U.S. Taxpayer Renouncing U.S. Citizenship Indicted And Extradition Started (5/11/20)

A reader just alerted me that I had overlooked a significant item of interest to readers of this blog. On March 5, 2020,, DOJ issued the following press release:  Founder of Russian Bank Charged with Tax Fraud: Allegedly Concealed $1 Billion in Assets and Income when Renouncing U.S. Citizenship, here.

Key excerpts from the release are:

According to the indictment, Oleg Tinkov was the indirect majority shareholder of a branchless online bank that provided its customers with financial and bank services.  The indictment alleges as a result of an initial public offering (IPO) on the London Stock Exchange in 2013, Tinkov beneficially owned more than $1 billion worth of the bank’s shares.  The indictment further alleges that three days after the IPO, Tinkov renounced his U.S. citizenship – a taxable event requiring Tinkov to report to the IRS the constructive sale of his worldwide assets, report the gain on the constructive sale of those assets to the IRS, and pay tax on such gain to the IRS.  Although Tinkov allegedly beneficially owned more than $1 billion of TCS shares at the time of his expatriation through a British Virgin Island structure, the indictment charges that Tinkov filed a false 2013 tax return with the IRS that reported income of less than $206,000, and a false 2013 Initial and Annual Expatriation Statement reporting that his net worth was $300,000.

If convicted, Tinkov faces a maximum sentence of three years in prison on each count.  He also faces a period of supervised release, restitution, and monetary penalties.

The indictment, here, charges two counts of tax perjury, § 7206(1), so the maximum incarceration period on the charges are six years.  The Government could always get a grand jury to issue a superseding indictment with more charges (e.g., FBAR counts or evasion counts, which are suggested by the discussion above).  It is reported that Tinkov has acute leukemia so (see e.g., Moscow Times article here), regardless of the number of accounts, I doubt that any period of incarceration would exceed 6 years.

Also, Tinkov apparently spent a lot of time outside the U.S., so during that period the statute of limitations was suspended (or not counted) toward the six-year statute otherwise allowed for the charges offenses.  § 6531(5) and flush language.

The CourtListener docket entries are here.

New IRS Relief Program for Expatriates Renouncing U.S. Citizenship (9/12/19)

The IRS recently announced a relief program for persons renouncing U.S. citizenship with respect to their tax compliance, including Section 877A, here, titled "Tax responsibilities of expatriation."  See IRS web page titled "Relief Procedures for Certain Former Citizens," here.

I have not practiced in the area of taxation involving U.S. citizenship renunciations.  I know the general rules and enough when presented with a need to either do some serious additional study or refer the client to someone who is an expert.  So, I have nothing personally to offer on the subject addressed in this new relief program.  The key point of this posting is to alert readers of the potential opportunity to take advantage of the relief program.

I do point readers to two articles written by attorneys who do practice in the area:

• Alan Winston Granwell, Andrea Darling de Cortes, William M. Sharp, New IRS Procedure Provides Favorable Path for Non-Compliant Expatriates to Become Tax Compliant (Holland & Knight Alert 9/11/19), here.
• Kevin Packman, Is the New IRS Expatriation Initiative Really Better than an Existing Program and Law? (Mondaq 9/10/19), here.
• Virginia La Torre Jeker, J.D., Ground-Breaking Development: IRS “Amnesty” Relief for Certain Expatriates! (US Tax Talk 9/6/19), here.

Interestingly, both articles are by attorneys in the same firm, Holland & Knight.

Here are the Highlights from the first article:

• New Procedure. On Sept. 6, 2019, the Internal Revenue Service (IRS) announced an important new procedure to enable certain non-compliant U.S. citizens who relinquish their U.S. citizenship to become U.S. tax compliant.
• Primary Targets. "Accidental Americans" who were unaware of their U.S. tax obligations.
• Eligibility and Filings. In general, 1) past compliance failures were non-willful, 2) past tax liability not in excess of $25,000 for the five years prior to, and the year of, expatriation and 3) less than $2 million in net assets as of expatriation date. Eligible taxpayers must file U.S. tax returns, including all required schedules, international information returns and Foreign Bank Account Reports (FBARs), for the five years preceding and the year of expatriation.
• Benefits and Takeaway. Qualifying taxpayers become compliant without having to pay any past due U.S. taxes, penalties or interest and avoid classification as a "covered expatriate," a designation that could result in extremely detrimental tax consequences. For qualifying expatriates, the new procedure provides a taxpayer-friendly pathway to U.S. tax compliance, thereby avoiding potentially detrimental U.S. tax consequences and adverse reputational risk.

The same article has the following Background (footnotes omitted):

U.S. citizens are subject to taxation on their worldwide income based on citizenship and not residency, which is the common standard globally. The U.S. worldwide taxation regime and associated tax compliance is complicated and burdensome for U.S. taxpayers, particularly those living abroad. Thus, for many "Accidental Americans," the enactment in 2010 of the Foreign Account Tax Compliance Act (FATCA), may have been the tipping point in their decision to expatriate. After FATCA was enacted, expatriations increased significantly.

New IRS LB&I Compliance Campaigns of Interest (7/30/19)

IRS LB&I has announced six new compliance campaigns, here.

1.  The new campaign particularly relevant for readers of this blog is:

• Post OVDP Compliance
Practice Area: Withholding & International Individual Compliance
Lead Executive: John Cardone, director of Withholding & International Individual Compliance

U.S. persons are subject to tax on worldwide income. This campaign addresses tax noncompliance related to former Offshore Voluntary Disclosure Program (OVDP) taxpayers’ failure to remain compliant with their foreign income and asset reporting requirements. The IRS will address tax noncompliance through soft letters and examinations.

JAT Comment:  Readers will recall that the OVDP had several iterations and, with the expansion of the Streamlined alternatives for nonwillful actors, OVDP itself was targeted to willful actors or persons at risk of the IRS treating them as willful actors.  So, those persons who took advantage of OVDP and took care of past issues presumably were back in the system with respect to their foreign income and asset reporting.  But, presumably, the IRS has some reason to believe that those OVDP participants may not  have stayed in compliance after closing out their OVDP participations.

2.  Another campaign of possible interest to readers is:

• ExpatriationPractice Area: Withholding & International Individual Compliance
Lead Executive: John Cardone, director of Withholding & International Individual Compliance 

U.S. citizens and long-term residents (lawful permanent residents in eight out of the last 15 taxable years) who expatriated on or after June 17, 2008, may not have met their filing requirements or tax obligations. The Internal Revenue Service will address noncompliance through a variety of treatment streams, including outreach, soft letters, and examination.