Daily Tax Update - July 24, 2008

FINANCE COMMITTEE HOLDS HEARING ON OFFSHORE TAX EVASION:  Today, the Senate Finance Committee held a hearing on the Cayman Islands and offshore tax issues. Senate Finance Committee Chairman Max Baucus said, “This is about finding out whether folks are paying the taxes they legally owe, or whether they’re seeking to run around US tax laws. Our duty is to help the IRS do its job and part of that job is tracking and prosecuting individuals and entities that evade taxes. I will not condone US taxpayers who knowingly and illegally avoid paying their fair share by storing money offshore. It burdens honest taxpayers and threatens the entire tax system. I think requiring individuals and companies to be more forthcoming about their offshore holdings in places like the Caymans will go a long way. It’s clear from today’s testimony that we have an opportunity – indeed a duty – to find legislative solutions to pressure the IRS and better enable them to collect on the nearly $345 billion annually of legally-owed but unpaid taxes.” 

  • According to the Committee, “Chairman Baucus also sought input on six legislative recommendations, including modifying the rules for the Foreign Bank Account Report (FBAR), which facilitates information collection by the IRS. The proposals would reinforce the role of the IRS in levying penalties against individuals who fail to file an FBAR, increase the statute of limitations for FBAR violations, require that FBARs be filed with tax returns, and strengthen rules on the disclosure of the identity of individuals who make money from offshore financial transactions. Witnesses agreed that the proposals would make strides in beginning to solve the problem of offshore tax evasion. Other recommendations from the witnesses included revising current IRS Form W-8 procedures–which allow US taxpayers to hide behind foreign shell corporations to protect individual identities–to require foreign companies to prove they are an active trade or business.” 
  • Testimony can be accessed via: http://finance.senate.gov/sitepages/hearing072408.htm
  • In conjunction with the hearing, the Joint Committee on Taxation released a report titled, “Selected Issued Relating To Tax Compliance With Respect To Offshore Accounts And Entities.” 
  • The report can be accessed via: http://www.jct.gov/x-65-08.pdf

TAX BILL INTRODUCED JULY 23rd:
S.3316: A bill to amend the Internal Revenue Code of 1986 to encourage the use of corrosion prevention and mitigation measures in the construction and maintenance of business property.
Sponsor: Sen Brown, Sherrod [OH] (introduced 7/23/2008)      Cosponsors (None)

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

STEPTOE & JOHNSON LLP - TAX PRACTICE
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