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Monthly Archives: September 2015

OVDP Penalty Increased To 50% For 48 Foreign Banks!

September 17, 2015

The new revisions to the US offshore voluntary disclosure initiative, which we posted on 6/18/14 "IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come into Compliance", now provides for and increased 50% FBAR Penalties for 'Willful' Non-Disclosers. 

 This group includes those individuals who have offshore bank accounts with a foreign financial institution which has been publicly identified as being under investigation, or is cooperating with a government investigation. IRS has published a list of those foreign financial institutions or facilitators. 

The complete list is as follows, as of 9/16/15:

            1. UBS AG (effective 8/4/14)
            2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd. (effective 8/4/14)
            3. Wegelin & Co. (effective 8/4/14)
            4. Liechtensteinische Landesbank AG (effective 8/4/14)
            5. Zurcher Kantonalbank (effective 8/4/14)
            6. swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG (effective 8/4/14)
            7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates (effective 8/4/14)
            8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd. (effective 8/4/14)
            9. The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India) (effective 8/4/14)
            10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates (effective 8/4/14)
            11. Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates (effective 12/19/14)
            12. Bank Leumi le-Israel B.M., the Bank Leumi le-Israel Trust Compay Ltd., Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A., and Bank Leumi USA (effective 12/22/14)
            13. BSI SA (effective 3/30/15)
            14. Vadian Bank AG (effective 5/8/15)
            15. Finter Bank Zurich AG (effective 5/15/15)
            16. Societe Generale Private Banking (Lugano-Svizzera) SA (effective 5/28/15)
            17. MediBank AG (effective 5/28/15)
            18. LBBW (Schweiz) AG (effective 5/28/15)
            19. Scobag Privatbank AG (effective 5/28/15)
            20. Rothschild Bank AG (effective 6/3/15)
            21. Banca Credinvest SA (effective 6/3/15)
            22. Societe Generale Private Banking (Suisse) SA (effective 6/9/15)
            23. Berner Kantonalbank AG (effective 6/9/15)
            24. Bank Linth LLB AG (effective 6/19/15)
            25. Bank Sparhafen Zurich AG (effective 6/19/15)
            26. Ersparniskasse Schaffhausen AG (effective 6/26/15)
            27. Privatbank Von Graffenried AG (effective 7/2/15)
            28. Banque Pasche SA (effective 7/9/15)
            29. ARVEST Privatbank AG (effective 7/9/15)
            30. Mercantil Bank (Schweiz) AG (effective 7/16/15)
            31. Banque Cantonale Neuchateloise (effective 7/16/15)
            32. Nidwaldner Kantonalbank (effective 7/16/15)
            33. SB Saanen Bank AG (effective 7/23/15)
            34. Privatbank Bellerive AG (effective 7/23/15)
            35. PKB Privatbank AG (effective 7/30/15)
            36. Falcon Private Bank AG (effective 7/30/15)
            37. Credito Privato Commerciale in liquidazione SA (effective 7/30/15)
            38. Bank EKI Genossenschaft (effective 8/3/15)
            39. Privatbank Reichmuth & Co. (effective 8/6/15)
            40. Banque Cantonale du Jura SA (effective 8/6/15)
            41. Banca Intermobiliare di Investimenti e Gestioni (Suisse) SA (effective 8/6/15)
            42. bank zweiplus ag (effective 8/20/15)
            43. Banca dello Stato del Cantone Ticino (effective 8/20/15)
            44. Hypothekarbank Lenzburg AG (effective 8/27/15)
            45. Schroder & Co. Bank AG (effective 9/3/15)
            46. Valiant Bank AG (effective 9/10/15)
            47. Bank La Roche & Co AG (effective 9/15/15)
            48. Belize Bank International Limited, Belize Bank Limited, Belize Corporate Services Limited, their predecessors, subsidiaries, and affiliates (effective 9/16/15)

      A list of foreign financial institutions or facilitators meeting this criteria is available.

      Of course, the IRS may add names to that list at any time, and whole groups of taxpayers will then be cut-off from OVDP without prior notice.
      In accordance with the terms of the Swiss Bank Program, each bank mitigated its penalty by encouraging U.S. account holders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. account holders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

      Under the program, banks are required to:

      • Make a complete disclosure of their cross-border activities;
      • Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
      • Cooperate in treaty requests for account information;
      • Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed (a/k/a Levers List);
      • Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations; and
      • Pay appropriate penalties.

      Banks meeting all of the above requirements are eligible for a non-prosecution agreement.


      “With each Additional Agreement, 
      the world where criminals can hide their money 
      is becoming smaller and smaller.  Those who circumvent offshore disclosure laws have little room to hide.”said Chief Richard Weber of IRS-Criminal Investigation.


      The same goes for taxpayers who worked with a "facilitator" who helped the taxpayer establish or maintain an offshore arrangement if the facilitator has been publicly identified as being under investigation or as cooperating with a government investigation. 

      Taxpayers who had undeclared income from one of these 48 Banks are still be eligible to enter the OVDP, but they will be subject to a 50% offshore penalty, rather than the existing 27.5 percent penalty.

      Of course if the IRS already has a particular taxpayer's name, then that person will not be eligible to enter the OVDP, and could be subject to multiple FBAR penalties.

      Do You Have Undeclared Income from One
      of the 48 Banks Delivering Names to the IRS?

      Do You Value Your Freedom?


      Want to Know if the OVDP Program is Right for You?

      Contact the Tax Lawyers at 
      Marini & Associates, P.A.  
       
      for a FREE Tax Consultation
      Toll Free at 888-8TaxAid (888) 882-9243

      Read more at: Tax Times blog

      IRS Ends Foreign Goodwill Tax Exception For Transfers to an Overseas Buyer.

      September 17, 2015

      IRS Ends Foreign Goodwill Tax Exception


      IRS
      The US Internal Revenue Service (IRS) has issued a New Regulation removing the foreign goodwill tax exception for transfers to an overseas buyer.

      The regulation (TD9739) also limits the type of property eligible for the "going concern" exception to tangible property and financial assets.

      Its aim is to counter companies' attempts to avoid tax on the disposal of intangible property by attributing a large part of the property's value to goodwill or going concern value, which are currently tax-free under s367(d) of the Tax Code.

      This provision allows a US company that transfers intangible property to a foreign corporation to be treated for tax purposes as having sold it in exchange for arm's-length royalty payments over the property's useful lifetime.

      Based upon taxpayer positions that the IRS has encountered in examinations and controversy, the  Treasury Department and the IRS are concerned about situations in which controlled groups evaluate economically integrated transactions involving economically integrated contributions, synergies, and interrelated value on a separate basis in a manner that results in a misapplication of the best method rule and fails to reflect an arm's length result. 
      Taxpayers may assert that, for purposes of section 482, separately evaluating interrelated transactions is appropriate simply because different statutes or regulations apply to the transactions (for example, where section 367 and the regulations thereunder apply to one transaction and the general recognition rules of the Code apply to another related transaction). 
      These positions are often combined with inappropriately narrow interpretations of § 1.482-4(b)(6), which provides guidance on when an item is considered similar to the other items identified as constituting intangibles for purposes of section 482. The interpretations purport to have the effect, contrary to the arm's length standard, of requiring no compensation for certain value provided in controlled transactions despite the fact that compensation would be paid if the same value were provided in uncontrolled transactions.
      These temporary regulations address the aforementioned concerns by clarifying the coordination of the application of section 482 in conjunction with other Code and regulatory provisions in determining the proper tax treatment of controlled transactions.

       
      US companies making offshore disposals on or after  September 16, 2015 must now pay tax on the recognized current gain of foreign goodwill included in the disposal. The rule also removes the previous 20-year limit on the useful life of intangible property. The lifetime is now the whole period during which the intangible property is reasonably expected to be exploited.

      Need Experienced International Tax Advise?
       
        Contact the Tax Lawyers of
      Marini & Associates, P.A.

      for a FREE Tax Consultation
      Toll Free at 888-8TaxAid ((888) 882-9243)

        Read more at: Tax Times blog

        US Citizens Living Abroad are Required to File a US Estate Tax Form

        September 17, 2015

        American citizens are subject to U.S. estate taxation with respect to their worldwide assets. An estate tax return, Form 706, United States Estate (and Generation-Skipping) Tax Return, Estate of a citizen or resident of the United States, is required for a deceased American citizen, if the fair market value at death of the decedent's worldwide assets exceeds the "unified credit exemption" amount in effect on the date of death. However, if the U.S. citizen made substantial lifetime gifts, and used the applicable “unified credit exemption” amount to eliminate or reduce any gift tax on the lifetime gifts, a U.S. estate tax return may still be required even if the value of the decedent’s worldwide assets is less than the “unified credit exemption” amount at the date of death (due to the decrease in the “unified credit exemption” for the lifetime gifts). To determine the “unified credit exemption” amount for American citizens for any particular year, refer to the Instructions to Form 706 or to Publication 559, Survivors, Executors, and Administrators.

        The Internal Revenue Service may collect any unpaid estate tax from any person receiving a distribution of the decedent’s property under transferee liability provisions of the tax code.

        U.S. citizens and long-term residents who relinquished their U.S. citizenship or ceased to be U.S. lawful permanent residents (green card holders) on or after June 17, 2008, and who meet specific average tax or net worth thresholds on the day prior to their expatriation are considered “covered expatriates” – subject to IRC section 877A. See Expatriation Tax for more information on covered expatriates.


        U.S. citizens and residents who receive gifts or bequests from covered expatriates under IRC 877A may be subject to tax under new IRC section 2801, which imposes a transfer tax on U.S. persons who receive gifts or bequests on or after June 17, 2008, from such former U.S. citizens or former U.S. lawful permanent residents.

        In addition, covered expatriates under IRC 877A are not considered U.S. expatriates for purposes of Form 706NA, United States Estate (and Generation-Skipping) Tax Return, Estate of a nonresident not a citizen of the United States.

        Have an Estate Tax Problem?
         

        Estate Tax Problems Require


        an Experienced Estate Tax Attorney

        Contact the Tax Lawyers at
        Marini & Associates, P.A.

         for a FREE Tax Consultation Contact US at

        www.TaxAid.us or www.TaxLaw.ms

        or Toll Free at 888-8TaxAid (888 882-9243).

        Robert S. Blumenfeld  - 
         Estate Tax Counsel

        Mr. Blumenfeld concentrates his practice in the areas of International Tax and Estate Planning, Probate Law, and Representation of Resident and Non-Resident Aliens before the IRS.

        Prior to joining Marini & Associates, P.A., he spent 32 years as the Senior Attorney with the Internal Revenue Service (IRS), Office of Deputy Commissioner, International.

        While with the IRS, he examined approximately 2,000 Estate Tax Returns and litigated various international and tax issues associated with these returns.As a result of his experience, he has extensive knowledge of the issues associated with and the preparation of U.S. Estate Tax Returns for Resident and Non-Resident Aliens, Gift Tax Returns, Form 706QDT and Qualified Domestic Trusts.

        Read more at: Tax Times blog

        Canadian FATCA IGA With U.S.Faces Constitutional Challenge in Court

        September 17, 2015

        In August last year, two women, Gwen Deegan of Toronto and Virginia Hillis of Windsor, launched a challenge to the Ottawa government's implementation of the US Foreign Account Tax Compliance Act (FATCA). Both are US citizens by birth but have lived in Canada since infancy and have no US passport, but are still liable to US worldwide taxation and FATCA reporting requirements.
        They claim the law contravenes the US-Canada Treaty, which prohibits the exchange of the type of information specified by FATCA. They also allege it contravenes Canada's Constitution Act and Charter of Rights and Freedoms.

         

        FATCA requires banks in every country to identify their US clients and report their accounts to the US Internal Revenue Service (IRS), either directly or indirectly through the banks' own domestic tax agency. In February 2014, the Canadian government signed a 'Model 1 agreement' with the US requiring Canadian banks to make FATCA reports to the Canada Revenue Agency (CRA), which will automatically forward the information to the IRS. This agreement was later translated into Canadian law through implementing legislation.
        The court has committed to giving a ruling before September 30, 2015 when the Canada Revenue Agency is scheduled to begin sending FATCA reports to Washington.  

        If the court overturns the inter-governmental agreement, Canadian banks will have no easy way of complying with the FATCA reporting regime. If they attempt to disclose their US clients' account details direct to the IRS they are likely to be challenged under Canada's privacy legislation. If they do not disclose the information required, they may then be forced to pay the non-compliance penalty specified by FATCA, a 30 per cent withholding tax on all their US-sourced investment income.
        However, appeals will certainly follow the first-instance outcome, whatever it is. In the meantime the Canada Revenue Agency will not be able to pass on the banks' FATCA disclosures to the IRS.
        Need Help With
          Your US Reporting Requirements?



         Contact the Tax Lawyers at

        Marini & Associates, P.A.  
        for a FREE Tax Consultation
        at: www.TaxAid.us or www.TaxLaw.ms or
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