Posted by williambyrnes on May 14, 2013
Editor’s Note: The following is an excerpt from Chapter 2 of LexisNexis® Guide to FATCA Compliance by William Byrnes and Robert Munro.
…
The over-arching requirements for FATCA [the Foreign Account Tax Compliance Act] are three-fold:
-
obtain appropriate due diligence information and documentation for account holders, investors and payees;
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report on relevant parties such as U.S. account holders, recalcitrant account holders and non-participating foreign financial institutions (“FFIs”); and
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coordinate withholding as appropriate and if necessary. The requirements are largely intertwined, with due diligence serving as the foundation for the reporting and withholding requirements.
Now that the final FATCA Regulations are published and a number of intergovernmental agreements (“IGAs”) have been signed, FFIs must implement practical steps to be FATCA compliant by January 1, 2014. There is no one-size-fits-all compliance plan for FFIs; however, there are many similar and consistent steps FFIs, regardless of location, can take to develop a FATCA compliance program to meet the broad goal of FATCA: to combat offshore tax evasion by U.S. persons and become FATCA compliant.
Before a FFI can become FATCA compliant, a FFI should take certain preliminary steps to determine the impact FATCA will have on the FFI as well as plan the path toward compliance in an efficient and timely manner.
Early in the process, the FFI should develop a FATCA task force or program team that will oversee the day-to-day operations to becoming FATCA compliant. The task force should include representatives from tax, anti-money laundering (“AML”) and customer on-boarding groups, technology, change management and operations as well as, potentially, other stakeholders. The task force will oversee the broad program plan for the FFI and likely report to the FATCA sponsoring executives or steering committee.
FFIs have to determine what, if any, communications they will prepare for both internal and external stakeholders concerning FATCA. An internal awareness and training program should be developed to teach FFI employees about FATCA and its importance to the FFI. The awareness program should start at the highest level to establish the necessary “tone at the top.”
The FFI may also want to prepare a list of questions, a “FAQs of FATCA,” to ensure the FFI’s clients are receiving a consistent message, regardless of where in the world they are located. FFIs should also determine what if any message they want to provide directly to clients or put on their websites, although it is very important that the FFI does not give unintentional tax advice to its clients.
Additionally, some training of FFI staff, including client-facing personnel, could assist with customers of the FFI receiving a clear and consistent message. It may likely be the FFI’s client-facing personnel are already receiving questions from customers regarding FATCA.
FFIs should take a proactive approach to minimize costs and interference with the customer experience at the FFI. With that in mind, prior to developing a FATCA compliance strategy, FFIs should conduct an assessment of the impact FATCA will have on the FFI by collecting information relating to:
- Number and activity of each legal entity and/or business line;
- Products and services offered by the business line;
- Types and volume of accounts;
- Relevant policies and procedures; and
- Identification of information technology (“IT”) systems and databases that maintain relevant information and may require updates.
The FFI should also determine what past interactions it has had with the IRS or home country tax authority relating to information reporting on their customers. FFIs may be able to leverage past reporting for FATCA compliance.
FFIs around the globe may rely on other parties to take on certain responsibilities. For example, a foreign fund may outsource some or all of its asset custody, compliance and regulatory functions, transfer agency services and/or distribution. In this case, the FATCA compliance program will only be as strong as the weakest link.
Coordinating and ensuring all relevant parties are working towards FATCA compliance will be important since a FATCA compliance failure on behalf of an agent of the FFI can be construed as a failure by the FFI itself. Asking questions of the FFI’s third-party service providers will be an important early step. If a third-party service provider is not working towards FATCA compliance, the FFI may want to re-assess their relationship and engagement with that party.
After the impact assessment is complete, the FFI will need to plan a path forward that not only makes all of the information technology systems and policy changes, but also develops a working corporate governance structure and functioning compliance program. …
Chapter contributors:
Richard Kando, CPA (New York) is a Director at Navigant Consulting and served as a Special Agent with the IRS Criminal Investigation Division where he received the U.S. Department of Justice – Tax Division Assistant Attorney General’s Special Contribution Award.
Jeffrey Locke, Esq. is Director at Navigant Consulting. Prior to joining Navigant, he served as an assistant New York state attorney general in the Criminal Prosecutions Bureau and worked in the prosecutor’s office for the United Nations in Kosovo.
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Posted in Compliance, Money Laundering, OECD, Reporting, Tax Policy, Taxation | Tagged: FATCA, FFI, Foreign Account Tax Compliance Act, Internal Revenue Service, LexisNexis, Money Laundering, NFFE, tax | Leave a Comment »
Posted by williambyrnes on May 10, 2013
Types of Entities
The Foreign Account Tax Compliance Act (“FATCA”) provides for withholding taxes to enforce reporting requirements on specified foreign accounts owned by specified U.S. persons or by U.S. owned foreign entities.
FATCA requires specified U.S. persons (U.S. citizen, residents and certain non-resident aliens) and specified domestic entities to report interests in specified foreign financial assets (SFFAs) if the aggregate value of those assets exceeds certain threshold. The regulations apply to domestic entities formed or availed of to hold, directly or indirectly, specified foreign financial assets. These specified entities include certain closely held corporations and partnerships that meet certain conditions and aggregation rules. Specified entities include domestic trusts if they meet certain criteria and exceed certain reporting threshold.
A U.S. owned foreign entity is an entity with one or more substantial U.S. owners. With certain exceptions, a substantial U.S. owner is any U.S. person with greater than 10% direct or indirect ownership interest in the foreign entity.
FATCA applies to U.S. persons who have specified foreign financial assets (SFFAs) whose value exceeds certain thresholds. The IRS announced in January 2013 that reporting by domestic entities with interests in specified foreign financial assets will not be required to file the IRS reporting form for FATCA, Form 8938, until after the date specified by final regulations, which will not be earlier than taxable years beginning after December 31, 2012.1
All foreign entities and foreign trusts are potentially subject to FATCA, in addition to the current Qualified Intermediary (QI) rules. Withholding rules and reporting requirements under FATCA depend upon the entity’s classification. FATCA classifies foreign entities as either financial entities or non-financial entities. Financial entities are classified as Foreign Financial Institutions (FFIs) [see infra. Chapter 7] while non-financial entities are classified as Non-Financial Foreign Entities (NFFEs) [see infra. Chapter 8].
Entities and trusts are very different under U.S. law. Entities include partnerships, limited liability companies (LLCs), international business companies (IBCs), foundations, usufructs, and corporations. In entities, the title to the property owned is not divided.
In a trust, however, U.S. law splits the ownership of the title into two parts, legal and equitable. The trustee of the trust owns the legal title for the benefit of the beneficiary, who owns the equitable title. A trust is a relationship, not an entity, and is treated differently under both the existing QI rules and FATCA.
Specified Foreign Financial Assets (SFFAs)
Financial Accounts
The most common type of SFFA that banks will encounter is a financial account such as any depository or custodial account that is maintained by an FFI.2 A financial account also includes non-publically traded equity or debt interest in a depository or custodial institution, an insurance company, or an investment entity.3 …
Moreover, a financial account includes a non-publically traded equity or debt interest in a holding company or treasury center in an expanded affiliated group [See infra. Chapter 8]. This applies if the holding company or treasury center has at least one investment entity or passive NFFE and the income of the investment entity or passive NFFE in the group exceeds 50% of the group’s aggregate income.4 …
Assets
SFFAs include assets not held in an account. Stocks and securities issued by a non-U.S. person that are held for investment are SFFAs whether they are held in an account with a FFI or not. The same holds true for capital or profits interests in a foreign partnership, any form of debt issued by a non-U.S. person, or a beneficial interest in a foreign trust, foreign estate, or foreign entity. A litany of financial instruments collectively referred to as “swaps” are also SFFAs whether held in an account or not. Options and derivative instruments that have any non-U.S. parties or are issued by a non-U.S. issuer are also SFFAs.5 …
Exemptions from SFFA Definitions
FATCA does provide exemptions. An interest in a foreign security or social insurance program is not a SFFA. A stock of precious metals held in a foreign safe deposit box is not a SFFA. Any security or partnership interest used or held in the conduct of normal trade or business is considered not to be held for investment under FATCA. Stock, however, cannot be considered to be held in the conduct of normal trade or business for purposes of FATCA. Therefore, foreign stock is a SFFA.6 …
Example of SFFA
To clarify what may be considered an SFFA, consider the following example. Mr. Smith, a U.S. person resident in the U.S., has $1 million in a Swiss bank account. He owns a partnership interest in a hedge fund established in the Cayman Islands, and directly owns 5,000 shares of a publically traded Japanese corporation, JapanCo. He also has social security benefits in a foreign country. …
1. IRS Notice 2013-10, “Information Reporting by Domestic Entities under Section 6038D with Respect to Specified Foreign Financial Assets”.
2. IRC §1471(d)(2), Treas Reg §1.1471-5(b)(1)(i), (ii).
3. IRC §1471(d)(2), Treas Reg §1.1471-5(b)(1)(iii)(A). “Investment entity” is defined in Treas Reg §1.1471-5(e)(4)(i).
4. IRC §1471(d)(2), Treas Reg §1.1471-5(b)(1)(iii)(B)(1). “Treasury center” is defined in Treas Reg §1.1471-5(e)(1)(v).
5. See generally IRS Form 8938, Statement of Specified Foreign Financial Assets.
6. See generally IRS Form 8938, Statement of Specified Foreign Financial Assets.
7. Foreign social security or social insurance programs are not specified as FFA, so they are not subject to FATCA reporting. Instructions to IRS Form 8938, Statement of Specified Foreign Financial Assets, p. 4.
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Posted in Compliance, Reporting, Tax Policy, Taxation, Uncategorized | Tagged: Cayman Islands, FATCA, FFI, Finance, Foreign Account Tax Compliance Act, Internal Revenue Service, international tax, IRS, LexisNexis, Limited liability company, NFFE, tax | Leave a Comment »
Posted by williambyrnes on May 3, 2013
Over 400 pages of compliance analysis !! now available with the 20% discount code link in this flier –> LN Guide to FATCA_flier.
The LexisNexis® Guide to FATCA Compliance was designed in consultation, via numerous interviews and meetings, with government officials, NGO staff, large financial institution compliance officers, investment fund compliance officers, and trust companies, in consultation with contributors who are leading industry experts. The contributors hail from several countries and an offshore financial center and include attorneys, accountants, information technology engineers, and risk managers from large, medium and small firms and from large financial institutions. A sample chapter from the 25 is available on LexisNexis: http://www.lexisnexis.com/store/images/samples/9780769853734.pdf
Contributing FATCA Expert Practitioners
Kyria Ali, FCCA is a member of the Association of Chartered Certified Accountants (“ACCA”) of Baker Tilly (BVI) Limited.
Michael Alliston, Esq. is a solicitor in the London office of Herbert Smith Freehills LLP.
Ariene d’Arc Diniz e Amaral, Adv. is a Brazilian tax attorney of Rolim, Viotti & Leite Campos Advogados.
Maarten de Bruin, Esq. is a partner of Stibbe Simont.
Jean-Paul van den Berg, Esq. is a tax partner of Stibbe Simont.
Amanda Castellano, Esq. spent three years as an auditor with the Internal Revenue Service.
Luzius Cavelti, Esq. is an associate at Tappolet & Partner in Zurich.
Bruno Da Silva, LL.M. works at Loyens & Loeff, European Direct Tax Law team and is a tax treaty adviser for the Macau special administrative region of the People’s Republic of China.
Prof. J. Richard Duke, Esq. is an attorney admitted in Alabama and Florida specializing over forty years in income and estate tax planning and compliance, as well as asset protection, for high net wealth families. He served as Counsel to the Ludwig von Mises Institute for Austrian Economics 1983-1989.
Dr. Jan Dyckmans, Esq. is a German attorney at Flick Gocke Schaumburg in Frankfurt am Main.
Arne Hansen is a legal trainee of the Hanseatisches Oberlandesgericht (Higher Regional Court of Hamburg), Germany.
Mark Heroux, J.D. is a Principal in the Tax Services Group at Baker Tilly who began his career in 1986 with the IRS Office of Chief Counsel.
Rob. H. Holt, Esq. is a practicing attorney of thirty years licensed in New York and Texas representing real estate investment companies.
Richard Kando, CPA (New York) is a Director at Navigant Consulting and served as a Special Agent with the IRS Criminal Investigation Division where he received the U.S. Department of Justice – Tax Division Assistant Attorney General’s Special Contribution Award.
Denis Kleinfeld, Esq., CPA. is a renown tax author over four decades specializing in international tax planning of high net wealth families. He is Of Counsel to Fuerst Ittleman David & Joseph, PL, in Miami, Florida and was employed as an attorney with the Internal Revenue Service in the Estate and Gift Tax Division.
Richard L. Knickerbocker, Esq. is the senior partner in the Los Angeles office of the Knickerbocker Law Group and the former City Attorney of the City of Santa Monica.
Saloi Abou-Jaoude’ Knickerbocker Saloi Abou-Jaoude’ Knickerbocker is a Legal Administrator in the Los Angeles office of the Knickerbocker Law Group concentrated on shari’a finance.
Jeffrey Locke, Esq. is Director at Navigant Consulting.
Josh Lom works at Herbert Smith Freehills LLP.
Prof. Stephen Polak is a Tax Professor at Thomas Jefferson School of Law’s International Tax & Financial Services Graduate Program where he lectures on Financial Products, Tax Procedure and Financial Crimes. As a U.S. Senior Internal Revenue Agent, Financial Products and Transaction Examiner he examined exotic financial products of large multi-national corporations. Currently, Prof. Polak is assigned to U.S. Internal Revenue Service’s three year National Research Program’s as a Federal State and Local Government Specialist where he examines states, cities, municipalities, and other governmental entities.
Dr. Maji C. Rhee is a professor of Waseda University located in Tokyo.
Jean Richard, Esq. a Canadian attorney, previously worked for the Quebec Tax Department, as a Senior Tax Manager with a large international accounting firm and as a Tax & Estate consultant for a pre-eminent Canadian insurance company. He is currently the Vice President and Sr. Wealth Management Consultant of the BMO Financial Group.
Michael J. Rinaldi, II, CPA. is a renown international tax accountant and author, responsible for the largest independent audit firm in Washington, D.C.
Edgardo Santiago-Torres, Esq., CPA, is also a Certified Public Accountant and a Chartered Global Management Accountant, pursuant to the AICPA and CIMA rules and regulations, admitted by the Puerto Rico Board of Accountancy to practice Public Accounting in Puerto Rico, and an attorney.
Hope M. Shoulders, Esq. is a licensed attorney in the State of New Jersey whom has previously worked for General Motors, National Transportation Safety Board and the Department of Commerce.
Jason Simpson, CAMS is the Director of the Miami office for Global Atlantic Partners, overseeing all operations in Florida, the Caribbean and most of Latin America. He has worked previously as a bank compliance employee at various large and mid-sized financial institutions over the past ten years. He has been a key component in the removal of Cease and Desist Orders as well as other written regulatory agreements within a number of Domestic and International Banks, and designed complete AML units for domestic as well as international banks with over three million clients.
Dr. Alberto Gil Soriano, Esq. worked at the European Commission’s Anti-Fraud Office in Brussels, and most recently at the Legal Department of the International Monetary Fund’s Financial Integrity Group in Washington, D.C. He currently works at the Fiscal Department of Uría Menéndez Abogados, S.L.P in Barcelona (Spain).
Lily L. Tse, CPA. is a partner of Rinaldi & Associates (Washington, D.C.).
Dr. Oliver Untersander, Esq. is partner at Tappolet & Partner in Zurich.
Mauricio Cano del Valle, Esq. is a Mexican attorney who previously worked for the Mexican Ministry of Finance (Secretaría de Hacienda) and Deloitte and Touche Mexico. He was Managing Director of the Amicorp Group Mexico City and San Diego offices, and now has his own law firm.
John Walker, Esq. is an accomplished attorney with a software engineering and architecture background.
Bruce Zagaris, Esq. is a partner at the Washington, D.C. law firm Berliner, Corcoran & Rowe, LLP.
Prof. William Byrnes was a Senior Manager then Associate Director at Coopers & Lybrand, before joining academia wherein he became a renowned author of 38 book and compendium volumes, 93 book & treatise chapters and supplements, and 800+ articles. He is Associate Dean of Thomas Jefferson School of Law’s International Taxation & Financial Services Program.
Dr. Robert J. Munro is the author of 35 published books is a Senior Research Fellow and Director of Research for North America of CIDOEC at Jesus College, Cambridge University, and head of the anti money laundering studies of Thomas Jefferson School of Law’s International Taxation & Financial Services Program.
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Posted in Compliance, Estate Tax, Financial Crimes, information exchange, Money Laundering, OECD, Reporting, Tax Policy, Taxation, Wealth Management | Tagged: Compliance, FATCA, Internal Revenue Service, LexisNexis, tax, Tax Evasion, tax reporting | Leave a Comment »
Posted by williambyrnes on March 4, 2013
As the world becomes “smaller,” the dynamics of global financial transactions are intensifying. This is why the Foreign Account Tax Compliance Act (FATCA) is one of the most important awareness issues in today’s tax policy and compliance arena. As new developments emerge almost daily in this ever-changing environment, the importance of working knowledge is increasingly pronounced. The LexisNexis® Guide to FATCA Compliance, scheduled for release in May 2013, will be an invaluable resource of insight into FATCA principles, the reasons behind them, and the best practice steps financial institutions must follow in order to comply. Comprehensive coverage in this work, authored by Professor William Byrnes and Dr. Robert Munro, is complemented by content provided by highly qualified international contributors to render meaningful information about all aspects of FATCA.
The impact of FATCA is far-reaching: Affected financial institutions of many descriptions must navigate complex and challenging regulations to maintain compliance. In broad terms, foreign banks, brokerages, pension funds, insurance companies and a host of other foreign businesses that disburse payments to U.S. citizens and residents are all subject to FATCA compliance. As agreements between nations are consummated and other FATCA developments unfold, the importance of awareness will only grow.
- See more at: http://www.lexisnexis.com/community/taxlaw/blogs/fatca/archive/2013/02/28/lexisnexis-174-guide-to-fatca-compliance.aspx#sthash.Xtf40oCq.megzVJco.dpuf
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Posted by williambyrnes on March 1, 2013
The LexisNexis® Guide to FATCA Compliance was designed in consultation, via numerous interviews and meetings, with government officials, NGO staff, large financial institution compliance officers, investment fund compliance officers, and trust companies, from North and South America, Europe, South Africa, and Asia, and in consultation with contributors who are leading industry experts. The contributors hail from several countries and an offshore financial center and include attorneys, accountants, information technology engineers, and risk managers from large, medium and small firms and from large financial institutions. Thus, the challenges of the FATCA Compliance Officer are approached from several perspectives and contextual backgrounds.
This edition will provide the financial enterprise’s FATCA compliance officer the tools for developing a best practices compliance strategy, starting with determining what information is needed for planning the meetings with outside FATCA experts.
This 330 page Guide contains three chapters written specifically to guide a financial institution’s lead FATCA compliance officer in designing a plan of internal action within the enterprise and interaction with outside FATCA advisors with a view of best leveraging available resources and budget [see Chapters 2, 3, and 4].
This Guide includes a practical outline of the information that should be requested by, and provided to, FATCA advisors who will be working with the enterprise, and a guide to the work flow and decision processes.
Click here to pre-order the LexisNexis® Guide to FATCA Compliance! Remember that only US customers can buy on the US Lexis store.
Chapter 1 Introduction
Chapter 2 Practical Considerations for Developing a FATCA Compliance Program
Chapter 3 FATCA Compliance and Integration of Information Technology
Chapter 4 Financial Institution Account Remediation
Chapter 5 FBAR & 8938 FATCA Reporting
Chapter 6 Determining U.S. Ownership Under FATCA
Chapter 7 Foreign Financial Institutions
Chapter 8 Non-Financial Foreign Entities
Chapter 9 FACTA and the Insurance Industry
Chapter 10 Withholding and Qualified Intermediary Reporting
Chapter 11 Withholding and FATCA
Chapter 12 ”Withholdable” Payments
Chapter 13 Determining and Documenting the Payee
Chapter 14 Framework of Intergovernmental Agreements
Chapter 15 Analysis of Current Intergovernmental Agreements
Chapter 16 UK-U.S. Intergovernmental Agreement and Its Implementation
Chapter 17 Mexico-U.S. Intergovernmental Agreement and Its Implementation
Chapter 18 Japan-U.S. Intergovernmental Agreement and Its Implementation
Chapter 19 Switzerland-U.S. Intergovernmental Agreement and Its Implementation
Chapter 20 Exchange of Tax Information and the Impact of FATCA for Germany
Chapter 21 Exchange of Tax Information and the Impact of FATCA for The Netherlands
Chapter 22 Exchange of Tax Information and the Impact of FATCA for Canada
Chapter 23 Exchange of Tax Information and the Impact of FATCA for The British
Virgin Islands
Chapter 24 European Union Cross Border Information Reporting
Chapter 25 The OECD, TRACE Program, FATCA and Beyond
Index
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Posted in Compliance, information exchange, OECD, Reporting, Tax Policy, Taxation | Tagged: Canada, Chapter 11 Title 11 United States Code, Chapter 13 Title 11 United States Code, FATCA, Financial institution, Internal Revenue Service, LexisNexis, United States | Leave a Comment »
Posted by williambyrnes on January 24, 2013
National Law Journal is doing a public survey that includes the category “Best Tax LLM Program” PLEASE – please – VOTE for Thomas Jefferson School of Law (I am very surprised to even be considered, but alas, now to be voted in the top class would be incredible…)
The voting begins today and below is the link for the survey. It is very long so please scroll through the questions until #63.
https://www.surveymonkey.com/s/2013BestofNLJ – question 63 – Thomas Jefferson
Voting will close February 10th and the winners will be announced in a special NLJ supplement on March 25th .
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Posted by williambyrnes on January 21, 2013
Treasury Advances Efforts to Secure International Participation, Streamline Compliance, and Prepare for Implementation of the Foreign Account Tax Compliance Act (January 17, 2013 U.S. Treasury Department of Public Affairs)
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) on January 17, 2013 issued comprehensive final regulations implementing the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA). Enacted by Congress in 2010, these provisions target non-compliance by U.S. taxpayers using foreign accounts. The issuance of the final regulations marks a key step in establishing a common intergovernmental approach to combating tax evasion.
These regulations provide additional certainty for financial institutions and government counterparts by finalizing the step-by-step process for U.S. account identification, information reporting, and withholding requirements for foreign financial institutions (FFIs), other foreign entities, and U.S. withholding agents.
The final regulations issued today:
Build on intergovernmental agreements that foster international cooperation. The Treasury Department has collaborated with foreign governments to develop and sign intergovernmental agreements that facilitate the effective and efficient implementation of FATCA by eliminating legal barriers to participation, reducing administrative burdens, and ensuring the participation of all nonexempt financial institutions in a partner jurisdiction. In order to reduce administrative burdens for financial institutions with operations in multiple jurisdictions, the final regulations coordinate the obligations for financial institutions under the regulations and the intergovernmental agreements.
Phase in the timelines for due diligence, reporting and withholding and align them with the intergovernmental agreements. The final regulations phase in over an extended transition period to provide sufficient time for financial institutions to develop necessary systems. In addition, to avoid confusion and unnecessary duplicative procedures, the final regulations align the regulatory timelines with the timelines prescribed in the intergovernmental agreements.
Expand and clarify the scope of payments not subject to withholding. To limit market disruption, reduce administrative burdens, and establish certainty, the final regulations provide relief from withholding with respect to certain grandfathered obligations and certain payments made by nonfinancial entities.
Refine and clarify the treatment of investment entities. To better align the obligations under FATCA with the risks posed by certain entities, the final regulations:
(1) expand and clarify the treatment of certain categories of low-risk institutions, such as governmental entities and retirement funds;
(2) provide that certain investment entities may be subject to being reported on by the FFIs with which they hold accounts rather than being required to register as FFIs and report to the IRS; and
(3) clarify the types of passive investment entities that must be identified and reported by financial institutions.
Clarify the compliance and verification obligations of FFIs. The final regulations provide more streamlined registration and compliance procedures for groups of financial institutions, including commonly managed investment funds, and provide additional detail regarding FFIs’ obligations to verify their compliance under FATCA.
Progress on International Coordination, Including Model Intergovernmental Agreements
Since the proposed regulations were published on February 15, 2012, Treasury has collaborated with foreign governments to develop two alternative model intergovernmental agreements that facilitate the effective and efficient implementation of FATCA. These models serve as the basis for concluding bilateral agreements with interested jurisdictions and help implement the law in a manner that removes domestic legal impediments to compliance, secures wide-spread participation by every non-exempt financial institution in the partner jurisdiction, fulfills FATCA’s policy objectives, and further reduces burdens on FFIs located in partner jurisdictions. Seven countries have already signed or initialed these agreements.
Today, Treasury announced for the first time that Norway has joined the United Kingdom, Mexico, Denmark, Ireland, Switzerland, and Spain as countries that have signed or initialed model agreements. Treasury is engaged with more than 50 countries and jurisdictions to curtail offshore tax evasion, and more signed agreements are expected to follow in the near future.
Additional Background on the Model Agreements
On July 26, 2012, Treasury published its first model intergovernmental agreement (Model 1 IGA). Instead of reporting to the IRS directly, FFIs in jurisdictions that have signed Model 1 IGAs report the information about U.S. accounts required by FACTA to their respective governments who then exchange this information with the IRS. Treasury also developed a second model intergovernmental agreement (Model 2 IGA) published on November 14, 2012. A partner jurisdiction signing an agreement based on the Model 2 IGA agrees to direct its FFIs to register with the IRS and report the information about U.S. accounts required by FATCA directly to the IRS.
These agreements do not offer an exemption from FATCA for any jurisdiction but instead offer a framework for information sharing pursuant to existing bilateral income tax treaties. Under both models, all financial institutions in a partner jurisdiction that are not otherwise excepted or exempt must report the information about U.S. accounts required by FATCA. Therefore, the IRS receives the same quality and quantity of
information about U.S. accounts from FFIs in jurisdictions with IGAs as it receives from FFIs applying the final regulations elsewhere, but these agreements help streamline reporting and remove legal impediments to
compliance.
Background on FATCA
FATCA was enacted in 2010 by Congress as part of the Hiring Incentives to Restore Employment (HIRE) Act. FATCA requires FFIs to report to the IRS information about financial accounts held by U.S. taxpayers,
or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. In order to avoid withholding under FATCA, a participating FFI will have to enter into an agreement with the IRS to:
Identify U.S. accounts,
Report certain information to the IRS regarding U.S. accounts, and
Withhold a 30 percent tax on certain U.S.-connected payments to non-participating FFIs and account holders who are unwilling to provide the required information.
Registration will take place through an online system. FFIs that do not register and enter into an agreement with the IRS will be subject to withholding on certain types of payments relating to U.S. investments.
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Posted by williambyrnes on January 2, 2013
In the first moments of 2013, Congress eased the fiscal cliff tax increases for taxpayers earning less than $450,000 by enacting the American Taxpayer Relief Act (Act), permanently extending the Bush-era income tax cuts for this group. … While the legislation extends the current income tax rates for taxpayers earning less than $450,000 ($400,000 for single filers) per year, it allowed the Bush-era tax cuts to expire for all higher-income taxpayers. Similarly, taxes on capital gains, dividends, and estates were increased for the wealthiest taxpayers.
How Were Income Taxes Increased by the Fiscal Cliff Compromise?
How Does the Act Impact the Current System for Tax Deductions and Exemptions?
Were Capital Gains and Dividend Rates Impacted by the Act?
How Are Estate and Gift Tax Rates Affected?
What Other Changes Were Made?
Beyond the Act: What is the “Investment Income Tax”?
Planning Under the Act: How Should Clients Plan for Higher Taxes in 2013?
Read the analysis at National Underwriters’ Advanced Markets - http://nationalunderwriteradvancedmarkets.com/articles/fc010113-a.aspx?action=16
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Posted in Estate Tax, Retirement Planning, Tax Policy, Taxation, Wealth Management | Tagged: Bush Tax Cuts, Capital gain, fiscal cliff, Fiscal conservatism, income tax, tax, Tax rate, United States, United States Congress | Leave a Comment »
Posted by williambyrnes on December 17, 2012
Your small business clients are faced with the increasing likelihood of higher taxes in 2013 and beyond; those aiming to reduce the slope of the fiscal cliff next year will want to take a closer look at the benefits of a defined benefit plan. …. read our strategy article at http://www.advisorone.com/2012/12/13/fully-funded-retirement-in-10-years-a-db-plan-for
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Posted by williambyrnes on December 7, 2012
Clients today assume that the tax-free status of life insurance is a given and may have even engaged in fiscal cliff planning that involves the purchase of life insurance to provide a source of tax-free investment income. Given today’s political climate, it is important for clients to realize that no tax preference is safe and that the tax benefits they have come to expect from life insurance are no exception.
read this article at Life Health Pro e-zine
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Posted by williambyrnes on December 5, 2012
2013 Tax Facts on Investments in PRINT and E-Book format 
provides clear, concise answers to often complex tax questions concerning investments. Pertinent planning points are provided throughout.
Organized in a convenient Q&A format to speed you to the information you need, 2013 Tax Facts on Investments delivers the latest guidance on:
- Mutual Funds, Unit Trusts, REITs
- Incentive Stock Options
- Options & Futures
- Real Estate
- Stocks, Bonds
- Oil & Gas
- Precious Metals & Collectibles
- And much more!
Key updates for 2013:
- New section on captive insurance
- New section on reverse mortgages
- Expanded section on ETFs
- Expanded section on precious metals & collectibles
- More than 30 new Planning Points, written by practitioners for practitioners, in the following areas:
- Real Estate
- Limited Partnerships
- Stocks
- Interest and Expenses
- Options
- Mutual Funds
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Posted in Estate Tax, Retirement Planning, Taxation, Trusts, Wealth Management | Tagged: 2013 Tax Facts, Business, Economy, Exchange-traded fund, futures real estate, incentive stock options, Investing, Investment, Mutual fund, Precious metal, Real estate investment trust, real estate limited partnerships, stocks bonds, tax, Wealth Management | Leave a Comment »
Posted by williambyrnes on December 3, 2012
After expenses covered by Medicare are taken into account, many of your clients retiring this year are likely to incur about $240,000 per couple in out-of-pocket health care expenses during retirement. … You may be able to alleviate the retiree health-expense problem by using guaranteed income annuities or life insurance alternative funding solutions.
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Posted in Insurance, Pensions, Retirement Planning, Wealth Management | Tagged: life insurance, medical expenses, Retirement planning | Leave a Comment »
Posted by williambyrnes on November 30, 2012
An increasing number of your clients are facing the novel possibility of choosing a lump sum payout from their pensions instead of the traditional annuity option. See the full article at -http://www.lifehealthpro.com/2012/08/16/when-clients-get-lump-sum-pension-offers-what-to-a
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Posted in Insurance, Pensions, Taxation, Wealth Management | Tagged: Life annuity, Pension, Retirement, Retirement planning | Leave a Comment »
Posted by williambyrnes on November 28, 2012
One question financial advisors are asking themselves today is whether life settlements have returned to the fold as a viable tool in their clients’ planning strategies. Read the entire article at http://www.lifehealthpro.com/2012/09/05/life-settlements-are-they-back
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Posted in Insurance, Retirement Planning, Taxation, Wealth Management | Tagged: life settlements, Retirement, Retirement planning | Leave a Comment »
Posted by williambyrnes on November 26, 2012
… the PPACA provisions proposing an additional 3.8 percent tax on investment income will shortly become effective … and your high-income clients will need advice on how to reposition their investments today to minimize its effect. Read the full article at http://www.lifehealthpro.com/2012/07/19/preparing-clients-for-the-reality-of-ppacas-invest
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Posted in Pensions, Retirement Planning, Taxation | Tagged: Patient Protection and Affordable Care Act, PPACA, tax | Leave a Comment »
Posted by williambyrnes on November 23, 2012
… While most compromise legislation has focused on allowing some of these rates to rise while maintaining current rates for lower-income groups, Congress may beable to leave most tax rates in place if they focus on capping deductions and reducing spending for all taxpayers. Of course,
US Tax Rates (Taxes on riches/wealth) (Photo credit: mSeattle)
Read the entire article at National Underwriters’ –> Life Health Pro <–
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Posted in Estate Tax, Tax Policy, Taxation | Tagged: Bush Tax Cuts, tax, Tax rate | Leave a Comment »
Posted by williambyrnes on November 21, 2012
http://www.nationalunderwriter.com/2013-tax-facts-on-insurance-employee-benefits-269.html
Organized in a convenient Q&A format to speed you to the information you need, 2013 Tax Facts on Insurance & Employee Benefits delivers the latest guidance on:
- Estate & Gift Tax Planning
- Roth IRAs
- HSAs
- Capital Gains, Qualifying Dividends
- Non-qualified Deferred Compensation Under IRC Section 409A
- And much more!
Key updates for 2013:
- Enhanced explanation of the Disclosure Regulations for Retirement Plan Service Providers
- Expanded section on the taxation of annuities
- More than 30 new Planning Points, written by practitioners for practitioners, in the following areas:
- Life Insurance
- Health Insurance
- Federal Income Taxation
- Estate Taxation
Plus, you’re kept up-to-date with online supplements for critical developments.
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Posted in Estate Tax, Pensions, Retirement Planning, Taxation, Wealth Management | Tagged: Capital gain, Deferred compensation, estate planning, Internal Revenue Code section 409A, life insurance, Pension, Roth, Roth IRA, tax | Leave a Comment »
Posted by williambyrnes on November 21, 2012
For your clients who have been playing the wait-and-see game in estate planning this year, the time for waiting is over. Absent congressional action, the current $5.12 million exemption will revert to $1 million in less than three months, and the current 35% maximum estate tax rate will jump to 55%. The entire article is available at http://www.lifehealthpro.com/2012/10/17/the-ticking-estate-tax-time-bomb-less-than-90-days
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Posted in Estate Tax, Pensions, Retirement Planning, Taxation, Trusts, Wealth Management | Tagged: estate planning, Inheritance tax, tax, Tax exemption | Leave a Comment »
Posted by williambyrnes on November 19, 2012
…insurance companies have begun building annuity products in a variety of shapes and sizes, and the latest crop of deferred income annuity products could pave the way for clients seeking to maximize retirement income security in the years leading up to retirement. Read the full article on AdvisorOne – http://www.advisorone.com/2012/11/08/how-new-deferred-annuities-provide-income-early-in
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Posted in Estate Tax, Pensions, Retirement Planning, Taxation, Wealth Management | Tagged: annuities, Financial services, insurance, Life annuity, Pension, Retirement, tax | Leave a Comment »
Posted by williambyrnes on November 15, 2012
Tax (Photo credit: 401(K) 2012)
With the election behind us, it is time for your clients to turn their attention to the looming tax reforms that should take shape over the next two months, and how these reforms can affect their retirement planning. Both arms of Congress will be working to reach a compromise on tax code provisions as basic as income tax rates before Jan. 1, after which the Bush-era tax cuts will expire, and rates could revert to pre-2001 levels.
Though President Obama spent little time discussing his views on tax-favored retirement accounts during his campaign, the plans he did set forth are indicative of the consequences for retirement savings. While this impact may not be immediately apparent to your clients, it is something that they need to consider as they plan for retirement this year and beyond. See the full article on National Underwriters’ Life Health Pro http://www.lifehealthpro.com/2012/11/13/retirement-planning-for-the-next-4-years-under-pre
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Posted in Estate Tax, Tax Policy, Taxation, Wealth Management | Tagged: Barack Obama, Retirement, Social Security, tax | Leave a Comment »
Posted by williambyrnes on June 27, 2012
LexisNexis Matthew Bender has launched a online-only international title: Money Laundering, Asset Forfeiture and Recovery, and Compliance – A Global Guide.
Written by two California law professors (Professors William Byrnes & Robert Munro, Thomas Jefferson School of Law),
English: Logo of Group of working out of financial measures of struggle against money-laundering (FATF) Русский: Логотип Группы разработки финансовых мер борьбы с отмыванием денег (ФАТФ) (Photo credit: Wikipedia)
Each nation has its own chapter with sections covering:
- Anti-money laundering and counter-terrorist financing;
- Criminal and civil forfeiture;
- Compliance & risk; and
- International cooperation.
The remaining nations of the world will be covered in quarterly updates scheduled to go live in 2012 and 2013.
Because the new product spans so many practice areas, it appears on seven area-of-law pages (Accounting, Banking, Criminal, Foreign Law, International Law, International Trade, and Taxation), plus Lexis Tax Center. Just look under “Search Analysis, Law Reviews & Journals”.
This title is also available as an ebook.
Link to the Book’s Introduction: 1 Money Laundering, Asset Forfeiture and Compliance INTRODUCTION
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Posted in Compliance | Tagged: Asset Forfeiture, Crime, International Law, International Trade, Money Laundering, terrorist financing, Thomas Jefferson School of Law | Leave a Comment »
Posted by williambyrnes on May 11, 2012
Business Transactions and Contract Drafting courses for India
distance learning and then 3 weeks, about 90 classroom training hours in San Diego on campus
- (International) Contract Drafting
- Business Transactional Law
- Legal Research and Writing
Individualized and group practical case studies with feedback
Contact William Byrnes wbyrnes@tjsl.edu
Or see the law school website for more information http://www.tjsl.edu/graduate/leep
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Posted in Courses | Tagged: Business, Distance education, India, Legal Process Outsourcing, LPO, Research, training | Leave a Comment »
Posted by williambyrnes on May 8, 2012
Business Transactions and Contract Drafting courses for Brazilians
11 – 27 June (3 weeks, about 90 classroom training hours) in San Diego on campus
Partners include OAB, AGU, UNAFE, and APAMAGIS
- (International) Contract Drafting
- Business Transactional Law
- US Legal Research and Writing
- Intro to US Law
Individualized and group practical case studies with feedback
Contact William Byrnes wbyrnes@tjsl.edu
Or see the law school website for more information http://www.tjsl.edu/graduate/leep
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Posted in Courses | Tagged: Brazil, business law, contract drafting, law, Law school, legal research, Legal writing | Leave a Comment »
Posted by williambyrnes on March 26, 2012
Want some free marketing material for your annuities business? Look no further than the U.S. Government Accountability Office (GAO), which recently released a report touting annuities for their ability to provide retirement income sufficiency in an increasingly uncertain environment.
The GAO recommends that retirees delay their receipt of Social Security Benefits and either draw down savings and purchase an annuity or select annuity options from their defined benefit (DB) plan instead of electing to receive their benefits in a lump sum.
According to the GAO, the shift from defined benefit pension plans to defined contribution (DC) plans like 401(k)s necessitates a heightened focus on annuities and other options for guaranteeing income during retirement . And even if workers are saving more for retirement through their DC plans, they are still at greater risk than employees with DB pensions.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of annuities in Advisor’s Journal, see How Much to Allocate to Annuities: A Critical Analysis (CC 11-109) & Drama Over the “Drawbacks” of Annuities (CC 11-62).
For in-depth analysis of the taxation of annuities, see Advisor’s Main Library: A—Amounts Received As An Annuity & B—Amounts NOT Received As Annuities.
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Posted in Wealth Management | Tagged: 401(k), Defined benefit pension plan, GAO, Government Accountability Office, Life annuity, Pension, Retirement, Social Security | Leave a Comment »
Posted by williambyrnes on March 23, 2012
Treasury Secretary Tim Geithner insists that the administration needs to reach a debt limit deal by the end of this week to give Congress enough time to enact the deal into law. Without a deal, the federal government will be unable to pay its debts as of August 2 of this year.
“Default is not an option,” he said on Tuesday, July 12, at the Treasury’s Women in Finance Symposium. “Failure is not an option, and they understand that—Speaker [John] Boehner and Minority Leader [Mitch] McConnell—absolutely understand we need to move in advance of the deadline on Aug. 2nd.”
Despite Geithner’s confidence that they will reach a deal, President Obama and Congressional leaders are also working on options for keeping the government’s bills paid if a deal can’t be reached by the Treasury’s August 2 debt limit deadline. “If we are unable to come together, we think it’s extremely important that the country reassure the markets that default is not an option and reassure Social Security recipients and families of military veterans that default is not an option,” said Mitch McConnell (R-K.Y.), who took part in the talks.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
For previous coverage in Advisor’s Journal, see Democrats Call Debt Limit Unconstitutional (CC 11-134), Debt Limit Standoff Boils Over (CC 11-115) and Storm Clouds over U.S. Debt (CC 11-85).
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Posted in Wealth Management | Tagged: Barack Obama, Default (finance), John Boehner, Mitch McConnell, Timothy Geithner, United States Congress, United States public debt, United States Secretary of the Treasury | 1 Comment »
Posted by williambyrnes on March 21, 2012
Partners in a partnership and members of an LLC, taxed as a partnership, cannot have individual SEP IRAs (Simplified Employee Pension Individual Retirement Account) plans, according to the IRS.
Only employers are capable of implementing SEP plans for their employees. Because partners are employees of the partnership for retirement plan purposes, they cannot have an individual SEP plan. If partners in a partnership wish to use a SEP plan, the partnership as an entity must maintain and contribute to the plan for the partners.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of IRAs in Advisor’s Journal, see Qualified Charitable Distributions from an IRA (CC 11-03) & How Are IRA Owners Investing Their Money? (CC 11-112).
For in-depth analysis of SEPs, see Advisor’s Main Library: IRAs and SEPs.
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Posted in Wealth Management | Tagged: 401(k), Business, Employment, Individual Retirement Account, Internal Revenue Service, Pension, Roth IRA, SEP-IRA | Leave a Comment »
Posted by williambyrnes on March 19, 2012
Looking to recapture its competitiveness in the domestic captive insurance business, Nevada passed Assembly Bill 74 (AB 74), which amends the state’s captive insurance law. Nevada Governor Brian Sandoval recently praised the amendment, saying it that “will make Nevada a more attractive place to do business for captive insurers.”
Generally, a captive insurance company forms as a subsidiary of a company to cover the risks of the parent company and its other subsidiaries. A captive insurance company typically does not insure risks of unrelated third parties—although some will insure their customers’ risks. Other captive insurers assume the risks of members of a trade association or group.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of the application of the Health Care law to captive provided health insurance, see Tax Facts, see 252. What nondiscrimination requirements apply to employer provided health benefits?.
Questions about Captives? Contact our Panel of Experts. Benjamin Terner is our “Captive Expert” and can answer your questions relating to domestic and offshore arrangements
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Posted in Wealth Management | Tagged: Brian Sandoval, Captive, Captive insurance, Financial services, insurance, Nevada, risk management, Trade association | Leave a Comment »
Posted by williambyrnes on March 16, 2012
Long-term gains yield more favorable tax costs than short-term gains. Short-term gains carry an additional 20% tax cost over long-term gains, encouraging the manufacturing of transactions designed to convert short-term to long-term gains. Unfortunately, these transactions attract undue attention from the IRS and are often disregarded by the Service. The IRS recently considered the tax treatment of one of these gain-recharacterization schemes, a basket option contract, in a generic legal advice memorandum (AM 2010-005).
The IRS altered its categorization of the contract, viewing it as if the investor purchased the securities in a margin account, paying cash equal to 10% of the value of the securities and borrowing 90% of the value from the investment bank. Just as was the case with the “option,” the investor had almost total control over investment of the securities and would reap all appreciation and income from the securities, less interest and brokerage fees.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
For in-depth analysis of options, see Advisor’s Main Library: G—Options and Futures.
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Posted in Wealth Management | Tagged: Futures, Futures contract, Internal Revenue Service, IRS, Options, Recharacterisation, Security (finance), tax | Leave a Comment »
Posted by williambyrnes on March 6, 2012
A massive increase of lawsuits and IRS investigations have surrounded the Millennium Multiple Employer Welfare Benefit Plan for years, with plan participants claiming it was nothing but a fraudulent device with sole purpose of generating millions in commissions for its agent promoters. There are accusations of taking a total of $500 million from 500 clients by inducing them to participate in a plan that offered no tax or other benefits to its participants.
Several lawsuits are still pending against the Millennium Plan, but at least one aspect of the alleged scam plan has been resolved. The IRS announced on July 5 that it reached an agreement with the Millennium Multiple Employer Welfare Benefit Plan (“Millennium Plan”). After numerous fraud allegations and the IRS abusive tax shelter investigation, the Millennium Plan filed for Chapter 11 bankruptcy.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of welfare benefits plans in Advisor’s Journal, see Tax Courts Holds Employee Taxable for Value of Life Insurance Owned by Welfare-Benefit & Deductions for Life Insurance Premium Payments to Welfare Benefit Plan Denied (CC 10-29).
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Posted in Wealth Management | Tagged: Employment, insurance, Internal Revenue Service, IRS, Millennium Plan, tax, Tax shelter, Welfare | Leave a Comment »
Posted by williambyrnes on February 21, 2012
The August 2 debt ceiling drop-dead date is less than a month away, and some Democrats are proposing a radical solution to the problem: Ignore it. They argue that the U.S. Constitution allows the President to simply ignore the debt ceiling and pay the federal government’s bills.
Democrats and commentators in favor of ignoring the limit cite section 4 of the 14th Amendment to the U.S. Constitution, which says, “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions…, shall not be questioned.”
They argue that the U.S. government is bound by the Constitution to pay its bills and won’t be able to do so if the debt ceiling is respected. As a result, the law creating the debt ceiling is unconstitutional in this particular scenario because it would force the federal government to violate a provision of the U.S. Constitution. Taking on new debt isn’t just about future spending. A significant amount of any cash generated by a new debt issue is needed to service existing debt.
In short, default is unconstitutional, and the debt ceiling is unconstitutional to the extent it restricts the President from following the Constitution’s requirements.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
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Posted in Wealth Management | Tagged: Constitutionality, Debt, Democratic Party (United States), Federal government of the United States, United State, United States Constitution, United States public debt, US Constitution | Leave a Comment »
Posted by williambyrnes on February 7, 2012
Are you an employee or independent contractor of your firm? If you’re doing business in California and get the classification wrong, you could be in for criminal charges and up to a $25,000 fine.
California State Bill 459—which would impose strict recordkeeping requirements and severe penalties on firms that misclassify employees as independent contractors—passed the state senate on June 2. The bill moved to the Assembly and went on to a hearing at the Assembly Committee on Labor and Employment two weeks later. The bill is expected to come to a vote in the Assembly later this summer.
Under the bill, firms that mischaracterize employees as independent contractors can be subject to fines of up to $25,000. They also will be required to keep records verifying independent contractor status for at least two years or face a fine of $500 per employee and misdemeanor criminal charges.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
For in-depth analysis of income taxation, see Advisor’s Main Library: Income Taxes.
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Posted in Wealth Management | Tagged: Business, California, Employment, independent contractor, Internal Revenue Service, law, Self-employment, Vocus | Leave a Comment »
Posted by williambyrnes on February 2, 2012
The Domestic Asset Protection Trust (DAPT) is the onshore response to concerns surrounding offshore asset protection vehicles, but are the onshore and offshore varieties of asset protection equivalent? Despite the surface similarities between DAPTs and asset protection vehicles based in the Caribbean and other offshore hotspots, the degree of creditor protection offered by them can be very different.
After a brief discussion of the history of DAPTs, this article examines the battle tactics used by creditors to break DAPTs and access trust assets.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of DAPTs in Advisor’s Journal, see Domestic Asset Protection Trusts: New Chart Ranks the States (CC 10-30) & The Spendthrift Clause (CC 09-32).
For in-depth analysis of DAPTs, see Advisor’s Main Library: G—Domestic Asset Protection Trusts.
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Posted in Wealth Management | Tagged: Asset protection, Asset-protection trust, Business, Caribbean, Creditor, DAPT, Financial services, United States | Leave a Comment »
Posted by williambyrnes on January 11, 2012
The Financial Industry Regulatory Authority (FINRA) is targeting structured products over concerns about unsuitable sales to retail customers. In an exclusive interview with AdvisorOne (a Summit Business Media product) Bradley Bennett, enforcement chief at FINRA, said that the agency’s caseload on the recent financial crisis has eased up, and the agency is ready to renew its focus on structured products.
Structured products are often marketed to retail customers without an adequate explanation of their associated risks. “They purport to give the alchemy of lowering risk while increasing yield,” Bennett said, “but the risk needs to be explained” both to the broker-dealer’s “sales force and customers, and be suitable given the customer’s financial circumstances.”
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of structured products in Advisor’s Journal, see SEC Warns Investors about Principal Protected Notes (CC 11-117).
For in-depth analysis of structured products, see Advisor’s Main Library: 7774. What is a structured product? How are structured products taxed?
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Posted in Wealth Management | Tagged: AdvisorOne, Broker-dealer, Business, Financial Industry Regulatory Authority, FINRA, Investment Advisor, Structured product, Summit Business Media | Leave a Comment »
Posted by williambyrnes on January 10, 2012
As anticipated, the SEC will delay implementation of the RIA transition. On June 22, the SEC approved rules that will transition thousands of advisors from SEC to state regulation, but the new rules won’t be effective until June 28, 2012, almost a year later than initially expected.
Under the regulatory structure in place before the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, investment advisors with $25 million or more in assets under management (AUM) were regulated by the SEC, and those with less than $25 million in AUM were regulated by the states. Dodd-Frank changed the registration threshold so that advisors with between $25 and $100 million in AUM—so-called “midsize advisors”—will be required to withdraw their registration from the SEC and register with state regulators.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of the planned switch and in Advisor’s Journal, see Disarray at the SEC is Complicating the “Switch” (CC 11-83), Hedge Funds Must Now Register with the SEC under the New Wall Street Reform Act (CC 10-45) & Dodd-Frank Wall Street Reform and Consumer Protection Act (CC 10-35).
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Posted in Wealth Management | Tagged: Consumer Protection Act, Dodd-Frank, Dodd–Frank Wall Street Reform and Consumer Protection Act, Hedge fund, Registered Investment Advisor, Regulation, SEC, Wall Street | Leave a Comment »
Posted by williambyrnes on January 3, 2012
You’ve been on a few “dates,” and you talk on the phone every couple weeks, but how well do your prospects and existing clients know you and understand your core personal investing philosophy? Small talk breaks down barriers and common interests keep the conversation moving, but taking the advisor-client relationship to the next level takes some work—and a lot of research. A recent survey gives us a head start by elucidating the communication divide that holds many advisors back from taking the big plunge with their prospects.
The survey found that HNW clients favor electronic communication media more than their advisors. Twice as many millionaires than advisors would like to use technology-enabled media—smart phone applications and social media. While 85% of millionaires are willing to communicate through social-media, e-mail, and text messages, only 43% of brokers and financial advisors share that willingness. And your millionaire clients are also more likely to use LinkedIn than you are (28% to 16%). And a third of millionaires already use social media in general as part of their professional life.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).
For other client development discussions in Advisor’s Journal, see Advisors’ Stairsteps of Influence (CC 11-49), Getting Your Feet Wet in the Social Media Market (CC 11-79) & Are Portfolios-To-Go Threatening Your Business? (CC 11-77).
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Posted in Wealth Management | Tagged: Business, Communication, Facebook, Financial adviser, Financial services, LinkedIn, Marketing and Advertising, Social media | Leave a Comment »
Posted by williambyrnes on December 22, 2011
In a merciful move, the Treasury has again extended the FBAR filing deadline for persons with only signature authority over a foreign financial account to November 1, 2011. [Notice 2011-54]. Two previous extensions had pushed the FBAR due date to June 30, 2011, but the Financial Crimes Enforcement Network (FinCEN) and the IRS recognized the difficulty signatories were having locating the information they needed to complete the form.
Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), must be filed annually by all U.S. citizens, residents, business entities, trusts, and estates with a financial interest in or signature authority over one or more foreign financial accounts (FFA) with an aggregate value greater than $10,000.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of the FBAR in Advisor’s Journal, see Do Your Clients’ International Assets Create Criminal Tax Exposure? (CC 11-73) & IRS Provides FBAR Answers (CC 11-119).
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Posted in Wealth Management | Leave a Comment »
Posted by williambyrnes on December 20, 2011
The Foreign Account Tax Compliance Act (FATCA) was designed as a comprehensive measure to combat offshore tax evasion—a noble aim. However, FATCA’s comprehensiveness is also a burden for many in the financial services industry, especially insurance carriers and producers. In comments to regulators, one foreign life insurance trade organization, the Association of International Life Offices (AILO), recently called FATCA’s requirements “onerous and disproportionate to the risk involved.”
Passed as part of H.R. 2847, the Hiring Incentives to Restore Employment Act (HIRE Act) on March 18, 2010, FATCA combats tax evasion by requiring disclosure from foreign institutions about accounts held by people, including U.S. citizens, and institutions risk being subject to U.S. tax. Many life insurance and annuity contracts are classified “accounts” under the Act, although FATCA doesn’t generally apply to property, casualty, and term life insurance contracts.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of FATCA in Advisor’s Journal, see IRS Proposed FATCA Guidance Expands Offshore Compliance Initiatives (CC 10-52) & Offshore’s Limited Shelf Life (CC 10-47).
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Posted in Wealth Management | Tagged: FATCA, Financial services, Hiring Incentives to Restore Employment Act, insurance, Internal Revenue Service, tax, Tax avoidance and tax evasion, United States | Leave a Comment »
Posted by williambyrnes on December 2, 2011
Register now to access Money Laundering, Asset Forfeiture and Recovery, and Compliance: A Global Guide, and receive a complimentary chapter in PDF! Order before December 15, 2011 and save 20%!*
View more information here
Written by Professors William Byrnes & Robert Munro of Thomas Jefferson School of Law, the new publication contains in-depth coverage of the laws and government actions in 47 nations to combat money laundering, terrorist funding and similar practices. Each nation has its own chapter with sections covering:
- Anti-money laundering and counter-terrorist financing;
- Criminal and civil forfeiture;
- Compliance & risk; and
- International cooperation.
The remaining nations of the world will be covered in quarterly updates scheduled to go live in 2012 and 2013.
Because the new product spans so many practice areas, it appears on seven area-of-law pages (Accounting, Banking, Criminal, Foreign Law, International Law, International Trade, and Taxation), plus Lexis Tax Center. Just look under “Search Analysis, Law Reviews & Journals”.
This title is also available as an ebook and mobile-book.
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Posted in Financial Crimes, Money Laundering | Tagged: Asset Forfeiture, Compliance, Money Laundering, terrorist financing | Leave a Comment »
Posted by williambyrnes on November 30, 2011
Despite calls for private creditors to absorb some of the cost of another round of Greek bailouts, German Chancellor Angela Merkel has backed down. Merkel met with French President Nicolas Sarkozy in Berlin on June 17, 2011 to discuss the role of private investors in the bailout. Following the meeting, the leaders announced a unified plan to deal with the Greek crisis. Chancellor Merkel is still asking private creditors to voluntarily take part in the bailout.
The Greek debt crisis spans back to early 2010, when a group of European governments—including Greece—faced funding crises that threatened European stability altogether. At the time, Greece had €300 billion in debt, bigger than its economy.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
For coverage of the U.S. debt crisis in Advisor’s Journal, see Debt Limit Standoff Boils Over (CC 11-115) & Debt Ceiling Approaching: Prepare for Impact (CC 11-100).
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Posted in Wealth Management | Tagged: Angela Merkel, Berlin, Chancellor of Germany, European sovereign debt crisis of 2010–present, European Union, Greece, Greek, Nicolas Sarkozy | Leave a Comment »
Posted by williambyrnes on November 29, 2011
In addition to confirming earlier beliefs, a new academic study about the effects of increase life-spans on savings rates has inspired new intrigue.
The conclusions reached by Optimal Retirement and Saving with Increasing Longevity, by David E. Bloom, David Canning, and Michael Moore are simple enough but need some further discussion: “[A] higher level of wages leads to earlier retirement and increasing savings rates. On the other hand an increase in life expectancy leads to an increase [in] the retirement age, but less than proportionately, while reducing savings rates.”
Consequently, the importance of planning for middle-income families increases. Without a solid plan, many are left working many more years than they hoped or planned.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of retirement values in Advisor’s Journal, see Appealing to Your Affluent Clients’ Retirement Planning Values (CC-11-42).
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Posted in Wealth Management | Tagged: David E. Bloom, Health, Life expectancy, Michael Moore, Pension, Retirement, Retirement planning, Saving | Leave a Comment »
Posted by williambyrnes on November 28, 2011
Despite the best efforts of Congressional Republicans, the ribbon-cutting for the U.S. Consumer Financial Protection Bureau (CFPB) is on schedule for next month. And unlike other Dodd-Frank progeny, this project looks like it’s going to hit the ground running.
The stated mission of the CFPB is to “make markets for consumer financial products and services work for Americans—whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.” After the mortgage debacle of the recent financial crisis and stories about predatory practices in the credit card and pay-day loan industries, who can argue with that mission statement?
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of the fight over Dodd-Frank in Advisor’s Journal, see Is Barney Frank’s Resolve to Implement Dodd-Frank Weakening? (CC 11-95) & Republicans Look to Erode Dodd-Frank (CC 11-75).
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Posted in Wealth Management | Tagged: Barney Frank, CFPB, Credit card, Dodd-Frank, Dodd–Frank Wall Street Reform and Consumer Protection Act, Financial services, Republicans, United States | Leave a Comment »
Posted by williambyrnes on November 23, 2011
Generally, life insurance policies be withdrawn without income tax consequences. However, there are circumstances where a “loan” is immediately taxable. We have covered situations where a policy is surrendered with a loan outstanding, resulting in taxable income. This article discusses another case where a policy “loan” will be treated as taxable income.
In Frederick D. Todd II et ux. v. Commissioner (T.C. Memo. 2011-123), the Tax Court considered whether a distribution from a welfare benefit fund to a fund participant was a policy loan or a taxable distribution.
For previous coverage of life insurance policies held by welfare benefit funds in Advisor’s Journal, see Deductions for Life Insurance Premium Payments to Welfare Benefit Plan Denied (CC 10-29).
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
For in-depth analysis of welfare benefit funds, see Advisor’s Main Library: B—Welfare Benefit Funds.
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Posted in Wealth Management | Tagged: income tax, insurance, Insurance policy, Loan, Payment, tax, Taxable income, Welfare | Leave a Comment »
Posted by williambyrnes on November 18, 2011
In recent times, federal estate tax is receiving most of the attention. Nevertheless, most of the death tax activity affecting Americans occurs at the state level.
The reality is, fewer states (twenty-two plus D.C) currently have a “death tax”—referring collectively to estate and inheritance taxes. Recently, a number of those states increased their exemption amount to exclude a large majority of their residents from the tax. One state—Ohio—is on the verge of repealing its estate tax altogether.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of Obama’s tax agreement, including its estate tax provisions, in Advisor’s Journal, see Obama Tax Agreement Faces Stiff Resistance in Congress (CC 10-112) and Obama Tax Agreement Passed by House (CC 10-117).
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Posted in Wealth Management | Tagged: Estate tax in the United States, Inheritance tax, Ohio, Politics, tax, Taxation, United States, United States Congress | 1 Comment »
Posted by williambyrnes on November 17, 2011
We are all aware that annuities have a bad reputation in the media: High fees, high-pressure sales, and unsuitability are the predominating themes.
A recent Securities Litigation & Consulting Group white paper summarizes the sentiments of the anti-annuity press, commenting that, “[a]nnuities stand out as the investment are most likely to be unsuitable since in virtually every instance, the investor would have been better served by mutual fund or a portfolio of individual stocks.”
Annuities are neither inherently “good” nor “bad.” It follows that rational evaluation of annuities can’t be conducted in a bubble—it must focus on their application. Herein lays their value and the coup de grâce the industry and individual producers have been awaiting.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of annuities in Advisor’s Journal, see How Much to Allocate to Annuities: A Critical Analysis (CC 11-109).
For in-depth analysis of the income taxation of annuities, see Advisor’s Main Library: Section 19.2 Income Taxation of Annuities.
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Posted in Wealth Management | Tagged: annuities, Business, Financial services, insurance, Investing, Life annuity, Mutual fund, White paper | Leave a Comment »
Posted by williambyrnes on November 11, 2011
Failure to file an FBAR (Report of Foreign Bank and Financial Accounts) can result in harsh consequences. The report is that fines of up to $500,000 and 10 years imprisonment can be rendered. Therefore, the need to for you and your clients with foreign financial accounts (FFAs) to familiarize yourselves with the Treasury’s escalating FBAR rules. Unfortunately, understanding the FBAR rules has not always been a straightforward proposition.
Until recently, the FBAR requirements were shrouded in mystery; but with the release of the last FBAR regulations earlier this year, the rules are finally clear. Furthermore, important clarifications were made by the IRS at a June 1 webcast.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber). For previous coverage of the FBAR in Advisor’s Journal, see Do Your Clients’ International Assets Create Criminal Tax Exposure? (CC 11-73).
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Posted in Wealth Management | Tagged: Bank Secrecy Act, FBAR, Internal Revenue Service, Report of Foreign Bank and Financial Accounts, tax, Treasury, United States, United States Treasury Department | Leave a Comment »
Posted by williambyrnes on November 10, 2011
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Posted in Compliance, Money Laundering | Tagged: Asset Forfeiture, Crime, LexisNexis, Money Laundering, Research | Leave a Comment »
Posted by williambyrnes on November 8, 2011
Last year Congress finally concluded about whether indexed annuities are securities. As a security, indexed annuities were subject to regulation by the SEC by including a provision in the in the Dodd-Frank Wall Street Reform Act that defines indexed annuities as insurance products outside the agency’s jurisdiction.
This year, some states are refusing to take Congress’s “NO” for an answer. In the latest action on the issue, Illinois Secretary of State Jesse White issued an order on May 24 indirectly concluding that indexed annuities are securities under Illinois law.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of indexed annuities in Advisor’s Journal, see Indexed Annuities: Still Insurance (CC 10 42).
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Posted in Wealth Management | Tagged: Congress, Illinois, insurance, Jesse White, Life annuity, Pension, Retirement, Wall Street | Leave a Comment »
Posted by williambyrnes on November 3, 2011
In a low-interest rate world, high-yield investments offering principal protection are enticing to investors. But the complexity of some high-end investment products has the Financial Industry Regulatory Authority (FINRA) and Securities and Exchange Commission’s (SEC) warning investors to look before they leap.
In an alert titled Structured Notes with Principal Protection: Note the Terms of Your Investment, the regulators warn investors that these structured products may not be what they seem. Although they are marketed under a variety of names with a “principal protection” component—e.g. “absolute return” and “minimum return”—the true extent of their safety is never obvious . Investors need to read the fine print to decide whether they are suitable for their investing needs and risk tolerance.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).
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Posted in Wealth Management | Tagged: Business, Financial Industry Regulatory Authority, FINRA, Investor, SEC, Securities and Exchange Commission, Structured product, U.S. Securities and Exchange Commission | Leave a Comment »
Posted by williambyrnes on October 31, 2011
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) was endorsed by President Obama as an asset providing the “strongest consumer financial protections in history.” However, almost a year after the Act was introduced, implementation of its broad reforms is slowing
The complexity of the Act is the root of it’s first problem: The bill came in at an overwhelming 2,319 pages, or 300,000 words, about half the length of the entire Christian Bible. By comparison, other paradigm-shifting financial acts were short-stories; the Federal Reserve Act was 31 pages, Glass-Steagall was 37 pages, and Sarbanes-Oxley was 66 pages long. Even the gargantuan Health Reform Act was shorter than Dodd-Frank. Consequently, even the Federal government can’t fully ascertain the Act.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of the debt limit fight in Advisor’s Journal, see Storm Clouds over U.S. Debt (CC 11-85).
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Posted in Taxation, Uncategorized, Wealth Management | Tagged: Barack Obama, Dodd-Frank, Dodd–Frank Wall Street Reform and Consumer Protection Act, Federal government, Federal Reserve Act, Glass–Steagall Act, Obama, Wall Street reform | Leave a Comment »
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