CREW Wants IRS to Investigate Land Deals by California Congressman

22 Aug 2006 // Citizens for Responsibility and Ethics in Washington (CREW) Aug. 17 filed a complaint against Rep. Gary Miller (R-Calif.) for alleged "failure to report or pay capital gains taxes" on the sale of property to the city of Monrovia, Calif.

The complaint alleges that Miller fraudulently used Internal Revenue Code Section 1033, which gives taxpayers up to two years to reinvest in replacement property capital gains realized from a forced sale.

In an Aug. 21 statement, Miller denied that he had done anything wrong and said he was sure he would be exonerated.

"The transactions in question were clearly and appropriately detailed in my income tax filings," he said, and "I am absolutely confident that the IRS will find that my tax forms have been properly filed."

CREW said Miller "invoked the provision three times for properties he was in fact not forced to sell," concluding "the odds of the government seizing your property once are similar to the odds of being struck by lightning. Essentially, Rep. Miller is claiming he was struck by lightning three times."

The complaint stated that, according to news reports, Miller sold 165 acres of land to the city of Monrovia in 2002, making a $10 million profit on the deal. He then reinvested the proceeds of that sale in land and building purchases in Fontana, Calif., and Rancho Cucamonga, Calif., in 2004. He claimed the same 1033 exemption when he sold some of his Fontana land and building acquisitions in April and June of 2005, the report said, and he used proceeds from the sale to purchase additional land in Fontana in 2006 on which he made a profit.

CREW claims the sale was not forced, that Miller had engaged in an "aggressive, public campaign to sell his property to the city for several years prior to the sale, and was videotaped at a 2000 City Council meeting repeatedly asking the city to purchase his property."

The nonprofit also cited a March 22, 2005, letter from City Manager Kenneth Hunt stating that "the redevelopment plan for the project area does not currently authorize the use of eminent domain."

Details Missing?

Miller said news articles about his land transactions in Fontana "have unfairly mischaracterized the terms of sale and incorrectly reported important transaction details."

Miller said he bought property in Fontana in 2004. The following year, he negotiated to sell a part of his property to the city. Escrow closed on July 19, 2005. Another parcel was sold to the city on April 12, 2006, he said.

Miller said he was contacted by the city because the city wanted to use part of his property as part of a redevelopment project. The city said it could acquire the property "with or without your consent," following the adoption of a resolution of necessity to do so.

However the redevelopment agency wanted to avoid adversarial acquisition and instead suggested the two enter into a voluntary contract, he said.

Miller also said reporters have overlooked that he sold the property to the city at the price at which he purchased it--plus costs, such as property tax payments--but that from 2004 to 2005, real estate prices in Fontana increased by an average of 29 percent, so that the property was worth more than the negotiated selling price.

Miller said the IRS form he filed "is not one that absolves my responsibility to pay taxes. Rather the form provides for a deferral of tax payment, where taxes on gains are paid at a point in the future. At the appropriate time, I will pay taxes on my profits from the land transactions."