Archive for Tax Controversy

U.S. Citizens’ Foreign Tax Credits Against The 3.8% Obamacare Surtax

John Richardson

I wrote a post on August 7, 2016 which discussed the August 5, 2016 decision of the United States Court of Appeals – District of Columbia Circuits in the Esher case. In this case, Justice Millet ruled that:

That extreme reading of the Totalization Agreement rests on nothing more than the Commissioner’s own say-so. It lacks any grounding in the Agreement’s text or in any principle governing the interpretation of international agreements. The tax court’s corresponding disregard of the Totalization Agreement’s textual direction concerning the role of French law in resolving undefined terms and in determining the content of the laws enumerated in Article 2(1)(b) was error and requires reversal.

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Overlooking Tax Expenditures Affecting The Federal Budget

A N 6.8

The GAO released a report today called Tax Expenditures: Opportunities Exist to Use Budgeting and Agency Performance Processes to Increase Oversight (GAO-16-622). The report examines the estimated $1.23 trillion annual cost of special tax deductions, exclusions, credits and preferential rates AND how there is basically no oversight of these costs relative to discretionary budget items. Apparently, OMB and federal agencies were to review tax expenditures (there are over 150 of them) to see how they help agency goals. So far, only 11 of 169 expenditures were addressed representing less than one-third of the total cost.

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Drivers And Impacts Of Derisking

William Byrnes

The FCA is interested in the circumstances around banks closing customers’ accounts, or restricting access for new customers, over the last few years. It wishes to know more about what is driving account closure and how many customers—of which type—are affected. The FCA is also concerned as to whether “wholesale” derisking and financial exclusion from the withdrawal of banking services is occurring and if due consideration is being given to the merits of individual cases before a decision is made to terminate an existing account or to not grant a new account.

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Worker Classification Questions—Employee or Contractor?

Annette Nellen

Worker classification—whether a worker is an employee or an independent contractor—is a longstanding and sometimes difficult issue. There are a few different classification schemes applicable to different types of laws (labor, tax, etc.). Employers tend to favor contractor status when possible to avoid payroll taxes, application of most labor laws (such as overtime), and state laws governing how someone is paid, sick pay, reporting, and more.

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Cayman Islands Will Not Show Theirs Until the U.S. Shows Theirs First

Ron Marini

We previously reported on the UK list of 40 countries that agree to automatically exchange beneficial ownership information, an updated list of jurisdictions it says have committed to its recent initiative. The list includes the Cayman Islands, Bermuda and Jersey, but not Guernsey or the British Virgin Islands, though Afghanistan and Nigeria are on the list.

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Paying Too Much CGT? Pravin Gordhan’s Tax Rate Reprieve

Hugo van Zyl

During February 2016 the beleaguered South African Minister of Finance, Minister Pravin Gordhan, made a serious attempt to balance government’s books.

Gordhan was called back after Minister Nene was removed from his position, by President Zuma early December 2015. The true reason for this politically motivated musical chairs, appointing three ministers in less than 4 days, remains a mystery. Point is Nene was removed and Gordhan had to step in and rescue the cash flow and ensure the country did not face junk status.

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Criminal Charges Filed Against Bank Settle!

Ronald Marini

On Thursday, February 4, 2016 DoJ announced the filing of criminal charges against Bank Julius Baer & Co. Ltd. (Julius Baer or the company), a financial institution headquartered in Zurich, Switzerland.   Julius Baer is charged with conspiring with many of its U.S. taxpayer-clients and others to help U.S. taxpayers hide billions of dollars in offshore accounts from the IRS and to evade U.S. taxes on the income earned in those accounts.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Read more

US Money Laundering In US Real Estate?

Ronald Marini

On Thursday, January 14, 2016  we posted U.S FinCEN Will Track Secret Buyers of Luxury Real Estate in Manhattan and Miami where we discussed that the Financial Crimes Enforcement Network (FinCEN) on January 13, 2016 issued a Geographic Targeting Orders (GTO) that will temporarily require certain U.S. title insurance companies to identify the natural persons behind companies used to pay “all cash” for high-end residential real estate in the Borough of Manhattan in New York City, New York, and Miami-Dade County, Florida. Read more

New Technology Helps Build Tax Organizations

Kat Jennings

The focus of my career has been guiding tax professionals and tax organizations in their growth and success. In this post, I will share the roadblocks most tax leaders face in finding the highly technical tax expertise they need for their organizations. There is a connectivity challenge tax leaders face today and one that I spent more than three decades identifying, researching and ultimately solving. Read more

2016 Form 1099’s are FATCA Compliant

Ronald Marini


IRS has issued the final version of 2016 Form 1099’s which contain a checkbox to be used if the form is being used to meet requirements of the Foreign Account Tax Compliance Act (FATCA).

The 2016 Forms Form 1099-B (Proceeds from Broker and Barter Exchange Transactions), 1099-DIV (Dividends and Distributions), 1099-INT (Interest Income), 1099-OID (Original Issue Discount) and 1099-MISC (Miscellaneous Income) each contain a checkbox entitled “FATCA filing requirement” that the form instructions instruct taxpayers to complete if they are using the form to meet the requirements of either of those regs. Read more

Proposed IRS Regulations Oppose Court Decision

Annette Nellen

Continuing with my list of ten news items and activities from 2015 that I think have particular tax policy relevance.  Today, for my fourth item is an odd and unfortunate way that the IRS is telling us they disagree with a 2013 court decision. In August 2015, the IRS issued proposed regulations under Section 199, Income attributable to domestic production activities – REG–136459–09 (8/27/15). This provision was added in 2004 and provides a “bonus” deduction for taxpayers engaged in domestic manufacturing which is broadly defined to include some construction, film production, and software development. It is a fairly complex provision that involves numerous definitions and allocations to identify the specified income that then generally produces a 9% deduction for the taxpayer.

The issue helps show the complexity that is involved when special rules exist. Special rules require precise definitions to know what qualifies and what does not. The particular issue I’m referring to what constitutes minor assembly (no 199 deduction) versus production (generates a 199 deduction).

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IRS Issues Proposed Country-by-Country Reporting Rules!

Ronald Marini

The OECD in October released its final recommendations under its project to combat tax base erosion and profit shifting, which included a plan for having companies file reports in their home jurisdictions detailing their business activities such as taxes accrued, profits and number of employees.

The IRS has now proposed rules requiring large companies to report information for each country of operation including the amount of revenue, profit or loss, capital and accumulated earnings, consistent with OECD recommendations designed to combat base erosion and profit shifting. The rules (REG-109822-15) would apply to U.S. parent companies with at least $850 million in annual revenue for the preceding annual accounting period, for the taxable year beginning on or after the rules are made final, ensuring that, for most companies, they won’t take effect before Jan. 1, 2017.

The proposed regulations affect U.S. persons that are the parent of a MultiNational Enterprise (MNE) group, with annual revenue for the preceding annual accounting period of $850 million or more. Read more