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Tuesday, August 04, 2015

HMB's Marilyn Wethekam Quoted in Bloomberg BNA Daily Tax Notes on NYC's False Claims Act Powers in State Tax Case 

"New York Court in 'Sprint Nextel' to Weigh State's False Claims Act Powers in Tax Case"

Daily Tax Report, August 4, 2015

by Gerald B. Silverman

New York's highest court will hear arguments in a potentially landmark case on the scope of the state's power to pursue False Claims Act claims in tax cases.

Arguments before the New York Court of Appeals are scheduled for Sept. 9. The case of first impression alleges Sprint Nextel Corp. knowingly and deliberately failed to collect and pay sales tax on its flat-rate calling plans, in an attempt to gain a competitive edge over its rivals (People v. Sprint Nextel Corp., N.Y., No. APL-2014-00152).

The company could be liable for some $400 million in back taxes and treble damages, if the court rules in favor of the state.

The case has drawn the attention of companies and tax practitioners because it is the first tax enforcement action filed under the state False Claims Act, which was amended in 2010 to cover tax cases. Tax experts told Bloomberg BNA that the case could have implications for other states...

Marilyn A. Wethekam, a partner at the Chicago law firm Horwood Marcus & Berk Chartered, said ''state tax disputes should not be adjudicated under a False Claims Act.''

''In the area of state tax, statutory interpretation is key, particularly when you are dealing with complicated issues or transactions where there is little or no guidance,'' she told Bloomberg BNA in an e-mail.

''It is extremely difficult in those situations to substantiate the argument that, because a taxpayer interpreted a statute in a manner with which the taxing authority may disagree, such an interpretation rises to the level of knowingly making a false claim,'' she said....

Copyright 2015 By The Bureau of National Affairs, Inc.. Reprinted with permission.

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