Revised FAQ 7.2, for the Offshore Voluntary Disclosure Program, provides:
What if the government is investigating the foreign financial institution where I hold my account or another facilitator who assisted in establishing or maintaining my offshore arrangement?
Beginning on August 4, 2014, any taxpayer who has an undisclosed foreign financial account will be subject to a 50-percent miscellaneous offshore penalty if, at the time of submitting the preclearance letter to IRS Criminal Investigation: an event has already occurred that constitutes a public disclosure that either
(a) the foreign financial institution where the account is held, or another facilitator who assisted in establishing or maintaining the taxpayer’s offshore arrangement, is or has been under investigation by the IRS or the Department of Justice in connection with accounts that are beneficially owned by a U.S. person;
(b) the foreign financial institution or other facilitator is cooperating with the IRS or the Department of Justice in connection with accounts that are beneficially owned by a U.S. person or (c) the foreign financial institution or other facilitator has been identified in a court- approved issuance of a summons seeking information about U.S. taxpayers who may hold financial accounts (a “John Doe summons”) at the foreign financial institution or have accounts established or maintained by the facilitator.
Examples of a public disclosure include, without limitation: a public filing in a judicial proceeding by any party or judicial officer; or public disclosure by the Department of Justice regarding a Deferred Prosecution Agreement or Non-Prosecution Agreement with a financial institution or other facilitator.
A list of foreign financial institutions or facilitators meeting this criteria is available (see below).
Once the 50-percent miscellaneous offshore penalty applies to any of the taxpayer’s accounts or assets in accordance with the terms set forth in the paragraph above, the 50-percent miscellaneous offshore penalty will apply to all of the taxpayer’s assets subject to the penalty (see FAQ 35), including accounts held at another institution or established through another facilitator for which there have been no events constituting public disclosures of (a) or (b) above.
Foreign Financial Institutions or Facilitators (as of 6/20/14)
- UBS AG
- Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
- Wegelin & Co.
- Liechtensteinische Landesbank AG
- Zurcher Kantonalbank
- swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG
- CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
- Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
- The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
- The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates
- Obvious as the nose on one’s face is the fact that taxpayers with accounts at the above listed banks had better get into the OVDP or take action to come into compliance before August 4, 2014.
- Also obvious is that fact that other banks are presently in the IRS’s headlights and may be added to the list at any time. So, taxpayers with accounts at non-listed accounts should take action and not be lulled into the belief that they are home free.
- While those with accounts at the above listed banks who come in from the cold will face a 50% penalty, that is still much less than the maximum penalty of 300% of the account value that could apply and less than the penalties that IRS has asserted in some recent cases, one most notably in which the penalty assessed exceeded the account value.
© 2014 by Robert S. Steinberg, Esquire All rights reserved