2018 Midterms: Democrat Faces Tax Questions In A DCCC-Targeted Race

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Posted: Oct 09, 2018 3:45 PM
2018 Midterms: Democrat Faces Tax Questions In A DCCC-Targeted Race

In New Jersey’s Fourth Congressional District, Rep. Chris Smith has long held the seat for Republicans. He’s been there since 1981. He’s been able to clinch anywhere from 55-60 percent of the vote easily. Trump carried the district by 15 points in 2016, but the Democratic Congressional Campaign Committee decided to put it on their 100-plus-seat target list this year. Smith is facing Joshua Welle in the general election (via NBC Philly):

Welle is a military veteran who served 12 years in the Navy, including tours in Afghanistan, the Persian Gulf and East Asia. Born in Trenton and raised in Wall, he touts his experience with national security, public policy and business.

[…]

My public career was founded on both my principles and the courage of my convictions. We must continue fighting for our civil rights, increased gun safety measures, and strong education funding. For our children and their future - we need policies that lift us up for the better, whether that’s ensuring a sustainable energy plan, securing access for women’s healthcare, or protecting Social Security and Medicare. Now more than ever, we need bold, innovative leaders that aren’t intimidated in the face of the 45th President and those who seek to block progressive causes and spread oppression and animosity. I am not afraid to lead the charge for these ideals. I have never backed down from a fight because of political convenience, and I don’t plan on starting now.

Yeah, he’s your run-of-the-mill Democrat. He also appeared to have had tax issues. He co-founded a software company, Severn Pacific, and owed some $130,000 in back taxes to the state of Delaware. The Trentonian has the backstory

Documents from the Delaware state Division of Corporations show Severn Pacific previously had an “AR delinquent, tax due” status and owed more than $130,000 in taxes earlier this year. The so-called AR delinquent, tax due status “represents a corporation that has not filed the required annual report and there are delinquent taxes due,” according to the Delaware state website.

Welle co-founded Severn Pacific in 2015. His campaign confirms the company fell into arrears stemming from a paperwork blunder but says Severn Pacific owed a “small amount” and never $130,000 in outstanding taxes.

“Josh and his partners ceased business operations in the summer of 2017. The company’s external business agent, who was brought onboard to assist in the dissolution of the business, neglected to file the necessary paperwork in for the state,” Welle campaign spokesperson Aubrey Fink said Thursday via email. “Appropriate filings were submitted to the federal government. Because state dissolution documents were not filed, the company continued to accumulate fees as if they were still operational.”

[…]

Welle’s congressional campaign has raised more than $600,000 since September 2017 and has spent money on marketing, including TV commercials, in hopes of defeating Smith and getting Welle elected to the U.S. House of Representatives this November as a Democrat. Federal records later this month will show Welle for Congress raised over $1.3 million to date, according to Fink.

Non-incumbent candidates like Welle must file a financial disclosure report within 30 days of raising or spending more than $5,000 in a campaign for election to the U.S. House of Representatives, according to the U.S. House Committee on Ethics.

Welle’s campaign raised more than $5,000 in campaign funds by Sept. 29, 2017. On the spending side, his campaign paid $3,500 to Veracity LLC for a digital consultant on Oct. 10, 2017, and paid $2,250 to NGP VAN for software on Oct. 11, 2017, according to Federal Election Commission campaign filing records. That level of fundraising and spending officially qualified Welle as a candidate for U.S. House, which shows he should have filed a financial disclosure report in October 2017. Welle did not file a financial disclosure report until March 11, records show.

The Democratic challenger belatedly filed his financial disclosure report with the clerk of the U.S. House of Representatives for the period of Jan. 1, 2017, through Feb. 28, 2018, saying his company Severn Pacific Inc. was dissolved in 2017.

Welle identifies himself as the CEO of Severn Pacific and certifies the statements he made on the financial disclosure report “are true, complete, and correct to the best of my knowledge and belief.”

Delaware corporation records appear to contradict Welle’s federal financial disclosure concerning the status of Severn Pacific. The discrepancy, according to the Welle campaign, is due to an external business agent neglecting to file the necessary paperwork with the state of Delaware when the company was dissolved last year.

The Welle campaign said the issue was settled, and that $1,000 fee was paid. Seems like an open and shut case, right? Well, not really. A conservative New Jersey-based blog, More Monmouth Musings, noted something odd about the timeline—and this is coming from the business agency that handled their paperwork. The story goes that Severn’s operations ceased in 2017, bad oversight led to the paperwork not being filed, leading to fees that were eventually paid off this year. Harvard Business Services, which handled the Severn account, says that wasn’t the case (via Rumson Patch):

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MoreMonmouthMusings then contacted Harvard Business Services later that same day, and an employee told the blog that they resigned as Severn's business agent in September of this year because the company did not pay their agency fees.

Courtney Sharp of Harvard Business Services also said that her company did not receive a dissolution order in the summer of 2017, as the Welle campaign told NewJerseyGlobe. She said that HBS was engaged to dissolve the company and resolve the past due taxes on October 2, the same day the tax issue was first reported on the conservative blog.

When Patch called Harvard Business Services Friday morning, they said they could not speak to the media, and an email to vice president Michael Bell was not immediately returned.

"The issue was due to an error in filing paperwork and exemplifies what is wrong with a bureaucratic tax system tax," said Maier [Kim Maier, Welle For Congress campaign manager] in a statement. "Small-business owners have too much red tape to cut through, and, as someone who was able to start a business, Josh knows the reality of everyday families in Central Jersey."

Hmmm…well, that’s odd indeed. Now, in all likelihood, Chris Smith survives, but if your opponent has tax questions--that could be very, very useful political ammunition.