Ohio hopeful for US House fought tax assessment

By Julie Carr Smyth
AP Statehouse Correspondent / April 14, 2010

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COLUMBUS, Ohio—The leading GOP challenger to Democratic U.S. Rep. John Boccieri was assessed nearly $1.4 million in unpaid state taxes, interest and fees in 2006 -- a finding he fought vigorously but eventually paid.

Republican Jim Renacci and his wife Tina filed adjusted gross income in 2000 of negative $247,000 but a state audit calculated the sum at $13.7 million, according to an Associated Press review of public documents. The couple was assessed $954,650 in unpaid taxes, $146,938 in interest, and a $293,876 penalty as a result of the discrepancy.

Renacci, of Wadsworth, has made his success as a businessman and proponent of fiscal discipline a linchpin of his campaign against Boccieri, among the nation's most vulnerable congressional Democrats.

According to a 2009 personal financial disclosure statement filed with the U.S. House, Renacci holds assets worth between $35 million and $50 million and made salary, interest and other income of between $500,000 and $4.3 million in 2008 and 2009. His precise worth can't be determined from the form because it asks only for ranges.

He is the Ohio Republican Party's pick for the nomination, which is also being sought in the May 4 GOP primary by former Ashland County Commissioner Matt Miller, radio talk show host Paul R. Schiffer, and H. Doyle Smith.

Boccieri, an Air Force pilot and repeat veteran of Iraq and Afghanistan, was elected in 2008, seizing a district that had leaned strongly Republican for the many years it was held by GOP Congressman Ralph Regula. His political vulnerability grew after he voted in favor of President Obama's health care reform bill. During the days just before and after that vote, Renacci's campaign raised $60,000 from supporters.

Campaign spokesman Jim Slepian said Renacci was among many Ohio taxpayers who fought similar assessments against income they held in trust in S corporations that they believed to be tax-free. The Renaccis' trust held about $14 million before it was liquidated in October 2000.

Slepian said Renacci's trust was established shortly after the law created them in 1996, and Renacci paid federal taxes on the sum as well as fully reporting the trust's contents to state tax regulators on his 2000 return.

Slepian said Renacci and many other Ohioans believed there were sound legal grounds on which to challenge the tax commissioner's decision to "unilaterally assess taxes on trusts for which Ohio law provided no tax liability."

"It took two state Supreme Court decisions and several years to clarify whether or not the commissioner's decision to impose this retroactive tax was legal, and once the law had been settled, Jim Renacci once again fully complied," Slepian said.

Court filings indicate the Renaccis persisted in challenging the tax law's application to his S corporation trust long after other taxpayers. In an October 2007 brief, for example, state attorneys told the Ninth District Court of Appeals in Medina County "the vast majority of those taxpayers filing appeals" with the Ohio Board of Tax Appeals over the same issue had either dismissed their cases or stopped pursuing their complaints.

They said the Renaccis were the only taxpayers to assert that penalties in such cases were an abuse of the commissioner's discretion, and noted that the state had the ability to apply a much larger penalty.

The state argued that, under guidelines issued in 2002, "the Renaccis' course of conduct properly would have subjected them to the imposition of the statutory fraud penalty. Their 2000 Ohio income tax return never disclosed their use of the grantor trust to exclude income from their S corporation shares held in the grantor trust and they never filed an amended 2000 return disclosing their use of the grantor trust device."

Slepian said protesting the taxation of the trust was a matter of principle for Renacci. He had an opportunity to avoid a portion of the penalty if had he settled earlier, Slepian said, but he chose to fight on -- and lost again. Slepian said Renacci still hopes to have all or part of the penalty refunded.

In a campaign video posted to YouTube, Renacci said he believes in smaller government and lower taxes so business owners can put more of their money back into creating jobs and improving the economy.