United States:
The amendment to the DC False Claims Act enables tax measures and improves tax enforcement in the district
March 08, 2021
Ropes & Gray LLP
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Changes to the DC false claims in mid-March
Act (the
"D.C. Act") 1, which provides for tax fraud
Enforcement under the law takes effect unless Congress
consider the reforms before that time. Among other things, the
The amended DC Act allows private whistleblowers to bring them with them
Lawsuits on behalf of the district, 2 against
Taxpayers who defrauded the government by underpaying taxes.
The DC Attorney General must also investigate the tax fraud
Violations3 and allows the Attorney General to
a determination of a violation to bring civil actions against
Violator.
When the DC law goes into effect, DC seven will join
States – Delaware, Florida, Illinois, Indiana, Nevada, New
York and Rhode Island – where false claims are based on
Tax claims can be asserted. While the federal law on false claims
("FCA") and most states' FCAs allow individuals
Fraud cases on behalf of the government bring most of them
FCAs – including the federal FCA – do not allow suits
on tax claims. FCAs typically make up part of the
funds raised to go to the people making the claims,
Incentives for private actions that have resulted in billions of
Dollars in federal and state coffers.
DC law creates civil and criminal liability for manufacturing
false claims to the District.4 offender must
knowingly making false claims – they must have actual knowledge
act or act of the violations in willful ignorance of the truth
in ruthless disregard for the truth.5 Like that
Federal FCA, the DC standard, does not require plaintiffs
show that a violation is specifically intended to violate
law.6 Whether the alleged false assertion at issue is a
Sellers overload a government agency, a company fakes
Records in the context of a transaction with an agency or – after
Change takes effect – a taxpayer who underpays taxes who
The DC law allows both private individuals and the DC attorney
general, civil actions under the D.C. Act.7 to be submitted
The new law changes the previous DC FCA in four ways:
- Tax fraud claims no longer exist
blocked as long as the accused taxpayer is liable to tax in the district
Revenue, income, or revenue of $ 1 million or more and the damages
pleaded a total of at least $ 350,000 in the lawsuit. - The upper limit for incentive payments
Informants who provide information about tax underpayments will be contacted
to 30% from 10% 8 - The DC law opens tax claims to a
possibly more extensive limitation period than currently
to tax lawsuits. Instead of being subject to DC tax law
general three-year limitation period for tax enforcement
Lawsuits of the D.C. Chief Financial
Officer, 9 tax claims under the DC law can be
brought after the later expiry of a six-year limitation period
and a three-year discovery reserve, but no later than ten years
after the date on which the violation was committed. 10 - Taxpayers affected by false claims
DC law litigation also faces FCA liabilities
up to three times as much damage as that
District11 under the triple damage of the law
Provision and additional civil law penalties per violation.
The DC Act was enacted to improve tax enforcement and
the declines in sales at D.C. as a result of
COVID-19 pandemic. 12 Other countries may follow suit
The removal of the FCA control bars by the district as a jurisdiction
Lost revenue and additional tools to protect revenue.
Further increase in revenue through increased enforcement
as increased tax rates or new taxes – can be political
attractive to state legislators.
Practical Implications and Considerations
The DC Act affects taxpayers with taxable sales, or income
District income of at least $ 1 million. On the
increased likelihood of enforcement action by the DC government
and private whistleblowers, taxpayers are now potentially subject
a ten year statute of limitations for DC FCA claims. Years
that were closed prior to the passing of the DC Act can now remain in place
open to FCA claims. Affected taxpayers should consider that
Follow the practical steps given the increased focus on taxes
Enforcement:
- Conduct internal tax audits
Positions taken in DC to assess potential risks. because
Information exchange agreements allow tax authorities to exchange information
Information on jurisdictions, federal prospects and
State tax authorities should also be considered internally
Reviews. - Update compliance programs and
Training tax staff on documentation best practices
Tax positions and advice. - Retain tax returns and related ones
Documentation for at least 10 years as a result of 10 years
Limitation period. - Be aware of anti-retribution
Provision in the FCA of D.C. Handle all FCA claims carefully. - Watch the developments in other states
in relation to the control bars of their FCAs.
Footnotes
1. D. C. Act 23-564.
2. Id.
3. DC code § 2-381.03.
4. DC code § 2-381.01.
5. Id.
6. Id.
7. Id.
8. D. C. Act 23-564; Sec. 3, D.C. Code §
47-4111.
9. DC code § 47-4301 (a). Note: Implicit cases
Tax fraud or tax evasion is not subject to the law of
Restrictions. See DC code § 47-4301 (d).
10. DC code § 2-381.05.
11. DC code § 2-381.02
12. District of Columbia Council, Committee of the
Full report on Bill 23-35, "False Claims Amendment Act of
2020 "(November 27, 2020),
The content of this article is intended to provide a general overview
Guide to the subject. Expert advice should be sought
about your particular circumstances.
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