Tax News & Views Beneficial Ownership Secure Mousse Roundup

FinCEN Finalizes Reporting Extension Rule Without More Relief - Andrew Velarde, Tax Notes ($):

The Financial Crimes Enforcement Network moved quickly with the finalization of its reporting deadline extension rule, which was released on November 29. It comes a mere two months after the proposal of the rule, which pushed the deadline for the filing of initial reports for companies created or registered in 2024 from 30 days to 90 days. Companies created or registered in 2025 or later still have only 30 days to submit their initial BOI reports under both the proposed rule and final rule. Entities created or registered before 2024 have until 2025 to file their initial BOI reports.

The rule relates to the Corporate Transparency Act, and reporting is necessary for both domestic and foreign companies. Reporting requires information such as names, addresses, and identifying numbers from the reporting entity, the beneficial owner, and the company applicant. FinCEN has estimated that in 2024 there will be 32.6 million reporting companies.

The new rules come with severe penalties for failure to report beneficial owners, new entities, or changes in ownership to FinCEN. A broad range of exemptions will exclude many businesses, but small or inactive entities are generally subject to them. 

The Upcoming Beneficial Ownership Information Disaster - Russ Fox, Taxable Talk. "Why do I see problems on the horizon? First, many (most?) entity owners are unaware of this new requirement.  Second, accountants might not be able to assist.  While FINCEN said that reporting companies (filers of the BOI reports) can consult with professional service providers such as attorneys or accountants, some state bar associations are stating that filing these reports is the practice of law; thus, it would be unlicensed practice of law (UPL) for me to assist a client in practicing this.  (As of today, the Nevada Bar Association hasn’t come out one way or the other on this.)  UPL is subject to fines and jail time."

Related: Updates to the Corporate Transparency Act for 2024 and Beyond.

House Republicans Urge Johnson to Move on Business Provisions - Cady Stanton, Tax Notes ($):

Nearly 150 House Republicans are pushing Speaker Mike Johnson, R-La., to support legislative action on three expired business tax provisions from the Tax Cuts and Jobs Act by the end of the year.

The November 29 letter, led by Rep. Rudy Yakym III, R-Ind., urges Johnson to back the extension of immediate research and development expensing, full capital expensing, and an interest deductibility rule, but doesn’t specify support for making the extensions retroactive to the provisions’ expiration dates. The letter also doesn’t include the signatures of any House taxwriters.

While there is broad support for these provisions, their path to passage is unclear. Democrats, many of whom support these provisions, refuse to advance them without an increase in the child tax credit. There are also procedural hurdles. Our Jay Heflin will provide an update on the legislative outlook here later today.

Senate Committees Agree With House On Taiwan Tax Bill - Asha Glover, Law360Tax Authority ($):

Senate Finance Committee Chairman Ron Wyden, R-Ore, ranking member Mike Crapo, R-Idaho, Senate Foreign Relations Committee Chairman Ben Cardin, D-Md., and ranking member Jim Risch, R-Idaho, said the legislative package they've negotiated with the House Ways and Means Committee to provide double-tax relief in Taiwan has bicameral and bipartisan support. They called for swift passage of the House's bill in a joint statement ahead of the House tax committee's scheduled vote on the proposal, adding that action to provide double-tax relief in Taiwan is long overdue.

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The Senate Finance Committee's bill, passed unanimously by the panel in September, would provide double-taxation relief and other benefits similar to those that would be established under a bilateral tax treaty once Taiwan approves reciprocal measures for U.S. businesses investing there, according to a summary of the discussion draft.

Because of Taiwan's ambiguous diplomatic status, the U.S. won't enter into tax treaties with the island, creating tax headaches for companies doing business there.

Related: Eide Bailly International Business Structuring Services.

1099-K Bill Authors Still Push for Inclusion in Tax Extenders - Doug Sword, Tax Notes ($):

Lawmakers in both the Senate and House say they’ll keep pressing their fixes for a twice-delayed $600 reporting threshold on payments made by gig economy businesses with hopes that one of their bills makes it into a tax extenders package.

The IRS has again delayed the implementation of the new limits, and has scheduled it to apply for 2024 at a $5,000 threshold - the amount that it would be in a bill proposed by lawmakers.

IRS Identity Protection PIN can help avoid fraud and tax-related identity theft - IRS:

As part of ongoing efforts to increase security, the Internal Revenue Service and the Security Summit partners today reminded taxpayers they can get extra protection against identity theft during the 2024 tax season by joining the Identity Protection Personal Identification Number (IP PIN) program.

The IRS IP PIN is a special six-digit number available to anyone who has a Social Security number (SSN) or an Individual Taxpayer Identification Number (ITIN). More than 8.1 million taxpayers are now protecting themselves against tax-related identity theft by participating in the IP PIN program.

Practitioner Diligence Obligations and the Report of Foreign Bank and Financial Accounts - IRS. "For purposes of due diligence, section 10.34(d) allows a practitioner to generally rely, in good faith and without verification, on information from a client. Good faith reliance, however, contemplates that a practitioner will make reasonable inquiries of a client who provides information that indicates possible overseas holdings subject to FBAR requirements."

The "FBAR" rules require annual disclosure of foreign financial accounts when their aggregate balances exceed $10,000 at any time during the year. Penalties of up to half the balance of non-reported accounts can apply if the reports are not filed.

These Mutual-Fund Holders Should Brace Themselves for a Big Tax Bill - Daisy Maxey, Wall Street Journal. "Fundholders may choose whether to take the payouts in cash or to reinvest them in additional fund shares. But either way, they must pay taxes on capital-gains distributions even if they haven’t sold any fund shares. And funds may make distributions even if they have declined in value."

A Cautionary Tale About Tax Court Filing Dates - Erin Collins, NTA Blog. "A timely filed petition is what gives the Tax Court jurisdiction to hear a taxpayer’s case. Pursuant to Tax Court Rule 22, all Tax Court petitions, regardless of format, are considered filed when received by the Tax Court in Washington, D.C., which is in the ET zone. For petitions filed by U.S. mail or a designated delivery service, the timely mailed, timely filed rule of IRC § 7502 applies so petitions filed by the deadline are considered filed on time even if they arrive at the Tax Court in Washington, D.C., after the due date. However, according to the Tax Court, the IRC § 7502 timely mailed, timely filed rule does not apply to electronically filed petitions so an electronically filed petition is considered filed when the Tax Court receives it. "

Related: Eide Bailly IRS Exam Assistance

Online security missteps during the holidays could lead to identity theft and tax fraud - Kay Bell, Don't Mess With Taxes. "During the holidays, many people want to help others who are less fortunate. Crooks know this, and often use recent tragedies or imitate charitable groups to coax people into sharing sensitive financial data."

If You Act Before Year-End, IRS Respects Do-Overs Unwinding Taxes - Robert Woods, Forbes. "Fortunately, the IRS agrees that some transactions can be unwound and that tax effects can be ignored. But to pretend a deal never happened you must meet two tough conditions: (1) Each party must go back to its position before the transaction as if it never occurred. Rescission isn’t a one-sided deal. (2) The go-back must occur in the same tax year as the deal. The IRS covers this in Revenue Ruling 80-58."

Proposed Regs Provide Guidance on Energy Credit - Parker Tax Pro Library. "The IRS issued proposed regulations that amend the regulations relating to the energy credit under Code Sec. 48 for the tax year in which eligible energy property is placed in service. The proposed regulations also withdraw and repropose, for additional clarity, portions of previously proposed regulations issued in REG-100908-23 regarding the increased energy credit amount available if prevailing wage and registered apprenticeship requirements are met."

Tax Treaty Shields Green Card Holder From FBAR Penalties But Not Late Filing of Form 8833 - Ronald Marini, The Tax Times. "But Aroeste owes a $1,000 penalty for each of the two tax years for failing to tell the U.S. until he filed amended returns in 2016 that he claimed treatment under a Mexico-U.S. tax treaty as a resident of Mexico, Judge Battaglia said. Aroeste, who is in his 80s, lived with his wife in Mexico City, where he spent more than 75% of his time during the tax years at issue, according to the opinion."

‘Billionaires Tax’ Bill Unveiled as Democrats Target Wealthy - Chris Cioffi, Bloomberg ($):

The Billionaires Income Tax bill would impose an annual levy on the appreciation of assets like stocks and bonds, and it includes rules aimed at deterring tax avoidance. It also proposes applying a levy on harder-to-value non-tradeable assets, like real estate when there’s a sale.

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The tax would apply only to people with more than $100 million in annual income or over $1 billion in assets for three years in a row, meaning only about 700 people would be impacted, a summary said.

Perhaps the amount of enforcement resources that this would require might have better uses than a complex and hard-to-administer tax that would apply to 700 people.

President of Brisbane recycling company and its former counsel sentenced to prison for tax fraud - IRS (Defendant names omitted):

Defendant Executive, of Danville, California, is—and at all relevant times was—President of Brisbane Recycling Company, Inc. ("Brisbane"), a rock-crushing business located in Brisbane, California. Defendant Attorney, of Pleasanton, California, was formerly counsel for Brisbane and Defendant Executive. Both defendants were convicted by a jury on April 7, 2023, following a two-week trial on charges that they conspired to defraud the United States from 2008 through 2016, in violation of 18 U.S.C. § 371. Defendant Executive was also convicted of one count of tax evasion, in violation of 26 U.S.C. § 7201, for failing to report more than $5.8 million in income on his 2014 federal tax return.

The evidence at trial showed that Defendant Executive ran daily operations at Brisbane and that Defendant Attorney owned and controlled several businesses... To avoid paying corporate income taxes for Brisbane, Defendant Executive expensed Brisbane's payments to Defendant Attorney's entities as royalties for the use of heavy equipment purportedly owned by Defendant Attorney's entities. In fact, however, Defendant Attorney had used the funds from Brisbane to purchase that equipment. Defendant Attorney also returned the funds he received from Brisbane to Defendant Executive in a variety of ways: (i) by regular money transfers from 2009 through 2016; (ii) by purchasing three homes for Defendant Executive; and (iii) by writing cashier's checks totaling $7 million pursuant to a fake loan. Defendant Executive did not declare the funds given to him by Defendant Attorney as personal income, even though they originated from Brisbane and thus were taxable, constructive dividends.

Sometimes using a criminal attorney requires you to engage a criminal attorney. 

Lock it down. Today is National Computer Security Day. Once you have made sure your anti-virus software is updated, and you have enabled two-factor identification with strong passphrases, treat yourself - it's also National Mousse Day!