Whistleblower News & Articles
April 15, 2021
Effective, March 16, 2021, Washington D.C. expanded its False Claims Act to repeal the tax bar and cover tax fraud. This expanded law will enlist whistleblowers in the fight to uncover major tax cheats, recover unpaid taxes, and close the tax gap.
The tax bar is part of the False Claims Act which says it does not cover fraud under the tax code. The tax bar is found at 31 U.S.C. § 3729(d). It says that the federal false claims act “does not apply to claims, records, or statements made under” the tax code. 31 U.S.C. § 3729(d). A similar version of the tax bar is found in the false claims acts of many states. In an earlier post we explained that some states have eliminated the tax bar to use their false claims acts to successfully target major tax fraud.
As we have previously explained, the tax gap is the difference between all the taxes that are owed and those paid. It is also a way to measure who isn’t paying their fair share of taxes. On April 13, 2021, the IRS Commissioner informed Congress that the federal tax gap had risen to as high as $1 Trillion per year.
Corporations and wealthy individuals were responsible for most of those unpaid taxes. And the IRS told Congress that cryptocurrencies and foreign income will only make the Tax Gap get even bigger.
One Senator called the $1 trillion tax gap a “jaw-dropping figure.”
Washington D.C.’s newly amended law now allows a whistleblowers to file a false claims act suit if someone with: (1) more than $1 million in D.C. taxable income, sales or revenue; (2) that has avoided paying at least $350,000 in taxes.
Like the federal FCA, this law entitles whistleblowers to 15% to 30% of the proceeds of any recovery. In passing the law, the District Council found that the D.C. False Claims Act has recovered at least $21 million since 2014.
The False Claims Acts of Delaware, Florida, and Nevada, contain no explicit limitation on false claims cases involving taxes, whereas in Illinois, Indiana, and Rhode Island, the tax bar only explicitly applies to income tax.
Washington D.C.’s expanded False Claims Act follows New York’s success in using its False Claims Act to combat tax fraud. The New York program encourages people with inside information on significant tax cheating to use the False Claims Act to report that fraud to the New York Taxpayer Protection Bureau. Those caught cheating on their taxes must pay up to three times the amount they failed to pay. If the New York tax authority, or the whistleblower acting on its behalf, recovers money from a defendant, the whistleblower receives a percentage of that recovery.
Since it was passed in 2010, the expanded New York False Claims Act has resulted in $467 million in recoveries for the State of New York. These recoveries are thanks to tax fraud tips from whistleblowers. In one case, New York recovered $330 million from Sprint Corporation for unpaid sales taxes. The whistleblower in that case received an award of more than $62 million.
The New York Law seeks to ensure that its program targets only big-ticket and serious tax fraud. Thus, it applies only to cases involving sales or income of more than $1 million in a single year. And the whistleblower must show a tax loss of more than $350,000.
If you are considering submitting a matter that involves tax fraud to the IRS or to a State Agency we urge to contact us for a free, confidential, consultation. We can explain the IRS whistleblower process in detail. We can also review the options of filing a False Claims Action in New York or states with similar laws.
September 9, 2015
New York Attorney General Eric Schneiderman has been given permission by the New York Appellate Court to continue a lawsuit against Sprint-Nextel Corp. using the state’s False Claims Act (FCA)....