LANSING – The Department of Treasury and the U.S. Internal Revenue Service began working together more formally Friday to stop those trying to avoid taxes at both levels of government.
Under the memoranda of understanding, the IRS will provide that state with lists of people and businesses offering or participating in abusive tax avoidance transactions, which the state can then use to find those not paying state taxes. In exchange, the state would apply state tax refunds to taxes due to the federal government.
Officials with the two tax agencies said the agreements would prevent duplication of effort by allowing one government to conduct the investigation and the other to use the results in adjusting taxes owed.
“This is an important step for the Department of Treasury to ensure tax fairness,” said Treasurer Jay Rising. “These tax schemes cost the state millions of dollars each year.”
Rising did not have specific estimates on the tax revenue lost to the ATATs.
“Abusive tax avoidance transactions are undermining the voluntary tax collection system,” said Jeffrey Basalla, IRS Area 6 director for small business/self employed. “The partnership agreement sends a strong message to those who are using abusive tax avoidance transactions: the state and federal governments are now partners in combating tax evasion.”
The agreement does not mean that all taxpayer information will be shared between the agencies, Basalla said. The agreement only pertains to ATATs, which are investment programs or accounting schemes specifically designed to hide taxable income or improperly reduce tax liability.
Officials capped off the press conference to announce the agreement by not only signing the memoranda, but with the IRS officials presenting the first disc of records on people offering ATATs, some 900 individuals and businesses. Rising said he expected that would be the first of many such discs coming to the department.
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