U.S. cracks down on use of tax shelters

International Herald Tribune ^ | June 22, 2002

[ATOMIC_PUNK]

In an aggressive new effort to shut down abusive corporate tax shelters, the Internal Revenue Service plans to begin demanding that companies and accountants turn over internal work papers that the tax agency in the past largely left alone.

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The papers it will seek can amount to a guide to all the questionable tax strategies a company has employed, along with its accountants' assessment of the chances the agency will disallow them, tax experts say.

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The shift comes at a time when the IRS is struggling to increase its audit rates of individuals and businesses and to make the audits more effective. The agency was pilloried on Capitol Hill in the late 1990s for allegedly heavy-handed tactics, and then restructured.

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Since then, the use of tax-avoidance schemes by both individuals and corporations has exploded. Many accounting firms, lawyers, investment bankers and consultants have gone into the business of devising shelters, which generally are transactions whose primary purpose is reducing taxes. But the IRS often cannot find the shelters that violate the tax code because they are lost in the underbrush of the tax return.

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The work papers appear to offer an effective brush-cutting tool.

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"If someone has access to those work papers, it would give them a road map to what the CPAs, certified public accountants‚ thought were aggressive positions taken" by the corporation, said Thomas Ochsenschlager of the accounting firm Grant Thornton LLP.

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Although the IRS has had the right for several decades to demand the work papers, the agency held off, deeming it too intrusive. But under its new policy, it will use this power against businesses using shelters that are on a Treasury Department list of abusive transactions.

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"The policy change gets us quickly to the heart of the problem" with a company's tax return, the IRS chief counsel, B. John Williams, said. "We don't have to spend months screwing around with rabbit trails. This simplifies things."

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Tax accrual work papers are typically prepared by accountants for corporations so that the companies know how much money to reserve in case a tax strategy is disallowed. The papers usually lay out the accountants' assessment of questionable tax positions the company has taken - and the chances that any of them would be rejected by the IRS. The riskier the tax position, the larger the reserve.

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Under the agency's new policy, companies that engage in one abusive transaction will be forced to disclose the work papers for that transaction, Williams said.

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Companies that engage in more than one such transaction will have to provide their tax accrual papers not just for the abusive transactions but also for any questionable items on their returns. That may well lead the agency to challenge other positions that do not involve shelters but might not be defensible, Williams said.

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The definition of an illegal tax shelter is murky as a result of recent court decisions. The tax agency has challenged a number of transactions as lacking any business purpose and has won in the lower courts. But a number of these victories have been reversed by appellate courts that saw a business purpose to the transactions.

[dasboot]

"....shall be secure in their papers and effects....."

Bermuda, here we come!

[dasboot]

Ted: "It is bettahh, ah, that a hundred innocent persons be ransacked and , ahh, oppressed, than one guilty tax cheat get away with , ah, shirking his or her responsibility to the ahhh people."

[Tourist Guy]

This from the gubmint that cannot balance their own books?

[wita]

Oh yea, I suppose you have to know and understand crooks to be able to find them. That certainly won't be difficult for the irs. Of course they are forced into it by the sheer weight of the ambiguous rules and regs that extract, far more than 50 percent of what we earn over a lifetime. I speak now of taxes in general not strictly income taxes. This doesn't even begin to look at double and triple taxation, at every level of bureaucracy. Government is beyond anything the founding fathers ever dreamed in their worst nightmare.

[Zon]

A tax revolt is not far off. Employees standing tall with their employers.

[Libertarianize the GOP]

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[Orion]

I was listening to the ABC news (radio) and the IRS chief was spouting off about how "the increase of audit rates is good for the average taxpayer..."

No kidding! This moron actually said this.

War is peace, ignorance is strength, ... Classic double-speak!

Say...who is president? Why when an anti-tax party is running the exec branch, is the tax monster getting sharper teeth?

Don't answer, or the chorus of "abuse" will drown out all sane arguments.

[Action-America]

Say...who is president? Why when an anti-tax party is running the exec branch, is the tax monster getting sharper teeth?

Don't answer, or the chorus of "abuse" will drown out all sane arguments.

Sorry, but I have to answer.  Duhbya!

I didn't vote for that pseudo-conservative chameleon and I am truly amazed that there are any conservatives out there that ever thought that he was conservative.  Klinton used the IRS to further his agenda and Duhbya is using the IRS to further his agenda.  Neither one gives a ra+$ a$$ about the Constitution.  To both klinton and Duhbya, the Constitution is just an inconvenience that they have to deal with.

Maybe this, along with campaign finance reform, the USA Patriot Act and his soft on Palestinian terrorism position will finally make all those head-in-the-sand Republicans wake up and realize that we must nominate a REAL conservative in two years.

A lot of Republican friends of mine turned a blind eye, when I showed them that Duhbya was just a moderate version of klinton.  Their sad refrain was, "We have to stick together."  Interestingly, many of them are the same people who have also proclaimed, "We have to stand on principle."  They voted to stick together and look what they got.  Fortunately, although a little late, several of them now agree with me, that it would have been better to vote Libertarian, even if it meant that algore would have been elected, because it would have sent a message to the GOP hierarchy, that we aren't going to take it any more.

It scares me to think of a Gephardt type as President for four years.  But, what scares me even more is the recent movement of many in the GOP (including Duhbya) toward the left.  If it continues, we will end up with two political parties that both represent the same liberal viewpoints.

The Republican Party has abandoned Republican voters.

It's time that we take back our party.  If the hierarchy stops us in the primaries, then we must register our refusal to compromise on our principles, by voting for an alternative candidate in those races where a better candidate exists, even if that candidate is not a Republican.  Even if those alternative candidates didn't win, just imagine how the GOP bigwigs would change their tune if several major left leaning Republicans (Grassley, Specter, Duhbya, etc.) were to lose, as a result of a 25% Libertarian vote.  But then, there is always the remote possibility that the true conservative candidate could win, if all conservatives were to actually vote their principles rather than compromise their principles for party.  After all, any conservative, regardless of party, is better than the best liberal Republican and that includes the would-be despot that currently occupies the Whitehouse.

You have to know that the IRS would not be doing this, unless they had passed it by Duhbya first.  In fact, I wouldn't be surprised to learn that the the whole idea was Duhbya's, in the first place.

 

[weikel]

Bush is a conseravtive, Bush is a conservative.

[Orion]

How long before the IRS discovers all these new "anti-terror" laws and swings into action against those Americans who are hiding a few bucks on some sandbar in the Caribbean?

Some of the countries do not cooperate at all with the IRS, so they must be harboring terrorism. Fifth and Fourth amendments rights to be secure in your persons and not be compelled to tell the taxman where your loot is - fuhgetaboutit...

IRS: Mr. Smith, we know you have a million dollars in Nevis and the Caymans. We used the NSA to eavesdrop on your phonecalls to your lawyer.

Smith: I want to talk to a lawyer.

IRS: You are an enemy combatant. You are holding money from the war on terrorism and funding the enemy.

Smith: I want to talk to a lawyer.

IRS: No lawyer, no trial, no confronting your accusers, no calling witnesses in your defense, no jury of your peers, no protection against cruel and unusual punishment, no right to be secure in your person and papers... Sign this confession or we will imprison your children, and have your wife raped.

Smith: This is unAmerican.

IRS: That statement confirms you are an enemy combatant. Come with me to the room with no darkness.

[dasboot]

AA:

Abe foisted the very first income tax upon the "nation" way back in the 1860's. He was a Republican. His party used the dough to prosecute a war, perhaps "necessary" (not going to start that argument), but certainly not "proper", Constitutionally speakin'.

Dubyah is a true Republican.

[Action-America]

Dubyah is a true Republican.

How true!

Isn't it interesting how things change?  I wonder how many of the "GOP can do no wrong" crowd have ever taken a long look at the Republican Party's socialist beginnings?  They proudly proclaim to be the party of Lincoln, as though that is supposed to be a good thing.  One of Lincoln's first actions, along with other Republicans, was to raise taxes 300%.  They followed up by ignoring the Constitution, in pursuit of their idea of federalism (taking Constitutional powers from the states and the people and investing it with the federal government).

The GOP had it's inception rooted in socialism.  But, for a number of years now, the Republican pendulum has swung toward the conservative side.  However, judging from the actions of Duh–bya and about half of the Republicans in Congress, that pendulum has begun a swing back towards the GOP's socialist beginnings.  As you pointed out, Duh–bya really is a true (Lincoln) Republican.

Remember, that it was Kennedy and the Democrats who cut taxes to give the economy a boost in the 60's.  Yet today, it is the Democrats who take every opportunity to raise taxes, while the original party of tax increases, the GOP, is currently pushing tax cuts.  In fact, no political party is immune to changes.  That's why I am a Conservative first and a Republican second.

The "GOP can do no wrong" crowd would be well advised to read, "The Real Lincoln", by Thomas DiLorenzo.  People who have studied history, will realize that most of what is in that book is not new information.  But, it is the first time that it has all been compiled in one place.  Republicans who have not yet read it, really should.  It would help them to realize that a political party is only as good as its leadership.

Right now, the GOP leadership is pseudo-conservative, at best.  Yes, Duh–bya takes some conservative actions, at times.  But, no true conservative would have ever signed the Campaign Finance Reform bill or the USA Patriot Act.  No, he isn't liberal.  But, Duh–bya and the other pseudo-conservative Republicans, who are promoting this garbage, are the beginning of that pendulum swing back to the left.

It will be a whole lot easier to stop the GOP from swinging back to the left now, than to go along with Duh–bya and the boys and let it happen and then have to build a whole new party from scratch, in order to advance conservative principles.  Besides, if a majority of conservatives can't get elected and stay in office without sacrificing conservative principles, then we've already lost and nothing we do will make any difference anyway.

 

[dasboot]

....if a majority of conservatives can't get elected and stay in office without sacrificing conservative principles, then we've already lost and nothing we can do will make any difference anyway.

Yup. I think that's where we are.