Using the False Claims Act to Remedy Tax Expenditure Fraud

26 Pages Posted: 14 Aug 2016 Last revised: 30 Sep 2016

See all articles by Ian Ayres

Ian Ayres

Yale University - Yale Law School; Yale University - Yale School of Management

Robert McGuire

Robert McGuire Law Firm

Date Written: August 10, 2016

Abstract

The federal False Claims Act (FCA) might be used to combat fraudulent claims regarding tax expenditures. The FCA has been used to protect the public fisc by imposing liability upon anyone who makes a false or fraudulent claim relating to an expenditure of federal funds. A substantial share of government spending is implemented through tax credits and deductions granted to individuals and entities for taking particular actions promoted through the Tax Code. Government funds dedicated to such tax incentives – so-called “tax expenditures” – are themselves potentially subject to false claims – for example, when a borrower makes a false representation that a mortgage relates to a principle or second residence in order to claim a home mortgage interest deduction. This article explores how the FCA as currently enacted might be invoked to combat fraud that targets tax expenditures, as well as doctrinal counter-arguments to such application. We touch on the potential breadth of the FCA’s reach if it is deemed to encompass such claims, as well as the prospect of using other whistleblower mechanisms to achieve similar results.

Keywords: FCA, False Claims Act, Tax Expenditure, Fraud

Suggested Citation

Ayres, Ian and McGuire, Robert, Using the False Claims Act to Remedy Tax Expenditure Fraud (August 10, 2016). Yale Law & Economics Research Paper No. 564. Available at SSRN: https://ssrn.com/abstract=2821606 or http://dx.doi.org/10.2139/ssrn.2821606

Ian Ayres (Contact Author)

Yale University - Yale Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States
203-432-7101 (Phone)
203-432-2592 (Fax)

Yale University - Yale School of Management

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Robert McGuire

Robert McGuire Law Firm ( email )

9233 Park Meadows Drive
Lone Tree, CO Lone Tree
United States
844-318-6730 (Phone)
866-352-1051 (Fax)

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