Thursday, October 29, 2009

Reports and Rumors on Offshore Accounts After 10/15

Jeremiah Coder of Tax Notes reports today on statements made at the UCLA Tax Controversy Institute in Beverly Hills, CA. Jeremiah Coder, Offshore Disclosure Process Will Continue to Produce Benefits, IRS Officials Say, 2009 TNT 207-1 (10/29/09). The key points from Mr. Coder's report for my readers are:

1. For foreign account holders who did not make it under the 10/15 wire, the IRS Deputy Chief Victor Song says "It's never too late to say you're sorry." Song sang the praises of the regular voluntary disclosure program which is still open. JAT Note: There was no reported discussion about using the quiet voluntary disclosure for these individuals. My gut tells me he was talking about the noisy disclosure.

2. A leading tax litigator, Ed Robbins of Hochman, Salkin et al, is reported to have said that the passing of the 10/15 deadline will mean severe civil penalties for those who disclose. It is not clear from the article that he was responding to Mr. Song's comment. Nor is it clear exactly what he meant by severe (many thought 20% was severe). Whatever it is exactly he certainly meant that, relative to 20%, it would be more severe. JAT Note: It is interesting to note that, even in the criminal cases to date, the Government is just going for 50%, so one could infer that the playing field is the 30% between 20% and 50%. That is, one could infer that if that is what one is inclined to do.

3. Stating the attitude of the prosecutor and apparently responding to the report of 7,500 persons joining the 10/15 voluntary disclosure initiative, Sandra Brown, a tax prosecutor, is reported to have said that securing the admissions of "7,500 felons" was "a great success." JAT Note: I wish she would have subtracted from this number my clients, none of whom were or are felons. I hope my clients will indulge me some advocate's wiggle room in that statement. Beyond that, I don't know that it serves the Government well for a Government official to refer to these persons as felons, even if that some of them may be. Certainly not all of them are. The Government well knows that it could not have obtained convictions of anything near this number even if it knew everything and had the resources to try them all. And, at the margins, such posturing might serve to limit future disclosures. Sure the IRS wants the mea culpa, but will often accept a shrouded mea culpa that gives the taxpayer some room to say to himself or herself that he or she is not a felon. I just think use of that word is counterproductive. Thus, I think the IRS would have gotten significantly fewer voluntary disclosures in this program if the it had required in its template letter an admission as follows: "I admit that I am a tax felon."

4. The same prosecutor said that the Government now will be able to take its Swiss success and move country by country. JAT Note: That sounds nice, but leaves some questions open. After the Government wraps up UBS, is it done with Switzerland. I would think not, and the next easy pickings for the Government might be the other Swiss banks. The treaty interpretation that permitted the UBS disclosures should equally apply to other Swiss banks, unless there were some understanding with the Swiss Government that the treaty interpretation would apply for now only to UBS. Moreover, which other tax haven country banks had sufficient U.S. presence to permit them to be susceptible to the type of pressure the U.S. could bring against UBS via the deferred prosecution agreement and John Doe summons?

1 comment:

  1. I was in the audience and heard that "7,500 felons" remark. It was like chewing on tin foil to hear that. "If you're innocent, why were you arrested?" is what it sounded like to me.

    All of us at some point or another have said things we regret. I suspect Sandra Brown is kicking herself for that slip, and let's be generous and give her a hall pass this time.

    But I'm with you. This can only be bad for the long term and the IRS's effort to have people accurately self-report. Ah, but who can blame them. It isn't as if there is any scholarship they could look to on the setting of appropriate levels penalties for civil or criminal violations.

    Oh, wait . . . .



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