The tax return for some 2 million Americans were audited last year, but few occasioned as much public confusion as was displayed in the WHite House yesterday, over the audit of the 1975 returns of President Carter.
White House officials offered two conflicting versions of how it came to pass that Carter's returns are being audited by the Internal Revenue Service.
The first version was offered by deputy press secretary Rex Granum. In it, Carter volunatrily asked the IRS to audit his previous tax returns in the interest of establishing a precedent regarding his strich adherence to the tax laws.
But when Granum's version was greeted with skepticism and some questions he couldn't answer, there followed an unusual 75-minute recess of the regular White House news briefing. During that time, the President's two chief press spokesmen and his White House lawyer discussed the situation with the President's tax accountant in Georgia.
White House press secretary Jody Powell then emerged from his office to offer the second version. According to it, the IRS told Carter's accountant and two lawyers representing him last Dec. 30 that it wanted to examine the 1975 return.
Both Powell and Granum said that the earlier version and other statements that they had made which they acknowledged were "misleading" resulted from misunderstanding and "honest mistakes."
Just as the confusion over the Carter audit seemed to be subsiding, a spokesman for Vice President Mondale said that Mondale's 1976 tax return are being audited by the IRS.
Al Eisele, the Vice President's press secretary, said Mondale was notified of the audit within the last two weeks. He said the IRS asked for additional information to support the return but that Mondale's office knew of "no special reason" for the audit.
The afternoon-long session of questioning was set off by a report in the New York newspaper Newsday that the audit was begun last spring, shortly after CArter took office. The White House immediately confirmed this and yesterday promised to make public the result of the audit.
The IRS has no comment on the matter, even refusing to confirm the existence of the audit. A spokesman at the agency said that slightly more than 2 per cent of about 84 million individual income tax-returns were audited during the first year that ended last June 30.
It was also not known what prompted the IRS to initiate the audit. But POwel offered some specualtion of that point based on what is known about the President's 1975 tax return, which was made public last summer during his campaign.
In 1975, Carter's income was $136,138, the bulk of it from his partnership in a family peanut processing and warehouse operation. His tax obligation, would have been about $58,000 but he reduced it to $17,464 by claiming a $41,702 investment tax credit for the purchase of new machinery at the warehouse. The investment tax credit is a well-established and legitimate tax reduction method.
Powell said that such a "large business tax investment item could be a reason to look at a return anyway."
Moreover, the President's partners in the peanut warehouse venture, his mother, lillian Carter, and his brother, BillY, have said that their 1975 tax returns are being audited. The IRS spokesman said that when one member of a partnership has his takes audited it is not unusual for the other partners also to be audited.
Billy Carter told Nation's Business magazine last month that he and his mother were being audited by the IRS.
According to the second and presumably official version of the story, this was what led up to the audit:
Sometime last December, the IRS regional director in Atlanta, whom Powell could identify only as "Mr. Henderson," telephoned the President-elect's account, Bob Perry, and suggested they meet to discuss how to handle Carter's tax returns in the future.
At the meeting, according to Powell, Henderson and Perry agreed to a second meeting to discuss earlier Carter tax returns. the second meeting was held Dec. 30 in Atlanta, with Robert Lipshutz, now the White House counsel, and Harvey Hill, Carter's personal lawyer, attending.
Lipshutz insisted that he could not remember whether individual tax returns and the possibility of an audit were discussed on Dec. 30. But even as he and Powell were answering questions, another call was placed by the White House to Perry, who confirmed that IRS officials told him at the Dec. 30 meeting that they intended to examine some of Carter's returns.
During the briefing, Powell made several references to the tax problems that engulfed former President Nixon near the end of his term. He said there was a "mutual desire" by both the IRS and the Carter White House to exercise special care in handling the President's tax returns of the Nixon scandal.
In his earlier version, Granum, basing his remarks on information from Perry and Lipshutz, had carried that notion even further. He said that if Perry had not suggested an audit the IRS would not have undertaken it.