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Beginning on January 1, 2024, many corporations, limited liability companies, and other entities created or registered to do business in the United States must report information about their beneficial owners—the persons who ultimately own or control the company, to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).

The Financial Crimes Enforcement Network (FinCEN) has issued FAQs on the beneficial ownership information (BOI) reporting requirements that will take effect on January 1, 2024.

In September 2022, FinCEN issued final regs implementing the Corporate Transparency Act (CTA). The CTA requires certain business entities created or registered to do business in the U.S. to report identifying information about their beneficial owners to FinCEN.

To supplement the guidance provided in the final regs, FinCEN recently issued a series of frequently asked questions (FAQs). The FAQs provide the following information:

• Unless exempt, entities would need to report their beneficial ownership information (BOI) to FinCEN if they had to file a document with their state, territory, or Tribal government to create or register the entity to do business in that jurisdiction (reporting entity).

Sole-proprietors using a fictitious or doing business as (DBA) name may also need to file DOI information if they had to register their DBA with a state agency. 

• A reporting entity will need to provide FinCEN with its legal name and any trade name or DBA, its address, the jurisdiction in which it was formed or first registered, and its taxpayer identification number.

• For each beneficial owner, the reporting company will need to provide the individual's legal name, birthdate, address and identifying number and copy of a driver's license, passport, or other approved document.

Per the FAQs, a "beneficial owner" of a reporting entity is any individual who exercises substantial control over the entity or who owns or controls at least 25% of the entity.

A beneficial owner:

• Directly or indirectly exercises “substantial control” over a company, or
• Directly or indirectly owns or controls 25% or more of a company’s ownership interests.

A person can be a beneficial owner when they have significant influence over the activities and decisions of the entity, even if they don’t own a substantial portion of the company’s stock or hold a formal title such as, but not limited to, CEO or President.

“Beneficial owners” could be found beyond the normal scope of ownership potentially extending to certain family members. These rules are complex and should be examined thoroughly to ensure compliance.

For entities created or registered to do business in the U.S. before January 1, 2024, their initial BOI reports are due by January 1, 2025. For entities created or registered to do business in the U.S. on or after January 1, 2024, their BOI reports are due within 30 calendar days of receiving notice that their entity's creation or registration is effective.

Updated reports will be required when there is a change to previously reported information about the reporting entity or its beneficial owners. These reports will be due within 30 calendar days after a change occurs.

Corrected reports will be required when previously reported information was inaccurate when filed. Corrected reports will be due within 30 calendar days of the error's discovery.

Have A Beneficial Ownership Problem?

Marini & Associates, P.A. 

Read more at: Tax Times blog

The US District Court for the District of Colorado on June 1, 2023, held that the US Department of Justice (DOJ) can assert and seek judgment for federal income tax deficiencies using a common law right of action, bypassing the usual statutory tax deficiency procedures outlined in the Internal Revenue Code (IRC). 

This decision in  in United States v. Liberty Global, Inc., might encourage the DOJ to seek tax collections through court judgments moving forward without following the IRC’s deficiency procedures. 

On its 2018 income tax return, Liberty Global, Inc. (LGI), a multinational telecommunications company, took the position that income earned by some of its controlled foreign corporations (CFCs) between January 1 and the close of the CFCs’ respective non-calendar tax years was not subject to certain IRC sections, including 951A (global intangible low-taxed income) and 965 (repatriation tax), and distributions of income from its CFCs during such period were tax-free under IRC Section 245A. LGI undertook a series of transactions that triggered CFC income and repatriated CFC profits during this period. The Internal Revenue Service (IRS) introduced retroactive temporary regulations to deny the benefits of this tax planning.

LGI originally filed its 2018 tax return in accordance with the temporary regulations, but later filed an amended return claiming a refund. The amended return took the position that the temporary regulations were invalid under the Administrative Procedure Act (APA). LGI prevailed on that position before the district court after filing a refund action.

The DOJ subsequently filed a separate complaint against LGI seeking to recover approximately $237 million in tax and $47 million in penalties, asserting that the transactions at issue lacked economic substance, and the substance of the transactions should be recognized over the form. 

The Complaint Was Filed Four Days Prior To The Expiration
Of The Three-Year Period Prohibiting Assessments.

LGI Moved To Dismiss The Amended Complaint On
The Ground That The IRS Did Not Issue A Notice
Of Deficiency Pursuant To IRC Section 6213(A).

A notice of deficiency is a prerequisite to assessing income tax. The government objected to the motion on the ground that it had a common law right to sue for an outstanding tax debt independent of the deficiency procedures.

The district court denied the motion to dismiss in a strongly worded order, concluding that “dual avenues of tax collection exist and are well recognized” and finding that the LGI’s interpretation of IRC Section 6213(a) was erroneous. To reach its conclusion, the district court had to determine that (1) there was sufficient support for the DOJ’s asserted common law right to sue on a tax deficiency and (2) that IRC Section 6213 does not prohibit such an action.

As to the first point, the district court acknowledged that this was a question of first impression in the US Court of Appeals for the Tenth Circuit but relied on a group of cases that, while distinguishable on various grounds, arguably endorsed the notion that the DOJ had such a right. The court also relied on the fact that neither it nor the parties could find any case law that explicitly rejected a dual process for tax collection. Regarding the second point, the court concluded that IRC Section 6123 was not a bar to the DOJ’s common law action and thereby rejected the key basis for LGI’s motion:

Defendant’s argument that section 6213(a) requires a notice of deficiency to issue before any recovery of unpaid income taxes can occur is based on a misleading alteration of the cited provision. The section provides in relevant part that “no assessment of a deficiency in respect of any tax imposed by subtitle A, or B, chapter 41, 42, 43, or 44 and no levy or proceeding in court for its collection shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer” and the taxpayer has had the opportunity to challenge that assessment in Tax Court if desired. See 26 U.S.C. § 6213(a). Defendant, purporting to quote this provision, asserts that “no levy or proceeding in court for [the collection of a tax deficiency] shall be made, begun or prosecuted until such notice has been mailed to the taxpayer.

The bracketed substitution of the phrase “collection of a tax deficiency” for “assessment of a deficiency” does nothing to enhance the clarity of the quoted language and in fact contorts its meaning. Defendant would rework the notice requirement to apply not only after administrative assessment but presumably to any recovery of unpaid income taxes. Section 6213 applies to the IRS’s assessment and collection of tax deficiencies; it does not refer to the government’s full panoply of remedies for recovery of unpaid taxes.

The district court interpreted the statute as requiring Section 6213(a) notice before collecting the assessed taxes. An “assessment” is a formal recording of a tax debt by the IRS. According to the court, it’s not the exclusive means through which the government can seek to obtain a judgment against a taxpayer for asserted deficiencies. Thus, because the government’s amended complaint did not operate to make an assessment, the court concluded that it is not barred by IRC Section 6213(a).

Although raised in LGI’s motion to dismiss, the LGI order declined to consider the implications of IRC Section 7422(e). This section allows a taxpayer to challenge a notice of deficiency in the US Tax Court after initiating a refund suit and gives the Tax Court jurisdiction over both the deficiency and refund suit. Is the common law right of action inconsistent with IRC Section 7422(e) in that it avoids the need for a notice of deficiency and eliminates the taxpayer’s ability to move their refund action to the Tax Court, or is the common law right more akin to the government’s right to offset in refund court? 

Liberty Global may embolden the DOJ to attempt to collect tax deficiencies by way of court judgment outside of the deficiency procedures provided by the IRC. 

We will closely monitor this case as it develops because it may require a new strategy when considering disputing a tax issue in courts other than the Tax Court.

 

 

for a FREE Tax Consultation at: 

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

Sources:

Lexology

United States v. Liberty Global, Inc., 

Read more at: Tax Times blog

The number of people expatriated from the United States rose nearly 55% during the second quarter of 2023 compared with the previous quarter, the Internal Revenue Service said in a notice published Thursday.

Among those included on the list are those who lose U.S. citizenship under Internal Revenue Code Section 877(a) and Section 877A, according to the notice, as well as long-term residents who are treated as losing citizenship under Section 877(e)(2).

The Number Of People Losing Or Renouncing Their U.S. Citizenship Increased to 830 For the 2nd Qtr of 2023.

A 55% Increase From The 1st Quarter of 2023.

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

• Nearly 1 in 4 American expatriates say they are “seriously considering” or “planning” to ditch their U.S. citizenship, a survey from Greenback Expat Tax Services finds.  
• About 9 million U.S. citizens are living abroad, the U.S. Department of State estimates.
• More than 4 in 10 who would renounce citizenship say it’s due to the burden of filing U.S. taxes, the Greenback poll shows.

Should I Stay or Should I Go?

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

According to Law360, The Third Circuit revived a couple's challenge to their Internal Revenue Service bill Wednesday, finding that their failure to comply with a 90-day deadline for filing a petition with the U.S. Tax Court wasn't fatal to their case.

In the published opinion, a three-judge appeals court panel handed a victory to taxpayer rights advocates and said that the 90-day deadline for challenging IRS deficiency notices under Internal Revenue Code Section 6213(a) isn't jurisdictional. The ruling reversed a decision by the Tax Court that tossed Isobel Berry Culp and David R. Culp's tax challenge due to their failure to comply with the deadline.

Congress hasn't plainly said that the statutory deadline is a jurisdictional hurdle that has to be cleared for access to the Tax Court, the Third Circuit said, upending previous determinations from the Tax Court that the Section 6213(a) deadline is jurisdictional. The U.S. Supreme Court determined last year in Boechler PC v. Commissioner that a deadline for other Tax Court cases under IRC Section 6330(d)(1) was also not jurisdictional, a decision cited by the Third Circuit in its opinion Wednesday. 

"If the [Section] 6330(d)(1) deadline in Boechler fell short of being jurisdictional, [Section] 6213(a)'s limit must as well," the Third Circuit said.

The IRS sought to increase the Culps' tax bill for 2015 after concluding they didn't report a roughly $8,800 legal settlement they received, even though they had reported it as "other income" on their return for that year, according to the Third Circuit. The agency sent a notice of deficiency to the couple after they failed to respond to a letter concerning the purported underpayment, which totaled nearly $4,700, including a penalty.

Later, in 2018, the IRS sent another letter, this time saying they owed just a little over $2,000 in taxes for 2015, the Third Circuit said. The couple didn't respond, so the IRS used a levy to take their Social Security earnings and tax refund for 2018.

The couple filed a petition with the Tax Court, which dismissed their case because they failed to meet the 90-day deadline.

The Third Circuit said in its opinion Wednesday that the couple's petition was well past the 90-day time frame for filing deficiency cases with the Tax Court. But the appeals court rejected the Tax Court's conclusion that the Section 6213(a) deadline is jurisdictional, citing the Supreme Court's decision finding Section 6330(d)(1) is not jurisdictional.

Like the text of Section 6330(d)(1), there is no clear connection in Section 6213(a) between the language concerning the 90-day deadline and the language giving the Tax Court jurisdiction over deficiency cases, the Third Circuit said.

Congress did intentionally limit the Tax Court's power in such cases in other parts of the statute, indicating that it "knew how to limit the scope of the Tax Court's jurisdiction," the opinion said.

"It expressly constrained the Tax Court from issuing injunctions or ordering refunds when a petition is untimely," the opinion said. "But it did not similarly limit the Tax Court's power to review untimely redetermination petitions."

And the 90-day deadline is subject to equitable tolling, the Third Circuit found, saying that nonjurisdictional deadlines are presumed to be subject to equitable tolling. There's no compelling evidence indicating Congress meant to exempt the deadline from such tolling, the appeals court said.

Have a Tax Problem?

 

Need To Go To Tax Court?

 

 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