State

This lawmaker bought a luxury houseboat in 2004. He never paid a dime in property taxes.

State Rep. C. Wesley Morgan, a Republican who represents part of Madison County, has not paid property taxes that local officials said were due on his 112-foot long houseboat. Morgan said the company that made the boat told him that if he registered the vessel with the U.S. Coast Guard, he would not owe any further taxes on it. That is incorrect, state and local officials said. The boat is docked on Lake Cumberland in Pulaski County.
State Rep. C. Wesley Morgan, a Republican who represents part of Madison County, has not paid property taxes that local officials said were due on his 112-foot long houseboat. Morgan said the company that made the boat told him that if he registered the vessel with the U.S. Coast Guard, he would not owe any further taxes on it. That is incorrect, state and local officials said. The boat is docked on Lake Cumberland in Pulaski County. bestep@herald-leader.com

State Rep. C. Wesley Morgan failed to pay property taxes on his $350,000 houseboat for more than a decade, denying school districts and local governments thousands of dollars each year, according to public records and interviews with officials.

Morgan, a Republican from Richmond, said in an interview Friday that he paid sales tax on the luxury boat when he bought it in 2004 but has never paid property taxes on it.

“I’ve never paid a dime on that boat since I got it” after paying the sales tax, Morgan said.

The freshman state lawmaker initially directed questions about his boat to a spokeswoman for House Republicans, but said Friday afternoon that he had received permission from House GOP leaders to speak with the newspaper.

Morgan said a representative of the company that made the boat told him that if he registered the vessel with the U.S. Coast Guard, he would not owe any further taxes on it. Other houseboat owners on the lake also told him they paid no property taxes as a result of registering their boats with the Coast Guard.

“I was a novice at this houseboat industry,” he said.

Morgan said he paid $2,500 to get the boat measured for that Coast Guard registration process. He said he understood that the manufacturer would take care of sending in the paperwork to register the boat with the Coast Guard, and did not find out until years later that it never happened.

Morgan’s understanding of the benefits of registering with the Coast Guard is incorrect, according to state and local officials who deal with houseboat taxes.

Even if an owner registers a houseboat with the Coast Guard, the law still requires filing a tangible tax return on the vessel annually, according to the Kentucky Department of Revenue.

Officials in Pulaski County, where Morgan’s boat is docked on Lake Cumberland, said the 2016 property tax bill on the boat would have been either $2,350 or $4,487, depending on its documentation status with the Coast Guard. Those figures were calculated using local tax rates and the $350,000 value of the boat listed in a court document.

Morgan’s boat has been docked at a Pulaski County marina since 2014, so he should have paid property taxes in the county in 2015, 2016 and 2017, according to the Pulaski County clerk’s office.

The state, the county school system, local services such as the library, as well as the city of Burnside, would have shared the money.

If Morgan did not pay taxes on the boat going back more than a decade, he ultimately could face a bill totaling tens of thousands of dollars because of added penalties and interest, said Tim Popplewell, the property valuation administrator in Russell County, who deals with houseboat taxes.

“He’s gonna get a big tax bill,” Popplewell said. “You’re gonna get upwards of $75,000 in a hurry.”

Popplewell said he has heard the claim a few times that documenting a houseboat with the Coast Guard excuses the owner from paying taxes.

That’s not the case, and it strains credulity that Morgan — a businessman who owns four liquor stores — would believe it, Popplewell said.

“I think that is a lame excuse that some people use,” he said.

Morgan, 67, has been the subject of controversy since joining the legislature in January because of proposed laws he filed to benefit his business and an arrest for illegally transporting alcohol as he moved products from one of his stores to another.

State law at the time barred liquor store owners from taking alcohol across county lines without a transporter’s license, a law designed to combat bootlegging. The legislature later changed the law and a judge dismissed the charge against Morgan, saying the statute was unconstitutional even before the change.

Two ways to pay taxes

Houseboat owners must declare their boat for tax purposes one of two ways in Kentucky.

One is to file a tangible tax return with the property valuation administrator in the county where the boat is docked, or with the Kentucky Department of Revenue. That method is for boats that have been registered with the Coast Guard, if they qualify.

There is a sizable state tax break on such “documented” boats. The state tax rate on tangible property is 45 cents per $100 valuation, but it’s only 1.5 cents per $100 on documented houseboats. Counties, schools and other local taxing districts can levy much higher tax rates on documented boats.

If the houseboat is not documented with the Coast Guard, the owner should get a title for it at the county clerk’s office, just as for other types of boats, according to the Kentucky Department of Revenue.

Records show Morgan did not go either route.

Morgan’s boat was not on Pulaski County’s certified personal property tax roll in 2015, 2016 or 2017, when a separate court record says it was docked at Lee’s Ford Marina Resort. That means he did not file a tangible tax return in those years.

In addition, there’s no record that he documented the boat with the Coast Guard in those years.

A Coast Guard database of documented boats current as of early July included an entry for the name and identification number of Morgan’s boat, but listed it as “case pending.”

Morgan said an agent working for him is pursuing Coast Guard registration of the boat, but that process has not been completed.

On the other front, Morgan did not obtain a title on the boat until July 17, 13 years after he bought it, according to state Transportation Cabinet records.

The title issued to Morgan in July said it was a first-time title. That means there would not have been information in the system to generate a property tax bill for Morgan, according to the Pulaski County clerk’s office.

Morgan said he applied for the title in order to document the boat with the Coast Guard.

With the boat now in the system, the Department of Revenue will be able to calculate how much Morgan owes in omitted taxes, penalties and interest, Popplewell said.

“And they won’t back off,” Popplewell said.

The department can’t comment on individual taxpayers because of confidentiality rules, said Glenn Waldrop, a spokesman for the department.

Morgan said he moored his boat in Pulaski, Russell and Wayne counties at different times. Taxing districts in all three would get a share if Morgan is charged for back taxes.

Morgan said he checked with an employee of the Department of Revenue during his 2016 campaign to see if he owed back property taxes on the boat. The employee, whose name he could not recall, said he did not, Morgan said.

The man said the issue was the subject of a court case and Morgan would not be subject to a payment while it was pending, Morgan said.

Pamela Trautner, a spokeswoman for the Department of Revenue, said Friday the agency is not aware of any court case challenging taxes on houseboats.

‘You go get a lawyer’

Morgan said he has always paid tax bills he knew about.

“You’ll not find one late, let alone never been paid,” he said.

Morgan said in his application for the title that he bought the boat in 2004. He listed the purchase price as $525,000.

The manufacturer was Sharpe Houseboats in Somerset, a one-time industry leader that later went out of business.

The 112-foot-long boat reportedly was a showpiece, featured in promotional efforts by the company.

Morgan said in a separate affidavit that Sharpe Houseboats did not complete the registration process on the boat. Still, he was able to obtain a title, and could have done so earlier, local officials said.

Morgan also has been involved in litigation over the boat in Pulaski County.

Morgan sued Lee’s Ford in 2016, alleging that the marina had illegally placed a lien on the boat and chained it to the dock.

Morgan had an agreement to sell the boat at the time, according to a court record. He asked a judge to force the marina to release the boat.

Lee’s Ford owner J.D. Hamilton argued in response that Morgan had not paid slip-rental fees and a commission that was due because he had listed his boat with Hamilton to sell, but then sold it privately.

Morgan struck a deal to sell the boat, which he moved to Lee’s Ford in 2014, for $350,000, Hamilton said. That sale was rescinded during the dispute over control of the boat.

Hamilton said in a court document that when he told Morgan he owed rental fees and a commission, Morgan said, “I don’t give a f--- what you do. You go get a lawyer.”

Morgan recently posted a bond of $162,444 — twice what Lee’s Ford’s attorney, John S. Gillum, calculated Morgan could owe in moorage fees if he loses the case.

Hamilton released the boat and Morgan moved it to another marina.

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