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IR-2004-19, Feb. 10, 2004
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.