Jan. 31 (Bloomberg) -- Thomas A. Daschle, the former U.S. senator picked to be Barack Obama’s Health and Human Services secretary, was aware in June that his free use of a car service might be taxable, a report to the Senate Finance Committee said.

Daschle, 61, amended his tax returns for 2005, 2006, and 2007 on Jan. 2, when he also paid $128,203 in back taxes and $11,964 in interest, a Daschle spokeswoman confirmed today. That included payments on the value of a car and driver provided by Leo Hindery Jr., a Democratic Party donor and a founder of the private equity firm InterMedia Advisors, the staff report said.

The panel’s examination of Daschle’s taxes during his time as a consultant may be one reason his confirmation has moved slowly. Obama appointed Daschle on Dec. 11, saying he would be a “leading architect” of efforts to revamp the U.S. health-care system. The Finance Committee confirmed Timothy Geithner as Treasury Secretary after grilling him on his failure to pay almost $50,000 in taxes.

Daschle, a former U.S. Senator, told the committee staff that in June “something made him think that the car service might be taxable,” the confidential report by the Finance Committee staff said. Daschle then contacted his accountant.

Jenny Backus, the Daschle spokeswoman, said in an e-mailed response to questions today that the accountant concluded “there could be” tax consequences and “planned to remedy the issue as part of Senator Daschle’s 2008 tax filings,” rather than sooner.

Embarrassed and Disappointed

“Senator Daschle is embarrassed and disappointed by these errors,” Backus said. “He apologized for his part in these errors and expressed his deep regret that the committee had to devote time to them.”

Daschle remains the best choice for the post, White House spokesman Bill Burton said.

“The president has confidence that Senator Daschle is the right person to lead the fight for health-care reform,” Burton said yesterday in a statement.

The back taxes for 2005, 2006 and 2007 also included amounts due for unreported consulting fees and donations that didn’t qualify for tax deductions.

Daschle’s confirmation hearing still hasn’t been scheduled by the Finance Committee. Chairman Max Baucus, a Montana Democrat, and ranking Republican Charles Grassley, of Iowa, will meet Feb. 2 to discuss nominations, Carol Guthrie, committee spokeswoman, said in a telephone interview.

‘Confident’ of Hearing

“In preparation for his nomination, Senator Daschle and his accountant identified some tax issues and fixed them,” Burton said. “We are confident the committee is going to schedule a hearing for him very soon and he will be confirmed.”

More than $100,000 of the tax and interest repayments was for use of the car.

Daschle didn’t report a May 2007 consulting payment of $83,333 from InterMedia, which paid him that amount each month. The tax forms provided to Daschle by InterMedia for 2007 didn’t include the payment because the money was transferred by a different method that month by a temporary clerk, InterMedia officials told the committee.

Daschle had to redo his tax forms as well because he couldn’t show that almost $15,000 in charitable contributions went to qualifying organizations, according to the panel’s report. He and his wife, Linda, made $276,000 in charitable contributions during the three-year period being studied by the panel, Backus said.

The committee is still looking into whether travel and entertainment services provided to the Daschles by EduCap, Inc., a nonprofit student loan company and its Loan to Learn program, as well as the philanthropic Catherine B. Reynolds Foundation and the nonprofit Academy Achievement in Washington, should be reported as income, according to the draft report.

Medicare Payments Due

The former senator has agreed that he will have to adjust again his 2005, 2006 and 2007 tax returns because he didn’t pay Medicare taxes on the additional taxable income he incurred with the use of the car, the Finance Committee staff reported.

As Health and Human Services secretary, Daschle would oversee Medicare, the insurance program for the elderly and disabled.

Daschle served in Congress for 26 years, losing his Senate seat in 2004. In 2005, he joined an advisory board for InterMedia. Daschle most recently worked as a special policy adviser for the Washington office of law firm Alston & Bird, advising clients on issues including health care, according to a statement on the firm’s Web Site.

Hindery, formerly an executive in the cable-TV industry, didn’t immediately return voice mails left on his cell phone.

To contact the reporter on this story: Aliza Marcus in Washington at amarcus8@bloomberg.net

Last Updated: January 31, 2009 16:19 EST