Being from New York, I have, on occasion, taken umbrage at denizens of that large state on the left coast who fancy themselves as trendsetters, whether it be in fashion, food or music.
I’m of the Woody Allen school of thought that California’s lone cultural advantage over New York in years past (aside from not having to scrape ice off your windshield for three months of the year) was the ability to make a right turn on red.
But giving credit where credit is due, California has become a quasi-trendsetter in the arena of state tax-shelter crackdowns.
As if tax shelters didn’t command enough unwelcome publicity from the recent skirmishes at Ernst & Young/Sprint and KPMG, the controversial vehicles are now under fire at the state level – particularly from California officials.
Seems the Golden State is more than a bit concerned over the results of a recent study, which showed that tax shelters have chopped down state tax revenues by roughly 33 percent over a 12-year period.
State revenue losses as a result of tax shelters were estimated to reach $8 billion to $12 billion by 2001, according to the Multistate Tax Commission, an amalgam of state revenue officials.
California claimed it is losing anywhere from $600 million to $1.3 billion on an annual basis.
That was motivation enough for the state to begin accelerated talks with the Internal Revenue Service about a data-sharing agreement to identify, as the authorities are fond of saying, the “aiders and abettors” of said tax shelters.
In contrast to the recent sea of negative ink tax shelters have garnered in the media, the instruments received scant attention on a state level.
And you can be sure, when it boils down to inflating dwindling tax revenues that other states will follow — no, make that jump — after California.
But according to the study, shelters impacted a bevy of other states including Florida, Ohio and West Virginia.
The California-IRS pact is expected to come to fruition in August. According to reports, the program would focus on promoters who market to wealthy individuals, professionals and smaller companies. According to the IRS Small Business/Self Employed division, roughly 15 percent of the tax shelter promoters under investigation by the IRS are based in California.
I don’t think I’m going out on a limb when I predict that tax-shelter promoters will end up on any generic “hot careers” list, as more states and federal regulators begin the process of piling on.
And as for California, please don’t take my New York pride the wrong way. After all, I’m forever in your debt for two of my personal favorites — the Beach Boys and designer pizza.
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