Tax Trial Begins For Anti-Tax Activist

DENVER (AP) -- Colorado's best known tax opponent went on trial Friday for tax evasion, as the government accused him of hiding millions through a sham charity set up to avoid taxes.

Douglas Bruce, a former state lawmaker and father of Colorado's Taxpayer's Bill of Rights, is accused of avoiding paying taxes by either not reporting income or diverting money to a nonprofit. He's also accused of attempting to influence a public service by allegedly trying to mislead tax officials.

The government said Bruce's nonprofit, called Active Citizens Together, was set up for the sole purpose of hiding his income funding his anti-government activism.

"This was not a viable, above-board charity, but simply a parking lot for him to park and hide his money," said Colorado Assistant Attorney General Robert Shapiro in opening statements.

Bruce, a cantankerous government gadfly who frequently clashes with public officials, says the tax evasion case against him is politically motivated. Bruce said he did not make money from his ACT nonprofit and that state officials are going after him for promoting smaller government.

"Their theory is just rubbish," Bruce told reporters after prosecutors laid out the case against him. Bruce, who is acting as his own attorney in the case, deferred his opening statement until he begins his defense next week.

If convicted, Bruce faces a fine up to $500,000 or possible jail time.

The government accused Bruce of illegally avoiding taxes starting in 2005. Using a stack of flow charts for the jury, Shapiro said Bruce never reported some $60,000 a year he made as an El Paso County commissioner from 2005 to 2008. Shapiro also accused Bruce of not reporting interest income from a California landscaping company to which he lent money.

Much of the government's case, though, centers on the ACT group. Shapiro said Bruce shuffled millions into accounts he controlled for ACT and then collected interest on that money without paying taxes on it.

"He was using a sophisticated scheme to avoid paying his fair share of Colorado taxes," Shapiro argued.

Shapiro also argued that the ACT nonprofit spent some 95 percent of its money on lobbying, which would far exceed the limit for a group that seeks to avoid taxes. ACT earned some $178,000 in interest on Bruce's donations between 2005 and 2007. Bruce scoffed at Shapiro's suggestion that he should've paid taxes on that interest.

"He doesn't understand the concept of a charitable donation," Bruce told reporters.

Shapiro moved to head off Bruce's political persecution argument. Bruce's tax-limiting constitutional amendment, the Taxpayers' Bill of Rights, requires a public vote for tax hikes and is still quite popular nearly 20 years after it was adopted.

"This is not a referendum on politics, ladies and gentlemen," Shapiro told the jury.

Bruce maintained his trademark defiant tone that infuriates some public officials. During one court break, when the jury was out of the room, Bruce taunted Shapiro with a promise of fireworks in his defense next week.

"You have a bulletproof vest? Oh wait, that was an attempt to influence through threat of violence. That was a joke," Bruce said. Shapiro chuckled.

Bruce's trial is expected to last through next week.

By Kristen Wyatt, AP Writer (© Copyright 2011 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)