Norris, McLaughlin & Marcus

Offshore Voluntary Disclosure Update: Opt-out Appeals Are Possible

As stated in our previous post on June 19, 2014, there are several options available to the taxpayer in the United States and abroad to come forward and report US income and file the appropriate informational returns such as FBARs, Forms 3520 and others.  For a taxpayer who decides to enter the Offshore Voluntary Disclosure Program (“OVDP”), there is currently an asset-based penalty of 27.5% of the highest aggregate balance of the assets in the applicable eight-year period, as well as an income-based penalty imposed on the unreported income.  The 27.5% rate becomes 50% in some circumstances where the taxpayer has holdings in certain enumerated foreign financial institutions, which are listed on the IRS page here.  For some of these OVDP participants, their facts may dictate that they will want to “opt-out” of the OVDP program to undergo a regular IRS audit examining their returns and judging their overall level of willfulness (defined as an intentional violation of a known legal duty).  In some circumstances, such an audit can produce a penalty lower than the OVDP rate.  Taxpayers in this opt-out audit situation should know that they are not bound by the audit results; they maintain the same appeal rights in the OVDP audit as they would in a regular IRS audit.  Of course, an affected taxpayer should discuss this option with a reliable professional first.

Foreign Investors in US Health Care Provider and Equipment Companies – Beware of the False Claims Act

“Since 2009, the United States Department of Justice has collected more than $2.3 Billion from healthcare professionals for violations of the False Claims Act.”  The Medical Profession Beware: False Claims Act – A Danger You Can’t Ignore, Theodore Margolis, Esq. and Sandra Jarva Weiss, Esq., MD News Eastern Pennsylvania/NW New Jersey, 2014.  The Act prohibits making any false Medicare reimbursement claims.  Hospitals, doctors, medical associations, labs and equipment suppliers have often violated one of the Medicare reimbursement requirements inadvertently, thereby increasing the prospect of a False Claims Act violation.  Potential damages in a successful claim by the Department of Justice can be between $5,000 and $10,000 per violation, plus three times the damages suffered by the government as a result of the false claim.  If you are a foreign entity considering an investment in, or the acquisition of, a US healthcare provider or equipment supplier, make sure that you undertake a vigorous and comprehensive due diligence of your target.  To read the full article, click here.

A World of Opportunity at the International Exporting Conference

The MIDJersey Center for Economic Development hosted an International Business Opportunities conference on Wednesday, giving businesses and officials the opportunity to network with foreign delegations and share best practices and resources for U.S. businesses to export goods and services internationally.

The conference, at the Forsgate Country Club in Monroe Township, included consul generals from South Africa, Indonesia, Colombia, Israel and Canada, as well as some of the state’s top business leaders and government officials.

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REWIND: International Business News #96

Are there any bounds to EU privacy protection?  Google is fighting to find out.  An EU court ruling earlier this year requires that Google remove personal information from its search results upon request.  According to Google’s top lawyer, this “right to be forgotten” appears to have been created without providing for clear objective tests on what information is in the public interest and need not be removed.  Google is now touring European cities and seeking online comment in an attempt to seek feedback on the EU rules.

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Is there relief for Taxpayers who previously closed their offshore voluntary disclosure cases under the new streamlined procedure? Practitioners comment on the situation.

In an interesting article published in Taxanalysts – Tax Notes Today, “Practitioners Disagree on Fairness of Lack of OVDP Retroactivity” by Andrew Velarde, tax practitioners weigh in on the lack of access to the new streamlined procedures for taxpayers with closed cases from their previous offshore disclosure filings. In our previous blog post, “IRS Offshore Voluntary Compliance Programs Expanded and Modified,” we discussed the new streamlined procedures announced by the IRS on June 18, 2014. Generally, these new procedures afford eligible taxpayers the opportunity to pay a 5% asset based penalty (for residents) as opposed to the Offshore Voluntary Disclosure Program’s 27.5% penalty (assuming, of course, that the eligible taxpayer has met certain criteria and has signed a certification under penalties of perjury that the taxpayer did not act willfully in their non-filing).

Questions or concerns about how this potentially affects you? Consult with a tax professional on whether this is prudent for you.

To obtain a copy of “Practitioners Disagree on Fairness of Lack of OVDP Retroactivity” by Andrew Velarde, please contact Taxanalysts.

Is the End Near for US Tax Inversions?

US Tax Law rewards U.S. corporations with substantial tax benefits when they buy foreign companies and declare that they are based overseas.

A tax inversion is a tax avoidance tool available under the Internal Revenue Code, whereby a US company acquires a foreign company and then claims that its base of operations is now located outside of the United States. By doing so, the US company can substantially reduce its US tax obligation. Treasury Secretary Jacob Lew noted in an opinion piece published in the Washington Post yesterday that since the last major overhaul of the US Tax Code in 1986, many foreign countries have reduced their corporate tax rates, effectively making it inviting for US companies to move many operations abroad. Tax inversions are one way to make that move and legally minimize their US tax obligation.

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News on Offshore Reporting Developments: Medical Device Inventor Sentenced to Prison for Tax Fraud

On Monday, July 7, Ashvin Desai, a medical device inventor from California, was sentenced to serve six months in prison and six months and one day of home confinement for concealing more than $8 million in foreign bank accounts in India and Dubai. Desai also faces a $14 million penalty for failing to report the foreign bank accounts to the government on tax returns and FBARs.

To read the full story, click here.

REWIND: International Business News #95

In this week’s REWIND of international business news, Canada gets tough on spam, China hammers down on M&A deals and shipping alliances, and in a curious spirit of bonhomie, Russia gives in on its bitcoin stance and offers tax amnesty for offshore companies.

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IRS Offshore Voluntary Compliance Programs Expanded and Modified

As promised, the Internal Revenue Service has made major changes to its offshore voluntary compliance programs, providing new channel for residents and expats to come into compliance with U.S. tax obligations.

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Offshore Disclosure Developments Continue: FBAR Deadline Is June 30

On June 3 at the OECD International Tax Conference, the IRS Commissioner John Koskinen said the IRS expects to make modifications to its offshore voluntary disclosure program shortly that will likely lessen the penalties for those with unreported offshore accounts whose compliance failures have been non-willful.

EXIT

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