Santa Fe owes nearly $400K in back taxes

IRS identified city’s original violations over a decade ago, but they hadn’t been addressed

In a move designed to clean up what Mayor Alan Webber called “old messes” in financial management, the city Finance Committee on Monday endorsed a budget amendment to pay the Internal Revenue Service nearly $400,000 in back taxes.

“The original violations were identified by the IRS over a decade ago,” Finance Director Mary McCoy told committee members. “The years under review at that time were calendar years 2006 and 2007, so since then, the city did not correct the areas of noncompliance.”

In 2009, an IRS audit found the city should be paying taxes for certain contractors who should have been classified as employees. The audit also found the city wasn’t appropriately deducting taxes for certain fringe benefits, such as uniforms, life insurance and recreation facility access, which city employees got for free, a city memo states.

“Despite the findings, it appears that the needed remedial actions were not taken upon completion of the audit,” the memo states.

City Councilor Signe Lindell said it was important for people to know that the outstanding back taxes predated “anybody in this group.”

“I came on this council in 2014 — I’ve never even heard about this,” she said. “I just want to clarify that this isn’t something new that happened in the last 18 months, that we’re dealing with something that we inherited from a decade ago,

which the numbers are certainly far from pleasant.”

The timing couldn’t be worse, Lindell said, referring to the economic downturn from the novel coronavirus pandemic, which prompted the city to reduce spending amid dismal revenue projections.

“I’m sorry that we have to dig ourselves out of this kind of hole,” she said.

City Councilor Carol Romero-Wirth characterized the payment to the IRS as part of getting the city’s financial house in order. It is “among the many things that we have been doing to put the city on the right course and the right financial footing in terms of how we do business,” she said.

During a virtual news conference Monday morning, Webber said the city was correcting a mistake from the past.

“We are still cleaning up old messes,” he said, referring to the findings from the 2009 audit by the IRS.

“No action was taken at the time to correct those findings and so we come down to 2020, and the IRS is knocking on our door saying, ‘Those things we told you about in the past were never changed,’ “the mayor said. “So, we are stepping up and responding to the IRS.”