This year’s Symposium will be available either in-person or online on Wednesday, March 13, starting at 815 am EDT.  It offers 7.5 CLE hours, including 1 Ethics hour and 4 Trial Practice hours. Cost is $279.  

You can register (and see the full Agenda) here: atlantabar.org/….   Topics include: 

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Turning to IRS violations, this WSJ article addresses in part why, “[o]n its 2007 return, Ensign Peak put down ‘1,000,000’ for its total assets. The real number was about $38 billion, an Ensign Peak document shows.”

To quote the Journal:

The post Wall Street Journal Begins Examining IRS Violations Exposed by Mormon Whistleblower Regarding Ensign Peak Advisors, Inc. appeared first on Whistleblower Lawyer Blog.

Mormon blows whistle on church’s alleged “clandestine hedge fund”

(https://www.cbsnews.com/60-minutes/ ):

The post On 60 Minutes, LDS Church admits “bailout” of for-profit business by Ensign Peak – which shows Ensign Peak cannot be tax-exempt. appeared first on Whistleblower Lawyer Blog.

On Sunday, May 14, 60 Minutes featured an interview with our IRS and SEC whistleblower client David Nielsen.

My colleague Richard Rubin and I are proud to represent this principled whistleblower.

#cbs #60minutes #whistleblower #finchmccranie #secwhistleblower #irswhistleblower #ensignpeak

The post 60 Minutes Interviews Our IRS & SEC Whistleblower Client David Nielsen: “Mormon Blows Whistle on Church’s Alleged ‘Clandestine Hedge Fund'” appeared first on Whistleblower Lawyer Blog.

(This post is by our colleague Richard Rubin of Rubin Law (www.rubinlaw.us), a tax attorney with significant experience in U.S. cross-border matters, including FATCA and U.S. international compliance.)

Bank accounts in countries outside the U.S. can cause headaches when owned by U.S. taxpayers. While owning foreign accounts has always entailed a reporting headache for U.S. taxpayers, the problem has recently heightened as a result of the FATCA legislation that is being implemented in a number of countries outside the U.S.

FATCA is a set of U.S. tax reporting rules that impact U.S. citizens, Green Card holders and other U.S. tax resident individuals who have accounts with non-U.S. banks or financial institutions.

An acronym for the Foreign Account Transactions Compliance Act, FATCA requires banks and financial institutions in countries outside the U.S.to provide the IRS with details of accounts that are owned by U.S. taxpayers. Although the mechanism varies slightly by country, in most countries where FATCA has been implemented banks and financial institutions are required to report these details to the Revenue Authority of that country, and the Revenue Authority is required to pass this information along to the IRS.

Foreign banks are generally required to report accounts known to be owned by U.S. citizens and Green Card holders, as well as accounts owned by anyone who is potentially U.S .tax resident, as indicated for example, by an associated U.S. address, U.S. telephone number, or U.S. person with signing power or other authority over the account.

For those U.S. tax residents who have duly reported their non-U.S. bank and other accounts on their U.S. tax returns (and on their Foreign Bank Account Reports or “FBAR’s”), FATCA has little practical significance. Conversely, FATCA is directly relevant to U.S. tax residents who have not reported their non-U.S. accounts. FATCA is also potentially relevant to individuals living outside the U.S. if they intend immigrating to the U.S. or otherwise becoming U.S. tax resident.

Compared to the Revenue Authorities of most other countries, the IRS tends to take non-compliance far more seriously, as is evident from the IRS penalties that are generally imposed for non-compliance, especially non-reporting of foreign bank accounts. As a result, individuals who are required to report their non-U.S. bank accounts, but have not done so, typically face heavy penalties and in some cases criminal prosecution when the IRS disovers their foreign accounts through FATCA reporting.

FATCA is at varying stages of implementation in a number of countries. Take for example South Africa: in June 2014 South Africa signed an agreement with the U.S.(a so-called Intergovernmental Agreement or “IGA”), in terms of which South Africa undertook to implement FATCA according to a timetable. Although the dates originally agreed have been extended, in February 2015 South Africa enacted legislation giving effect to FATCA. As things currently stand, South African banks and institutions are obliged to commence reporting client account details with effect from June 2015.

While certain implementation issues and dates remain to be clarified, one thing is clear; that in time to come South African banks and institutions will routinely be rendering details of accounts held by U.S. taxpayers.

As with most other jurisdictions, South African institutions are required to provide details of accounts known to be owned by U.S. citizens or Green Card holders, as well as accounts owned by anyone who is potentially U.S. tax resident, as indicated for example, by an associated U.S. address, U.S. telephone number, or U.S. person with signing power or other authority over the account. In some cases, an “in-care-of” or “hold mail” address is sufficient to require reporting, if this is the sole address on file with the South African bank.

Individuals who obtain Green Cards are often unaware that if they spend even a short period in the U.S. they typically become U.S. taxpayers; and being unaware of their U.S .taxpayer status, they generally don’t file U.S. tax returns or FBAR’s, with the result they also fail to report their non-U.S. accounts. In cases such as these, FATCA reporting may cause the individual’s foreign bank to render their account details to the IRS before the individual gets to file the necessary returns and make the necessary disclosures.

In most cases the headache of unreported foreign accounts can be relieved – and generally cured – by taking appropriate corrective measures. This often includes some form of Voluntary Disclosure to the IRS, and in certain cases may include other forms of disclosure.

There are a number of categories of Voluntary Disclosure, and the various U.S. options entail different qualifying criteria as well as different consequences. In certain cases, the risk of criminal prosecution may favor a solution that focuses on reducing the chances of criminal indictment; while in others, the risk of criminal prosecution is sufficiently low allowing focus on a solution that reduces or eliminates civil penalties.

While the remedy always depends on the specific facts, one principle is almost universally true: that doing nothing about foreign unreported accounts is not a solution.

(We asked our colleague Richard Rubin of rubinlaw.us to share his observations on FATCA.)

The post FATCA – Foreign Bank Account Headaches appeared first on Whistleblower Lawyer Blog.

Steve Whitlock, Director of the IRS Whistleblower Office, gave a preview last Fall. Listening to an audience react enthusiastically to his SEC counterpart Sean McKessy discuss awarding more than $14 million to a whistleblower, Whitlock wryly observed that the IRS had “only” awarded $50 million to whistleblowers in FY 2013.

To those who follow the IRS Whistleblower Program closely, Whitlock’s comment was a rare moment to take a bow of sorts. It was a brutal year in which Whitlock’s boss, Acting Commissioner Steve Miller, lost his job as the IRS faced attacks that it had politicized reviews of organizations claiming tax-exempt status. Although the Whistleblower Office played no role in that controversy, Sen. Grassley and others also scorned the IRS and Treasury for obstructing Congress’ mandate to establish a robust whistleblower program.

The post What the Just-Released 2013 IRS Whistleblower Office Annual Report Means for Future Tax Whistleblowers appeared first on Whistleblower Lawyer Blog.

A Liechtenstein bank avoided prosecution by agreeing to turn over files on 200 U.S. customers and to pay $23.8 million for assisting U.S. taxpayers in opening and maintaining undeclared bank accounts from 2001 through 2011.

Liechtensteinische Landesbank AG (LLB-Vaduz) helped a significant number of U.S. taxpayers hide these offshore accounts, evade U.S. taxes, and file false tax returns with the IRS, according to today’s announcement.

The post Liechtenstein Bank Secrecy Gives Way in $23.8 Million IRS Settlement That Exposes US Tax Evaders appeared first on Whistleblower Lawyer Blog.

If successful, this case may net New York three times the more than $100 million in unpaid taxes that the state alleges Sprint has failed to pay its state and local governments. It may also bring the whistleblower 15%-25% of what the state recovers.

The N.Y. Supreme Court first rejected Sprint’s arguments that the N.Y. Tax Law did not require payment of the sales tax in question. The Court allowed the case to proceed.

Sprint was successful in limiting the time in question to March 31, 2008 forward, but now faces discovery and a potential trial over allegations that include whether Sprint knowingly made “false records or statements” and repeatedly engaged in “fraudulent or illegal activity.”

The Court also dismissed the Complaint’s unnecessary conspiracy count, by holding that a corporation cannot conspire with its own subsidiaries.

Most state False Claims Acts mirror the federal law, which excludes tax cases from the types of cases that whistleblowers (known as “relators”) may bring as “qui tam” cases. Attorney General Eric T. Schneiderman as a legislator had a lead role in enacting New York’s current False Claims Act.

AG Scheiderman and his Senior Advisor and Counselor Gregory Krakower have warmly welcomed tax whistleblowers and their attorneys to file tax qui tam cases in New York. The Attorney General has established a Taxpayer Protection Bureau within his office led by Randall Fox, whom I have found very approachable and receptive to these cases.

For whistleblower lawyers who already have pending IRS Whistleblower claims that also have New York state tax elements, the New York Taxpayer Protection Bureau holds great promise. The IRS and New York need to amend their information sharing agreement so that the IRS may share information and resources with the new Taxpayer Protection Bureau, which receives the whistleblower filings. Ideally, the IRS and the N.Y. Taxpayer Protection Bureau should be able to assist each other in joint audits when appropriate–especially in cases of complexity.

We congratulate the NY AG and the Taxpayer Protection Bureau on this recent decision that recognizes the validity of this significant case.

Excerpts of the Court’s Order allowing the case against Sprint to proceed follow:

PEOPLE OF THE STATE OF NEW YORK,
BY ERIC T. SCHNEIDERMAN, ATTORNEY GENERAL FOR THE STATE OF NEW YORK, AND STATE OF NEW YORK, EX REL.
EMPIRE STATE VENTURES, LLC,
Plaintiffs,
v.
SPRINT NEXTEL CORP., SPRINT SPECTRUM L.P.,
NEXTEL OF NEW YORK, INC. AND NEXTEL PARTNERS OF UPSTATE NEW YORK, INC.,
Defendants.

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 49
DECISION AND ORDER Index No. 103917/2011
O. PETER SHERWOOD, J.:

Defendants Sprint Nextel Corp. and its wholly-owned subsidiaries, Sprint Spectrum L.P., Nextel of New York, Inc., and Nextel Partners of Upstate New York, Inc. (collectively, “Sprint”), move, pursuant to CPLR 3211(a)(5) and (7), to dismiss the Complaint in this tax enforcement action.

BACKGROUND
This case arises out of a qui tam action pursuant to the New York False Claims Act, State Finance Law § 189. Empire State Ventures, LLC initially commenced the action, pursuant to State Finance Law § 189, essentially alleging that Sprint, mobile telecommunications service providers, failed to collect or pay New York sales taxes on receipts from the sale of certain wireless telephone services. After an investigation, plaintiff, People of the State of New York, by Eric T. Schneiderman, Attorney General for the State of New York, intervened and filed a superceding Complaint, also alleging claims under the State Finance Law, as well as claims under the Tax Law and Executive Law. The Attorney General claims, in essence, that Sprint knowingly filed false tax returns and underpaid New York sales taxes on its mobile telecommunications offerings in order to gain an advantage over its competitors.

The superceding Complaint includes the following factual allegations, which, on this motion to dismiss, are accepted as true. From 2002 to the present, Sprint has sold wireless telephone calling plans to New York customers for a set number of minutes per month at fixed monthly recurring access rates. Customers incur the fixed monthly recurring access charges regardless of whether they actually use all of the available minutes in a given month, or whether they make interstate or intrastate charges. Customers also incur overage charges, on a per-minute basis, for any minutes used in excess of the monthly allotment. Sprint issues monthly invoices, which do not distinguish between interstate and intrastate usage, but rather, include the fixed monthly recurring access charges, any overages charges, and charges for sales taxes.

Beginning in July 2005, Sprint implemented a nationwide program of unbundling its wireless offerings. As such, Sprint began treating part of its fixed monthly access charges for wireless voice services as if they were charges for interstate calls charged on a per-minute basis. The monthly invoices from defendants continued to identify the charges as fixed monthly recurring access charges. However, Sprint did not collect or pay New York sales taxes on the interstate calls. Sprint also submitted monthly and quarterly State sales tax filings reflecting only the amount of sales taxes it collected for intrastate calls. The submissions offer very little insight into the standards Sprint used to identify each component of the unbundled charges.

The superceding Complaint alleges that Sprint intentionally avoided more than $100 million in New York sales tax obligations by arbitrarily unbundling its wireless offerings. The Complaint also alleges that for the years at issue, the percentage of fixed-rate wireless calling plans on which Sprint did not collect sales taxes ranged from 13.7% to 28.5% of the overall fixed rate. Plaintiff maintains that the allocation between taxable and non-taxable categories not only ignored the applicable sections of the Tax Law, but also was arbitrary because it was not related to any customer’s actual usage.

The first cause of action alleges that Sprint violated State Finance Law § 189(1)(g) by knowingly making or using false records or statements material to an obligation to pay or transmit money or property to the state and local governments. The second cause of action alleges that Sprint violated State Finance Law § 189(1)(c) by conspiring to violate State Finance Law § 189(1)(g). The third cause of action alleges that Sprint violated Executive Law § 63(12) by repeatedly engaging in fraudulent or illegal activity, including failing to collect and pay sales taxes and submitting false sales taxes filings in violation of New York State Tax Law § 1105. The fourth cause of action alleges that Sprint violated article 28 of the New York State Tax Law, specifically Tax Law § 1105(b)(2), by failing to collect or pay New York sales taxes.

Sprint now seeks to dismiss the Complaint for failure to state a cause of action. Sprint also seeks to dismiss as time-barred so much of the third and fourth causes of action as assert claims concerning statements made prior to March 31, 2008.

DISCUSSION
. . .
The New York False Claims Act, State Finance Law § 189(1)(g), prohibits any person from knowingly making or using a false record or statement to avoid an obligation to pay or transmit money or property to the state or a local government. Effective August 10, 2010, the False Claims Act was amended to expressly apply to knowing violations of the New York Tax Law (2010 McKinney’s Session Laws of NY, ch 379, at A 11568).
New York’s Tax Law § 1105(b)(2) imposes a four percent tax on:

“[t]he receipts from every sale of mobile telecommunications service provided by a home service provider, other than sales for resale, that are voice services, or any other services that are taxable under subparagraph (B) of paragraph one of this subdivision, sold for a fixed periodic charge (not separately stated), whether or not sold with other services.”

Here, the superceding Complaint alleges in great detail how Sprint implemented a nationwide program of unbundling its mobile telecommunications offerings, treating part of its fixed monthly access charges for wireless voice services as if they were charges for interstate calls charged on a per-minute basis, failing to collect or pay New York sales taxes on the interstate calls, and submitting monthly tax statements only for the taxes collected for intrastate calls. Construed in the light most favorable to plaintiff, the first cause of action sufficiently alleges that Sprint violated State Finance Law § 189(1)(g), by knowingly making or using a false record or statement material to avoid an obligation to pay New York sales taxes required under Tax Law § 1105(b)(2), so as to survive a motion to dismiss.

However, Sprint disagrees that the factual allegations in the superceding Complaint adequately state a valid claim for relief under State Finance Law § 189(1)(g). Instead, Sprint contends that its tax collection decisions are justified based on a reasonable interpretation of the various statutes.

Sprint asserts that the plain language of the Tax Law permits it to exclude from sales taxes the portion of its fixed monthly recurring access charges that is attributable to interstate voice services, even when said services are bundled with intrastate services. Sprint maintains that Tax Law § 1105(b) must be construed in its entirety, including subdivisions (1), (2), and (3), and that when so construed, the plain language of § 1105(b) excludes interstate voice services from New York sales taxes. Thus, Sprint asserts that the superceding Complaint does not sufficiently allege that it knowingly submitted false statements in order to avoid an obligation to pay state taxes on the sale of mobile telecommunication services. Sprint also argues that in any event, its interpretation of the Tax Law is reasonable and, thus, not punishable.

. . .
Here, the statutory construction urged by Sprint is inconsistent with the plain language used. Tax Law § 1105(b)(1) imposes a four percent tax on:

“The receipts from every sale, other than sales for resale, of the following: . . .
(B) telephony and telegraphy and telephone and telegraph service of whatever nature except interstate and international telephony and telegraphy and telephone and telegraph service and except any telecommunications service the receipts from the sale of which are subject to tax under paragraph two of this subdivision. . . .”

Thus, § 1105(b)(1) expressly excludes receipts from telecommunications service that are taxable under § 1105(b)(2).

Section 1105(b)(2) imposes the four percent tax on receipts from every sale of mobile telecommunications services, other than sales for resales, that are voice services sold for a fixed periodic charge. The superceding Complaint specifically seeks to redress Sprint’s alleged tax avoidance for mobile telecommunications services sold for a fixed periodic charge. Thus, § 1105(b)(2) must be applied to address plaintiff’s claims.

Section § 1105(b)(3) states that “[t]he tax imposed pursuant to this subdivision is imposed on receipts from charges for intrastate mobile telecommunications service of whatever nature in any state if the mobile telecommunications customer’s place of primary use is in this state.” Thus, § 1105(b)(3) taxes receipts from intrastate mobile telecommunications charges incurred by New York customers while they are in any state. A review of the superceding Complaint reveals no factual allegations that require the application of § 1105(b)(3).

Simply stated, nothing in the plain language of Tax Law §§ 1105(b)(1) or (b)(3) addresses plaintiff’s allegations that Sprint knowingly avoided New York sales taxes on the sale of mobile telecommunications services for a fixed monthly recurring access charge.
Furthermore, Tax Law § 1111(1) states, in part:

“(1) Receipts from the sale of mobile telecommunications service provided by a home service provider shall include ‘charges for mobile telecommunications services.’ Such term shall mean any charge by a home service provider to its mobile telecommunications customer for
(A) commercial mobile radio service . . . and (B) any service and property provided therewith.
(2) With respect to services or property described in subparagraph (B) of paragraph one of this subdivision, internet access service, any mobile telecommunications service which the mobile telecommunications customer originates in a foreign country to the extent included in the fixed periodic charge, any interstate or international telephony or telegraphy or telephone or telegraph service of whatever nature which is not a voice service, and any property or service which is not telephony or telegraphy or telephone or telegraph service of whatever nature, a home service provider shall collect and pay over tax, and a mobile telecommunications customer shall pay such tax, on receipts from any charge that is aggregated with and not separately stated from other charges for mobile telecommunications service. Provided, however, if such home service provider uses an objective, reasonable and verifiable standard for identifying each of the components of the charge for mobile telecommunications service, then such home service provider may separately account for and quantify the amount of each such component charge. If a home service provider chooses to so separately account for and quantify and separately sells any such property or service, then the charge for such property or service shall be based upon the price for such property or service as separately sold.”

Thus, Tax Law § 1111(1) expressly requires mobile telecommunications providers to collect and pay state sales taxes on mobile telecommunications services included in a fixed periodic charge, unless the provider uses an objective, reasonable and verifiable standard for identifying each of the components of the charge, in which case, the provider may separately account for and quantify the amount of each such component charge.
. . .

The post Court Allows N.Y. Tax Whistleblower Case To Proceed Against Sprint-Nextel Corporation appeared first on Whistleblower Lawyer Blog.

Bob understands that public service is a noble calling for so many in our government. He epitomizes all that is good in fairly administering our internal revenue laws.

When IRS Whistleblower Office Director Steve Whitlock began hiring for the first “tax whistleblower” office that Congress had authorized in late 2006, Bob Gardner was one of his most important finds. Bob has a wealth of knowledge and perspective on tax issues, built through broad experience as an IRS revenue agent, and then in positions in what is now the IRS Large Business and International Division.

The post Amid Attacks on the IRS, Recognition of the Best of the IRS Whistleblower Office appeared first on Whistleblower Lawyer Blog.

My criticism starts–but does not end–with any IRS personnel who singled out “Tea Party” and similar groups for extra scrutiny based on their political affiliations. Any such acts cannot be tolerated..

But less noticed is what was being done–or not done–since at least mid-2012 by the Treasury Inspector General for Tax Administration (“TIGTA”).

The Senate Finance Committee’s official “timeline” states that, in May 2012, “TIGTA briefs [IRS] Commissioner Shulman on the targeting by the IRS of tea party applications for 501(c)(4) status.”

So the Inspector General’s Office knew, at least six months before the 2012 elections, that “targeting” of these applicants had occurred? If TIGTA told Commissioner Shulman that it was auditing the problem, why did it take TIGTA another year to issue its May 2013 report?

And did Commissioner Shulman, a Bush appointee with no reason to “hide” any “targeting” of conservative groups, rely on the Inspector General’s staff to gather evidence and take appropriate action? Shouldn’t TIGTA have acted expeditiously? TIGTA’s other FY 2013 reports reveal nothing so pressing that it should have taken it another year.to complete its work.

It is not too much to ask that all IRS and Treasury employees follow the law, and exercise some judgment.

Venting aside, we also must acknowledge that the nation needs a well-functioning IRS (and a working TIGTA).

If we like a strong military, or adequate security against the next terrorist attack, obviously we must have an IRS to collect revenue to pay for that protection. Those of us who do not wish to pay more taxes than our “fair share” (which is everyone) need the IRS to pursue tax cheats.

But IRS and Treasury employees must follow the law, not their own preferences. Although this controversy does not directly involve the IRS Whistleblower Program about which we often write, it is nonetheless an important one.

The post Reforming the IRS–and Why We Need a Functioning IRS That Follows the Law appeared first on Whistleblower Lawyer Blog.