Time Running Out For New York's Tax Dodgers As Amnesty Draws To A Close

by Leroy Baker, Tax-News.com, New York

28 February 2006

New York State Commissioner of Taxation and Finance, Andrew S. Eristoff has reminded individuals and corporations that they only have until March 1, 2006, to take advantage of a special state program which waives civil penalties and legal action against those who voluntarily come forward under the state's tax amnesty.

In a statement released earlier in the month, Commissioner Eristoff urged taxpayers who may have used illegal tax shelters to "do the right thing" and declare their activities under New York’s ‘Voluntary Compliance Initiative,’ which began October 1, 2005.

“For those involved in illegal tax shelters, this unique program is an opportunity too good to pass up. We’re allowing a company or individual to come clean on abusive tax shelters and pay any taxes owed with little or no consequence,” Commissioner Eristoff said.

However, he went on to warn that: "Once the program expires on March 1, our Department will vigorously pursue offenders and impose punitive interest and penalties which make it clear that tax fraud and abuse do not pay.”

The transactions targeted by the amnesty include listed transactions that are the same or similar to those identified by the Internal Revenue Service. They also include tax avoidance transactions designed to avoid New York State tax by utilizing an ‘intangible holding company’ or similar arrangements that inappropriately shift taxable income to lower taxing jurisdictions or tax exempt entities.

Throughout the five-month period, corporate and individual taxpayers have been encouraged to voluntarily disclose their participation in so-called 'abusive' tax shelters for years prior to January 1, 2005, and pay underreported tax liabilities and interest attributable to tax avoidance transactions, without incurring any of the new penalties recently enacted for participating in banned tax shelters.

According to the Associated Press, only about 25 individuals or companies have come forward under the New York scheme. The names are being withheld under state and federal privacy laws.

New York officials expect to collect about $25 million this fiscal year from the program and another $50 million for 2006-2007.

A similar tax amnesty by the Californian tax authorities which concluded last year recouped some $3 billion in additional taxation - ten times higher than the state's initial forecast.

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