It seems that there is some growing legislative opposition to a portion of the government's broader initiative to combat offshore tax evasion. To induce foreign nations to release information on U.S. taxpayers who have bank accounts overseas, the Internal Revenue Service has proposed a quid pro quo arrangement: Provide account information on our taxpayers and we will hand over the identities of your citizens who hold assets in the U.S.
That arrangement would require U.S. banks to disclose the information to the IRS. At the moment, it is set to be implemented as an IRS regulation in 2013, but some federal lawmakers have balked at the idea. They have expressed concern that foreign investors would withdraw their money from the U.S., thereby harming the economy. States with a high number of foreign investors, like Florida, would stand to suffer greatly, they argue.
In fact, the U.S. House of Representatives has taken action to block the IRS regulation. Yesterday, it gave approval to a bill that would not allow the regulation to take effect until the unemployment rate declined below the 6 percent threshold. The bill now moves to the Senate, where its prospects for passage are unknown.
The Treasury Department indicated that if legislators did manage to push back the date of the regulation's enactment, it would limit the IRS's vigor in pursuing alleged instances of tax evasion overseas. Even so, the agency would not give up its efforts. While a delay in the regulation could be an interesting development, compliance with all offshore reporting requirements should remain a high priority for those with foreign accounts, regardless of the outcome of the legislation.
Source: Orlando Sentinel, "House votes to postpone IRS rule on foreign deposits in U.S. banks," July 26, 2012.
• Holding assets overseas is not illegal, but one must follow a number of reporting rules. If you would like more information about our firm's practice, please visit our Miami offshore bank accounts page.