Tax Roundup, 3/26/2013: Snatching defeat from the jaws of preparer-regulation victory. And: Iowa leads, UK follows on film.

March 26th, 2013 by Joe Kristan

20130326-1Film tax credit scams are big news in the U.K. right now.  An Irish actress, Aoife Madden, yesterday received a 54-month sentence in her role in scamming a U.K. film tax credit scheme.  Irish Times reports:

The group successfully claimed £1.5 million in film tax breaks after they said they intended to make a film titled Landscape of Lives  with a £19 million budget, funded by Jordanian backers.     

Once they were arrested two years ago, the five hurriedly produced a film called, ironically, Landscape of Lies for just £90,000, which went on to win a Silver Ace award from last year’s Las Vegas Film Festival.     

The film, which starred former EastEnders actor Marc Bannerman and Andrea McClean, told the story of a former British soldier’s attempts to discover the truth behind his friend’s murder in an apparent mugging.     

Before suspicions had been aroused, Madden’s London film company, Evolved Pictures, told revenue and customs that millions had been spent on Hollywood A-list actors and film crew when it lodged a value added tax repayment application for £1.48 million. It received more than £1 million.

Lost in the coverage is Iowa’s pioneering role in film tax credit scams.  A little-known film producer from Minnesota came here and showed the Brits just how it’s done:

Take Iowa. A start-up called Polynation Pictures came looking for backing for a sci-fi flick so lame it would have embarrassed Ed Wood. With a financing scheme worthy of Max Bialystock, the con these folks pulled was nearly as inept as the film they made, but Iowa’s film office was too starry eyed to notice.

The $767,250 production Polynation Pictures proposed eventually came in at $3.7 million. This was achieved in part with preposterous expenses. Producers claimed they paid $1,350 to rent six orange road cones. The use of two 6-foot ladders supposedly cost the company $900 (a bargain, as Polynation claimed to have spent another $900 to rent a single 8-foot ladder). Among production necessities was a new Mercedes. The partners set up an array of separate companies and used them to bill themselves extravagantly for work supposedly done on the picture. These were presented to Iowa as “deferred payments”—to be paid if the movie made money (which the enterprise was sure to do when Iowa handed the tax credits over). The only thing missing was a staged rendition of “Springtime for Hitler.”

Polynation mastermind Wendy Weiner Runge received 10 years for her star turn in the film credit program.

The film credit program was touted as a way to make Iowa a leader in the film world.  And, in a way, it did.

You might be interested in this interview with Ms. Madden about her role in the film, knowing what we know now.  She said this:

This project has been a crazy but wonderful challenge!! I’ve always wanted to produce a feature, and have a number of projects in development, but this was the one I just wanted to lift off the page. I think the biggest challenge was sourcing finance, which is no surprise for an independent film company. We were extremely lucky to find international investors and lobby them to back the project, but this was a lengthy process and has always been a challenge.

A challenge, yes, but I’m not sure they turned out lucky.

 

Snatching defeat from the jaws of victory. Now that the courts have saved the IRS from itself by shutting down the misguided preparer regulation system, the Senate rides to the rescue to screw everything up again, Accounting Today reports:

The two leaders of the Senate Finance Committee, Chairman Max Baucus, D-Mont., and ranking Republican member Orrin Hatch, R-Utah, have begun developing proposals for reforming the U.S. Tax Code, including giving the Internal Revenue Service the clear statutory authority to regulate tax preparers in case the IRS loses its appeal of a recent court case invalidating its Registered Tax Return Preparer regime.

The IRS can’t answer its phones.  Its pockets are being picked to the tune of billions by semi-literate South Florida grifters.  And the Senate thinks that preparers are the problem?   Preparer regulation is a market-share enhancement program for the national franchise tax prep outfits;  the rules were written by a former H&R Block CEO.  If Senators Baucus and Hatch want to re-enact these anti-competitive and useless rules, it just shows who they really represent.  (Via Going Concern). 

 

Howard Gleckman,  Congress Has Not Passed A 2014 Budget, and Probably Won’t (TaxVox).  Why do that, when Henry and Robert have other chores for them?

Joseph Henchman,  Senate Votes on Tax Proposals, Including State Taxation of Internet Commerce.  (Tax Policy Blog) Amazon taxes seem inevitable.  Otherwise Wal-Mart can’t compete with a guy selling things from his basement on the Internet.

Brian Strahle,  The Marketplace Fairness Act:  Is It Really Fair?

Kay Bell,  Online sales tax a step closer with Senate budget amendment

Thanks, you’ve helped enough already.  A New Proposal to Promote American Manufacturing (Martin Sullivan, Tax.com).

 

Jack Townsend, Supreme Court Will Decide Whether B____t Tax Shelters with Basis Overstatements Draw the 40% Penalty

Tony Nitti,  What Are Your Odds Of Being Audited By The IRS?

TaxGrrrl, Taxes From A To Z (2013): N Is For Notice Of Deficiency

Missouri Tax Guy,  Social Security Benefits, are they taxable?

Patrick Temple-West, Proposals to tax trades spark financial firm lobbying, and more (Tax Break)

Peter Reilly,  Has Scalia Already Thrown In The Towel On Same Sex Marriage ?

Dan Meyer, “Where No Tax Rate Has Gone Before…”

Trish McIntire,  That Reminder – 2013. “Your Failure to Plan Is Not My Emergency!”  The tax preparer April battle cry.

 

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