Posted on 09/26/2004 8:47:24 PM PDT by Still Thinking
AUGUSTA (Sep 25, 2004): The Maine Revenue Service defended itself before a legislative committee last week against claims that it is getting heavy-handed about chasing down people who still have ties to the state -- through banks, churches or alumni associations -- but don't pay income taxes here.
Sen. Karl Turner, R-Cumberland, raised the issue for review by the Appropriations Committee after he had heard from a former resident that the state was targeting people making contributions to their alumni associations, churches or other charities. He also had heard others were targeted because they continued to use banks and investment firms in the state.
"It's a fool's chase for us as a state," if it's true, he said at the committee meeting last Thursday, because people unfairly targeted as tax cheats "will do the rational thing and terminate those relationships. They will terminate their relationship with their church, terminate their relationship with their alumni association and no longer use Maine banks" or other investment services, he said.
Turner's concerns were raised a week before the Maine Supreme Judicial Court was to take up an appeal of a Maine Maritime Academy graduate, who was convicted of felony income-tax evasion last spring.
Maritime probe
The Maine Maritime Alumni Association has filed a brief in the case because it believes its graduates have been targeted over the years by the Revenue Service.
Charles Sherman, president of the alumni association, said, "we're not necessarily supporting any one individual, rather the generic 6,000 plus graduates," who could come under suspicion simply because they went to the school.
Association members want to know why the cases involving Maine Maritime graduates have been criminal versus civil, and they want to have a clear definition of "domicile" -- the thing that determines state residency in Maine.
According to state records, in the last four years there have been 201 criminal cases brought for income tax evasion and 27 have involved merchant seamen.
Jobs like seaman and other mobile professions raise flags for the Revenue Service because it is hard to determine where a person actually lives.
Attorney Jonathan Block of Portland, who is representing the alumni association's interests in the case, said the Revenue Service has it out for Maine Maritime graduates because of a "couple of bad apples" who were justifiably prosecuted in the past. After those cases, he said, an investigator at Maine Revenue Services started going through the alumni list. "It was a project," he said. "Their target is anybody that grew up in Maine, went to the academy, and now claims to be living in any other state or country," with no income tax or lower rates than Maine.
The problem, he said, is many of those places are shipping ports like Washington state, Texas and Florida.
Block, a tax attorney for Pierce Atwood, said that while the Maine Maritime case is very different than what Turner raised because one is criminal and the other civil, he has seen what he called "a ton" of cases involving people who have left the state but maintain ties here.
"It dwarfs the Maine Maritime thing," he said. "I've had 60 cases in the last two and a half years" involving snowbirds, expatriots and people with second homes here, when he only saw one case in the 10 years before that.
Defining residency
Jerome Gerard, acting director for the Maine Revenue Service, said he could not comment on the Maine Maritime case because it was under appeal.
He spoke to the Appropriations Committee about the Revenue Service's general policy that a person's "domicile" determines where he pays income tax. "The Maine statute does not attempt to define exactly what domicile means," he said, but rather incorporates the common-law definition and uses a number of "indicators" to determine where a person lives.
Those include: residential property ownership; driver's license; vehicle registrations; professional licenses; job requirements; hunting and fishing licenses; prior tax returns; and voting records.
"Years ago we decided to ask you if you made any contributions in Maine," Gerard said, but "it is not one of our routine questions today."
As for church affiliation or support, he said, a regular donation, made by check to a church, could "place them in Maine every Sunday."
Reviewing a person's bank records also could help determine where people spend their time, he said, by tracing where ATM transactions were made.
He said he understood that "people feel like it's kind of an invasion of privacy," adding that checking on church donations "may be going a little too far."
"Yes it's invasive," he admitted, but "the biggest problem we face is nonfiling."
Living next door to a tax-free state like New Hampshire adds to the problem, he believes, with 60 cases currently pending on the border.
Turner said after the committee meeting he was taking a wait-and-see attitude. "It would appear that there isn't a problem," he said, but "when you talk to practitioners, you get a different story" from attorneys and accountants, who have out-of-state clients.
"Part of my purpose in raising it was to put a shot across the bow and force the administration to take a look" at their own policies, Turner said.
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