IRS Considers Call To Examine City Council Stipend Expenditures

An official with the Internal Revenue Service has notified Black Rock resident Jennifer Buchanan, host of the Bridgeport Now cable access show, it is considering her request for the agency to examine taxpayer-financed stipend expenditures of City Council members she claims are not ordinary in the course of their duties such as “payment to cell phone providers, Cable TV, grocery stores, drug stores, hardware stores and many restaurants.”

A letter to Buchanan from Stephen A. Martin, acting director of the Exempt Organizations Division, states the IRS

“… has an ongoing examination program to ensure that exempt organizations comply with the applicable provision of the Internal Revenue Code. The information you submitted will be considered in this program. Internal Revenue Code section 6103 protects the privacy of tax returns and tax return information of all taxpayers, therefore we cannot disclose the status of this investigation. If at a later date you have additional information that you believe is relevant to this matter please attach a copy of this letter to the information and send it to the address shown above.”

If council members leverage stipends for personal use, must taxes be paid?

Council stipends, $9000 a year in lieu of compensation, have been debated on OIB. Theoretically, the stipends exist to cover costs associated with council responsibilities, but some members of the 20-person budget and legislative body, according to Buchanan, have taken latitude with how the taxpayer money is spent.

In a letter to the IRS requesting a review Buchanan asserts “I, like most citizens want to see my tax dollars allocated in compliance with IRS rules, just as I file my tax returns in compliance with IRS rules. It is never a good day when citizens find reason to ask for a higher governing body to investigate their local elected officials, however, sadly that day has arrived.” More from Buchanan’s letter to the IRS:

There appear to be 2 issues concerning the voting on and and disbursement of local, state and federal tax funds and the use of tax free Stipends funds by the Bridgeport CT City Council. I have enclosed official Ethics investigation request as well as documents regarding the disbursements in question. I would very much appreciate your help in investigating this matter. I have enclosed disbursement statements, Stipend disbursement statements and Bridgeport City Monthly financial analysis reports. Please note I have filed form 13909 with supporting documents. Please let me know if you wish a copy of the supporting documents.

The 20 member elected city council is the governing body to vote on and approve the city budget. The Mayor submits the budget, the most recent was 530,000,000 consisting of local tax and fees with revenue of about 300,000,000 and state and federal funds combined to make up the budget shortfall …

Many city council members are also full time city employees … The city employees all vote on the final combined funds budget.

$180,000 fund called City Council Stipends (item 51402 under Legislative Department on the general ledger), is approved to reimburse members for expenses specific to their duties. The city council members have approved and disbursed excess funds in their name from year end using the excess of the $180,000 to various charitable and religious organizations as Supportive Contributions. City Council members also have a debit card to access, which was set up so the council people would not have to pay income taxes on the stipends.

City Council members have a suite of offices, complete with computers, cable TV, Wi-Fi, copy machines, fax machines and telephones with 24 hour access at the City of Bridgeport Office building, 999 Broad Street, Bridgeport CT. The enclosed stipend statements show payment to cell phone providers, Cable TV, grocery stores, drug stores, hardware stores and many restaurants.



  1. How long will it be before a “sheriff” appears to look at the behavior of those in power and make a determination as to whether corrections of various kinds need to be made? I have been writing about the subject along with Andy Fardy for 4-5 years currently. There seems to be more interest in Bridgeport finances today than there was originally.

    Of course there is so much that might be reviewed as Kevin Lembo has been saying. Standing up to special interests, changing how government works, rooting out waste and inefficiency, saving millions for taxpayers, and doing it through transparent, open and accountable practice.

    So we continue to address the City Council. That is where the first change can occur. There are rumors of departures from the Council in the next year. Who will do the business of the taxpayer voter? Time will tell.

  2. How will we get the Council representatives to change their course? Of course if you see challenges such as reported here objectionable, and favor the status quo, and think the Council is doing as well as can be expected, we’ll wait for the sheriff. Time will tell.

  3. There are 15 people on the council who feel they can do what they want when they want and the public be damned. Every incumbent took advantage of the giveaway program under the direction of Tom McCarthy, president of the council. We have two council people who buy their weekly groceries and pay for them with the city debit card. When questioned they claim they bought food for their constituents. Yeah, right!!! These same council people used the debit card to pay their cable bills. I suppose they did that because they invite everybody in their district to their house to watch the Simpsons.
    We then have all the 15 making charitable contributions. We have two who made a contribution to the older times marching band in which they both participate. We have two council people making donations to PAL. The head of PAL is a councilmen and one of the council contributors is a relative.
    This arrogance goes on and on, it’s time they all get replaced next year. Maybe the feds will get a few of them.

  4. A liberal is someone who feels a great debt to his fellow man, which debt he proposes to pay off with your money.–G. Gordon Liddy

    Hey CC you have nothing to worry about! Just show the IRS your 1099s and W2s for the last 5 years. Then ask the City Attorney for his opinion. After that get a good tax lawyer.

    Great job, Jen!!!

  5. I can see Anastasi trying to find a loophole now. I hope the IRS comes down on them hard, then the feds finally get here and investigate Finch’s dealings. We need to clean house in 2015, something is very rotten here.

  6. 42.02 GENERALLY
    Section 6103 of the Internal Revenue Code of 1986 generally prohibits the disclosure of “tax returns” and other “tax return information” outside the Internal Revenue Service (IRS) unless the disclosure falls within one of the specific provisions of section 6103(c) through (o). Note particularly that the statute provides the sole and exclusive means by which return information may be disclosed; the courts do not possess any extra-statutory power to order the IRS to produce return information, either sua sponte or on a motion by a defendant. See United States v. Lochmondy, 890 F.2d 817, 823-24 (6th Cir. 1989) (Section 6103(i) grants no authority for courts to issue sua sponte orders for the disclosure of tax information); United States v. Barnes, 604 F.2d 121, 145-46 (2d Cir. 1979).

    In cases involving “tax administration” (e.g., criminal tax prosecutions or other criminal cases that have been specifically designated as “related” to tax administration) that have been referred to the Department of Justice, the IRS may, in its own discretion, disclose to the Department of Justice prosecutors handling the case the tax returns and tax return information that “may” relate to the case (section 6103(h)(2)). Under section 6103(h)(2), the prosecutors may use the returns and return information for investigative purposes. Section 6103(h)(4) authorizes the prosecutor to introduce into evidence at trial a return or piece of return information that “is” relevant to the case.

    In non-tax criminal cases, Federal prosecutors may obtain and use for investigative purposes returns and other information filed with the IRS by a taxpayer only through an ex parte order of a United States district court based upon an application (that must be signed by the United States Attorney) showing that the information is relevant to an ongoing criminal prosecution. [FN1] The prosecutor may use that information at trial (e.g., introduce it into evidence or otherwise make it public in the proceeding) only upon a showing to the court that the information is “probative of an issue” in the case.

  7. The City Attorney has made it clear what we call a stipend is income to or for the recipient and they must report it as such. You think the City Attorney will not defend the people who voted for his salary increase? Let’s double the pay and see if more people decide to run for City Council.

  8. Jennifer,
    I am interested in learning the nature of your ethics complaint. If you are suggesting the council has failed to establish more precise Dos & Don’ts for use of the stipend account, I believe you are on the right track. Here is a case of the fox guarding the henhouse.
    The council has failed to establish sufficient rules, regulations and signoffs while at the same time, apparently, the city has loosened their own regs.
    If the Ethics Commission failed to act on your complaint due to insufficient documentation, based on the letter from the IRS, I would urge you to file again.
    You have the City Attorney’s office whispering in the commission’s ear not to take up the matter while at the same time whispering in the council’s ear not to worry about the tax implications.

    1. Bob, I did not file the ethics complaint. I did include copies of documentation from formal complaints filed by other citizens in the past. This was a collaborative effort, with documents collected from many different sources.

  9. Keep in mind, City Council stipend funding is authorized by an Ordinance passed by a City Council in the past. Ordinances stand until they are modified in some way. The last City Council tabled a resolution dealing with a change in Stipend administration. When someone from outside the City administration looks at where we are, they will see the disconnect between a reimbursement system and a debit card advancement system.

    There is some good news it seems in that less than half the money appropriated by the Council in the past several years is actually spent. The bad news is the Council does not reduce the Stipend item to adjust for the lower utilization. They also do not care they are operating administratively in a way that contradicts their authorization. But who is the sheriff on such a matter?

    The other financial item of specific note was the decision by Council President Tom McCarthy to inform fellow Council persons in June, 2013 to make requests of the Purchasing Department for up to $2,000 per Council member to be directed to one or more charitable organizations. That money was to be paid from a Legislative Department line item called Other Services. Fifteen Council persons took advantage of this “deal.” A total of over $30,000 of taxpayer money was sent to local charities in a year where the Council faced primaries and elections. How did we find out about this? Only because for the first time in nearly 25 years, 12 months of financial reports were presented to the public after external audit. THE CHARITABLE CHECKS WERE SENT OUT LATE IN JUNE 2013, BUT NEVER SHOWED IN THE JUNE DRAFT MONTHLY REPORT PRESENTED TO THE PUBLIC IN AUGUST. IT TOOK UNTIL JANUARY 2014 WHEN A NEW COUNCIL MEMBER ASKED FOR THE FIRST TIME THAT A FINAL JUNE AUDITED REPORT BE PRESENTED THAT THIS INFO APPEARED. SURPRISE!!! OIB!

    The City governance process is not on solid ground. What supports it is detached from reality. Economic development that will contribute to full tax payments is not necessarily what is trumpeted by the spin specialists. Any reduction in State funds will be particularly harmful. When supposed watchdogs have never been trained or believe they are more comfortable serving as lapdogs, the citizen taxpayer must come forward and represent his own interests. Time will tell.

    1. John Marshall Lee, you said, “Any reduction in State funds will be particularly harmful.” So do you think if Tom Foley is elected governor, he will “increase funds” to Bridgeport?

      1. Ron Mackey,
        What I think about lots of things, I share with folks with whom relationships are developed over many sessions at meals or over coffee.
        But you do not want to meet me, you have made clear. Initially you just made excuses, but more recently you do not even bother to provide an excuse.
        So what I think about Foley or Malloy is a subject for a different venue. Just as you generally do not comment on my reports of what is ongoing in the City, perhaps because you are closer to some City Council members who are personally affronted by what I say, not understanding they have a bigger responsibility in public service than they act out each month. By the way, whether Foley or Malloy will continue the current level or modify State funding of Bridgeport, don’t you think the larger issue is how responsible anyone outside Bridgeport feels about how Bridgeport uses the money they receive? Time will tell.

  10. Ron,
    I am not the only reader who is unfamiliar with “FRB.”

    First I guessed you may have been trying to write “FiReBird,” a word that is familiar to you.

    Since your cryptic comment was not logged as a REPLY to my response to you, I thought you might just be clearing your throat of a “FuRBall” as a family pet may do from time to time after grooming. But that wasn’t satisfying either.

    As a white-water paddler for more than 20 years, my experiences on rocky passages with lots of water passing swiftly brought back to me the same letters, just different distribution in the form of a warning: Big Freakin’ Rock. But you did not know about running rivers I guessed.

    Thanks for creating an OIB mystery, kind of a word game. Will we get the real meaning anytime soon? Time will tell.

      1. Thank you, Ron. FRB it is.
        Perhaps you have given some thought to the Board you mention. Assuming it is of local creation rather than State-appointed because of a financial meltdown of some type: would it be elected or appointed? Would there be qualifications for membership? Terms? Evaluations of activity? Any restrictions on access to fiscal info? And powers (probably only possible if created by Charter)? Bi-partisan? Any special ethical considerations? What else might serve the public in this regard? Time will tell.


Leave a Reply