Yearly Archives: 2023

On June 9, 2020 to the we posted The 2017 TCJA's Repatriation Tax is Constitutional in the 9th Circ., where we discussed that the Ninth Circuit tossed a constitutional challenge to the 2017 federal tax overhaul's corporate repatriation tax, affirming a lower court's decision that the one-time levy passes muster under a clause limiting the federal government's authority to tax.

Now according to Law360, the U.S. Supreme Court said on June 26, 2023, that it would review a Ninth Circuit ruling rejecting a couple's challenge to the constitutionality of the repatriation tax that was passed in the Republicans' 2017 tax law.

The Justices Granted The Petition By Charles And Kathleen Moore, Who Challenged The Tax Cuts And Jobs Act's Repatriation Tax Under Internal Revenue Code Section 965,
A One-Time Mandatory Transition Tax On
Deferred Earnings Held Abroad.

The couple asked the court to review their case in February, arguing the Ninth Circuit wrongly concluded that reinvested profits from an Indian business in which they were shareholders could be taxed as income under the 16th Amendment without running afoul of a clause limiting the federal government's authority to tax.

The Moores argued the tax was unconstitutional because it was applied to earnings they never received. They said it is a direct tax that violates the U.S. Constitution's apportionment clause, which requires that such taxes be apportioned among the states in proportion to their population. The 16th Amendment, though, carves ot an exception for income taxes.

The couple first filed a complaint in 2019 in a Washington federal court, saying they paid about $15,000 in taxes under Section 965 based on their small stake in a controlled foreign corporation, KisanKraft Ltd., that provides equipment to small-scale farmers in India.
In seeking a refund, the Moores said the tax bill was based on earnings retained and invested by KisanKraft, earnings they never received and the levy is a direct tax that violates the constitution's apportionment clause.

The Washington court tossed the suit, and the Ninth Circuit upheld the decision in June 2022, agreeing with the lower court that the one-time repatriation tax served a legitimate purpose.

The repatriation tax also shares features with other levies that apply taxes without clear realization events, according to the government. For example, the government said, U.S. citizens who relinquish citizenship are taxed on the value of their assets as if they had sold them the day before expatriation, regardless of whether they had sold those assets or not.

Chye-Ching Huang, executive director of the Tax Law Center at New York University School of Law, said the case could encourage suits challenging other areas of settled tax law if the justices were to decide the case in favor of the couple.

"If the Supreme Court rules for the plaintiffs, that would invite litigation unsettling swaths of the tax code that have been enacted by both parties over many decades based on their shared, correct understanding of the constitution," Huang said in a statement.

Have IRS Tax Problems?

     Contact the Tax Lawyers at

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243) 

Read more at: Tax Times blog

According to Law360, a former pharmaceutical executive lost his last chance to reduce a $1.4 million penalty for failing to report a foreign bank account when the U.S. Supreme Court declined on Tuesday to hear the case.

The court will not consider Arthur Bedrosian's argument that the U.S. should have used a subjective standard to determine whether he acted recklessly in failing to report an account he held at UBS in Switzerland on his 2007 tax forms. Bedrosian had almost $1.9 million in the account, which he had operated since the 1970s, according to court documents.

Bedrosian, former chief executive officer of pharmaceutical company Lannett, had appealed a 2022 Third Circuit ruling affirming a $1 million penalty that had grown to $1.4 million including interest and late fees. He argued that the appellate court erred by using an objective standard and not a subjective standard to determine whether he willfully avoided reporting his account. An objective standard saying that he should have known he needed to report his account is too broad, he argued, and can be interpreted to include almost every instance of nonreporting.

A district court initially struck down the penalty when it first considered the case, finding that while Bedrosian had negligently failed to report his Swiss bank account, he had not acted willfully.

The Third Circuit remanded the case in 2018, determining that it was unclear whether the court had used the correct legal standard to determine Bedrosian's willfulness. In reviewing the case a second time, the district court decided that Bedrosian's conduct was egregious enough to rise to the level of a deliberate act.

Bedrosian appealed again, and a Third Circuit panel agreed with his earlier argument that the government failed to set a foundation for evidence that it used to determine his account balance and penalty. However, an admission by Bedrosian's attorney during opening statements that his client had about $2 million in his account, the panel said, was sufficient to set the penalty amount, which is equal to 50% of the account balance. In September, the panel declined to rehear the case.

Ian Comisky of Fox Rothschild LLP, who represents Bedrosian, said he was disappointed in the Supreme Court's decision not to review the case. The Supreme Court held in June that the standard for scienter, or knowledge of wrongdoing, in False Claims Act cases is subjective, not objective, Comisky noted. He said he had hoped the court would extend that reasoning in a different context to Bedrosian and "clarify an important area of the law with respect to the imposition of penalties."

Been Assessed a 50% Willful FBAR Penalty?

 

 

Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 

 

for a FREE Tax Consultation

at: www.TaxAid.com or www.OVDPLaw.com or

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

 

Read more at: Tax Times blog

In July 2021, the House of Representatives, Committee on Appropriations, requested that TIGTA “review the IRS’s strategy to recruit and train employees to conduct audits of high earners and large businesses that underreport income as well as to collect taxes from taxpayers who have the ability to pay their outstanding debts, while also protecting taxpayer rights in the course of its enforcement efforts.” 

IRS Enforcement Function Full-Time Equivalent Employees Have Declined From Fiscal Years (FY) 2010 Through 2021
Due To Budget Decreases.

The devotion of considerable resources to the hiring surge also kept the agency's Large Business and International and Small Business and Self-Employed divisions from replacing employees lost to normal attrition, the report said. 

This reduction to enforcement function staffing levels has affected the total enforcement revenue collected by the IRS. This audit was initiated to evaluate the IRS’s strategy to recruit employees to conduct audits of high earners and large businesses. A separate report on the IRS’s examination training strategy will be issued later this fiscal year.

This reduction to enforcement function staffing levels has affected the total enforcement revenue collected by the IRS. This audit was initiated to evaluate the IRS’s strategy to recruit employees to conduct audits of high earners and large businesses. A separate report on the IRS’s examination training strategy will be issued later this fiscal year. 

The Inflation Reduction Act (IRA) provided the IRS with approximately $45.6 billion dedicated to enforcement activities. The IRS has initiated planning efforts to hire these employees, with the majority working in the IRS’s Large Business and International (LB&I) and Small Business/Self-Employed (SB/SE) Divisions. 

Reductions to IRS enforcement function staffing levels over the last decade have affected the total enforcement revenue collected. The IRS estimated that the gross annual Tax Gap for Tax Years 2014 to 2016 was $496 billion, and projects that for Tax Years 2017 to 2019, it will increase to $540 billion per year. A reduction in the number of enforcement function employees may affect the IRS’s ability to maintain sufficient audit coverage of entities and individuals contributing the most to the Tax Gap and limit its efforts to collect the taxes taxpayers acknowledge they owe but have not paid. 

The IRS Estimates That, With Existing Hiring Actions And Expected Attrition, The LB&I Division Could Hire Approximately 450 Positions And The SB/SE Division Could Hire Approximately 2,300 Positions Without Exceeding Their Authorized Staffing Levels.

However, the hiring surge of 10,000 employees to assist in reducing the tax return filing backlog for the Wage and Investment Division’s Submission Processing and Accounts Management functions has prevented the LB&I and SB/SE Divisions from hiring more employees to increase audits of high earners. Further, the LB&I and SB/SE Divisions have not maintained their authorized staffing levels with normal attrition and the hiring of new employees to replace those who have left the business units. 

A draft of the SB/SE Division’s FY 2023 hiring goals includes additional revenue agent hires. Increased examination hiring is also part of the LB&I Division’s overall hiring plan for FY 2023. The IRS issued the IRA Strategic Operating Plan in April 2023. The plan estimates that, through the end of FY 2024, there will be a total growth of approximately 20,000 employees funded by the IRA. Approximately 7,000 full-time equivalent employees are planned for enforcement business units. This report presents a pre-IRA snapshot of IRS enforcement hiring efforts.

However,the $20 billion in IRS funding cuts included in the debt limit deal reached by President Joe Biden and House Speaker Kevin McCarthy would be part of the largest-ever rescission of previously authorized funding, the chair of the House tax panel said Tuesday, May 30, 2023 in urging colleagues to support the bill.

However, The Hiring Surge Of 10,000 Employees To Assist In Reducing The Tax Return Filing Backlog For The Wage And Investment Division’s Submission Processing And Accounts Management Functions Has Prevented The LB&I And SB/SE Divisions From Hiring More Employees To
Increase Audits Of High Earners.

Further, the LB&I and SB/SE Divisions have not maintained their authorized staffing levels with normal attrition and the hiring of new employees to replace those who have left the business units. 

A draft of the SB/SE Division’s FY 2023 hiring goals includes additional revenue agent hires. Increased examination hiring is also part of the LB&I Division’s overall hiring plan for FY 2023. The IRS issued the IRA Strategic Operating Plan in April 2023. 

Now All of Those Aspirational Objectives to Guarantee
Fairness in The Tax System Are ALL GONE
as a Result of the Debt Limit Bill!

The $20 billion in IRS funding cuts included in the debt limit deal reached by President Joe Biden and House Speaker Kevin McCarthy would be part of the largest-ever rescission of previously authorized funding, the chair of the House tax panel said Tuesday, May 30, 2023 in urging colleagues to support the bill.

Have an IRS Tax Problem?

    Too Bad - There Is Not Going to Be
Any IRS Employees to Help You!

As 52,000 Are Qualified To
Retire in the Next 6 Years!

 Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243) 

According to Law360, the level of Internal Revenue Service resources used for a hiring surge of workers to help address the agency's backlog of tax returns kept the agency from adding workers to audit more wealthy taxpayers, according to a watchdog report released Monday.

The devotion of considerable resources to the hiring surge also kept the agency's Large Business and International and Small Business and Self-Employed divisions from replacing employees lost to normal attrition, the report said. The LB&I and SB/SE divisions will house the majority of enforcement workers the agency plans to hire to audit high earners and large businesses, the Treasury Inspector General for Tax Administration's report, dated Thursday, said.

"As a result, LB&I and SB/SE division management have been unable to keep up with hiring new employees to replace those who have left their business units and will be unable to complete as many audits of high earners and large businesses as planned," the report said.

TIGTA's report said it was a snapshot of IRS hiring work before the Inflation Reduction Act, which provided the IRS $45.6 billion for enforcement as part of a nearly $80 billion funding increase.

The report advised the IRS' deputy commissioners for services and enforcement and operations support to work together to develop a plan to effectively manage changes in hiring volume and to improve IRS-wide communication channels to lessen the impact of large hiring surges. The agency agreed with both recommendations, according to the report.

Budget cuts caused the IRS' number of full-time equivalent enforcement employees to plunge 30 percent between the 2010 and 2021 fiscal years, the report said. 

The Treasury Inspector General for Tax Administration (TIGTA) has released an audit requested in July 2021 by the House Appropriations Committee and addressing the IRS' strategy to recruit and train employees to conduct audits of high earners and large businesses that underreport income. (Audit Report No. 2023-10-025)

The legislative mandate also wanted such employees to collect income taxes from taxpayers who have the ability to pay their outstanding debts, while also protecting taxpayer rights in the course of its enforcement efforts.

TIGTA pointed out that enforcement function full-time equivalent employees have declined by 30% from fiscal years 2010 through 2021. "This reduction to enforcement function staffing levels has affected the total enforcement revenue collected by the IRS," the audit said.

The audit made clear that the IRS was counting on the $45.6 billion "dedicated to enforcement activities" provided for in the Inflation Reduction Act of 2022. "The IRS has initiated planning efforts to hire these employees, with the majority working in the IRS' Large Business and International (LB&I) and Small Business/Self-Employed (SB/SE) Divisions," TIGTA said.

According to the audit, the IRS has estimated that the gross annual Tax Gap for Tax Years 2017 to 2019, will be $540 billion per year. "A reduction in the number of enforcement function employees may affect the IRS' ability to maintain sufficient audit coverage of entities and individuals contributing the most to the Tax Gap and limit its efforts to collect the taxes taxpayers acknowledge they owe but have not paid," the audit said.

The IRS also estimated that, with existing hiring actions and expected attrition, the LB&I Division could hire some 450 positions and the SB/SE Division could hire approximately 2,300 positions and stay within authorized staffing levels. However, the hiring surge of 10,000 employees to help tackle the tax return filing backlog "has prevented" these two divisions from hiring more employees to increase audits of high earners, TIGTA said. "Further, the LB&I and SB/SE Divisions have not maintained their authorized staffing levels with normal attrition and the hiring of new employees to replace those who have left the business units," the audit said.

The IRS Strategic Operating Plan, which was issued in April, estimates that through the end of FY 2024, there will be a total growth of approximately 20,000 employees funded by the IRA. Approximately 7,000 full-time equivalent employees are planned for enforcement business units.

Read more at: Tax Times blog

Why are some Americans Individuals expatriating?

• Trump Did Not Win the Election?
• Obama-Care with its associated additional 3.8% Obama Care Tax make you feel like leaving the country?
• You're so sick of liberal Democrats trying to socialize the United States by taxing wealthy people?

• Or maybe you're a naturalized U.S. citizen or permanent resident who has prospered here, but would now like to move back the old country for retirement or to start a new  venture?

According to CNBC the top reason why Americans abroad want to dump their U.S. citizenship include:

So Where Do Wealthy People Move To
When They Expatriate From The US?

According to Henley & Partners, Private wealth migration trends look set to revert to pre-Covid patterns in 2023, with Australia reclaiming the top spot for net millionaire arrivals as it did between 2015 and 2019, and China suffering the biggest net outflows of high-net-worth individuals as it has since 2013. 

Notable exceptions are former top wealth magnets, the UK and the USA, according to the Henley Private Wealth Migration Report 2023, which tracks wealth and investment migration trends worldwide. 

Millionaire migration figures can be a telling real-time barometer for the health of an economy as wealthy people are extremely mobile and they therefore tend to be the first to move when the need arises. The countries that consistently attract affluent families through migration tend to be economically robust and usually have low crime rates and offer attractive business opportunities.

The top five destinations for net inflows of high-net-worth individuals in 2023 are projected to be

1. Australia, 
2. the UAE, 
3. Singapore, 
4. the USA, and 
5. Switzerland. 

On the flip side, the largest net outflows of millionaires are expected to come from 

1. China, 
2. India, 
3. the UK, 
4. Russia, and 
5. Brazil.

Australia is expected to attract the highest net inflow of high-net-worth individuals in 2023. This large influx of the world’s wealthiest is nothing new. Australia consistently attracts sizeable numbers of millionaires every year, mainly from Asia and Africa, but more recently also from high-income countries such as the UK.

Need Advise on Expatriation?

 

Contact the Tax Lawyers at 

Marini & Associates, P.A.   

for a FREE Tax Consultation contact us at:

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

Read more at: Tax Times blog