DNC and Dems’ Private Club Delinquent on Taxes 16 Times in 7 Years (PJM Exclusive)

PajamasMedia.com

Isn’t paying higher taxes patriotic? The Democratic National Committee and their private dining establishment in D.C., the National Democratic Club, are serious tax scofflaws.

October 28, 2010 – by Richard Pollock

The Democratic National Committee and the party’s private club in the nation’s capitol have been delinquent with tax payments on sixteen separate occasions over the last seven years, Pajamas Media has learned.

According to District of Columbia government records, since 2004 the Democrats’ main political committee and its National Democratic Club — an exclusive restaurant and hideaway on Capitol Hill where prominent Democrats and their guests dine — have been hit with fines and interest penalties in excess of $115,000 for failure to pay their property taxes on time.

Officials at the D.C. Office of Tax and Revenue reviewed tax records with Pajamas Media. Government records here and here paint a picture of two highly visible political establishments that have been tax deadbeats for most of the last seven years. This year, the club fell so far into tax arrears that it was listed as part of a D.C. government “tax sale” in August. The DNC and the club finally paid the property taxes in September to dodge a government seizure and a public auction sale.

The D.C. government requires owners of property to pay their taxes twice a year — in March and September. Records show the Democratic National Committee was delinquent six times, and the club missed payments ten times when facing the last fourteen tax deadlines.

In 2009, the club failed to pay its taxes a total of 15 months after the two tax deadlines. That year it was fined and penalized four times, amounting to $15,339 in fines and penalties.

It also appears that the national Democrats have had a tough time running their private club as a  business — even with lucrative IRS tax breaks. In 2004 the restaurant acquired federal tax exempt status as a “private club.”

Not only did the DNC and the club repeatedly fail to pay their taxes on time, they were deep in debt. Year-over-year operating has been in the red, and they have been perilously drawing down their financial reserves. They were faced with a labor contract they could not afford, and they even lost their chef.

In its March 2010 newsletter, National Democratic Club outgoing president Scott Nishioki sounded more like a Republican in his farewell address in talking about the club’s woes, writing:

Two years ago, when I convened my first Board of Governors meeting, our highest priority was addressing the Club’s financial problems. At the rate that the Club was drawing down its reserves, it would have been just a matter of time before drastic moves would need to be taken.  Fortunately, with the support of the Board and the Club’s members, we increased initiation fees, monthly dues, and drink prices, and imposed cost cutting measures that have allowed the Club to turn the financial corner, at least for now.

[...]

For the first time in many years, we ended the year, 2009, with a surplus.

Despite Nishioki’s talk, the club was so delinquent, the D.C. government put the restaurant up for sale on August 12.

Reached via telephone,  the current president of the National Democratic Club, Ted Mastroianni, said he had no comment about his predecessor’s remarks regarding the financial peril of the club.

As for the specific charges of tax delinquency, Mastroianni said:

I’ve been president since March. I’m not familiar with the charges at all. I think you’re wrong. Like all government records, they are prone to errors.

I met with D.C. government officials at the Office of Tax and Revenue. OTR officials personally reviewed the tax documents and confirmed they are accurate.

Pete Sepp, executive vice president of the National Taxpayers Union, told Pajamas Media he’s surprised that a Democratic organization should be tardy on their tax payments:

It’s interesting to note that the DNC and the Democratic Party often champion the cause for state and local governments by saying they are starved for cash.

In part, the club’s difficulties can be traced to Terry McAuliffe, former Democratic Party chairman. For years the club was the property of the Democratic National Committee. But in 2002, in a complicated deal, McAuliffe “sold” the property to the club for $4.1 million and it became a tax exempt 401(c)7 entity. It was designated a “private club” under IRS guidelines, which allowed it to enjoy many tax benefits. The next year, McAuliffe and the Bank of America imposed a lien on the property.

The property, like the rest of the housing market, has declined in value. It’s assessed at $3.2 million.

Mr. Mastroianni disassociated his organization from the DNC, saying that the club had no connection to the Democratic Party:

We are a non-profit organization and are a legally separate organization.

The club charges an annual membership fee of $1,200 for the privilege of dining at the restaurant, plus the cost of the consumption of food and liquor. Democratic members of Congress, governors, and political insiders are frequently seen at the club, which is a half a block from the Democratic National Committee offices.

Grover Norquist, president of the conservative Americans for Tax Reform, told Pajamas Media:

Barack Obama’s Democratic Party is the party of Leona Helmsley. Taxes are for little people. The Secretary of the Treasury, the highest ranking government official in charge of taxes, didn’t pay his own taxes and President Obama didn’t believe that was a problem.

They don’t see themselves bound by the law any more than Louis the Fourteenth did. They are above the law, they are above taxes. Taxes and laws are for little people.

NTU’s Sepp says the disclosure doesn’t surprise him:

There are plenty of instances in Washington, D.C., where a member of Congress or an organization involved in politics says one thing and does another. This seems to be one of those cases.

The DNC did not return any of PJM’s calls requesting comment for this article.

Richard Pollock is the Washington, D.C., editor for Pajamas Media and the Washington bureau chief of PJTV.

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