Posts Tagged ‘film tax credits’

Tax Roundup, 9/3/14: Fight the power edition. And: another Iowa film credit economic triumph!

Wednesday, September 3rd, 2014 by Joe Kristan

It’s good to be back.  Sometimes other things take precedence over work.

 

Fight the Power!  Tax Analysts’ Joseph Thorndike defends the corporation income tax as a bulwark against corporate power ($link):

Popular fondness for taxing corporations may reflect an imperfect understanding of the corporate levy’s incidence. But it also reflects a clear-headed view of where the power lies in American society.

That’s interesting.  Lets see where some major institutions stack up in terms of “power,” measured by revenue (an imperfect measure, but one that is at least available for all of them, unlike net worth).

Google: $55 billion.

Apple: $171 billion.

Microsoft: $23 billion.

BP: $379 billion

State of California: $112 billion

United States Government revenue: $2,770 billion.

United States Government spending: $3,450 billion.

 

In handy graph form:

20140902-1

Of course, only one of these outfits can also send in people with guns to settle disputes with all of the others.  So who is going to impose an income tax to rein in the monster on the Potomac?

 

Economic Development, film style: Iowa pays $2 million to settle film lawsuit (Des Moines Register).  But think of the intangible benefits!

 

Kristy Maitre, Kristine Tidgren, ACA’s Thorny Impact On More-Than-2% S Corporation Shareholders

Consequently, in the absence of further guidance, we believe that if an S corporation chooses to increase wages for its employees to make up for its non-ACA-compliant employer payment plan, the more-than-2% shareholders will now have to pay FICA/FUTA taxes on that compensation, just as the other employees will now have to pay income taxes and FICA taxes on the increased wages. These payments are no longer made pursuant to an employer health plan and cannot be excluded from taxation.

You don’t have to have 50 employees to have Obamacare problems.

 

Peter Reilly, IRS Will Not Tax Forfeited Jackpots Of Compulsive Gamblers.  Mighty kind of them.

Kay Bell, Running errands for mom and other September tax moves

TaxGrrrl, Credit Cards, The IRS, Form 1099-K And The $19,399 Reporting Hole

Tony Nitti, Tax Court Says Bank ‘Thank You’ Points Are Taxable Income   

 

 

Scott Hodge, IRS Data Contradicts Kleinbard’s Warnings of Earnings Stripping from Inversions  (Tax Policy Blog)

Ajay Gupta, Yep, Son, We Have Met the Enemy (Tax Analysts Blog).  Mr. Gupta discusses the FIRPTA precedent for the current inversion hysteria:

It turns out that the enemy in the ‘80s was not the pools of offshore money ready to descend on onshore real estate. Nor will the enemy this time be the many offshore tax havens ready to shelter departing onshore companies. The enemy, as always, is closer to home.

Congress would be a good place to look.

 

Robert D. Flach once again gets to the heart of the matter:  “There is absolutely nothing illegal, immoral, or unethical with trying to ‘dodge’ taxes.  By ‘dodge’ I mean ‘avoid’.”

 

20140527-1Joseph Thorndike, When Do-Gooder Taxes Don’t Do Good (Tax Analysts Blog).

I’m no fan of anti-obesity taxes, whether they target soda, candy bars, or any other junk food. They are regressive and arbitrary, not to mention paternalistic and condescending. Supporters have all sorts of genuine good intentions. But ultimately, these taxes are simply an unfair money grab dressed up as a public health initiative.

Now we have some evidence that they may be ineffective, too.

Imagine that.

 

William Gale, Don’t be fooled: America’s deficit is still a problem

Sebastian Johnson, State Rundown: Sept. 2 (Tax Justice Blog).  A left-side rundown of “Oil tax ballot fails in Alaska, film tax credits pass in California, and Ohio needs to do more on EITC expansion. Also: updates on Iowa gubernatorial election and a new report on airline gas tax breaks.”

TaxProf, The IRS Scandal, Day 482

 

And New Coke marketing genius award goes to…  From Going Concern, news of the boldest marketing move since the Edsel.  (Adrienne Gonzalez)

 

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Tax Roundup, 5/2/14: Film credit trial remake edition. And: Senator Otter, taxwriter.

Friday, May 2nd, 2014 by Joe Kristan


harold
An Iowa appeals court this week threw out the conviction of TV-show producer Dennis Brouse
on charges arising out of the Iowa film tax credit scandal.  The court ruled 2-1 that unclear jury instructions rendered the guilty verdict untenable.  From the decision:

After examining the jury instruction and finding it so confusing, we conclude that it was not possible for the jury to find sufficient evidence to convict pursuant to a general verdict that implicated the joint criminal conduct instruction. 

The case was remanded to the trial court.  I believe the state can appeal this decision to the Iowa Supreme Court.  I am not sure whether the state can retry Mr. Brouse if the ruling stands.  The reversal would leave Wendy Weiner-Runge as the only person hit with serious prison time in the scandal.

In any case, the real offenders in this case will go free.  No charges will be filed against the legislators who voted overwhelmingly to create a cash-filled pinata for out-of-state filmmakers.  The Governor who was to oversee the program will never have to answer for appointing a former drugstore film clerk to run it.  The clerk’s immediate supervisor faces no charges for letting the clerk run wild, committing taxpayer dollars by the millions virtually without documentation or control.

The real crime is that the 150 legislative supergeniuses feel competent to take money from taxpayers and give it to people who convince them they will use it better.

Other coverage: KCCI.com

Cite: State v. Brouse, No. 12-1076  [3-1192]

 

 

 

Andrew Mitchel, 2014 First Quarter Published Expatriates – Second Highest Ever:

 

Chart by Andrew Mitchel LLC

Chart by Andrew Mitchel LLC

Considering how poorly the U.S. tax system treats Americans abroad, it’s no surprise.

 

Jason Dinesen, On Tax Refunds and “Not Owing Tax,” Part 1  “Just because you got a refund it doesn’t necessarily mean you didn’t owe taxes.”

Kay Bell, Tax moves to make in May 2014

Peter Reilly, IRS Chief Counsel Checks 1986 Committee Reports To Give Break On Foreclosed Real Estate   

TaxProf, The IRS Scandal, Day 358

Russ Fox, Once Again, Bring Me the Usual Suspects: 2014 Small Business Tax Index.  Iowa does poorly.

Robert D. Flach brings your Friday Buzz!

 

Kyle Pomerleau, It Takes 175 hours for a U.S. Business to Comply with U.S. Taxes (Tax Policy Blog).  For bigger businesses, that’s way low.

Howard Gleckman, The Tax Extenders: Yes, Virginia, They Really Are Tax Cuts (TaxVox).

 

 

Not Senator Wyden

Not Senator Wyden

 Senator Wyden, meet Animal House.

Otter: ” But you can’t hold a whole fraternity responsible for the behavior of a few, sick twisted individuals. For if you do, then shouldn’t we blame the whole fraternity system? And if the whole fraternity system is guilty, then isn’t this an indictment of our educational institutions in general? I put it to you, Greg – isn’t this an indictment of our entire American society? Well, you can do whatever you want to us, but we’re not going to sit here and listen to you badmouth the United States of America.”

Senator Ron Wyden:At the same time, the potential misconduct of a small group of IRS employees should not tarnish the overwhelming majority of hard working agency employees who do play by the rules.”

 

I did not have tax with that state, New York.  Bill Clinton: ‘I Thank God Every Day That Hillary and I Live in NY and Pay the Highest Aggregate Tax Rate in America’  (TaxProf)

 

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Tax Roundup, 3/13/14: Looming Payday Edition. And: incentives galore!

Thursday, March 13th, 2014 by Joe Kristan

20130104-1Deduction day looms.   March 15 is the deadline for calendar-year corporate return filings and payments.  It’s also an important deadline for accrual-basis taxpayers for another reason:  compensation accrued at year-end by a calendar-year accrual-basis taxpayer has to be paid by March 15 of the following year to be deductible in the year accrued.

As every first-year accounting student learns, accrual accounting tries to match expenses with the period in which the income is earned.  If a bonus is based on calendar-year sales or profits, it normally can’t be paid until after year-end, when the numbers are sorted out; still, the bonus is related to those sales, so accrual accounting counts the expense against that year’s income.

The tax law has many limits on accrual accounting.  For example, accrued expenses to “related parties,” typically owners and their families, can’t be deducted until the expenses are actually paid.  The tax law gives accrual businesses 2 1/2 months after year-end to pay accrued compensation to non-related employees.  Otherwise, the deduction is deferred until the year in which the employee is paid.

Does the compensation have to be paid by Saturday, or can I wait until Monday?  The tax law provides that when tax returns are due on a weekend, the deadline is extended to the following monday.  That’s why 2013 calendar-year corporation returns  are due March 17, 2014 – March 15 is on Saturday this year.

But the IRS says that doesn’t work for compensation.  Rev. Rul. 83-116 holds that it only applies to “acts required to be performed in connection with the determination, collection, or refund of taxes”  — things like filing returns.  So, according to IRS, the March 15 deadline still stands for payment 0f 2013 accrued compensation.  It’s not clear that the IRS would win in court on this — they have lost on a similar issue — but you don’t want to be the test case.  If you want to deduct 2013 accrued compensation on your 2013 return, pay it by Saturday.

 

 

haroldIncentives!  Coralville Likely on the Hook for Large Chunk of Von Maur Taxes.  Coralville marches to the beat of its own drummer, who apparently is heavily medicated.

Hey, let’s pay $34 million to build a Des Moines Convention Hotel!  Brian Gongol reports “The city financed the hotel to help spur convention business…but now it’s in danger of losing money.”  You don’t say.

Tax Justice Blog, Film Tax Credit Arms Race Continues: “Saying “no” to Hollywood can be a difficult thing for states, but here are a few examples of lawmakers and other stakeholders questioning the dubious merits of these credits within the last few weeks”.

Good.  Iowa doesn’t seem to have been badly hurt since it turned from subsidizing filmmakers to jailing them.

Related: Robert Wood, Film Taxes Ensnares Beckhams, Bob Geldof, Andrew Lloyd Webber, Annie Lennox & More

 

TaxGrrrl, Taxes From A To Z (2014): F Is For Foreign Tax Credit.  “For many taxpayers, it’s more advantageous to claim income taxes you paid or accrued during the year to a foreign country or U.S. possession as a credit than as a deduction.”

William Perez, Chart: Total Refundable Credits from 1990 to 2011.  There are more of them now.

Peter Reilly, Hedge Fund, TEFRA And Community Property Give Woman Tax Nightmare

Russ Fox, The IRS Needs Volunteers for the Taxpayer Advocacy Panel

 

Cara Griffith, States’ Perspectives on Federal Tax Reform (Tax Analysts Blog)

Joseph Henchman, Nebraska Legislators Approve Inflation Indexing But Drop Major Tax Overhaul (Tax Policy Blog)

Howard Gleckman, Mike Lee’s Tax Plan: An Intriguing Idea That Would Add $2.4 Trillion to the Deficit (TaxVox)

Kay Bell, House panel finally looking at Internet sales tax legislation

TaxProf, The IRS Scandal, Day 308

News from the Profession.  Tweeting a Lot About Audit Stuff Can Get You a Job at Deloitte.  (Going Concern)

 

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Tax Roundup, 2/11/14: Employer mandate “shared responsibility” delayed for some. And: fresh scam!

Tuesday, February 11th, 2014 by Joe Kristan

20121120-2It’s such a disaster, we’re only going to force some employers to do it right now. The IRS has issued final regulations on the employer health insurance mandate that delay their impact on companies with 50-100 employees until 2016.  The “shared responsibility provisions” — such a creepy name — will still apply to employers with 100 “full-time equivalent” employees in 2015.  The Wall Street Journal reports:

 Under the original 2010 health law, employers with the equivalent of at least 50 full-time workers had to offer coverage or pay a penalty starting at $2,000 a worker beginning in 2014. Last year, the administration delayed the requirement for the first time by moving it to 2015.

The new rules for companies with 50 to 99 workers would cover about 2% of all U.S. businesses, which include 7% of workers, or 7.9 million people, according to 2011 Census figures compiled by the Small Business Administration. The rules for companies with 100 or more workers affect another 2% of businesses, which employ more than 74 million people.

You’ll look in vain in either Sec. 4980H, the “shared responsibility” tax code section, or Sec. 1513 of the Affordable Care Act, which enacted 4980H, for anything that says the provision can take effect later than 2014.  Once again the administration is making it up as it goes in a tacit admission that Obamacare is a half-baked mess.  I hope somebody with 100 employees sues the IRS on equal-protection grounds to enjoin this politically-motivated selective enforcement.   To me it’s another clue that the individual mandate will also be delayed, and ultimately abandoned.

Paul Neiffer, Some ACA Relief for Employers with 50 to 99 Employees

Jason Dinesen, The Affordable Care Act and Small Businesses   

Martin Sullivan, Forget Obamacare for a Minute. Here’s Some Good News About Health Policy (Tax Analysts Blog).  

 

Via Wikipedia

Via Wikipedia

New filing season, same old scams.  Our area IRS Taxpayer Liason says this email is circulating:

Dear Applicant,

An Income Tax repayment is a refund of tax that you’ve overpaid.
Internal Revenue Service  ( IRS ) has received new information about your taxable
income you’ve overpaid too much tax through your job or pension in previous years.

There was a mistake with your tax, which an error occurred on your tax return,
and therefore your income reduced. Your employer also used the wrong tax code.

You are eligible to receive a refund of $2670.48 USD as your recent tax refund.
IRS will send you a repayment. You’ll get the repayment either by cheque in the post or by bank transfer.

Please click here to get your tax refund on your Visa or Mastercard now.

Note : Your refund can be delayed for a variety of reasons. For example submitting
invalid records or applying after the deadline.

Best Wishes,

IRS Tax Refund Service Team
Internal Revenue Service.

Of course it is a scam.  Some obvious clues: a real IRS notice doesn’t have to tell you that it’s dealing in “USD.”  We say “checks” in the US; you get “cheques” in Canada, the UK, or other old Commonwealth countries.  IRS doesn’t do refunds on credit cards.  And, of course, the most important clue:  the IRS will never initiate contact you with an e-mail or phone call.  If an email says it’s from the IRS, it’s not.

 

TaxGrrrl, Understanding Your Tax Forms: The W-2   

 

haroldHooray for Hollywood!  Movie Producer Peter Hoffman Charged With Film Tax Credit Fraud.  It involves Louisiana, which continues its co-dependent relationship with Hollywood with film tax subsidies.  Iowa, sadder but wiser, now prefers producer room and board subsidies to Film Tax Credits.

 

Howard Gleckman, Incoming Senate Finance Chair Wyden Outlines His Tax Agenda (TaxVox):

Speaking in Los Angeles to a conference sponsored jointly by the USC Gould School of Law and the Tax Policy Center, Wyden framed his tax agenda around several key issues:

Narrow the gap between taxation of investment income and ordinary income.

Significantly increase the standard deduction.

Simplify and enhance the refundable Child Tax Credit and Earned Income Tax Credit.

Revise savings incentives by creating a new investment account for all Americans at birth, shift savings subsidies from high-income taxpayers to low- and moderate-income households, and consolidate and simplify the current tangle of existing tax-preferred savings incentives.

Enhance job training.

Restore Build America Bonds—a short-lived idea that partially replaced tax-exempt state and local bonds with direct federal subsidies. He’d also seek ways to encourage business to funnel overseas earnings into domestic infrastructure investment.

It’s a disappointing agenda from somebody considered a thoughtful center-left voice on tax policy.   Any tax on investment income is best understood as a double-tax, and I don’t think by “narrowing the gap” he means lowering ordinary inocme rates.  His second, third and fourth points are fine, but the “Enhance job training” and “Build America Bond” proposals are just political pinatas to be broken open by insiders.  If you want to see what jobs training dollars really accomplish, I refer you to Iowa’s own CIETC.

 

TaxProf, The IRS Scandal, Day 278

checkboxJeremy Scott, Check the Box for Tax Avoidance (Tax Analysts Blog).  

The check-the-box rules allowed multinationals to create entities that were treated one way in a foreign jurisdiction and another by the United States. These entities, so-called hybrids, are at the core of companies like Apple’s tax strategies, and they have been used to bring about obscenely low effective tax rates (2.3 percent on $700 billion in foreign earnings, according to the Obama administration).

I think any corporate above zero is obscenely high.

 

Kyle Pomerleau, Proposal to Exempt Olympians’ Prize Money from Taxation: Good Politics, Wrong Solution (Tax Policy Blog)

Kay Bell, IRS takes a bite out of U.S. Olympic medalists’ winnings

 

Keith Fogg, Holding People Hostage for the Payment of Tax – Writ Ne Exeat Republica (Procedurally Taxing). No, he’s not talking about tax season.

 

News from the Profession: PwC Will Probably Be the First Accounting Firm to Replace Interns With Robots.  (Going Concern).  Makes sense, as they were the first to do so with partners.

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Tax Roundup, 1/31/14: Earned Income Tax Credit Awareness Day party edition! And: e-filing begins.

Friday, January 31st, 2014 by Joe Kristan


EITC error chart
Yes, for those of you not already taking the day off to observe it, today is Earned Income Tax Credit Awareness Day!  Let’s celebrate with a true story of EITC awareness.

Cedar Rapids tax preparer Demetries Johnson displayed her awareness of the credit in a big way:

Defendant DEMETRIES JOHNSON notified some taxpayers seeking her services that she could obtain larger tax refunds than they would otherwise receive.  To obtain refunds, defendant DEMETRIES JOHNSON would knowingly report false information on taxpayers returns. The claims made in the tax returns were false, fictitious, and fraudulent in that the claims for refunds, for example: 1) falsely reported income when little or no income was earned, thereby substantially and materially overstating taxpayers’ income in a manner that made the taxpayer appear eligible for a refund by virtue of the EITC; and 2) falsely included a child or children on taxpayers’ returns who did not in fact qualify under the EITC.  Through submission of these false claims, defendant DEMETRIES JOHNSON increased payments made by the Internal Revenue Service to the taxpayers or to bank accounts controlled by the defendant.

Her awareness ended up earning a two-year prison sentence after she pleaded guilty to tax charges.  Her keen level of awareness isn’t uncommon; a recent Treasury Inspector General analysis showed that 21-25% of the $13 billion of the credit issued annually is claimed “in error.”  No small amount of those errors are deliberate.

Those who scam the system are especially aware that the credit is “refundable.”  If you claim more credit than you owe in taxes, the IRS will send you a check for the excess.  Like all refundable credits, it attracts fraudsters.

Come to think of it, maybe “awareness” isn’t the real problem with the Earned Income Credit.

 

Flickr image courtesy Shock264 under Creative Commons license

Flickr image courtesy Shock264 under Creative Commons license

When you buy a round, it’s always popular Wind industry fears slowdown as Congress considers future of popular tax credit  (Des Moines Register).  The recipients of wind subsidies delivered through the tax law are annoyed that there is a delay in getting their free stuff.

The headline says the wind turbine subsidy is “popular,” but nothing in the article backs that up, or even repeats the claim.  I suppose it’s as popular with the Warren Buffet-controlled utility that is a big recipient of the credit as the Earned Income Tax Credit was with Demetries Johnson’s clients.

 

Lois Lerner, ex-IRS, ex-FEC

Lois Lerner, ex-IRS, ex-FEC

TaxProf, The IRS Scandal, Day 267.  He highlights today’s Peggy Noonan piece:

 Meanwhile, back in America, conservatives targeted and harassed by the Internal Revenue Service still await answers on their years-long requests for tax exempt status. When news of the IRS targeting broke last spring, agency officials lied about it, and one took the Fifth. The president said he was outraged, had no idea, read about it in the papers, boy was he going to get to the bottom of it. An investigation was announced but somehow never quite materialized. Victims of the targeting waited to be contacted by the FBI to be asked about their experience. Now the Justice Department has made clear its investigation won’t be spearheaded by the FBI but by a department lawyer who is a campaign contributor to the president and the Democratic Party. Sometimes you feel they are just laughing at you, and going too far.

For a case where a key figure promptly hid behind the Fifth Amendment, the FBI was sure quick to conclude there was no crime.

 

William Gale, Benjamin Harris, David John, State of the Union Speech Promotes New Retirement Savings Vehicles (TaxVox):

 Similar to the R-Bond discussed in a recent AARP Public Policy Institute paper written by William Gale, David John and Spencer Smith, MyRA would allow individuals to save in a government bond account similar to the one offered as an option to federal employees through the Thrift Savings Plan. The details are unclear (there’s a WhiteHouse fact sheet here), but MyRA would allow new savers and those with small balances to accumulate retirement savings without either having to pay administrative charges or face market risk.

Just inflation and government policy risk.

 

20130916-1TaxGrrrl, IRS Officially Opens Tax Season Today, Begins Processing Returns and Refunds

William Perez, IRS’s Electronic Filing Systems Opens January 31

Kay Bell, Are you ready to e-file your federal tax return? Here’s how.

Trish McIntire, IRS Notice Prevention

 

Fear the Family (and other related parties).  My new post at IowaBiz.com, the Des Moines Business Record Business Professionals Blog.

 

Kyle Pomerleau notes A Few Contradictions in President Obama’s State of the Union Address (Tax Policy Blog)

Keith Fogg, Does Treasury’s Policy Restraining Referrals to Low Income Tax Clinics Harm Individuals and the Tax System? (Procedurally Taxing)

Robert D. Flach serves up his last Buzz for awhile as he begins his tax season hiatus.  It’s his 43rd tax season.  If I hit my 43d tax season, it will be in my 68th year.  I admire Robert’s endurance, but I have no plans to match it.

 

haroldDirector of Chartered firm among 13 charged over £2.5m film tax fraud (ifaonline.co.uk).  I think film tax credits are the bait car of tax incentives.

Useless tool.   Treasury Nominee Dynan Calls Home Buyer Tax Credit ‘Useful Tool’ (Tax Analysts, $link).  Not only should her nomination be rejected on the basis of her approval of the failed and fraud-ridden credit, she should be presumed self-disqualified from any public position ever.

While I think the court decision ending tax-free treatment for cash parsonage allowances is likely to stand, not everyone agrees.  Zelinsky: The First Amendment and the § 107 Parsonage Allowance (TaxProf)

 

Tax Trials continues its “Famous Fridays” series with Pete Rose, Gambling Winnings Are Income Too.

News from the Profession: PwC Doing Its Part to Keep Dog Tails Wagging in Northeast Ohio (Going Concern)

 

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Tax Roundup, May 1, 2013: Brittannia gets behind filmmakers in a big way. Also: IRS power grab takes a new direction.

Wednesday, May 1st, 2013 by Joe Kristan

hh44.jpgNew U.K. film tax credit indictments.  It appears that the Brits are slowly moving towards the Iowa approach of jailing filmmakers instead of subsidizing them.  Ic.Scotland.co.uk reports:

Five people are to be charged in connection with a film industry tax relief fraud which cost the public purse around £125 million, the Crown Prosecution Service said.

The group allegedly abused a tax relief that allows investors in the British film industry to offset losses against other tax liabilities in order to cheat the public revenue.

“Around £125 million” translates to around $194 million.  And in Iowa film producers are serving time for stealing merely single digits of millions.  It just goes to show what you can accomplish with a national effort.

 

Boo.  House bill would give IRS authority to regulate tax pros (Kay Bell)  The power grabbers at IRS and their buddies at the national franchise tax prep firms have been thwarted by the courts.  Now they are using their congresscritter friends to put in the fix.

Kay sadly falls for it:

The quality independent tax professionals are following tax law changes, staying up to date and providing their clients with reliable tax services. Down the  street, however, an inept preparer is undercutting their prices and mucking up the system for all of us — the IRS, tax pros and taxpayers alike.

The IRS can’t regulate anybody into competency.  They can make people pass a “competency” test that really is a literacy test.  They can make people pay for CPE.  But they can’t make anybody competent who wouldn’t be otherwise.    What they can do is drive little preparers out of the business with nagging paperwork, red tape and hassles that the big boys can just assign to their compliance departments, and, when necessary, to their lobbyists.  This reduces the supply of preparers, increasing the cost of preparation for taxpayers.

The real problem with tax errors isn’t preparers; it’s the horrendous tax law and the inept legislators who make it happen.

 

Jacob Sullum on the Burden of Online Sales Taxes (Reason.com):

In a 2011 paper published by the Mercatus Center at George Mason University, Veronique de Rugy and Adam Thierer recommended “an ‘origin-based’ sourcing rule for any states seeking to impose sales tax collection obligations on interstate vendors.” Under that rule, which mirrors what happens when you buy something while visiting another state, each business collects sales tax on behalf of the state where it is based, no matter where the customer happens to be.

The beauty of this approach is that it treats all retailers equally, eliminates the daunting challenge of dealing with many different taxing authorities, and respects state policy choices while encouraging tax competition between jurisdictions. Evidently the idea makes too much sense for Congress to consider.  

 That would motivate online sellers to locate in low tax jurisdictions, which is why congresscritters from high-tax places will never allow it to happen.

 

Scott Drenkard,  California Considers Soda Tax in 2013, Forgetting Resounding Defeat in 2012 (Tax Policy Blog)

Joseph Thorndike, When Tax Reform Means Soaking the Rich (Tax.com)

Eric Toder,  How to Improve the Tax Subsidy for Home Ownership.  (TaxVox).  Maybe by eliminating it?

Jack Townsend,  John Doe Summons Issued to Wells Fargo for Records of CIBC FirstCaribbean International Bank Correspondent Account

Patrick Temple-West,  FATCA hurts Americans abroad, and more (Tax Break)

 

J.D. Tuccille, If High Cigarette Taxes Fuel a Booming Black Market, What Will High Marijuana Taxes Do?  (Reason.com).

David Brunori, Pancho Villa and Three Hundred Million Joints (Tax.com)

 

News you can use:  How Not to Deduct 85,491 Miles (Russ Fox)

 The Critical Question:  Has Microsoft Excel Ruined the World? (Going Concern)

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Tax Roundup, 3/15/13: Corporate return day! And: Can you audit a myth?

Friday, March 15th, 2013 by Joe Kristan

Calendar-year corporation returns are due today! They are easy to extend on Form 7004 if you can’t finish them today.  If you don’t extend an S corporation return and you file late, the penalty starts at $195 for each late K-1, and $195 each for every additional month the return is late.

 

If Iowa's tax law were a car, it would look like this.

If Iowa’s tax law were a car, it would look like this.

Joseph Henchman,  Iowa House Passes Alternative Maximum Tax: Income Tax Option Clear of Carveouts (Tax Policy Blog).  Joseph has some good things to say about the Iowa alternative tax that passed the house this week (HF 478):

I’ve never filled out an Iowa income tax form but it looks like one of the harder state tax returns. Iowa allows you to deduct what you pay in federal income tax, which is nice but is that much more calculation work (and probably drives up tax rates). There are lines for the lump-sum tax, the minimum tax, the K-12 textbook credit, the school district surtax, the motor fuel tax credit, and the earned income tax credit. I’m sure each one of these has their explanations of necessity but together it sounds like a lot of paperwork, record-keeping, and Tax Filing Day frustration.

Hence, I’m impressed by a bill passed yesterday (House File 478)  by the Iowa House which would offer an alternative to all Iowa taxpayers: a 4.5 percent tax on all income above about $15,000, which no further deductions or exemptions. It’s not perfect: our friend Joe Kristan pointed out that a credit for taxes paid to another state and a deduction for federal interest are probably constitutionally required, and offsetting deductions to certain kinds of income (allowing gambling losses if you tax gambling winnings) is good policy. But as Joe said, the bill “is a welcome step towards improving Iowa’s income tax.”

I’m hoping it’s a step towards the Tax Update Quick and Dirty Iowa Tax Reform Plan.

 

 

It’s a myth, so they’re cracking down on it!

Huffington Post, The Millionaire Migration Myth: Don’t Fall for This Anti-Tax Scare Tactic.

Bloomberg News, States Crack Down on Top Earners Who Flee as Levies Rise: Taxes

If they feel have to “crack down” on something, maybe there’s something to that myth.

 

The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.

The Ultimate Swiss Army Knife. Flickr Image courtesy redjar under Creative Commons license.

Janet Novack,  Blame Congress, As Well As H&R Block And IRS, For College Tax Credit Mess. Oh, I do!  From the article:

Far be it from me to let either the Internal Revenue Service or tax prep giant H&R Block off the hook for the current mess which has delayed refunds for more than 600,000 taxpayers claiming college tax credits by up to eight weeks. In addition to their operational missteps, both did a poor job (at least  initially) of communicating with taxpayers who desperately need those refunds to pay tuition or other bills.

But let’s put some of the blame where it rightly belongs: on the Washington politicians. For more than two decades, Congress has been expanding  “tax expenditures” with little regard for how complicated such provisions might be for taxpayers to use and for the IRS to administer,  let alone for whether they do enough good to justify their cost and the economic distortions they create.  A new 1065-page Congressional Research Service compendium lists 250 different tax expenditures. Happy reading.

Every little break like this diverts IRS resources from actually collecting income taxes and makes the income tax a little less effective and useful.  Yet Congress still sees the tax law as the Swiss Army Knife of public policy.

 

Jim Maule,  Tax Depreciation: Do the Math:

No matter how well a student in the basic tax course masters the depreciation deduction to the extent it is studied, that student knows that the total depreciation with respect to a property cannot exceed its cost. All of the students would find themselves bewildered by the proposition that depreciation deductions on a property that cost $34,799 would total $56,000.

So was the Tax Court.

 

Tony Nitti,  Golfer Sergio Garcia Comes Up Short In Tax Court, But Is The Decision A Victory For Other Athletes? He won on his endorsement royalty income, so while he may not have had an undisputed win, he did OK, like a PGA golfer who gets second-place prize money.

 

William Perez,  Delays in Issuing Tax Refunds Related to Education Tax Credits

Going Concern,  IRS Won’t Be Sorry If You Never Get Around to Claiming Your Refund.  Over $900 million in 2009 refunds will be out of reach of their rightful recipients after April 15, when the 3-year window for claiming them expires.

Trish McIntire, Don’t Lose Your 2009 Refund

 

Paul Neiffer,  Will Large Farmers Be Able to Use Cash Method in the Future?!  Farmers should get the same tax rules and breaks everyone else does, no less and no more.

Kay Bell,  Will a relationship neutral tax code save traditional marriage?.  Not every problem is a tax problem.

Howard Gleckman, The Ideological Chasm Between the House and Senate Budgets

William McBride, Dave Camp Floats a Rewrite of Small Business Tax Rules (Tax Policy Blog)

 

Jack Townsend, U.S. Taxpayer Pleads to FBAR and Tax Perjury Violation

Brian Mahany, IRS Agent May Be Headed To Prison For Info Leak – Whistleblower Protection

Brian Strahle, State Tax Revenues:  Corporate Income Tax Not That Important?

Oh, Goody.  Applying for Obamacare Subsidies Will Be as Complicated as Doing Your Taxes (Megan McArdle)

 

Argo pay your taxes.  It turns out Iowa isn’t the only government whose film tax credits attract scammers.  From London comes this via Boston.com:

In some ways ‘‘A Landscape of Lies’’ was a typical indie film, with a tiny budget, a B-list cast and an award from an American film festival.           

What made it special is that it was created solely to cover up a huge tax fraud.

In fact, officials say, the project was a sham, set up to claim almost 1.5 million pounds in goods and services tax for work that had not been done, as well as 1.3 million pounds under a government program that allows filmmakers to claim back up to 25 percent of their expenditure as tax relief.

No word on whether Leo Bloom prepared the fraudulent returns.

 

News you can use: Polish Up Your Guccis. (Christopher Bergin, Tax.com).

Will there be tax reform? I think there has to be. But I don’t think it will look like theTax Reform Act of 1986 because, in short, it’s not 1986, and we don’t have the same problems or even the same tax system. That doesn’t mean there aren’t a lot of lessons to be learned from the ’86 experience. But I don’t think tax reform will happen soon. And a few of the reasons I think that come right out of “Gucci Gulch.”

I have a copy of Showdown at Gucci Gulch, the book about how the 1986 tax reforms were enacted.  I haven’t brought myself to open it; it seems too much like reading about my job.

 

TaxGrrrl,  Arrest of Dancing Mascot Puts Liberty Tax Wavers In The Spotlight

He should have hidden the cash across the pond.  Opening statements underway in Beavers tax evasion trial (WGNtv.com)

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Tax Roundup, 11/14/2012: So what about the other $8.4 trillion?

Wednesday, November 14th, 2012 by Joe Kristan

Tell me when they get serious about the budget.  The federal budget deficit is running about $1 trillion annually.  So how does the President propose to address it?  Primarily by increasing taxes by $1.6 trillion — over 10 years.  And, of course, no real spending cuts.  The TaxProf links this:

Wall Street Journal:  Obama Sets Steep Tax Target: President to Seek $1.6 Trillion More in Revenue, Double Level From 2011 Talks:

President Barack Obama will begin budget negotiations with congressional leaders Friday by calling for $1.6 trillion in additional tax revenue over the next decade, far more than Republicans are likely to accept and double the $800 billion discussed in talks with GOP leaders during the summer of 2011. …

Kevin Smith, a spokesman for House Speaker John Boehner (R., Ohio), dismissed the president’s opening position for the negotiations. He said Mr. Boehner’s proposal to revamp the tax code and entitlement programs is “consistent with the president’s call for a ‘balanced’ approach.” …

In negotiations between Messrs. Boehner and Obama in mid-2011, the two sides neared agreement on a plan to cut the deficit by $4 trillion over 10 years, including $800 billion in new revenue. The deal fell apart after Mr. Obama asked to raise the revenue component to $1.2 trillion, and to this day each side blames the other for the collapse. Based on that history, some senior GOP aides said they believed a likely compromise would call for about $1 trillion in new tax revenue, possibly from capping deductions for wealthier taxpayers.

As noted here, a straight dollar cap on itemized deductions would still be a tax increase on pass-through businesses.  Taxpayers who report business income on their personal returns have to deduct the state income taxes as itemized deductions, rather than as “above-the-line” business expenses.  A straight deduction cap would eliminate the deduction for state income taxes on business income.

How would you be able to tell if they are serious?  When they admit that to have government benefits for everybody, you have to increase taxes for everybody, and that cutting spending by cutting “fraud, abuse and waste” never happens.  The rich guy isn’t buying.

Chart 29. The federal deficit has grown so large that tax increases only on America’s millionaires will not be our silver bullet. Even if the government took all of the income earned by those who have an after-tax income of $1 million or more, the amount of revenue generated would fall far short of eliminating the deficit. The expected federal deficit for 2012 is about $1.2 trillion. The latest IRS data indicates that the total after-tax income for all millionaires is roughly $709 billion. If every penny of that after-tax income were taken by the government through a 100% tax rate, and we assume that no spending cuts are made to accompany the tax increase, this would account for only about 60% of the amount needed to erase the deficit. With numbers like this, one thing is clear: soaking the wealthy with increasingly higher tax rates simply cannot be the only answer to our nation’s fiscal problems.

 

TaxProf,  Democrats Embrace Romney’s Tax Plan to Limit Deductions

Patrick Temple-West,  Essential reading: Democrats like a Romney idea on income tax, and more (Tax Break)

Tell me when they get serious about the budget II: Branstad, Grassley push for extension of wind tax credit (Radio Iowa, via The Beanwalker)

So much for that deficit solution.  ‘Fat Tax’ in Denmark Is Repealed After Criticism (New York Times)

Howard Gleckman,  Congress Can’t Avoid Tax Rate Hikes By Closing “Loopholes” (TaxVox)

 

 

Meanwhile, this upcoming tax season is likely to be horrible.  Acting IRS Commissioner Steven T. Miller tells the IRS that many taxpayers may have to wait until late March next year to file, depending on whether and when an “AMT Patch” is enacted (my emphasis):

Without an AMT patch, about 28 million taxpayers would be faced with a very large, unexpected tax liability for the current tax year (2012). In addition, in order to allow time for the IRS to make the programming changes necessary to conform our processing systems to reflect expiration of the AMT patch and the credit ordering rules, the IRS would, at minimum, need to instruct more than 60 million taxpayers that they may not file their tax returns or receive a refund until the IRS completes the necessary systems changes. Because of the magnitude and complexity of the changes, it is entirely possible that these taxpayers would not be able to file until late March 2013, if not even later. Tens of millions of these taxpayers would unexpectedly have to pay additional income tax for 2012, leaving them with a balance due return or a much smaller refund than expected.

Tax season has become more compressed into the last few weeks before April 15 because 1099s and K-1s are issued later every year as a result of tax law complexity.  It looks like it could get much worse.

 

You Gotti like it.   John A. Gotti, son of the convicted organized crime figure, scores a legal victory, convincing the Tax Court not to grant summary judgment for the IRS in a tax case involving a corporation he controls with his wife.  It involves a dispute over whether IRS correspondence mailed to a jail address was a proper notification at the taxpayer’s “last known address.”

 

Another sign of the apocolypse.  There is now on online exchange for trading transferable film tax credits.  Tax Analysts reports ($link)

The newly launched Online Incentives Exchange LLC (OIX) purports to be the first “truly national, transparent, liquid exchange for the trading of state tax credits,” competing against direct brokerages in the trading of transferable and/or refundable state tax credits.

Right now, only Louisiana tax credits are trading on the exchange. Organizers plan to enable trading of California and Georgia credits in December and to eventually list on the exchange transferable and refundable tax credits in the 45 states where those incentives are available.

I prefer Iowa’s new practice of imprisoning filmmakers, myself.

 

Richard Morrison,  What Canada Can Teach Us about Corporate Taxes (Tax Policy Blog)

William Perez,  TIGTA Reveals Cause of Refund Delays that Occurred in Early 2012

Kay Bell,  Superstorm Sandy tax considerations; California cities’ soda tax falls flat

Paul Neiffer,  IRS Announces It Does Not Like Fixed Dollar Gifts

Jason Dinesen,   No to Additional Preparer Testing, Yes to CPE Requirements. I say no to the entire preparer regulation scheme.

Brian Strahle,  What Are Your Year-End State and Local Tax Needs?

Robert D. Flach has an exasperated Buzz.

 

Worse than a computer virus?  McAfee On The Run: Murder and Mayhem (But Few Taxes) In Belize  (TaxGrrrl)

In these troubled times, it’s good to know there are still things we can believe in.  Sixth Circuit Agrees That Cliff Claven Is Not A Thief (Peter Reilly)

x

 

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Tax Roundup, 10/25/2012: Extra services at the post office. And there’s no such thing as a free sandwich.

Thursday, October 25th, 2012 by Joe Kristan

Opportunities with the postal service.  A mail carrier in Alabama has been accused of picking up more than letters on his route.  A Department of Justice press release says Mr. Harrison, a postman, served as a courier for a tax refund ID-theft ring:

Members of the conspiracy filed false tax returns using stolen identities from various locations including the Northern District of Alabama. The fraudulent tax refunds were directed to debit cards that were mailed to addresses on Harrison’s postal route in Montgomery, Ala. Harrison retrieved the debit cards from the mail and, for a fee, provided them to a co-conspirator.

The moral?  When it absolutely, positively needs to get there, be the top bidder for your mailman.

 

Richard Morrison,  Chart of the Day: The Demographics of Income Inequality (Tax Policy Blog):

Russ Fox,  Nevada Business Tax Initiative Ruled Invalid

My new post at IowaBiz.com:   Payroll taxes: Once is enough

Keep firing.  Hollywood tax incentives come under fire (NBCnews.com)

Patrick Temple-West, Essential reading: For some of the wealthy, a 0 percent tax on capital gains, and more (Tax Break)

Trish McIntire,  Basics of Retirement Tax Planning

 

Brutal Assault on Reason Watch: 

Anthony Nitti,  President Obama Releases Agenda For A Potential Second Term: Dissecting the Tax Aspects

Kay Bell,  We think Congress is doing a better job.  Since they went home, coincidentally.

Daniel Shaviro,  Paul Krugman on the worst case scenario if Romney wins

Linda Beale,  Tax Questions about the Romney-Ryan Ticket–from Romney’s Tax Returns to Ryan’s Vouchercare

 

Attention is great, but links are better.  Amy Hamilton at Tax Analysts quotes my post from yesterday extensively ($link)

 The governor is suggesting “a new tax plan that would exist side-by-side with Iowa’s current complex and loophole-ridden mess,” Kristan said, adding that the plan would require taxpayers to compute their taxes under each system and file whichever return produced the lowest tax.

Thanks!  But two quibbles.  First — no link?  I link to you, you link to me — manners!  Second, you didn’t even mention The Quick and Dirty Iowa Tax Reform plan in a discussion of Iowa Tax Reform.   Isn’t that like talking about the World Series without mentioning the Giants?

 

Expensive free sandwiches.  From Going Concern:

A St. Louis accountant has allegedly been taking the cheap thing just a little too far by scamming unsuspecting restaurateurs in the area for free sandwiches. Yup, you read that right: free sandwiches.

They call him the Scamwich Artist and it seems he’s been making the rounds, complaining about getting bad food in exchange for gift cards and, well, more food.

The story quotes restaurant personnel as saying the accountant was caught red-handed, and the guy’s picture, taken by a restaurant manager with a smart phone, is now all over St. Louis and the Internet.  It will make for interesting conversation at his next client meeting.

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Tax Roundup, 7/23/2012: Chasing smokestacks, catching smoke. Also: final film credit trial starts; 1040s and summer homes.

Monday, July 23rd, 2012 by Joe Kristan

So the guy who swindled customers in his commodity brokerage in Cedar Falls also swindled Iowa “economic development” smokestack chasers.  From QCTimes.com and AP (via State 29):

Even before its dramatic collapse last week, an Iowa-based brokerage implicated in a $200 million fraud scandal had defaulted on the terms of a $1.24 million state incentives package that helped the firm build a state-of-the-art headquarters, newly released records show.

The Iowa Economic Development Authority warned Peregrine Financial Group, Inc. in March that it had violated its contract by paying employees lower salaries than promised and must pay back some of its aid immediately, according to a letter released in response to a request from The Associated Press.

It’s yet more evidence for what I’ve long said about “economic development incentives”:

When Iowa tries to pay other businesses to come here, it’s like a guy who brings his wife’s purse into a bar to buy drinks for the girls. The girls aren’t impressed, and any he does pick up aren’t worth much.

That’s something Iowa should ponder before it signs the check to bribe a fertilizer plant to locate in Iowa with tax money paid in part by competing fertilizer plants that are already here.

Who pays the bills? The Tax Foundation has a map showing the Percentage of Federal Income Tax Revenue from Filers Making Over $200,000:

Airball. The former owner of a Kansas City minor league basketball team will go away for 51 months for crimes that included not remitting payroll tax withholidngs, reports CJOnline.com:

James Clark, 53, of Overland Park, a former owner of the Kansas City Knights basketball team, pleaded guilty to one count of tax fraud and one count of bank fraud. Clark admitted that he withheld payroll taxes from employees of his company, SWISH Holding Corp., while failing to pay more than $502,000 to the Internal Revenue Service. He diverted the funds and used them for his own purposes, including the operation of the basketball franchise.

Many people think that they are just “borrowing” money when they fail to remit withheld taxes.  It can be tempting when suppliers are howling for cash.  This case shows that failure to remit withholdings can have consequences much more serious than cash late penalties and interest.

 The last scheduled trial of an Iowa film tax credit fiasco figure is slated  to start today.  Chad Witter, an accountant who worked as a middleman in obtaining and marketing film credits, will go on trial in Polk County District Court on charges of theft, fraudulent practice and ongoing criminal conduct.  Dennis Brouse, a producer who worked with Mr. Witter, was sentened to ten years in prison earlier this year on charges arising out of the disastrous program to bribe filmmakers to come to Iowa with transferable tax credits.

How Government Limits Upward Mobility (Howard Gleckman, TaxVox):

True, social welfare programs provide a valuable safety net for the very poor. For instance, the Earned Income Tax Credit and the Child Tax Credit are important income supports for low-income families.

But because these safety net programs phase out as incomes rise, some people face marginal tax rates as high as 80 percent for getting a better job or even a raise.  A new Urban Institute calculator shows how this works.

Related:  Taxing the heck out of the top 400 taxpayers won’t help the bottom 20 million

Will your 1040 help pay for your vacation home? My latest post at Iowabiz.com, the Des Moines Business Record group blog for entrepreneurs.

WSJ: IRS Audit of Romney Donor Raises Questions About Presidential Enemies List (TaxProf Blog)

Jana Luttenegger, Summer Camp Tax Credits (DavisBrown Law Firm Tax Blog)

Or somewhere darker: The IRS Art Advisory Panel Has Its Head In The Clouds (Janet Novack)

Kay Bell, Bicycling commuters, you might qualify for a tax-free workplace benefit

Russ Fox, Two Sets of Books Aren’t Better than One.  At least when  one set doesn’t include the skimmed receipts.

Jason Dinesen, Medicare Part B and Same-Sex Married Couples

Jack Townsend, Form 8938 Resource

Peter Reilly wades into the swamp of the tax treatment of Scientology.

TaxGrrrl, Saban Suggests Penn State Tickets Should Be Taxed To Pay For Scandal.  I read that as “Satan” at first.

News you can use: The General Crapiness of Your Life Does Not Relieve You of Your Tax Obligations (Anthony Nitti)

Robert D. Flach will save $11,000 in taxes annually by fleeing New JerseyHe’s getting paid to do something most of us would be happy to do for free.

Help Wanted: The Hunt for a New Going Concern Freelancer Goes OnIf you have a Big 4 bad attitude, what are you waiting for?

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Iowa House votes to increase EITC while chasing Harold Hill out of town

Tuesday, May 8th, 2012 by Joe Kristan

The Iowa General Assembly is in a frenzy of legislation.  Yesterday the Iowa House passed its version of property tax reform (HF 2475).  It differs from the Senate bill in several important ways.  The House bill imposes a limit on tax increases based partly on the Consumer Price Index.  Its increases the Iowa Earned Income Credit to 10% of the federal credit, vs. the 20% proposed by the Senate (SF 2161).  The increase would be retroactive to the beginning of this year.

The House also approved a bill modifying the Iowa trust code and making minor changes in the Iowa inheritance tax, but without the controversial repeal of Iowa’s rule against perpetuities — a repeal supported by Iowa bank trust departments who have been losing trusts to neighboring states with looser rules.

Both houses yesterday approved HF 2337, a bill that among other things formally repeals the Iowa Film Tax Credit.  While the disastrous credit was originally enacted over three dissenting votes, the repeal drew 14 no votes in the Senate and 15 in the house.

Lest we think the repeal of the film credit shows that the legislature finally understands the unwisdom of corporate welfare through the Iowa tax code, the Iowa House signed off on SF 2342.  This bill provides tax credits for 20% of the cost of “geothermal heat pumps” and 50% of the federal tax credit for “solar energy systems.” The House passed the bill 82-14; the Senate version passed over only one dissent.

Related:

Governor to buy property tax reform by doubling earned income credit?

Harold Hill gulls the House

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Is ‘Harel Goldstein’ Harold Hill’s real name?

Wednesday, January 25th, 2012 by Joe Kristan

20110629-2.jpgIowa achieved another economic development milestone with a guilty plea by imprisoned California filmmaker Harel Goldstein on charges arising out of Iowa’s film tax credit program. Thegazette.com reports:

Prosecutors said during filming of

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Wheeler: what happened to me can happen to other state employees

Monday, December 26th, 2011 by Joe Kristan

The former head of the Iowa Film Office says that his prosecution and conviction for misconduct in office sends a bleak message to state employees, reports The Des Moines Register:

Interviewed for the first time since his conviction in October, Tom Wheeler told The Des Moines Register last week that he believes the verdict in his high-profile case means any state employee could wind up being charged criminally “through no fault of their own.”
Wheeler said he had no training, no employee handbook and no legal coaching on the ramifications of screwing up when he was drafted to run Iowa

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Massachusetts follows where Iowa leads

Tuesday, December 13th, 2011 by Joe Kristan

Iowa shows the way in enabling film tax scams, but now Massachusetts is catching up. The Hollywood Reporter says a director has been charged with scamming the Bay State’s film tax credit program. The scam purportedly used the same tools used in scamming the Iowa program: inflating film expenditures to fraudulently obtain tax credits, which could then be sold for cash. From the report:

The first four charges could carry prison sentences of up to five years. The three tax related charges could lead to prison terms of three years for each. Adams would also likely be forced to make restitution of at least $3.6 million of the $4.7 million in tax credits he has already received, which represents the amount the authorities believe was false.

Among the items they allege was false was a claim that actor Richard Dreyfuss was paid $2.5 million for Lightkeepers, when in fact (per their investigation) he was paid only $400.000.

Of course the film office enablers are undaunted:

Lisa Trout, head of the Massachusetts state film office, said as far as she knows this is the first such case involving an alleged fraud in the program. She said the program has been successful for the state and is funded to continue through 2022.

Successful? The Massachusetts Department of Revenue isn’t so sure, reports the Tax Policy Blog:

A new report on film industry tax incentives, conducted by the Massachusetts Department of Revenue, was released this month. The report finds that the state’s $82 million film tax credit program generated $10 million in new state tax revenue in 2009. That is equal to about 13 cents of incoming tax revenue per dollar of tax credit awarded, an unimpressive number which even includes tax revenue gained from the increased economic activity as money spent by the film makers makes its way through the local economy (known as the “multiplier effect”).
The report also finds that the credits brought 222 net jobs for Massachusetts residents in 2009, at a cost of nearly $325,000 per in-state job.

At least Iowa wised up and stopped the film gravy train. Massachusetts is sadder, but as yet no wiser.

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Borchers indictment: investigation by other means?

Thursday, December 8th, 2011 by Joe Kristan

The Iowa Attorney General’s Office yesterday moved to dismiss charges it had filed against Donald Borchers arising out of the Iowa Film Tax Credit Program. The Des Moines Register reports:

State prosecutors had accused Donald Borchers, 55, of Beverly Hills, Calif., of defrauding the state of at least $75,000. Charges were filed in October after Borchers declined to provide more information to explain his actions.
Purchases made by Borchers and another filmmaker eventually led to firings in the Iowa

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Film incentives bomb at box office

Monday, November 28th, 2011 by Joe Kristan

While supporters of film tax credits, like Iowa’s failed tax credit program, often say they create so much development they pay for themselves. The Tax Policy Blog says it didn’t work that way in Massachusetts:

The Massachusetts Department of Revenue recently released a report detailing that $14.6 million in tax credits were given to filmmakers in 2010, yet the film tax-incentive program only generated $800,000 in new state revenue.

But I’m sure the intangible benefits were spectacular.

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Benz-buying Borchers busted

Thursday, October 27th, 2011 by Joe Kristan

UPDATE, 12/8/11: Charges dropped. Original post below.
The director of the remake of Children of the Corn, who famously bought a Mercedes with Iowa taxpayer dollars through the Iowa film credit program, has been charged with bilking the program through allegedly inflated costs.
The State Auditor Report on the film program says that the Children of the Corn project was rewarded tax credits for over $1.9 million in ineligible or unsubstantiated expenses. It doesn’t appear that the car is among them.
The Des Moines Register contacted Donald Borchers:

Reached Wednesday, Borchers declined to comment on the new charges filed Friday against him. Rather, he voiced frustration with the Des Moines Register for saying he could not be reached for comment in September 2009 for an article focusing on when Iowa’s former economic development chief knew about potentially abusive expenditures within the program.
Borchers said he tried to reach the newspaper. Had he been interviewed, he would have said that former film chief Tom Wheeler approved the purchase of the Mercedes as a way of stimulating Iowa

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Saints win on the field, but lose in the film business

Thursday, October 6th, 2011 by Joe Kristan

It looks like the New Orleans Saints football team had the same sort of luck with film tax credits as the State of Iowa. From NOLA.com:

Wayne Read, who hoodwinked more than two dozen members of the New Orleans Saints organization out of nearly $1.9 million by selling them bogus film tax credits, was sentenced Wednesday to four years in federal prison.

That’s different from Iowa, where the taxpayers, rather than the credit buyers,were the fraud victims.

Read, the former chief executive of Louisiana Film Studios LLC, told The Times-Picayune in 2009 that he spent the Saints’ money on studio rent and development. But he never applied for the credits from the state, and the film studio project ended in bankruptcy.
Several other players blame former Saints long snapper Kevin Houser, who is also in the securities business, for the bad deal. One lawsuit alleges that Houser paid the money for tax credits directly to Read instead of using the money to obtain “shares of stock, membership units, or promissory note establishing the nature and terms of the ‘investment.'”

The moral? Whether the film tax credits are being peddled by the long snapper or Hollywood, somebody is getting robbed.

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The Snooki veto

Tuesday, September 27th, 2011 by Joe Kristan

New Jersey Governor Christie has vetoed tax credits for the TV show “Jersey Shore,” reports TaxGrrrl. Fine. But why should his taxpayers be funding Hollywood at all? Isn’t the Iowa example enough to show how foolish it is to give tax money to the film industry?
Related: Auditor report: millions of real taxpayer dollars paid for imaginary film expenses

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Film credits buy Iowa ridicule

Friday, September 23rd, 2011 by Joe Kristan

Today’s Wall Street Journal has some fun at Iowa’s expense, courtesy of our Film Tax Credit program:

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”

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