Image: Sarah Palin
Jake Roth  /  AP
Republican vice presidential candidate Sarah Palin campaigns  in Jacksonville, Fla., on Tuesday. 
updated 10/7/2008 6:34:50 PM ET 2008-10-07T22:34:50

Gov. Sarah Palin's practice of charging the state when she stays in her home must be reviewed to determine if she should pay taxes on the payments, state Finance Director Kim Garnero said Tuesday.

Palin, the Republican vice presidential nominee, released two years' worth of tax returns last week that did not list the per diem payments she received since becoming Alaska governor in December 2006. She collected nearly $17,000 during that period for 312 nights spent in her Wasilla home about an hour's drive from Anchorage, according to state travel records.

Palin listed 157 days spent in Anchorage during 2007 on her travel forms. Garnero said Palin's work place as governor is considered to be Juneau, so she filed for the per diem payments when she stayed at her home in Wasilla.

But state officials consider changing an employee's work station when they spend most of their time in another area, she said. That review will occur for Palin, Garnero said, which may require Palin to report future per diem payments as income.

"That's something we need to confer with the governor's office on," said Garnero, who said she was not aware of the number of days Palin spent working in Anchorage.

A typical work year for most employees is 260 days in a calendar year, but Garnero said the governor's staff told her Tuesday that her work year is considered 365 days because she is on call around the clock. That would mean Palin spent about 43 percent of last year working in Anchorage, and would allow the governor to continue receiving per diem payments that aren't taxed when she stays at her home, Garnero said.

IRS' call
The final decision likely will be made by the Internal Revenue Service, said Allen Bingham, an Anchorage accountant and member of the Alaska Society of Certified Public Accountants' taxation committee. IRS officials could determine that Palin owes taxes on past and future per diem payments, Bingham said.

Bingham said Palin's situation is unusual because she claimed such a large number of days working away from Juneau, something that would typically raise red flags when considering whether the per diem should be considered income.

"It's certainly one of those things that some of us have raised our eyebrows about," he said.

Palin released her tax returns last week, which revealed that she and her husband underpaid their estimated taxes with an April extension and likely will owe interest. The per diem payments were not included as income in those returns.

A spokeswoman for Palin did not immediately return a telephone call or e-mail. However, the Palins had asked Washington, D.C., lawyer Roger Olsen to review their tax returns before they made them public last week. Olsen, who worked in the Reagan administration's Department of Justice's tax division as an assistant attorney general, wrote that Palin's per diem payments were considered properly as reimbursements that should not be taxed because the state considered Juneau to be her place of business.

"No special consideration was ever given to Governor Palin, notwithstanding that she was the governor of Alaska," Olsen wrote in a three-page letter outlining his review of the family's tax returns.

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