Misuse of the Disabled Access Tax Credit


It's bad enough when tax promoters rip off the government, but stealing from the disabled adds insult to injury. JDKatz recently represented a tax whistle blower before the IRS,  who was stealing not only from the Government, but  from the disabled  as well.
 

In 1990, Congress passed Title I of the Americans with Disabilities Act which prohibited private employers with 15 or more employees from discriminating against a qualified individual with a disability. To implement this prohibition, the ADA also requires that employers provide reasonable accommodations to the known physical or mental limitations of a qualified individual with a disability, unless to do so would impose an undue hardship on the operation of an employer's business. In order to comply with this requirement (and other requirements imposed by the ADA, e.g. those of Title III), an employer may have to make significant outlays.

With the passage of the ADA, Congress was concerned with the financial burden of this legislation on certain small businesses. As a result, IRC § 44 was enacted. Section 44 created a disabled access credit in the case of an "eligible small business" equal to an amount of 50 percent of the "eligible access expenditures" for the taxable year that exceed $250 but not more than $10,250. Section 44(c) requires that the eligible access expenditures be made for the purpose of enabling the small business to comply with the ADA.

JDKatz assisted the Internal Revenue Service in its investigations of several promoters of fraudulent schemes involving the disabled access credit. The Promoters generally sold the credit as an investments or advertising, which was represented as qualifying the purchaser for the disabled access credit. It was evident that the purchaser was not required to pay any amount other than the down payment or enrollment fee. The marketers of these promotions then indicate that in return for the "cost" of $10,250 or more, the customer has purchased an asset that provides easier access to the disabled. Thus, according to the promoters, the purchasing taxpayers have incurred "eligible access expenditures" which qualify for the credit. In reality the entire transaction was a sham, and the disabled were no better off by virtue of the participation in the transaction.

The IRS ultimately disallowed many of these credits, and the Disabled Access Tax Credit scheme was named to the IRS's Dirty Dozen list of the top scams n 2006.


Under prior and existing law the Whistleblowers identity remains confidential.

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