Around the Net on Offshore Accounts While Otherwise Unproductive (3/20/14)

This will aggregate some of the information I  picked up today in my automated Google searches of the web.

Item #1

A PR Newswire loudly [loudly is my web euphemism for hyperbolically] announced the following:  New Website to Assist Millions of Taxpayers with Undisclosed, Offshore Accounts (3/20/14), here.  I think this is an advertisement to attract those alleged millions and their resources to his coffers.  (I hope he has a good database and staff skills to handle the influx.)  The announcement includes the following:

For those US taxpayers in this precarious position they need expert advice and decisive action to pre-empt imposition of civil tax fraud and criminal tax evasion civil and criminal penalties, which may include: wire fraud, mail fraud, money laundering, failure to file FBAR forms (now known as FinCen Form 1114). Total penalties may be millions of dollars with jail sentences imposed for a maximum of over 80 years for all tax-related felonies.

This is, of course, fear mongering.  The real world is different.  Check out the spreadsheet here which indicates far less -- even minuscule sentences -- in the real world compared to this promo piece.  That does not mean that taxpayer do not face substantial downsides from the behavior, of course.

Item #2

A Wall Street Journal article addresses the expat  issue:  Nearly One-Third of Expats Confused by U.S. Tax Filing Requirements, here.

I don't subscribe to the WSJ because it is a business iteration of Fox News Network (which I like because of the blondes but I won't pay for that anymore because of the WSJ/blonde biases do not match my biases).  So, if you want to read that article, you will have to be a subscriber.  But, if I can speculate about the contents, are they really saying the 2/3's + of expats are not confused and that, therefore, they commit tax fraud when they don't report foreign income (including financial account income) and file FBARs.  WSJ being a Republican rag, I doubt that they intended to infer that because, I suspect, that data set includes a significant number in the "base" to which WSJ pitches its goods.  Really, what they might want to rag on is the IRS and Obama as being responsible for anything inappropriate by anybody anywhere, including expats.

Item #3

U.S. Attorney Enabler Sentenced for Assisting Offshore Evasion (3/19/14)

DOJ Tax announces that attorney Christopher M. Rusch, who enabled two U.S. taxpayers, Messrs. Stephen M. Kerr and Michael Quiel, via offshore bank accounts, has been sentenced to serve 10 months.  See press release here.  (For other blogs on these various players, I suggest readers use the search feature above.)  Key excerpts of the press release (omitting the hype) are:

California attorney Christopher M. Rusch was sentenced to serve 10 months in prison for helping his clients Stephen M. Kerr and Michael Quiel, both businessmen from Phoenix, hide millions of dollars in secret offshore bank accounts at UBS AG and Pictet & Cie in Switzerland 

* * *. 

According to the evidence presented at trial, Kerr and Quiel, with the assistance of Rusch and others, including Swiss nationals, established nominee foreign entities and corresponding bank accounts in Switzerland to conceal Kerr and Quiel’s ownership and control of stock and income they deposited in these accounts.   Rusch testified at trial, admitting that he and others caused the sale of the shares of stock through the undeclared accounts.   Rusch further testified that, at Kerr and Quiel’s direction, he transferred some of the money in the secret accounts back to the United States through Rusch’s Interest on Lawyer’s Trust Account before dispersing the money for Kerr and Quiel’s benefit, including the purchase of a multi-million dollar golf course in Erie, Colo.   According to court documents and evidence presented at trial, with Rusch’s assistance, Kerr and Quiel each failed to report more than $ 4,600,000 and $2,000,000 of income, respectively, during 2007 and 2008 which they hid in the undeclared accounts with Rusch’s assistance.  

Swiss Legislature Further Erodes Swiss Secrecy by Permitting Secret Disclosure to Tax Authorities (3/19/14)

In an excellent short article, Kevin Packman, here, reports that the Swiss have further eroded a component of the fast expiring concept of Swiss bank secrecy.  As Swiss Banking Becomes More Transparent, Americans With Undeclared Swiss Accounts Are Warned (Mondaq 3/18/14), here.

In a move that was likely celebrated by United States governmental officials, Swiss banking secrecy eroded even further on Thursday, March 6, 2014. This is the day that parliament voted to provide foreign tax authorities with identifying information on accountholders with undeclared accounts in Swiss banks without giving the accountholder advance notice.  The one requirement is that the requesting country must demonstrate that by providing notice to the accountholder, the investigation would be hindered.

Kevin's reference is to:  Parliament relaxes terms for tax data exchange (swissinfo 3/6/14), here, which says in part:

Parliament has approved a legal amendment that tax evaders will not always have to be told if Switzerland sends information about them to other countries. The move further loosens Swiss banking secrecy laws in order to avoid a global backlash. 

* * * * 

The Senate on Thursday confirmed an earlier decision by the House of Representatives that people suspected of tax evasion whose information is being sent to another country do not have to be informed of this if the other country can prove that telling them would hinder the investigation. 

 The argument over the reform brought up questions about whether such a move goes against clauses in the Swiss constitution related to guarantees of transparency in legal processes. In the end, the majority in parliament concluded that passing the amendment was in Switzerland’s best interest to meet the OECD’s demands and avoid possible sanctions.

It's All About Packaging the Narrative (3/19/14)

Procedurally Taxing, the premier federal tax procedure blog, has a great guest blog posting by Susan Morse, a UT Professor.  Can the IRS Tell a Good Story? (Procedurally Taxing Blog 3/19/14), here.

The blog is based on Professor Morse's article on Narrative and Tax Compliance, on SSRN here.  The SSRN summary of the article is:

Some noncompliant taxpayers fall outside the reach of third-party withholding and reporting. Revenue agencies may use enforcement and/or prosocial strategies to encourage compliance among such taxpayers. Revenue agencies should stand ready to use narrative as part of these efforts, despite implementation challenges. This is because of the persuasive capacity of narrative. It is also because media will likely create a narrative around any prominent strategy, and the media narrative may not further the goals of the agency.

In arguing for the narrative approach to bolster tax administration and compliance, Professor Morse says in the blog:

A tax administrator might use a punishment narrative to persuade taxpayers that evasion will be discovered (even though the chance of audit is very low).  Stories about other taxpayers, similar to target taxpayers, who have gotten caught can help persuade the audience about the likelihood of audit.  The U.S. government did a nice job with this with respect to its criminal prosecution of holders of secret offshore accounts.  Its strategy was straightforward – it simply wrote press releases that gave some detail about the lives of the individuals who struck plea bargains, for example describing one taxpayer as a retired sales manager for Boeing. 

* * * * 

Stories can be very short.  One famous six-word effort is sometimes attributed to Ernest Hemingway:  “For sale: baby shoes, never worn.”  The IRS offshore account press releases, barebones as they were, gave enough information to permit other taxpayers to fill in the blanks, and make a persuasive story out of the skeleton information.   It helps that the offshore account stories targeted a fairly specific kind of tax avoidance.  Leigh Osofsky, for example, has written about the promise of a strategy that tailors enforcement efforts for micro-groups of taxpayers.

Israeli Banks Advised to Prepare for FATCA Before Negotiations Finalized (3/19/14)

Although the U.S. and Israel are in negotiations, it appears the endgame is in sight.  See Banks told to prepare for new reporting rules on U.S. clients (Haaretz 3/19/14), here.  Key initial except::

The Bank of Israel Sunday advised Israeli banks to begin gearing up to provide information about their U.S. clients to U.S. tax authorities, as provided in the U.S. Foreign Tax Compliance Act. 

The statement was issued by the central bank in an effort to ensure that Israeli banking institutions will be ready to comply with FATCA when it goes into effect, in July. The purpose of the act is to help U.S. authorities collect any taxes owed by U.S. citizens, wherever they may live, with accounts at banking institutions outside the United States. 

Israeli banks are subject to laws in Israel, and not to U.S. laws such as FATCA. Until now, Israeli banks were obliged to protect their customers’ privacy and were forbidden from providing information on account holders to any parties unless Israeli regulators explicitly stated otherwise. 

The banks had expected Israel’s central bank to push them to comply with the U.S. crackdown, though. Doing otherwise could expose the banks to U.S. sanctions, including limits on their branches within the United States. 

Sunday’s order brought Israel’s banking system in line with many others that have given in to American demands, including Switzerland’s banks, which had been well-known for their privacy. 

As far as is known, the step was taken following advanced negotiations between Israeli government officials and their U.S. counterparts. The bilateral deal would include an Israeli commitment to provide the required information about the American customers of Israeli banks. In return, the United States is expected to commit to provide the Israeli government with comparable data on U.S. banks’ Israeli customers. 

Most Israeli banks have been preparing for two years for the introduction of FATCA in Israel, informing their U.S. customers about the anticipated requirement and its implications. 

It is assumed that any U.S. citizen seeking to evade the reporting requirements has already withdrawn their funds from Israeli banks and turned to other investment channels, such as Israeli real estate, which is not subject to regulation under FATCA. Others have voluntarily disclosed their assets to the U.S. Internal Revenue Service.

Dave Wolf, an Isreali lawyer, advises here that (emphasis supplied by JAT):

This development is quite surprising as usually countries sign the FATCA agreement first before starting the implementation of FATCA rules. 

The negotiations with the USA have been ongoing a very long time and this may be partly the result of the U.S. Department of Justice criminal investigation into the behavior of three Israeli banks in Switzerland: Bank Leumi, Bank Hapoalim and Bank Mizrahi.

U.S. Expects the Swiss Bank Initiative to Produce Information on Account Holders and Bank Professionals (3/19/14)

The following are some key points from a Tax Notes article, Jaime Arora, DOJ Doesn't See Barriers to Receipt of Information Under Swiss Bank Program, 2014 TNT 53-5 (3/19/14).

1. DOJ Tax AAG Keneally expects that information will be forthcoming about account holders and banking professionals under the U.S. Swiss bank initiative.  If that expectation is not met, " the program includes a clause that would allow the DOJ to terminate it."

2.  "In addition to the clause in the program allowing for its termination, the timeline of the program provides another safeguard, Keneally said. She said the DOJ will look at category 2 banks first and make sure the program is working before it moves on to the category 3 banks."

3. The U.S. will assist treaty partners seeking information on their taxpayers.  Keneally noted as an example the John Doe summonses for Norway.

Senators Urge Extradition of Indicted Swiss Bank Enablers (3/18/14)

Senators Levin and McCain, key members of the Senate Permanent Subcommittee on Investigations which held a recent hearing on offshore bank tax evasion, has written DOJ to seek extradition from Switzerland of indicted enablers.  The letter is here.

The body of the letter is short, so I quote it in full:

We are writing to urge a change in the current policy of the Department of Justice (DOJ) which, for more than five years, has not sought extradition from Switzerland of a single Swiss national charged with criminal conduct related to aiding and abetting U.S. tax evasion. 

During the hearing held by the U.S. Senate Permanent Subcommittee on Investigations on February 26, 2014, you testified that DOJ has charged 35 bankers and 25 financial advisors with misconduct related to facilitating U.S. tax evasion.  Of those, 6 have been convicted or pled guilty, and the majority of the rest apparently live openly in Switzerland, having avoided trial on their alleged crimes for years.  Yet you also testified that DOJ has not asked Switzerland to extradite any of those defendants, because DOJ believes “the Swiss will not extradite its citizens.”  

The extradition treaty between the United States and Switzerland, however, does not bar the extradition of Swiss nationals who assisted U.S. nationals in the commission of criminal tax evasion, and it is time to test the Swiss government’s professed willingness to cooperate with international tax enforcement efforts and put an end to its nationals participating in criminal tax offenses.  While Article 3 of the U.S.-Swiss treaty provides some discretion to the Swiss government to deny U.S. extradition requests related to tax offenses, that discretion is limited.  The treaty states that it can “not be used to shield from extradition underlying criminal conduct, such as fraud …or falsification of public documents.”  At least some of the charges in the indictments filed against Swiss bankers and intermediaries appear to meet that standard.  Additionally, Article 8, which provides an exception to extradition requests that name a treaty partner’s nationals, is limited to circumstances where “[t]he Requested State [Switzerland] … has jurisdiction to prosecute that person for the acts for which extradition is sought.” Switzerland does not consider tax evasion a crime, and therefore cannot prosecute such cases, which means the Article 8 exception should not apply to U.S. extradition requests to Switzerland for cases related to tax evasion.  

Given that the current treaty does not foreclose the cooperation of the Swiss government in extradition requests for tax cases, we urge DOJ to at least attempt to use the authorities laid out in that treaty.  Even if a request is unsuccessful, it will inform both Switzerland and its citizens that the United States is ready to make full use of available legal tools to stop facilitation of U.S. tax evasion and hold alleged wrongdoers accountable. 

Thank you for your attention to this matter.

Tax Court Case Where Party In Interest Invokes the Fifth Amendment (3/19/14)

In Humboldt Shelby Holding Corporation v. Commissioner, T.C. Memo. 2014-47, here, decided yesterday, the Tax Court knocked down a digital options bullshit tax shelter relying on the now uniformly discredited interpretation of Helmer v. Commissioner, T.C. Memo. 1975-160, hawked by bogus tax shelter promoters in the mid-to late 1990s through the early 2000s.  The Court starts the opinion as follows:

James Haber is a tax professional who has promoted tax shelters to third parties through a company called the Diversified Group, Inc. (DGI). This case involves a tax scheme Mr. Haber carried out for his personal benefit. Mr. Haber is petitioner's sole shareholder, and his scheme would have allowed petitioner to avoid approximately $25 million of Federal income tax while incurring costs of only $320,000. 

To carry out the tax scheme at issue, petitioner contributed paired options to a partnership to generate an artificially high basis in property the partnership later distributed. Petitioner recognized large capital losses when it sold the stock and reported those losses on its 2003 return to offset capital gains. Respondent disallowed the capital loss deductions and related section 1621 business deductions and determined that petitioner was liable for a section 6662 accuracy-related penalty. The issues for decision are:

1) whether petitioner improperly claimed short-term capital loss deductions of $74,093,688 for its 2003 taxable year. We hold that it did; 

2) whether petitioner improperly claimed section 162 business deductions of $1,249,925 for professional fees it incurred during its 2003 taxable year. We hold that it did; and 

3) whether petitioner is liable for the accuracy-related penalty under section 6662. We hold that it is.

These holdings are straightforward.

An interesting aspect of the case is the following:

Mr. Haber is petitioner's sole owner and the architect of its tax avoidance plan. Mr. Haber is a witness in criminal proceedings in the Southern District of New York involving a former DGI client. The U. S. attorney for that district denied Mr. Haber's request for immunity. Consequently, Mr. Haber has invoked his Fifth Amendment privilege against self-incrimination and declined to testify in these proceedings. Petitioner moved to stay the case until the criminal prosecution's conclusion. We denied the motion after finding that the interests of justice did not support further delaying the trial. 

OPINION 

I. Burden of Proof 

The taxpayer bears the burden of proving by a preponderance of the evidence that the Commissioner's determinations are incorrect. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Deductions are a matter of legislative grace, and a taxpayer bears the burden of proving entitlement to any claimed deductions. Rule 142(a)(1); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). The term "burden of proof" includes two distinct concepts: (1) the burden of persuasion, "i.e., which party loses if the evidence is closely balanced", and (2) the burden of production, "i.e., which party bears the obligation to come forward with the evidence at different points in the proceeding". Schaffer v. Weast, 546 U.S. 49, 56 (2005). Before trial we considered shifting the burden of proof to respondent in the light of Mr. Haber's decision to invoke his Fifth Amendment privilege and our decision to move forward with the trial in his absence. We ultimately decided against shifting the burden of persuasion because doing so would have effectively sanctioned the Commissioner for the Federal prosecutor's refusal to grant Mr. Haber immunity. We did shift the burden of production to respondent and requested petitioner to provide an offer of proof regarding the testimony Mr. Haber would have provided if he had been granted immunity. 

Immunity is a statutory creation whose administration Congress bestowed on the executive branch. 18 U.S.C. secs. 6002 and 6003 (2012). Congress has given the Attorney General the authority to exchange the protection of immunity for otherwise incriminating testimony when, in his judgment, a witness' testimony may be in the public's interest. United States v. Quinn, 728 F.3d 243 (3d Cir. 2013). "There is * * * overwhelming judicial and legislative authority for the proposition that review on the merits of a Federal prosecutor's decision to grant immunity is barred by statute." United States v. Herman, 589 F.2d 1191, 1201 (3d Cir. 1978). This bar extends to judicial review on the merits of a prosecutor's decision to withhold immunity. Id. 

Rule 142 permits the Court to shift the burden of proof in its discretion under certain circumstances. Given the prosecutor's broad authority to make immunity decisions without judicial interference, we exercised this discretion cautiously here. After careful consideration of Mr. Haber's circumstances, we determined that he could invoke his Fifth Amendment right to avoid testifying, but we declined to shift the burden of persuasion. After trial it is apparent that the burden of persuasion has no bearing on the resolution of this case. The evidence in the record would support our conclusion even if we had shifted the burden and even if Mr. Haber had testified as petitioner claimed in its offer of proof. Considering the significant objective evidence of his intent here, we would have given little weight to his self-serving testimony. See Faulconer v. Commissioner, 748 F.2d 890, 894 (4th Cir. 1984) ("A taxpayer's mere statement of intent is given less weight than objective facts."), rev'g T.C. Memo. 1983-165.

Article on FATCA as New International Standard (3/18/14)

Tax Notes has published a new article on FATCA.  Joshua D. Blank and Ruth Mason, Exporting FATCA, 142 Tax Notes 1245 (Mar. 17, 2014).  Professors Blank and Mason are at NYU Law and UVA Law.  The earlier draft version at SSRN is here.  The following is the SSRN summary of the article:

The Foreign Account Tax Compliance Act (FATCA) represents a powerful response by the United States to flagrant offshore tax evasion. Although the new reporting regime has been criticized as unilateral and extraterritorial, this short article, prepared for a symposium hosted by Pepperdine Law Review, shows that multilateralism and cooperation so far have been the keys to implementing FATCA. In addition to spurring bilateral Intergovernmental Agreements (IGAs) to implement FATCA, and copycat legislation in other jurisdictions, for many countries, the FATCA reporting requirements represent an aspirational new global standard for automatic exchange of information – one that would supplement, if not replace, information exchange on request.

The following are excerpts (footnotes omitted) from the article as published in Tax Notes (haven't compared to the draft which I link above).  I present them in the outline format of the article, omitting most of the text (omissions shown by * * * *) and sometimes adding information shown by brackets [ ].

A. Introduction

* * * *

B. The Rise of FATCA

* * * *

1. Background. 

* * * *

2. FATCA. 

* * * *

3. Criticisms [of FATCA]

[Those who don't like FATCA will find some reinforcement in this succinct summary of criticisms]

C. From Unilateralism to Multilateralism

While complaints about the unilateralism and extraterritoriality of FATCA are not without merit, FATCA has enhanced multilateral cooperation in combating tax evasion, and it has spawned similar legislation and treaties in other jurisdictions.

Credit Suisse Banker Pleads Guilty to Tax Conspiracy (3/12/14; 3/13/14)

Andreas Bachmann, a Credit Suisse Banker, pled guilty today to one count of conspiracy.  See DOJ Tax press release, here.  The Statement of Facts is here.  I excerpt portions of the Statement of Facts below.

Key excerpts (bold face added by JAT):

In a statement of facts filed with the plea agreement, Bachmann admitted that between 1994 and 2006, while working as a relationship manager in Switzerland for a subsidiary of an international bank, he engaged in a wide-ranging conspiracy to aid and assist U.S. customers in evading their income taxes by concealing assets and income in secret Swiss bank accounts.

As part of that conspiracy, Bachmann traveled to the United States twice each year to provide banking services and investment advice to his U.S. customers.  As a matter of practice, prior to traveling to the United States, Bachmann notified his executive management, including the head of the subsidiary’s private bank in Zurich and the chief executive officer of the subsidiary, of the planned trip and its objectives.

Although Bachmann had been informed of limitations under U.S. law on his ability to provide investment advice to U.S. account holders regarding U.S. securities, the highest ranking executive at the subsidiary was aware that Bachmann was violating U.S. law.  According to the statement of facts, Bachmann was effectively told by the chief executive officer for the subsidiary, “Mr. Bachmann, you know what we expect of you, don’t get caught.”

According to the statement of facts, Bachmann also engaged in cash transactions while traveling in the United States.  In the course of arranging meetings with U.S. customers, some clients would request that Bachmann either provide them with cash as withdrawals from their undeclared accounts or take cash from them as a deposit to their undeclared accounts.  As part of that process, Bachmann agreed to receive cash from U.S. customers and used that cash to pay withdrawals to other U.S. clients.  In one instance, Bachmann received $50,000 in cash from one U.S. customer in New York City and intended to deliver the money to another U.S. client in Southern Florida.  Airport officials in New York discovered the cash but let Bachmann keep the money after questioning him.  The client in Florida refused to take the money after the client learned about the questioning by New York airport officials, and Bachmann returned to Switzerland with the $50,000 in cash in his checked baggage.  Bachmann advised the executive management of the subsidiary about the incident with the cash.

Bachmann also understood that a number of his U.S. customers concealed their ownership and control of foreign financial accounts by holding those accounts in the names of nominee tax haven entities, or structures, which were frequently created in the form of foreign partnerships, trusts, corporations or foundations.

Bachmann dealt with Josef Dӧrig, a co-defendant, regarding the formation and/or maintenance of structures for U.S. customers, among others.  In approximately 1997, the international bank instructed Dӧrig to form his own company specializing in the formation and management of nominee tax haven entities because it was “too risky” to have Dörig perform that work from inside the international bank.  The international bank then directed the subsidiary and others to use Dӧrig and his Swiss trust company, Dӧrig Partner AG, as the preferred choice for the formation and management of structures.

JAT Comments:

The real target of this plea and the wording of the press release is, of course, Credit Suisse.  Perhaps even the testimony of the CEO at the recent PSI hearing.

Addendum 3/12/14 6:32 PM:

House Oversight Committee Staff Report on Lois Lerner (3/11/14)

The House Committee on Oversight and Government Reform has issued its report on the Lois Lerner episode.  The report is titled Lois Lerner's Involvement in the IRS Targeting of Tax-Exempt Organizations, here.  This is a staff report.

I have not had time to study the report.  My gut reaction from perusing it is that it is a political document, and that she made the right call in invoking the Fifth Amendment privilege, not because the evidence supports her guilt of anything but because the evidence supports that the House majority had found her guilty long ago. So, my only comment is to repeat a quote, variously worded, from the inimitable Daniel Patrick Moynihan: "Everyone is entitled to his own opinion, but not his own facts."

I have done a quick Google search and, not surprisingly, the majority's blogosphere base is wholeheartedly praising the report.

Addendum 3/11/14 6:00 PM:  Let me say that, in my own way, I hope that the report calls it exactly right.  For, if it does not, if it is materially wrong in in reporting of the facts and the fair inferences from the facts, the staff and those who led the staff have done this country a great disservice, not to mention the people they have libeled with no consequence to the staff and those who led the staff.

Addendum 3/12/14 10:06 AM:

Readers of this blog know the standard precaution that is given when serious charges against U.S. citizens are made by way of an indictment:\

The charges and allegations contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

See e.g., a sample USAO SDNY press release announcing an indictment here.

The question raised by this report is whether that precaution applies when charges are made against U.S. citizens by a partisan congressional committee?

Outstanding Presentation on FBAR Assessment and Collection (3/11/14)

Caroline Ciraolo, a major player in tax controversy generally and in OVDI/P specifically, has prepared a great presentation titled Assessment and Collections of the FBAR Penalty.  Caroline's bio is here.  The presentation is here.  Although the presentation is dated April 10, 2013, Caroline advises that the materials presented are still current.  Let me just say that Caroline drills down and asks and answers the questions most readers might have thought about with regard to FBAR assessment and collection.

Some topics she deals with are:

• Administrative Offsets and Suits to Collect FBAR Penalties, Including Statutes of Limitations
• Interest on Unpaid FBAR Penalties
• Taxpayer Lawsuits to Challenge the FBAR Penalty Under the Tucker Act.
• The FBAR Penalty in Bankruptcy

One particular matter that I found of current interest is a quick judicial remedy for a taxpayer suffering an FBAR willful penalty assessment.  The taxpayer may bring immediately a partial payment Tucker Act suit, not hampered by Flora's full payment rule.  For example, say the FBAR willful penalty is $1,000,000.  The taxpayer might pay, say, $100 and bring suit immediately (subject to any administrative claim that might have to be filed, which I have not researched yet).  That does not mean that the Government will stop collection measures, but collection measures may be limited, so the Government would likely then counterclaim for the balance (assuming that the two year statute of limitations for FBAR collection suits is still open, which would be the case if the taxpayer brings an immediate suit).

Even better, the taxpayer suffering an FBAR assessment can bring the suit in district court.  I have not traced out definitively whether the taxpayer is entitled to a jury, but the USAM Civil Resource Manual Title 4, 201, Jury Trials in Civil Cases, here, seems to indicate that a jury trial may be available.

Of course, one forum to litigate the FBAR assessment under the Tucker Act is the Court of Federal Claims where a jury trial is not available.  So, in choosing the forum, the taxpayer and his counsel will have to consider carefully the pros and cons of a jury trial.  In the case I am currently considering this option for a jury trial in the local district court is the way to go.  If we draw that assessment after Appeals Office review, we will be in the district court with a jury demand in less than a week (subject to any required administrative request which, under the tax analog, would be a formality because of Appeals previous consideration).

List of 14 Swiss Banks Under Criminal Investigation (3/9/14)

Here is my current list of the 14 Category 1  banks under criminal investigation with no opportunity to join the U.S. Swiss Bank initiative:

Bank Frey
Bank Hapoalim (Switzerland)
Bank Julius Baer
Bank Leumi (Switzerland)
Basler Kantonalbank
Credit Suisse AG
HSBC Private Bank (Suisse)
Liechtensteinische Landesbank (Switzerland) Ltd.
Mizrahi-Tefahot (Switzerland)
Neue Privat Bank
Neue Zürcher Bank
Pictet & Cie
Rahn & Bodmer
Zürcher Kantonalbank

I would appreciate readers advising if this list is not correct.

Addendum on 5/21/15:  I found another list, Swiss Banks Entering U.S. Client Disclosure Program (Swissinfo 10/15/14), here.  The Swissinfo list overlaps except that (i) Neue Zürcher Bank is on my llist and not on Swissinfo list and (ii) Group SCA is on the Swissinfo and not on my list.

More on Credit Suisse and the Larger SEC Issue for Some Swiss Banks (3/7/14)

I previously blogged on the Credit Suisse SEC fine.  Credit Suisse Take a Hit on U.S. Tax Evasion Business (Federal Tax Crimes Blog 2/21/14), here.  The Wall Street Journal has a good more recent article: Joel Schedman, Broker Dealer Rules Have Teeth Against Swiss Banks (WSJ World 3/6/14), here.  Some f the opening excerpts to get your interest:

Despite stories of unmarked elevators and secret wire transfers, the most damaging charge against Credit Suisse Group AG has been comparatively mundane: as it courted Americans for offshore accounts, the bank failed to register its bankers with the Securities and Exchange Commission. 

Credit Suisse Group AG bankers courted American tax evaders, between 2002 and 2008, schooling them in how to do an end-run around the Internal Revenue Service and hide behind Swiss secrecy rules, according to a 181-page report from the Senate’s Permanent Subcommittee on Investigations. Beyond just offering American clients undeclared Swiss accounts, Credit Suisse bankers helped set up “shell entities” to “mask their U.S. ownership.” The bankers also offered helpful tips in hiding financial activity, like keeping transactions below a certain dollar amount to avoid triggering greater scrutiny, according to the report. 

Credit Suisse acknowledges the “misconduct, centered on a small group of Swiss-based private bankers, previously occurred at our bank,” according to the bank’s statement submitted to the subcommittee. Bank officials “deeply regret these employees’ actions.” Since 2008, after the allegations came to light, Credit Suisse, “took proactive and decisive steps to ensure that only U.S. clients who established compliance with U.S. tax laws could remain at the Bank,” according to the statement. The bank says it shut down the unit responsible for in 2009. 

Despite the color of the alleged tax evasion, the most painful charge against the bank has been less sexy: As bankers recruited American clients, they failed to register with the SEC. Credit Suisse agreed to pay the SEC $196 million over those charges last month, in a case that bore a striking resemblance to the allegations against another Swiss bank, UBS AG. “It’s Deja Vu all over again,” said John C. Coffee, a professor at Columbia Law School.

Fifth Amendment and Immunity in Congressional Hearings (3/6/14; 3/11/14)

Since the Darrell Issa witch hunt is back in the news regarding Lois Lerner's invocation of her Fifth Amendment privilege, I thought I would remind readers of the following blog entry earlier when this nonsense flared up.  Invoking the Fifth - the House Oversight Inquisition (Federal Tax Crimes Blog 5/25/13), here.

I now add two excerpts from law review articles -- the first discussing assertion of the Fifth Amendment in a congressional hearing and the second discussing the congressional committee's ability to avoid the Fifth Amendment by getting immunity for the witness.  (Note that the latter is the way that Committee can get Lerner's testimony that Issa and his crew claims is so essential to the  investigation; so one obvious question is why the Committee does not obtain immunity for her; could one answer be that they know the testimony she will give is not as damaging as they can claim if she does not give the testimony; in other words, is she more useful to the conspiracy theorists by claiming the Fifth when the truth to which she would testify is not helpful to their cause?)

Kalah Auchincloss, Congressional Investigations and the Role of Privilege, 43 Am. Crim. L. Rev. 165, 193-195 (2006) (footnotes omitted).

B. Fifth Amendment in a Congressional Investigation 

1. Watkins v. United States: The 5th Amendment Lives 

As noted several times previously, individual rights did not appear to pose a limit on congressional investigatory power until after the era of abuse by HUAC. Despite the importance of the Fifth Amendment, it is interesting to observe that even this explicitly constitutional privilege was not openly recognized by the Court as available to a witness before Congress until the 1950s.  

In Watkins v. United States [354 U.S. 178 (U.S. 1957), here], the Supreme Court granted certiorari to review the conviction of a witness for contempt for declining to answer questions posed to him by HUAC.  Watkins had cited the Fifth Amendment right to remain silent as justification for his refusal to testify. The Court overturned Watkins' conviction, finding that the Bill of Rights applies to congressional hearings just as it does to courts:

It is unquestionably the duty of all citizens to cooperate with the Congress in its efforts to obtain the facts needed for intelligent legislative action. It is their unremitting obligation to respond to subpoenas, to respect the dignity of the Congress and its committees and to testify fully with respect to matters within the province of proper investigation. This, of course, assumes that the constitutional rights of witnesses will be respected by the Congress as they are in a court of justice. The Bill of Rights is applicable to investigations as to all forms of governmental action. Witnesses cannot be compelled to give evidence against themselves.

U.S. Motion for Summary Judgment in Zwerner (3/5/14)

I have just had the opportunity to peruse the Government's motion for summary judgment in the Zwerner case.  The motion is here (Note to readers, I have bookmarked the outline of the presentation in the pdf but you must download the pdf to take advantage of the bookmarked table).  The motion was filed 2/28/14.  I did not downloaded or read the exhibits, but have listed them here as presented in the motion.  My quick cut is that the exhibits are not relevant for any comments that I will make here.  The docket entries as of this morning are here.

My comments are:

1. The Government asserts that the burden of proof it must meet to establish willfulness is by a preponderance of the evidence.  Two courts have so held, although in one of the holdings was dicta.  I continue to believe that a strong case can be made for the clear and convincing standard.  I have presented my basic position on this point in earlier blogs, although I have recently refined the argument.  So, maybe I'll post on it later.

2.  The Government asserts the willful blindness, saying it is not necessary to prove Zwerner's knowledge that the law required the filing of the FBAR and imposed penalties for failure to do so.  I think that argument is wrong.  Congress' command was that the person have acted willfully.  In this context, it is clear that willfulness is the intentional violation of a known legal duty.  Nobody can seriously question that proposition. See Ratzlaf v. United States, 510 U.S. 135 (1994), here (the defendant knew of the BSA CTR filing requirement and sought to avoid it but did not know the law penalized it)  The question is whether willful blindness is a substitute for intentional violation of a known legal duty (as the Government appears to argue) or, instead, is simply a fact pattern from which the trier of fact is permitted to infer that the person had the requisite intent to violate a known legal duty, which after all is the command of  the statute.  The cases are fuzzy on this distinction, but if it is as the Government argues -- i.e., a substitute for intentional violation of a known legal duty -- then the position adds to the statutory basis for liability enacted by Congress.  That cannot be right.  I too have recently refined my analysis on this position and may post on it later.  (Note that I usually refer to willful blindness as conscious avoidance, as the label below for links to other blogs on the subject suggests.)

3.  Willfulness -- in the sense of intentional violation of a known legal duty -- is an inference from the facts because, as the Government notes, it is hard to prove the workings of a mind.  It thus should be the rare case that a finding of willfulness is compelled as a matter of law, as the Government asserts.  This is a variation of the concern I express in paragraph 2, but I suppose that willful blindness also is an inference from facts and thus also not well-suited for summary judgment.

The outline for the Government's argument on the defendant's liability is:

The Scariest Tax Form? Scary Is in the Eye of the Beholder (3/3/14)

Robert Wood has a timely reminder that certain forms, if not filed or filed properly, can create major statute of limitations problems for U.S. taxpayers.  Robert W. Wood, Scariest Tax Form? Skip It, And IRS Can Audit Forever (Forbes 3/l3/14), here. The particular form he focuses on is the Form 5471.  The Form 5471 is here.  The instructions for the form are here (in pdf format) and here (in html format).  Here is the key excerpt:

The IRS normally gets three years to audit. Sometimes, say if you mess up with offshore account reporting, the IRS gets six. Having a foreign bank account and unreported income is tough to resolve. The safest approach is going into the IRS Offshore Voluntary Disclosure Program, although some clients opt for more aggressive approaches. 

What many people find surprising is that having a company that holds a foreign account is even more sensitive. Yes, we’re talking about controlled foreign corporations, also called CFCs. When a U.S. shareholderdholds more than 50 percent of the vote or value of a foreign corporation, the company is a controlled foreign corporation or CFC. A U.S. shareholder is a U.S. person who owns 10 percent or more of the foreign corporation’s total voting power. 

That triggers reporting, including filing an annual IRS Form 5471. It is an understatement to say this is an important form. Failing to file it means penalties, generally $10,000 per form. A separate penalty can apply to each Form 5471 filed late, and to each Form 5471 that is incomplete or inaccurate. 

What’s more, this penalty can apply even if no tax is due on the return. That seems harsh, but the next rule—about the statute of limitations—is even more surprising. If you have a CFC but fail to file a required Form 5471, your tax return remains open for audit indefinitely. Normally, the statute expires after three or six years, depending on the issue and its magnitude. 

This statutory override of the normal statute of limitations is sweeping. The IRS not only has an indefinite period to examine and assess taxes on items relating to the missing Form 5471. In fact, the IRS can make any adjustments to the entire tax return with no expiration until the required Form 5471 is filed. You might think of a Form 5471 like the signature on your return. Without it, it really isn’t a return.

This is scary.  But there are many returns and return filing obligations that are scary.  Picky and choosing is a matter of personal preference.  Mr. Woods is concerned about an unlimited civil statute of limitations -- or at least a civil statute suspension until the information is provided.  The criminal statute of limitations is not suspended.

IRS CI Is Looking at Renunciations of Citizenship Just in Case (3/1/13)

It is reported the IRS CI is interested in the reasons that U.S. citizens renounce their citizenship.  Jaime Arora, IRS Criminal Investigation Division Looking Into U.S. Citizenship Renunciations, 2014 TNT 41-8 (3/3/14).  The article is nonspecific about what the IRS is looking for and the consequences might be if they found something.

Still, there are tax requirements for renouncing citizenship in certain cases.  I won't go into them now, but link to blogs on the subject here.

I can imagine that mishandling the various forms and representations required for renunciation, including the tax forms and representations, could be a crime under various federal statutes -- tax and nontax -- and, at last if something was done wrong related to taxes, conceivably the renunciation conduct could refresh statutes of limitations for tax crimes that might have otherwise expired.