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June 2, 2010 - Phil Hodgen

Proposed law to force public disclosure of names of amnesty participants

Rep. Timothy H. Bishop (D-NY) has introduced a proposed law in Congress to force the IRS to publicly identify people who have been granted immunity or amnesty from criminal prosecution.

This reeks of Rome, Emperors, and bread and circuses.

The way it works now:

You have an undisclosed foreign account.  You want to clean up your tax situation, so you make a “noisy disclosure” to the Internal Revenue Service using the procedures in place for decades.  You do the paperwork, pay your back taxes, pay penalties, and you’re done.

Mr. Bishop’s way:

You have an undisclosed foreign account.  You want to clean up your tax situation, so you make a “noisy disclosure” to the Internal Revenue Service using the procedures in place for decades.  You do the paperwork, pay your back taxes, pay penalties, and you’re done.  Then your name is published for the entire world to see.

Question.  Is Mr. Bishop’s idea likely to increase voluntary tax compliance or decrease voluntary tax compliance?

Here’s Mr. Bishop’s play to the masses:

111TH CONGRESS
2D SESSION

H.R. 5076

To amend the Internal Revenue Code of 1986 to require the disclosure
of the names of individuals who are granted amnesty from criminal prosecution
by the Internal Revenue Service.

IN THE HOUSE OF REPRESENTATIVES
APRIL 20, 2010

Mr. BISHOP of New York introduced the following bill; which was
referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to require the disclosure of the names of individuals who are granted amnesty from criminal prosecution by the Internal Revenue Service.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the “Stop Offshore Bad Actors Act of 2010”.

SEC. 2. DISCLOSURE OF THE NAMES OF INDIVIDUALS WHO ARE GRANTED AMNESTY FROM CRIMINAL PROSECUTION BY THE INTERNAL REVENUE SERVICE.

(a) IN GENERAL. — Chapter 77 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

“SEC. 7529. DISCLOSURE OF THE NAMES OF INDIVIDUALS WHO ARE GRANTED AMNESTY FROM CRIMINAL PROSECUTION BY THE INTERNAL REVENUE SERVICE.

“Not later than 60 days after the close of each calendar year, the Secretary shall publish in the Federal Register the names of individuals who have been granted amnesty or immunity from criminal prosecution by the Internal Revenue Service during the preceding calendar year.”.

(b) CLERICAL AMENDMENT. — The table of sections for such chapter 77 is amended by adding at the end the following new item:

“Sec. 7529. Disclosure of the names of individuals who are granted amnesty from criminal prosecution by the internal revenue service.”.

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to amnesty granted after the date of the enactment of this Act.

What does this law say?

I don’t know. This tax law appears to be written by someone unfamiliar with the Internal Revenue Code and the Internal Revenue Service:

  • Amnesty” is a word that is not known to the IRS. It is not a defined term. It is not a word of art. It is not used in the Internal Revenue Code. And it is DEFINITELY not a colloquial expression used by the Service.

    Rep. Bishop, pick up that red phone in your office and call Commissioner Douglas Shulman and ask him if the recent Voluntary Disclosure Program was an “amnesty.” Be on the speakerphone because you don’t want to break an eardrum as he shouts his answer back at you. “Amnesty” is a word used colloquially in the real world, not in government.

  • The IRS doesn’t have an action called a “grant” of amnesty or a formal declaration to a taxpayer that he/she is not going to be prosecuted for criminal tax evasion etc. There are a series of bureaucratic decisions on how to handle a particular case.

    For instance, look at the letters that Criminal Investigations issued to people who made applications under the Voluntary Disclosure Program. These are very much “The Lord giveth, the Lord taketh away, thus sayeth the Lord” type of letters. My clients would call me up and say “WTF?” to me. The IRS absolutely does not say “You’re home free, buddy!”

    Rep. Bishop’s idea is going to create a whole new level of internal arterial schlerosis at the Service. Yay. 🙁 Not.

In short, the law as written is unworkable. And that’s probably the intention. Because this is not a law for enacting. This is a horn for tooting.

Who does it apply to?

Let’s say this Bill is enacted on June 30, 2010, just for the sake of example. This is just a thought experiment.

The vast majority of the 15,000 or so people who are in the pipeline for the current Voluntary Disclosure Program could conceivably be publicly outed. If you say that “amnesty” is “granted” when the Closing Agreement is signed, then the vast majority of you in the VDP will have your names in print.

That is, in fact, Rep. Bishop’s intention. From his press release:

The Stop Offshore Bad Actors Act of 2010 (H.R. 5076) would inform the public of the names of approximately 15,000 individuals who, in 2009, received amnesty from criminal prosecution in return for the disclosure of their secret offshore accounts. These individuals broke the law and tried to cheat the system, yet they remain anonymous. The legislation would also require that individuals who receive any future amnesty will be denied anonymity.

Impact in the future

Let’s ask ourselves a common sense question. Someone a year from now wants to clean up a tax mess. They might have foreign accounts, they might have just a common garden variety tax problem. Are they more likely or less likely to approach the IRS if they know they’re name will be publicly revealed?

Motivation?

What is Rep. Timothy Bishop’s motivation to introduce such a poorly-conceived and poorly-drafted Bill into Congress?

From the press release for the Bill on his website:

“Municipalities around the country display ‘Walls of Shame’ where drunk drivers and others are exposed for acting against their communities, I want to reveal and shame tax evaders in the same way,” Bishop said. “Those granted amnesty by the IRS should have considered the possibility that they would become known to the public before they decided to cheat their neighbors.”

As I said, bread and circuses.

Likelihood of success

Nil. This is a press release/photo opp play to the voters. With any luck the House Ways and Means Committee will send this Bill to oblivion, which is where it belongs.

Voluntary Disclosure