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Question on Virginia Fraud Against Taxpayers Act (VFATA)

Discussion in 'Taxation' started by Coolio, Apr 23, 2021.

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  1. Coolio

    Coolio Law Topic Starter New Member

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    Dear all,

    thank you for kindly finding time to comment on the following:
    1. According to § 8.01-216.3(A)(1)&(2) False claims; civil penalty of VFATA "any person who: knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; Knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim ... shall be liable to the Commonwealth for a civil penalty". Which actions of the individual fall under the provisions of this Act/paragraph:
      1. Failure to file tax return
      2. Failure to pay income tax
      3. False claims/concealment of information within welfare programs (Medicaid, SSI, etc.)
      4. ALL of the above
    2. According to § 8.01-216.7(A)&(B) Award to private plaintiff of the said Act "if the Commonwealth proceeds with an action brought by a person ... such person shall receive at least fifteen percent ... of the proceeds of the action or settlement of the claim; If the Commonwealth does not proceed with an action, the person ... shall receive an amount that the court decides is reasonable for collecting the civil penalty and damages. The amount shall be not less than twenty-five percent ... of the proceeds of the award or settlement". Firstly, it sounds like the award is paid regardless of whether the Commonwealth proceeds with an action or not, and secondly - the award is higher if the Commonwealth does not proceed, which is weird. Do I misunderstand the provisions of this paragraph?
    Thank you guys!
     
  2. Tax Counsel

    Tax Counsel Well-Known Member

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    Neither of those. First, § 8.01-216.5(A) allows a person to sue on behalf of the Commonwealth for a violation of § 8.01-213. The problem is that § 8.01-216.3(D) specifically states that: "Except as provided in subdivision A 5, this section shall not apply to claims, records, or statements relating to state or local taxes." Subdivision (A)(5) only relates to taxes owed with respect to gambling devices. Thus, all other taxes, including state income tax, are outside the reach of the Act and neither the Commonwealth or a private person may bring an action under § 8.01-213 for income tax issues. The reason for that, of course, is that the state already has extensive powers and remedies for collection of tax and prosecution of tax evaders.

    Second, even if taxes were not excluded from the reach of the Act, a violation of § 8.01-213 requires that a person have submitted a false claim of payment to the state. Neither the failure to file a return nor the failure to pay taxes owed is a presentation of a false claim for payment. The filing of a fraudulent refund return or refund tax claim, however, would be the presentation of a false claim. But since, as mentioned above, taxes are excluded from the reach of the statute, you cannot bring a claim on behalf of the state even had there been a fraudulent refund claim submitted on a tax return.


    If it was a false claim for payment of a welfare program administered by the state it would fall within the statute. Not all false information or concealment is necessarily a false claim for payment, so one has to carefully analyze the false information given. Note that the statute only covers false claims made to the state for payment. False claims made to the federal government for payment, like for SSI, SNAP payments, SSA disability, etc, are outside the scope of the Act because obviously the state has no jurisdiction over federal programs.

    No, you don't misunderstand it, and it's not weird. If the private person proceeds without intervention by the state and wins money for the state, the private person gets more because he or she had to bear the cost of bringing the action. If the state intervenes and takes over, the private person gets less because it is now the state incurring the expense of litigating it.
     
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  3. Coolio

    Coolio Law Topic Starter New Member

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    Thank you @Tax Counsel that was very helpful! :)
    As for the very last part, I initially thought that Commonwealth "proceeds with an action" means smth. like "agrees with the fact of violation and becomes a party [prosecutor?] in a legal process", while based on your words this is rather "whose resources are spent to push the case further".
    Informative. I wish I became a lawyer in the past - love those small details.
     

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