Archive for the ‘Oregon’ Category

Yet Another Reminder that a License Doesn’t Always Mean Ethical Behavior

Sunday, October 6th, 2013

While we wait for the Loving appeal decision to come out, yet another reminder that not all licensed tax professionals are ethical. Here, we just have allegations of fraud, so it is definitely possible that the alleged villain of the story is innocent. Nevertheless, the story is too rich to not bring up.

Anyway, from Portland, Oregon, comes the indictment of Steven Cyr. Mr. Cyr is a tax attorney. He’s been charged with two felony counts of overstating the expenses on his own tax returns (for 2006 and 2007). According to a story in Willamette Week, Mr. Cyr reported expenses of $524,678 in 2006 and $408,767 in 2007; the indictment alleges that the total expense figures are inflated. Mr. Cyr is also being investigated by the Oregon Bar.

In any case, this indictment also shows that the IRS does have means of going after tax professionals who do commit crimes. If I were to commit tax crimes, the IRS can sue me and bar me from ever preparing tax returns. They can being proceedings to revoke my license–my license comes from the federal government. If I do something truly rotten, I can be indicted for those crimes.

The idea that just because people have licenses that they will all suddenly go the straight and narrow is laughable. There were tax crimes years ago; there will be tax crimes in the years that follow…licensing or not.

Texas #1, California #50 in Business Location Survey

Thursday, May 3rd, 2012

Another week, another survey of which state is best for business. For the eighth straight year, Chief Executive magazine ranked Texas as the best state in the union as to where to conduct business. Unsurprisingly, California is at the bottom. My state, Nevada, is at #12; Aaron’s home of Maryland is #40. Here are the top ten and bottom ten states:

1. Texas
2. Florida
3. North Carolina
4. Tennessee
5. Indiana
6. Virginia
7. South Carolina
8. Georgia
9. Utah
10. Arizona

41. Hawaii
42. Oregon
43. Pennsylvania
44. Connecticut
45. New Jersey
46. Michigan
47. Massachusetts
48. Illinois
49. New York
50. California

The two states that made the biggest moves were Oregon and Louisiana. Oregon fell nine spots in the ranking, likely due to their income tax increase that passed last year. On the other end of the spectrum is Louisiana, which was ranked 47th in 2006 but is now ranked 13th (up 27 spots from 2011).

Meanwhile, Chief Executive describes California as having slipped deeper into the ninth circle of business hell. Perhaps this section of the report will enlighten Sacramento:

The following is a representative sample of comments from participating CEOs:

  • California is the worst! They are doing everything possible to drive a business out of their state. If it were not for the climate, they would have lost half their population.
  • California regulations, taxes and costs will leave only tech, life sciences and entertainment as viable. If you aren’t an elitist, no room here for the middle or working classes.
  • California treats business owners like criminals. California has different overtime policies for its own employees vs. private sector.
  • California’s labor regulation is a job killer. We will be moving our business out of the state, which will lose hundreds of jobs simply due to the poor regulatory environment.
  • California should secede from the union—it is like doing business in a foreign country, it has its own exchange rate, and its regulation is crazy.

Meanwhile, the budget deficit in California grows (the Legislative Analyst says it’s at $3 billion and will grow from that number). Perhaps the idea of cutting regulations and spending just what the state takes in might garner some support in Sacramento. Well, one can always dream….

Nevada Thanks Oregon

Saturday, January 30th, 2010

The Nevada Development Authority was thrilled this week when Oregon voters passed a pair of “Tax the Rich” initiatives. The two tax increases will raise the personal income tax rate to 11% on individuals making $125,000 or more ($250,000 if married filing jointly). The other tax increase is on businesses: the $10 minimum corporate income tax has been replaced with a $150 minimum tax, or 0.1% of gross revenues in excess of $500,000. The measure was sponsored by public employee unions.

How many businesses will want to expand in Oregon when they can move to Washington (with no individual income tax, though there is a business tax) or Nevada (with no personal or corporate income tax)? How many business owners will see these tax increases and lay off individuals? As the Tax Foundation said, you can’t tax the guy behind the tree. This tax increase will make Oregon less competitive and will cause the state to lose jobs in the middle of a recession.

The Chairman of Nike calls these tax increases a death spiral. He’s dead-on accurate.

Is Oregon at the Tax Crossroads?

Sunday, January 17th, 2010

The Wall Street Journal editorializes on Friday that Oregon is at the tax crossroads. The Oregon Legislature, dominated by Democrats, voted to increase the state’s top personal income tax bracket to 11% from 9%; they also voted to increase the state’s business income tax to 7.9% from 6.6%. Signatures were gathered and a mail election is underway on whether or not these tax increases actually go into effect.

The Journal notes,

In the last budget, the Democratic controlled state legislature doled out a $259 million pay raise to the government work force, even as the state was facing a near $1 billion deficit. In the last three years, the state has added 25,000 new public employees while losing 40,000 private sector jobs. The union TV ads say the tax hikes are needed to preserve schools, roads and public services.

The 11% income tax rate will make Oregon’s income tax about twice as high as the national average. Businesses in Portland can move across the Columbia River to Vancouver, Washington and pay zero income tax. Oregonians used to argue they didn’t have to pay a state sales tax. But the current tax proposal imposes a first-ever “gross receipts tax” on certain retail and wholesalers. This is a disguised sales tax.

The days of unlimited tax and spend are ending. The election in Massachusetts is demonstrating the anger of Americans towards the Democrats’ tax and spend proposals. We’ll have to wait a couple of weeks to see if Oregonians send a message to their legislature about increasing taxes in a recession.

Didn’t You Know that Wages Aren’t Taxable?

Monday, November 23rd, 2009

Well, I didn’t know that, but one group on individuals made that argument. Joseph Saladino, Marcel Bendshadler, and Michael Mungovan tried that dubious stance. They offered what the Portland Oregonian called a “tax evasion service” as they prepared over 1000 returns where they noted that compensation for personal labor isn’t taxable. One defendant, Richard Ortt, was acquitted; earlier, Richard Fuselier pleaded guilty.

Assistant US Attorney Allan Garten told the Oregonian, “So let’s assume for a moment that you would get a W2 that said $40,000. (The guilty men) would list as income $40,000, and then they would deduct the value of your labor of $40,000 … so that you paid no taxes…That’s illegal.”

Given that the tax fraud involved $9 million, the guilty individuals are looking at lengthy terms at ClubFed. If a tax preparer tries to tell you wages aren’t taxable, run, don’t walk, out of the office.

“The Producers” Doesn’t Work in Real Life

Monday, October 26th, 2009

One of my favorite movies of all time is Mel Brooks’ The Producers with Zero Mostel as Max Bialystock and Gene Wilder as accountant Leo Bloom. They decide to produce the worst possible Broadway play–Springtime for Hitler–and sell several hundred percent of their show. The movie is wonderful and if you haven’t seen it it’s well worth the time.

Three federal lawsuits have been filed against ClassicStar LLC alleging the company oversold the breeding rights in various thoroughbred mares. In one lawsuit, filed in 2004, ClassicStar is alleged to have sold more than $160 million of mare lease rights when it only owned $40 million. As Leo Bloom would say, “You can only sell 100% of anything.”

Those lawsuits note that a federal investigation was ongoing. That reached fruition today when David Plummer, Spencer Plummer, and Terry Green all pleaded guilty to one county of conspiracy to defraud the United States. Acting U.S. Attorney Kent Robinson noted, “This nationwide fraudulent scheme is by far the largest criminal tax case in the history of Oregon.” Here’s some of how it worked.

Investing in race horses is done by wealthy individuals. It’s very expensive to do this, and you usually end up pooling your investment with others, especially if you are going to invest in the best horses. You’re betting on genetics, and sometimes it works and sometimes it doesn’t.

ClassicStar allowed investors to lease the reproductive capacity of specific thoroughbred horses. If the mare had a foal during the time that the investor held the lease, the investor would own the foal. And you get a tax deduction based on the losses incurred. Most investors financed their investments with loans from the purportedly independent National Equine Lending Company. But NELC wasn’t independent–it was owned by ClassicStar–and the money never really changed hands. Let’s add in that many investors apparently never had to make a loan payment and the fraud starts to stand out.

But that’s not all. ClassicStar also substituted less expensive quarter horse mares for thoroughbred horse mares as ClassicStar didn’t have enough of the thoroughbreds. So many individuals obtained tax deductions they weren’t entitled to, leading to refunds that they shouldn’t have received. The total size of the phony tax deductions is $500 million which led to a loss to the US Treasury of $200 million. Needless to say, the three who pleaded guilty are looking at very lengthy stays at ClubFed. Individuals who invested in ClassicStar are likely going to receive “Dear Valued Taxpayer” letters from the IRS in the very near future. And there are still the lawsuits to be resolved.

If you ever get the idea of selling more than 100% of anything, don’t. Only bad things can happen if you do.

Oregon Looking at a Mileage Tax

Sunday, January 4th, 2009

Among the many taxes that we pay is the gasoline tax. Oregon, which has no sales tax, uses the gasoline tax as its primary funding for road repairs. Governor Ted Kulongoski wants to change that.

“As Oregonians drive less and demand more fuel-efficient vehicles, it is increasingly important that the state find a new way, other than the gas tax, to finance our transportation system,” Governor Kulongoski told the News-Record.

There are obvious problems with a complete switchover. Many cars do not have GPS devices; equipment would also be needed at every gasoline station. And what would happen if an Oregonian bought gas in Washington state? Or if he drove there; would he have to pay the mileage tax on out-of-state driving?

Still, the linked article gives a look at a possible future source of government revenues. Interestingly enough, Governor Kulongoski is asking for the gasoline tax to be raised by $0.02/gallon.

What You Do in Salem Won’t Stay in Salem…

Thursday, June 15th, 2006

It’s a nice, Spring day, and you’re relaxing in your office at the Oregon Department of Revenue. All that’s on your desk is a stack of tax returns. So why not browse some pornography on the Internet?

Well, you’re now an ex-employee. And there was a Trojan on the Porn site. And those files you were working on? Someone, somewhere may have that data.

Hat Tip: TaxProf Blog

Oregon DOR Press Release

AP Story

Tax by the Mile?

Tuesday, February 15th, 2005

Over the past few months, there have been stories (trial balloons?) on replacing the gasoline tax with a “per mile” road tax. As this story from CBS notes, Oregon is testing the idea. For a large number of reasons, this is a bad idea that is likely doomed to failure.

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