Agency to Collect on Liability in Excess of $1 Million for Tax Years 1992 to 2009
Annapolis, MD (January 18, 2011) – Emphasizing his commitment to maintaining a level playing field for all Maryland taxpayers, Comptroller Peter Franchot announced today that his agency reached a settlement agreement with Gerald Katz of Montgomery County that will result in nearly $1.5 million being put back into state coffers. The settlement is part Katz’s criminal conviction.
In August 2010, Katz entered a guilty plea to two counts of willful failure to file Maryland income tax returns for 2004 and 2005 in the Circuit Court for Anne Arundel County. As a component of his sentencing, he reached a settlement agreement with the Comptroller of Maryland that requires him to pay unpaid taxes for tax years 1992 to 2009, totaling nearly $1.5 million. Katz is a practicing attorney in Maryland and Virginia, and a partner of Katz & Stone, LLC. He is also licensed to practice in the District of Columbia.
Aside from his financial obligation to the Comptroller of Maryland, Katz received a three-year suspended sentence and five years supervised probation on each of the two counts, to be served concurrently, for the criminal charges. Additionally, he must complete 100 hours of community service by providing pro bono legal services. The settlement agreement is a condition of his probation. Therefore, noncompliance could result in criminal prosecution.
Upon uncovering probable wrongdoing on the part of Gerald Katz, the Comptroller’s Office requested the Criminal Division of the Maryland Office of the Attorney General to investigate the matter. Last year, the Attorney General’s Office initiated criminal charges against Katz. He was charged with two counts of willfully failing to file a tax return as required by Title 13, subtitle 10 of the Tax General Article of the Annotated Code of Maryland. Each count carries a maximum penalty of five years imprisonment and/or a $10,000 fine.
“As Comptroller, I have always vowed to protect all law-abiding taxpayers, regardless of their profession,” said Comptroller Franchot. “Therefore, I refuse to tolerate activities and practices that blatantly disregard Maryland tax laws, especially when they are committed by practitioners of the law. My office, working in conjunction with the Office of the Attorney General, will continue to pursue these criminals in an effort to maintain a level playing field for all Maryland taxpayers.”
For 2004, Katz failed to pay $50,432.54 in taxes, fraud penalties and interest and owed an additional $46,019.88 in taxes, fraud penalties and interest for 2005. For those two years alone, the defendant owed the state $96,452.42. Records indicate that Katz purchased his home in Montgomery County in 1986 and obtained his driver’s license in 1989, yet the Comptroller’s office has received income tax returns from him on only a few occasions within this 24-year time span. He currently has federal tax liens with the Internal Revenue Service, as well.
The settlement agreement reached holds Katz accountable for outstanding Maryland income tax liabilities for tax years 1992 to 2009. Records indicate that he owes $588,611 in tax for the aforementioned years, as well as $125,346 in penalties and $784,756 in interest as of yesterday.
Sheila Katz, wife of Gerald Katz, has signed the settlement agreement as a guarantor for the tax, which will continue to accrue interest on the outstanding tax portion until it is paid in full. By entering into this settlement agreement, the Katzs waive any right to participate in any current or future state of Maryland amnesty program pertaining to the stipulated amounts or the tax years associated with this agreement.
According to the settlement agreement, Gerald Katz is required to make an initial payment of $50,000 to the Comptroller of Maryland by close of business on January 25, 2011. This is in addition to the payment of $46,615 he made in August at the time he entered his guilty plea. He has agreed to permit the Comptroller of Maryland to debit $2,683 from the bank account of his choice on the twentieth day of each month, beginning next month and continuing until the financial obligation is fulfilled. The initial payment and the first monthly payments will be applied to the taxes, penalties and interest associated with tax years 2004 and 2005. Thereafter, all monthly payments will be applied to the overall outstanding balance.
Additionally, on January 13 of each year until the stipulated amount is paid in full, Katz must account to the Comptroller for any distributions, whether in-kind or cash, he receives from any business, investment, or other source during the previous calendar year.
By entering this guilty plea, as a licensed Maryland attorney, Katz faces possible sanctions from the Maryland Bar, which could include the loss of his license to practice law in Maryland. Not only are licensed lawyers, in general, required to comply with the law, including the filing of tax returns, attorneys practicing law in Maryland must be compliant in the payment of those taxes they owe in order to maintain their Maryland license.