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Tax Qui Tams Reach Maturity

03/07/2018 | Bloomberg Tax

New Yorks False Claims Acts allow individuals to pursue qui tam whistleblower suits against delinquent taxpayers. In this article, Kirby McInerney LLPs Randall M. Fox discusses New Yorks tax qui tam experience and how it aids tax enforcement and compliance.

By Randall M. Fox
March 7, 2018

Thanks to 2010 amendments to New York’s False Claims Act, whistleblowers can receive incentive awards of 15 to 30 percent of the government’s recovery for bringing actions — called “qui tam” actions — on behalf of the government to help recover tax monies lost by fraud. After the amendments, Attorney General Schneiderman promptly set up a new bureau in his office to handle these tax-related cases, called the Taxpayer Protection Bureau.

Now that New York has had tax qui tams for almost eight years, it is fair to say that this type of case has reached a level of maturity. A number of cases have worked their way through the system, with some judicial decisions, some settlements, and some cases in active litigation. Other states can now look to New York to see the benefits they and their citizens are missing.

The need to add such new tools for tax enforcement is indisputable. On the federal level, the IRS has measured an annual “tax gap” of $458 billion. Late compliance and tax enforcement efforts only bring the gap down to $403 billion. While states have not all reported on their own tax gaps, it can be assumed that a similar percentage of state and local taxes are not getting paid, and that much of that shortfall is from knowing, big-ticket tax law violations that can be addressed under False Claims Acts like New York’s.

The article can be accessed in full by clicking on the link.