U.S. Rep Ackerman seeks tax refunds for Madoff victims

Legislation that would allow the victims of the Bernard L. Madoff Securities LLC fraud to receive refunds for the taxes they paid on phantom profits was introduced today by Rep. Gary Ackerman, D-N.Y. The bill would extend to 13 years the amount of time investors in the Madoff fund could obtain refunds for the taxes they paid. The Fraudulent Tax Relief Act would allow the victims to claim a refund for all taxes paid on what turned out to be false profits dating back to 1993. Currently, taxpayers can amend tax filings only for the past three years, and the Madoff Ponzi scheme operated for a much longer period, according to officials investigating the case. Last month, Madoff trustee Irving Picard, a partner in the New York office of Cleveland law firm Baker & Hostetler LLP, said there is no evidence that securities were ever purchased for Madoff accounts for the last 13 years. The bill also would allow victims who recoup the taxes they paid on bogus profits to receive the funds as a tax credit if they preferred that method over a tax refund. The legislation “will give the victims of Bernie Madoff back the money that the government has no business in keeping,” Mr. Ackerman said in a press relief. “The government should not become the beneficiary of these ill-gotten gains.” Mr. Ackerman last month also sent a letter to Internal Revenue Service commissioner Douglas Shulman urging that investors defrauded by Madoff claim a theft loss on their 2008 taxes and amend their tax returns dating back to at least 1995. By claiming a theft loss, investors would be eligible for a tax credit for money lost in the scandal. Dozens of Mr. Ackerman’s constituents in his Queens-Long Island district are victims of the massive Ponzi scheme, the release said. Separately, U.S. Rep. Kendrick B. Meek, D-Fla., introduced today legislation amending the Internal Revenue Code to provide tax relief to individuals harmed by Ponzi schemes who have paid taxes on "phantom" earned income.