Ways & Means debates H.115, weighs tax relief options for fraud victims

Members of the Vermont House Ways & Means Committee discussed H.115 on April 17, examining whether state tax rules give victims of financial scams an adequate path to avoid tax liability on money they did not keep. The committee heard from the state taxpayer advocate, the Vermont Attorney General’s Office and a banking industry representative but took no formal vote on H.115.

The committee opened by asking how current law treats taxable income that results from a fraudster’s taking a taxpayer’s funds. Jeff Dooley, taxpayer advocate for the Vermont Department of Taxes, told the committee that "Under current law, what they can do is apply for extraordinary relief" and that the commissioner of taxes may, at his discretion, exclude income that arose solely because of fraud so the victim does not incur tax liability on funds they no longer possess.

Dooley said the relief exists in practice but is underused because many victims and some department intake staff do not recognize the option. He described a recent rise in cases:…