President Reagan's inaugural committee is trying to avoid paying nearly $200,000 in Prince George's County amusement taxes on its gala last week at the Capital Centre by claiming the money collected from the event will go for charitable purposes.
Officials of the Presidential Inauguration Committee 1981 have told the Maryland Comptroller's office, which collects the county tax and determines when it is levied, that about $1.7 to $2 million raised by the nationally televised tribute to President Reagan will be used to pay for future presidential inaugurations or a new presidential inaugural scholarship fund -- both of which they say are tax-exempt enterprises -- and therefore should not be subject to any taxes.
Prince George's County imposes a 10 percent tax on all events that feature entertainment and charge an admission fee. Sponsors of such an event are supposed to pay the tax -- charged on the total amount of money brought in -- to the state controller, who then returns it to the county.
The tax can be waived, either by the county government or the state, if the money raised by the event is "devoted exclusively to a charitable purpose," such as a church fundraiser held to finance a new building. It is under this provision of state law that Reagan's committee is hoping to avoid paying taxes on the Jan. 19 event.
"We are discussing with the state right now the appropriateness of having to pay the amusement tax," said Herbert Marks, associate general counsel of the committee. The raised by the event, he said, was used to provide entertainment, which included such Hollywood notables as Frank Sinatra, Johnny Carson and Donnie and Marie Osmond, but the bulk of it, he said was intended for "future public inaugural events or the inaugural scholars program," and educational fund that the inaugural committee is just now setting up.
"These [uses] are clearly within the gamut of charitable purposes," Marks said.
Despite the committee's explanation for its efforts to avoid paying the tax, some county and state officials viewed the gala with a more jaundiced eye, seeing it simply a dose of expensive -- $100 a ticket -- revelry that Prince George's has the right to, and should, tax. Even County Executive Lawrence Hogan, the state's Republican National Committeeman who attened the event, has gone on record as being "very much opposed to any exemption being granted for the Republican gala," according to aides of the executive.
"His opinion doesn't mean a whole lot in this matter because it's something that the state has to determine," said Lawrence Hogan Jr., son and aide of the county executive. "But we certainly would like to see $200,000."
The younger Hogan said that because the sponsors of similar events held at the Capital Centre have been forced to pay the admissions tax the county feels that the inaugural committee should pay it also. "If no one else is paying the tax we wouldn't want to single out the president who we worked so hard to elect," he said. "But we also wouldn't want to give him any special treatment. It's up to the state to decide it."
According to Assistant Maryland Attorney General Jerry Langbaum, the treasurer's office has asked the inaugural committee to provide it with financial statements and receipts from the event "so that we can determine whether or not this affair is taxable."
Once the information is received, the comptroller's office will try to determine whether all the money went to charitable institutions, what kind of payments or other provisions were made for entertainers and whether anyone connected with the gala was paid a commission based on a percentage of gross receipts, according to state officials.
"We'll have to determine what Johnny Carson's salary was, what they paid for his hotel room or if they sent him a dozen bottles of champagne," said one official. "If it's the latter we might have some problems."
Langbaum and Marks said they expect the issue to remain unresolved for several weeks while the committee gathers its records and waits for the bills from the gala to come in.