Summary of the Levin-Whitehouse-Begich-Shaheen Stop Tax Haven Abuse Act
Thursday, September 19, 2013
The Levin-Whitehouse-Begich-Shaheen Stop Tax Haven Abuse Act, S. 1533, would:
Title I – Deterring the Use of Tax Havens for Tax Evasion
- 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, including prohibiting U.S. banks from doing business with a designated foreign bank.
- Strengthen FATCA (§102) by clarifying when, under the Foreign Account Tax Compliance Act, 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 shifting to the U.S. taxpayer, who takes advantage of the related loopholes, the burden of proving: who controls an offshore entity; when money sent to or received from offshore is taxable income; and when offshore accounts have sufficient funds to trigger a reporting obligation.
- Stop companies incorporated offshore but managed and controlled from the United States from claiming foreign status (§103) and avoiding U.S. taxes on their foreign income by treating them as U.S. domestic corporations for 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 the offshore swap payments loophole (§105) by treating swap payments that originate in the United States as taxable U.S. source income.
Title II-Other Measures to Combat Tax Haven Abuses
- Require annual country-by-country reporting (§201) by SEC-registered corporations to disclose their employees, gross revenues, and tax payments on a per country basis.
- Establish a penalty on corporate insiders who hide offshore holdings (§202) with a securities law fine of up to $1 million per violation.
- Require anti-money laundering programs (§§203 and 204) for private funds and formation agents to ensure they screen high risk clients and offshore funds.
- Strengthen John Doe summons (§205) by streamlining court procedures used by the IRS to obtain these summons, while also strengthening court oversight.
- Combat hidden foreign financial accounts (§206) by facilitating IRS use of Foreign Bank Account Reports and Suspicious Activity Reports, and simplifying penalties for unreported foreign accounts.
Title III – Ending Corporate Offshore Tax Avoidance
- Eliminate incentives for offshoring jobs and operations (§301) by deferring corporate tax deductions for expenses related to deferred income so that, for example, a U.S. corporation could not take a tax deduction for building a plant offshore until it also declared and paid taxes on income produced by that plant.
- Stop foreign tax credit manipulation (§301) by requiring foreign tax credits to be considered on a pooled basis.
- Limit incentives to move intellectual property and related marketing rights offshore (§§302 and 303) by taxing excess income earned from transferring that property offshore to a related foreign entity, and by allowing the IRS to use common sense methods to value the transferred property.
- Repeal check-the-box rule for foreign entities and CFC look-through rule (§304) to stop U.S. multinationals from disregarding their offshore subsidiaries to avoid U.S. taxes on passive income.
- Stop offshore loan abuse (§305) by preventing multinationals from artificially repatriating offshore funds tax-free by treating them as short-term loans from their offshore subsidiaries to their U.S. operations.
Download the Levin-Whitehouse-Begich-ShaheenStop Tax Haven Abuse Act [PDF]