Associated Press, SC Gov’s State Flights May Raise Tax Liabilities, by Jim Davenport:

South Carolina Gov. Mark Sanford’s use of state planes for personal and political trips could open him and the state to federal tax penalties because the flights never were recorded as taxable fringe benefits.

Tax experts who reviewed an Associated Press analysis of more than 100 flights since 2003 said numerous trips could have triggered IRS rules that require adding the value of flights to the governor’s wages, making them subject to taxes. The analysis shows nine flights since 2008 alone could be worth $19,019 in taxable benefits.

“The state appears to take the position that they assume that all of these are business flights,” said Marianna Dyson, a former IRS fringe benefits lawyer and one of the nation’s leading experts on the topic. By doing that, the state “ignored the rules applicable to the use of an employer’s aircraft.”

The governor’s office contends the need to report any of Sanford’s trips as income is preposterous because every flight is official business. “It’s all working condition fringe benefits that we don’t believe is taxable,” said Sanford spokesman Ben Fox.

An AP investigation this summer showed Sanford traveled to numerous personal and political events even though state aircraft only are to be used for official business. While the governor has said he did nothing wrong, he has yet to explain how he properly used state planes for all those flights. The governor on many occasions mixed official business — such as a meeting with newspaper editors — with a political event like a speech to a GOP group — and tax experts say those trips could require Sanford to pay taxes on some flights. …

His spokesman was given detailed information on more than 100 trips with potential tax implications but refused to detail why each was not taxable. …  Bob Kamman, a fringe benefits expert in Phoenix who reviewed the AP research, which was based on flight logs and schedules, said at least 68 flights could be taxable. …

Other governors have faced similar scrutiny. An AP review in December estimated former Illinois Gov. Rod Blagojevich could owe more than $60,000 on non-business flights worth at least $225,000. Former Alaska Gov. Sarah Palin’s settlement of an ethics investigation for trips taken with her children included a promise to pay any back taxes.

(Hat Tip: Bob Kamman.)