Some states expanding their whistleblower laws to include tax whistlebloweing including California, Michigan and D.C.

A small but growing group of states are considering expanding their whistleblower laws to allow individuals with specific and undisclosed tax evasion to report this to the states and be eligible for a sizeable award on money collected. New York has such a law and over the last ten years has collected over $467 Million in revenues over evasion of New York state taxes. New York obtained settlements of $70 million from a hedge fund that improperly allocated corporate income to a low-tax jurisdiction, $13 million from a hospitality company engaged in accounting fraud, and $10.7 million from an art dealer that circumvented the sales tax. Also, the end of 2018, New York won $330 million from telecommunications giant Sprint Corp., which failed to properly account for sales taxes on its flat-rate calling plans. In total, New York has won 18 settlements valued at $467.4 million since its False Claims Act was revised in 2010. When weighed against the budget for the Taxpayer Protection Bureau, which administers New York’s program, the state has earned a return on investment of 3393%, according to the law firm Kirby McInerney LLP.

California Attorney General Xavier Becerra will present a plan to expand the state’s False Claims Act (FCA) to tax matters In addition, Michigan and the District of Columbia will consider bills that add tax code violations to the list of actionable frauds coming under their false claims laws.

State false claims laws allow whistleblowers to file suits against parties that knowingly perpetrate frauds against the state. Whistleblowers are permitted to render a bounty, typically between 15% and 30% of any proceeds won, and attorney’s fees. Thirty-one states have false claims laws that also permit whistleblowers to file qui tam actions.