Palazzos CPA Firm Status Is Murky
Wifes Ownership May Violate Mississippi Law
Freshman Rep. Steven Palazzo (R-Miss.) recently transferred ownership of his accounting firm, Palazzo & Co., to his wife to comply with federal requirements that lawmakers not have financial interests outside of Congress.
But in setting up the new corporate structure to satisfy House rules, it’s unclear whether Palazzo is adhering to state laws in Mississippi.
The problem is that certified public accounting firms such as Palazzo’s can only be owned by CPAs. The Congressman is one, but his wife, Lisa Palazzo, is not.
Heard on the Hill came across the issue during an ongoing inquiry into the fallout from a previous HOH report about Palazzo’s staffers hosting a weekend romp at a waterfront house in Annapolis, Md.
After HOH began asking about the CPA situation this week, the firm’s website was changed. Lisa Palazzo is now identified as the “firm administrator,” and the site removed references to Steven Palazzo as the sole proprietor. However, the state, as of Wednesday, still lists the Congressman as the “Registered Agent” for the firm.
The firm’s website also expunged references to it being a CPA-licensed firm. On Wednesday morning, the website welcomed visitors to the “Palazzo & Company, PLLC, an Expat CPA firm.” By early afternoon, however, visitors were welcomed to “Palazzo & Company, LLC, an Expat tax firm.”
The Congressman converted Palazzo & Co. from being registered as a professional limited liability company to be a limited liability company earlier this year, Palazzo Chief of Staff Jamie Miller tells HOH. A PLLC is formed for a business that requires the owner to hold a license for the services rendered, while an LLC can be formed by anyone, regardless of professional qualifications.
Some time after noon Wednesday, the company website went from PalazzoCPA.com to PalazzoTax.com. Not all references to it being a CPA firm were removed, however. Email contact information retained the firm’s @PalazzoCPA.com addresses, as in email@example.com.
Palazzo & Company is a tax firm that specializes in handling the tax needs of expatriate Americans, including armed services personnel and civilian contractors in conflict zones. As of Wednesday evening, the firm’s website touted its CPA bona fides on its home page: “Welcome to Palazzo & Company, LLC, an Expat Tax firm that focuses on the tax needs of US Expatriates. We are dedicated to providing the highest quality tax and accounting services to Expats and the Companies they work for around the world, including remote and hostile sites. Our firm values the relationship between Client and CPA and we do everything we can to provide the highest quality services to our clients.”
Another feature of the firm’s website: an entree to political giving.
On the firm’s website, clients and visitors can contribute to the Expat Political Action Committee, originally advertised in a 2008 company tax alert newsletter.
“[I]n light of the current political and economic uncertainty one can never tell,” the alert reads. “That is why we have created the Expat Political Action Committee (EPAC) to protect, promote and preserve US Expat rights in Washington, DC. More on EPAC in future tax alerts.”
A thorough search of Federal Election Commission filings and the Mississippi secretary of state’s charities and nonprofit listings showed no evidence that a PAC of this name was ever registered or has made any political donations.
Yet the company’s site accepts EPAC contributions via a PayPal account attached to firstname.lastname@example.org. A receipt for a donation says, “You sent a payment … to Steven Palazzo.”
Palazzo’s Congressional office said the PAC listing was a glitch on the site and couldn’t provide any further information about it.
House rules required the change in the Congressman’s company ownership arrangement. According to the House Ethics Manual, Members of Congress are prohibited from earning “income from professional fees such as … accounting.”
Furthermore, House rules cap the amount of outside earned income Members can pull in each year they are in office; for 2011 the limit is $26,955.
According to Palazzo’s 2010 financial disclosure forms, the Congressman made close to $200,000 the year before he took office.
At the same time that Palazzo converted the company, Miller says, he transferred its ownership to his wife. Miller said the transfer happened May 26, but as of Nov. 30, the Corporation Commission of Mississippi, which is maintained by the Mississippi secretary of state, still listed the firm’s name as “Palazzo & Company, PLLC,” and the “Registered Agent” for the firm as Steven M. Palazzo.
“They do tax professional services,” Miller said.
The transfer of the Congressman’s personal business was an attempt to comply with House ethics rules, Miller said. The process had been ongoing since Palazzo was elected last November and was executed under the guidance of legal counsel, according to Miller.
According to the Mississippi Public Accountancy Statutes, which are Title 73, Chapter 33 of the Mississippi Code 1972: “In order to obtain and maintain a firm permit … [a] certified public accountant firm shall be required to show the following … [a] simple majority of the ownership of the firm in terms of financial interests and/or voting rights hold a certified public accountant licenses in any state.”
According to the Mississippi State Board of Public Accountancy, Lisa Palazzo is not a licensed CPA with the state.