Monday, December 9, 2019

EB-5 Investments Increased to $900,000 and $1.8 Million Starting November 21, 2019

On July 9, 2019 we posted EB-5 Investment - New Regulations Expected To Increase Minimum Investment of $500,000 To $1.35 Million where we discussed that on June 27, 2019 the Office of Management & Budget (OMB) reported on its website that it has finished its review of the Obama-era regulations that would significant changes to the minimum investment amount, as well as other consequential changes. The regulations have proposed increasing the minimum investment of $500,000 to $1.35 million, and the $1 million investment to $1.8 million. Upon the regulation’s publishing in the Federal Register, the final effective date may be between 30 to 60 days.

The Final Rule scheduled to be published on Wednesday, July 24, 2019, in the Federal Register is set to raise investment amounts for the EB-5 program. Other major program changes include the centralization of TEA's in the Department of Homeland Security (DHS) and a clarification of procedures for removing conditions on permanent residence. This is the first significant revision to the EB-5 program's regulations since 1993.

The New EB-5Program Changes Include:

  • Increased investment amounts: $500,000 to $900,000 for TEA investments and $1 million to $1.8 million for non-TEA investments.
  • TEA centralization to DHS for geographic area designation.
  • Investment amounts raised every five years.
  • Clarifying USCIS procedures for removal of conditions on permanent residence.
  • Allowing EB-5 petitioners to retain original priority dates.
Additionally, the new regulations outline what is required to qualify a project as a TEA and requires that the USCIS will make the determination, not the individual states. Prior to the new regulations, a regional center could simply request a TEA letter from the state, county or city government where the project was located (depending on the state). This will not be the process anymore, since the USCIS will adjudicate all TEA requests. This will improve integrity within the EB-5 program since the regional center operators will not be able to gerrymander their projects into qualifying as a TEA when they do not.
E-2 Investor Visa
Alternatively, potential investors seeking an EB-5 should also consider an E-2 investor visa. They are an appealing options for foreign business persons, investors, managers, and employees who wish to stay in the United States for extended periods of time to oversee:


  1. an enterprise that is engaged in trade between the United States and a foreign country; or 
  2. a major investment in the United States.
The E visa isn’t for just anyone who has a trade or investment. This visa class is exclusively for what the USCIS terms “treaty traders and investors”. This means that all applicants must be nationals of a country that holds a treaty of trade and commerce with the United States.

If you’re wondering if your country is a treaty country, you can look for it on the comprehensive list provided by the Department of State.
 
The regulations state that you must be a national of one of these countries, but you do not necessarily need to be currently living there. 
 

Treaty Investor (E-2) Visa

Treaty investor applicants must meet specific requirements to qualify for a treaty investor (E-2) visa under immigration law. The consular officer will determine whether a treaty investor applicant qualifies for a visa.
  • The investor, either a real or corporate person, must be a national of a treaty country.
  • The investment must be substantial. (Usually $100,000 in a corporate bank account) It must be sufficient to ensure the successful operation of the enterprise. The percentage of investment for a low-cost business enterprise must be higher than the percentage of investment in a high-cost enterprise.
  • The investment must be a real operating enterprise. Speculative or idle investment does not qualify. Uncommitted funds in a bank account or similar security are not considered an investment.
  • The investment may not be marginal. It must generate significantly more income than just to provide a living to the investor and family, or it must have a significant economic impact in the U.S.
  • The investor must have control of the funds, and the investment must be at risk in the commercial sense. Loans secured with the assets of the investment enterprise are not allowed.
  • The investor must be coming to the U.S. to develop and direct the enterprise. If the applicant is not the principal investor, he or she must be employed in a supervisory, executive, or highly specialized skill capacity. Ordinary skilled and unskilled workers do not qualify. 
Coming to America?
 
 
Need Pre-Immigration Tax Advice?  
 
Contact the Tax Lawyers atMarini & Associates, P.A. 



 
 for a FREE Tax Consultation Contact US at
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888 882-9243). 


Wednesday, December 4, 2019

Treasury Issues Final Regulations on Foreign Tax Credits

The Internal Revenue Service issued final regulations in on the Foreign Tax Credit, a long-standing tax benefit that generally allows individuals and businesses to claim a credit for income taxes paid or accrued to foreign governments in IR-2019-193.

The Tax Cuts and Jobs Act (TCJA) made major changes to the tax law, including revamping the U.S. international tax system. Specifically, several Foreign Tax Credit provisions were changed, including repeal of section 902, which allowed deemed-paid credits in connection with dividend distributions based on foreign subsidiaries’ cumulative pools of earnings and foreign taxes. TCJA also added two separate limitation categories for foreign branch income and amounts includible under the Global Intangible Low-Taxed Income (GILTI) provisions.

Additionally, the TCJA changed how taxable income is calculated for purposes of the Foreign Tax Credit limitation by disregarding certain expenses and repealing the use of the fair market value method for allocating interest expense. 

Finally, the TCJA made systemic changes to U.S. taxation of international income that impact the Foreign Tax Credit calculation. These systemic changes include the introduction of a participation exemption through a dividends received deduction for certain dividends in section 245A and the introduction of GILTI, which subjects to current U.S. taxation foreign earnings that would have been deferred under previous law, albeit at a lower tax rate and subject to extra Foreign Tax Credit restrictions. 

The IRS also issued Proposed Regulations relating to the allocation and apportionment of deductions and creditable foreign taxes, foreign tax redeterminations, availability of Foreign Tax Credits under the Transition Tax, and the application of the Foreign Tax Credit limitation to consolidated groups.
  1. These Treasury issued rules confirming that research and development expenses do not have to be allocated against foreign income. 
  2. Treasury also finalized proposed regulations, issued last year, that allow companies to claim some increased foreign tax credits against their GILTI liability. But the final rules don't include the broader exclusions advocated by companies that said the interaction between the foreign tax credit limitations and GILTI was an unexpected consequence not intended by Congress.
  3. Foreign tax credit limitations were of little concern to companies before the 2017 passage of the TCJA, as the U.S. corporate tax rate of 35% was well over that of most foreign countries. But with a new, lower rate of 21%, as well as an expected global minimum rate of 13.5%, the foreign tax credit limitations can have a significant impact on a company's overall tax payments. 
  4. They alsoconfirm that research and development expenses do not have to be allocated against foreign income, resolving an open question that companies had been considering since the regulations were issued last year. 
Have an International Tax Problem?
 

 
Contact the Tax Lawyers at
Marini & Associates, P.A. 

 
 for a FREE Tax Consultation Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888 882-9243). 

 

Trends in IRS audits - Part II

As we discussed in Trends in IRS audits – Part I, the IRS’s auditing power has been greatly diminished in the past decade and according to accountinTODAY, while most taxpayers envision Internal Revenue Service audits as intrusive investigations resulting in criminal sentences. Today, nothing could be farther than the truth.

As we discussed in Trends in IRS audits – Part I:
  1. Most audits are done by mail.
  2. The main issue in audits: The EITC. and
  3. An alarming amount of people do not respond to an audit 
4. The most common IRS challenge to a return is not an audit  - The dreaded CP2000 Automated Underreporter notice is current three times more prevalent than an IRS audit. The CP2000 program utilizes IRS information returns (W-2s and 1099s) to match them against the filed return to discover discrepancies. A discrepancy may result in a CP2000 notice proposing additional tax (and possibly penalties) to the return. Most taxpayers do not realize (or care for that matter) that a CP2000 is not an audit. The CP2000 is less intrusive than an audit because the IRS is not allowed to examine the taxpayer’s books and records. However, for most taxpayers, the difference does not matter. The average amount owed for a CP2000 notice in 2018: $1,773.
 
However, there is good news for taxpayers: Even the mostly automated underreporter process has been cut back due to lack of IRS resources.  
 
AT-112119-Buttonow- CP2000 cases.png
 
5. The IRS knows who to audit -The audit change rate was 89 percent for all taxpayer types in 2018. In fact, the audit change rate has been between 81 percent and 89 percent since 2005. When the IRS selects a return for audit, they pretty much know it will likely result in an adjustment.
 
AT-112119-Buttonow- Audit Change Rates.png
 
 
6. Field audits are rare, but expensive - In 2018, the IRS hit an all time low for the number of field audits conducted. Field audits are the most comprehensive, and are saved for complex taxpayers and situations — like businesses and tax avoidance schemes. The IRS has said that their audits have a great return on investment and reduction of audit results in large amounts lost to the U.S. Treasury.
The numbers support the IRS. In 2018, the average amount owed in a field audit was $85,400. Luckily for taxpayers, the IRS only conducted just under a quarter of a million field audits in 2018.
 
AT-112119-Buttonow- Extra tax owed on audit.png
 
 
7. Want your business to escape audit? Be an S corp or partnership - The IRS continues to struggle to audit S corp and partnership returns. This situation is likely to get worse as the more experienced IRS business auditors continue to retire. Audit rates for S corps and partnerships are both 0.22 percent or, put another way, 1 in every 455 passthrough entities were examined in 2018. It is no wonder that the number of S corporations have increased by 38 percent from 2005 to 2018 (3.5 million in 2005 versus 4.85 million in 2018).
 
AT-112119-Buttonow-Audit rates for S corps and partnerships.png
 
 Have a Tax Audit Problem?
 

 
You Should Immediately Consult With
An Experienced Tax Attorney
 

 
Contact the Tax Lawyers at
Marini & Associates, P.A. 

 
 for a FREE Tax Consultation Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888 882-9243). 

 
 
 

Wednesday, November 27, 2019

M&A Wishes All of Its Readers a Happy Thanksgiving

 
 
Marini & Associates, P.A.
 
wishes All of Its Readers a
Happy Thanksgiving!


G20 Celebrates End of Offshore Banking Secrecy!

According to the OECD, on 26-27 November, the 10th Anniversary Meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) in Paris will bring together more than 500 delegates from 131 member jurisdictions for renewed discussions on efforts to advance the tax transparency agenda.
It Has Been Ten Years Since The G20 Declared The End Of Banking Secrecy, The International Community Has Achieved Unprecedented Success In Using New Transparency Standards To Fight Offshore Tax Evasion. 
Working through the Global Forum, 158 member jurisdictions have implemented robust standards that have prompted a tidal shift in exchange of information for tax purposes.
 
At the heart of this shift are thousands of bilateral exchange relationships now in place, which have enabled more than 250 000 information exchange requests over the past decade.
 
According to data in The Global Forum’s 10th anniversary report, in 2018 nearly 100 member jurisdictions automatically exchanged information on 47 million financial accounts, covering total assets of USD 4.9 trillion. In total, more than EUR 100 billion in additional tax revenue has been identified since 2009.

 
 
A recent OECD study shows that wider exchange of information driven by the Global Forum is associated with a global reduction in foreign-owned bank deposits in international financial centres (IFC) by 24% (USD 410 billion) between 2008 and 2019. The commencement of AEOI in 2017 and 2018 is associated with an average reduction in IFC bank deposits owned by non-IFC residents of 22%.

“The Global Forum has been a game-changer,” said OECD Secretary-General Angel Gurría. “Thanks to international co‑operation, tax authorities now have access to a huge trove of information that was previously beyond reach. Tax authorities are talking to each other and taxpayers are starting to understand that there’s nowhere left to hide. The benefits to the tax system’s fairness are enormous,” Mr Gurría said.
 
Almost all Global Forum members have eliminated bank secrecy for tax purposes, with nearly 70 jurisdictions changing their laws since 2009. Almost all members either forbid bearer shares– previously a longstanding impediment to tax compliance efforts – or ensure that the owners can be identified. Since 2017, members must also ensure transparency of the beneficial owners of legal entities, so these cannot be used to conceal ownership and evade tax.
 
Tax transparency is particularly important for developing countries. With support from the Global Forum, 85 developing country members have used exchange of information to strengthen their tax collection capacity. The Africa Initiative has helped African members identify over EUR 90 million in additional tax revenues in 2018, thanks to information exchanges and voluntary disclosures. To improve developing countries’ uptake of automatic exchange of financial information, the OECD-UNDP Tax Inspectors Without Borders Initiative today launched a pilot project aimed at supporting the effective use of the data.
 
“There is still a lot of work ahead of us,” said Zayda Manatta, head of the Global Forum Secretariat. “Members must continue efforts to ensure full implementation of existing standards and address the tax transparency challenges of an increasingly integrated and digitalised global economy.”
 
 
Have Unreported Income From Offshore Accounts?

 
 
Want To Know Which OVDP Program is Right for You?
 
 
Contact the Tax Lawyers at
Marini & Associates, P.A. 
 
 for a FREE Tax Consultation Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888 882-9243). 
 
 
 
 
 

 

Friday, November 22, 2019

Trends in IRS audits - Part I

According to accountinTODAY, most taxpayers envision Internal Revenue Service audits as intrusive investigations resulting in criminal sentences. Today, nothing could be farther than the truth. The IRS’s auditing power has been greatly diminished in the past decade. IRS audit resources have been reduced by 28 percent in the last decade and the audit rate has dropped from 0.9 percent in 2010 to 0.5 percent in 2018. In fact, the number of IRS audits in 2018 (991,168 audits) dropped almost in half compared to 2010 (1.735 million audits).

AT-11-2119-Buttonow - IRS audit Rates.png


Since 2010, the IRS has been tasked with doing more with less resources, but the reality is that the IRS cannot do more audits with less resources. The IRS audit data reveals 10 trends from the past decade that have become the new realities for current state of IRS audits.


1. Most audits are done by mail - This trend started with IRS reforms in the late 1990s. In 1998, just before IRS reforms, the service audited 47 percent of taxpayers by mail. In the past decade, IRS data shows that the service prefers the less-intrusive mail audit. Today, three out of four audits of individual taxpayers are done by mail — a ratio that has held since 2010. These audits usually challenge small amounts of credits or deductions on a return, and require only a mail response, with documentation, to an IRS central campus location.

AT-112119-Buttonow Field versus Mail audits.png
 
2. The main issue in audits: The EITC - Fifty percent of all individual audits involve a taxpayer who is claiming the Earned Income Tax Credit. IRS efforts to curb EITC errors largely rely on audits to hold a questionable EITC claim on a return. Politicians have criticized the IRS in the past for picking on low-income taxpayers, and the EITC audit rate is their main evidence. Compared to other taxpayer profiles, the IRS clearly has the propensity to address the EITC taxpayer more than other issues, even the small-business individual taxpayers.
 
3. An alarming amount of people do not respond to an audit There is linkage here to the EITC mail audit. The Taxpayer Advocate reports that almost two-thirds of all mail audits go without response or are assessed by taxpayer default. That is, the IRS just assesses the additional tax without the taxpayer contesting the service’s determination. Only one in five taxpayers agree to their mail audit adjustment — and likely, from the data, they don’t understand how to appeal. This mess leads to many audit reconsiderations (i.e. an audit “re-do” request). Again, more question marks here for the targets of mail audits — the low-income population.
 
 
AT-112119-Buttonow-Audit Non-response rate.png
 
To be continued in parts II & III. 
Have an IRS Tax Problem?
 
 
 
Contact the Tax Lawyers at

Marini & Associates, P.A. 
 
 for a FREE Tax Consultation Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888 882-9243). 
 

Tuesday, November 19, 2019

Ten Facts About Tax Expatriation - Part II

On November 6, 2019 we posted Ten Facts About Tax Expatriation - Part I, where we discussed that whatever your motives, just because you leave the United States and renounce your citizenship, don't assume you can leave U.S. taxes (or U.S. tax forms and complexity) behind, particularly if you are financially well-off.

For those who expatriate after June 16, 2008, the rules are different, since Internal Revenue Code Section 877A applies instead of Section 877. You are subject to an immediate exit tax, which deems you (for tax purposes) to have sold all of your worldwide property for its fair market value the day before your departure from the U.S.
We also discussed in Ten Facts About Tax Expatriation - Part I:

1. Uncle Sam taxes income worldwide. 

2. Expatriating means really leaving.

3. The old 10-year window is closed.

Herein will discuss 7 more, of the 10 things you need to know about Expatriation:
(set forth below and in one subsequent blog posts)

4. Big changes came in 1996.
Thirty years later, in 1996, after the Forbes story on "The New Refugees" created a stir, Congress tried again. As part of the Health Insurance Portability and Accountability Act of 1996 (otherwise known as HIPAA), Congress added a presumption of tax avoidance if an expatriate's five-year average net income tax exceeded $100,000, or if the expatriate's net worth was $500,000 or more (both adjusted each year for inflation). But people could--and with the help of skilled lawyers did--rebut the presumption, and the IRS still had to show tax avoidance in most cases.

5. Tax avoidance is now irrelevant.
In 2004 (in the American Jobs Creation Act), Congress threw out the tax avoidance motive test altogether, imposing 10 years of U.S. tax on U.S. source gross income and gains on a net basis if you left the country for any reason. However, Congress increased the threshold for determining who was subject to this expatriation tax. An individual was only subject to the expatriation tax if he had an average net annual income tax for the five years preceding expatriation of $124,000, or if he had a net worth of $2 million or more on the date of expatriation. (If you expatriated on or after June 17, 2008, under the new Section 877A, there is a higher net worth threshold--currently $145,000 of annual net income tax for 2010.)

In some cases, even if you're below these thresholds, you'll get taxed. For example, expatriates must certify their past U.S. tax compliance by filing an IRS Form 8854. Any expatriate who fails to certify compliance with U.S. federal income tax laws for the five taxable years preceding expatriating is subject to the expatriate income tax even if he didn't meet the income tax liability or net worth tests.
Plus, later U.S. visits can be expensive if you expatriated before June 17, 2008 (and Internal Revenue Code Section 877 applies). In that case if an expatriate comes back to the U.S. for more than 30 days in any year during the 10 years following expatriation, that person is considered a resident of the U.S. for that whole tax year. That means the person would again be subject to U.S. tax on his worldwide income, not just his U.S.-source income. Ouch!

This 30-day rule does, however, have an exception for any days (up to a 30-day limit) that the individual performed personal services in the U.S. for an employer (who is not related). This exception only applies if that individual either had certain ties with other countries or was physically present in the U.S. for 30 days or less for each year in the 10-year period on the date of expatriation or termination of residency.

6. There are special rules for long-term residents.
It's easy to define who is or is not a U.S. citizen, but the term "long-term resident" isn't quite so clear. A long-term resident is a non-U.S. citizen who is a lawful permanent resident of the U.S. in at least eight years during the 15-year period before that person's residency ends. A "lawful permanent resident" means a green card holder. However, a person is not treated as a lawful permanent resident for purposes of this eight-year test in a year in which that person is treated as a resident of a foreign country under a tax treaty, and does not waive the treaty benefits applicable to the residents of that country. Caution: holding a green card for even one day during a year will taint the whole year.

7. There's an exit tax for expatriations on or after June 17, 2008.
The Heroes Earnings Assistance and Relief Tax Act of 2008 (generally known as the Heroes Act) changed the method of taxation for those who became expatriates on or after June 17, 2008, adding even more complexity and usually higher U.S. taxes. If you are a U.S. citizen or long-term resident who expatriates on or after June 17, 2008, you will be deemed (for tax purposes) to have sold all of your worldwide property for its fair market value the day before you leave the U.S.! All that gain is subject to U.S. tax at the capital gains rate. Plus, all your gain is taken into account without regard to any ameliorative tax provisions in the Internal Revenue Code.
Put differently, you get all of the bad parts of the tax code, and none of the good. That would include, for example, the inability to benefit from the $250,000 per person ($500,000 per couple) exclusion from gain on a principal residence (Section 121 of the Internal Revenue Code) and many other rules. The exit tax is like an estate tax, in the sense that everything that would be part of your estate will be subject to income tax on unrealized gains as of the day before you expatriate, as if you sold all your assets the day before leaving. In effect this is Congress' way of making sure your assets don't escape the estate tax entirely through expatriation.

"Should I Stay or Should I Go?"


Need Advise on Expatriation? 
 

Contact the Tax Lawyers of
Marini & Associates, P.A. 

For a FREE Tax Consultation at:
Toll Free at 888-8TaxAid ( 888 882-9243)