Senate Subcommittee Releases Tax Shelter Report

by Mike Godfrey, for LawAndTax-News.com, Washington

21 November 2003

In a report released in conjunction with hearings held on Tuesday and Thursday, the Senate Permanent Subcommittee on Investigations painted a picture of accounting firms which aggressively marketed tax shelters to their clients during the 1990s.

As a result of its investigation into the tax shelter industry, the Senate subcommittee came to the following conclusions, the report revealed:

"First, the investigation has found that the tax shelter industry is no longer focused primarily on providing individualized tax advice to persons who initiate contact with a tax advisor. Instead, the industry focus has expanded to developing a steady supply of generic “tax products” that can be aggressively marketed to multiple clients. In short, the tax shelter industry has moved from providing one-on-one tax advice in response to tax inquiries to also initiating, designing, and mass marketing tax shelter products."

"Secondly, the investigation has found that numerous respected members of the American business community are now heavily involved in the development, marketing, and implementation of generic tax products whose objective is not to achieve a business or economic purpose, but to reduce or eliminate a client’s U.S. tax liability. Dubious tax shelter sales are no longer the province of shady, fly-by-night companies with limited resources. They are now big business, assigned to talented professionals at the top of their fields and able to draw upon the vast resources and reputations of the country’s largest accounting firms, law firms, investment advisory firms, and banks."

Ranking Democrat, Senator Carl Levin revealed that he plans to increase penalties for those found to be promoting abusive tax shelters.

The Senate Permanent Subcommittee on Investigations report on the US tax shelter industry can be found in the Tax-News Resources Section.

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