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D.C. Attorney General pursues False Claims Act case in individual income tax matter

On August 31, 2022, the D.C. Attorney General Karl Racine announced that his office was pursuing an action against an individual, Michael Saylor, for allegedly owing individual income tax to the District as a resident under a “fraudulent scheme.” The Attorney General is also pursuing a violation of the False Claims Act related to his failure to file and pay the tax since 2005, as well as fraud or negligence penalties. Further, the Attorney General is pursuing claims against his employer MicroStrategy, Inc. for allegedly conspiring with him to avoid paying D.C. income tax by failing to withhold District income taxes. The action highlights the breadth of the District’s False Claims Act statute (recently expanded in 2021), the Attorney General’s interest in pursuing tax cases outside of the administrative process, and – more generally – the District’s unique issues with respect to tax residency.

In its complaint filed August 22, 2022, the Attorney General contends that Mr. Saylor is responsible for D.C. individual income tax since 2005 because he was either, or both: (1) domiciled in the District; or (2) a statutory resident. A statutory resident is an “individual who maintains a place of abode within the District for an aggregate of 183 days or more during the taxable year, whether or not the individual is domiciled in the District.”  D.C. Code Ann. § 47-1801.04(42).

As acknowledged by the Attorney General, this is the first lawsuit it has filed under the recently-amended False Claims Act. Prior to 2021, the District’s False Claims Act (D.C. Code Ann. § 2-381.02) did not apply to tax matters whatsoever. However, the D.C. Council amended the act to apply to “claims, records, or statements … that refer or relate to taxation.”

Courts may impose treble damages for violations of the D.C. False Claims Act, in addition to civil penalties of between $5,500 and $11,000 for each violation.

A copy of the relator’s False Claims Act Complaint and Jury Demand is here. A copy of the complaint filed by the Office of the Attorney General is here. Stay tuned to Eversheds’ SALT Shaker for continuing information on this case, as well as District tax residency and False Claims Act tax matters.

District of Columbia et al. v. Saylor et al., Case No. 2021 CABSLD 001319 B (D.C. Super. Ct. complaint filed Aug. 22, 2022).

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