SOUTH CAROLINA DEPARTMENT OF REVENUE
Public Affairs Office
Phone (803) 898-5464
Contact: Danny Brazell
Fax (803) 898-5446
FOR IMMEDIATE RELEASE
July 22, 2004
Revenue Department Announces
Tax Shelter Amnesty Period
South Carolina Department of Revenue Director Burnie Maybank today encouraged South Carolinians and corporations doing business in this state who have, or suspect they may have, participated in abusive tax shelter programs to come clean by contacting the Department of Revenue, amending their tax returns and paying any taxes owed by September 1, 2004.
The Internal Revenue Service announced May 5 that taxpayers participating in a variety of Bond and Option Sales Strategies, frequently referred to as “Son of Boss” tax shelters, had until June 21, 2004, to accept an IRS settlement offer to resolve their tax issues. South Carolina will follow the IRS amnesty initiative provided taxpayers who participated in Son of Boss shelters, also known by the acronyms COBRA and BLIPS, come forward to the Department by September 1, 2004.
South Carolina also will offer similar relief to taxpayers who voluntarily contact the DOR about other abusive tax avoidance schemes not covered by the
“Son of Boss” initiative. In addition to Son of Boss, tax avoidance shelters known by the names SILO, LILO, PICO, CDS, FLIP, BOSS, BLIPS, CARDS, GIFT, OPIS, SOS and SC-2, have been aggressively marketed since the early 1990’s to companies and wealthy individuals as a means of creating artificial income losses to offset gains from other types of income. These shelters, and others listed at http://www.irs.gov/businesses/corporations/article/0,,id=120633,00.html, are subject to disclosure under terms of the Department of Revenue’s amnesty program until September 1, 2004.
Taxpayers who do not come forward voluntarily will be assessed all appropriate penalties, including civil fraud penalties, based on the extent of the taxpayer’s involvement in abusive shelters. Taxpayers who voluntarily disclose their transactions can avoid the penalties and possible civil fraud charges that will be levied against those who do not comply.
Notably, the amnesty period applies only to taxpayers, and the Department will not waive its enforcement of Treasury Department Circular 230, which sets professional responsibility standards for tax practitioners. The Department has already begun investigations into possible violations of Circular 230 issues.
“Estimates indicate that state revenues lost to illegal corporate tax shelters alone totaled $80 million in 2001,” Maybank said. “These shelters not only result in honest taxpayers paying millions more than their fair share in taxes, they line the pockets of out-of-state shelter promoters with millions of dollars in commissions – millions that should have been paid in state taxes.”
“Some shelter participants may not yet know that they were sold an abusive tax shelter,” Maybank added. “We are working diligently to reign in these promoters, and I encourage anyone who participated in a transaction they suspect was abusive to come forward before it is too late.”
The amnesty period covers all transactions currently listed as abusive by the IRS, plus several others now under scrutiny by the IRS and the DOR. Taxpayers seeking more information should contact the Department at (803) 898-5604.