William Byrnes' Tax, Wealth, and Risk Intelligence

OECD transfer pricing documentation and country-by-country reporting released as discussion draft for public comment

Posted by William Byrnes on January 31, 2014

Yesterday (January 30, 2014) the OECD released an initial draft of revised guidance on transfer pricing documentation and country-by-country reporting for comment by interested parties.

Action 13 of the BEPS Action Plan released on July 19, 2013 calls for a review of the existing transfer pricing documentation rules and the development of a template for country-by-country reporting of income, taxes and economic activity for tax administrations.

The OECD Announcement stated that its Committee on Fiscal Affairs believes that it is essential to obtain input from stakeholders on this Discussion Draft to advance the work. Specific issues on which comments would be appreciated are noted in the draft.

The OECD requests that comments be submitted in writing to transferpricing@oecd.org by February 23, 2014.

A public consultation event will be held at the OECD in Paris at the end of March 2014 with specifically invited persons selected from among those who provide written comments. An open discussion of the draft with all interested persons will take place at a future date to be determined in April or May.

Transfer pricing rules are an inescapable part of doing business internationally, and the LexisNexis Practical Guide to U.S. Transfer Pricing provides an in-depth analysis of the U.S. rules. This product is designed to help multinationals cope with the U.S. transfer pricing rules and procedures, taking into account the international norms established by the Organisation for Economic Co-operation and Development (OECD). It is also designed for use by tax administrators, both those belonging to the U.S. Internal Revenue Service and those belonging to the tax administrations of other countries, and tax professionals in and out of government, corporate executives, and their non-tax advisors, both American and foreign.

Posted in OECD, Transfer Pricing | Tagged: BEPS, OECD, transfer pricing | Leave a Comment »

106 Swiss Banks seek Non-Prosecution Agreements and Non-Target Letter with the DOJ (but twice that, did not…)

Posted by William Byrnes on January 31, 2014

free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671 Number of Pages in PDF File: 58

On January 25, Kathryn Keneally, assistant attorney general of the Justice Department’s Tax Division, served as the keynote speaker for the American Bar Association Section of Taxation 2014 Midyear Meeting. to provide agency updates – including on the Switzerland banks non-prosecution agreement program that expired December 31.

David Voreacos of Bloomberg News reported that Kathryn Keneally, in her keynote remarks, stated that 106 Swiss banks (of approximately 300 total) filed the requisite letter of intent to join the Program for Non-Prosecution Agreements or Non-Target Letters (the “Program“) by the December 31, 2013 deadline. Renown attorney Jack Townsend reported on his blog on December 31st a list of 47 Swiss banks that had publicly announced the intention to submit the letter of intent, as well as each bank’s category for entry: six announced seeking category 4 status, eight for category 3, thirty-three for category 2. 106 is a large jump from the mid-December report by the international service of the Swiss Broadcasting Corporation (“SwissInfo”) that only a few had filed for non prosecution with the DOJ’s program (e.g. Migros Bank, Bank COOP, Valiant, Berner Kantonalbank and Vontobel). [1]

SwissInfo reported that Migros Bank selected Program Category 2 because “370 of its 825,000 clients, mostly Swiss citizens residing temporarily in the US or clients with dual nationality”, met the criteria of US taxpayer. Valiant told SwissInfo that “an internal review showed it had never actively sought US clients or visited Americans to drum up business. The bank said less than 0.1% of its clients were American.” The DOJ reported that in July 2013, Liechtensteinische Landesbank AG, a bank based in Vaduz, Liechtenstein, entered into a non-prosecution agreement and agreed to pay more than $23.8 million stemming from its offshore banking activities, and turned over more than 200 account files of U.S. taxpayers who held undeclared accounts at the bank.

William R. Davis and Lee A. Sheppard of Tax Analysts’ Worldwide Tax Daily reported that “one private practitioner estimated that some 350 banks holding 40,000 accounts have not come in.” (see “ABA Meeting: Keneally Reports Success With Swiss Bank Program”, Jan. 28, 2014, 2014 WTD 18-3.)

Two court orders entered in November 2013 in a New York federal court will further aid the offshore compliance investigations by authorizing the IRS to serve what are known as “John Doe” summonses on five banks to obtain information about possible tax fraud by individuals whose identities are unknown. The John Doe summonses direct the five banks to produce records identifying U.S. taxpayers holding interests in undisclosed accounts at Zurcher Kantonalbank (ZKB) and its affiliates in Switzerland and at The Bank of N.T. Butterfield & Son Limited (Butterfield) and its affiliates in Switzerland, the Bahamas, Barbados, Cayman Islands, Guernsey, Hong Kong, Malta and the United Kingdom. The summonses also direct the five banks to produce information identifying foreign banks that used ZKB’s and Butterfield’s correspondent accounts at the five banks to service U.S. clients.

Swiss banks Wegelin ceased operations because of the DOJ investigation and its consequent guilty plea. Bank Frey followed suit because of the DOJ investigation and costs of future compliance with FATCA (its former head of private banking was indicted, and an > attorney in the same indictment pled guilty to conspiracy to commit tax fraud <). Frey bank, in a November 28, 2013 statement, defended itself: “In October, the former Bank Frey & Co. AG decided to cease its banking activities and to terminate all of its client relationships. Beforehand, the Bank verified the tax compliance of all its US clients, and an external auditor confirmed so. In addition, the Bank examined all of its other clients to determine whether they had any link to the US. Again, an external auditor checked and confirmed these findings. As a result, it was determined that Bank Frey did not have any clients with potential US tax issues.”

What is the Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks?

The Tax Division of the Department of Justice > released a statement on December 12 < strongly encouraging Swiss banks wanting to seek non-prosecution agreements to resolve past cross-border criminal tax violations to submit letters of intent by a Dec. 31, 2013 deadline required by the Program for Non-Prosecution Agreements or Non-Target Letters (the “Program“). The Program was announced on Aug. 29, 2013, in a > joint statement < signed by Deputy Attorney General James M. Cole and Ambassador Manuel Sager of Switzerland (> See the Swiss government’s explanation of the Program < ). Switzerland’s Financial Market Supervisory Authority (FINMA) has issued a deadline of Monday, December 16, 2013 for a bank to inform it with its intention to apply for the DOJ’s Program.[2]

The DOJ statement described the framework of the Program for Non-Prosecution Agreements: every Swiss bank not currently under formal criminal investigation concerning offshore activities will be able to provide the cooperation necessary to resolve potential criminal matters with the DOJ. Currently, the department is actively investigating the Swiss-based activities of 14 banks. Those banks, referred to as Category 1 banks in the Program, are expressly excluded from the Program. Category 1 Banks against which the DoJ has initiated a criminal investigation as of 29 August 2013 (date of program publication).

On November 5, 2013 the Tax Division of the DOJ had released > comments about the Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks < .

Swiss banks that have committed violations of U.S. tax laws and wished to cooperate and receive a non-prosecution agreement under the Program, known as Category 2 banks, had until Dec. 31, 2013 to submit a letter of intent to join the program, and the category sought.

To be eligible for a non-prosecution agreement, Category 2 banks must meet several requirements, which include agreeing to pay penalties based on the amount held in undeclared U.S. accounts, fully disclosing their cross-border activities, and providing detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest. Providing detailed information regarding other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed is also a stipulation for eligibility. The Swiss Federal Department of Finance has released a > model order and guidance note < that will allow Swiss banks to cooperate with the DOJ and fulfill the requirements of the Program.

The DOJ’s November comments responded to such issues as: (a) Bank-specific issues and issues concerning individuals, (b) Choosing which category among 2, 3, or 4, (c) Qualifications of independent examiner (attorney or accountant), (d) Content of independent examiner report, (e) Information required under the Program – no aggregate account data, (f) Penalty calculation – permitted reductions, (g) Category 4 banks – retroactive application of FATCA Annex II, paragraph II.A.1, and (h) Civil penalties.

Regarding which category to file under, the DOJ replied: “Each eligible Swiss bank should carefully analyze whether it is a category 2, 3 or 4 bank. While it may appear more desirable for a bank to attempt to position itself as a category 3 or 4 bank to receive a non-target letter, no non-target letter will be issued to any bank as to which the Department has information of criminal culpability. If the Department learns of criminal conduct by the bank after a non-target letter has been issued, the bank is not protected from prosecution for that conduct. If the bank has hidden or misrepresented its activities to obtain a non-target letter, it is exposed to increased criminal liability.”

Category 2 Banks against which the DoJ has not initiated a criminal investigation but have reasons to believe that that they have violated US tax law in their dealings with clients are subject to fines of on a flat-rate basis. Set scale of fine rates (%) applied to the untaxed US assets of the bank in question:

– Existing accounts on 01.08.2008: 20%
– New accounts opened between 01.08.2008 and 28.02.2009: 30%
– New accounts after 28.02.2009: 50%

Category 2 banks must delivery of information on cross-border business with US clients, name and function of the employees and third parties concerned, anonymised data on terminated client relationships including statistics as to where the accounts re-domiciled.

Category 3 banks have no reason to believe that they have violated US tax law in their dealings with clients and that can have this demonstrated by an independent third party. A category 3 bank must provide to the IRS the data on its total US assets under management and confirmation of an effective compliance programme in force.

Category 4 banks are a local business in accordance with the FATCA definition.

Regarding the requirement of the independence of the qualified attorney or accountant examiner, the DOJ stated that the examiner “is not an advocate, agent, or attorney for the bank, nor is he or she an advocate or agent for the government. He or she must provide a neutral, dispassionate analysis of the bank’s activities. Communications with the independent examiner should not be considered confidential or protected by any privilege or immunity.” The attorney / accountant’s report must be substantive, detailed, and address the requirements set out in the DOJ’s non-prosecution Program. The DOJ stated that “Banks are required to cooperate fully and “come clean” to obtain the protection that is offered under the Program.”

In the ‘bottom line’ words of the DOJ: “Each eligible Swiss bank should carefully weigh the benefits of coming forward, and the risks of not taking this opportunity to be fully forthcoming. A bank that has engaged in or facilitated U.S. tax-related or monetary transaction crimes has a unique opportunity to resolve its criminal liability under the Program. Those that have criminal exposure but fail to come forward or participate but are not fully forthcoming do so at considerable risk.”

[1] See Mathew Allen, US tax deal could prove deadly for small banks, SwissInfo, December 10, 2013, available at http://www.swissinfo.ch/eng/politics/US_tax_deal_could_prove_deadly_for_small_banks.html?cid=37506872

[2] See Supermarket banks sign up to US tax probe, SwissInfo, December 11, 2013, available at http://www.swissinfo.ch/eng/business/Supermarket_banks_sign_up_to_US_tax_probe.html?cid=37516028 (accessed December 12, 2013).

FATCA Compliance Program and Manual

The LexisNexis® Guide to FATCA Compliance (2^nd Edition) comprises 34 Chapters grouped in three parts: compliance program (Chapters 1–4), analysis of FATCA regulations (Chapters 5–16) and analysis of FATCA’s application for certain trading partners of the U.S. (Chapters 17–34), including intergovernmental agreements as well as the OECD’s TRACE initiative for global automatic information exchange protocols and systems. The 34 chapters include many practical examples to assist a compliance officer contextualize the regulations, IGA provisions, and national rules enacted pursuant to an IGA. Chapters include by example an in-depth analysis of the categorization of trusts pursuant to the Regulations and IGAs, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, insights as to the application of FATCA and the IGAs within new BRIC and European country chapters.

Posted in Compliance, FATCA, Financial Crimes, information exchange | Tagged: DOJ, FATCA, offshore, secrecy, Swiss banking | 2 Comments »

Tax Filing Season Opens Today – January 31

Posted by William Byrnes on January 31, 2014

The 2014 tax filing season opens today. This is the first day that the IRS will accept 2013 federal income tax returns. If you are working on your taxes and need tax help, the IRS website has both tax help and tax information.

Tax Forms and Publications. Download tax forms and publications. Many publications are also available in Spanish.
IRS Tools. You’ll find several tools and self-service options on IRS.gov to help you with your taxes. Here are just a few:
- Use the Interactive Tax Assistant to answer many of your tax questions.
- Find out if you’re eligible for the Earned Income Tax Credit by using the EITC Assistant.
- Use the AMT Assistant tool to find out if you may need to pay Alternative Minimum Tax.
- Track your refund using the ‘Where’s My Refund?’ tool.

When you are ready to file your tax return beginning Jan. 31, there are several, free options that you should consider. Taxpayers who have visited IRS Taxpayer Assistance Centers in prior years for free tax preparation should be aware that, beginning this year, these offices are no longer offering this service. Other options for free tax preparation include:

Use Free File to e-file for free. Most people e-file their tax return these days. Everyone can use IRS Free File to prepare and e-file their federal taxes for free. The only way to use this program is through the IRS website. If you made $58,000 or less, you can use free tax software. If your income is more than $58,000 and you feel comfortable doing your own taxes, use Free File Fillable Forms. This option has the electronic versions of IRS paper forms.
Get taxes done with VITA or TCE. You may be able to get free tax preparation at a Volunteer Income Tax Assistance or Tax Counseling for the Elderly site. IRS-trained volunteers can help you get the tax credits and deductions you’re entitled to claim. The VITA program generally offers free tax return preparation and e-filing to people who earn $52,000 or less. The TCE program offers help mainly to people 60 or older. Thousands of free tax preparation sites around the nation will open in late Jan. and early Feb. Visit IRS.gov to find the one nearest you.

IRS YouTube Videos:

Welcome to Free File – English
Do It Yourself Free Tax Preparation – English | Spanish | ASL
IRS Information Available in Spanish – English | Spanish | ASL
How to Get 1040 Forms – English | Spanish | ASL

The newest addition to the Tax Facts Library, Tax Facts on Individuals & Small Business focuses exclusively on what individuals and small businesses need to know to maximize opportunities under today’s often complex tax rules. It is the essential tax reference for financial advisors, & planners; insurance professionals; CPAs; attorneys; and other practitioners advising small businesses and individuals. See http://www.nationalunderwriter.com/tax-facts-on-individuals-small-business.html

Organized in a convenient Q&A format to speed you to the information you need, Tax Facts on Individuals & Small Business delivers the latest guidance on:
» Healthcare
» Home Office
» Contractor vs. Employee — clarified!
» Business Deductions and Losses
» Business Life Insurance
» Small Business Valuation
» Small Business Entity Choices
» Accounting — including guidance on how standards change as the business grows
» Capital Gains
» Investor Losses
» New Medicare Tax and Net Investment Income tax
» Individual Income Taxation

Posted in Taxation | 1 Comment »

Which Tax Form Should You File?

Posted by William Byrnes on January 30, 2014

The IRS released Tax Tip 2014-03 today: Which Tax Form Should You File?

The IRS is promoting its free tax software or Fillable Forms option that allows you to fill in your tax forms using a computer. You can e-file the completed forms for free!

The IRS offers the following tips for choosing the correct tax form:

You can generally use the 1040EZ if:

Your taxable income is below $100,000;
Your filing status is single or married filing jointly;
You are not claiming any dependents; and
Your interest income is $1,500 or less.

The 1040A may be best for you if:

Your taxable income is below $100,000;
You have capital gain distributions;
You claim certain tax credits; and
You claim adjustments to income for IRA contributions and student loan interest.

However, reasons you must use the 1040 include:

Your taxable income is $100,000 or more;
You claim itemized deductions;
You are reporting self-employment income; or
You are reporting income from sale of a property.

IRS YouTube Videos:

Welcome to Free File – English
IRS Tax Forms and Publications – English | Spanish | ASL

Authors Professor William Byrnes and Robert Bloink

Posted in Taxation | Tagged: IRS, IRS tax forms, tax filing, tax season | Leave a Comment »

Can an individual roll over or convert a traditional IRA or other eligible retirement plan into a Roth IRA?

Posted by William Byrnes on January 30, 2014

A “qualified rollover contribution” can be made from a traditional IRA or any eligible retirement plan to a Roth IRA. Amounts that are held in a SEP or a SIMPLE IRA that have been held in the account for two or more years also may be converted to a Roth IRA.

Read the three page of planning tips from William Byrnes and Robert Bloink’s Tax Facts Online analysis at > Think Advisor <

The new myRA, to be established by Treasury under request of President Obama, is covered previously in this blog at > myRA < Several blog subscribers have emailed me with policy and operational questions about the “myRA“. A vein of questions that I find particularly interesting is whether tax policy rests with the executive instead of Congress? The myRA has a tax benefit (tax exemption during the earnings period) and a cost (no fees to be passed onto the employee, but as the adage goes: “there is no free lunch”). Tax Policy (tax imposition and tax benefit) should be established by Congress as part of the democratic process of establishing a fiscal budget. Yet, this norm is not absolute because Congress handed over of both establishing and enforcing regulation to the Executive (Treasury in this case). Establishing and enforcing the regulations also impacts policy. If you care to comment directly in the blog, do so below or feel free to continue sending me your comments directly.

Authoritative and easy-to-use, 2014 Tax Facts on Insurance & Employee Benefits shows you how the tax law and regulations are relevant to your insurance, employee benefits, and financial planning practices. Often complex tax law and regulations are explained in clear, understandable language. Pertinent planning points are provided throughout.

Organized in a convenient Q&A format to speed you to the information you need, 2014 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 2014:

Important federal income and estate tax developments impacting insurance and employee benefits including changes from the American Taxpayer Relief Act of 2012
Concise updated explanation and highlights of the Patient Protection and Affordable Care Act (PPACA)
Expanded coverage of Annuities
New section on Structured Settlements
New section on International Tax
More than thirty new Planning Points, written by practitioners for practitioners, in the following areas:
- Life Insurance
- Health Insurance
- Estate and Gift Tax
- Deferred Compensation
- Individual Retirement Plans

Plus, you’re kept up-to-date with online supplements for critical developments. Written and reviewed by practicing professionals who are subject matter experts in their respective topics, Tax Facts is the practical resource you can rely on.

Posted in Retirement Planning, Wealth Management | Tagged: Byrnes, income tax, Individual Retirement Account, IRA, Retirement, Roth IRA, Traditional IRA | Leave a Comment »

Opportunity for All: Securing a Dignified Retirement for All Americans (the “myRA”)

Posted by William Byrnes on January 29, 2014

Since many persons have asked me for the link, I copy the new myRA information from the President’s announcement below. Creating the “myRA” – a Simple, Safe, and Affordable Starter Savings Account to Help Millions of Americans Start Saving for Retirement….

In the State of the Union, the President announced that he will use his executive authority to direct the Department of the Treasury to create “myRA” – a new simple, safe and affordable “starter” retirement savings account that will be offered through employers and will ultimately help millions of Americans begin to save for retirement.

Starter Savings Account: Making It Easier to Start Saving for Retirement. This new product will be targeted to the many Americans who currently lack access to workplace retirement savings plans, which is usually the most effective way to save for retirement. Starting to save is just the first step towards a secure retirement, and the President wants to help more Americans save for their future.
Safe and Secure: Principal Protection So Savers’ Account Balance Will Never Go Down. The product will be offered via a familiar Roth IRA account, and savers will benefit from principal protection, so the account balance will never go down in value. The security in the account, like all savings bonds, will be backed by the U.S. government. Contributions can be withdrawn tax free at any time.
User-Friendly for Savers: Portable Account with Contributions that Are Voluntary, Automatic, and Small. Initial investments could be as low as $25 and contributions that are as low as $5 could be made through easy-to-use payroll deductions. Savers have the option of keeping the same account when they change jobs and can roll the balance into a private-sector retirement account at any time.
Favorable Investment Return: Same Secure Investment Return Available to Federal Employees. Savers will earn interest at the same variable interest rate as the federal employees’ Thrift Savings Plan (TSP) Government Securities Investment Fund.
Widely Available: Available to Millions of Middle Class Americans Through Their Employer. This saving opportunity would be available to the millions of low- and middle-income households earning up to $191,000 a year. These accounts will be offered through an initial pilot program to employees of employers who choose to participate by the end of 2014. The accounts are little to no cost and easy for employers to use, since employers will neither administer the accounts nor contribute to them. Participants could save up to $15,000, or for a maximum of 30 years, in their accounts before transferring their balance to a private sector Roth IRA.

…

The President remains committed to working with Congress to help secure a dignified retirement for all Americans. While Social Security is and must remain a rock-solid, guaranteed progressive benefit that every American can rely on, the most secure retirement requires a three-legged stool that includes savings and pensions. That’s why the President is using his executive authority to create the “myRA” and has already proposed to work with Congress on the following proposals to help Americans save for their retirement:

Giving Every Employee Access to Easy, Payroll-Based Savings Through the Auto-IRA. About half of all American workers do not have access to employer-sponsored retirement plans like 401(k)s, which puts the onus on individuals to set up and invest in an Individual Retirement Account (IRA). Up to 9 out of 10 workers automatically enrolled in a 401(k) plan through their employer make contributions, even years later, while fewer than 1 out of 10 workers eligible to contribute to an IRA voluntarily do so. The President’s budget will propose to establish automatic enrollment in IRAs (or “auto-IRAs”) for employees without access to a workplace savings plan, in keeping with a plan that he has proposed in every budget since he took office. Employers that do not provide any employer-sponsored savings plan would be required to connect their employees with a payroll deduction IRA. This proposal could provide access to one-quarter of all workers, according to a recent study.

—– Making Sure the Auto-IRA Works for Workers and Small Businesses. Workers would not be required to contribute and are free to opt out. Employers would also not contribute. The plan would also help defray the minimal administrative costs of establishing auto-IRAs for small businesses, including through tax incentives.

Removing Inefficient Retirement Tax Breaks for the Wealthiest While Improving Them for the Middle Class. The Auto-IRA will spread the tax benefits for retirement savings to millions more middle-class Americans. Current retirement tax subsidies disproportionately benefit higher-income households, many of whom would have saved with or without incentives. An estimated two-thirds of tax benefits for retirement saving go to the top 20% of earners, with one-third going to the top 5 percent of earners. Our tax incentives for retirement can be designed more efficiently. According to one 2012 study, additional tax expenditures are a comparatively inefficient way to generate additional saving. The President has proposed to limit the benefits of tax breaks, including retirement tax preferences, for high income households to a maximum of 28 percent. The President has also proposed to limit contributions to tax-preferred savings accounts once balances are about $3.2 million, large enough to fund a reasonable pension in retirement.

* Importance of Securing a Dignified Retirement for All Americans *

Many Americans lack access to workplace retirement savings plans – usually the most effective and generous means of saving for retirement. About half of all workers and 75 percent of part-time workers lack access to employer-sponsored retirement plans.
The financial crisis dealt a severe blow to the retirement outlook for many families, wiping out more than $12 trillion dollars in household wealth. While financial markets have returned to their pre-crisis levels, median household wealth has only recovered 45 percent of the losses during the recession.
The risk of an insecure retirement is especially great for women, minorities, and low-income Americans. Women continue to be less prepared for retirement than men and comprise 63 percent of the elderly living below the poverty line. White households have six times the wealth, including retirement savings, of African Americans or Hispanics. And low-wage and part-time workers are just one-third as likely as high-wage and full-time workers to participate in an employer-based retirement plan.

Organized in a convenient Q&A format to speed you to the information you need, 2014 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 2014:

Important federal income and estate tax developments impacting insurance and employee benefits including changes from the American Taxpayer Relief Act of 2012
Concise updated explanation and highlights of the Patient Protection and Affordable Care Act (PPACA)
Expanded coverage of Annuities
New section on Structured Settlements
New section on International Tax
More than thirty new Planning Points, written by practitioners for practitioners, in the following areas:
- Life Insurance
- Health Insurance
- Estate and Gift Tax
- Deferred Compensation
- Individual Retirement Plans

Posted in Retirement Planning | Tagged: IRA, myRA, Retirement planning, State of Union speach | 2 Comments »

FATCA Intergovernmental Agreements (IGA) Update

Posted by William Byrnes on January 29, 2014

As of January 29, 2013 the U.S. has nineteen IGAs signed and published, although others have been agreed in principle but not yet signed. Sixteen of the current nineteen IGAs are based on Model 1: Costa Rica, Denmark, France, Germany, Guernsey, Ireland, Isle of Man, Italy, Jersey, Malta, Mexico, the Netherlands, Norway, Spain, the UK. Three IGAs are based on Model 2, being Bermuda, Japan and Switzerland.

The following jurisdictions are treated as having an intergovernmental agreement in effect:

Model 1 IGA
Model 2 IGA
This is a complete list of joint FATCA statements between the United States and other countries:

Model Intergovernmental Agreements (Model Agreements)

Following the enactment of FATCA, Treasury published the Model Intergovernmental Agreement to Improve Tax Compliance and to Implement FATCA. Use the links here to find the current version of the agreement you need.

FATCA Compliance Program and Manual

Posted in FATCA | Tagged: FATCA, IGA, intergovernmental agreement | Leave a Comment »

$135 billion of reported gifts for 2012 nearly tripling 2011 levels

Posted by William Byrnes on January 28, 2014

Yesterday, the IRS Tax Stats Dispatch (#2014-2) included the link for the summation of data from all 2012 Gift Tax Returns. (see http://www.irs.gov/uac/SOI-Tax-Stats—Total-Gifts-of-Donor,-Total-Gifts,-Deductions,-Credits,-and-Net-Gift-Tax)

Interestingly, the total reported gifts of 2012 of approximately $135 billion was substantially more than double the 2011 year of approximately $51 billion, and previous years before that. The significant pickup in reported gift giving over the last several years compared to 2012 is in the category $1 million and larger gifts.

Will be interested to read your comments as to why this may be ? By example, is this the result of the now settled Estate and Gift tax rates ? Is it a result of the timing of retiring baby boomers wealth transfer to the next generation of their progeny? Is it charitably driven ?

Were financial planners prepared for the planning of this more than doubling of gifts to future generations and for charitable / legacy purposes?

Use Comments below.

Tax status and size of taxable gifts, current period [1]	Total gifts [2]		Total annual exclusions		Total included amount of gifts		Total deductions [3]		Taxable gifts, current period [4]
Tax status and size of taxable gifts, current period [1]	Number	Amount	Number	Amount	Number	Amount	Number	Amount	Number	Amount
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)
All returns, taxable and nontaxable	258,393	$134,846,285,766	244443	11794733033	191816	123051555062	5606	8120138820	190401	114968624890
$0	67992	5822167968	67680	4054653753	1415	1767514212	1415	1767514212	0	0
Less than $2,500	7612	362423498	6528	233021040	7612	129402627	24	119914708	7612	9487920
$2,500 under $5,000	7433	412615201	7075	262415929	7433	150200871	407	123,960,592	7433	26240997
$5,000 under $10,000	9294	563330627	8934	321839948	9294	241490859	264	172533814	9294	68957045
$10,000 under $25,000	26161	1366229180	25611	924979071	26161	441250106	217	17,630,195	26161	423619911
$25,000 under $50,000	23829	1731665895	22746	796632342	23829	935033551	397	84434152	23829	850599399
$50,000 under $75,000	13048	1239385141	12504	400229648	13048	839155682	17	38,557,818	13048	800621940
$75,000 under $100,000	8306	996198369	7583	183011743	8306	813186628	6	91,801,097	8306	721385532
$100,000 under $250,000	29570	6071771849	26863	961754449	29570	5110017617	311	338746401	29570	4771297431
$250,000 under $500,000	17,470	$7,519,686,206	16193	709363682	17470	6810322321	662	439160459	17470	6371161683
$500,000 under $1 million	16,149	$12,885,834,594	14609	773330454	16149	12112504390	390	346832003	16149	11765882467
$1 million or more	31,529	$95,874,977,236	28117	2173500974	31529	93701476195	1497	4579053368	31529	89159370564

Posted in Retirement Planning, Tax Exempt Orgs, Wealth Management | Tagged: charitable, estate tax, financial planning, gift tax, gifts, IRS, IRS statistics | Leave a Comment »

When Are IRA Funds Taxed?

Posted by William Byrnes on January 27, 2014

Q. When are funds in an IRA taxed?

Funds accumulated in a traditional IRA generally are not taxable until they actually are distributed. Funds accumulated in a Roth IRA may or may not be taxable on actual distribution. Special rules may treat funds accumulated in an IRA as a “deemed distribution” and, thus, includable in income.

Read the three page planning tips and analysis of William Byrnes and Robert Bloink at Tax Facts Online > Think Advisor <

Posted in Retirement Planning, Wealth Management | Tagged: Byrnes, income tax, Individual Retirement Account, IRA, Retirement | Leave a Comment »

The Private Foundation’s Topsy Turvy Road in the American Political Process

Posted by William Byrnes on January 24, 2014

This > article < by Professor William Byrnes studies this American political debate on the charitable tax exemption from 1864 to 1969, in particular, the debate regarding philanthropic, private foundations. The article’s premise is that the debate’s core has little evolved since that between the 1850s and 1870s.

To create perspective, a short brief of the modern economic significance of the foundation sector follows. Thereafter, the article begins with a review of the pre- and post-colonial attitudes toward charitable institutions leading up to the 1800s debates, illustrating the incongruity of American policy regarding whether and to what extent to grant charities tax exemption. The 1800s state debates are referenced and correlated to parts of the 1900s federal debate to show the similarity if not sameness of the arguments against and justifications for exemption. The twentieth century legislative examination primarily focuses upon the regulatory evolution for foundations. Finally, the article concludes with a brief discussion of the 1969 tax reform’s changes to the foundation rules and the significant twentieth century legislation regulating both public and private foundations.

Number of Pages in PDF File: 97 (link to article: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2304044)

Posted in Tax Exempt Orgs, Tax Policy | Tagged: charitable tax deduction, charitable tax exemption, charity, history of charity | Leave a Comment »

A New World Order of Financial and Business Information Transparency

Posted by William Byrnes on January 23, 2014

The countries of the world, pushed by a U.S. Treasury promotional campaign, have inevitably capitulated to the U.S. unilateral demand for information although the per-country compliance cost may exceed one billion dollars and privacy protection laws must be amended. However, push back by important U.S. trading partners resulted in the U.S. Treasury entering into an expanding network of bi-lateral intergovernmental agreements that in most instances provide for automatic exchange between the competent authorities of the required financial information to fulfill FATCA compliance. These agreements may lead to an imposition of FATCA reporting compliance, though to a lesser extent, upon U.S. financial institutions, that the U.S. Treasury may in turn provide automatically to the foreign competent authority.

FATCA should not be observed in a historical vacuum but instead requires at least an understanding of the U.S. previous attempt to collect such information under the qualified intermediary (‘QI’) regime. Moreover, FATCA should not be observed in a unilateral vacuum but instead requires an overview of the EU and OECD information exchange initiatives and challenges thereto, tax collection and remission alternatives, as well as an overview of the spawn of FATCA (e.g. the UK’s son-of-FATCA approach).

This discussion will also explore the general nature, issues, and challenges of information collection and exchange. During this discussion we will digress into the topic of the information of a business’ financials and of its operations, the topic of domestic and cross border asymmetry of information, as well as the dialogue for global harmonization of information (such as standardization of accounts and of tax base determination), and for exchange of such information. Such conversation is necessary for a robust understanding of the topics of base erosion and the efforts of countries to control ‘transfer pricing’.

Powerpoint available at http://www.slideshare.net/williambyrnes1/uv-a-winter-2014-fatca-and-eoi

FATCA Compliance Program and Manual

Fifty contributing authors from the professional and financial industry provide 600 pages of expert analysis within the LexisNexis® Guide to FATCA Compliance (2^nd Edition): many perspectives crafted into one, coherent voice by primary author William Byrnes. The LexisNexis® Guide to FATCA Compliance (2^nd Edition) comprises 34 Chapters grouped in three parts: compliance program (Chapters 1–4), analysis of FATCA regulations (Chapters 5–16) and analysis of FATCA’s application for certain trading partners of the U.S. (Chapters 17–34), including intergovernmental agreements as well as the OECD’s TRACE initiative for global automatic information exchange protocols and systems. The 34 chapters include many practical examples to assist a compliance officer contextualize the regulations, IGA provisions, and national rules enacted pursuant to an IGA. Chapters include by example an in-depth analysis of the categorization of trusts pursuant to the Regulations and IGAs, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, insights as to the application of FATCA and the IGAs within new BRIC and European country chapters.

Posted in FATCA | Tagged: FATCA, information exchange, international tax | 2 Comments »

Professor Byrnes Lectures for University of Amsterdam’s International Tax Program

Posted by William Byrnes on January 22, 2014

UvA teaching

Following his October present ation in Moscow at Moscow Finance University organized with University of Amsterdam, Professor William Byrnes was invited to lecture last week for the intersession international tax course of the University of Amsterdam’s Centre for Tax Law. While at the University of Amsterdam, he engaged with Dean Dr. Edgar du Perron on collaborative distance education opportunities, and attended the European Law Student Association’s (ELSA) annual Groot Juridisch Dictee of the Amsterdam chapter.

William Byrnes noted, “Dr. Dennis Weber, the Director of the Amsterdam Centre for Tax Law, is a renowned jurist and author on tax issue brought before the European Court of Justice. He is frequently referred to as a powerhouse among European Tax Law faculty. In 2015, Amsterdam will begin offering the LL.M. of International Taxation in English for a very selective group of professionals. With his robust full-time tax faculty and cadre of Ph.D. candidates from around the world, I expect it to quickly become the premier international tax degree within Europe, perhaps globally.”

Professor Dennis Weber included, “I visited Thomas Jefferson’s campus last February when I lectured to its tax students about international tax risk management and also about practical aspects of careers in the tax field. I became very intrigued with how Associate Dean William Byrnes dynamically engaged students on campus and worldwide through leveraging communication and multimedia technologies. We are investigating potentially collaborating on joint online initiatives in the future and look forward to discussing these further when I return to San Diego this March to deliver my next international tax lectures.”

“Of all my international invitations” Professor Byrnes added, “University of Amsterdam is my favorite because I am an alumni and have fond memories and friends from my three years on campus when I studied international tax law, and participating as an active member of ELSA Amsterdam. The University of Amsterdam led to my initial academic opportunities in South Africa because my fellowship dissertation on transfer pricing profit-margin based methodologies was, at that time, quite unique and South Africa was re-thinking its tax system. With the G20 and OECD’s new agenda against base erosion and profit shifting (BEPS), transfer pricing is now a prominent topic of study in most tax law programs, but two decades ago only Amsterdam offered me the opportunity to delve deeply into it via a shared research program at the IBFD.”cts of careers in the tax field. I became very intrigued with how Associate Dean William Byrnes dynamically engaged students on campus and worldwide through leveraging communication and multimedia technologies. We are investigating potentially collaborating on joint online initiatives in the future and look forward to discussing these further when I return to San Diego this March to deliver my next international tax lectures.”

Professor Byrnes continued, “Also, Dr. Weber, Bruno Da Silva, and I had the opportunity to discuss several future collaborative publications stretching out through 2015 and beyond, including authoring a Lexis book on international tax for the Asian academic and professional market to be translated into several local languages, reworking a Lexis publication on tax treaties, and finally, expansion of my Lexis transfer pricing publication from the U.S. perspective to a global, comparative approach. Bruno Da Silva, who is just completing his doctoral candidacy at UvA on the topic of information exchange, and I just collaborated on the second edition of LexisNexis Guide to FATCA Compliance. His representation of the China Territory of Macau, his OECD research and his work with Loyens and Loeff is establishing him as a leader among his European colleagues for understanding cross border information information flows.”

“Moreover, I explored with Dr. Edgar du Perron, Dean of University of Amsterdam Faculty of Law, and Dr. Weber the ‘flipping the classroom’ approach to distance education and how we may implement some joint international tax courses in this regard that can receive status as professional designations from various financial service authorities and associations. Such courses could become the starting point for Amsterdam to leverage for the undergraduate law courses. It was interesting to learn from Dean Perron that a group of entrepreneurial Amsterdam law students have captured lecture recordings of some of their courses, splicing them into multimedia course outlines and then selling them, albeit potentially without obtaining the faculty members authorization.”

Posted in Courses, Education Theory, FATCA, Uncategorized | Tagged: Dennis Weber, edgar du perron, FATCA, information exchange, international tax, University of Amsterdam, William Byrnes | 1 Comment »

Ancient Roman Munificence: The Development of the Practice and Law of Charity

Posted by William Byrnes on January 22, 2014

This > article < by Professor William Byrnes traces Roman charity from its incipient meager beginnings during Rome’s infancy to the mature legal formula it assumed after intersecting with the Roman emperors and Christianity. During this evolution, charity went from being a haphazard and often accidental private event, to a broad undertaking of public, religious, and legal commitment. Charitable giving within ancient Rome was quite extensive and longstanding, with some obvious differences from the modern definition and practice of the activity.

The main differences can be broken into four key aspects. First, as regards the republican period, Roman charity was invariably given with either political or ego-driven motives, connected to ambitions for friendship, political power or lasting reputation. Second, charity was almost never earmarked for the most needy. Third, Roman largesse was not religiously derived, but rather drawn from personal, or civic impetus. Last, Roman charity tended to avoid any set doctrine, but was hit and miss in application. It was not till the imperium’s grain dole, or cura annonae, and the support of select Italian children, or alimenta were established in the later Empire that the approach became more or less fixed in some basic areas. It was also in the later Empire that Christianity made an enormous impact, helping motivate Constantine – who made Christianity the state religion – and Justinian to develop legal doctrines of charity.This study of Roman charitable activities will concern itself with several streams of enquiry, one side being the historical, societal, and religious, versus the legal. From another angle, it will follow the pagan versus Christian developments. The first part is a reckoning of Roman largesse in its many expressions, with explanations of what appeared to motivate Roman benefactors. This will be buttressed by a description of the Roman view of society and how charity fit within it. The second part will deal with the specific legal expressions of euegertism (or ‘private munificence for public benefit’ ) that typify and reveal the particular genius that Romans had for casting their activities in a legal framework. This is important because Rome is the starting point of much of charity as we understand the term, both legally and institutionally in the modern world. So studying Roman giving brings into highlight and contrast the beginnings of Charity itself – arguably one of the most important developments of the civilized world, and the linchpin of the Liberal ethos.

Number of Pages in PDF File: 68 (link is http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2314731)

Posted in Tax Exempt Orgs, Tax Policy | Tagged: Catholic, charitable giving, charity, Christian-Judeo, Jurisprudence, Legal History, Roman Law, tax | 1 Comment »

The next hot annuity for clients is ?

Posted by William Byrnes on January 20, 2014

As clients have begun to feel the shifting winds with respect to the general economy, the annuity market is now undergoing its own type of evolution.

While products that tie fluctuations in an annuity’s cash surrender value to prevailing market interest rates may have seemed unacceptably risky to most clients just a few months ago, changes in today’s interest rate environment now have clients flocking to find these features.

Annuities with market value adjustment (MVA) features may be the next hot product for clients looking to beat the return on other conservative investment products, so read the full analysis of this emerging trend by Professor William Byrnes and Robert Bloink at Think Advisor !

ThinkAdvisor.com supports the professional growth and vitality of the Investment Advisory community, from RIAs and wealth managers of all kinds, to independent broker-dealer and wirehouse representatives. We provide unparalleled access to the knowledge, information and critical resources they need to succeed at every stage in their career, including professional development, education and certification, industry news and analysis, reference tools and services, and community networking opportunities.

Posted in Insurance, Pensions, Retirement Planning, Wealth Management | Tagged: Brokerages, Business, Collective investment scheme, Financial services, Investing, Investment, Investment Advisory, Life annuity | Leave a Comment »

The IRS Median Offshore Penalty 580% of Tax Due For Those Who Make Honest Mistakes

Posted by William Byrnes on January 16, 2014

Published via the IRS Newswire (IR-2014-3) and on the Taxpayer Advocate website of the IRS on January 9, 2014, National Taxpayer Advocate Nina E. Olson released her 2013 annual report to Congress. The Taxpayer Advocate, replying on State Department statistics, cited that “7.6 million U.S. citizens reside abroad and many more U.S. residents have FBAR filing requirements, the IRS received only 807,040 FBAR submissions in 2012.”{1} The Taxpayer Advocate noted that “more than one million U.S. citizens reside in Mexico and many Mexican citizens reside in the U.S.” The Report pointed out that most persons that worked in Mexico had to pay into a government mandated retirement account (known as a AFORES), and that this retirement account may be reportable to the IRS as a foreign trust.

Regarding individual international tax compliance initiatives, the IRS Newswire reported that “Analyzing results from the IRS’s 2009 OVD program, the Advocate found the median offshore penalty was about 381% of the additional tax assessed for taxpayers with median-sized account balances, and 580% of the tax assessed for taxpayers with the smallest account balances (i.e., the bottom 10%, with an average $44,855 account balance). Taxpayers who “opted out” of the OVD program and agreed to subject themselves to audits fared better but still faced penalties of nearly 70% of the tax and interest.”

The Report stated: “Since 2009, the IRS has generally required those who failed to report offshore income and file one or more related information returns (e.g., the Report of Foreign Bank and Financial Accounts (FBAR)) to enter into successively more punitive offshore voluntary disclosure (OVD) programs. … The programs were punitive, charging average penalties of more than double the unpaid tax and interest associated with the unreported accounts. … On average, the IRS assessed penalties of nearly 70% of the unpaid tax and interest in the audits of those who opted out.” The FBAR penalty of 50% of the account balance, for up to six years of non-compliance, equals a potential maximum FBAR penalty of 300% of the account itself, without regard to the actual tax due, interest thereupon, and tax penalties.

The finding that small account holding benign taxpayers paid penalties of nearly 600% of the actual tax due appears to be a miscarriage of the intent of policy makers. This situation has also led the Taxpayer Advocate to conclude that benign actors, in particular those with small non-reported accounts, made either soft disclosures or prospectively began to comply “… without subjecting themselves to the lengthy and seemingly-unfair OVD process.”

Regarding the 2012 IRS Streamlined OVD program, the taxpayer Advocate found that as of September 2013 2,990 taxpayers had submitted returns reporting an additional $3.8 million in taxes.

{1} Report Volume 1, Page 229.

Posted in FATCA, Tax Policy | Tagged: Byrnes, income tax, IRS, offshore, OVD, Taxpayer Advocate | 6 Comments »

Entering the Retirement Income Game? What About Universal Life?

Posted by William Byrnes on January 15, 2014

A new product feature has emerged to help clients looking to supplement retirement income or protect against the risk of outliving their assets, and, in an unusual twist, this feature is not attached to an annuity. Insurance carriers have thrown universal life insurance policies into the retirement income game by offering accelerated benefit riders that make it easier than ever for clients to access the value of their policies.

For clients looking to secure life insurance protection, longevity insurance, and a steady stream of retirement income, these new guaranteed income withdrawal riders could be the perfect solution!

Read the full analysis of Professor William Byrnes and Robert Bloink at Think Advisor !

Professor William Byrnes is a full time academic providing unbiased, informative critique to his readers. Subscribers of Tax Facts and of National Underwriters receive weekly strategic industry intelligence such as retirement strategies and client case studies. ThinkAdvisor.com, an industry news site, supports the professional growth and vitality of the Investment Advisory community, from RIAs and wealth managers of all kinds, to independent broker-dealer and wirehouse representatives. We provide unparalleled access to the knowledge, information and critical resources they need to succeed at every stage in their career, including professional development, education and certification, industry news and analysis, reference tools and services, and community networking opportunities.

Posted in Insurance, Retirement Planning, Wealth Management | Tagged: Business, Cash value, Financial services, insurance, Investment Advisory, life insurance, Retirement, term life insurance | Leave a Comment »

FATCA FFI Agreement technical corrections released by IRS

Posted by William Byrnes on January 14, 2014

Revenue Procedure 2014-13 (2014-3 I.R.B. 419), published January 13, 2014, contains corrections to the FFI agreement released on December 26, 2013.

Below are the links to the Revenue Procedure 2014-13 (2014-3 I.R.B. 419), published January 13, 2014, that contain corrections to the FATCA FFI Agreement released on December 26, 2013. The FFI Agreement is contained within the Revenue Procedure publication and accessible below.

The corrections can be found in sections 3.03(B)(1), 4.02(C), 5.01, 6.07, 9.02(B), 9.02(D) and 10.03 of section 5 (FFI Agreement) of Revenue Procedure 2014-13. The January 1, 2014, effective date of Revenue Procedure 2014-13 is unchanged.

Rev. Proc. 2014–13

FFI Agreement for Participating FFI and Reporting Model 2 FFI

Table of Contents

FATCA Compliance Program and Manual

Posted in FATCA | Tagged: FATCA, FFI agreement | 2 Comments »

FATCA Intergovernmental Agreements

Posted by William Byrnes on January 13, 2014

As of December 31, 2013 the U.S. has eighteen IGAs signed and published, although others have been agreed in principle but not yet signed. Fifteen of the current eighteen IGAs are based on Model 1: Costa Rica, Denmark, France, Germany, Guernsey, Ireland, Isle of Man, Jersey, Malta, Mexico, the Netherlands, Norway, Spain, the UK. Three IGAs are based on Model 2, being Bermuda, Japan and Switzerland.

Joint Statements and Signed Bilateral Agreements

FATCA Compliance Program and Manual

Posted in FATCA | Tagged: Bermuda, Cayman Islands, Costa Rica, FATCA, Germany, Guernsey, IGA, Implement FATCA, Isle of Man, United States | 1 Comment »

Best Practices for Distance Learning in Legal Education

Posted by William Byrnes on January 10, 2014

The American Association of Law Schools (AALS) President reported at the Sunday morning Section Officers’ breakfast on January 4, attended by Associate Dean William Byrnes of Thomas Jefferson School of Law, that this year’s conference had the second highest registration in AALS history.

During the AALS annual conference in New York City, LexisNexis sponsored the breakfast held at the Hilton Midtown for the Workgroup on Distance Education for Legal Education. The sit down breakfast, filled at room capacity of stakeholders from among law schools, is the third annual breakfast during AALS and seventh meeting of the workgroup.

The Lexis sponsored breakfast provided Professor Rebecca Purdom (pictured left), renown environmental law academic and leader of Vermont Law School’s Environmental online program, the opportunity to lead a stakeholder discussion on the Workgroup’s Report of Best Practices before the second edition publication in March. Professor Purdom also presented the agenda of the March 2014 three-day Workgroup meeting sponsored by Washington University School of Law (St. Louis). Professor Purdom stated, “The Workgroup evolved from a 2011 project presented at the Harvard Law School – New York Law School initiative of conferences ‘The Future of Legal Education 2.0’. Over the past two years, law schools’ interest has substantially grown in the workgroup’s best practices and case examples output as the schools leap forward into providing online courses and programs for their JD and LLM students.”

William Byrnes, as chair of the Report subgroup (Best Practices for Distance Learning in Legal Education: A “Blue Paper” Summary of Delivery Models, Regulatory Issues, and Recommended Practices), has been coordinating input from academics from a representation of backgrounds, law school rankings, and regions, discussing and organizing contributions from workgroup members. Replying to the question: “What were some of highlights of the AALS conference this year?” Professor Byrnes answered, “The most significant “wake up” call of the AALS conference was the presentation about the ABA variance granted William Mitchell College of Law for a flexible hybrid, distance delivered JD degree. The newly announced hybrid short residence – online JD degree combines intensive, one week on-campus seminars once a semester with online course work during the semester. This variance is a game changer regarding thinking about delivery of U.S. legal education and I expect distance hybrid programs to be wildly popular.”

The American Bar Association general restrictions for earning distance education credits (Standard 306) are being relaxed as well. Under current ABA accreditation standards, a JD student may not earn any distance education during the first year of law school, and after the first year the student is restricted to no more than four distance education credit hours in any one semester, and a maximum 12 credits total may apply to the juris doctorate degree. The new accreditation standard (Standard 311) will remove the maximum distance education credits per semester restriction, and increase the allowance to 15 credits toward the degree. However, in light of the newly announced variance, it is expected that several schools will also seek to expand the curriculum and practice-oriented opportunities afforded by distance education, especially schools in low population density regions.

William Byrnes said “As the pioneer of distance learning delivered law degrees by ABA institutions, I am glad to see other law schools finally understanding the strengths offered by technology. At Thomas Jefferson, my understanding of distance education pedagogy has deepened, and is frequently called upon by other schools, promoting Thomas Jefferson an academic leader among the ABA schools.”

“How will this impact students?” William Byrnes continued “For students, it opens the possibility, by example, of combining 15 hours of distance credits for electives with externship credits and independent study credits to complete a full academic year while perhaps undertaking a practical externship in a foreign country. The student could begin the overseas, practical experience in January of the second year and return December the third year, allowing a full 12 months immersion, and not be penalized with a late graduation. The last semester at the home school is a good idea to allow the student to engage in the necessary local state bar procedure courses and other bar preparation common for impending graduate, as well as reintegrate with student organizations and friends. Of course, technology like video/web conference applications such as Skype, Google Chat, and Polycom allow students off campus to remain engaged with home school students organizations and the like. Still, technology doesn’t replicate throwing frisbee on Pacific Beach with friends or replace the unexpected meeting at the Starbucks down the street from the law school.”

“Quality of education was a concern on many minds which I think will in turn increase interest in the workgroup’s best practices project and report. I also expect several more variances and online programs to be applied for in 2014”. Professor Byrnes concluded “The March 2014 distance education workgroup meeting has opened a third day to address requests from law schools to provide practical online course examples of tools and techniques.”

The first edition of the workgroup’s best practices report may be downloaded from the Harvard website. The vastly expanded, and refined, second edition of Best Practices for Distance Learning in Legal Education: A “Blue Paper” Summary of Delivery Models, Regulatory Issues, and Recommended Practices will be published at the March 6 – 8, 2014 workshop. Contact William Byrnes for more details (https://profwilliambyrnes.com/about-2/).

Posted in Education Theory | Tagged: best practices, Distance education, Distance Learning, Legal education, pedagogy, Rebecca Purdom, William Byrnes | 1 Comment »

Taxpayer Bill of Rights

Posted by William Byrnes on January 9, 2014

Published via the IRS Newswire (IR-2014-3) and on the Taxpayer Advocate website of the IRS, National Taxpayer Advocate Nina E. Olson today released her 2013 annual report to Congress, urging the Internal Revenue Service to adopt a comprehensive Taxpayer Bill of Rights (TBOR).

The Newswire reminds the public that in a prior report, Olson analyzed the IRS’s processing of applications for tax-exempt status and concluded its procedures violated eight of the ten taxpayer rights she has proposed. The current Report though provided a broad rationale, based on internal coherence, collection efficiency, and international practices for Congress to codify a Taxpayer Bill of Rights, and for the meanwhile the IRS to issue its own. Examples of international practice included, by example, references to OECD Reports and to Canada’s practice. The Report quotes Thomas Jefferson: “A bill of rights is what the people are entitled to against every government on earth, general or particular; and what no just government should refuse, or rest on inferences.”{1}

The Newswire quotes the Report “Taxpayer rights are central to voluntary compliance. If taxpayers believe they are treated, or can be treated, in an arbitrary and capricious manner, they will mistrust the tax system and be less likely to comply with the laws voluntarily. If taxpayers have confidence in the fairness and integrity of the system, they will be more likely to comply.”

Regarding efficiency, the Newswire focuses on the report’s emphasis that the U.S. tax system is built on voluntary compliance: 98% percent of all tax revenue the IRS collects is paid timely and voluntarily. Only 2% results from IRS enforcement actions. While arguing that knowledge of taxpayer rights promotes voluntary compliance, the report cites a survey of U.S. taxpayers conducted for TAS in 2012 that found less than half of respondents believed they have rights before the IRS and only 11 percent said they knew what those rights are.

Regarding coherence, the Report states: “The Internal Revenue Code provides dozens of real, substantive taxpayer rights. However, these rights are scattered throughout the Code and are not presented in a coherent way. Consequently, most taxpayers have no idea what their rights are and therefore often cannot take advantage of them.”

The report calls on the IRS to take the taxpayer rights that already exist and group them into ten broad categories, modeled on the U.S. Constitution’s Bill of Rights. The report says the “simplicity and clarity” of a thematic, principle-based Taxpayer Bill of Rights would help taxpayers understand their rights in general terms.

1. The Right to Be Informed

2. The Right to Quality Service

3. The Right to Pay No More than the Correct Amount of Tax

4. The Right to Challenge the IRS’s Position and Be Heard

5. The Right to Appeal an IRS Decision in an Independent Forum

6. The Right to Finality

7. The Right to Privacy

8. The Right to Confidentiality

9. The Right to Retain Representation

10. The Right to a Fair and Just Tax System, Including Access to the Taxpayer Advocate Service

Read the complete Report at http://www.taxpayeradvocate.irs.gov/2013-Annual-Report/full-2013-annual-report-to-congress/

{1} Report Volume 1, Page 7.

Posted in Tax Policy | Tagged: Bill of Rights, Byrnes, IRS, Taxpayer Advocate | Leave a Comment »

Professor Byrnes Attends AALS Conference | Thomas Jefferson School of Law

Posted by William Byrnes on January 8, 2014

Read about the events that transpired including the announcement during an ABA session for the first ABA variance given to an online JD degree …

> Professor Byrnes Attends AALS Conference | Thomas Jefferson School of Law <

Posted in Education Theory | Tagged: AALS, ABA, American Bar Association, Byrnes, Distance education, Distance Learning, Purdom | 1 Comment »

IRS’ Frequently Asked Questions (FAQs) – FATCA Registration System

Posted by William Byrnes on January 8, 2014

The IRS has published the following FATCA FAQs about the FATCA Registration Portal and System, including these topics:

FATCA Registration System – Overview
Registration System Resource Materials
General System Questions
FATCA Account Creation and Access
Registration Status and Account Notifications
Expanded Affiliated Groups (EAG)
Registration Updates
Global Intermediary Identification Number (GIIN) – Overview
GIIN Format

#	Questions	Answers
FATCA Registration System – Overview
Q1.	What is the FATCA Registration System?	An overview of the FATCA Registration System is available, along with other Registration Resources and Support Information, on the FATCA Registration Resources Page.
Registration System Resource Materials
Q2.	What training is available for the Registration System?	In addition to these Q&As, the FATCA Registration Online User Guide will provide information on how to answer questions and navigate through the online system. Short “how-to” videos for the Registration system are also available on the FATCA Registration Resources Page.The IRS anticipates adding more items in the near future to aid those registering through the FATCA Registration Website.
Q3.	What help will be available for the FATCA Registration System?	The FATCA Registration Resources Pagecontains information to get you started, including the FATCA Registration Online User Guide, short “how-to” videos for the Registration system, and other resources.If help is needed prior to logging onto the FATCA registration system, the Registration User Guide will provide information about logging in and navigating through the system. There is also a link “Forgot FATCA ID or Access Code?” on the login page with information on how to obtain assistance with login issues.Once logged on, the FATCA registration system contains help icons (question marks) throughout the registration with information on particular questions or fields. At the top of each page of the FATCA registration system there is a navigation bar with a “get help” option that will provide additional resources and contact information.

General System Questions
Q4.	What languages will the registration system be available in?	The registration system will be in English only; however only certain special characters will be accepted (~ ! @ # % ^ * ( ) ? , . ).
Q5.	Will there be a test environment or a beta version of the FATCA registration system?	No, there will not be a test environment or a beta version of the registration system. The registration system is currently open. The FI’s can input their data. On or after January 1, 2014, the FI will need to submit their registration.
Q6.	Will the system have certain mandatory fields or will they all be mandatory?	Not all fields in the online registration form are mandatory. Fields that are mandatory are marked with an asterisk at the end of the question. Also, depending on how you answer a question, the system will automatically skip some questions as appropriate.
Q7.	Will there be an automatic check of legal names against a database to prevent misspellings or to provide consistent formatting?	The system will validate that the legal name contains only valid characters, but will not check the legal name against any database for spelling or format issues. Valid characters include lower and upper case letters (a-z, A-Z), numbers (0-9), and the following special characters: blank space, ampersand (&), hyphen (-), forward slash (/), period (.), comma (,), apostrophe (‘), pound sign (#), and percent sign (%). The legal name cannot start with a special character.
Q8.	What is the maximum number of characters allowed for name fields?	Most name fields allow for up to 40 characters to be input. You will not be able to input more characters than allowed in a particular field. There are specific error messages to guide you when you click on the “Next” or “Save” button in the registration system if there is a problem with the input you provided.
Q9.	How should an FI enter the FI legal name in question 2 or the member FI legal name in question 12 (for lead FIs) if the FI legal name is longer than what the system allows, or has characters that the system does not allow?	At this time, the FATCA registration system can only capture 40 characters (spaces between names will count toward the character limit). Further, only upper and lower case letters (a-z, A-Z), numbers (0–9) and the following special characters are accepted: blank space, ampersand (&), hyphen (-), forward slash (/), period (.), comma (,), apostrophe (‘), pound sign (#), and percent sign (%). Parentheses and brackets are not accepted at this time. The legal name cannot start with a special character.To the extent that the full legal name can be entered, please do so. If however, the full legal name does not fit, please note the following: At least the first 10 characters must match the FI’s legal name. Any legal and numerical designations must be included in the remaining 30 characters. No abbreviations in the first 10 characters, but otherwise it is okay to abbreviate.
Q10.	How can a Financial Institution register an entity in a newly created country?	The FATCA registration system includes countries on the ISO 3166 listing, and as new countries are added, the system will be updated to include them. There is also an option to select “other” for the country if the system has not yet added a country to the drop down lists.
Q11.	Does the system have the capability to show the questions and responses before the registration is submitted? Can the questions and responses be printed or saved?	The registration is separated into four parts. In the online registration system, how each part displays depends upon how the questions are answered; accordingly, the Financial Institution (FI) will only see the parts of the form that are applicable to it. At the end of parts 1 through 3, there is an edit / review function which will display the questions and responses provided. The FI can use the print functionality from its browser to print each of these parts. Once the registration is submitted, there are options on the home page to review each of the applicable parts of the registration. There is also an option for the FI to print, view, and save (in pdf format) the agreement (part 4) of the form.An FI (except Sponsoring Entities) can view or save (in pdf format) its branch table information from the home page.A Lead FI can view or save (in pdf format) its member FI table from the home page. An FI can edit its registration by selecting the “Registration-Edit/Complete/Submit” option on its home page.

FATCA Account Creation and Access
Q12.	What is the maximum number of users that can access a FATCA account at one time?	Each Financial Institution (FI) will have its own FATCA Account, with a unique FATCA ID. Although the login credentials (FATCA ID and access code) can be shared between the Responsible Officer and up to five (5) points of contact designated on the registration form, only one person can access the account at a time.For Expanded Affiliated Groups, each member FI has its own FATCA ID and access code, so members can log into the system independent of other members of the group. The Lead FI has access to all of the member FI accounts from their home page, and if the Lead FI is accessing a member account, that member will not be able to log in. If a member FI is logged in, the Lead FI will not be able to access that member account until the member logs out; however it will be able to access its own lead account.
Q13.	What are the password requirements for FATCA Accounts?	When creating a FATCA account, a Single, Lead or Sponsoring Entity Type Financial Institution will create an access code (like a password) to be used with the systemically assigned FATCA ID for all future logins to the account. The access code must be between 8 and 20 characters and include at least one uppercase letter, one lowercase letter, one number, and one of the following special characters ~ ! @ # % ^ * ( ) ? , .For Member type FI’s, the registration system will generate a unique FATCA ID and a temporary access code for each member when the Lead FI creates the member accounts. The Lead FI will provide the login information to each of its member FIs. When each member FI logs into their FATCA account, they will be prompted to select a new access code, following the criteria described in the above paragraph.
Q14.	What are challenge questions used for?	Each Financial Institution (FI) will select two challenge questions from a list of predefined questions and provide an answer to each. For all FIs except Member Type FIs, this will be done as part of the account creation process. Lead FIs will create all member FI accounts, and the first time the Member FI logs into their FATCA account, they will be prompted to select and answer their challenge questions. Each FATCA account will have two challenge questions and answers provided by the FI.Challenge questions will be used by each FI to reset their own access code if they forget it. Challenge questions and answers can be reviewed and updated at any time by the FI when logged into their account. From the home page, the FI can select the “Challenge Questions – Edit/Review” option and review and make changes as necessary.
Q15.	Can a member of an Expanded Affiliated Group (EAG) create their own FATCA account?	A Member Financial Institution (FI) cannot create its own FATCA account. The Lead FI will create all their member accounts and provide each member FI with its login credentials. The member will then log into its account and complete its registration.
Q16.	What is the time lapse between the creation of the FATCA ID for the Lead FFI and the FATCA IDs for the Member FFIs?	Once the Lead FI creates its own FATCA account, and has completed Part 1 of the registration, it will create the FATCA accounts for each member by adding the members in Part 2, question 12 of the online registration. As soon as a member’s information is completed, and the “add another” button is clicked, that member FI will appear in the table below the question with its FATCA ID and temporary access code.

Registration Status and Account Notifications
Q17.	What type of notifications will the FATCA Registration system provide?	The FATCA Registration system will generate automatic e-mail notifications to the Responsible Officer (RO) to check the FATCA account when a financial institution (FI) registration changes between some statuses. There will also be messages posted on the FI’s message board, which it can access on the home page of its FATCA account.
Q18.	How can a Financial Institution check the status of its registration?	A Financial Institution (FI) can check the status of its FATCA registration by logging into its FATCA account and checking the account status displayed on its home page. The system will also generate automatic e-mail notifications to the Responsible Officer (RO) to check the FATCA account when a Financial Institution (FI) registration changes between some statuses. A list of statuses and their definitions can be found in the appendix of the FATCA Registration Online User Guide.
Q19.	Can the Responsible Officer (RO) list more than one e-mail address on the registration system?	The RO can only list one e-mail address in question 10 of the registration.
Q20.	Can the change of status e-mail notifications go to the Responsible Officer (RO) and the Points of Contact (POCs)?	The registration system will send an e-mail only to the Responsible Officer when the registration changes between some statuses. Therefore, the FI should carefully consider which email address is provided in question 10 of the registration.

Expanded Affiliated Groups (EAG)
Q21.	If a lead Foreign Financial Institution (FFI) of an Expanded Affiliated Group (EAG) registers and lists each Member on Part 2 of the registration, then would each member of the EAG still need to separately register?	Each member financial institution of the EAG will need to complete a registration, once the Lead has created its account. In part 2 of the Lead FI’s registration, the lead FI will add basic identifying information for each member, and the system will create the member FATCA accounts. Each member will then need to log into the system and complete its registration.
Q22.	Once the lead Financial Institution (FI) has its FATCA ID, will it be possible for each of the member Expanded Affiliated Group (EAG) entities to log on at the same time to register?	Once the Lead adds a member under part 2 of the Lead’s registration, the system will generate a FATCA ID and temporary access code for the member (thus establishing the member’s account). The Lead will give that account information to the member and it can log into its member account. Each FI has its own account, so the Lead and member(s) can all be logged in at the same time to their own accounts. Because the Lead FI has access to member accounts, only one (either the Lead or Member FI) can access the member account at a time.
Q23.	How does the lead Financial Institution (FI) access its member FI accounts?	Once a lead FI creates its member accounts, it can access the member FI accounts by clicking on the “view member information link” from its homepage, and clicking on the name of the member FI in the table. The Lead FI can access each of its member accounts under its own lead FI account login – it does not need to log into each of the member accounts separately. However, since only one person can access the account at a time, the lead FI will get an error message if it tries to access the member account when the member FI is logged in, and the member FI will not be able to log into its account if the lead FI is accessing it.

Registration Updates
Q24.	Where does a Financial Institution (FI) send information to have updates made on its registration?	Updates cannot be made on paper. Once an account is established, (whether on the paper form 8957 or online), the FI will manage any updates to its registration form and account online. An FI that chooses to initially register on paper will have its logon information sent to it in the mail. The FI will log into the FATCA Registration System, and select the” Registration – Edit/Complete/Submit” option from its home page to edit the registration form data, or choose from other available account options.
Q25.	How can the access code for the FATCA account be changed?	The financial institution (FI) can change the access code by logging into the FATCA account, and selecting the “Access Code – Change” option from its home page.The FI can also reset its own access code if it forgets it by clicking on the “Forgot FATCA ID or Access Code?” link from the login page, and following the instructions to answer the challenge questions provided during registration.Member financial institutions will also be required to change their initial temporary access code provided by their Lead FI the first time they log into the system.
Q26.	How can the Responsible Officer (RO) or Points of Contact (POCs) be changed?	An FI can edit its registration by logging into its FATCA account and selecting the “Registration – Edit/Complete/Submit” option from its home page. To change the RO or POCs, the FI would edit Question 10 or 11 of the registration as appropriate, and resubmit the registration.Because the RO and POCs share the login credentials for the FATCA Account, the FI may want to change its access code when its personnel changes. The access code can be changed from the home page by selecting the “Access Code – Change” option.
Q27.	Can a Financial Institution (FI) that is limited change to a Participating FFI?	Yes, an FI can edit their registration by logging into its FATCA account and selecting the “Registration – Edit/Complete/Submit” option from its home page. The FI would change its classification in question 4, and resubmit its registration.
Q28.	How do I get my registration out of registration submitted status?	Notice 2013-43 stated that after January 1, 2014 the FI will need to submit a final registration. If an FI submitted a registration prior to this date, it can be changed by the FI. To change the status of your registration from registration submitted, go to your home page. Under Available Account Options: Select “Registration – Edit/complete/Submit.” You will be asked if you want to change your status to “initiated.” Select yes. After January 1, 2014, you may submit your registration as final.
Q29.	Why did my registration status change toRegistration Incomplete and how do I submit the registration again?	Notice 2013-43 stated that after January 1, 2014 the FI will need to submit a final registration. If an FI submitted a registration prior to this date, the registration status will be systemically updated to Registration Incomplete on December 31, 2013. The registration system will be unavailable during this time.Beginning on January 1, 2014, you can login to your FATCA account, and resubmit your registration by selecting “Registration – Edit/Complete/Submit” under the Available Account Options on your home page. You will be asked if you want to change your status to Initiated. Select yes, and review each page of the registration, making any necessary updates, and clicking the “next” button at the bottom of each page to continue. When you get to Part 4 of the registration, complete the information, and click on the Submit button. Your registration status will then be updated toRegistration Submitted. You can go back at any time to update information.

Global Intermediary Identification Number (GIIN) – Overview
Q30.	What is a GIIN?	A GIIN Composition Document is available along with other Registration Resources and Support Information, on the FATCA Registration Resources Page.
Q31.	Will Financial Institutions (FIs) and Branches that are limited be issued GIINs?	No, FIs and branches that are limited will not be issued GIINs.
GIIN Format
Q32.	What is the format of the GIIN?	The GIIN is a 19-character identification string that is a composite of different identifiers, including the FATCA ID, Financial Institution type, category code and country identifier. For more information see the full description in the GIIN Composition Document.
Q33.	Are the period (.) separators in the GIIN required?	Yes. The period separators comprise three characters in the 19-character identification number. Please see the GIIN Composition Document for more information.

FATCA Compliance Program and Manual

Fifty contributing authors from the professional and financial industry provide expert analysis within the LexisNexis® Guide to FATCA Compliance (2^nd Edition): many perspectives – one voice crafted by the primary author William Byrnes. The second edition has been expanded from 25 to 34 chapters, with 600 pages of regulatory and compliance analysis.

The 34 chapters include many practical examples to assist a compliance officer contextualize the regulations, IGA provisions, and national rules enacted pursuant to an IGA. The chapters include in-depth analysis of such topics as the categorization of trusts pursuant to the Regulations and IGAs, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, insights as to the application of FATCA and the IGAs within new BRIC and European country chapters.

See: http://www.lexisnexis.com/store/catalog/booktemplate/productdetail.jsp?pageName=relatedProducts&prodId=prod19190327&ORIGINATION_CODE=00247

Posted in FATCA | Tagged: FAQ, FATCA, Foreign Account Tax Compliance Act, GIIN, Internal Revenue Service, IRS, January 1 2014, Legal name | Leave a Comment »

IRS Gives High-Income Taxpayers a Break on New 3.8% Tax

Posted by William Byrnes on January 2, 2014

The IRS has finally given high-income taxpayers a break with the release of the final regulations governing the new 3.8% tax on net investment income.

These final rules mark a dramatic shift from the IRS’s previous position. By adding flexibility to the rules, the IRS’s unanticipated amendments ease the sting of the investment income tax.

Read Professor Robert Bloink and William Byrnes’ analysis of the shift in the IRS’ position at > Think Advisor <

tax planning case studies for individuals and small business available on Tax Facts online

Posted in Taxation, Wealth Management | Tagged: accounting, income tax, Internal Revenue Service, IRS, IRS tax forms, Patient Protection and Affordable Care Act, Taxation, United States | 3 Comments »

FATCA Frequently Asked Questions End-of-Year Update

Posted by William Byrnes on December 31, 2013

On December 27, 2013 the IRS issued a new FATCA FAQ (FAQ #29) to explain Notice 2013-43 (Revised Timeline and Other Guidance Regarding the Implementation of FATCA).

Q29.

Why did my registration status change to Registration Incomplete and how do I submit the registration again?

Notice 2013-43 stated that after January 1, 2014 the FI will need to submit a final registration. If an FI submitted a registration prior to this date, the registration status will be systemically updated to Registration Incomplete on December 31, 2013. The registration system will be unavailable during this time.Beginning on January 1, 2014, you can login to your FATCA account, and resubmit your registration by selecting “Registration – Edit/Complete/Submit” under the Available Account Options on your home page. You will be asked if you want to change your status to Initiated. Select yes, and review each page of the registration, making any necessary updates, and clicking the “next” button at the bottom of each page to continue. When you get to Part 4 of the registration, complete the information, and click on the Submit button. Your registration status will then be updated to Registration Submitted. You can go back at any time to update information.

Read my previous FATCA coverage of the recent end of year releases regarding the new FFI Agreement, Registration Portal, GIIN issuance, among related topics > herein <

FATCA Compliance Program and Manual

The previous 25 chapters have been substantially updated, including many more practical examples to assist a compliance officer contextualize the regulations, IGA provisions, and national rules enacted pursuant to an IGA. The nine new chapters include by example an in-depth analysis of the categorization of trusts pursuant to the Regulations and IGAs, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, insights as to the application of FATCA and the IGAs within new BRIC and European country chapters. Chapter 7 has been drafted for a financial institution’s compliance officer, Chapter 9 for the trust department compliance officer, and Chapter 10 for the insurance firm’s compliance officer. Chapter 7 provides a new section analyzing the compliance risks with the IRS’ released FFI agreement.

See: http://www.lexisnexis.com/store/catalog/booktemplate/productdetail.jsp?pageName=relatedProducts&prodId=prod19190327&ORIGINATION_CODE=00247

Posted in FATCA | Tagged: BRIC, FATCA, Foreign Account Tax Compliance Act, Internal Revenue Service, IRS, Regulation, Regulatory compliance | Leave a Comment »

Assoc. Dean Byrnes’ Book “Tax Facts on Individuals and Small Business” Published | Thomas Jefferson School of Law

Posted by William Byrnes on December 30, 2013

Read about > Assoc. Dean Byrnes’ Book “Tax Facts on Individuals and Small Business” Published | Thomas Jefferson School of Law <

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LTC’s Future Lies in New Crop of Hybrid Products

Posted by William Byrnes on December 30, 2013

When it comes to long-term care coverage, advising risk-adverse clients has historically required a balancing act that many traditional long-term care insurance (LTCI) policies simply are not cut out for. In weighing the need for coverage against the risk of a lost investment, clients frequently decide against obtaining coverage.

Fortunately, changes in the long-term care marketplace have recently inspired a new crop of products that can alleviate some concerns of clients who are already feeling the pinch of a persistently low interest rate economy. While longer lifespans and the ever-increasing cost of care have led to dramatically higher LTCI costs, new asset-based products can allow your clients to obtain affordable coverage on an almost risk-free basis, with features and tax-preferences that will likely tip the scales in favor of coverage for even the most cautious of clients.

Read the analysis of Prof. William Byrnes and Robert Bloink at ThinkAdvisor !

Posted in Retirement Planning | Tagged: Business, Financial services, Health, insurance, Interest rate, long term care insurance, Long-term care, LTCI | Leave a Comment »

Final FATCA FFI Agreement released by IRS

Posted by William Byrnes on December 27, 2013

On December 26 the IRS released Rev Proc 2014-10: FFI Agreement for Participating FFI and Reporting Model 2 FFI. The final FFI agreement contains a number of changes to provisions of the draft FFI agreement that required correction or clarification. The Rev Proc provides four areas of such changes and clarifications that occur in the final FFI agreement.

First, several of the cross-references in the FFI agreement (notably, in section 2 of the FFI agreement) are modified in anticipation of the publication of two sets of temporary regulations to which the updated cross-references relate. Both sets of temporary regulations are expected to be published in early 2014.

Second, the FFI agreement contains revisions to correct minor technical errors in the draft FFI agreement.

Third, revisions are made to further clarify the FFI agreement and conform it to the temporary chapter 4 regulations. By example, as contemplated in Notice 2013-69, the FFI agreement provides that, with respect to calendar years 2015 and 2016, participating FFIs that are required to report foreign reportable amounts paid to nonparticipating FFIs shall report this information on Form 8966.

Finally, the FFI agreement also provides for a two-year transition period during which a reporting Model 2 FFI may elect to apply the due diligence procedures described in the FFI agreement in lieu of those in Annex I of an applicable Model 2 IGA and the FFI agreement is also revised to reflect that this election is made by the reporting Model 2 FFI and not the reporting Model 2 IGA jurisdiction. Read my previous FATCA coverage > herein <

FATCA Compliance Program and Manual

See: http://www.lexisnexis.com/store/catalog/booktemplate/productdetail.jsp?pageName=relatedProducts&prodId=prod19190327&ORIGINATION_CODE=00247

Posted in FATCA, Uncategorized | Tagged: BRIC, FATCA, FFI, Foreign Account Tax Compliance Act, Foreign function interface, Internal Revenue Service, LexisNexis, Regulation | Leave a Comment »

Court Eases Use of Annuities to Avoid Medicaid Spend-Down

Posted by William Byrnes on December 24, 2013

The winds are finally changing for Medicaid recipients, as evidenced by a recent U.S. Court of Appeals ruling that eases state-imposed restrictions on the use of annuities, reducing the need for your clients to spend down assets in order to become eligible for Medicaid assistance. The 6th Circuit ruling shut down the state’s attack on Medicaid-compliant annuities in this case, ruling in favor of clients who rely upon these annuities to provide sufficient income even if one spouse requires Medicaid assistance to pay for long-term care in a nursing home.

Based on this precedent, your clients may begin to experience a much more favorable Medicaid planning environment as they gain greater flexibility in the purchase timing and beneficiary designation requirements for annuity contracts that escape the Medicaid resource calculation formula, without jeopardizing an unhealthy spouse’s Medicaid eligibility.

Read the full analysis of Professor William Byrnes and Robert Bloink at Think Advisor !

Posted in Retirement Planning, Wealth Management | Tagged: Business, Financial services, insurance, Life annuity, Long-term care, Medicaid, Nursing home, United States | Leave a Comment »

FATCA FFI List Resources and Support Information Webpage and FFI List FAQs are Now Available

Posted by William Byrnes on December 23, 2013

On December 19, the IRS released FATCA News Issue Number 2013-16 wherein it announced the FATCA FFI List Resources and Support Information Webpage and the FATCA FFI List Frequently Asked Questions (FAQs) have been posted to the FATCA Website.

The IRS’ new FATCA FFI List Resources and Support Information includes the following information:

An FFI may agree to report certain information about its account holders by registering to be FATCA compliant. An FFI that has registered and that has been issued a global intermediary identification number (GIIN) will appear on a published FFI List. The FFI List can be downloaded in its entirety or searched for specific information (FI name, GIIN or country). Search results can also be downloaded. Withholding agents may rely on an FFI’s claim of FATCA status based on checking the payee’s GIIN against the published FFI List. This FFI list search and download tool is scheduled to be available beginning June 2014, and will be updated monthly.

Additional information on FATCA registration is available in the FATCA Registration Overview. More details about the GIIN are available in the GIIN Composition document.

FFI list Search and Download Capabilities

Beginning in June 2014, a search tool, partial list download, and a full downloadable list will be available on IRS.gov to the public. No login or password will be required to search or download the list. The data will be refreshed on the 1st of the month and will only include FIs and branches approved 5 business days prior to the first of the month. The date of the last update to the information will be displayed on the page. Previous months lists will not be available on IRS.gov.

The FFI List search and download tool can be used for looking up individual or groups of FIs and their branches to determine if they are on the list of FATCA compliant FIs. To use the search feature, at least one of the following search fields must be filled in: GIIN, Financial Institution Name, or Country. The results will be displayed on the screen and can be exported in CSV, XML or PDF formats. Search tips will be available on this site.

A complete list of all FATCA compliant FIs and branches will also be available for download in CSV and XML formats. If you plan to import this file into your own database, additional information including the schema, is available on the FFI List Schema and Test Files page.

The IRS FFI List FAQs is available at http://www.irs.gov/Businesses/Corporations/IRS-FFI-List-FAQs

FATCA Compliance Program and Manual

Fifty contributing authors from the professional and financial industry produced LexisNexis® Guide to FATCA Compliance (2^nd Edition). The second edition has been expanded from 25 to 34 chapters, with 600 pages of regulatory and compliance analysis.

See: http://www.lexisnexis.com/store/catalog/booktemplate/productdetail.jsp?pageName=relatedProducts&prodId=prod19190327&ORIGINATION_CODE=00247

Posted in Compliance, FATCA | Tagged: BRIC, FATCA, Financial institution, Foreign Account Tax Compliance Act, GIIN, Internal Revenue Service, IRS, LexisNexis | Leave a Comment »

Three Year-End Tax Tips from the IRS

Posted by William Byrnes on December 20, 2013

The IRS released Special Edition Tax Tip 2013-16 in time for Christmas within which it offers three year end tips to help taxpayers prepare for the tax filing season. The IRS three tax tips are as follows:

1. Start a filing system. If you don’t have a filing system for your tax records, you should start one. It can be as simple as saving receipts in a shoebox, or more complex like creating folders or spreadsheets. It’s always a good idea to save tax-related receipts and records. Keeping good records now will save time and help you file a complete and accurate tax return next year.

2. Make Charitable Contributions. If you plan to give to charity, consider donating before the year ends. That way you can claim your contribution as an itemized deduction for 2013. This includes donations you charge to a credit card by Dec. 31, even if you don’t pay the bill until 2014. A gift by check also counts for 2013 as long as you mail it in December. Remember that you must give to a qualified charity to claim a tax deduction. (See the blog posting on December 19 here under regarding the IRS charitable giving year-end tips and compliance notes.)

3. Contribute to Retirement Accounts. You need to contribute to your 401(k) or similar retirement plan by Dec. 31 to count for 2013. On the other hand, you have until April 15, 2014, to set up a new IRA or add money to an existing IRA and still have it count for 2013.

The Saver’s Credit, also known as the Retirement Savings Contribution Credit, helps low- and moderate-income workers in two ways. It helps people save for retirement and earn a special tax credit. Eligible workers who contribute to IRAs, 401(k)s or similar workplace retirement plans can get a tax credit on their federal tax return. The maximum credit is up to $1,000, $2,000 for married couples. Other deductions and credits may reduce or eliminate the amount you can claim.

Posted in Retirement Planning, Tax Exempt Orgs, Taxation | Tagged: Individual Retirement Account, Internal Revenue Service, IRS, Itemized deduction, tax, Tax deduction, Tax return (United States) | Leave a Comment »

IRS Offers Tips for Year-End Giving

Posted by William Byrnes on December 19, 2013

In its December 16th Newswire (IR-2013-98), the IRS reminded individuals and businesses making contributions to charity of several important tax law provisions that have taken effect in recent years. The IRS highlighted the following changes in the end of year Newswire.

Special Tax-Free Charitable Distributions for Certain IRA Owners

This provision, currently scheduled to expire at the end of 2013, offers older owners of individual retirement arrangements (IRAs) a different way to give to charity. An IRA owner, age 70½ or over, can directly transfer tax-free up to $100,000 per year to an eligible charity. This option, first available in 2006, can be used for distributions from IRAs, regardless of whether the owners itemize their deductions. Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible.

To qualify, the funds must be transferred directly by the IRA trustee to the eligible charity. Distributed amounts may be excluded from the IRA owner’s income – resulting in lower taxable income for the IRA owner. However, if the IRA owner excludes the distribution from income, no deduction, such as a charitable contribution deduction on Schedule A, may be taken for the distributed amount.

Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients.

Amounts transferred to a charity from an IRA are counted in determining whether the owner has met the IRA’s required minimum distribution. Where individuals have made nondeductible contributions to their traditional IRAs, a special rule treats amounts distributed to charities as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions. See Publication 590, Individual Retirement Arrangements (IRAs), for more information on qualified charitable distributions.

Rules for Charitable Contributions of Clothing and Household Items

To be tax-deductible, clothing and household items donated to charity generally must be in good used condition or better. A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return.

Donors must get a written acknowledgement from the charity for all gifts worth $250 or more that includes, among other things, a description of the items contributed. Household items include furniture, furnishings, electronics, appliances and linens.

Guidelines for Monetary Donations

To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.

Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

These requirements for the deduction of monetary donations do not change the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet both requirements.

Reminders

To help taxpayers plan their holiday-season and year-end giving, the IRS offers the following additional reminders:

Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of 2013 count for 2013. This is true even if the credit card bill isn’t paid until 2014. Also, checks count for 2013 as long as they are mailed in 2013.
Check that the organization is eligible. Only donations to eligible organizations are tax-deductible. Exempt Organization Select Check, a searchable online database available on IRS.gov, lists most organizations that are eligible to receive deductible contributions. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in the database.
For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction, including anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2013 Form 1040 Schedule A to determine whether itemizing is better than claiming the standard deduction.
For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.
The deduction for a car, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.
If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.
And, as always it’s important to keep good records and receipts.

IRS YouTube Videos:

Year-End Tax Tips: English | Spanish | ASL
Charitable Contributions: English | Spanish | ASL
Exempt Organizations Select Check: English | Spanish | ASL

See Publication 526, Charitable Contributions.

See Online mini-course, Can I Deduct My Charitable Contributions?

Posted in Compliance, Tax Exempt Orgs, Taxation | Tagged: Charitable contribution, charitable deduction, Charitable organization, IRA, IRS, tax exempt | Leave a Comment »

Act Now on End of Year Expiring Tax Breaks: IRA Charitable Rollovers, Bonus Depreciation

Posted by William Byrnes on December 18, 2013

Individual clients may have one final chance to satisfy required minimum distribution (RMD) requirements without increasing taxable income.

Small business clients, on the other hand, should be advised that the time to expand is now, as special expensing and bonus depreciation rules are also set to expire at year’s end.

Regardless of your client’s situation, the list of expiring tax breaks is robust enough to grab everyone’s attention.

Read Professor William Byrnes and Robert Bloink’s end of year planning tips at > Think Advisor <

Posted in Taxation | Tagged: accounting, Business, MACRS, RMD, Section 179 depreciation deduction, Small business, Tax break, Tax credit | Leave a Comment »

IRS’ Announcement for Signing FFI Agreement and Finalizing FATCA Registration

Posted by William Byrnes on December 17, 2013

On Monday December 16, the IRS issued Announcement 2014-1 reminding foreign financial institutions (FFI) that have registered via the FATCA Portal to log back in after January 1, 2014 in order to sign the FFI agreement and finalize the registration process. The IRS and Treasury anticipate that the final FFI agreement will be published prior to January 1, 2014. The latest FFI Agreement draft has been covered previously (choose the FATCA tag on the left menu to read previous analysis).

Any FI submitting its registration information on or after January 1, 2014 may subsequently choose to revoke its status by revisiting its account and deleting its registration (if its GIIN has not yet been issued) or cancelling its registration (if its GIIN has already been issued).

The IRS stated that final qualified intermediary (QI), withholding foreign partnership (WP), and withholding foreign trust (WT) agreements will be published in early 2014. Any FI seeking to renew its status as a QI, WP, or WT should do so during the FATCA registration process.

The IRS also reminded FFIs that verification of a GIIN is not required for payments made prior to January 1, 2015 with respect to any payee that is a reporting Model 1 FI (pursuant to an intergovernmental agreement between its country and the U.S.). The IRS added that while reporting Model 1 FIs will be able to register and obtain GIINs on or after January 1, 2014, they will not need to register or obtain GIINs until on or about December 22, 2014, to ensure inclusion on the IRS FFI list by January 1, 2015.

FATCA Compliance Program and Manual

The FATCA compliance officer responsible for an enterprise with multiple lines of business in multiple jurisdictions is particularly at risk of missing this critical registration deadline and other important compliance milestones, especially in jurisdictions that do not have a Model 1 IGA with the U.S. This LexisNexis® Guide to FATCA Compliance 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, interaction with outside FATCA advisors with a view of best leveraging available resources and budget, and systems management [see Chapters 2, 3 and 4].

See: http://www.lexisnexis.com/store/catalog/booktemplate/productdetail.jsp?pageName=relatedProducts&prodId=prod19190327&ORIGINATION_CODE=00247

Posted in Compliance, FATCA | Tagged: BRIC, FATCA, Financial institution, Foreign Account Tax Compliance Act, GIIN, Internal Revenue Service, IRS | Leave a Comment »

IRS’ FATCA Registration System Updates

Posted by William Byrnes on December 16, 2013

By Professor William Byrnes, – co-author of LexisNexis® Guide to FATCA Compliance; co-author of Foreign Tax & Trade Briefs

FATCA Registration Portal

FATCA requires that FFIs, through a responsible officer (a.k.a. “FATCA compliance officer”), make regular certifications to the IRS via the FATCA Portal, as well as annually disclose taxpayer and account information for U.S. persons, unless an intergovernmental agreement (“IGA”) allows for indirect reporting to the IRS via a foreign government. On Monday, August 19 the IRS opened its online FATCA registration system for financial institutions that need to register for compliance with the Foreign Account Tax Compliance Act. [See https://sa2.www4.irs.gov/fatca-rup/login/userLogin.do.]

This critical FATCA milestone was supposed to open July 15; however only on July 12 did the IRS issued a postponement, as well as a push back all of the corresponding impacted milestones and deadlines. See Lexis article: FATCA FFI Compliance Extended; FATCA Portal, Other Key Dates Pushed Back.

Participating FFI List to Avoid FATCA Withholding

FFIs will now have four months, until April 25, 2014, to register on this portal to be included on the Participating FFI List that the IRS will publish June 2, 2014. Beginning July 1, 2014, withholding agents will implement the 30 percent FATCA withholding on payments of U.S. source income, including portfolio interest and capital gains, made to FFIs not on the Participating FFI list.

Global Intermediary Identification Number (GIIN)

An FFI will be included on the Participating FFI (“PFFI”) List if the FFI has registered via the FATCA Portal that the FFI agrees to comply with the IRS’ Foreign Financial Institution Agreement (“FFI Agreement”). The IRS will begin issuing each PFFI a Global Intermediary Identification Number (GIIN) as portal registrations are finalized by April 25, 2014. The PFFI will then include on its certification to U.S. withholding agents that GIIN — allowing matching against the PFFI List. [On April 8. 2013 the IRS released a sample of the PFFI List schema with example GIINs. See http://www.irs.gov/Businesses/International-Businesses/IRS-FFI-List-Schema-and-Test-Files.]

The following changes were made to the FATCA Registration System on December 8, 2013. For more detailed information, refer to Appendix A in the updated FATCA Registration Online User Guide.

1. Corrections to reported problems:

(a) Corrects problems with Member PDF file – currently only displays last 50 members in list, times out when there is a large number of members

(b) Corrects problem with deleting PAI contracts in part 3, question 15

2. Wording updates

(a) Minor wording changes to registration screens (Questions 10, 11a, 11b, POC Authorization, Part 4 – Submit)

(b) Wording changes to help text, including “instructions” page and “get help” page

(d) Wording changes on FI home pages

(e) Updates to external content linked to from registration system

(f) Update to country drop down list for questions with countries

3. Enhancements

(a) Additional statuses added

(b) Additional information added on FI home pages, including link to manage branch information

(d) Added notifications to FI’s, including external email notifications to RO for certain status changes

For the period from the opening of the FATCA registration website through December 31, 2013, a financial institution (FI) will be able to access its online account to modify or add registration information.

FIs can use the remainder of 2013 to become familiar with the FATCA registration website, to input preliminary information, and to refine that information. On or after January 1, 2014, each FI will be expected to finalize its registration information by logging into its online account on the FATCA registration website, making any necessary additional changes, and submitting the information as final.

As registrations are finalized and approved in 2014, registering FIs will receive a notice of registration acceptance and will be issued a global intermediary identification number (GIIN).

Below find a link to IRS instructions, user guide and video materials to assist you and your financial institution with FATCA registration:

“How-to” videos to assist financial institutions with FATCA registration:

FATCA Compliance Program and Manual

See: http://www.lexisnexis.com/store/catalog/booktemplate/productdetail.jsp?pageName=relatedProducts&prodId=prod19190327&ORIGINATION_CODE=00247

Posted in Compliance, FATCA | Tagged: FATCA, Financial institution, Foreign Account Tax Compliance Act, Foreign function interface, Internal Revenue Service, IRS, LexisNexis | Leave a Comment »

FATCA just one tentacle of IRS’ Efforts to Uncover Noncompliant U.S. Taxpayers – the Swiss Non-Prosecution Program

Posted by William Byrnes on December 13, 2013

Professor William Byrnes is the primary author of LexisNexis’ Guide to FATCA Compliance. The 2nd edition features 600 pages of compliance analysis with practical examples, broken into 34 chapters, contributed by 50 experts from within financial institutions and large firms, and from interviews with tier 1 banks, trust company service providers (TSPs), and insurance companies.

The Tax Division of the Department of Justice > released a statement on December 12 < strongly encouraged Swiss banks that want to seek non-prosecution agreements to resolve past cross-border criminal tax violations to submit letters of intent by the Dec. 31, 2013 deadline required by the Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program“). The Program was announced on Aug. 29, 2013, in a > joint statement < signed by Deputy Attorney General James M. Cole and Ambassador Manuel Sager of Switzerland (> See the Swiss government’s explanation of the Program < ). Switzerland’s Financial Market Supervisory Authority (FINMA) has issued a deadline of Monday, December 16, 2013 for a bank to inform it with its intention to apply for the DOJ’s Program.[1]

On November 5, 2013 the Tax Division of the DOJ had released > comments about the Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks < .

Swiss banks that have committed violations of U.S. tax laws and wish to cooperate and receive a non-prosecution agreement under the Program, known as Category 2 banks, must submit a letter of intent by Dec. 31, 2013. To be eligible for a non-prosecution agreement, Category 2 banks must meet several requirements, which include agreeing to pay penalties based on the amount held in undeclared U.S. accounts, fully disclosing their cross-border activities, and providing detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest. Providing detailed information regarding other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed is also a stipulation for eligibility. The Swiss Federal Department of Finance has released a > model order and guidance note < that will allow all other Swiss banks to cooperate with the DOJ and fulfill the requirements of the Program.

The DOJ’s November comments respond to such as issues as: (a) Bank-specific issues and issues concerning individuals, (b) Choosing which category among 2, 3, or 4, (c) Qualifications of independent examiner (attorney or accountant), (d) Content of independent examiner report, (e) Information required under the Program – no aggregate account data, (f) Penalty calculation – permitted reductions, (g) Category 4 banks – retroactive application of FATCA Annex II, paragraph II.A.1, and (h) Civil penalties.

– Existing accounts on 01.08.2008: 20%
– New accounts opened between 01.08.2008 and 28.02.2009: 30%
– New accounts after 28.02.2009: 50%

Category 4 banks are a local business in accordance with the FATCA definition.

The international service of the Swiss Broadcasting Corporation (“SwissInfo”) reported that of 300 eligible Swiss banks, only a few had filed for non prosecution with the DOJ’s program (e.g. Migros Bank, Bank COOP, Valiant, Berner Kantonalbank and Vontobel). [2]

The DOJ reported that in July 2013, Liechtensteinische Landesbank AG, a bank based in Vaduz, Liechtenstein, entered into a non-prosecution agreement and agreed to pay more than $23.8 million stemming from its offshore banking activities, and turned over more than 200 account files of U.S. taxpayers who held undeclared accounts at the bank.

Two court orders entered in November 2013 in a New York federal court will further aid these investigations by authorizing the IRS to serve what are known as “John Doe” summonses on five banks to obtain information about possible tax fraud by individuals whose identities are unknown. The John Doe summonses direct the five banks to produce records identifying U.S. taxpayers holding interests in undisclosed accounts at Zurcher Kantonalbank (ZKB) and its affiliates in Switzerland and at The Bank of N.T. Butterfield & Son Limited (Butterfield) and its affiliates in Switzerland, the Bahamas, Barbados, Cayman Islands, Guernsey, Hong Kong, Malta and the United Kingdom. The summonses also direct the five banks to produce information identifying foreign banks that used ZKB’s and Butterfield’s correspondent accounts at the five banks to service U.S. clients.

[1] See Supermarket banks sign up to US tax probe, SwissInfo, December 11, 2013, available at http://www.swissinfo.ch/eng/business/Supermarket_banks_sign_up_to_US_tax_probe.html?cid=37516028 (accessed December 12, 2013).

[2] See Mathew Allen, US tax deal could prove deadly for small banks, SwissInfo, December 10, 2013, available at http://www.swissinfo.ch/eng/politics/US_tax_deal_could_prove_deadly_for_small_banks.html?cid=37506872

Posted in Compliance, FATCA | Tagged: Banking in Switzerland, DOJ, FATCA, Foreign Account Tax Compliance Act, Swiss Bank, Swiss Financial Market Supervisory Authority, Switzerland, tax compliance, Tax Evasion, United States Department of Justice | 4 Comments »

NationalUnderwriter.com is celebrating throughout the month of December with two FREE Shipping offers! (No coupon necessary)

Posted by William Byrnes on December 12, 2013

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Posted in book | Tagged: Business, Financial plan, financial planning, Financial services, income tax, national underwriter, risk management, Stock-keeping unit, Underwriting | Leave a Comment »

Bipartisan Budget Act of 2013

Posted by William Byrnes on December 12, 2013

On December 10, 2013, Senate Budget Committee chairman Patty Murray (D-WA) and House Budget Committee chairman Paul Ryan (R-WI) announced that they have reached a two-year budget agreement in advance of the budget conference’s December 13^th deadline.

The Bipartisan Budget Act of 2013 would set overall discretionary spending for the current fiscal year at $1.012 trillion—about halfway between the Senate budget level of $1.058 trillion and the House budget level of $967 billion. The agreement would provide $63 billion in sequester relief over two years, split evenly between defense and non-defense programs. In fiscal year 2014, defense discretionary spending would be set at $520.5 billion, and non-defense discretionary spending would be set at $491.8 billion.

The sequester relief is fully offset by savings elsewhere in the budget. The agreement includes dozens of specific deficit-reduction provisions, with mandatory savings and non-tax revenue totaling $85 billion. The agreement would reduce the deficit by $23 billion.

The Summary of the Bipartisan Budget Act of 2013 includes:

PREVENTION OF WASTE, FRAUD, AND ABUSE

Improving the collection of unemployment insurance overpayments
Strengthening Medicaid third-party liability (“dead beat dad” provision)
Restriction on access to the Death Master File (fee based access going forward to cover its costs)
Identification of inmates requesting or receiving improper payments

FEDERAL CIVILIAN AND MILITARY RETIREMENT

Federal Employees Retirement System for new employees
Annual adjustment of retired pay and retainer pay amounts for retired members of the Armed Forces under age 62

HIGHER EDUCATION

Default Reduction Program
Elimination of nonprofit servicing contract

TRANSPORTATION

Aviation security service fees
Transportation cost reimbursement

MISCELLANEOUS PROVISIONS

Limitation on allowable government contractor compensation costs: limits how much a contractor could charge the federal government for an employee’s compensation to $487,000, adjusted annually to reflect changes in the Employment Cost Index. (Comment: does this mean that government contractors are receiving more than $487,000 annually for an employee? How do I sign up?).
Pension Benefit Guaranty Corporation premium rate increases

See House Report at http://budget.house.gov/the-bipartisan-budget-act-of-2013/

See CBO Report at http://www.cbo.gov/publication/44964

Posted in Tax Policy | Tagged: Bipartisan Budget Act of 2013, Budget, Discretionary spending, Employment Cost Index, Non-tax revenue, Senate, United States House Committee on the Budget, United States Senate Committee on the Budget | Leave a Comment »

for research of ‘Home Mortgage Cramdown in Bankruptcy’ – Richard Gendler awarded title of “Doctor of Law”

Posted by William Byrnes on December 11, 2013

After a successful dissertation defense on October 22, 2013, Thomas Jefferson School of Law awarded the degree of Doctor of Science of Law, called a “J.S.D.” degree, to Dr. Richard S. Gendler. The J.S.D. is a research-based doctoral degree, the most advanced law degree in the United States. It requires three to five years of legal research and writing on a unique issue of law that makes a substantial and novel contribution to a field of study. The J.S.D. degree is equivalent to a Ph.D. in law, which first requires the completion of the Bachelor, J.D., and LL.M. degrees. …

Associate Dean William Byrnes added, “Dr. Richard Gendler has undertaken ground-breaking empirical research for his Ph.D. of all Chapter 13 cases that were filed in the Southern District of Florida from 2009. Dr. Gendler scrutinized the effectiveness of cure of mortgages on homeowners’ principal residences relative to the use of lien stripping in Chapter 13 plans, both for underwater and non-underwater mortgages. ….”

The dissertation topic was “Home Mortgage Cramdown in Bankruptcy.” The dissertation provided an extensive study into the interplay between the recent home mortgage crisis and U.S. Bankruptcy Law. Read about Dr. Richard Gendler’s research and findings about cramdown and bankruptcy at http://www.tjsl.edu/news-media/2013/10956

Posted in Compliance, Wealth Management | Tagged: bankruptcy, Chapter 13 Title 11 United States Code, Chapter 7 Title 11 United States Code, cramdown, Debt, law, Richard Gendler, United States, US Bankruptcy law | Leave a Comment »

TIGTA’s FATCA Report – Is the FATCA portal development better than that of the federal medical insurance exchange?

Posted by William Byrnes on December 10, 2013

Last week on December 5, 2013 the Treasury Inspector General for Tax Administration (TIGTA) publicly released its September 27 report titled: “Foreign Account Tax Compliance Act: Improvements Are Needed To Strengthen Systems Development Controls For The Foreign Financial Institution Registration System”.^[1] TIGTA’s objective was to assess the IRS’s systems development approach for the FATCA Registration Portal. Specifically, TIGTA evaluated the IRS’s established management controls and processes over information technology program management, security control processes, testing documentation, requirements management, and fraud prevention controls.

The IRS estimates that between 200,000 and 400,000 entities will register on its FATCA Online Portal. Industry groups have produced larger estimates based on by example various trust arrangements being categorized as Foreign Financial Institution (FFIs). April 25, 2014 is the deadline for registration to be included on the participating FFI (PFFI) list that will be issued in time to avoid FATCA withholding that will begin July 1, 2014.

Once an FFI is registered on the FATCA Portal, if it is not protected by an intergovernmental agreement (IGA) between the U.S. and its country or jurisdiction, the FFI will need to provide (and the IRS capture) identifying information for certain U.S. accounts maintained by the institution such as account number, balance, gross receipts, and withdrawals. TIGTA identified three key groups that FATCA directly impacts:

(1) taxpayers who meet the reporting requirements threshold for foreign financial assets;

(2) FFIs that report to the IRS foreign financial account information exceeding certain thresholds held by U.S. taxpayers; and

(3) withholding agents who withhold a 30 percent tax on taxpayers who fail to properly report their specified financial assets related to U.S. investments.

An October 2014 industry poll of 100 financial firms, half large firms, founds that more than 55 percent rated average to poor their understanding of FATCA.^[2] The four critical challenges identified in that survey include: (1) lack regulatory requirement clarity, (2) FATCA expertise scarcity, (3) operational impact, and (4) data issues. According to the tax department of a tier 1 European bank, the signature of IGAs could reduce cost estimates to roughly US$100 million per institution covered by the respective IGA. Given the U.S.-U.K. IGA, the national cost estimate of the U.K. Revenue for impacted U.K. financial institutions is a one-off cost of approximately £900 million – £1.600 billion with an ongoing cost of £50 million – £90 million a year.^[3]

In its report, TIGTA stated six recommendations for the IRS to improve system development, documentation, management, and testing.

(1) The Chief Technology Officer (CTO) and the Commissioner, LB&I Division, should ensure that the FATCA Organization PMO and FATCA information technology management timely identify and communicate system changes to minimize costs and reduce waste for future information technology development projects.

(2) The CTO should ensure that adequate program management controls are in place and are consistently followed to guide the future system development activities needed for the FATCA and to better position the IRS to accomplish its goals for improving the benefits of its FATCA goals and objectives.

(3) The CTO should ensure that the SCA Test Plan and Developer Security Test and Evaluation Plan are prepared so that all security requirements, security controls, and test cases are identified, traced, and tested, and all security testing is performed before deployment of Drop 1 to ensure that the FRS operates as intended.

(4) The CTO should ensure that all testing groups follow the recently established Internal Revenue Manual (IRM) procedures for documenting test cases for consistency in testing requirements and in detecting and correcting errors to ensure that the FRS meets all of its requirements as needed.

(5) The Commissioner, LB&I Division should establish IRM procedures for all testing groups to ensure that documentation of test cases is consistent with and supports the IT Organization requirements testing process.

(6) The CTO should ensure that IRM guidelines are followed so that the RTVM is established at the beginning of the testing life cycle and updated and maintained throughout the requirements management and testing processes, and that the RTVM is utilized on a regular basis to ensure that all FRS and future FATCA system requirements are included in test cases and tested.

Before the first version (Release 1.0) was shelved, the IRS expended $8.6 million of a $14.4 million forecast budget over 19 months on the FATCA Registration Portal (FFI Registration System or “FRS”). The current version (Release 1.1) is in development with a final forecast price tag to roll out a working version of the FRS of $16.6 million, i.e. $2.2 million over budget.

Examples of Key Capabilities and Features of FRS Release 1.0

Capabilities

Features

The FRS is a modern web-based application with 24/7 accessibility. Specifically, it:Ø Allows Financial Institution (FI) users to establish an online account, including the ability to choose a password and create challenge questions.Ø Displays a customized home page for FIs to manage their accounts.

Ø Ensures security for all data provided on behalf of FIs.

Ø Provides FIs with tools to oversee member and/or branch information.

Ø Establishes a streamlined environment for FIs to register in one place.

The FRS provides flexibility for FIs to report on and manage information throughout their corporate structure (branch and members). Specifically, the system:Ø Generates automatic notifications when an FI status changes.Ø Implements a universal numbering system (Global Intermediary Identification Number) that can be used by local taxing authorities.

Ø Allows FIs to appoint delegates (points of contact) to perform registration tasks.

Source: FRS overview presented by the IRS to the Treasury Inspector General for Tax Administration on February 21, 2013.

For further analysis see the Lexis Guide to FATCA Compliance: http://www.lexisnexis.com/store/catalog/booktemplate/productdetail.jsp?pageName=relatedProducts&prodId=prod19190327

Commentary

In comparison of the expenditure overruns and technical glitches of the state and federal affordable health care (ACA or Obama Care) exchanges, the FRS budget overrun and push back seem quite successful. Of course, it remains to be seen if the FRS does not go further over-budget and if its roll out is not further pushed back. Yet it must be noted that the 2012 GAO report stated that: “In addition to its internal control deficiencies, IRS faces significant ongoing financial management challenges arising from its continued need to safeguard the large volume of sensitive hard copy taxpayer receipts and related information and to address its exposure to significant improper refunds based on identity theft.”

The 2012 TIGTA report on the Information Technology Program recognized that the IRS will have responsibility for the tax system but also for the Patient Protection and Affordable Care Act (PPACA). As a result of PPACA, the IRS has been assigned the job of overseeing all U.S. persons’ healthcare records in the new healthcare system. TIGTA identified weaknesses “over system access controls, configuration management, audit trails, physical security, remediation of security weakness, and oversight and coordination on security-related issues.” TIGTA further stated: “Until the IRS addresses security weaknesses, it will continue to put the confidentiality, integrity, and availability of financial and taxpayer information and employee safety at risk.”

Finally, the IRS was supposed to, has it already been five year ago now(?), have web-based access for each taxpayer of his/her IRS tax account. Still waiting on this customer service feature… But it must also be noted that over the past five years Congress has the IRS tasked with substantial new responsibilities without additional substantial resources to accomplish them all (too bad Congress pulled the plug on the additional 1099 reporting by all taxpayers – that would have been interesting to watch the IRS cope on top of the ACA and FATCA). Billions in incorrectly paid earned income tax credit payments has certainly made the headlines, with the implication being that Congress should have the IRS fix current challenges before forcing it to initiate new ones.

Maybe private enterprise would better accomplish certain tasks, or to take over certain functions – which leads to a different discussion about government / private partnerships and/or outsourcing of tax administration and collection (the Romans did that, as did feudal lords, and if I recall correctly, Bush II’s administration with regard to collections). But as a colleague shared with me today – medicare only has a 3% administrative cost whereas private enterprise runs as high as 70% administrative cost. So private enterprise may not be a cost effective solution. I look forward to discussing this topic in class….

[1] Available at http://www.treasury.gov/tigta/auditreports/2013reports/201320118fr.pdf (accessed December 9, 2013).

[2] NICE Actimize Financial Services Poll Finds That More Than 55 Percent of
Financial Institutions Rate Understanding of FATCA Legislation ‘Average’ to ‘Poor’, October 9, 2013.

[3] HMRC, Tax information and Impact Note – The International Tax Compliance (United States of America) Regulations 2013, August 7, 2013, http://www.hmrc.gov.uk/fatca/itc-regs-2013.pdf (accessed November 30, 2013).

Posted in book, Compliance, FATCA, information exchange, Reporting, Tax Policy | Tagged: FATCA, Financial institution, Foreign Account Tax Compliance Act, FRS, Internal Revenue Service, IRS, TIGTA, Treasury, Treasury Inspector General for Tax Administration | 2 Comments »

Overcoming Objections: What Part of “No” Don’t You Understand?

Posted by William Byrnes on December 9, 2013

… Objections are the sales profession’s version of death and taxes. They’re inevitable, nobody likes them, but nobody’s figured out a way to prevent them from cropping up. You’ve heard all of these and more besides. How do you respond to them?

Read Professor William Byrnes and Robert Bloink on ThinkAdvisor !

Posted in Wealth Management | Tagged: American Academy of Financial Management, financial planning, High net worth individual, HNWI | Leave a Comment »

High Net Worth Clients: How to Find Them, How to Service Them

Posted by William Byrnes on December 2, 2013

…. But the very rich are different in other ways too. For one thing, they’re elusive. Thomas Stanley’s famous book was called “The Millionaire Next Door” because he found that by and large, millionaires are modest, hard-working people who don’t flaunt their wealth. Perhaps apart from the fact that many of them are business owners, that means there’s no special way to prospect for them. ….

Here, as always, knowledge is power. For prospecting HNWs, the first thing to know is where and how to find them, so that is where we begin. However, once you’ve found them the key thing is to know their psychology. …

Read William Byrnes and Robert Bloink on ThinkAdvisor !

Posted in Uncategorized | Tagged: American Academy of Financial Management, high net wealth, HNWI, millionaires | Leave a Comment »

Will a Twitter Freeze Slash Your Thanksgiving Weight Gain or Your Client’s Tax Bill?

Posted by William Byrnes on November 28, 2013

While you think about how to reduce your weight, after the glutinous consumption of the Thanksgiving meal today, also consider how to reduce your client’s estate tax before an investment pays off. The Twitter executives developed a plan to reduce their eventual gift and estate taxes in advance of their IPO. The IPO has cause the value of the company to skyrocket. But your client does not have to own Twitter stock to leverage the Twitter tax plan…. In fact, a closer look at the planning strategies employed by Twitter shows that your client does not have to be sitting on the next hot silicon valley IPO to benefit from their use. Even if your client does not own pre-IPO shares, the freeze and discounting strategies used can save them from a hefty tax bill.

Read William Byrnes and Robert Bloink’s analysis of the Twitter freeze strategy that may be attractive for certain of your clients at > http://www.thinkadvisor.com/2013/11/06/can-a-twitter-freeze-slash-your-clients-tax-bill <

And please support our newest book that has just been published: > Tax Facts on Individuals and Small Business <

Posted in Estate Tax, Taxation | Tagged: estate tax, gift tax, Initial public offering, IPO, tax, Twitter | Leave a Comment »

Health Insurance Providers Fee (or Tax or Penalty, call it what you will) – IRS guidance issued yesterday…

Posted by William Byrnes on November 27, 2013

and it has finally come to pass time … the new health care penalty, tax, fee – whatever it is, to be calculated for businesses. Perhaps not the best timing considering the rocky roll out. On the other hand, better to get the bad news 11 months before the next election, when it can be forgotten by the time mail in ballots are sent out.

Notice 2013-76 provides guidance on the health insurance providers fee related to (1) the time and manner for submitting Form 8963, “Report of Health Insurance Provider Information,” (2) the time and manner for notifying covered entities of their preliminary fee calculation, (3) the time and manner for submitting a corrected Form 8963 for the error correction process, and (4) the time for notifying covered entities of their final fee calculation.

For each fee year, the IRS will make a preliminary fee calculation for each covered entity and will notify each covered entity. The notification will include (1) the covered entity’s allocated fee; (2) the covered entity’s net premiums written for health insurance of United States health risks; (3) the covered entity’s net premiums written for health insurance of United States health risks taken into account after application of § 57.4(a)(4); (4) the aggregate net premiums written for health insurance of United States health risks taken into
account for all covered entities; and (5) instructions for how to submit a corrected Form 8963 to correct any errors through the error correction process.

The information reported on each Form 8963 will be open for public inspection. This aspect will be very interesting as various groups pull and then post business’ 8963s.

Posted in Compliance | Tagged: Agents and Marketers, Business, Financial services, Health, Health insurance, insurance, Obama Care, Obama Care tax, Patient Protection and Affordable Care Act, tax penalty, United States | 1 Comment »

IRS Gives Double Tax Benefits of Health FSAs a Boost

Posted by William Byrnes on November 26, 2013

As we inch closer to 2014, many clients are gearing up for a potential reduction in covered health benefits as employer-sponsored health plans are modified and insurers have begun cancelling coverage in anticipation of the Affordable Care Act (ACA) effective date.

Planning for these costs is heating up, and the IRS has placed the significance of the health flexible spending account (FSA) as a tax-free funding tool in the spotlight. While reducing taxable income in light of higher tax rates is a priority for many clients, the potential for increased out-of-pocket medical expenses under the ACA may provide an even stronger motivation in 2014. As a result, the double tax benefits offered by FSAs have become more valuable than ever, and the IRS has recently taken steps to ease the restrictions that may have previously dissuaded clients from taking advantage of these vehicles.

Read William Byrnes and Robert Bloink’s analysis of health flexible spending account that may be attractive for certain of your clients at > http://www.thinkadvisor.com/2013/11/12/irs-gives-double-tax-benefits-of-health-fsas-a-boo l <

Posted in Insurance, Tax Policy | Tagged: Flexible spending account, FSA, Health insurance, Internal Revenue Service, IRS, Patient Protection and Affordable Care Act, Postal codes in Canada, Tax exemption | Leave a Comment »

International Tax Reform – Senator Baucus fires a volley

Posted by William Byrnes on November 20, 2013

In his first volley to start a serious discussion for reform of the U.S. taxation of the international activities of U.S. parent companies, Max Baucus, Senate Finance Committee Chairman released several draft tax bills yesterday. His release statement included, “The proposal — the first in a series of discussion drafts to overhaul America’s tax code — details ideas on how to reform international tax rules to spark economic growth, create jobs, and make U.S. businesses more competitive.”

The primary components of the proposed draft Bills include:

Income from selling products and providing services to U.S. customers is taxed annually at full U.S. rates.
Passive and highly-mobile income is taxed annually at full U.S. rates.

The drafts include two options that apply an annual minimum tax to income from products and services sold into foreign markets:

(1) apply a minimum tax rate to all such income, or

(2) tax such income at a lower minimum tax rate if derived from active business operations and at the full U.S. rate if not

Examples provided of a minimum rate include 60% and 80% of applicable U.S. tax, with an allowance for tax credit maintained.

The proposal calls for a ‘deemed repatriation’ of all historical earnings of foreign subsidiaries that have not been previously subject to U.S. tax, imposing a one-off tax at an example rate of 20%, payable over eight years. Tax credits would also be allowed as offset against this one-off tax.

The proposal seeks to eliminate of the international aspects of the “check-the-box” rule. Finally, the proposal explores mitigating ‘base profits erosion’ (BEPS) arrangements used by foreign multinationals to avoid U.S. tax.

Senator Baucus is quoted, “Over the past three years, the Finance Committee has examined every aspect of the tax code in an effort to fix a broken system. Through hearings, option papers and blank slate proposals, we’ve received input from key stakeholders and nearly every member of the Senate. These discussion drafts are the next step. They represent proposals collected throughout this process and provide a path forward on tax reform. Some are Democratic ideas. Some are Republican ideas. The common link is they are all ideas worth exploring.”

The Ranking (aka Minority) Member of the Committee, Republican Senator Orrin Hatch, released a statement that significant policy differences must still be bridged before international tax reform is realized: “…. but the fact is that significant policy differences remain between both sides and a final agreement was never reached. I hope that once the budget conference negotiations have concluded that we can renew our discussions to determine whether we can find common ground to overhaul our tax code.”

The discussion draft is available at > Senate international tax proposals<

The proposed bills with legislative language are available at:

> International Tax Provisions Bill (Option 1) <

> International Tax Provisions Bill (Option 2) < and

> International Tax Provisions Bill (Option 3)

For the entire series of Tax Reform Discussion Papers, see http://www.finance.senate.gov/issue/?id=6c61b1e9-7203-4af0-b356-357388612063

Posted in Tax Policy, Taxation | Tagged: BEPS, CFC, deferral, international tax, Max Baucus, Senate, Senate Finance committee, Tax law, Tax reform, United States | Leave a Comment »

Tax Court Provides Help for Estate Planning Using Gift Tax Valuation

Posted by William Byrnes on November 19, 2013

In the gift tax arena, the value assigned to the transferred property can often make or break your high-net-worth clients’ tax planning strategies, leading many clients to move conservatively through the valuation minefield.

Despite this, the newest strategy to emerge in the world of gift tax valuation can actually allow these wealthy clients to reduce their estate tax liability. Reversing course from a previous line of cases, the Tax Court recently blessed a cutting edge valuation strategy for lifetime gifts that can be used to reduce overall estate tax liability for these clients by simultaneously reducing the bite of the often-overlooked three-year bringback rule—a rule which can cause even the most carefully laid estate plans to fail.

Read William Byrnes and Robert Bloink’s analysis of the tax court case and the three-year bringback rule at > http://www.thinkadvisor.com/2013/10/29/tax-court-provides-help-for-estate-planning-using <

Posted in Estate Tax | Tagged: accounting, estate tax, gift tax, Inheritance tax, Internal Revenue Service, Redox, tax, Tax Court, United States | Leave a Comment »

video interview on distance education

Posted by William Byrnes on November 18, 2013

Posted in Education Theory | Tagged: Distance education, Distance Learning, William Byrnes | Leave a Comment »

Using Deferred Annuities to Build Pension Plans for the Next Generation

Posted by William Byrnes on November 13, 2013

The most recent shift in the audience for deferred annuity products may come as a surprise to many advisors who are accustomed to selling these vehicles to older clients in pursuit of secure income late in life. Insurance carriers have taken steps to break free of this typical market, in many cases by changing product cost structures to appeal to an expanded (and much younger) client base.

As a result, advisors need to recognize that this new generation of deferred annuity products can be marketed even to clients who are in their 30s, 40s and 50s, erasing the common perception that most annuity purchasers are those stereo typically risk-adverse clients who have already retired. Younger generations have joined the market for secure income, which should have every advisor asking this question: How young is my next annuity prospect?

Read William Byrnes and Robert Bloink’s analysis of indexed variable annuities and how these product offerings may be attractive for certain of your clients at > http://www.thinkadvisor.com/2013/10/21/using-deferred-annuities-to-build-pension-plans-fo <

Posted in Wealth Management | Tagged: annuities, Annuity, Business, financial planning, Financial services, insurance, Life annuity, life insurance, Pension, Retirement, Wealth Management | Leave a Comment »

Indexed Variable Annuities—a VA Product Curveball

Posted by William Byrnes on November 11, 2013

Persistently low interest rates may have created a challenging environment for annuity carriers in recent years, but many clients remain deeply skeptical about the prospect of returning to the more volatile equity markets. Indexed variable annuities (IVAs), while developed to help insurance carriers manage risk more accurately, can represent the perfect solution for these market-shy clients.

IVAs—known to some as structured annuities—offer clients an investment alternative that can provide the stability and many of the product offerings associated with annuity products but also the potential for participation in any equity market gains. However, they also offer substantial downside protection to cushion against potential investment losses.

Read William Byrnes and Robert Bloink’s analysis of indexed variable annuities and how these product offerings may be attractive for certain of your clients at > http://www.thinkadvisor.com/2013/10/14/indexed-variable-annuitiesa-va-product-curveball <

Posted in Wealth Management | Tagged: annuities, Financial services, Indexed annuity, insurance, Investing, Life annuity, Retirement | Leave a Comment »

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FFI Agreement for Participating FFI and Reporting Model 2 FFI

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