Two Democratic members of Congress have introduced separate bills into the House of Representatives that would provide more generous tax refunds for victims of investment scams, including those victims of Bernard Madoff's USD65bn scam.
On March 11, Rep. Gary Ackerman, a Senior Member of the House Financial Services Committee, introduced a bill that would allow victims of Madoff’s Ponzi scheme to receive refunds for the taxes they paid on 'profits' they thought they earned but which in reality never existed. Ackerman represents dozens of constituents in his Queens/Long Island district who invested in Madoff's funds.
The measure, entitled the Fraudulent Tax Relief Act, would extend to 13 years the amount of time these investors can obtain refunds for the taxes they paid on the phony income. Presently, taxpayers can only amend tax filings for the past three years. The bill would also allow victims who recoup the taxes they paid on bogus profits to receive the funds as a tax credit instead of a refund.
Ackerman introduced the legislation in the wake of last month’s announcement that no evidence exists to indicate that securities were ever purchased for Madoff’s customer accounts for the last 13 years.
“This legislation, if enacted, will give the victims of Bernie Madoff back the money that the government has no business in keeping. The government should not become the beneficiary of these ill-gotten gains," stated Ackerman.
Ackerman recently sent a letter to Internal Revenue Service Commissioner Doug Shulman urging him to allow those defrauded by Madoff to claim 'theft loss' on their 2008 taxes, and amend their tax returns dating back to at least 1995. However, Ackerman has received no response from the Commissioner, according to his March 11 news release.
A similar bill was introduced last month by Rep. Kendrick B. Meek, who represents a large number of Madoff's victims in his Florida constituency. Like Ackerman's bill, this measure would also extend the loss carryback period for victims of Ponzi schemes, but by ten years instead of 13.
"This legislation provides some degree of relief to harmed investors, allowing them to recoup taxes paid on phantom income," Meek explained.
"While their initial investment cannot be saved, the taxes paid on that income can," he added.
Meek's bill has been referred to the House Ways and Means Committee, which has jurisdiction over tax legislation.
Madoff pleaded guilty to a number of charges in a Manhattan court on March 12. Prosecutors have accused him of swindling investors, which range from moderately wealthy pensioners to large financial institutions, out of a total of USD65bn. He is facing a maximum prison term of 150 years. The hunt is now on for the missing billions.
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