DOJ Wins Tax Shelter Case Against Dow Concerning $1 Billion in Bogus Deductions

March 27, 2013 — Tax fraud hurts honest citizens across America. The IRS Whistleblower Office was established in 2006 to encourage conscientious whistleblowers to notify the IRS about businesses and private individuals who cheat on their taxes. Under the Tax Relief and Health Care Act of 2006, the IRS Whistleblower Office is authorized to pay government collaborators 15 to 30 percent of the amount the government collects as a result of an informant’s information. The reward is available in tax fraud cases involving businesses no matter the amount recovered. For cases against private individuals, however, whistleblower rewards can be paid only if the tax, penalties and other amounts collected top $2 million and if the individual’s gross income is more than $200,000 for each taxable year in question.

Federal Court Sanctions Dow for Phony Tax Shelters

A federal court in Louisiana has rejected two tax shelters devised for The Dow Chemical Company by its lawyers and investment firm. Not only will Dow be prevented from relying on $1 billion in bogus tax deductions, the company will also be forced to pay penalties in connection with the artificial tax benefits.

According to the Justice Department, the phony tax benefits came about as a result of a partnership that Dow ran from Switzerland, the company’s European headquarters. In a 74-page opinion, Chief Judge Brian A. Jackson found that the partnership was created to exploit possible loopholes in the tax code rather than for any legitimate business purpose. Although Dow claimed that it was only acting on the advice of its lawyers and investment firm, Judge Jackson noted that any prudent and reasonable business would have known that the tax scheme was “too good to be true.” Dow saw its tax department, Judge Jackson observed, more as a profit center than an expense. As a result, the court decided to impose penalties for the tax evasion.

Waters & Kraus: Lawyers Helping Tax Fraud Whistleblowers

When reporting a tax fraud scam to the IRS, the informant generally retains a lawyer to fulfill many necessary and required tasks including:

  • researching the tax issues involved,
  • locating and fronting the expenses for tax law and accounting experts,
  • preparing disclosure forms for the IRS, and
  • serving as the liaison between the IRS, the experts, and the government collaborator.

Schemes like this one in which Dow was found to have used a tax shelter for generating deductions rather than conducting legitimate business are just one type of tax fraud.

With a nation-wide presence and extensive experience combating fraud against the United States, Waters & Kraus, LLP, provides whistleblowers in tax evasion cases with aggressive legal representation. Our lawyers are here to protect and maximize your interests. To learn more about Waters & Kraus, or to have a tax fraud whistleblower attorney review your potential case, email us or call 800.226.9880.

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That’s the first question everyone asks. The truth is it’s impossible to know. But we can tell you this. Waters Kraus Paul & Siegel has what it takes to fight against big corporate interests and win. That’s why we’ve taken more mesothelioma trials to verdict than any other firm. And that’s why we’ve recovered more than $1.3 billion for clients like you. Do you think you have a case? Contact us now to speak with an attorney.

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