A state official has told the Associated Press, that NYS Governor David Paterson’s embattled chief of staff is resigning after it was revealed he had to pay nearly $300,000 in taxes and penalties that went unpaid for years.

The state official close to the decision says Charles O’Byrne’s resignation was accepted with regret by Paterson, his close friend. The official spoke on the condition of anonymity because Paterson hadn’t yet announced the decision.

O’Byrne, who has ties to the Kennedy family, was the muscle behind Paterson. He could have – and still could be – a liability to the governor, who plans to run for election to a full term in 2010.

The story took a curious turn this week when O’Byrne’s tax attorneys revealed that the amount owed wasn’t $200,000, as they had previously estimated, but about $100,000 more.

A state official told the AP that Paterson regretted to accept the resignation. The two have been close friends for many years.

O’Byrne has said clinical depression kept him from paying taxes from 2001 to 2005, before he took the job titled secretary to the governor.

O’Byrne’s problems were first made public in the New York Post on Saturday and O’Byrne has been fighting against mounting pressure to keep his $178,500-a-year job since.

(WCBSTV / MyFoxNY/ YWN-112)