$24,197 California Refund Sought : Agnew Wants Tax Break on Bribes He Returned

Former Vice President Spiro T. Agnew, claiming he is entitled to tax deductions for the $142,500 he paid Maryland as restitution for bribes he collected while governor, is asking the State Board of Equalization to refund $24,197 in California income taxes.

Agnew, a resident of Rancho Mirage, claimed the deduction on his 1982 California income tax return after a Maryland circuit judge directed him to reimburse that state for the bribes he had accepted plus $101,235 in interest. The deduction was disallowed four years later by a California Franchise Tax Board auditor, who assessed Agnew additional taxes plus interest.

Agnew paid the taxes under protest and appealed the auditor’s decision to the State Board of Equalization, which has scheduled a hearing Thursday.

The tax dispute is the latest in a string of legal entanglements stemming from Agnew’s acceptance of bribes from road engineering contractors during his tenure as governor of Maryland from 1967-69.

The bribery scandal involving the vice president erupted in 1973, just as the Watergate controversy was enveloping the Nixon Administration and capturing national attention. Agnew resigned Oct. 10, 1973, as part of an agreement with federal prosecutors. He pleaded no contest to charges that he had evaded taxes on thousands of dollars paid to him as governor by Maryland road engineers seeking government contracts.

Later, he was ordered to pay additional taxes, penalties and interest of $148,000 to the federal government and $14,105 to the state of Maryland. The publicity surrounding the case prompted three Maryland residents and the state attorney general to file a civil lawsuit to recover the bribe money for the state.

Agnew, who became a business consultant after leaving the Administration, reported more than $600,000 in income from wages, interest and dividends on his return.

Agnew is seeking the tax deduction in California because by the time the final ruling was issued in the Maryland case in 1981 and the former vice president made the payment, he was a California resident.

Court Order Cited

In a tax appeal filed with the Board of Equalization by Maryland lawyer T. Rogers Harrison, who also represented Agnew in the civil case, the former vice president argued that he is entitled to a deduction on his California income tax because the $142,500 bribe restitution payment was made to satisfy a court order.

Agnew also contended that, in effect, he was being taxed twice--once by the state of Maryland when he was directed to pay $14,105 in back taxes and now by the state of California. Furthermore, he contended, it would not be fair to require him to pay taxes on money he was not allowed to keep.

Harrison urged California officials in making their decision to “ignore the identity of those involved” and focus entirely on the circumstance Agnew was facing as a state taxpayer.

“There is no doubt it is patently unfair,” Harrison wrote.

The attorney said that even the judge in the “prolonged, expensive and agonizing” Maryland civil case noted in his ruling that Agnew should get credit for the Maryland taxes he paid because the money was “not . . . his to begin with” and he “should not be required to pay tax on it.”

But lawyers for the California Franchise Tax Board said the question of double taxation is something Agnew needs to resolve with the state of Maryland, not the state of California. They acknowledged that in California a taxpayer can receive a refund if he has paid taxes in previous years on income he was later forced to return.

In Agnew’s case, however, they argued that the previous tax was paid before he became a resident of California.

“The state of California has never received any income, in the form of taxes or otherwise, from the amounts (Agnew) allegedly received as bribes during his various terms of office,” wrote Lazaro L. Bobiles, a lawyer for the Franchise Tax Board. “(Agnew) has made restitution of the alleged bribes only to the state of Maryland and has paid taxes on the alleged bribes only to that state and to the federal government.”

As for his argument that he was entitled to a deduction for payment of a court judgment, Bobiles said California law only permitted deductions for the expenses of “carrying on a trade or business or expenses incurred in the production of income.”

To give Agnew a break on his California taxes, Bobiles argued, would have the effect of requiring California taxpayers to partially subsidize Agnew’s “return of public monies to the taxpayers of Maryland.”

Harrison, who could not be reached for comment Monday, said in the appeal that Agnew was prohibited by a statute of limitations from seeking a refund of his Maryland taxes.