Ponzi-scheme tax break bill is dead

Proposed legislation to give retroactive tax breaks to victims of Ponzi schemes is dead, after the House Revenue and Taxation Committee’s chairman determined his committee wouldn’t support the bill. Senate Tax Chairman Brent Hill, R-Rexburg, had proposed the bill, HB 595, to let victims write off their losses against previous years’ taxes, instead of just current year’s taxes, after a big scam in eastern Idaho; the measure would have cost the state between $500,000 and $1 million annually. Click below to read a full report from Idaho Falls Post Register reporter Nick Draper.

Ponzi bill put down

By NICK DRAPER
The Post Register

BOISE — A bill that would have given enhanced tax relief to victims of Ponzi schemes is dead.

Rep. Dennis Lake, R-Blackfoot, said Friday he won’t hold a public hearing on the legislation that would allow victims of fraudulent investment arrangements to write off more of their losses when they file their state income taxes.

“That (bill) wouldn’t pass my committee if we had a hearing,” said Lake, who chairs the House Revenue and Taxation Committee.

Lake said Thursday he planned on holding a hearing on the bill next week, but after talking to most of the 18 committee members, Lake said the legislation had little support.

“There’s no sense in doing (a hearing) if a big majority of my committee would not vote for it,” said Lake, who as a committee chairman has the power to determine whether bills receive public hearings.

The bill was sponsored by Sen. Brent Hill, R-Rexburg. He said he understands that the revenue and taxation committee had questions about his bill’s potential fiscal impact and doesn’t fault Lake for not holding a public hearing.

“There’s no sense in wasting the committee’s time if there’s no chance of passing it,” said Hill, who added that he wasn’t sure if he’d bring a similar bill back in future legislative sessions.

Ponzi schemes, named for inventor Charles Ponzi, are a form of investment fraud in which a person or group uses funds obtained from new investors to pay bogus returns to earlier investors.

Today, Idaho residents can only write off investment losses during the year when those losses occurred.

Hill, however, wanted to let people who lost more money than they earned in a given year either subtract those losses from income earned in previous years or income earned in future years, a process that’s currently allowed when people file their federal income tax returns.

The Idaho State Tax Commission estimated the bill would reduce tax receipts to the general fund by $500,000 to $1 million a year.

Lake said that potential loss of tax revenue, along with the likelihood of helping people who participated in the Ponzi schemes with the aim of making significant profits, turned legislators against the bill.

Hill’s legislation followed news reports about Daren Palmer’s alleged investment scheme in eastern Idaho. On Feb. 26, 2009, two federal regulatory agencies, the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission, sued Palmer in U.S. District Court, alleging he operated a multimillion-dollar Ponzi scheme.

Although Palmer was never registered to sell or offer securities investments, financial regulators allege that beginning in 1997, Palmer operated an investment program that took in more than $60 million from at least 50 investors.

During the course of his program, Palmer indicated his program would generate returns of approximately 20 percent to 25 percent, regardless of market conditions, court documents indicate.

Regulators allege that Palmer, an Idaho Falls resident, invested only a small percentage of his clients’ deposits in legitimate trading accounts. He allegedly spent more than $6 million of his clients’ money on personal expenses and redistributed the bulk of the rest to other investors in the form of bogus returns.

A federal judge and court-appointed receiver shut down Palmer’s investment company, Trigon Group Inc., last year and froze Palmer’s assets, but he has not been charged with a crime.