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Court Authorizes IRS to Issue Summonses to Discover U.S. Taxpayers with Offshore Bank Accounts at Belize Bank International Limited and Belize Bank Limited

September 17, 2015

According to the DoJ, a federal court in Miami entered an order today authorizing the Internal Revenue Service (IRS) to serve a “John Doe” summons seeking information about U.S. taxpayers who may hold offshore accounts at Belize Bank International Limited (BBIL) or Belize Bank Limited (BBL), the Justice Department announced today. 

The order, which was entered by U.S. District Judge Ursula Ungaro, granted the United States’ petition for permission to seek records of BBIL’s and BBL’s correspondent accounts at Bank of America, N.A. and Citibank, N.A.  Those records will allow the IRS to identify U.S. taxpayers who hold or held interests in financial accounts at BBIL and BBL, as well as other financial institutions that used the same correspondent accounts.

“The Department and the IRS are using every tool available to identify and investigate those individuals determined to evade their U.S. tax and reporting obligations through the use of offshore financial accounts and foreign entities,”

said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. 

“These John Doe summonses will provide detailed information about individuals using financial institutions in Belize and, to the extent funds were transferred, other jurisdictions.  But rest assured, we are receiving information from many sources regarding hidden foreign accounts and offshore schemes.  The time to come clean is now – before we knock on your door.”

According to the IRS declaration, BBL is incorporated and based in Belize, and directly owns BBIL.  The IRS declaration further states that Belize Corporate Services (BCS) is incorporated and based in Belize and offers corporate services including the purchase of “shelf” Belizean international business companies.  BBL, BBIL and BCS are all corporate subsidiaries of BCB Holdings Limited, according to the declaration.  The declaration describes and IRS Revenue Agent’s review of information submitted by BBL and BBIL customers who disclosed their foreign accounts through the IRS offshore voluntary disclosure programs.  The customers in the “John Doe” class may have failed to report income, evaded income taxes, or otherwise violated the internal revenue laws of the United States, according the declaration.

The IRS uses what are known as “John Doe” summonses to obtain information about possible violations of internal revenue laws by individuals whose identities are unknown.  The John Doe summonses approved today direct Citibank and Bank of America to produce records identifying U.S. taxpayers with accounts at Belize Bank International Limited, Belize Bank Limited, or their affiliates, including other foreign banks that used BBIL and BBL’s correspondent accounts to service U.S. clients.  The court also granted the IRS permission to seek records related to Citibank’s and Bank of America’s correspondent accounts for BCS and information related to BCS’s deposit accounts at Bank of America.

A correspondent account is a bank account that one bank maintains for another bank.  Financial transactions involving U.S. dollars flow through U.S. banks; therefore, foreign banks that do business in U.S. dollars, but do not have an office in the United States, obtain a correspondent account in order to reach U.S. customers.  Transactions in the correspondent account leave a trail in the United States that the IRS can follow, including by using a John Doe summons.  The John Doe summons can let the IRS obtain records of money deposited, paid out through checks, and moved through the correspondent account through wire transfers.

Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide.  U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year.  Willful failure to report a foreign account can result in a fine of up to 50 percent of the amount in the account at the time of the violation.  Individuals wishing to learn more about the IRS offshore voluntary disclosure programs should visit our web page on voluntary disclosures and type in "OVDP" in the upper left corner of our Tax Blog.

Do You Have Undeclared Income from Belize Bank International Limited (BBIL) or Belize Bank Limited (BBL)?
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

Canadian Court Rules to Allow Canadian Tax Information Transfer to U.S. under FATCA

September 17, 2015

On September 17, 2015 we posted Canadian FATCA IGA With U.S.Faces Constitutional Challenge in Court where we discussed that 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.

The judge denied the “declaratory and injunctive relief” requested by the plaintiffs to stop the initial transfer of information. But he wrote that he did so “without prejudice to their right to pursue their claim” further.

Need Help With
  Your US Reporting Requirements?
 



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Sources

Financial Post
Wall Street Journal

STEP

 

 

Read more at: Tax Times blog

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

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