FOR IMMEDIATE RELEASE |
MONDAY, MARCH 29, 2004
TDD (202) 514-1888
JUSTICE DEPARTMENT SUES TO STOP NATIONWIDE TAX SHELTER INVOLVING FALSE CHURCH STATUS
Suits filed in California, Colorado, Oklahoma, Missouri and North Carolina
WASHINGTON, D.C. - The Department of Justice today filed suits in federal courts in California, Colorado, Oklahoma, Missouri, and North Carolina to stop a nationwide abusive tax scheme in which customers are advised to create, and claim church status for, a company known as a corporation sole.
"As con artists continue to press their tax scam promotions on the public, the Department of Justice continues to work with the IRS to shut them down." said Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division.
Named in the suits were:
According to papers filed in the cases, it is alleged that Saladino and the other defendants advise and assist customers to establish and claim church status for a corporation sole, to which the customers transfer assets and income that they continue to control. The government alleges the corporations sole are used merely to fund a person’s lifestyle, and not for church purposes. The complaint alleges that Saladino and his sales organization falsely state that customers who use corporations sole do not need to file tax returns or pay taxes.
It is further alleged that in another part of the scheme, the defendants help their customers file false returns seeking refunds from the government for past taxes paid, based on the bogus argument that compensation for personal labor is nontaxable. Defendants call this the “claim of right” doctrine.
The Justice Department has asked the courts to order Saladino and the other defendants--and anyone working with them--to stop promoting these schemes and to provide the government with their customer lists. More than 700 customers, located in nearly every state and several foreign countries, are alleged to be in the program.
According to court papers filed by the Justice Department, Saladino and his cronies market their scheme on the Internet, in conference calls and at seminars. In its court papers, the Justice Department alleges that customers are charged from $200 to $2,295 to participate in the schemes.
Corporation sole and claim of right promotions are named in the IRS’s annual consumer alert of the “Dirty Dozen” as tax scams taxpayers are urged to avoid. A complete list of the “Dirty Dozen” can be found http://www.irs.gov/newsroom/article/0,,id=120803,00.html.