Agriculture Commissioner Richie Farmer failed to report or pay taxes on his personal use of a state vehicle for the past six years, despite repeated warnings from state auditors, according to public records.
Farmer, a Republican candidate for lieutenant governor in the May 17 primary, acknowledges the error. Farmer will get amended wage and tax statements and have an undetermined sum of money deducted from his paychecks in coming months to compensate retroactively for his past failure to pay, said his spokesman, Bill Clary.
Clary said he did not know if Farmer will have to amend his tax returns for previous years.
"What it does with his taxes is a tax attorney thing," Clary said Tuesday.
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On Monday, a lawyer for the state auditor's office, Robert McBeath, wrote to the U.S. Internal Revenue Service and the Kentucky Revenue Department to advise them of Farmer's "failure ... to report fringe benefits associated with personal use of state-assigned vehicles."
"We will appreciate your keeping us advised of any action your office takes with respect to this matter," McBeath wrote.
The Agriculture Department provides Farmer with a state-owned Chevy Suburban as part of his benefits package, in addition to his $110,346 salary. Farmer is allowed to drive the sport utility vehicle outside of business hours, such as around Frankfort, where he and his family live.
But state vehicle policy requires personal mileage to be reported to the Personnel Cabinet, which prepares state employees' wage and tax statements. The policy says "the value of the employee's use of the vehicle must be reported as wages ... and all appropriate taxes must be withheld."
Farmer, the running mate of state Senate President David Williams, has failed to report his personal mileage for six years, according to the state auditor's office. Farmer first was elected as agriculture commissioner in 2003.
In an April 25 letter to Farmer, state Auditor Crit Luallen said a 2010 audit of the Agriculture Department found that Farmer had tracked his personal mileage but was not submitting it to the Personnel Cabinet, which would have included it as part of his taxable income.
Audits for 2008 and 2009 likewise reported that Farmer's personal mileage was not submitted. The audits refer to Farmer only as an Agriculture Department employee, but he is identified in the subsequent letters to the IRS and the state Revenue Department, and Farmer's office confirmed that he's the employee in question.
"The failure to properly report this information may lead to noncompliance with IRS requirements," Luallen wrote in her letter last month.
Luallen's office this week forwarded her findings to federal and state tax officials for further review because they involve tax issues.
On Tuesday, Farmer spokesman Clary attributed the lapse to a "problem with internal reporting and procedure" at the Agriculture Department. Farmer filled out personal mileage reports, but they never left his office, Clary said.
"Somebody in his office was just putting them in a folder," Clary said. "She didn't know what to do with them, so she didn't send them over to Personnel."
"Everyone in the department who has personal use of a vehicle, even if it's just a little, is now very much aware of this policy," Clary said. "That may not have been the case before."
Clary said that, in response to the most recent audit, Farmer sent his personal mileage records since 2008 to the Personnel Cabinet. The cabinet will use a valuation method to determine the monetary value of Farmer's personal use of the vehicle. Clary said he did not know what the mileage was or what the value will be.
"They're working on it," Clary said. "I don't know how much we're talking about here. It isn't a ton."
The Personnel Cabinet on Tuesday declined a request for the information under the Kentucky Open Records Act, citing the Agriculture Department as the official custodian of the mileage records and referring queries to that agency.
Speaking generally, and not of Farmer's case specifically, Lexington tax attorney Kenton Ball on Tuesday said IRS and state tax officials are getting tougher about collecting what's owed from "taxable fringe benefits," such as personal use of employer-owned vehicles. This is due in part to governments' increased need for revenue, Ball said.
Employers regularly should remind employees to report their personal mileage, said Ball, a former attorney with the Revenue Cabinet. However, the honor system also applies because employees are expected to volunteer the truth about where they're driving, he said.
"It's a personal honor, slash, personal integrity issue if you fail to report this," Ball said. "It's a soft, gray area that doesn't have a lot of light shined on it."