Tax Board Says No to Agnew’s Bid for Refund

Former Vice President Spiro T. Agnew is not entitled to California income tax deductions for the $142,500 he paid the state of Maryland as restitution for bribes he collected while in public office, a tax appeals board ruled Thursday.

The California Board of Equalization voted unanimously to deny the former vice president’s request for a $24,197 tax refund after one member asserted that it would be ridiculous to construe the repayment of bribes to be deductible business expenses.

“I find it very hard to be sympathetic,” said board member Conway Collis, “to someone who had to pay over $140,000 back to the state of Maryland as part of restitution for bribes taken, but now wants California to allow him a deduction for that payback just because he is now a California resident.”

Neither Agnew, who lives in Rancho Mirage, nor his attorney attended the brief hearing.

Agnew had paid the tax under protest after the Franchise Tax Board disallowed the deduction in a 1986 audit of his 1982 state income tax return. He appealed the decision to the five-member Board of Equalization, where it automatically became a public matter.

Agnew was accused by federal prosecutors in 1973 of collecting illegal cash kickbacks on highway contracts beginning in the early 1960s when he was Baltimore County executive and continuing while he was governor and vice president.

Agnew resigned as vice president on Oct. 10, 1973, and pleaded no contest to a single charge that he had evaded federal income taxes on the bribes. He was ordered to pay a $10,000 fine and handed a three-year suspended prison term.

He was subsequently directed to pay back taxes on the kickbacks, along with interest and penalties amounting to $148,000 to the federal government and $14,105 to the state of Maryland.

Moved to California

Later, as a result of a civil lawsuit, he was ordered to make restitution payments totaling $268,482 to the state of Maryland to cover the amount of the bribes plus interest. By the time the court issued its order, Agnew had become a California resident.

Agnew could have filed for a refund on his Maryland taxes but his attorney maintains that by that time the statute of limitations had run out.

In a short appeal, Agnew argued that he was entitled to deduct the restitution payments from his state income tax because he made them to satisfy a court order. He also contended that, since he had already been taxed on the bribes by the state of Maryland, it would be unfair for California to prevent him from deducting the restitution payment.

Attorneys for the Board of Equalization recommended that his request for a refund be denied, arguing that the question of double taxation was something Agnew needed to resolve with the state of Maryland and not the state of California. Under California law, they said, payment of the court judgment is not a deductible expense.

“It would hardly be equitable for the taxpayers of California essentially to foot the bill for part of (Agnew’s) liability to the taxpayers of Maryland for bribes received while he was a resident and elected official of that state,” they wrote.

Despite their unanimity on the issue, the Agnew case illustrated anew the animosity that exists among the five Board of Equalization members, who regularly accuse each other of grandstanding for the press.

“I want to thank Mr. Agnew for bringing this to our attention because . . . we all have political ambitions and there’s nothing more delightful than this publicity feast upon which we can all indulge,” said board member William Bennett with tongue in cheek.

Retorted Chairman Paul Carpenter: “I think I’ve heard the pot calling the kettle black.”

Although he voted to deny the refund, Bennett wondered afterward whether cases such as Agnew’s, which generate tremendous publicity, ever get a fair hearing from elected public officials.

“People such as Agnew and others are in a very difficult position when it comes to getting a fair and objective hearing, and that’s wrong,” he said.

But in Maryland, former lawyers and prosecutors involved in his court cases told the Associated Press they could not sympathize with Agnew for his tax difficulties.

“Nothing that Mr. Agnew will try to do surprises me,” said John F. Banzhaf III, a law professor who helped develop the civil case against the former vice president. “It takes a tremendous amount of chutzpah to try to take a tax deduction for bribe money.”

“Do I feel sorry for Agnew? Absolutely not. He is one of the luckiest men of his generation,” said Stephen H. Sachs, who was Maryland’s attorney general when Agnew made the restitution payment. “Agnew’s plea bargain was the greatest deal since the Lord spared Isaac on the mountaintop.”

Agnew can now either ask the board for another hearing or appeal its ruling to the courts.