Saturday, October 1, 2022 Oct 1, 2022
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Politics & Government

Dallas City Council Runoff Races Get Ugly

Two City Council candidates have had tax liens placed on properties they own in the last decade, although there's more to the story in each case.
By |
Kelsey Shoemaker

The campaigns for two Dallas City Council candidates are trying to put their respective opponents’ tax records in the spotlight heading into early voting for the June 5 runoff elections. And, well, here’s some spotlight. In addition, I’m going to try and shine it on some important context in both cases.

Have two candidates for City Council—Gay Donnell Willis and Jesse Moreno—at some point in the last decade had tax liens placed on property they own or owned because of tax issues? After talking to one candidate directly and to the other’s tax attorney, the short answer is “yes, but…” In each case, this is a very significant “but…” and a longer answer is required.

Let’s start with District 13, where Leland Burk and Willis are contending for the North Dallas and Preston Hollow seat being left open by a term-limited Jennifer Staubach Gates. On Thursday afternoon, Burk’s campaign emailed a bunch of media types in town with a press release titled “Leland Burk Calls on Gay Donnell Willis to Drop out of City Council Race.” The release, which was sent by veteran political consultant Mari Woodlief, came with attached tax documents. The gist is that the IRS says Willis and her ex-husband owe about $500,000 in income taxes that went unpaid between 2007 and 2011. According to these documents, the IRS and the state—the latter for separate, unpaid property taxes—placed liens on her and her ex-husband’s Park Lane home.

Gay Donnell Willis, who is running for the City Council seat in District 13.

“It’s hard to expect citizens to trust someone who does not pay their taxes to be an honest and thoughtful steward of taxpayer dollars,” Burk is quoted in the press release. “And to make matters even worse, when confronted with the tax liens, she did not tell the truth.”

Burk’s claims are repeated online by a website that appeared to go live Thursday, and on Burk’s Facebook page.

Willis’ tax attorney, Jason B. Freeman, rebutted this in a letter shared by Willis’ campaign Thursday evening. “Our federal tax laws are complex,” as he writes, and I think it’s worth copying the bulk of the letter below. Here’s Freeman, the bolding and italics are his:

I represented Ms. Donnell Willis as her attorney with respect to federal tax assessments for the years 2007 through 2011—assessments that were removed by the United States Tax Court and are not owed by Ms. Donnell Willis.

The representations set forth on the website are not correct. In fact, the tax issues related to 2007-2010 were ultimately resolved by an order from the Tax Court issued on September 3, 2020. I represented Ms. Donnell Willis in that case. The Tax Court removed the tax amounts at issue because they were not properly attributable to Ms. Donnell Willis under the federal tax laws. As reflected in the Order, the court determined that only $15,801 was properly attributable to Ms. Donnell Willis.

The court’s order demonstrates that the amounts set forth on the website link listed above are incorrect and misleading. Moreover, the smaller amounts determined by the court were based upon somewhat complex matching issues that were ultimately resolved. They also do not reflect payments that may have since been made or credited against those amounts.

Moreover, on March 10, 2019, the IRS filed a Certificate of Release of Federal Tax Lien with respect to the year 2011 because I and my firm had previously demonstrated to the IRS that the amounts related to 2011 were not properly attributable to Ms. Donnell Willis.

Our federal tax laws are complex. The IRS sometimes attributes income and taxes incorrectly. Ultimately, Gay Donnell Williss successfully demonstrated that she did not owe the tax amounts that are reflected on the website linked above.

Willis, speaking on the phone Thursday afternoon, said that her divorce decree, finalized in 2014, required her ex-husband to pay all tax liabilities. Asked when she became aware that her ex-husband had hundreds of thousands of dollars in unpaid income taxes, she said she couldn’t recall.

“Getting too caught up in the theatrics of this is exactly what Leland Burk’s campaign wants,” Willis said. “I would advise the media and residents and voters in D13 to not be fooled by this, because that’s exactly what it is.”

C.P. Henry, a veteran political consultant working on Willis’ campaign (and who managed Burk’s unsuccessful 2013 campaign for the District 13 seat), said the taxes sought by the IRS were her ex-husband’s responsibility.

“She knew there was a tax liability. That’s one of the reasons she divorced the guy,” Henry said. “This was a very bad marriage on many levels. And [her ex-husband’s] financial impropriety was one of them.”

After the divorce, when she realized the IRS was keeping both her and her ex-husband in its sights, Willis and her attorney later requested what’s called “innocent spouse relief” from the agency, she said. In these cases, the “innocent spouse” is not held liable for any tax problems attributable to the actions of the other, presumably less innocent spouse.

She described Burk’s call for her to resign as a “desperate lie” from a “flailing” campaign. Both she and Henry, her campaign manager, pointed to D Magazine reporting that showed Burk’s campaign spent about $250,000 vs. Willis’ $41,000 in expenditures ahead of this month’s general election. They finished with roughly the same number of votes, Burk leading slightly with 4,133 votes cast to Willis’ 4,019. “It makes me wonder what their polls are showing,” she said.

Leland Burk, who is running for the City Council seat in District 13.

The attack on her tax record, Willis contended, is an attempt to distract from a potential conflict of interest that, if Burk is elected, could very well hinder some of his work on the City Council. A real estate developer who owns property at Preston Center in District 13, Burk would have to recuse himself from any zoning cases or City Council votes pertaining to said property.

“Sadly, [Burk’s campaign] has just started this mudslinging, and I do not want people to take their eyes off of the issues,” Willis said.

She has called on Burk to apologize and retract his claims.

Keeping in mind that state and local taxes are often about as complex as federal tax laws, let’s turn now to District 2, where former Park Board member Jesse Moreno is in a runoff with former city spokesperson Sana Syed for the seat being vacated by the term-limited Adam Medrano.

A couple weeks back, someone within Syed’s campaign emailed D Magazine a document showing the state of Texas had placed a tax lien of more than $148,000 on Moreno’s house in 2015. The document cites sales taxes due to the state and city.

Moreno and his family own a restaurant and tamale operation in East Dallas called El Popular Tamale House. At the time of the tax lien, they were running the tamale business from a storefront and restaurant called Peak & Elm at, appropriately enough, Peak and Elm streets. Moreno sold hot tamales at the restaurant, but most of his business then was in bulk sales of cold tamales. This is important to note, said Mark Melton, who was Moreno’s tax attorney and has been in the news lately for his pro bono work fighting evictions in the Dallas area.

Candidate Jesse Moreno, who wants to be elected in District 2.

“The rules are real crazy,” Melton said. “You can sell frozen food and have no sales tax on it, but if you heat it up and sell it, then there is sales tax. If you go to the grocery store there’s no sales tax on groceries, but if you go to a restaurant, there is sales tax, because the food has been prepared for you, so it’s a taxable sale.”

Moreno had been filing sales tax returns and paying what he thought he owed every month, Melton said. Then Moreno went through a sales tax audit. His point-of-sale system had not kept records of which tamales were sold hot and which were cold. “And so we could not prove to the state that almost all of that [gross revenue] was really non-taxable sales of cold tamales,” Melton said. Moreno and Melton made a deal with the state and agreed to a payment plan.

“They put the lien on his house to secure the payment plan, which is timely,” Melton said. “He’s made all his payments. This wasn’t an issue where he was a tax evader and got caught or anything like that. It was just confusion over record-keeping.”

A provision in the Dallas city charter requires that a member of the City Council “not be in arrears in the payment of any taxes or other liabilities due to the city.” There’s some gray area here, so I called Melton again this morning. Moreno was on a payment plan, and was making his payments on time. And although the lien was on Moreno’s house, it was to secure a payment plan for taxes owed by his family’s tamale business, not Moreno as an individual. “He doesn’t owe the taxes,” Melton said. “The company owes the taxes. He just agreed to put his house up for the tax bill.”

Regardless, Melton said that on Thursday he and Moreno mailed a check paying the roughly $25,000 balance remaining on the bill. The provision in the city charter only applies to members of the City Council upon their election, and not to candidates. Moreno wanted to make sure there was no ambiguity if he is elected in next month’s runoff, Melton said. And the matter shouldn’t reflect poorly on Moreno, he said. “The whole thing arose not because of any incompetence or irresponsibility,” he said. “He was collecting sales tax and remitting it the whole time. He just couldn’t prove which tamales were frozen or cold.”

What will the few voters paying attention to these races make of all this? That’s up to them. I suspect they’ll have at least two takeaways: politics is a messy business, and taxes are complicated.

Early voting starts Monday and runs through June 1, with polls closed on Memorial Day. Election Day is June 5.

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