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"Combating the
use of abusive tax avoidance schemes by high-income individuals
and others is a top enforcement priority," said IRS
Commissioner Mark W. Everson. "Coordinating our casework and
sharing leads with the states is an important way to extend the
reach of the IRS and help the states."
Under the terms of
the partnership, IRS and the cities and states coordinate efforts
to address common compliance concerns in the area of Abusive Tax
Avoidance Transactions (ATAT) by working in tandem and avoid
repeating each other’s efforts.
"The states
and the IRS routinely share information, but the ATAT program
presents us with an exceptionally fertile opportunity to help one
another," said Stephen M. Cordi, Deputy Comptroller for
Maryland and president of the Federation of Tax Administrators, an
association of the tax agencies in all states, D.C. and New York
City. "These abusive shelters are hidden through many layers
of business transactions and money shifts. Each agency may have a
few pieces of that puzzle but by working together we can fit it
all together for the benefit of taxpayers."
The initial leads
transferred to states involved scams using offshore transactions,
abusive trusts, employee leasing, home-based businesses,
employment taxes and other tax-avoidance schemes. The IRS, states
and cities will subsequently share information on any resulting
tax adjustments from the audits allowing them to piggyback on the
results of each other’s work. The process allows the agencies to
leverage resources by greatly decreasing the possibility of two or
even three tax agencies performing a lengthy examination of the
same taxpayer.
The cities and
states that have signed partnership agreements and that received
information include: Alabama, Alaska, Arizona, Arkansas,
California, Colorado, Connecticut, Delaware, District of Columbia,
Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas,
Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota,
Mississippi, Missouri, Montana, New Hampshire, New Jersey, New
Mexico, New York City, New York State, North Carolina, North
Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South
Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia,
Washington, West Virginia and Wisconsin.
The IRS also
announced the latest results of its Offshore Voluntary Compliance
Initiative (OVCI). More than 1,300 taxpayers applied to OVCI and
so far the initiative has yielded more than $170 million in taxes,
interest and penalties to the U.S. Treasury. In addition, the
effort led to obtaining the names of 479 scheme and scam
promoters. Nearly half of these promoters were previously unknown
to IRS investigators.
Under the terms of
this 2003 initiative, taxpayers came forward, amended their
returns, paid taxes, interest and penalties and furnished the IRS
with information regarding the person who promoted the offshore
arrangements to them. Interested persons had from January 14 to
April 15, 2003 to step forward. If accepted by OVCI, eligible
taxpayers could avoid criminal prosecution and some penalties.
State governments
will also benefit from OVCI under existing information-sharing
agreements. State tax administrators will be able to make use of
the information voluntarily given by taxpayers to the IRS.
“Our coordinated
efforts will continue to serve as a catalyst to strengthen overall
tax administration at the federal, state and local levels,” said
IRS Small Business/Self-Employed Commissioner Dale F. Hart.
“This effort maximizes our efforts to stretch our resources as
we continue to combat the proliferation of abusive tax
transactions and schemes.”
New York and
California tax officials praised the ongoing partnership.
“Working with the IRS and other states, New York has stepped-up
efforts to identify and prosecute companies and individuals who
promote or engage in abusive tax shelter schemes,” said New York
State Department of Taxation and Finance Commissioner Andrew S.
Eristoff. “The information-sharing process under the partnership
will allow us to save resources and accelerate our efforts.”
“With federal and
state officials cracking down on illegal tax shelters for
multi-millionaires, Californians will be better assured that
everyone pays their fair share,” said State Controller and
Franchise Tax Board Chair Steve Westly.
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