IRS GETS TOUGH ON 527S: Having identified concerns about dozens of filings among the growing tax-exempt Section 527 political group segment, the Internal Revenue Service is moving to improve reporting and disclosure by those groups.

Under Section 527 of the Internal Revenue Code, certain political groups must periodically file public disclosure reports with the IRS, rather than the Federal Election Commission. The statute requires these organizations to report their contributions and disbursements so that their support and operations are in the public domain in advance of elections.

The new initiative will include contacting Section 527 political groups whose filings appear to be incomplete, were filed late, or were amended and are different from the original filing.

The initiative’s launch is timed in advance of key upcoming filing dates — Sept. 20 for monthly filers, or Oct. 15 for quarterly filers, and Oct. 21 for pre-election reports — so that correct information is available to the public.

“This effort will help improve the completeness and accuracy of these important public disclosures,” said Steven T. Miller, commissioner of the IRS Tax-Exempt and Government Entities Division. “Our job is to ensure compliance with the law.”

The IRS noted that groups that fail to timely report, fail to include all required information about contributions and disbursements, or that report incorrect information may be required to pay 35 percent of the amount related to the failure.


FORMER IRS LAWYERS SUSPENDED OVER ROLE IN TAX COURT FRAUD: Two former Internal Revenue Service lawyers have been suspended indefinitely from practice before the agency and had their law licenses suspended as a result of a complaint related to a federal court ruling that they defrauded the courts so that the IRS could win 1,300 tax shelter cases.

Attorneys Kenneth W. McWade and William A. Sims were each suspended indefinitely from practice before the IRS. The Oregon Supreme Court this month suspended McWade for two years, while the Arkansas Supreme Court in March suspended Sims’ law license for one year.

Both lawyers were also suspended by the U.S. Tax Court for two years, The New York Times reported.

The suspensions stem from a January 2003 decision by the Federal Court of Appeals for the Ninth Circuit in San Francisco. In the case Dixon v. Commissioner of Internal Revenue, the court ruled that the lawyers, who were both involved with a Tax Court test case to determine the liability of some 1,300 taxpayers who purchased tax shelters in the 1970s and 1980s, defrauded the Tax Court by cutting a secret deal with two of the test case petitioners in exchange for their help in prosecuting the other petitioners.

In the 2003 decision, Circuit Judge Michael Daly Hawkins noted that the IRS “has done little to punish the misconduct and even less to dissuade future abuse.” At that time, both McWade and Sims were suspended without pay for two weeks and transferred out of the Honolulu division. Sims accepted the censure, while McWade retired from the IRS, according to court documents.

As a result of that decision, Michael Louis Minns, a Houston lawyer who represented many of the tax shelter buyers, filed grievances against McWade and Sims with their respective bars.

The Times noted that in fighting the suspension, both lawyers filed papers contending that they had acted properly.


THOMSON TAX & ACCOUNTING BUYS FOREIGN TAX LAW INC.: Thomson Tax & Accounting has strengthened its position in international tax law with the acquisition of international tax information provider Foreign Tax Law Inc.

Terms of the deal were not disclosed.

FTL’s publications, which include print, CD and online versions of Tax Laws of the World and Commercial Laws of the World, will become part of its RIA range of products. The series consists of English translations of full or partial texts of major tax and corporate legislation in more than 100 countries.

“The acquisition of Foreign Tax Law will enable us to offer an important new source of service to both Foreign Tax Law and RIA customers,” says Peter Warwick, TTA president and chief executive.

Laws covered in the Foreign Tax Law series include: income/corporate tax law; value-added tax law; corporation law; trust law; commercial codes; environmental law; money laundering and other regulations affecting financial transactions; labor law; and bankruptcy law.

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