By Tim Craig and Mike DeBonis
Washington Post Staff Writers
Thursday, January 13, 2011; 10:40 PM
Since joining the D.C. Council two years ago, Michael A. Brown has become the chief advocate for raising taxes on the city's wealthiest residents, arguing that those who earn at least $250,000 a year are not paying their share.
Yet Brown and his wife have failed to pay the property taxes on a Chevy Chase home assessed at $1.4 million, according to public records. Brown, who earns more than $300,000 a year, owes the District $14,263 for property taxes, the records show.
The tax debt, an amount Brown disputes, is part of financial records that raise questions about whether Brown is keeping up with his bills. Since he bought his house in 1996, banks or mortgage lenders have issued five notices of foreclosure sale, according to records. None of the notices has led to a foreclosure sale, and Brown said he did not know that the notices were issued.
"I know nothing about any of them," said Brown (I-At Large), chairman of the council's Housing and Workforce Development Committee.
Brown unsuccessfully pushed his proposal to create two new tax brackets for the wealthy in the spring and in December as the council was cutting human services to help balance the budget. With the city facing another shortfall in next year's budget, Brown has pledged he will lead a similar effort this spring.
Brown said he only recently found out about his unpaid District property taxes.
City records show that Brown's debt to the District has been adding up for the past two years after he failed to pay his full balance in 2009, resulting in a $1,766 shortfall.
Last year, according to the records, Brown did not make either of his payments, adding an additional $12,496 to his bill.
When first contacted by The Washington Post last week, Brown said he was unaware of the unpaid taxes. In a subsequent interview this week, he said he and his wife learned of the debt late last year after they received a notice in the mail.
On Thursday night, Brown said that he had called the Office of Tax Revenue earlier in the day and that the office lowered his bill after he informed workers there that it had failed to account for a primary-residency deduction to which he was entitled. He pledged to pay the bill on Friday.
Brown said he had assumed his property tax payments were being collected and remitted by his mortgage lender.
After he refinanced his home in 2007, Brown said, his bank sold the mortgage to another financial institution. He said he thinks the original owner of his mortgage failed to inform the new lender about the property tax obligations.
"When the mortgage was sold to a different company, I guess the property taxes did not attach and hence we just found out about it," he said. "We will clear it up."
But records show this isn't the first time that Brown, a member of the Finance and Revenue Committee, has been faced with a tax debt.
In April, the Internal Revenue Service filed a $50,000 lien against Brown for failure to pay income taxes dating to 2004. According to a copy of the lien, Brown failed to pay $7,128 in 2004, $28,625 in 2005, $5,176 in 2007 and $11,951 in 2008.
Brown, who is on a repayment plan, said the problem arose when the IRS recalculated some of his deductions. "There is nothing wrong with being on a payment plan," said Brown, adding that he's like "millions of other Americans."
City records reveal Brown and his wife, Tamera, were also to settle a lien on unpaid District income taxes from a dozen years ago. According to records filed with the office of recorder of deeds, the Browns paid $12,700 to settle a liability for unpaid income taxes, interest and penalties from 1999.
Brown said he had no recollection of the matter. "That was more than 10 years ago," he said.
D.C. Council members, whose jobs are not considered full time, earn an annual salary of $125,000. Brown, son of late commerce secretary Ronald H. Brown, also works as a lobbyist for the Edwards Angell Palmer and Dodge law firm. According to his 2009 financial disclosure forms, Brown listed $250,000 in outside income, which he said in an interview came from his work at the firm.
Brown becomes the third council member to have faced questions on their finances in recent years.
Council member Marion Barry (D-Ward 8), 74, is on probation after his conviction in 2006 for failing to file tax returns. At the time, Barry admitted that he had not paid the bulk of the taxes on $500,000 he earned from 1999 through 2004.
During his successful campaign last year to become council chairman, Kwame R. Brown (D) was forced to explain why three credit card issuers had sued him in D.C. Superior Court, alleging nonpayment of bills and interest exceeding $55,000, court records indicate.
Kwame Brown, who is resolving the cases, later estimated that his personal debt exceeds $700,000, including the mortgage on his Hillcrest home. He has acknowledged part of his debt stems from refinancing his house at the height of the real estate boom, extracting tens of thousands of dollars in equity from a property that later fell in value.
Michael Brown has also tapped his house's value for cash.
The Browns purchased the home in 1996, taking out a $448,000 mortgage at the time. After refinancing a number of times - in part, Brown said, to finance his 2006 mayoral run - the Browns took out a $1,050,000 mortgage on their home in 2007.
In June and July 2009, three notices of foreclosure sale were filed with the District's recorder of deeds, saying the Browns were in arrears on the outstanding balance of $1,059,443.40 they owed on the mortgage. The holder of the note, LNV Corp., required the Browns to pay as much as $106,416 to prevent a sale. In July 2010, LNV again filed for a foreclosure sale, with the balance on the mortgage now totaling $1,267,470. A sale was set for Sept. 8. None of the notices, including one from 2004, appears to have proceeded to auction.
Brown said he had no idea of any foreclosure proceeding and questioned whether the repeated sale of his mortgage might have led to inaccurate notices being filed.
After the 2007 loan was originated, it was immediately assigned to the Mortgage Electronic Registration System, a private service that tracks loan transactions, eliminating the need to record the transfers in property records.
MERS has been accused of not maintaining proper records of transactions, and legal authorities in the District and many states have questioned whether lenders who hold notes through MERS are entitled to foreclose.
James E. McNulty, an economist and finance professor in Florida, said it is not uncommon for homeowners to be hit with faulty foreclosure notices. "There have been lots of these things documented in the press," he said, attributing the problem to "poor recordkeeping and documentation issues" during the height of the real estate boom.
But Julia Gordon, senior policy counsel for the Center for Responsible Lending, said in most cases homeowners would learn of foreclosure notices if they are keeping close tabs on their mail.
"It is pretty unlikely someone is going to miss something like that," Gordon said. "But the system is not really set up to help homeowners understand what is going on."
Despite the controversy, Brown said he will not let questions about his personal finances or taxes get in the way of pushing ahead with his proposals to raise taxes on the wealthy to try to prevent deep cuts to social service programs.
"I will continue to be the chief advocate," he said. "One thing has nothing to do with the other."