IRS: Supervisor candidate Pete Foppiano owes $1.5 million in taxes

Pete Foppiano, a candidate for Sonoma County's 4th District supervisor seat, owes $1.5 million in federal income taxes, according to liens filed against him at the county Recorder's Office.

Foppiano, a mortgage and real estate broker and former Healdsburg mayor, has owed the money to the Internal Revenue Service since 2010, the county records show.

In addition, the state and county filed tax liens against Foppiano. All 10 of those tax liens, which totaled $15,635, have been cleared, although some were paid off only two weeks ago, records show.

Foppiano, 60, adamantly disputes the amount the IRS claims he owes for the tax years 1999 through 2008. He said the liens are due to the federal agency's "misinterpretation" and "misunderstanding."

"I have paid every single dime of tax that I legally owe, not the amount they claim I owe," he said Tuesday. "I have attorneys arguing the point."

While the IRS liens stem from a standoff with the federal government, a list of other past debts and financial judgments on file against Foppiano at the county reflect his struggle through the recession, he said.

"I'm just like everybody else — the average, middle-class person on the street. I tried to persevere, there were some consequences and we're all hoping to recover," he said.

Still, questions about Foppiano's financial history could stall his candidacy just 12 days before voting begins in the June 3 primary, upending a closely fought race for the north county seat held by outgoing Supervisor Mike McGuire.

A political operative involved in the race provided the initial tip to The Press Democrat regarding the liens and other court judgments on file against Foppiano in Sonoma County Superior Court and the county Recorder's Office. The source requested anonymity before providing the information.

Two of Foppiano's four rivals in the contest said the liens raise doubts about his ability to hold public office in a system dependent on taxpayer revenue.

"My first question: Is that normal to have that many tax liens and judgments against you?" said James Gore, a candidate in the race. "When tax issues come up, it's pretty sensitive with voters and residents."

"I don't think it's going to help his chances," said Ken Churchill, another rival in the contest.

Foppiano said his dispute with the IRS arose from the way the agency calculated his income.

The IRS focused only on total deposits made into his business bank accounts, even though much of it represented commissions owed to agents working for him, he said.

Foppiano said that under state law, as a licensed real estate broker he is required "to receive and transmit commissions that belong to an agent."

For example, for 2005, he said the IRS said his adjusted gross income was $1,277,000, based on deposits into his accounts.

But he said he paid out almost $628,000 of that in commissions to agents, who were selling property or securing loans. Along with his business expenses of $126,000, he calculated his estimated adjusted gross income at $522,485.

Foppiano said the federal agency focused only on bank deposits and disallowed all his deductions.

"The IRS says you put a check in the bank, that is your earned income," he said. "Their numbers are wildly in error."

"We have a disconnect between state and federal law," he added. He said he has spent years and "tens of thousands of dollars in attorneys fees to try and correct" the amount the IRS says he owes.

Renael Thompson, the IRS officer who signed the liens against Foppiano, said she couldn't discuss details — including how much of what Foppiano owes is a result of penalties and interest.

"I couldn't disclose anything about his tax liens — what he may owe, or any specific information," she said.

Public records raise additional questions about Foppiano's other tax liabilities.

County records show Foppiano failed to pay county business taxes in a timely fashion, with nine separate "certificate of delinquency" liens filed against him totaling $8,395 between 2002 and 2013.

By April 11, Foppiano had paid off all of the liens, some of which had been pending against him for years.

He said they represented business taxes assessed for Golden Bear Financial, his mortgage and real estate company.

Foppiano said some of the county tax notices may have been delivered to an old office address, so he never received them.

"I made a mistake thinking I had paid for previous years. When I found out I hadn't, I immediately went in and paid it," he said.

Foppiano also had a $7,240 lien filed against him in 2008 by the state Franchise Tax Board representing $4,029 in income taxes owed, plus penalties and interest.