Brady paid almost no U.S. taxes in three of past four years

Brady paid almost no U.S. taxes in three of past four years
by Greg Hinz
Copyright by Chicago Business
4/23/2010 2:08 PM CDT
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GOP gubernatorial nominee Bill Brady, facing financial setbacks in his family construction business, paid nothing, or almost nothing, in federal income taxes in three of the past four years, according to a summary released by his office Friday afternoon.

And over the past five years as a whole, Mr. Brady -- a state senator and Bloomington home developer -- paid a relatively modest 20.2% in federal taxes despite a reported total adjusted gross income for those years of more than $1.6 million.

The figures come from a somewhat unusual press release e-mailed to reporters on Friday afternoon by the Brady campaign.

Mr. Brady previously had refused to release his returns, citing personal business concerns. He reversed field earlier in the week after Democratic incumbent Pat Quinn released his returns and indicated he would make Mr. Brady's refusal a major issue in the race.

But despite that promise, Mr. Brady finally decided only to make a copy of his returns available for review for three hours in his Springfield office. Reporters who were not able to go to Springfield on short notice instead were sent the email summary.

In the summary and press release, Mr. Brady alludes to "down years" in the construction business. Because of that "new reality," he said in a statement, the number of employees in the family business has been slashed by half.

That apparently explains some and perhaps all of the wide variation in Mr. Brady's reported income. His spokeswoman did not return calls and emails seeking elaboration.

But the returns also indicate that Mr. Brady has been able to use those setbacks to sharply slash his federal tax liability.

Mr. Brady's income was highest in 2004 and 2005, when according to the summary he had taxable income of $495,000 and $466,000, respectively, and paid a combined $314,000 in federal and state income taxes.

But in 2006, his reported income dropped to $130,326, with federal taxes of $1,228 and state taxes of $3,610.

The home-building business was still booming that year, but Mr. Brady's press release said his family also "began retooling" their company in 2006.

Mr. Brady's income popped back up in 2007 to $372,355 and he paid $42,000 in federal and $11,000 in state taxes that year.

But in 2008, he reported a negative adjusted gross income of $116,679 and paid no taxes. That may because of business losses that were rolled forward but, again, the Brady campaign had no immediate responses to questions.

Mr. Brady's reported gross income in 2009 was a positive $120,000. But his "taxable income" was $49,733, and he paid no federal income tax and $3,309 in state income tax.

The press release says Mr. Brady's 2009 taxable income "came under a provision of the IRS...to help small business fight through and survive by allowing the sales of assets."

As a state senator in both 2008 and 2009, Mr. Brady was paid a base salary of $67,836 in each year, plus a stipend of $10,327 as minority spokesman on the Senate Insurance Committee, according to the Illinois comptroller's office.

Mr. Quinn reported paying $32,000 in taxes in 2009 on income of $157,000 -- almost all of it from his salary as governor.

In the press release, Mr. Brady said his business reverses are a good indication of why Illinois needs a new governor, sensitive to the need to improve the state's economic climate.

In the six years as a whole, he said, the Brady family paid 22% of their income in taxes and contributed more than 6% to charity.

* * * 3:30 p.m. update: The Brady campaign says it will make the candidate's tax lawyer, Jason Barickman, available in a conference call for up to 100 reporters this evening.

And Capitol Fax correctly reminds that, while paying no taxes, Mr. Brady loaned his political campaign $130,000 in the past two years.

* * * 4:30 update: The Quinn campaign is out with its take and, predictably, it's not very nice.

In a statement, if first blames Mr. Brady for not really disclosing the returns as much as giving select reporters "a glimpse of Haley's Comet." Cute.

Then it notes that, in some years, Mr. Brady paid no taxes, even though he clearly earned more than $100,000. "The original Tea Party's rallying cry was 'no taxation without representation'," it adds. "Sen. Brady misinterpreted this line as 'no taxation for elected representatives."

Either way, the Quinn folks clearly are going to make an issue of it. For a change, they have something to go on the offense about.

* * * 5:30 update: Mr. Brady's attorney -- Jason Barickman, who also happens to be the Champaign County GOP chair -- just finished the conference call, and was able to add some light.

According to him, Mr. Brady's income briefly popped up in 2007 when, as part of the retooling that began in 2006, Brady's company sold some assets "probably to raise cash", and then incurred a tax liability.

Losses by Brady companies -- a mix of a Subchapter S firm, an LLC and and a C Corp. are involved -- more than offset Mr. Brady's Senate $75,000 Senate pay in 2008, and a section of Barack Obama's stimulus bill designed to help small companies slashed his liability in 2009, Mr. Barickman said.

All that, if accurate, makes sense. Or at least follows the law.

But, as a matter of practical politics, Mr. Brady still is going to have to explain how he really can make $75,000 a year as a state senator and still pay nothing, or almost nothing, in federal income taxes in three of the past four years.

Mr. Barickman said the typical Illinoisan "can relate" to Brady's financial woes. We'll see.