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U.S. files lawsuit against promoter of alleged tax scheme

Actor Wesley Snipes filed for $7 million refund

WASHINGTON (CNN) -- The Justice Department Thursday sued the promoter of an alleged tax refund scheme whose client list includes actor Wesley Snipes, who the government claims has asked for a bogus refund of more than $7 million.

The suit filed in federal court in Tampa, Florida, seeks to stop Douglas Rosile Sr. of Florida from promoting a scheme that allegedly was used to under-report more than $36 million in federal income taxes.

The government says the bogus tax claims prepared by Rosile are based on an erroneous assertion that only income from foreign sources is subject to U.S. income tax.

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The largest of the refund claims prepared by Rosile was an amended income tax return for actor Wesley Snipes. His amended return dated April 14, 2001, requested a $7,360,755 refund of 1997 income taxes paid, based on reducing Snipes' adjusted gross income to zero.

The civil suit filed against Rosile says that the IRS detected Snipes' tax claim as bogus and did not pay it.

Snipes was one of about 200 clients of Rosile in 32 states.

The government's action against Rosile is the latest in a series of suits brought against promoters of tax avoidance schemes.

The government brief says the "foreign sources" argument is "based on an absurd misreading" of a section in the Internal Revenue Code. The government brought injunction suits against three other promoters of the same scheme last November.

"The argument that only foreign sources of income are subject to income tax has been rejected out of hand by every judge who has examined it," said Assistant Attorney General Eileen O'Connor, who heads the Tax Division.

"Taxpayers who participate in this and other patently frivolous schemes risk substantial civil and criminal penalties," O'Connor said.

There was no indication that Snipes also faces prosecution in the case.