I suspect most folks would be surprised to learn that if a major corporation defrauds the federal government out of $100 million in taxes, it can’t be sued under the federal False Claims Act. That’s because of a loophole in the federal law prohibiting a whistleblower from bringing a tax qui tam case. But if that same major corporation was defrauding the state of New York out of $100 million in taxes, that state could bring a qui tam case under New York’s False Claims Act.
New York closed the tax loophole in its state False Claims Act case in 2010. In fact, a whistleblower has brought such a case. Earlier this year, New York Attorney General, Eric Schneiderman, intervened in that case against Sprint-Nextel Corp. for deliberately under-collecting and underpaying millions of dollars in New York state and local sales taxes on flat-rate access charges for wireless calling plans.
The Internal Revenue Service has a whistleblower office now. Whistleblowers can go to the IRS and file a complaint. But if the IRS decides not to take the case, the potential whistleblower case is over and done with. Because there is no qui tam provision, the whistleblower can’t proceed without the IRS on the federal level. To be a whistleblower in a tax whistleblower case in New York, the Defendant must have at least $1 million in income and deprive the state of at least $350,000 in revenue. Perhaps, Congress should take a look at what New York is doing and then make some needed charges in the federal law.
Source: Corporate Crime Reporter
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