More Sales Tax News in the FCA Area: IL Whistleblower Finds Success in NY

Chicago lawyer Stephen Diamond has made quite a name for himself in recent years for his perceived abuse of the Illinois False Claims Act (“FCA”).  Many believe Diamond is misusing the FCA or is using it for self-serving reasons not consistent with the FCA’s intent.  

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Cash for Scalps: Governor Cuomo Announces New Round of Grants for Tax Prosecutions

Last week, Governor Cuomo announced the latest round of grants to
district attorneys’ offices in 29 New York State counties under the Crimes
Against Revenue Program (also known as “CARP”).  The program provides substantial monetary grants to district attorneys’ offices in the state to investigate and prosecute crimes against the public fisc.

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What About New York State’s Federal Tax Audits?

A noteworthy determination was issued earlier this month by one of the Division of Tax Appeals’ administrative law judges. Judge Bennett found in Matter of Chery that the Division of Taxation improperly denied the petitioning taxpayer’s status as a real estate professional, as reported on his federal income tax return. Consequently, the taxpayer was entitled to claim Schedule E rental losses from two rental properties – not only on his federal return, but on his New York State return as well.

This case highlights some of the hazards of a trend we’re seeing with increasing frequency: the New York State Tax Department conducting audits focused on taxpayers’ federal income tax returns. This case and others beg the question: to what extent, if any, should New York State auditors be auditing federal tax returns?

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By the Numbers: The Annual Report of the Division of Tax Appeals and Tax Appeals Tribunal

Earlier this month, the Annual Report of the New York State Division of Tax Appeals and Tax Appeals Tribunal for fiscal 2014-15 was submitted to the governor and the heads of the Senate and Assembly. Last year, we offered our analysis of the report for fiscal 2013-14. Keeping with that tradition, there are a few things to note about this year’s report.

First and foremost: according to the numbers, it is getting tougher to win. Considerably tougher, actually. Here’s the analysis of Administrative Law Judge determinations from this year’s report, as compared to the numbers in the two prior years:

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Proceed with Caution: Developments in the Crimes Against Revenue Program

Earlier this year, Governor Cuomo announced that 28 district attorneys’ offices around the state would receive grants totaling nearly $15 million under New York’s Crimes Against Revenue Program (CARP), which provides substantial monetary grants to district attorneys’ offices in the state to investigate and prosecute crimes against the public fisc. Using CARP funds, DAs in cash-strapped counties can secure resources for staff and other expenses to investigate and prosecute tax crimes. From what we’re seeing, they’re doing just that.

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The Buzz on the Medical Marijuana Excise Tax

In a few short years, marijuana has gone from being widely regarded as an illicit drug to being legalized for medical purposes in 23 states and for recreational purposes in four states – with others expected to follow suit in short order. New York State jumped on the bandwagon last year with the enactment of the Compassionate Care Act (the Act), a highly-regulated medical marijuana program. In fact, the Department of Health is currently accepting applications from would-be “registered organizations” (ROs) aspiring to be among the five ROs to receive the department’s blessing to cultivate and dispense medical marijuana from up to four locations around the state. 

So why would sophisticated tax bloggers like us care? As tax nerds, we see tax issues everywhere! Indeed, the potential for states to grow tax revenue from marijuana sales has been a selling point on much of the state-level marijuana legislation from the outset. The potential is great: Colorado collected over $50 million in tax revenues and related fees in its first year. New York State, never one to forego a new tax, adds a new Article 20-B to the Tax Law under the Compassionate Care Act. Article 20-B imposes a 7% excise tax on every sale of medical marijuana by an RO to a “certified patient” or “designated caregiver” – both defined terms under the Act. That’s a pretty high tax rate…

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