Today, taxing authorities across the globe, including the Internal Revenue Service (IRS), are increasing their efforts to gather and share sensitive taxpayer information, often aggressively seeking copies of tax advice, opinions and analysis prepared by counsel and other advisors. In some situations, tax advisors specifically draft their advice to be shared with third parties, but frequently the IRS seeks advice that was always intended to be confidential client communications—for example, drafts and emails containing unfinished analysis and unguarded commentary. Sharing this latter type of advice could be problematic for taxpayers because such advice could be used as a road map for examiners during an audit and may mislead the IRS regarding the strength or weakness of a taxpayer’s reporting positions.

Last month, we spoke to tax executives at Tax Executives Institute forums in Houston and Chicago about the IRS’s increased use of treaty requests to obtain US taxpayers’ documents and information from international tax authorities. Continue Reading Maintaining Confidentiality While Navigating Cross-Border Transactions

McDermott Will & Emery recently published Issue 3, 2017 of International News, which covers a range of legal developments of interest to those operating internationally.

This issue focuses on the upcoming Brexit from the European Union and the changes in the US Administration; both subjects which have dominated headlines over the past year. This issue explores ways in which prepared investors and businesses can continue to function effectively during this period of uncertainty and change.

Read full issue.

A number of provisions included in the Senate’s tax reform bill, H.R. 1 (the Senate Bill) would impact the insurance sector. Many of the provisions would affect only the life insurance industry. Others affect property & casualty (P&C) insurance companies. Still others affect both life and P&C insurance companies.

Wrapping Up November – and Looking Forward to December

Please view all of the topics we discussed over the last month, and take a look at the upcoming tax controversy events where our lawyers will be speaking in December.

Upcoming Tax Controversy Activities in December:

December 14, 2017: Catherine Battin, Britt Haxton, Kristen Hazel, Mary Kay Martire, Jane May, Sandra McGill and Judith Wethall will be hosting the Tax in the City® – A Year in Review event, which will focus on the state and local impact, as well as the federal and international aspects of tax reform.

December 14, 2017: Thomas Jones will be presenting the webinar, “Understand how the new Tax Reform bill will affect the status of captive insurers and hear the latest 2017 tax developments” for the Vermont Captive Insurance Association.

Within the Internal Revenue Code (Code) is a rule commonly known as the “mailbox rule” or the “timely mailed, timely filed rule.” Under Code Section 7502(b), the date that an item—including a Tax Court petition—is postmarked and mailed can also be the date the item is considered filed. When an item is received after the filing deadline, the mailbox rule can make all the difference. There are, however, procedural requirements which must be satisfied. In Pearson v. Commissioner, the Tax Court, in a court-reviewed opinion, held that a Tax Court petition mailed with a Stamps.com postage label was timely filed under the mailbox rule.

Taxpayers generally have 90 days to file a petition with the Tax Court after receiving a notice of deficiency. In Pearson, the Tax Court received the taxpayers’ petition one week after the 90-day period expired, but the envelope in which the petition was mailed bore a Stamps.com postage label dated within the 90-day period. The administrative assistant who created the Stamps.com postage label supplied the court with a declaration under penalty of perjury stating that she went to a US Post Office the same day as the postage label date and mailed the petition. Continue Reading Tax Court: Mailbox Rule Can Apply with Stamps.com Postage Label

As details of tax reform take shape, our team continues to evaluate proposed legislation and to provide critical, real-time guidance on the likely impacts to our clients.

McDermott has always partnered with our clients to design strategies that are both creative and sound—to effectively plan for long-term business success. Access our new Tax Reform Resource Center for strategies and tools that will continue to help you lead your organization through the opportunities and risks brought about by proposed tax reform. You can also subscribe to stay on top of McDermott’s latest take on tax.

Access the Tax Reform Resource Center.

We previously posted on the Order by the US District Court for the Western District of Texas in Chamber of Commerce of the United States of America, et al. v. Internal Revenue Service, Dkt. No. 1:16-CV-944-LY (W.D. Tex. Sept. 29, 2017). In that Order, the court held that Treas. Reg. § 1.7874-8T was unlawfully issued.  See here for our prior post.  As expected by many, the government on November 27, 2017, appealed the Order to the Court of Appeals for the Fifth Circuit. The next steps are for the Fifth Circuit to set a briefing schedule and a date for oral argument. We will continue to follow this case and provide updates.

The IRS has never won a single litigated case arguing for foreign base company sales income (and has never litigated a foreign base company services income case). Courts have consistently rejected the government’s arguments to expansively apply the definition of Subpart F sales income in order to carry out asserted congressional intent. While the courts have acknowledged that the policies informed the rules, they have not permitted the policies to eclipse the plain language of the code, even where the taxpayer engaged in tax planning that took advantage of the rules and arguably frustrated the policies underlying the rules.

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On Tuesday, November 21, a jury acquitted Bank Frey executive Stefan Buck of conspiracy to commit criminal tax evasion in the Southern District of New York. The case is captioned United States v. Edgar Paltzer and Stefan Buck, No 1:13-cr-00282-JSR (S.D.N.Y.).

In April 2013, an indictment was filed against Buck and a co-conspirator, Edgar Paltzer, alleging a criminal conspiracy whereby Buck, the head of private banking at Bank Frey, and Paltzer, a US citizen and lawyer, conspired with US taxpayers to move funds out of Swiss banks under investigation in the US, including Wegelin. The alleged criminal conduct included arranging for cash withdrawals and purchases of jewelry, opening new undeclared accounts, and filing false statements of beneficial ownership, among other actions.

Continue Reading Jury Acquits Swiss Banker Stefan Buck of Tax Evasion Conspiracy