McInnis says he paid taxes on entire ill-gotten $300,000

One-time Republican frontrunner for governor Scott McInnis told the Colorado Independent he paid taxes on the entire $300,000 he was paid by Hasan Family Foundation to produce a handful of articles that, as has been widely reported, McInnis didn’t write but mostly lifted from papers written years ago by Gregory Hobbs, now a Colorado Supreme Court Justice.

McInnis was paid by the Hasan Foundation as a fellow but the money wasn’t all paid directly to McInnis. According to Foundation tax returns, McInnis received the $300,000 in three installments. He was directly paid $150,000 in 2005 and $37,500 in 2007. In between those payments, however, came one in 2006 for $112,500, which went to “Invest 2 LLC,” a now defunct limited liability corporation that listed McInnis’s wife Lori as its registered agent.

Invest 2 was formed in 2003 and dissolved in 2006, according to records on file with the Colorado Secretary of State. The Secretary of State’s office does not require LLCs to list their owners, so there is no way to determine through a public records search whether Scott McInnis and/or other people were owners of the LLC.

Asked Thursday why he would have taken some of the Foundation money personally and had some of it paid to an LLC, McInnis said simply “there is no reason.”

The LLC technically had no relationship to the fellowship work. It’s also not clear whether McInnis worked on the articles as an employee of the LLC. McInnis said that he and his wife file taxes jointly and that he therefore paid taxes on the $112,000 that went to Invest 2.

Media critic and Colorado independent contributor Jason Salzman has been doggedly reporting on the McInnis Hasan fellowship and he wrote a blog post yesterday at his BigMedia blog asking whether “McInnis avoided taxes on $112,500 of Hasan water money?”

It seems unlikely McInnis avoided taxes altogether although, as one prominent local attorney who asked not to be named, said “it would seem to me there was some tax advantage to do it that way. Obviously there is some tax advantage or he wouldn’t have done it. It is curious that he is not the registered agent of the LLC.”

In April, McInnis allowed The Colorado Independent and The Denver Post to look at but not photocopy pages of his tax returns from 2005 to 2008. The Post story, written then, contains no mention of income from Invest 2 LLC. The Independent’s notes from that meeting also contain no mention of Invest 2. McInnis’s financial disclosure forms from his time in Congress also do not mention Invest 2.

“If the corporation had multiple owners, and McInnis has said that his business activities involved family members and others, there could be tax avoidance issues,” Salzman speculated. “In other words, the income from McInnis’ writing activities may have been spread to his corporate co-owners, like perhaps his children, who had lower tax brackets than McInnis, and thus less tax was paid.”

Ethical questions have multiplied around the McInnis candidacy since news of the plagiarism broke. As the Colorado Independent reported Thursday, he has still not made arrangements to pay back the $300,000 the Hasan Foundation has asked be returned. The Independent has left messages for corporate and personal tax specialists and is continuing to report this story.

[Photo via McinnisforColorado flickr ]

Scot Kersgaard has been managing editor of a political newspaper, editor and co-owner of a ski town newspaper, executive editor of eight high-tech magazines (where he worked with current Apple CEO Tim Cook), deputy press secretary to a U.S. Senator, and an outdoors columnist at the Rocky Mountain News. He has an English degree from the University of Washington. He was awarded a fellowship to study internet journalism at the University of Maryland's Knight Center for Specialized Journalism. He was student body president in college. He spends his free time hiking and skiing.

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