July 26, 2011
Washington, DC— Today, Representatives Lloyd Doggett (D-TX), Sander Levin (D-MI) and Rosa DeLauro (D-CT), along with more than 50 House cosponsors, introduced the Stop Tax Haven Abuse Act, which would curb abuses of the international tax laws that cost taxpayers nearly $100 billion a year. Senator Carl Levin (D-MI) recently introduced the same legislation in the Senate.
“It is long past time to take effective action to stop offshore tax dodging,” said Congressman Lloyd Doggett, a senior member of the House Ways and Means and Budget Committees. “Revenue lost to these tax avoidance schemes contributes to the soaring budget deficit and increases the burden on small businesses, families, and others who play by the rules.”
“Offshore tax abuses are not only undermining public confidence in our tax system, but increasing the tax burden on middle America,” said Senator Levin,who had introduced companion legislation in the Senate. “People are sick and tired of tax dodgers using offshore trickery and abusive tax shelters to avoid paying their fair share. This bill offers powerful new tools to combat offshore and tax shelter abuses, raise revenues, and eliminate incentives to send U.S. profits and jobs offshore. Its provisions, which can help stop the $100 billion per year drain on the Treasury, will hopefully be part of any deficit reduction package this year, but should be passed in any event.”
“Abuse of tax havens is a serious problem that undermines our entire tax system, let alone leads to higher deficits. We must step up enforcement, close offshore tax loopholes and ensure that working families are not unfairly burdened because of people trying to avoid paying the taxes they owe,” said Congressman Levin, Ranking Member of the House Ways and Means Committee.
“Addressing tax haven abuse is a critical part of addressing our national deficit. Too many companies are avoiding taxes by sheltering money overseas, and this legislation will ensure this unfair practice is halted,” said Congresswoman DeLauro. “The cost, both in dollars and jobs, at a time when so many families are still struggling, is unacceptable.”
The bill is supported by small business, labor, and public interest groups, including the Financial Accountability and Corporate Transparency (FACT) Coalition, American Sustainable Business Council, Business for Shared Prosperity, Main Street Alliance, AFL-CIO, SEIU, Citizens for Tax Justice, Tax Justice Network-USA, U.S. Public Interest Research Group, Global Financial Integrity, Global Witness, Jubilee USA, and Public Citizen.
A number of provisions from past versions of the legislation have made it into law, such as measures to curb abusive foreign trusts, close offshore dividend tax loopholes, and strengthen penalties on tax shelter promoters.
The Stop Tax Haven Abuse Act would authorize the Treasury Secretary to take special measures against foreign jurisdictions or financial institutions that impede U.S. tax enforcement, close offshore tax loopholes, and increase penalties on tax shelter promoters. A more detailed bill summary is attached.
To read Rep. Doggett’s op-ed on the Stop Tax Haven Abuse Act, please click here.
The bill would:
AUTHORIZE SPECIAL MEASURES TO STOP OFFSHORE TAX ABUSE (§101) by allowing Treasury to take specified steps against foreign jurisdictions or financial institutions that impede U.S. tax enforcement.
STRENGTHEN FATCA (§102) by clarifying under the Foreign Account Tax Compliance Act when foreign financial institutions and U.S. persons must report foreign financial accounts to the IRS.
ESTABLISH REBUTTABLE PRESUMPTIONS TO COMBAT OFFSHORE SECRECY (§102) in U.S. tax and securities law enforcement proceedings by treating non-publicly traded offshore entities as controlled by the U.S. taxpayer who formed them, sent them assets, received assets from them, or benefited from them when those entities have accounts or assets in non-FATCA institutions, unless the taxpayer proves otherwise.
STOP COMPANIES RUN FROM THE UNITED STATES CLAIMING FOREIGN STATUS (§103) by treating foreign corporations that are publicly traded or have gross assets of $50 million or more and whose management and control occur primarily in the United States as U.S. domestic corporations for income tax purposes.
STRENGTHEN DETECTION OF OFFSHORE ACTIVITIES (§104) by requiring U.S. financial institutions that open accounts for foreign entities controlled by U.S. clients or open foreign accounts in non-FATCA institutions for U.S. clients to report the accounts to the IRS.
CLOSE CREDIT DEFAULT SWAP (CDS) LOOPHOLE (§105) by treating CDS payments sent offshore from the United States as taxable U.S. source income.
CLOSE FOREIGN SUBSIDIARY DEPOSITS LOOPHOLE (§106) by treating deposits made by a controlled foreign corporation (CFC) to a financial account located in the United States, including a correspondent account of a foreign bank, as a taxable constructive distribution by the CFC to its U.S. parent.
REQUIRE ANNUAL COUNTRY-BY-COUNTRY REPORTING (§201) by SEC-registered corporations on employees, sales, financing, tax obligations, and tax payments.
ESTABLISH A PENALTY FOR CORPORATE INSIDERS WHO HIDE OFFSHORE HOLDINGS (§202) by authorizing a fine of up to $1 million per violation of securities laws.
REQUIRE ANTI-MONEY LAUNDERING PROGRAMS (§§203-204) for hedge funds, private equity funds, and formation agents to ensure they screen clients and offshore funds.
STRENGTHEN JOHN DOE SUMMONS (§205) by allowing the IRS to issue summons to a class of persons that relate to a long-term project approved and overseen by a court.
COMBAT HIDDEN FOREIGN FINANCIAL ACCOUNTS (§206) by allowing IRS use of tax return information to evaluate foreign financial account reports, simplifying penalty calculations for unreported foreign accounts, and facilitating use of suspicious activity reports in civil tax enforcement.
STRENGTHEN PENALTIES (§§301-302) on tax shelter promoters and those who aid and abet tax evasion by increasing the maximum fine to 150% of any ill-gotten gains.
PROHIBIT FEE ARRANGEMENTS (§303) in which a tax advisor is paid a fee based upon the amount of paper losses generated to shelter income or taxes not paid by a client.
REQUIRE BANK EXAMINATION TECHNIQUES (§304) to detect and prevent abusive tax shelter activities or the aiding and abetting of tax evasion by financial institutions.
ALLOW SHARING OF TAX INFORMATION (§305) upon request by a federal financial regulator engaged in a law enforcement effort.
REQUIRE DISCLOSURE OF INFORMATION TO CONGRESS (§306) related to an IRS determination of whether to exempt an organization from taxation.
DIRECT THE ESTABLISHMENT OF STANDARDS FOR TAX OPINIONS (§307) rendering advice on transactions with a potential for tax avoidance or evasion.