The DFLer's Senate campaign said that his corporation, AFI, unknowlingly neglected to pay taxes because it stopped doing business in the state numerous years ago. A California tax official said that AFI needed to dissolve itself. The GOP sees a pattern.
DFL U.S. Senate candidate Al Franken owes $5,800 to the state of California after failing to file state income tax returns for his personal corporation from 2003 to 2007, officials said Wednesday.
Franken, widely considered the front-runner for his party's endorsement to face Sen. Norm Coleman, apparently hasn't done business in California for years but didn't take steps in the meantime to dissolve the corporation, Alan Franken Inc. (AFI). Franken's accountant said Wednesday that his office had asked California to remove AFI from its tax records five years ago, however.
AFI is considered "forfeited" by California and required to pay the state a minimum franchise tax of $800 for each year it's been delinquent, said John Barrett, a spokesman for the state Franchise Tax Board in Sacramento.
"When you start a corporation, whether it's Al Franken or Joe Blow, it's a legal entity almost like a human being, with a date of creation and a date of death," Barrett said. "He hasn't filed his '03-07 corporate returns."
Once Franken fills out the necessary forms, files the delinquent returns and pays the tax, penalties and interest, California can close down the corporation, Barrett said. According to Barrett, Franken owes $4,000 in back taxes and $1,794.60 in penalties and interest.
His mistake isn't uncommon, Barrett said. Many business owners don't understand the need to dissolve a corporation before walking away from it, he said.
It was the second time in two months that an unpaid penalty has been found entered against AFI outside Minnesota. Both times the news was broken by Minnesota Democrats Exposed, a blog run by Republican activist Michael Brodkorb.
Franken camp responds
Franken, who is conducting his "On Your Side" tour of the state, was in St. Cloud on Wednesday and unavailable for comment, campaign manager Andy Barr said.
However, the campaign released a statement from Franken's accountant, Allen Chanzis, who said his office sent a letter to the state of California in 2003 asking it to remove AFI from its tax records as AFI "will no longer be doing business in California."
In his statement, Chanzis said: "We made an honest and reasonable attempt to inform the state of California that we wished to terminate our corporate status within the state."
"Today I learned that the action intended may have required a different technical form than the one that I sent. I have contacted the state of California in order to rectify the situation and bring this matter to a conclusion."
However, state records show that Chanzis filed corporate disclosure forms for AFI with the California Secretary of State's office in 2004 and 2006. Barr said he didn't know enough about the matter to explain the possibly conflicting documents.
GOP official sees 'pattern'
Mark Drake, a spokesman for the Minnesota Republican Party, said Wednesday that the incident "is part of a pattern" that began with last month's revelations that AFI had failed to pay workers' compensation insurance in New York state.
"Al Franken doesn't follow the law, and he thinks there is one set of rules for Al Franken and one set of rules for somebody else," Drake said. "Now it turns out the state of California has been looking for him for years, so Al Franken has a real credibility problem here."
It's unclear who, if anyone, received the several notices that Barrett said the state routinely sends to a company in AFI's situation, informing it that returns haven't been filed.
The mailing address that California has for AFI is Chanzis' New York office. Chanzis did not return a phone call Wednesday.
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 to manage his entertainment and speaking enterprises. He incorporated the business in California in 1998 and in Minnesota in 2005, when he and his wife moved to Minneapolis.
Barrett said that state corporate collectors would have been trying to track down Franken for the past few years. Asked why they wouldn't have been able to find the nationally known Franken, Barrett said that celebrities typically list only CPAs (as Franken did) or tax attorneys rather than their home address, "so it's like an endless circle."
A copy of the letter from the office of Franken's accountant to California is at www.startribune.com/a4280.
Kevin Duchschere • 612-673-4455