8,819 she owed to the IRS for the $41,000 in rent, he said.

“What happened is Lois voluntarily amended her tax returns … what she has done is totally within the law and there is no ethics violation at all,” Millman said.

This, he argued, shows the value of publicly releasing tax returns, and again he called on Maldonado to do the same.

“This is exactly why it’s so important for Mr. Maldonado to publicly release his taxes for every year he’s been in public office, to make sure that he has properly paid what he owes,” Millman said.

Capps’ campaign says there are real questions about Maldonado’s tax history and “dubious deductions” for personal expenses. The day after news outlets picked up the story about her amended tax returns, her campaign site published the federal court documents for Maldonado’s IRS case.

Earlier this year, Maldonado said he was stepping away from Agro-Jal Farming Enterprises, which he co-owns with his brother and father, the Los Angeles Times reported.

Bardella said Monday that the business is going through federal tax court with the IRS over millions of dollars in deductions, adding that the dispute is about deductions being taken over a period of 10 years instead of 29 years. Settlement negotiations are under way, but if no agreement is reached, Bardella said Maldonado could have to pay hundreds of thousands of dollars for his one-third ownership of the family business.

Bardella said they won’t be releasing Maldonado’s personal tax returns until the court case is finalized, and he wasn’t sure how long that will take.

Noozhawk staff writer Giana Magnoli can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.

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