Washington News

At a meeting in Washington on September 12, former Treasury Secretaries Robert Rubin and James Baker discussed the upcoming "fiscal cliff." The forum was held in order to discuss the national debt and potential financial solutions. Treasury Secretaries from both parties were invited to discuss future financial options.

Both responded to the Congressional Budget Office (CBO) report that indicates the increased taxes and reduced spending scheduled to take place in January of 2013 could lead to recession. The Washington name for the potential financial challenge to the nation is "fiscal cliff."

Former Secretary Rubin stated, "It may be that for all kinds of reasons one party or another decides that's the way to negotiate. But if we go over, we can't stay over for very long, that's for sure." Rubin was referring to the effect of the potential fiscal cliff on negotiations between the parties in the November Congressional session.

Former Treasury Secretary James Baker joined by satellite. He stated, "There will be a recognition that we have to move the cliff out … so that we have time to deal with it and deal with it in an effective and orderly way, and I think that's what's going to happen."

Secretary Baker was referring to proposals by Assistant Senate Majority Leader Richard Durbin (D-IL) and others. Durbin has introduced a plan to delay the scheduled changes for six months to enable the Senate Finance Committee and House Ways and Means Committee to develop and pass new legislation.

House Speaker John Boehner (R-OH) was asked this week about the fiscal cliff and whether a compromise is possible. Boehner stated he is "not confident at all" that the House and Senate will be able to act. The House passed the Job Protection and Recession Prevention Act of 2012 (H.R. 8) to extend all tax rates for one year. The House also has passed the Pathway to Job Creation through a Simpler, Fairer Tax Code Act of 2012 (H.R. 6169) to set up a fast-track process for tax reform in 2013.

However, the Senate has passed the Middle Class Tax Cut Act (S. 3412) and would increase taxes for upper-income individuals. Senate Majority Leader Harry Reid (D-NV) still indicated that he hopes for a compromise in November.

$104 Million Whistleblower Award

Former UBS banker Bradley Birkenfeld disclosed to the IRS the existence of large numbers of U.S. taxpayers who maintained Swiss bank accounts and were failing to pay income tax on the earnings. The disclosures lead to a substantial income tax recovery by the IRS. Following the disclosure, Birkenfeld served two and one-half years in federal prison for enabling a U.S. billionaire to avoid taxes. He currently is under house arrest.

On September 11 the IRS published a summary statement and granted Mr. Birkenfeld an award of $104 million. Under the "whistleblower statute" in Sec. 7623(b), an individual who reports tax evasion to the IRS may receive an award of 15% to 30% of the tax recovery.

The National Whistleblower Center (NWC) issued a press release and discussed the award. Birkenfeld's attorneys Steven M. Kohn and Dean A. Zerbe jointly stated, "The IRS today sent 104 million messages to whistleblowers around the world - that there is now a safe and secure way to report tax fraud and that the IRS is now paying awards. The IRS sent 104 million messages to banks around the world - stop enabling tax cheats or you will get caught."

The Whistleblower Center summarized five different results of the action by Birkenfeld.

1. UBS Fine - The UBS Bank paid $780 million to the IRS.
2. Amnesty Programs - The IRS offered amnesty with payments of taxes and interest to citizens with overseas accounts. Over 35,000 U.S. taxpayers entered the program.
3. Back Taxes - As a result of the amnesty program, the IRS collected approximately $5 billion in back taxes.
4. Swiss Government - An updated tax treaty that permits greater dissemination of information from Swiss banks has been approved.
5. Taxpayers - Approximately 4,900 taxpayers with offshore accounts have been disclosed to the IRS. Many Tax Court cases are now in process.

The whistleblower statue was sponsored by Sen. Charles Grassley (R-IA). He stated, "This case provides evidence about how the whistleblower program can be effective because the IRS is saying its work against this kind of tax fraud would not have been possible without the whistleblower. The potential for this program is tremendous, and it's up to the IRS to continue paying rewards and demonstrating to whistleblowers that the process will work and that they will be heard and protected."