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Subject: IR-2004-19 -- IRS, STATES MOVE FORWARD IN FIGHT AGAINST
ABUSIVE
TAX AVOIDANCE
IR-2004-19, Feb. 10, 2004
IRS, STATES MOVE FORWARD IN FIGHT AGAINST ABUSIVE TAX AVOIDANCE
WASHINGTON - Internal Revenue Service officials announced today
that they
have started sharing leads on more than 20,000 taxpayers engaged
in
abusive tax avoidance with tax agencies in 45 states, the
District of
Columbia and New York City. The IRS also announced today the
latest
results of another effort to combat abusive tax avoidance, the
Offshore
Voluntary Compliance Initiative (OVCI).
The sharing of leads was the first large transfer of information
under the
terms of the new IRS-state partnership unveiled in September.
More than
20,000 audit leads and other information have been shared with
the states,
and more information will be shared in the future.
"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 today 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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