Students who paid Daniel Doyle Benham for classes may want their money back. In fact, they may want to use it to pay their overdue taxes. Benham, of Twin Lake, Michigan, taught seminars on how to avoid paying taxes â or he did until the Justice Department filed an injunction against him, forcing him to stop.
Authorities say Benham failed to file tax returns on $450,000 of income in 2000-2003. The money was earned working for auto dealerships in Muskegon and Traverse City, and also from fees he received for presenting seminars on taxes and bankruptcy.
The purpose of the seminars was to teach students how to create legal entities that would shelter income and therefore avoid taxes. The U.S. Attorney, Donald A. Davis, told reporters, "He conducted seminars all over the country. Not only did he commit fraud, he sold fraud. The principal source of his unreported income was what other people paid him for his materials and his seminars."
On October 17, 2008 Benham was convicted on four counts of tax evasion and one count of bankruptcy fraud. He has been incarcerated since the conviction.
On February 4, U.S. District Judge Robert J. Jonker sentenced Benham to four concurrent five year sentences for tax convictions plus a consecutive year for filing a false bankruptcy. In addition, the judge ordered him to pay restitution of $45,679 and, following the completion of his prison sentence, to spend three years on supervised release.
One tactic Benham used for avoiding taxes was setting up an alter ego for himself in the state of Nevada, under the name of ROC-Grp (which stood for various things: Relying on Christ, Remedies on the Court, Remedies Out of Court). The government case against him said that Benham used ROC-Grp to disguise his business and personal finances, and claimed it was a "religious corporation sole," existing "only under the authority of Yahuwek Tzur Yisrael."
The IRS has been warning of the corporation sole scam for years. In a 2004 press release, then-IRS Commissioner Mark Everson said: "This scheme shamelessly tries to take advantage of special tax benefits available to legitimate religious groups and church leaders. Unscrupulous tax promoters always look for ways to game the system and prey on unsuspecting victims. Taxpayers should be on the look-out for these and other scams."
Scheme promoters like Benham seek to exploit legitimate laws to establish sham religious corporations. The schemes are marketed through high-cost seminars costing upward of $1,000 per attendee, and represented as a legal way to hide personal assets in order to avoid federal income taxes, child support, and other personal debts.
"Corporation sole" was part of IRS Dirty Dozen list of most notorious tax scams in 2004 and 2005, but has since dropped off. The IRS notes that they've uncovered less activity involving this particular scam following court cases against a number of promoters.