Friday: New round of financial questions dogs Franken

Responding to new Republican charges that DFL U.S. Senate candidate Al Franken hid income from California tax authorities for years, Franken's campaign said Thursday that his accountant is trying to sort out whether taxes are owed.

Campaign manager Andy Barr said Franken is eager to resolve the matter, the latest in a series of controversies surrounding his personal corporation, Alan Franken Inc.

"Al feels that because his name is at the top of the organization, he takes ultimate responsibility for everything that goes on," Barr said. "But if there's a mistake that's been made, he's pretty insistent that the accountant fix it. He's been pretty vocal with [the accountant] on this point."

"Al spent the week doing an economy tour of the state," Barr said, adding "We're not hearing about this except from the Republican Party. ..."

The latest questions about the personal corporation Franken set up to handle his entertainment enterprises came in the wake of news last week that Franken owes California $5,800 in back taxes and penalties for failing to file state income tax returns for the corporation from 2003 to 2007.

The dollar figure represents a minimum tax charged to corporations with or without reported income.

The campaign explained that no returns were filed because Franken hadn't done business in the state since 2003, and that the accountant was unaware that the corporation, Al Franken Inc. (AFI), had to be formally dissolved.

But Republicans now say Franken has in fact done business in California on many occasions. Using the Internet and information programs such as Lexis Nexis, party researchers found 32 public appearances that Franken made in California from 2003 to 2007, at least eight of which charged an admission fee. For instance, Franken spoke at universities, addressed the Urban Land Institute and debated conservative pundit Ann Coulter for a lecture series.

Two events cited by the GOP were Franken appearances on the NBC's "Tonight Show with Jay Leno," taped in Burbank, Calif., for which Franken would have been paid the standard union fee as a member of the Screen Actors Guild.

"There's no question that he meets the definition of doing business in California since 2003," said Republican Party Chairman Ron Carey, calling Franken's claim to the contrary "a flat-out falsehood."

While AFI didn't pay corporate income taxes in those years, however, it wasn't entirely clear Thursday whether Franken had included that income on personal returns. Barr said that the campaign did not know whether personal returns have been filed in California, and that Franken's New York-based accountant, Allen Chanzis, was meeting with California officials to clarify what, if anything, is owed and to pay it.

The Star Tribune has been unable to independently verify whether taxes have gone unpaid.

Theresa Gray, a spokesperson for California's state Franchise Tax Board in Sacramento, said she could not confirm details of Franken's earnings in California for the years in question. Gray said Franken still owes more than $4,743.40 in corporate taxes, fines and penalties for the years between 2003 and 2007, when he failed to file corporate tax returns. Barr said that payment will be made once the accountant and tax officials resolve the matter.

Gray said that all earnings in California are taxable, but whether Franken would be obligated to pay corporate taxes on any income earned, rather than personal income taxes, would depend on how much he earned and other circumstances. The corporate income tax rate in the state is 8.84 percent, while the top tax rate in California for individual incomes is 9.3 percent -- with a 1 percent surcharge on taxable income over $1 million.

"There's not a lot we can say about individual income tax returns," Gray said. "We can say a little more about corporate returns, but not much."

Carey said he is skeptical that Franken has paid personal income taxes in California. He said Franken could resolve the issue by releasing his California income tax returns.

"The chance of that happening is one in a thousand, maybe," Carey said. "But why would he run everything through his personal accountant when AFI was set up to handle these kinds of transactions?"

The charges come after a series of controversies involving Franken's business.

Last month, Franken paid a $25,000 penalty to New York state for failure to pay workers' compensation insurance while an employer from 2002 to 2005. Franken, who said he never received the dozen-plus notices from New York in part because he had recently moved to Minnesota, paid the penalty and an $833 fine for failing to pay disability insurance.

The comedian and author started AFI in 1991 in New York. He incorporated the business in California in 1998 and in Minnesota in 2005, when he and his wife moved to Minneapolis.

Kevin Duchschere • 612-673-4455 Patricia Lopez • 651-222-1288