Levin Moves to Close Tax Shelters
Citing $100 billion in revenue drained from the U.S. Treasury at the expense of honest, hardworking American families who pay their fair share, U.S. Senators Carl Levin (D, MI), Norm Coleman (R-MN), and Barack Obama (D-IL), introduced comprehensive legislation to stop offshore tax haven and tax shelter abuses.For more than four years, Mr. Levin and Mr. Coleman, the Chairman and senior Republican of the Permanent Subcommittee on Investigations respectively, have led an in-depth Subcommittee investigation into offshore tax havens, abusive tax shelters, and the professionals who design, market, and implement these tax dodges. Experts have estimated that the total loss to the Treasury from offshore tax evasion alone approaches $100 billion per year, including $40 to $70 billion from individuals and another $30 billion from corporations engaging in offshore tax evasion. Abusive tax shelters add tens of billions of dollars more.
The Stop Tax Haven Abuse Act is a strengthened version of a tax reform bill that Levin, Coleman, and Obama introduced in the last Congress. The legislation was strengthened as a result of a year-long Subcommittee investigation which resulted in a hearing and report on August 1, 2006, examining a series of case studies showing how U.S. taxpayers are using offshore secrecy jurisdictions to dodge U.S. taxes.
Among other measures, the 68-page bill would:- Establish Presumptions to Combat Offshore Secrecy by allowing U.S. tax and securities law enforcement to presume that non-publicly traded, offshore corporations and trusts are controlled by the U.S. taxpayers who formed them or sent them assets, unless the taxpayer proves otherwise;
- Impose Tougher Rquirements on U.S. Taxpayers Using Offshore Secrecy Jurisdictions by listing 34 jurisdictions which have already been named in IRS court filings as probable locations for U.S. tax evasion;
- Authorize Special Measures to Stop Offshore Tax Abuses by giving Treasury authority to take special measures against foreign jurisdictions and financial institutions that impede U.S. tax enforcement;
- Strengthen Detection of Offshore Activities by requiring U.S. financial institutions that open accounts for foreign entities controlled by U.S. clients, open accounts in offshore secrecy jurisdictions for U.S. clients, or establish entities in offshore secrecy jurisdictions for U.S. clients, to report such actions to the IRS;
- Close Offshore Trust Loopholes by taxing offshore trust income used to buy real estate, artwork and jewelry for U.S. persons, and treating as trust beneficiaries those persons who actually receive offshore trust assets;
- Strenthen Penalties on tax shelter promoters by increasing the maximum fine to 150% of their ill-gotten gains, and on corporate insiders who hide offshore stock holdings by increasing the maximum fine on them to $1 million per violation of U.S. securities laws;
- Stop Tax Shelter Patents by prohibiting the U.S. Patent and Trademark Office from issuing patents for “inventions designed to minimize, avoid, defer, or otherwise affect liability for Federal, State, local, or foreign tax”; and
- Require Hedge Funds and Company Formation Agents to Know Their Offshore Clients by requiring them to establish anti-money laundering programs like other U.S. financial institutions, under regulations to be issued by the Treasury Department.
