Tax Whistleblower Blog

Dutch Bank funded U.S Tax Shelter…..says tax whistleblower

One thing is clear; the IRS is back in business. A decade ago, Congress enacted the Restructuring and Reform Act of 1998 (RRA 98). Due to alleged abuse by the IRS, Congress increased the administrative requirements and legal duties of the IRS in an effort to ensure that taxpayers were essentially given every chance to dispute their tax liability and/or dispute the payment of their tax liability before enforcement. RRA 98 initially brought the IRS to a halt in its tax enforcement endeavors. However, today, the IRS, with the help of individuals (i.e. tax whistleblowers), is back in the business.

According to the recent article, Dutch Bank Funded US Tax Shelters, by David Armstrong and Jesse Drucker of the Wall Street Journal, the IRS is now getting a jump start in its examinations with the help of tax whistleblowers like Joseph Insinga, a finance specialist with the Dutch Bank, Rabobank. Although it is unclear whether the bank itself had participated in promoting (rather than simply financing) numerous transactions deemed to be “abusive” tax shelters, the bank did become part of the transaction by financing deals between Diversified Group, Inc. and U.S. taxpayers. Diversified Group, promoted the transaction known as Midco (a shelter where a straw party purchases the stock of a company resulting in capital gains to the seller and immediately selling the assets of the company allowing the buyer to obtain a high basis for its assets for depreciation purposes) that is now being investigated by the IRS on a taxpayer by taxpayer basis

Joseph Insinga, having worked with Rabobank for years was terminated from his position in 2004. Despite the fact that he sued Rabobank for age discrimination and won a multi-million dollar judgment, he, in a timely fashion, approached the IRS under their Tax Whistleblower Reward Program and provided “specific and credible information” including documentation (i.e. a draft of a Rabobank internal audit done in 2005 citing more than 100 transactions referred to as “aggressive” tax wise). It is believed that Rabobank financed entities that helped companies save at least $1,460,000,000 in U.S. taxes. Could Insinga be entitled to a minimum reward under the Tax Whistleblower Reward Program of 15% of this amount (i.e. $219,000,000) or possibly the maximum reward of 30% of this amount (i.e. $438,000,000)? That answer may never be made public.

But what is known is that the Tax Whistleblower Reward Program is here to stay. One has to wonder, how many employees of Rabobank knew the same information as Insinga, or how many employees of the 100 some taxpayers that were involved in the Midco transaction could have been the tax whistleblower? Yes, as word of the Tax Whistleblower Reward Program spreads, efficient enforcement by the IRS will increase along with increased compliance by taxpayers of the Internal Revenue Code. Both are the desired results by Congress.

To continue reading the entire story Dutch Bank Funded U.S. Tax Shelters.