Giannoulias took tax deduction for bank work in 2006

posted at 11:36 am on September 29, 2010 by Ed Morrissey

Alexi Giannoulias insists that he left his family’s bank in 2005 as he began his campaign for treasurer in Illinois, a convenient time as many of the decisions that sent Broadway Bank into receivership took place at that point and after.  However, Giannoulias told the IRS a slightly different story — and got a tax break as a result.  The Democratic nominee for Senate claimed at least 500 hours worth of work at the bank in 2006 in order to gain a $2.7 million deduction last year as the FDIC started watching the bank for collapse:

U.S. Senate candidate Alexi Giannoulias tells voters he was gone from his troubled family bank by late 2005, but that’s not what he told the Internal Revenue Service.

Giannoulias was able to take a $2.7 million tax deduction last year because he reported working hundreds of hours at Broadway Bank in 2006. …

The bank was at the top of his résumé when he was a 30-year-old first-time statewide candidate in 2006 with few professional highlights. But in his tight Senate race against Republican Mark Kirk, his tenure as a senior loan officer at Broadway is a bull’s-eye for critics who hit him for the bank’s loans to mob figures as well as troubled lending that contributed to Broadway’s collapse earlier this year.

Saying he left in 2005 gives Giannoulias maximum distance from the bank’s questionable lending practices, the April takeover by federal regulators and other controversies such as a loan by the bank to convicted influence peddler Antoin “Tony” Rezko in early 2006.

But by reporting that he worked at least 500 hours at Broadway in 2006, Giannoulias was able to get a break that helped him avoid paying federal income tax for 2009.

The issue isn’t tax evasion or fraud.  Apparently, the deduction is legitimate if Giannoulias worked at the bank in 2006, although it’s not clear exactly how working more than 500 hours for Broadway in 2006 gets someone off the hook for that much in taxes. That goes far beyond my paltry experience in tax law, and unless someone shows this analysis by the Chicago Tribune as faulty, I’ll assume that they have the legal implications correct.

But it’s not the legal implications that matter; it’s the political implications of offering one story publicly and another to the IRS.  The issue is one of honesty.  If Giannoulias insisted he stopped working at Broadway in 2005, and it turns out that he was fairly involved in 2006, one has to wonder why he didn’t just use 2006 as the cutoff date.  The Tribune explains that rather well; Giannoulias was the loan officer for the bank before his departure, and the bank gave loans to some very shady characters like Mike “Jaws” Giordano, a mob figure with a felony record who wanted to build floating casinos with the money, and Tony Rezko, who just got convicted of political corruption.

Giannoulias doesn’t want the subject of Broadway Bank’s loans and ultimate failure to become an issue in this election, even though it cost taxpayers hundreds of millions of dollars to rescue the bank shortly after his family took out almost $70 million in capital.  Instead of addressing the issue honestly, Giannoulias tried a little deception, pocketing his tax deduction for work he pretended not to have done in 2006.  That kind of dishonesty doesn’t belong in the Senate.


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So he’s a liar, what else is new?

Cookies Mom on September 29, 2010 at 11:39 AM

It’s the Chicago Way.

portlandon on September 29, 2010 at 11:39 AM

but did he have some lady washing his windows??? now that’d be a scandal…../

ted c on September 29, 2010 at 11:40 AM

Hmm. The way that deduction works, I think, is that (assuming Giannoulias was a major stockholder) the rule is a question of passive versus active involvement. 500 hours in a year is about 12 weeks full time work, or roughly 3 months. That would have made him active, coupled with his previous full time work there, so he could take advantage of the business losses.

Nice gig, but now it blows up in his face. Heh. Guess we’ll see if that 2.7 million dollar deduction was worth his Senate seat.

Vanceone on September 29, 2010 at 11:43 AM

At least is this thug loses his senate race, PBHO has a ready replacement for Geithner.

Bishop on September 29, 2010 at 11:44 AM

Democrats: Lowering the bar so you don’t have to. Just shut your eyes and pull the lever and pray they screw you last.

Extrafishy on September 29, 2010 at 11:44 AM

Liar, crook, politician….anyone surprised?

PatriotRider on September 29, 2010 at 11:45 AM

Michelle Obama got away with these kinds of shenanigans, why can’t Giannoulias?

portlandon on September 29, 2010 at 11:47 AM

If the LIBS in Illinois don’t see that this guy is a tax cheating, “knee deep in scandal” loser and actually vote for him, they deserve everything they get.

Dan Pet on September 29, 2010 at 11:49 AM

But it’s not the legal implications that matter; it’s the political implications of offering one story publicly and another to the IRS. The issue is one of honesty.

…..Honesty is never an issue for democrats…
……they are incapable of it.

This guy is a lying crook.It has been pointed out many times during his campaign how corrupt he is…….

……….the people of Chicago are either numb to it or don’t seem to care.

Chicago is a broke,crime infested mess and yet the “adults” continue to vote these corrupt idiots in year after year……it is a clear case of insanity.

Baxter Greene on September 29, 2010 at 11:50 AM

That kind of dishonesty doesn’t belong in the Senate.

Are you kidding! He’s precisely the kind of person Harry Reid is looking for!

GarandFan on September 29, 2010 at 11:50 AM

But by reporting that he worked at least 500 hours at Broadway in 2006, Giannoulias was able to get a break that helped him avoid paying federal income tax for 2009.

The issue is honesty

In other words lying, deceitfulness, and/or stealing. What else? It’s The Chicago Way.

The Democratic nominee for Senate claimed at least 500 hours worth of work at the bank in 2006 in order to gain a $2.7 million deduction last year

WOW. $2.7 million???!!!? It wasn’t work-work and in Chicago that’s tax deductible.

conservative pilgrim on September 29, 2010 at 11:53 AM

Are you kidding! He’s precisely the kind of person Harry Reid is looking for!

GarandFan on September 29, 2010 at 11:50 AM

Ha. Maybe he’ll be Reid’s new pet.

conservative pilgrim on September 29, 2010 at 11:54 AM

This is delish. So delicious.

It’s like this:

In 2008, someone in the DNC ran the numbers, and figured Hillary was not electable, even after all the groundwork the Democrats and their allies in the media laid down. The Baby Boomers are retiring, and retirement means fixed income. Fixed income means less ability to write million dollar checks for 527s or max out giving to Democrat candidates. By 2012, if Hillary were the nominee in ’08 and lost, they may not have the same funding they would in 2008.

So they called in 0bama and the Chicago Gang to take Hillary out, which they did. The problem with the Chicago Gang is that a nation doesn’t run like a city. You can’t “lean on” every journalist in the country or threaten every advertiser they have. Your opponents can’t be annoyed into moving out of your jurisdiction. And quite a few folks actually expect honesty from their government and get quite upset when they don’t get it.

It is to laugh. Giannoulas counted on voter apathy and hip-pocket media to keep stuff like this quiet. This ain’t Chicago.

Sekhmet on September 29, 2010 at 11:55 AM

If the LIBS in Illinois don’t see that this guy is a tax cheating, “knee deep in scandal” loser and actually vote for him, they deserve everything they get.

Dan Pet on September 29, 2010 at 11:49 AM

And what about those that vote third party in this race? No third party candidate has a chance in this race.

Our choices here suck, but I can handle six years of Kirk over six years of Giannoulias.

WashJeff on September 29, 2010 at 11:56 AM

The issue is one of honesty.

Giannoulias? Chicago? Honesty?

JEM on September 29, 2010 at 11:58 AM

There’s something fundamentally wrong with the voters of Illinois if this guy can even manage to top 25%.

JEM on September 29, 2010 at 12:00 PM

Let’s see his Obama-styled speech pattern get out of this one…

mjbrooks3 on September 29, 2010 at 12:06 PM

There’s something fundamentally wrong with the voters of Illinois if this guy can even manage to top 25%.
JEM on September 29, 2010 at 12:00 PM

My state elected Franken and also woman-beater Ellison. This is a fundamental problem with garbage liberals.

Bishop on September 29, 2010 at 12:06 PM

Giannoulias? Fuggedaboudit. You know what I’m sayin’?

slickwillie2001 on September 29, 2010 at 12:06 PM

The tax side of this is straightforward. You must work 5 years in order to take the loss on your tax return.

So, his “deduction” that sounds so sinister above is just losses – that’s real money.

Now, the political side is the real problem.

faraway on September 29, 2010 at 12:07 PM

Giannoulias has been running ads accusing Kirk of lying about his military service or lack thereof in Iraq. Now the Lying Stone turns back on him. It is too bad that Kirk had to fudge the truth on his own issues, otherwise he would be running away with this election in a cakewalk.

Yes, Kirk is a moderate (he is my congressman in IL-10), but I know that he will vote the right way when it comes to cutting taxes and spending and that’s good enough for me.

Even my liberal wife is voting straight ticket Republican in Illinois this year because she is so disgusted with the direction that Obama, Guv Quinn and the Dems have been taking the country.

Old Fritz on September 29, 2010 at 12:16 PM

That kind of dishonesty doesn’t belong in the Senate.

That kind of dishonesty belongs in a federal prison for a few years at the very least….

huskerdiva on September 29, 2010 at 12:16 PM

500 hours = $2.7 million deduction.

Ummmmm…..I thought there wasn’t supposed to be any math on this quiz, but…..doesn’t that translate to $5,400 per hour???

alwyr on September 29, 2010 at 12:19 PM

So, his “deduction” that sounds so sinister above is just losses – that’s real money.

Now, the political side is the real problem.

faraway on September 29, 2010 at 12:07 PM

Actually, the *real* real problem would be if he was actually lying to the IRS about his eligibility for that deduction. Although I suppose he can just appeal to Tim Geithner for clemency or something.

TexasDan on September 29, 2010 at 12:19 PM

I’d be happier if Kirk hadn’t been such squishy Rino. At least he appears to be on board to block any lame duck nonsense if elected.

Did you know we can email or fax Fed Write-In ballots now for IL (but give up privacy, of course)? It is very convenient and have to say I like it and no longer have to wait and worry for a ballot to come overseas, or get lost going back.

Renwaa on September 29, 2010 at 12:20 PM

Giannoulias, another of the most open, honest and ethical examples of the Democratic opposite game.

maverick muse on September 29, 2010 at 12:26 PM

Saying he left in 2005 gives Giannoulias maximum distance from the bank’s questionable lending practices, the April takeover by federal regulators and other controversies such as a loan by the bank to convicted influence peddler Antoin “Tony” Rezko in early 2006.
But by reporting that he worked at least 500 hours at Broadway in 2006, Giannoulias was able to get a break that helped him avoid paying federal income tax for 2009.

Hmmm, let’s do the math.

If Giannoulias worked 500 hours for Broadway Bank in 2006, and worked 40 hours a week, that would span 12 1/2 weeks. If that period started the first of the year (2006), it would have ended somewhere around late March, not long before the “April takeover by federal regulators”.

So, either Giannoulias WAS involved in the “questionable practices” leading to the federal takeover of the bank, or he bilked the IRS out of taxes on $2.7 million (at a 35% rate, that comes to $945,000 of unpaid taxes, or $1,890 per hour “worked” in 2006).

Giannoulias is either a banking crook or a tax cheat, or both. Just the kind of man we want in the Senate raising OUR taxes (/sarc).

Steve Z on September 29, 2010 at 12:26 PM

just appeal to Tim Geithner for clemency or something.

TexasDan

Seems so. But really, given that Geithner’s in the outs soon, Timmy might cling bitterly to his own right to cheat that doesn’t include letting anyone else who’d end up pulling him down all the sooner.

maverick muse on September 29, 2010 at 12:29 PM

/Given the amount of tax dollars evaded IN THAT TAX BRACKET by claiming to work 500 hours, are we to conclude that the top bracket’s tax payments are due either by not working at all or by working over 500 hours, but when they work the magic number of 500 hours, they don’t pay taxes?/

FLAT TAX PRIVATE INCOME

maverick muse on September 29, 2010 at 12:33 PM

Yeah, but he dabble in witchcraft? NO!!!

Caper29 on September 29, 2010 at 12:37 PM

500 hours = $2.7 million deduction.

Ummmmm…..I thought there wasn’t supposed to be any math on this quiz, but…..doesn’t that translate to $5,400 per hour???

alwyr on September 29, 2010 at 12:19 PM

Unfortunately, none of the reporting fleshes out what’s really going on. In 2005 and 2006 (and earlier years, for that matter), AG was both a shareholder and an employee of the bank, which evidently was an S corporation whose annual net income or loss is reported on the indidual returns of the shareholders in proportion to their share ownership during the particular year. Evidently, the bank had losses in 2006, and AG’s share of the bank’s losses was $2.7M.

Now, I believe, as part of the Tax Reform Act of 1986, Congress wanted to make it harder for investors in flow-through entities (such as an S corporation) to deduct losses if they didn’t “materially participate” in the company. Some byzantine regs were proposed in the late 1980s to provide some bright-line tests, and I think AG was trying to hang his 2006 deduction of losses on one of those tests–that is, that he worked 500 hours.

In the end, AG seems to be talking out of three sides of his mouth. First, he says to voters that he had nothing to do with the bank in 2006 so that he’s not tainted by the bad lending. Second, he’s telling the IRS that he slaved 500 hours during the the first five months of 2006 so that he can support his deduction of the losses. But wait, he’s now telling everyone that the worked those 2006 hours, but he did so serving in a Sergeant Schultz capacity in which he “saw nothinggggggg!”

You be the judge. If I’m the IRS, his 2006 return (filed in 2007) may still be open under the normal three-year statute of limitations. If not, I’d argue fraud which opens things back up. Then, I’d ask AG to provide support (diaries and what not). The IRS could crucify this guy.

Not to be incomplete, AG would eventually be able to take a deduction for his losses–but they’d be suspended until the year when he disposed of his stock. So, in the end, his use of the deduction is largely one of timing–either in 2006 or in later years.

BuckeyeSam on September 29, 2010 at 12:40 PM

For what it’s worth, the tax law which requires a minimum of 500 hours of service to support a tax deduction (hence eliminating the ability of passive investors to benefit from many tax deductions attributable to their investments) was part of the Tax Reform Act of 1986.

That law was pushed through Congress by none other than Chicago’s own Dan Rostenkowski and everyone’s favorite RINO, Bob Dole.

Nice irony.

molonlabe28 on September 29, 2010 at 12:43 PM

Another lying liberal in Chicago. He’s sure to win that Senate seat now!

capejasmine on September 29, 2010 at 12:47 PM

I saw him on Morning Joe being interviewed with his nose so
high in the air if it had been raining he would have drown.

Marcus on September 29, 2010 at 1:09 PM

BuckeyeSam on September 29, 2010 at 12.40 ‘responding’ to my remarks at 12.19 wherein I said:

500 hours = $2.7 million deduction.
Ummmmm…..I thought there wasn’t supposed to be any math on this quiz, but…..doesn’t that translate to $5,400 per hour???

_______________

BuckeyeSam: There are 30 days to election…30 days! You can waste your time citing IRS Rules & Regulations to ‘prove’ AG is in compliance with the letter of the law (and I’m sure your analysis is much more insightful than mine).

However, the fact remains this man took a $2.7 million tax deduction and his ‘justification’ is he spent 500 hours on bank business. However you wish to ‘crunch the numbers’, this does in fact translate to AG vasluing his services at $5400 per hour.

IRS Rules and Regulations aside, any question as to ‘right or wrong’ aside, the claimed $5400/hour valuation on this man’s services SHOULD enrage the IL electorate.

Thankfully, AG doesn’t have 32, 33, 35, much less 40+ days to ‘explain/justify’ himself. The voters are going to the polls in 30 days and they CAN relate to $5400/hour – as opposed to convoluted, strained and strangled ‘explanations’ as to why everything’s allegedly on the ‘up and up’.

alwyr on September 29, 2010 at 1:16 PM

What a bitter shame that we didn’t nominate a Republican to run against this scumbag. Instead we have Mark Kirk, douchebag, anti-conservative liberal sissy.

It would have been so easy to flush Giannoulias down the drain, but there are still far too many conservatives who will not vote for a candidate who hates them, like Kirk obviously does. And I can’t blame them one bit.

Our choices here suck, but I can handle six years of Kirk over six years of Giannoulias.

WashJeff on September 29, 2010 at 11:56 AM

Barely.

Jaibones on September 29, 2010 at 2:32 PM

As a rich person shouldn’t Gianoulious want to pay extra taxes?

Two things are pretty striking for followers of Chicago politics.

1. The Trib , despite being liberal, continues its love affair with Mark Kirk. The two should get a room already.

2. Mark Kirk continues to be a crafty politician. Someone should tell the Gianoulious campaign that you wait until October to release the damning info about your opponent. The last month will be all about Broadway Bank. Kirk generally outperforms the polls so it wouldn’t shock me if this one was called earlier than people expect.

Illinidiva on September 29, 2010 at 3:23 PM

Illinidiva on September 29, 2010 at 3:23 PM

Interesting viewpoint. I have it exactly the opposite:

1. The Trib, despite 100 years without endorsing a Democrat for President, goes all the way in the tank and helps run Obama’s campaign, and is now suffering a vicious whipping at the hands of their former patrons. They have endorsed almost all Republicans in the coming election, after waves of Democraps in lower races the past two cycles.

They are nevertheless staffed from bottom to almost the top with nothing but liberals. What few aren’t Democrats are RINOs of the lowest order. Their love of liberal Mark Kirk should have been as predictable as cold in January.

2. Mark Kirk is running just ahead of the weakest Senate candidate outside of South Carolina, in an environment where virtually any candidate with ten fingers and toes would be crushing Giannoulias by double digits (yeah). The only thing that has kept it close is Kirk perfidy and his astonishing stupidity. He could have kissed up to conservatives, lied and bought some of their support; instead he continued to trash the right all the way into September. He is openly contemptuous of his base; he actually likes liberal Democraps more than conservatives, and he goes way out of the way to show it.

He might be the stupidest politician in Illinois. If he’s leading at all, it’s an accident.

Jaibones on September 29, 2010 at 9:37 PM