

The Republican candidate for the U.S. Senate in Alabama, Roy Moore, speaks at a campaign rally. (Scott Olson/Getty Images)

The Alabama charity once led by Senate candidate Roy Moore did not report to the Internal Revenue Service that in 2011 it guaranteed him $498,000 in back pay, according to an income report provided to The Washington Post by the charity itself.

Five tax law and accounting specialists said it appears the guaranteed payment should have been reported as compensation, a disclosure that would have triggered a federal tax bill of more than $100,000.

Moore and his campaign have not responded to questions about whether he paid the taxes, or to requests that he release his income tax returns.

John Bentley, a board member and former chairman of the charity, the Foundation for Moral Law, said Moore once told him that he had sought advice on the financial arrangement from an accountant. Moore said he was told the compensation was not taxable until he cashed in on the promised back pay, Bentley said. Moore has not yet done so, he said.

The tax issue is the latest in a series of questions over Moore’s financial ties to the Alabama charity where he worked after he was ousted from the state Supreme Court in 2003 for refusing to remove a Ten Commandments monument from a public building. Moore, 70, a Republican, is the front-runner in the race to fill the U.S. Senate seat vacated by Attorney General Jeff Sessions.

Moore served as president of the charity from 2007 to 2012, working 20 hours a week, tax filings show. The charity agreed to pay him a $180,000 annual salary in a deal that was not publicly disclosed until a news account by The Post on Oct. 11. The group also said that if it could not afford his full salary in a given year, it would make up for the shortfall when it was able to do so, documents show.

Controversial conservative and former Alabama chief justice Roy Moore won the Republican primary for the state's Senate seat on Sept. 26, setting up a crisis within the GOP. Here's a look at three problems his win poses for the D.C. establishment. (Jenny Starrs/The Washington Post)

In 2011, the charity gave Moore promissory notes worth $498,000 for unpaid salary in previous years, backing the notes up with a second mortgage on the group’s historic building in Montgomery, Ala. The arrangement entitles Moore to demand payment at any time or claim an equal stake in the building, which serves as the group’s headquarters.

David Walker, a tax law professor at Boston University, said IRS rules for compensation are complex. But he said that it appears Moore’s financial transaction with the charity became taxable the moment he was given the right to demand payment or foreclose on the group’s building.

“It’s a significant possibility,” Walker said.

Walker was one of five tax law and accounting specialists who reviewed IRS filings and other documents at The Post’s request.



Jane Searing, an accountant and nonprofit tax specialist in Washington state, said Moore did not have to be paid in cash to be taxed on the future proceeds.

“Compensation can be anything. It can be chickens. It can be property. It can be cash,” Searing said. “It doesn’t make any sense to me why they’re not reporting it as taxable income.”

In a statement issued to Alabama reporters Oct. 12, Moore’s campaign chairman, Bill Armistead, denounced The Post’s reporting and said the Oct. 11 article on Moore’s compensation was distorted. He cited no specifics.



“The story was full of all of the same distortions and innuendos that characterized past political attacks on Judge Moore,” the statement said. “Voters in Alabama can see through the sleazy tactics of the Washington Post who are trying to discredit Judge Moore.”

The Foundation for Moral Law, now led by Moore’s wife, initially provided an array of documents in response to questions from The Post. Those documents include IRS income reports for Moore known as 1099 forms, which show he was paid as an independent contractor while serving as president of the foundation.

The 1099 forms show the total compensation paid to an independent contractor each year. Employers provide copies of the forms to contractors and to the IRS annually, and the information is used to prepare and verify tax returns.





The 2011 income report for Moore issued by the Foundation for Moral Law did not include $498,000 in guaranteed back pay. (​)

Charity spokesman Martin Wishnatsky did not respond to repeated questions about the 1099 income reports.

In an interview, Bentley recalled a conversation he had with Moore about the back pay.

“I feel sure that he told me that he had talked to his accountant about it and the accountant felt it wouldn’t be taxable,” said Bentley, a state circuit court judge.

Moore’s compensation deal began in 2007, when the charity’s board agreed to pay him the $180,000 annual salary, documents show. The board allowed Moore to raise money toward that salary through an initiative called Project Jeremiah, a ministry to pastors and preachers.

The charity assumed Project Jeremiah might not receive enough contributions to cover the salary and agreed to make up any shortfalls. If the charity did not have the cash in a given year, the debt to Moore would accumulate.

Over the next five years, Moore received between $55,000 and $115,000 in reported income each year, including up to $12,900 for medical insurance, the 1099 forms and other charity documents show.

[Click here to view income reports, known as 1099 forms, showing Roy Moore’s reported compensation from the charity from 2007 to 2012]

In early 2011, the charity’s board agreed to pay Moore for “arrearages of salary during the past four (4) years,” according to the charity’s record of the meeting. The board issued a promissory note for $393,000 and arranged a second mortgage on the group’s building to back it up. In December of that year, the note and the mortgage were updated to guarantee Moore $498,000.

“The entire principal balance will be due and payable on demand,” said the updated promissory note on Dec. 19, 2011.



The Foundation for Moral Law used a second mortgage on its Montgomery, Ala., headquarters building to back up its guarantee of $498,000 in back pay for Moore, giving him the right to demand payment at any time.

In 2012, the amount was boosted to $540,000.

The five specialists consulted by The Post said they believe that the “on demand” provision transformed the charity’s promise of pay into taxable income.

“I think they made a mistake. I think they didn’t realize it was taxable compensation the moment he had a right to it,” said Marcus S. Owens, former chief of the exempt-organizations division at the IRS and a partner at the Loeb & Loeb law firm in Washington. “It’s not when he gets the payment; it’s when he has the legal right to it.”

If the specialists are correct and Moore did not pay taxes on that income, he and the Foundation for Moral Law could owe a variety of taxes, interest and penalties. In 2011, that would include at least $159,000 for federal income taxes alone, assuming the standard deduction, according to an analysis by Searing that she described as conservative.

Philip Hackney, a former attorney in the IRS exempt-organizations division, said that because of the complexity of the law, it is impossible to say with certainty whether Moore owed taxes on the promised back pay. He said only the IRS could make that determination.

“There’s a good case that that was income at that moment,” said Hackney, a tax law professor at Louisiana State University.

The IRS audited the charity’s finances for 2013, after Moore had left. Owens said auditors generally do not examine prior years.

The agency typically does not try to collect unpaid taxes more than three years after returns are submitted. But that window can widen to six years if there is a “material omission” in tax filings, Owens said. He said that in this case, the amount of compensation involved probably would trigger the longer review period, putting the deadline for review in spring 2018.

The 1099 forms provided to The Post conflict with the charity’s publicly reported information about Moore’s compensation over the years.



The forms show the payments went to a family company called Roy S. Moore LLC. Moore owned the company with his wife, Kayla, and their daughter, Heather, who also worked at the charity, records show.

The Foundation for Moral Law’s annual 990s — forms designed to improve accountability of charities by publicly revealing their finances — suggest that payments were made directly to Moore, rather than to a company, and that he was paid in some years as an employee, not as a contractor.



Moore received the benefits of an employee, including health insurance, and perks such as a bodyguard and a spacious office in the foundation’s refurbished headquarters, according to documents and an online video.

In interviews, Bentley, the board member, has said that the organization was essentially run by the Moore family and has faulted himself for providing little oversight. He expressed surprise when he learned from Post reporters that Moore was paid as a contractor.



“This is news to me. I’ve never heard of Roy S. Moore LLC,” Bentley said. “He was a foundation employee. Why else would we come up with a $180,000 salary?”