I 111th CONGRESS 1st Session H. R. 1389 IN THE HOUSE OF REPRESENTATIVES March 9, 2009 Mr. Ackerman introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to allow a refundable credit for taxes paid on earnings reinvested and lost in a fraudulent investment scheme.

1.

Short title

This Act may be cited as the Fraudulent Tax Relief Act of 2009.

2.

Refundable credit for income taxes paid on earnings reinvested and lost in a fraudulent investment scheme

(a)

In general

Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to refundable credits) is amended by inserting after section 36A the following new section:

36B.

Credit for income taxes paid on earnings reinvested and lost in a fraudulent investment scheme

(a)

In general

There shall be allowed as a credit against the tax imposed by this subtitle for the taxpayer’s 1st taxable year beginning after the date of the enactment of this section an amount equal to the tax imposed by this chapter for all prior taxable years beginning after December 31, 1994, which was paid on earnings— (1)from an investment which the taxpayer did not know, and reasonably should not have known, was fraudulent, (2)which were reinvested in such investment, and (3)which remained so reinvested until the fraud was discovered. (b)

Credit limited to loss sustained

The credit allowed by subsection (a) shall not exceed the aggregate loss sustained on such investment as of the close of such 1st taxable year. (c)

Application of section

This section shall apply to frauds discovered during 2008.

. (b)

Conforming amendments

(1)Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting 36B, after 36A,. (2)The table of sections for such subpart C is amended by adding at the end the following new item: Sec. 36B. Credit for income taxes paid on earnings reinvested and lost in a fraudulent investment scheme.. (c)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.