Daily Tax Update - January 9, 2012: Offshore Voluntary Disclosure Program Reopens

OFFSHORE VOLUNTARY DISCLOSURE PROGRAM REOPENS: Today, the IRS announced that it has reopened the Offshore Voluntary Disclosure Program (OVDP) "following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs." More than $4.4 billion has been collected by the IRS so far from the 2009 and 2011 programs. This is the third OVDP program offered by the IRS and the program will be open "for an indefinite period until otherwise announced."

  • Although the IRS said that the program is "similar to the 2011 program in many ways," there is no firm deadline to apply as specified in the two previous programs. However, the IRS said that the "terms of the program could change at any time going forward. For example, the IRS may increase penalties in the program for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any point."
  • IRS Commissioner Doug Shulman said, "Our focus on offshore tax evasion continues to produce strong, substantial results for the nation’s taxpayers. We have billions of dollars in hand from our previous efforts, and we have more people wanting to come in and get right with the government. This new program makes good sense for taxpayers still hiding assets overseas and for the nation’s tax system." Shulman added, "As we’ve said all along, people need to come in and get right with us before we find you. We are following more leads and the risk for people who do not come in continues to increase."
  • According to the IRS, "The overall penalty structure for the new program is the same for 2011, except for taxpayers in the highest penalty category. For the new program, the penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. That is up from 25 percent in the 2011 program. Some taxpayers will be eligible for 5 or 12.5 percent penalties; these remain the same in the new program as in 2011. Participants must file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties. Participants face a 27.5 percent penalty, but taxpayers in limited situations can qualify for a 5 percent penalty. Smaller offshore accounts will face a 12.5 percent penalty. People whose offshore accounts or assets did not surpass $75,000 in any calendar year covered by the new OVDP will qualify for this lower rate. As under the prior programs, taxpayers who feel that the penalty is disproportionate may opt instead to be examined."
  • The IRS added, "More details will be available within the next month on IRS.gov. In addition, the IRS will be updating key Frequently Asked Questions and providing additional specifics on the offshore program."
  • The press release can be accessed here.
  • For additional information, contact: - Matthew D. Lerner - mlerner@steptoe.com, Philip R. West - pwest@steptoe.com, or Catherine W. Wilkinson - cwilkinson@steptoe.com

IRS RELEASES FORM FOR REPORTING CORPORATE ACTIONS AFFECTING STOCK BASIS: The IRS has issued the form and instructions for reporting corporate organizational actions that affect stock basis. Form 8937, "Report of Organizational Actions Affecting Basis of Securities," allows issuers of securities to comply with section 6045B by describing any action that affects the basis of their outstanding, issued stock in an information return filed with the IRS. Affected issuers may also post the required information on public websites.

  • According to the IRS, "File Form 8937 if you are an issuer of a specified security reporting requirement for any organizational action that affects the basis of its stock or security."
  • Section 6045B encompasses mergers, stock splits, spinoffs, and several other organizational events, and the information return is supposed to detail an action's quantitative effect on the basis of each share of stock. Because it applies to publicly and privately traded securities, as well as to all outstanding stock rather than to only shares issued after the statute's effective date, the reporting requirement has a broad reach. The form must be filed 45 days after the corporate action, or January 15 of the following year, if earlier.
  • Penalties may be imposed for failing to file Form 8937 by January 17, 2012 for transactions occurring in 2011.
  • The forms and instructions can be accessed via:
  • For additional information, contact Mark J. Silverman - msilverman@steptoe.com

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
Steptoe & Johnson LLP has one of the largest and most diverse law firm tax practices in the country. The practice covers the entire spectrum of federal taxation, including representation of businesses before the Congress, Treasury and the national office of the IRS; transactional planning for domestic and multinational corporations; complex audit and controversy work for corporations and other business interests contesting IRS adjustments; litigation before the Tax Court, Court of Federal Claims, district courts, courts of appeals and the Supreme Court. The firm's tax practice also encompasses all aspects of employee benefits (ERISA), executive compensation, tax-exempt organizations and charitable giving. Steptoe has an extensive state and local tax practice, representing an array of business clients on complex sales and use tax, corporate income tax and property tax matters, both advising those clients and handling audits, administrative appeals, and litigation for them. Read more information on Steptoe's tax practice.