Congress votes for delaying US compliance with TIEAs

251 U.S. Congressmen decided that the taxpayer resources were better spent trying to reduce unemployment to 6% than collecting information about accounts held by foreigners in U.S. banks. TIEA compliance by the US is among the projects which would cost more than US$50 million to carry out.

Despite strong bipartisan requests in both chambers of Congress, the Treasury Department has refused to withdraw the rule, or at a minimum, conduct an economic impact analysis on how the regulation would affect the banks and the economy.

According to Florida’s Office of Financial Regulation, the regulation could lead to tens of billions of dollars being withdrawn from Florida banks and moved to overseas accounts.

Congressman Bill Posey’s amendment, was introduced with Congressman Gregory Meeks (D-NY) to stop the IRS from implementing new misguided regulations expected to lead to billions of dollars of capital flight from U.S. banks to foreign institutions.

However, agreements for the implementation of FATCA continue full speed ahead, burdening banks worldwide with more compliance. Countries like Panama which have signed tax information exchange agreements are still expected to amend their legislation and information systems to eliminate bearer shares and collect information on deposits by U.S. account holders.

"My hope is that at the end of the day people will say this is not a good time to do this," Posey said.

See also:

EU suspendería el intercambio fiscal http://www.prensa.com/impreso/economia/eu-suspenderia-el-intercambio-fiscal/112399/

House Passes Bill to Halt Regulations, Expands Freeze to Rules Costing $50 Million http://www.bna.com/house-passes-bill-n12884910868/

Housa approves three Posey amendments http://spacecoastdaily.com/2012/07/house-approves-three-posey-amendments/

FATCA not appropriate for the Bahamas http://www.tribune242.com/news/2012/aug/03/ex-ag-fatca-iga-not-appropriate-for-the-bahamas/

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Center for Freedom and Prosperity

For Immediate Release
Tuesday, July 31, 2012
202-285-0244
www.freedomandprosperity.org

CF&P President: Congressional Vote on IRS Regulation is First Step in Reasserting Proper Legislative Role in Policymaking

Washington, D.C., Tuesday, July 31, 2012) Last week the House of Representatives voted with bipartisan support (251-165) to approve an amendment to the Red Tape Reduction Act (H.R. 4078) that would include the recently adopted IRS regulation requiring reporting on nonresident alien interest deposit information among the regulations to be delayed until unemployed drops below 6%. Andrew Quinlan, President of theCenter for Freedom and Prosperity, offered the following statement:

“The House has taken a first and necessary step in taking back the power to pass regulation from an IRS agency that has gone rogue. With passage of this rule, Treasury Secretary Geithner and the Obama Administration usurped the authority of Congress to determine how best to attract much needed foreign investment to the US. Thanks to the leadership of Congressman Posey, the House has began taking that authority back. I call on the Senate to follow suit, and then for this temporary delay to be made permanent.”

Congress has long opposed agency efforts to implement the reporting regulation, which undermines more than 90 years of Congressional intent on foreign investment. Each time the issue of foreign deposits has come up, Congress has specifically decided not to tax it nor asked for it to be reported. The IRS facilitating taxation by other governments will have the same economic impact as if the US taxed it directly, thus undermining the clear intent of Congressional policy.

The IRS has also flaunted legal requirements for regulatory enactment, such as requirements that economically significant rules be accompanied by a cost-benefit analysis. They have never conducted a proper analysis because there are no direct benefits to which they can point. A study by the Mercatus Centeron an earlier, more limited and thus less damaging, version of the rule estimated the US would lose $88 billion in foreign investment, well above the $100 million impact necessary to trigger the cost-benefit requirement.

CF&P has fought various versions of this regulation for over 10 years, successfully delaying the rule on several occasions. The vote on Rep. Posey’s amendment represents another victory for those who believe not only that ensuring American requires keeping it an attractive destination for capital, but in the rule of law and proper checks and balances.

For more information on the destructive IRS regulation:

http://freedomandprosperity.org/issues/irs-information-sharing-regulation/

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Treasury Signs FATCA Agreement with 5 European Countries

... “This morning’s announcement that an ‘Intergovernmental Agreement to Improve Tax Compliance and to Implement FATCA’ has been reached with U.K., France, Germany, Italy and Spain was anticipated and welcomed,” commented Denise M. Hintzke, global tax leader of foreign account tax compliance at Deloitte Tax LLP. “At a high level, both the reciprocal and non-reciprocal versions should help financial institutions reach important FATCA objectives, while potentially reducing costs to comply. We expect further negotiations on the specifics of what will be required in the country attachments. Much remains to be done to meet the requirements in the tight timeline, and many details are to come, but this announcement represents a significant step forward in the global exchange of information to combat tax evasion.”

However, that global exchange of information received a setback on Thursday in Congress, the same day as the integovernmental agreement was announced. The House voted 251-165 to support an amendment to the Red Tape Reduction Act sponsored by Rep. Bill Posey, R-Fla., and Gregory Meeks, D-N.Y., to stop the IRS from implementing new regulations requiring U.S. banks to disclose the identities of foreign depositors to the IRS, which would then pass along the information to their home countries. The regulations were set to take effect in January, but under the amendment that passed on Thursday, they would be postponed until the U.S. unemployment rate declines to 6 percent.

The prospects for passage of the amendment in the Senate are uncertain. Sen. Marco Rubio, R-Fla., has been building support for introducing similar legislation in the Senate, but he told the Orlando Sentinel he prefers to go a different route for pressuring the IRS to withdraw the regulations. Lawmakers argue that the regulations discourage foreigners from depositing their money in U.S. banks. The Treasury Department counters that it is merely requiring the same information to be reported on foreign depositors that it requires from U.S. citizens, and delaying implementation of the regulations impedes the IRS's efforts to crack down on offshore tax havens.

FATCA was enacted in 2010 by Congress as part of the Hiring Incentives to Restore Employment Act. FATCA requires foreign financial institutions to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

The Treasury Department and the IRS said they would continue to work with other governments and with businesses to implement FATCA and to achieve maximum consistency and standardization in the technical implementation of the agreed information exchange, including by providing more detailed guidance as necessary.

Updates and further information on FATCA can be found by visiting the FATCA page on www.IRS.gov.

See full text in http://www.accountingtoday.com/news/treasury-signs-fatca-agreement-uk-france-germany-spain-italy-63416-1.html

IRS allows deducting expenses for conventions held in Panama

Part I

Section 274.—Disallowance of Certain Entertainment, Etc., Expenses

26 CFR 1.274-1: Disallowance of Certain Entertainment, Etc., Expenses

Rev. Rul. 2011-26

....

Rev. Rul. 2007-28, 2007-1 C.B. 1039, identified each of the following jurisdictions as a beneficiary country for which there was in effect an agreement with the United States as described in section 274(h)(6)(C)(i) and for which there was not in effect a finding by the Secretary of the Treasury that the tax laws of the beneficiary country discriminate against conventions held in the United States: Antigua and Barbuda, Aruba, Bahamas, Barbados, Bermuda, Costa Rica, Dominica, Dominican Republic, Grenada, Guyana, Honduras, Jamaica, Netherlands Antilles, and Trinidad and Tobago.

Since publication of Rev. Rul. 2007-28, the “Agreement Between the Government of the United States of America and the Republic of Panama for Tax Cooperation and the Exchange of Information with Respect to Taxes” entered into force on April 18, 2011. See Treas. News Release at http://www.treasury.gov/presscenter/press-releases/Pages/tg1144.aspx (April 18, 2011). This new agreement qualifies as an agreement described in section 274(h)(6)(C)(i). Panama is a beneficiary country, and no finding is in effect by the Secretary of the Treasury that the tax laws of Panama discriminate against conventions held in the United States. Therefore, Panama is included within the North American area under section 274(h)(6) as of April 18, 2011.

Three other beneficiary countries -- the Cayman Islands, the British Virgin Islands, and Saint Lucia -- have entered into tax information exchange agreements with the United States that are not of the type described in section 274(h)(6)(C)(i) because of certain limitations in the scope or implementation of those agreements. Accordingly, these three beneficiary countries are not included as part of the North American area under section 274(h)(6). In the case of Saint Lucia, certain transition relief has been provided, as reflected in the Holding below.

HOLDING

For purposes of determining whether deductions are allowed for expenses incurred in connection with a convention, the following areas are included in the North American area as of the effective date of section 274(h) except as otherwise indicated:

Panama April 18, 2011

Full text in http://www.irs.gov/pub/irs-drop/rr-11-26.pdf

U.S., Panama Sign New Tax Information Exchange Agreement

The U.S. has Tax Information Exchange Agreement (TIEAs with the following offshore financial centers:
Bahamas
Barbados
Bermuda
Cayman Islands
Costa Rica
Dominica
Gibraltar
Grenada
Jersey
Liechtenstein
Netherlands Antilles
St. Lucia

The TIEAs with Antigua and Belize were terminated.

Fortunately, Panama law allows entities to redomicile corporations and foundations to other countries...

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In a ceremony at the U.S. Department of the Treasury on Tuesday, November 30, Treasury Secretary Tim Geithner and Panamanian Vice President and Minister of Foreign Affairs Juan Carlos Varela signed a tax information exchange agreement (TIEA) between the United States and Panama.

A press release on the TIEA can be viewed at link; the full text of the TIEA can be viewed at this link; and the TIEA Joint Declaration at this link.

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The Department of State has the honor to refer the Embassy of the Republic of Panama to the
Agreement between the Government of the United States of America and the Government of the
Republic of Panama for Tax Cooperation and the Exchange of Information Relating to Taxes
(“the Agreement”), signed today, and to confirm on behalf of the Government of the United
States the following understandings reached between our two Governments (“the Parties”):
1.
With respect to subparagraph 1(a) of Article 3 (Taxes Covered) of the Agreement, it is
mutually understood by the Parties that the term “all federal taxes” includes the following
taxes imposed by the United States:
2.
With respect to subparagraph 1(b) of Article 3 (Taxes Covered) of the Agreement, it is
mutually understood by the Parties that the term “all national taxes” includes the
following taxes imposed by the Republic of Panama:
(a)
Income Tax
(b)
Real Estate Tax
(c)
Vessels Tax
(d)
Stamp Tax
(e)
Notice of Operations Tax
(f)
Tax on Banks, Financial and Currency Exchange Companies.
(g)
Insurance Tax
(h)
Tax on the Consumption of Fuel and Oil Derivates
(i)
Tax on the Transfer of Movable Goods and the Provision of Services
(j)
Tax on the Consumption of certain Goods and Services
(k)
Tax on the Transfer of Immovable Goods
3.
With respect to Article 9 (Costs) of the Agreement, it is mutually understood by the
Parties that costs that would be incurred in the ordinary course of administering the
(a) Federal income taxes;
(b) Federal taxes related to employment;
(c) Federal estate and gift taxes; and
(d) Federal excise taxes.

domestic tax laws of the requested State shall be borne by the requested party when those
costs are incurred for purposes of responding to a request for information. It is also
mutually understood by the Parties that all other costs are considered extraordinary costs,
and shall be borne by the requesting party. Examples of extraordinary costs include, but
are not limited to, the following:
(a)
fees charged by third parties for research and copying documents;
(b)
fees for non-government counsel or experts appointed or retained, with the
approval of the competent authority of the requesting Party, for litigation in the
courts of the requested party related to a specific request for information;
(c)
fees and expenses of a person who appears for an interview, deposition or
testimony relating to a specific information request. The fees and expenses will
be the ordinary amounts allowed under the laws of the party in which the
interview, deposition or testimony is held or taken.
The competent authorities shall consult with each other in advance if extraordinary costs
are likely to exceed $1,000, or in the case of subparagraph (c) of this paragraph, $100, in
order to determine whether the requesting Party will continue to pursue the request and
bear the cost.
4.
The Government of the United States of America and the Government of Panama intend
that the Agreement enter into force as soon as is practicable following the enactment of
any legislation by Panama that is necessary under its domestic laws in order for Panama
to comply fully with the terms of the Agreement. The Government of Panama expects
that this legislation will be enacted before the end of 2011. As soon as practicable after
such legislation has been enacted, the Government of the United States and the
Government of Panama intend to take such actions, including exchange of notifications,
as are necessary to cause the Agreement to enter into force in accordance with its terms.
5.
The United States understands that, with respect to the necessary legislation referred to in
paragraph 4, Panama intends to enact legislation requiring the identification of the
owners of bearer shares. The United States further understands that such legislation:
(a)
will require resident agents acting for Panamanian entities to obtain and
maintain in their records information sufficient to identify the owners of
those entities, even in cases in which shares of those entities are issued in
bearer form, including, where the owner is a legal person, information
sufficient to identify substantial owners of that legal person. For this
purpose, a resident agent will not be required to obtain and maintain
information sufficient to identify substantial owners of legal persons in
cases where the resident agent acts for a professional client that is part of

an organization that is required to maintain information on such entities
and that has agreed to make available such information to the resident
agent when requested;
(b)
will require resident agents to produce ownership and client identity
information in their possession in response to a proper request under the
Agreement, whether with respect to newly-formed entities or entities in
existence at the time the legislation is enacted; and
(c)
will require resident agents to obtain such ownership information with
respect to entities existing at the time the legislation is enacted within a
five year period from the date of the enactment of the law.
6.
It is mutually understood that under laws currently in effect, each party is authorized to
obtain and exchange information, including information held by financial institutions and
other fiduciaries, pursuant to a request under a tax information exchange agreement,
regardless of whether the requested party has a domestic tax interest in such information.
7.
Under section 274(h) of the U.S. Internal Revenue Code, an individual may deduct from
income expenses incurred with respect to attendance at a conference or convention held in
Panama in the same manner and to the same extent the individual would be permitted to
deduct such expenses with respect to attendance at a conference or convention held in the
United States, provided that there is in effect between Panama and the United States a tax
information exchange agreement meeting the requirements of section 274(h)(6). It is
mutually understood that the Agreement is intended to meet those requirements.
8.
It is mutually understood that the entry into force of this Agreement does not prevent the
Parties from discussing the possibility of an agreement for the avoidance of double taxation
in the future.
The Department has the further honor to propose, on behalf of the Government of the United
States of America, that the present note and the Embassy’s affirmative reply thereto confirming
that the Government of the Republic of Panama shares these understandings shall constitute an
agreement between the two Governments on these points which shall enter into force on the
same date as the Agreement.
Department of State,
Washington, November 30, 2010