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Panel: Treasury nominee made tax errors

Committee says undersecretary for international affairs pick has taken steps to bring her tax returns into compliance.

Another Obama administration nominee is in hot water over tax issues. Senate Finance Committee leaders Wednesday announced that Lael Brainard, President Obama's nominee for Treasury undersecretary for international affairs, made several late payments and errors on her 2005-2008 tax returns.

There were late payments related to District of Columbia unemployment insurance benefits for household employees, as well as late property tax payments on real estate Brainard and her husband own in Rappahannock County, Va.

There were questions about the immigration status of some household employees, according to the report. Brainard might have improperly used a deduction for in-home office expenses, the committee said. Brainard has taken steps to bring her tax returns into compliance, they added.

"This nomination took a long time to process because it took so many rounds of questions to try to get complete answers from the nominee," Finance ranking member Charles Grassley, R-Iowa, said in a statement. "The dollar amounts involved aren't large compared to some other administration nominees this year, but the lack of candor, accuracy and timeliness in addressing the issues has been discouraging."

Baucus and Grassley said the investigation of Brainard's tax returns was bipartisan and that the vetting process was the same as for every nominee considered by the committee since 2001.

"I am satisfied Ms. Brainard has taken the steps necessary to fix the discrepancies in documents submitted to the committee. We intend to move forward as soon as possible on this nomination, to bolster the efforts at Treasury and strengthen America's recovery at home and abroad," Baucus said.

Senate Foreign Relations Chairman John Kerry, D-Mass., expressed support for Brainard and appeared a bit perturbed by the length of the process. "Eight months of a vetting process is more than enough when no questions persist. In fact, questions and questions have been answered, and answered, and answered, and they have been answered satisfactorily," Kerry said in a statement.

According to documents released by the Finance leaders, the first meeting panel staff had with the nominee and her tax preparer was on May 28, just a few days after Obama announced her selection.

Brainard is current on all Washington, D.C., unemployment taxes. The panel said several payments of real estate taxes on two plots of land in Rappahannock County were late during 2005, 2006 and 2007, but that the appropriate penalties and interest have been paid.

There were also errors in employment eligibility verification forms submitted for household employees hired since 2005. Also, the committee said Brainard deducted 16.7 percent of her household expenses in 2005-07 from her partnership income as an in-home office deduction.

The committee said it could not verify that 16.7 percent was the accurate percentage of space used in her home, and that it appeared to be closer to 21.9 percent. Since Finance investigators raised the issue, Brainard said she and her husband would reduce the size of their home office deduction in 2008 by half but would not amend their prior returns.