Virginia tax department eliminates investigative unit

RICHMOND, Va. (AP) - The Virginia Department of Taxation is eliminating its criminal investigation unit as part of a cost-savings strategy.

Six positions on the investigative staff were eliminated by laying off two employees and transferring four others to the agency's compliance department to do data research. The change was established in the revised state budget the General Assembly passed in February, and is intended to save $120,000 annually. It takes effect July 1.

Because Virginia is a compliance state whose income tax policies comply with federal tax law, most of the heavy lifting on fraud investigations falls first to the Internal Revenue Service.

"If you're cheating Virginia, you're also cheating the IRS," said Bill Leighty, a former chief of staff to Govs. Mark R. Warner and Tim Kaine, and now a consultant and expert on government efficiency.

Tax Commissioner Craig Burns said a large-scale shift to electronic filing had increasingly rendered the unit, formed to conduct old-fashioned investigations of tax cheats, obsolete. At the same time, he said, the agency was understaffed in the sector responsible for sophisticated data analysis that flags potential fraud within electronic filings.

There was a growing need for help in the compliance department to "ensure the required research and analytical services were available while directing resources to larger compliance and possible fraud-prevention programs," Burns said.

Investigations into fraud cases that the tax department criminal investigations unit handled will be handed off to law-enforcement agencies such as the Virginia State Police, which has a white collar crimes division, and local police agencies.