Stop Tax Haven Abuse legislation reintroduced
International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX
Copyright © Legal Benchmarking Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Stop Tax Haven Abuse legislation reintroduced

On July 12 2011, Senator Carl Levin once again introduced his latest version of the Stop Tax Haven Abuse Act (Bill). Representative Lloyd Doggett recently introduced the same legislation in the House.

tanenbaum.jpg
ozim.jpg

Edward Tanenbaum

Tola Ozim

The Bill no longer contains the list of tax haven countries. In its place, however, are a host of increased reporting provisions imposed on taxpayers and financial institutions alike, as well as provisions that build upon the Hire Act and, in particular, FATCA.

As to the Hire Act and FATCA, the Bill proposes to clarify certain definitions and requirements of the FATCA disclosure legislation-such as inclusion of checking accounts within the disclosure requirements of financial institutions, as well as assets in the form of derivatives and swap agreements; limiting the ability of the Internal Revenue Service (IRS) to waive compliance by certain entities to only those that present a low risk of tax evasion, and a host of others.

In addition, the IRS would be given the authority to issue increased sanctions against foreign jurisdictions and foreign financial institutions, especially toward non-FATCA compliant institutions-such as limiting such an institution's access to the US markets through US correspondent banks and prohibiting US institutions from conducting transactions with such foreign institutions. There would also be imposed various rebuttable evidentiary presumptions against US taxpayers,who form, maintain or transfer assets to offshore accounts with non-FATCA institutions.

Two interesting loopholes are also targeted. The first, involving credit default swaps, would treat payments made from the US by counterparties on credit default swap payments as US source payments subject to withholding. The second, referred to as the foreign subsidiary deposits loophole, would treat offshore funds of controlled foreign corporations (CFC) as a sec. 956 deemed dividend to the extent that the funds are parked in US-located bank accounts held in the name of the CFC.

There are also numerous other provisions in the Bill designed to enhance anti-money laundering programmes and to deal with summons enforcement, tax shelters (and their promoters) and Circular 230 standards.

Perhaps the most substantive and far-reaching provision is the one dealing with corporations managed and controlled in the US. As in prior versions, the Bill would treat as a domestic corporation any foreign corporation that is publicly traded or that has aggregate gross assets of $50 million or more, if it is managed and controlled in the US. The Bill clearly targets, but it is by no means limited to, hedge funds with addresses outside the US whose key personnel or investment advisors are located in the US.

The future of the legislation is still unclear. While many Republicans will be opposed to many (but not all) of the provisions, its continued introduction could pave the way for it to eventually become law.

Edward Tanenbaum (edward.tanenbaum@alston.com) and Tola Ozim (tola.ozim@alston.com), New York

Alston & Bird

Tel: +1 (212) 210-9400

Fax: +1 (212) 210-9444

Website: www.alston.com

more across site & bottom lb ros

More from across our site

An overhaul of EU import taxes could spell the end of an exemption for cheap parcels
Sharma, managing director for A&M in the United Arab Emirates, tells ITR about intense time pressures, mimicking Jurgen Klopp and what makes tax cool
AI will speed up some of the most laborious TP processes without making human input redundant, argues Hank Moonen, CEO of TaxModel
Firms with a broad geographic reach are more likely to win work, especially from global companies with high turnovers, according to survey data of nearly 29,000 corporate counsel
Australian businessman Gordon Merchant used EY’s advice to offset an A$85 million capital gain, according to the Federal Court
Griggs has been drafted in ahead of schedule as the incumbent Tim Ryan departs for Citigroup; while the Netherlands plans to scrap a 15% share buyback tax
Authorities must ensure that Russian firms do not use transfer pricing schemes to increase profits made from oil sold in different markets, advocacy organisations have argued
Fallet, a partner at law firm Mauger Muniz Advogados in Brazil, tells ITR about his passion for tax law, the leaders who inspired him, and what makes tax cool
The former chief operating officer will assume the role on July 1
Ahead of next week's Indirect Tax Forum in London, ITR spoke with Christian Van Der Valk of Sovos about how different governments and companies are embracing e-invoicing
Gift this article