WASHINGTON – In an effort to help those defrauded by deceptive investment brokers, U.S. Rep. Bill Pascrell, Jr. (D-NJ-8) today introduced the bipartisan Ponzi Scheme Victim’s Tax Relief Act of 2011. U.S. Rep. Charles Boustany, Jr., MD (R-LA-7) is the lead co-sponsor of the legislation.
“No one wants to fall victim to a Ponzi scheme. Bernie Madoff’s deception, as well as the deception of others schemers across the county, was deplorably shocking. In addition to countless small investors and retirees, nonprofit humanitarian organizations, foundations and banks also fell victim to Madoff. The potential effect of those losses on our society can never be calculated,” said Pascrell, a member of the House Ways and Means Committee, which oversees the development of our nation’s tax policy. “But to help the small investors who lost so much, we can at least provide some relief, and a path to recoup tax dollars paid on earnings which never existed.”
“Victims of Allen Stanford’s investment scam have been devastated. This critical legislation will help thousands of retirees, investors, and small businesses which had millions of dollars stolen,” said Boustany, a member of the House Ways and Means Committee. “The tax relief in the legislation is the least we can do, compared to the disgusting and sickening actions of Stanford to take the hard-earned savings of thousands of investors.”
The Ponzi Scheme Victim’s Tax Relief Act of 2011 will expand the net operating loss carryback period for investors in a Ponzi-type scheme from five to 10 years. Victims who lost money in a Ponzi scheme can recoup some of their losses by declaring them as net operating losses during previous tax years and collecting refunds from those tax years.
The bill also allows small investors who held Ponzi-related assets in an individual retirement account (IRA) to claim a deduction equal to 60 percent of their Ponzi-related loss with a cap of $2 million.
The Safe Harbor rulings provided by the IRS in early 2009 provided some relief to fraud victims. However, large numbers of victims were excluded or limited in their benefits from these rulings. Most of these victims paid taxes on these investments. Others were dependent on their IRAs and retirement savings to cover their living needs. Nearly every state has uncovered and prosecuted Madoff, Allen Stanford, and Tom Petters or other similar Ponzi schemes.
Additional original co-sponsors include Reps. Shelley Berkley (D-NV), Scott Garrett (R-NJ), Carolyn Maloney (D-NY), Peter King (R-NY), Steve Rothman (D-NJ), Tom Rooney (R-FL), Allyson Schwartz (D-PA), Ileana Ros-Lehtinen (R-FL), Anthony Weiner (D-NY), Pete Sessions (R-TX).