Maryland Comptroller Peter Franchot plans to introduce legislation in January that he says will help his office protect taxpayers and mete out stronger punishment to those who commit tax fraud.

Called “The Taxpayer Protection Act,” the proposed legislation “will allow my agency to keep pace with rapidly-increasing fraud schemes and fast-changing threats to sensitive data,” Franchot said.

Franchot announced the proposed legislation at the MACPA’s annual Comptroller’s Luncheon on Dec. 1 in Baltimore.

The announcement comes at a time when tax fraud in Maryland is more widespread than ever.

“Franchot said that when he took office in 2007, his team uncovered about 300 fraudulent returns seeking $656,000 in refunds that belonged to someone else,” writes Baltimore Sun reporter Erin Cox. “In the first 10 months of 2015, they found more than 18,700 bogus returns seeking more than $38.3 million.”

In response, the proposed legislation would:

• change major tax crimes from misdemeanors to felonies;
• lengthen the statute of limitations for tax crimes from three to six years;
• add a penalty for fraudulent tax return preparers;
• make it a felony for trying to “evade or defeat any tax imposed under the Tax General Article” and impose a penalty upon conviction; and
• provide legal authority to issue injunctions against preparers under investigation for fraud to protect consumers while investigations are ongoing.

“Our office has always been committed to protecting Maryland taxpayers from fraudulent tax preparers and dedicated to protect the data that we’ve been entrusted to monitor,” said Deputy Comptroller Sharonne Bonardi. “Recent data breeches have left us concerned that Maryland taxpayers may be more exposed to potential fraud. We want to enhance our toolkit so that we have more tools for enforcement and detection purposes.”

View from the MACPA
Members of the MACPA’s State Tax Committee are praising the proposal “in concept” while reserving final judgment until they can review the bill’s language in its entirety.

“The overall concept is very good,” said Jerry Beard, CPA, a supervisor in the Tax Department at Ellin & Tucker, Chartered, and chair of the MACPA’s State Tax Committee. “The Maryland statutes right now don’t have a lot of deterrent in that most of the so-called tax fraud qualifies as a misdemeanor. To have bigger penalties for the people who are perpetrating these crimes is a great idea.”

“MACPA members see literally dozens of clients who are impacted by identity theft and fraudulently filed returns each year,” added Karen Syrylo, CPA, a director with Altus State and Local Tax and Advisory and a member of the State Tax Committee. “The Comptroller’s idea of finding and punishing the people who are committing these acts of fraud on honest citizens is something we definitely support in concept.”

MACPA Executive Director Tom Hood, CPA, also said the proposed legislation has significant merits.

“We hope to support this important legislation, as our members have indicated more and more concerns about identity theft and fraudulent tax preparers over the past year,” said Hood. “The statistics on the rise in fraud involving taxes are mind-boggling. That kind of unscrupulous activity creates a significant burden on our members who are helping taxpayers comply with income tax laws.”

Syrylo said the Comptroller’s Office understands the important role that certified, ethical tax preparers play in Maryland’s economy and is committed to working with the MACPA to ensure that the bill accomplishes its goal — punishing fraudsters and protecting taxpayers — without any unintended consequences that might negatively impact Maryland CPAs. She said that, at the request of the Comptroller’s Office, members of the MACPA’s State Tax Committee will review the language of the bill and offer suggestions to the comptroller’s staff if any changes are needed.

Bonardi welcomes the feedback while emphasizing that the Comptroller’s Office draws a bold, distinct line between Maryland’s CPAs and those who seek to defraud the state’s taxpayers.

“(Fraudulent tax preparers) are, of course, not certified preparers and often are not registered to prepare tax returns in Maryland,” she said. “We want to deter these bad actors and make the distinction between them and Maryland CPAs. We don’t see that this (legislation) would have any negative affect on MACPA members. It would encourage taxpayers to seek assistance from accredited, certified tax professionals and protect them from those who are not.”

We’ll provide further details as the MACPA’s State Tax Committee reviews the proposed legislation.