PIERRE, S.D. (KELO) — The tax-free payments that all 105 South Dakota lawmakers receive for daily expenses during session don’t meet current Internal Revenue Service requirements, a lawyer for the Legislature’s professional staff told leadership Monday.
The comments came from Michael Loesevitz of the state Legislative Research Council. His experience included work for a public accounting firm and a tax lawyer.
The lawmakers currently receive $151 apiece per day that they serve in session. The session ran 37 days this year. To comply with the IRS, the Legislature must either charge federal income and payroll taxes on all 105 lawmakers’ per-diem payments, or stop paying the three legislators who live within 50 miles of Pierre while keeping the other 102 tax-free, Loesevitz said.
Loesevitz said the IRS also allows a broader view of what session means. The IRS definition covers all the calendar days while in session, but excludes any time when lawmakers don’t meet for more than four consecutive days. For the South Dakota session this year, Loesevitz said that would have meant 60 days of per diem: January 14 through March 12, and the final day March 30.
Using the expanded IRS approach for per diem would have increased the cost about $364,000, according to LRC deputy director Sue Cichos. She said per diem would be $151 again for 2021. Loesevitz noted the IRS doesn’t require a legislator to be at the Capitol to collect per diem.
The National Conference of State Legislatures, while then-Senator Deb Peters of South Dakota was the organization’s president, issued a memo that led the Legislative Research Council to have lawmakers sign an accountability form. Cichos said legislators are paid per diem on the Friday before session starts, for all but two days, because legislators rent living space in the Pierre-Fort Pierre area.
Senator Brock Greenfield, a Republican from Clark, is the Senate president pro tem. He said Senator Red Dawn Foster, a Democrat from Pine Ridge, suffered a broken leg and missed some session days. He said there was concern that she would need to pay back the per diem she had received for those days.
Senate Democratic leader Troy Heinert of Mission said he’d hate to cut out the three legislators from the Pierre area because of where they live. Heinert suggested doing the IRS “calendar” definition and pay the taxes. Heinert said there are “a lot” of legislators including himself who lose money during session. “You got to pay tax on it, you pay tax on it,” Heinert said.
Greenfield said there would be “a real outcry from the public” about lawmakers paying themselves for days they don’t work on top of the additional compensation. “A hundred fifty-one dollars more than compensates me for my expenses,” Greenfield said. He said legislators who rent motels often were charged at below state-government rates. “I don’t want to get carried away padding our own pockets,” Greenfield said.
Heinert agreed there might be a public outcry, but there are days when legislators do uncompensated work during the nine months outside of the regular session. “I don’t think anybody’s doing this job trying to get rich,” Heinert said. Heinert recalled past legislators who brought suggestions on additional compensation.
House Speaker Steven Haugaard, a Republican from Sioux Falls, suggested some examples be assembled that could be shown to other legislators. Haugaard said it might be possible to revise the policy in a way that would allow legislators to continue keeping the same amount of per-diem while making the payments larger and taxable.