Monthly Archives: July 2014

Jack M. Mintz: Why identifying taxation with economic patriotism is a ‘Lewnie’ notion

Interesting article. Neglects to mention that the Obama administration wants to make the changes retroactively. This article should be read along with the following Robert Wood article.
The health of a country is a function (in part) of the health of it’s tax system. The U.S. tax system is unbelievably out of touch with the reality of the modern world. It has reached the point where the rest of the world should take note and encourage U.S. tax reform.
As this article points out:

The U.S. is one sick puppy.


Getting Married – How Must I Include the IRS In My Wedding Plans?

Yes and marriage is particularly problematic for Americans abroad – especially when an non-U.S. citizen (AKA Alien) becomes the spouse. For more on the “FBAR Marriage”:

William Byrnes' Tax, Wealth, and Risk Intelligence

Why would a taxpayer want to include the IRS in his or her wedding plans?  Well, “its the law”.

No, the taxpayer does not need to send a wedding invitation to the closest IRS office.  But a 2014 marriage results in changes to the new married “couple’s” 2014 tax filing and possibly amount owed in tax for 2014.  Whether the couple will owe more in tax each year, including the year of marriage, over that of the combined amount of each individual’s tax due, depends on several factors, such as whether both spouses have income and how much that income is.  In general, a married couple, when both spouses are employed, pay more income tax than if they remained single and filed individual tax returns.  Also, the married couple may owe, and may owe more, of the additional 3.8% Net Investment Income Tax.

The IRS’ Summer Tax Tip 2014-2 reminds…

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According to the Wall Street Journal:
“ZURICH—Swiss banks are seeking to chip away at potential penalties from the U.S. Justice Department by offering to compensate American clients who disclose their hidden accounts, according to people familiar with the matter.

More than 100 Swiss banks have signed up for a self-reporting program offered last year by the Justice Department, which can result in penalties for harboring undeclared American accounts. Banks can mitigate penalties by encouraging clients to pre-emptively disclose those accounts to the U.S. Internal Revenue Service.

Some banks have dangled financial incentives in front of current and former clients to entice them to divulge accounts to the IRS. In some instances token amounts of around $5,000 are being offered, attorneys and financial advisers say. In other cases significantly larger offers are selectively being made to share the legal and accounting costs that accompany the voluntary disclosure process.

A client entering voluntary disclosure can face fees amounting to hundreds of thousands of dollars, attorneys say.”
Interesting commentary from Robert Steinberg follows:

The Tax Wars Blog

An article in the Wall Street Journal on July 19, 2014 by John Letzing (“Taxpayers Get Incentives to Report: Swiss Banks Aim to Entice Americans to Disclose Accounts to IRS by Helping Cover Costs, Penalties”), reveals what many professionals have known for a while.  Some Swiss Banks are pressuring and offering inducements for clients to enter the IRS Offshore Voluntary Disclosure Program and agree to waive Swiss Bank Secrecy laws that the banks can disclose their accounts.

Why are the Swiss banks so eager to have their American customers enter the OVDP that they would offer financial incentives?

Answer: Because, it serves the bank’s interests.  Over 100 smaller Swiss banks have entered the Swiss Bank Settlement Program offered by the Department of Justice and sanctioned by the Swiss government.  These so-called Category 2 banks not presently under investigation will pay a penalty under negotiated non-prosecution agreements (NPAs).  The banks must…

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Treasury’s war, citizenship, reserve currencies, debt, #MH17 and more

The above tweet references a July 21, 2014 podcast by Simon Black of Sovereign Man. Whether you agree or disagree with the content, this podcast is fascinating because it attempts to interpret current events both:

1. In light of history; and

2. In terms of how certain events relate to each other.

The podcast references a number of topics that have been the subject of individual posts here, the Isaac Brock Society and other blogs. For that reason alone it is worth the 40 minute investment.

Examples include:

Continue reading

FATCA – Guilty Until Found Innocent

“There are some who don’t see a link between the Credit Suisse fine and FATCA. Simply put, they both deal with banks assisting in offshore tax evasion. The difference between FATCA and the fine is that in the near future the onus of proof shifts away from the regulator to the institution in question.

Under this new regime the institution in question is guilty until found innocent.”

FATCA & CRS Training. Advice. Consultancy.

There has been much talk of Credit Suisse being fined USD 2.6 Billion by US regulators.

Within hours speculation was rife about which institution would be next to be caught in the crosshairs of US regulators.

Speculation was that the next would be BNP Paribas, not for allegedly facilitating tax evasion but for allegedly facilitating money laundering to countries like Iraq, Sudan and Syria.

The profile of this news story has dipped in the last week or so but the fine allegedly being considered is USD 10 Billion.

The allegations, if true, warrant a substantial fine but there are many, including the French, that consider a fine of USD 10 Billion disproportionate.

Recently, the French Government has been talking a lot about ‘reciprocity’.

But why that word in particular? Surely the French do not believe that American Banks have been facilitating money laundering in Euros? I severely doubt it.


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There is no one solution for a client who has an unreported offshore bank account. There are a number of alternative routes one may take to come into compliance:

OVDP and Opt-out
Streamlined Process for taxpayers residing outside of the U.S.
Streamlined Process for taxpayers residing in the U.S.
Transitional Rules for those who’ve mailed their OVDP Letter before July 1, 2014.
Quiet Disclosure.
Filing forward.
Do nothing is Statutes of Limitations have run.
Traditional Voluntary Disclosure for those with domestic unreported income.
Optional compliance procedures for those with unfiled FBARS but no unreported income.
Optional Compliance Procedures for those with unfiled information returns but no unreported income.

The Tax Wars Blog

John J. Scroggin published an interesting and entertaining survey of tax complexity in the Wealth Strategies Journal (Tax Complexity, History, and Humor, July 8, 2014).

The article begins with a quote from Judge Learned Hand:

 “In my own case the words of such an act as the Income Tax… merely dance before my eyes in a meaningless procession: cross-reference to cross-reference, exception upon exception—couched in abstract terms that offer [me] no handle to seize hold of [and that] leave in my mind only a confused sense of some vitally important, but successfully concealed, purport, which it is my duty to extract, but which is within my power, if at all, only after the most inordinate expenditure of time. I know that these monsters are the result of fabulous industry and ingenuity, plugging up this hole and casting out that net, against all possible evasion; yet at times I cannot…

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Revenue from the Offshore Voluntary Disclosure Initiatives (OVDI), FBAR, and FATCA

The article quotes:
“Congress enacted both the Title 31 and the Title 26 provisions regarding the reporting requirements of the FBAR … and Form 8938 (Statement of Specified Foreign Financial Assets). Reporting on the FBAR is required for law enforcement purposes under the Bank Secrecy Act, as well as for purposes of tax administration. As a consequence, different policy considerations apply to Form 8938 and FBAR reporting. These are reflected in the different categories of persons required to file Form 8938 and the FBAR, the different filing thresholds for Form 8938 and FBAR reporting, and the different assets (and accompanying information) required to be reported on each form. Although certain information may be reported on both Form 8938 and the FBAR, the information required by the forms is not identical in all cases, and reflects the different rules, key definitions (for example, “financial account”), and reporting requirements applicable to Form 8938 and FBAR reporting.

These differing policy considerations were recognized by Congress during the passage of the HIRE Act and the enactment of Section 6038D. Congress’s intention to retain FBAR reporting requirements, notwithstanding the enactment of section 6038D, was specifically noted in the Technical Explanation of the Revenue Provisions Contained in Senate Amendment 3310, the “Hiring Incentives To Restore Employment Act,” …

The Technical Explanation states that “[n]othing in this provision [section 511 of the HIRE Act enacting new section 6038D] is intended as a substitute for compliance with the FBAR reporting requirements, which are unchanged by this provision.” (Technical Explanation at p. 60.) …”

William Byrnes' Tax, Wealth, and Risk Intelligence

Disclosures and Amount Recovered Thus Far by OVDI from Non-Compliant Taxpayers 

Treasury-Dept.-Seal-of-the-IRSOn June 18, 2014, IRS Commissioner John Koskinen disclosed that the 2009, 2011, and ongoing 2012 OVDIs have generated more than 45,000 disclosures and the collection of about $6.5 billion in taxes, interest and penalties.  Thus, on its face, the OVDIs look to be batting an average of approximately 9,000 taxpayers a year with approximately $1.3 billion revenue.

However, at the beginning of the year it was reported that (OVDI) have led to 43,000 taxpayers paying back taxes, interest and penalties totaling $6 billion to date.  The past 6 months only generating 2,000 additional disclosures and $500 million additional revenue may lead one to speculate that the OVDI, at least for high net wealth disclosures, is petering out.  Regarding the 2012 IRS Streamlined OVD program, the Taxpayer Advocate found that as of September 2013, 2,990 taxpayers submitted returns reporting only…

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Andrew Coyne: Judges rule to hold Parliament to its word, not to usurp its power

Thanks to Andrew Coyne for a well written article on:
1. The Harper Government’s attitude toward Canada’s Charter of rights; and
2. The role of law and the constitution in Canada.
In an era where the Supreme Court of Canada has become the “Official Opposition”, this article raises issues worth considering.

Part II: U.S. Enforcement/Collection of Taxes Overseas against USCs and LPRs – Pasquantino – Wire Fraud and Mail Fraud

There’s good news and bad news:

First, the good news – The revenue rule appears to remain the law making it difficult to enforce U.S. tax claims abroad;

The bad news – There are other statutes that can be used.

“At the end of the day, it seems this case stands for the proposition that the U.S. government can indeed use U.S. laws, to at least indirectly enforce the tax laws of another country. The dissenting opinion in this 5-4 decision, written by Justice Ginsburg at 375 noted that (“Canadian courts are best positioned to decide ‘whether, and to what extent, the defendants have defrauded the governments of Canada and Ontario out of tax revenues owed pursuant to their own, sovereign, excise laws.’”) (quoting United States v. Pasquantino, 336 F.3d 321, 343 (4th Cir. 2003).

The direct enforcement by the U.S. government of U.S. tax judgments overseas will usually be very difficult, specifically to collect overseas assets to pay the taxes. However, the point of Pasquantino is that the government has yet another tool to bear against U.S. persons, at least in certain circumstances, that may help them effectively (and indirectly) bring legal actions against them in the U.S. to effectively enforce tax claims arising from transactions overseas. This can be a very powerful tool for the government.”


Please see my prior post for important background and an introduction to the “Revenue Rule”, U.S. Enforcement/Collection of Taxes Overseas against USCs and LPRs – Legal Limitations

The 9th Circuit Her Majesty case and the Canadian Supreme Court Harden case were both discussed. Both cases are older (1997 and 1963, respectively) and both directly address the old English common law “Revenue Rule” which stands for the proposition as explained by the Canadian Supreme Court citing to another case that:

“. . . there is a well-recognized rule, which has been enforced for at least 200 years or thereabouts, under which these courts will not collect the taxes of foreign States for the benefit of the sovereigns of those foreign States; and this is one of those actions which these courts will not entertain.”n3 [1928] Ch. 877 at 884.

More recently in 2005 in Pasquantino, the U.S. Supreme Court reaffirmed the…

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CCICS – Reliance on Other Agencies Complicates FinCEN’s Bid to Toughen Enforcement

“Other signs suggest FinCEN is toughening its approach in different ways. In October, ACAMS reported that the bureau is considering whether to employ its subpoena power under Title 31 of the U.S. criminal code to retrieve account data from foreign financial institutions with correspondent accounts in the United States.”

The Truth is the LIGHT

Reliance on Other Agencies Complicates FinCEN’s Bid to Toughen Enforcement

By Colby Adams

Efforts to ramp up the U.S. financial intelligence unit’s enforcement of the Bank Secrecy Act have run into a longstanding hurdle: the bureau’s reliance on financial regulators for case leads.

Under the directorship of former federal prosecutor Jennifer Shasky Calvery, the Financial Crimes Enforcement Network’s once-separate compliance and enforcement functions have been combined into a single office within the new Division of Enforcement. The bureau, known as FinCEN, has staffed the division with former federal prosecutors.

The division’s establishment came as part of a bureau-wide reorganization that commenced in June 2013, and a subsequent hiring campaign intended to enhance the issuance of warning letters, injunctions and civil money penalties against institutions and individuals that violate U.S. anti-money laundering (AML) rules.

But despite the fact that FinCEN has grown its team of enforcement specialists from four to as…

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