New York closes loophole on tax evasion

New York Attorney General Eric Schneiderman (L) is sworn in by Chief Judge Jonathan Lippman during a ceremony at the Capitol in Albany, New York, January 1, 2011. REUTERS/Mike Groll/Pool

NEW YORK (Reuters) - New Yorkers who evade income taxes will now have to face both federal and state prosecutors, now that the legislature has shut the so-called “Helmsley” loophole, the state’s attorney general said on Tuesday.

A “double jeopardy” provision in New York’s criminal law blocked the state from pursuing tax criminals who already had been charged for separate but related tax crimes by federal prosecutors, Attorney General Eric Schneiderman said in a statement.

The loophole was named after former hotel magnate Leona Helmsley; New York state’s tax charges against her were thrown out by the court, which ruled they were based on the “same criminal transaction” as the federal tax charges.

“Tax evasion is a crime, but for too long, white collar criminals have benefited from a gaping loophole in state law that has let them off the hook,” Schneiderman said. “The days of giving tax evaders a free pass are over,” he said.

Both the Assembly and the Senate have approved the bill, which now will be sent to the governor.

New York’s income taxes are a major source of its revenue, and state and federal prosecutors have been investigating whether New Yorkers are among the U.S. citizens who hid funds in Swiss bank accounts.

Reporting by Joan Gralla; Editing by Leslie Adler