US States Club Together To Fight Abusive Tax Shelters

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

26 January 2004

Tax collectors in twelve states, including California and New York, met with representatives from the Federation of Tax Administrators and the Multistate Tax Commission last Wednesday to discuss how to combat tax sheltering on a broad front.

"California is joining forces with other states to crack down on abusive tax shelters, and we're putting our collective resources to work," commented Californian State Controller Steve Westly last week.

"We're going to use the best ideas from every state to find and prosecute tax cheats," he added.

The other participating states and cities include Colorado, Connecticut, Illinois, Massachusetts, Michigan, Minnesota, New Jersey, Ohio, Tennessee, and Wisconsin, as well as New York City.

California is also offering a Voluntary Compliance Initiative for taxpayers who invested in abusive tax shelters. Taxpayers have until April 15 to correct their tax returns and make full payment of the taxes owed or face new harsh penalties. The Californian Franchise Tax Board claims the state loses $600 million to $1 billion in tax money annually through abusive tax sheltering.

Last year, 41 states, among them New York and California, signed a Memorandum of Understanding with the IRS allowing federal and state tax collection agencies to pool their collective information on delinquent taxpayers and concentrate the battle against abusive tax shelters.

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