We left the story of Florida tax shelter promoter Michael L. Meyer last August with my article, The Ultimate Tax Plan Of Donations Of LLC Interests To Charity Leads To The Indictment Of Michael Meyer (Aug. 12, 2023). As previously related, Meyer would have a client create an LLC and fund it with valuable assets, then the client would donate a significant interest in the LLC to a Meyer-controlled charity and take a tax deduction for the value of the interest. Of course, the client would still control the LLC and its assets, while a significant portion of the LLC’s income — equal to the percentage donated — would flow up to its charity owner and not be taxed ever. Later, the client would buy back the interest from the charity, usually at some amount less than the amount of the donation taken, and thereby regain full control of the LLC and its assets while enjoying the juicy charitable tax deduction.
This, just by the way, describes the vast majority of tax shelters: Things are pretty much the same before and after, but somehow there is a big tax deduction artificially inserted in the middle. In the case of charity tax shelters, another way to look at them is that the charity is used as what amounts to a sponge to soak up taxes. I’ve sat in not just a few meetings where charitable tax shelters were pitched to my clients over the years, and that’s exactly how the promoters describe what goes on: The complicit charity sponges up the taxes.
As my previous article details, Meyer went beyond even this abusive of charities and did things such as backdating documents and filing false returns that finally caused DOJ-TAX to step in and say “Enough!” In Meyer’s case, this meant first being hit with a promoter injunction in 2019, as related in my article, Mike Meyer’s ‘Ultimate Tax Plan’ Involving Charitable LLCs And LPs Hit With DOJ Permanent Injunction (Aug. 29, 2019), to finally get him to stop selling his shelters. The next shoe to drop was the aforementioned indictment.
Today’s update is that Meyer has plead guilty to conspiracy to defraud the United States and for tax evasion, according to a DOJ Press Release (Jan. 19, 2024). He is now awaiting sentencing and faces five years each on multiple charges, plus restitution for tax losses and monetary penalties. Even pleading out, he is probably facing at least 10 years hard time in Club Fed.
What is interesting is that by agreeing to a guilty plea, Meyer will probably also be expected to testify against others involved in the scheme, meaning other persons who promoted the “Ultimate Tax Plan” (now there’s a name that will not attract IRS attention) to their clients, but who themselves have not yet entered guilty pleas — they probably very soon will.
From a criminal law perspective, this is interesting because usually the DOJ (and state prosecutors) start from the outside and work their way in until the central figure finally gives up, but here Meyer as the central figure is waiving the white flag before some of the more peripheral players. This also increases the odds that more folks may be added to the prosecutions, meaning the clients of the Ultimate Tax Plan who used Meyer’s shelters.
Anyway, stay tuned.