SC Department of Revenue
SC joins other states in fight against illegal tax shelters




Public Affairs Office

Contact: Danny Brazell, (803) 898-5464




March 4, 2004

S.C. joins other states in fight

Against illegal tax shelters   

            Thirty-four state tax agencies today signed a joint agreement to share information on abusive tax shelters and illegal transactions, a move intended to strengthen their fight against this complex problem.

             “Abusive tax avoidance transactions have become a threat to the fiscal health of our states,” explained Stephen M. Cordi, Deputy Comptroller for Maryland and president of the Federation of Tax Administrators (FTA), an association of the tax agencies in all states, Washington, D.C. and New York City. “It’s hard to overstate the size of the problem or the difficulty of dealing with it in an efficient and systematic way.

            “These schemes depend on dozens of layers of transactions --each one intended to bury the taxable income a little deeper.  The layers are then scattered among any number of states. We can only uncover these types of schemes by sharing knowledge and by having a close working relationship with our sister states.”

            The agreement signed today focuses on the type of abusive tax transaction information to be shared, confirms the role of joint promoter audits and coordinated enforcement actions and encourages active exchanges of case listings and documents.

            “At a time when states are desperately in need of every legitimate tax revenue dollar they can collect, we cannot afford to look the other way when individual taxpayers or businesses are illegally sheltering income,” said South Carolina Department of Revenue Director Burnet R. Maybank. “On the contrary, to do anything other than go after these abusive tax avoidance schemes would be unfair to millions of honest taxpayers. This agreement gives us another weapon in our arsenal to do that.”  

            As New York State Department of Taxation and Finance Commissioner Andrew S. Eristoff explained, “Working with the IRS and other states, we will scrutinize major accounting firms, tax practitioners and other professional firms who may be or have been involved in promoting these illegal schemes, which allow companies and individuals

to evade millions of dollars in taxes. The complexity of these transactions doesn’t mitigate the fact that these companies and individuals are engaged in potentially criminal acts, ripping off the vast majority of honest taxpayers.”

            California State Controller and Chair of the Franchise Tax Board Steve Westly added, “With California facing a record budget deficit, we can’t afford to let tax cheats take money away from schools, healthcare and major projects like building freeways. We’re teaming up with other states to work smarter, catch more tax cheats and collect the revenue they owe.”

          State tax agencies routinely share confidential tax data with one another. For more than 10 years FTA has facilitated this activity by developing and sponsoring the Uniform Exchange of Information Agreement. Each state’s statute spells out the manner in which confidential data can be shared, stored or disposed. The multistate disclosure agreement is the written authorization required by each state’s statute. Today’s agreement specifies the types of work that will be done together to combat abusive and illegal transactions.





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