Thursday night, the Blytheville City Council's Finance and Purchasing Committee decided not to recommend that the city reimburse former Mayor Barrett Harrison the $8,381.30 joint federal tax refund that he claims was applied to the city's $3.2 million IRS debt.
Instead, the board believes Harrison should be making the reimbursement request to the IRS.
The city's tax attorney, William Fones of Baker Donelson, has said the $8,381.30 was a civil penalty against Harrison, who was mayor at the time of the city's failure to pay the payroll taxes. City Attorney Mike Bearden has argued otherwise, saying Harrison is entitled to be reimbursed the refund because it went toward the city's debt. The Finance Committee released a statement on its decision.
"In examining the facts of this request, we have the following: 1) The IRS deducted $8,381.30 from Mr. Harrison's 2011 tax refund," the statement reads. "2) The tax attorney hired by the city affirms this is a civil penalty assessed to Mr. Harrison. 3) Mr. Harrison has stated that the IRS people he has talked with told him that repayment from the city would be the 'easier' way to be reimbursed, as opposed to seeking reimbursement from the IRS.
"It is our feeling that as the IRS was the entity that assessed the penalty to Mr. Harrison, they should be the ones to reimburse him. If that reimbursement needs to come from the city, it is our opinion that the IRS should pay him and assess the city. Therefore, we will not be recommending that the City Council authorize any payments to Mr. Harrison at this time."
This morning, Harrison was disappointed with the decision.
"I guess I understand their confusion on that because it's been hard for anyone to understand," Harrison said, noting on one hand the tax attorney has said it's a civil penalty, but then goes on to say in an email that it was applied to the city's debt."
He added it is frustrating that only two Council members -- R.L. Jones and Tommy Abbott -- have come to see him about the matter.
Harrison contends the unwillingness to reimburse the refund is unfair to his family members, who were a part of the tax return.
The former mayor also believes, "I was used to get those $700,000 in penalties abated," and there is a potential for the IRS to change its mind on the abatement.
During Thursday night's meeting, Jones asked if the city has any proof that the money was a civil penalty, and Abbott responded that, "We just have the word of our tax attorney."
Jones wants to see legal documents showing that it was indeed a civil penalty.
According to Abbott, who chairs the Finance Committee, officials have requested further documentation.
"You're not only dealing with Mr. Harrison, you're dealing with his family," Jones said. "The tax lawyer should show us in detailed writing so we can say, 'Mr. Harrison you need to go and ask the IRS for your money,' but that hasn't been so because they are saying the money was applied, if you read that letter."
Councilman Kevin Snow said Harrison was seeking reimbursement from the wrong source.
"This is the way I look at it," Snow said. "If I had some money coming to me and you kept it, I wouldn't go to him for it. I would go to who kept it. We did not take his money, the IRS kept it. He should go through them to get his money. I'm not saying he's not entitled to it. In fact, I think he is entitled to it, but he needs to go through who kept it. If they determine that they reduced our debt by this amount, then they need to assess us and let us pay the IRS. They need to reimburse him, not us. That money does not need to come from the city; we didn't take it."
Meanwhile, Abbott reported to the board that the total payover from the 1-cent IRS tax was $590,863.08. He said there is $571,543.52 in the IRS Payment Account, and it will stay there until at least April because the IRS has until then to determine it missed something, if it did. This morning, Abbott was looking into the discrepancy of the two payover figures, noting the numbers were off by the same amount in October.
The city received the final IRS tax turnback funds in November from the September collection. With the $228,868.11, the city collected a total of $3,519,396.57 during the 15-month life of the 1-cent tax. Before the tax, the city used general funds to pay $290,664.80 of the $3,238,517.85 debt.
mbrasfield@blythevillecourier.com