Iron Bars do not a Prison Make

President Bush has signed H.R. 7802, which is now Public Law No. 110-428 [The GPO has yet to post it, but give them a week or two or three.] We now have on the books the Inmate Tax Fraud Prevention Act of 2008.

Background: There are significant restrictions as to when, to whom and how much information from taxpayers' tax returns may be disclosed by the IRS. This is a good, nay, vital requirement, because nobody in their sound mind would file a tax return with the IRS if they thought the info on the tax return would become public information. But there are circumstances where tax return information must be disclosed, and so, Internal Revenue Code Section 6103 sets forth the particulars. [N.B. The version hyperlinked in this post, on the GPO website, is NOT the latest version, but if you look at it you will get an idea of Section 6103's general scheme, and general prolix verbosity.].

It seems that it is possible to outsmart the IRS by filing a tax return claiming a refund when no refund is actually warranted, because the IRS sends out the refund checks before auditing the tax return. This in and of itself is not so bad, BUT, there the criminals out there not only cheat on their own tax returns, but file false returns in the name of other people as well.


Taking it a step further, prisoners can and do successfully file false tax returns from the security of inside the prison walls. From Florida prisoners alone, there were fraudulent returns of over $4 million filed (at least that is what the IRS caught). A South Carolina inmate admitted at a Congressional hearing that he filed over 600 returns for himself or other inmates, face value approximately $3.5 million, approximately 90% of which were "successful."

More disturbing still, according to this South Carolina inmate, is that most of the money goes to the illegal drug market, and, he paid protection money to the Muslims in the prison to ensure his personal safety.


And so, President Bush has signed into law the Inmate Tax Fraud Prevention Act of 2008. In addition to a little rider that protects the pensions of retired federal judges for their widows and other surviving relatives, the Act adds Section 6103(k)(10) to the Internal Revenue Code, which permits the IRS to disclose tax return information on Federal inmates suspected of tax return fraud to the Federal Bureau of Prisons.

To which I say "Bravissimo!!"

But:

(A) The provision currently sunsets after 2011; and

(B) The IRS still cannot disclose the info to State prison officials, effectively leaving people like the South Carolina inmate out of the IRS's reach.

It is not a totally bad thing that Congress is proceeding with caution in tinkering with the disclosure provisions of Section 6103. But I hope that this obviously experimental legislation proves to be successful enough to warrant the removal of the sunset provision, and its expansion to include state inmates within the sweep of the statute.

Sex Subsidy Disallowed

The New York State Division of Tax Appeals has upheld a New York State income tax audit of the tax returns of one William G. Halby. Seems as though Mr. Halby wanted the already overtaxed New York State taxpayers to subsidize his sexual activities.

The Tax Appeals Determination in Matter of William G. Halby, DTA Nos. 821494 & 821810 (18 September 2008) is a good read. One sample paragraph is set forth below

"For the 2002 tax year, petitioner claimed a medical expense deduction of $105,271.00, after the 7.5% limitation on federal adjusted gross income (AGI). Included among the medical expenses claimed was an expense of $111,364.00, of which $40,588.00 was categorized on an attachment to Schedule A on petitioner's federal return as 'therapeutic sex' and $70,776.00 as 'massage therapy to relieve osteoarthritis and enhance erectile function through frequent orgasms.' Also included as part of the medical expense deduction claimed were the sums of $658.00 for medical books, videos and periodicals and $2,173.00 for 'pornography to enhance sexual performance in lieu of taking Viagra.'"

Read the whole thing here.


My question: It specifically indicated on the taxpayer's FEDERAL tax return that he was claiming these relatively large dollar value deductions. The New York people threw a flag on the play. How did this ever get by my ex-colleagues at the IRS?

Not Their Boy/Girl

This Blog's posting of 31 July 2006, entitled "He's Not Our Boy," spotlighted attempts by various Jewish groups to distance themselves from convicted bribepayer Jack Abramoff, and by CAIR to distance itself from Seattle terrorist Naveed Afzal Haq.

Now, the Catholic League is doing similar with respect to Rhiannon O'Donnabhain, the the gender bender who now seeks an income tax deduction for the sex reversal surgery he/she paid for. The word on the street is that O'Donnabhain was the taxpayer to whom IRS Chief Counsel Memorandum 200603025 was addressed, as discussed in this Blog's post "Taxman or Taxwoman" (24 January 2006).

The Catholic League, to be sure, is a well-reputed Catholic civil rights organization which this posting does not purpose to trash. The CL in general, and its President, William A. Donohue, in particular, have earned a reputation for calling matters as they see them, and, indeed, they make some calls which need to be made.

As an example, the latest posting from the CL website throws a flag on Florida attorney Loring Spolter's motion for the recusal of U.S. District Judge William Zloch in a DUI case which Spolter is defending. Spolter's basis for the recusal motion is that Judge Zloch is overly biased towards Catholics and Catholicism, and his "proof" is that Zloch is a supporter of Ave Maria Law School, of which two of his clerks are alumni.

Though Ave Maria Law School is unabashedly a Catholic institution, it does accept students of all faiths, and does have a diverse faculty. Geography is the sole reason I have not applied for a faculty position there. If my own experience obtaining a degree from another Catholic institution is any indication, I don't see where Ave Maria's Catholic orientation would adversely affect its ability to impart a fine legal education to students of whatever religious background. And I do believe that Judge Zloch is perfectly capable of adjudicating the case without regard to any party's religious orientation. The Catholic League has, then, appropriately blown the whistle on Spolter.

Bill Donahue's hackles were raised by an article in Tax Notes which reported that Rhiannon O'Donnabhain was "born into an Irish-Catholic Boston family." Donahue did what he has been conditioned to do -- he wrote a letter to the Editor of Tax Notes, which Tax Notes published yesterday ["Catholic Group Questions Religious and Ethnic Identification in Article," Tax Notes, Aug. 20, 2007, p. 699, 2007 TNT 162-34 (Doc 2007-19017).]. In his letter Donahue implores "Can you tell me why the man's ancestry and the religion in which he was raised were identified in the piece? It does not seem as if the man's Irish-Catholic background is relevant to the story. Would Tax Notes Today mention if he were an Ashkenazi Jew or a Scottish Presbyterian?"

Tax Notes pointed out that O'Donnabhain's attorney publicly distributed literature mentioning O'Donnabhain's Irish Catholic upbringing, and that O'Donnabhain himself/herself mentioned this in his/her testimony at the trial. O'Donnabhain, then, has opened the door and made the matter relevant.

And so, the Catholic League now implicitly seeks to disclaim O'Donnabhain as one of their own, just as Jewish groups have tried to jettison Abramoff, and just as CAIR has tried to hide Haq under a burqa.