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The IRS Large Business and International Division Organizational Structure

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Almost two years ago, the IRS Large Business and International Division announced long-term changes in its structure as well as its approach to tax enforcement. In the fall of 2015, the IRS completed the first phase of the structural changes in the Division – re-organization of its administrative structure. This structure exists intact today and we fully expect for it to last for a long while. Let’s discuss this current administrative structure of the IRS Large Business and International Division.

IRS Large Business and International Division: Areas of Responsibility

The IRS Large Business and International Division forms a huge part of the IRS. First, it is responsible for the tax compliance enforcement (US domestic and US international) with respect to all corporations, subchapter S corporations, and partnerships with assets greater than $10 million. Most of these businesses employ a large number of employees and their business affairs involve complex accounting principals and tax laws. Second, the Division deals with individual international tax compliance, including offshore voluntary disclosures.

Current Organization of the IRS Large Business and International Division

The IRS Large Business and International Division is currently organized into Support Areas (a smaller part of the Division) and Practice Areas.

The Support areas concentrate on supporting the Practice Areas through data analysis and integrated feedback loop (which is a highly important feature that was incorporated into the Division’s reorganization plan in 2015). The Support areas include Headquarters, Program and Business Solutions (including Technology and Program Solutions and Resource Solutions), Compliance Integration (including Data solutions and the highly-important Compliance Planning and Analytics) and Assistant Deputy Commissioner – International.

The second part of the IRS Large Business and International Division is divided into five Practice Areas and four Compliance Practice Areas. The Practice Areas include: (1) Cross Border Activities, (2) Enterprise Activity, (3) Pass-Through Entities, (4) Treaty and Transfer Pricing Operations and (5) Withholding and International Individual Compliance. US international tax compliance concerns are especially important in areas 1, 4 and 5.

The Compliance Practice Areas basically represent a geographical division of the United States into four tax enforcement areas: Central (which consists of North Central and South Central Fields), Eastern (which consists of Great Lakes and Southeast Fields), Northeastern (which includes North-Atlantic and Mid-Atlantic Fields) and, finally, Western (which includes West and Southwest Fields).

The IRS Large Business and International Division Reorganization Now Entered Into the Second Phase

Since January 31, 2017, the IRS Large Business and International Division reorganization commenced the second phase with the enaction of the first thirteen issue-based IRS Compliance Campaigns. These campaigns represent a new approach to tax enforcement that is believed to fit best the new administrative structure of the division. In the near future, Sherayzen Law Office will update its website with articles dedicated to this important new development.

Happy New Year 2017! | International Tax Attorney Minneapolis

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Sherayzen Law Office, PLLC wishes a very Happy New Year 2017 to all of our clients and readers of our blog! We wish you great health, happiness and prosperity in this New Year 2017! And, to stay in full compliance with US tax laws!

Twin Cities international tax lawyer

The New Year 2017 is going to be a complicated one when it comes to international tax compliance. Let us focus today on two primary updates.

The first notable novelty of the New Year 2017 is the shift in the FBAR deadline; from now on, the FBAR is going to be due on April 15. At this point, the IRS guidance is that this deadline is set for April 15 irrespective of whether it falls on a Saturday, Sunday or a holiday. Hence, it is important to remember that the 2016 FBAR will be due on April 15, 2017, even though US tax returns will be due on April 18, 2017. Please, look for additional articles on this issue in January of 2017.

Second, for the first time ever, FATCA Form 8938 will apply to domestic corporations, partnerships and trusts that hold specified foreign financial assets if the total value of those assets exceeds $50,000 on the last day of the tax year or $75,000 at any time during the tax year. The IRS has been threatening this expansion of the application of Form 8938 since 2011. Now, in the New Year 2017, US domestic entities will need to comply with these new requirements on their 2016 US tax returns. Sherayzen Law Office will be providing additional updates on this issue throughout this year’s tax season.

There are many New Year 2017 updates made to various forms by the IRS. Some of these updates are fairly specific to certain classes of taxpayers, whereas other updates are more general in nature. Our professional legal and tax team at Sherayzen Law Office closely follows these IRS updates and developments to make sure that we provide our clients with the highest quality of service.

As in prior years, if you are a client of Sherayzen Law Office in this New Year 2017, you can rest assured that your US tax compliance is in good hands and you have an intelligent advocate of your interests on your side.

Hence, enjoy the New Year 2017 celebrations and contact Sherayzen Law Office during this year’s tax season for the high-quality professional legal and tax help!

US Continental Shelf Definition of the United States | US Tax Attorney

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The US continental shelf presents a unique problem to the tax definition of the United States. It is governed by a special tax provision that sets it apart from any other tax definition. If fact, the US continental shelf is only considered to be part of the United States with respect to specific taxpayers who are engaged in a particular activity on or over the continental shelf. In this article, I will explore certain features of the US continental shelf definition of the United States that distinguishes it from any other tax provision in the Internal Revenue Code (IRC).

Definition of the US Continental Shelf

For the purposes of the US income tax, the IRC § 638(1) states that the United States “when used in a geographical sense includes the seabed and subsoil of those submarine areas which are adjacent to the territorial waters of the United States and over which the United States has exclusive rights, in accordance with international law, with respect to the exploration and exploitation of natural resources.” The opening clause of IRC § 638 specifically states that this definition of the United States applies only to the activities “with respect to mines, oil and gas wells, and other natural deposits.”

Analysis of the Definition of the US Continental Shelf

Two aspects need to be noted with respect to the definition above. First, the reference to international tax law means that the US government considers 200 miles of land underneath the ocean as its territory (the so-called “Exclusive Economic Zone” or “EEZ”). An interesting assumption that underlies IRC § 638 is that the continental shelf and the EEZ are the same.

Second, I want to emphasize that this is the definition that is tied to land only, not the water above the land – even more precisely, to certain activities on the ocean’s floor rather than in the water. This is a highly important aspect of IRC § 638, because it produces interesting results.

On the one hand, anyone (including foreign vessels and foreign contractors) drilling or exploring oil in the US continental shelf is considered to be engaged in a trade or business in the United States, which subjects these individuals and companies to US income tax. This also means that US tax withholding needs to be done with respect to foreign contractors. Moreover, even personal property (located over the US continental shelf) of a taxpayer engaged in the drilling or the exploration of the US continental shelf would most likely be classified as US personal property within the meaning of IRC § 956.

On the other hand, fishing in a boat in the same zone will not be considered as an activity within the United States, because it is not linked to mines, oil and gas wells, and other natural deposits.

This means that the application of the US Continental Shelf’s definition of the United States depends on the activity of the taxpayer, not just his location.

US Continental Shelf Rules and Foreign Countries

There is one more interesting aspect of the US continental shelf definition of the United States: its application to foreign countries. The first part of IRC § 638(2) states that the same definition of the continental shelf will also apply to foreign countries – i.e. the seabed and subsoil adjacent to the foreign country or possession and over which the country has EEZ rights.

At the end, however, IRC § 638(2) contains an interesting limitation: “ but this paragraph shall apply in the case of a foreign country only if it exercises, directly or indirectly, taxing jurisdiction with respect to such exploration or exploitation.” In other words, if a foreign country exercises its taxing jurisdiction over the continental shelf, then it is considered to be part of a foreign country. Otherwise, it will be considered as “international waters” (since it is also outside of the US continental shelf).

Contact Sherayzen Law Office for Professional Help with US Tax Issues

The definition of the United States in the context of the US continental shelf is just one of many examples of the enormous complexity of US tax laws. While even US citizens with domestic assets only have to struggle with these issues, the complexity of US tax laws is multiplied numerous times when one deals with a foreign individual/company or even US taxpayers with foreign assets. It is just too easy to get yourself into trouble.

This is why you need the help of the professional international tax law firm of Sherayzen Law Office. Our firm specializes in helping US and foreign taxpayers with their annual tax compliance, tax planning and dealing with past US tax noncompliance.

Contact Sherayzen Law Office Today to Schedule Your Confidential Consultation!

Foreign Gift Requirements | Foreign Gift Tax Attorney

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Foreign Gift Requirements is one of the most important topics for U.S. taxpayers with foreign relatives. In this article, I would like to quickly overview foreign gift requirements for U.S. tax purposes.

Foreign Gift Requirements: What is a Foreign Gift?

Legally, the term “gift” means a definite, voluntary and gratuitous transfer of property from one individual to another. The transfer must be gratuitous (or, in legal terms “without consideration”) to the recipient; there should be no expectation of receiving services or monetary consideration in return.

A foreign gift, would mean a gift received by a U.S. person from a foreign person. A “foreign person” is defined as a nonresident alien individual or foreign corporation, partnership or estate.

General Foreign Gift Requirements to Make a Foreign Gift Effective

There are four general foreign gift requirements for a foreign gift to be legally effective. First, the donor must have a legal capacity to make a gift. Usually, this means that the donor must be of the majority age and have the mental capacity to understand that he is making a gift.

Second, there must be donative intent – i.e. the donor must actually intend to give a gift to the donee. It important to emphasize that a promise to make a gift in the future is not a gift, even if the promise is accompanied by a present transfer of the physical property in question.

The other side of the donative intent is that the donor does not expect to receive any compensation or consideration for the transfer of the gift. The intent can be established through conduct, statements and, most effectively, writings.

Third, a gift must be delivered to the donee; the delivery is complete when it is made directly to the donee or to the third part on the donee’s behalf (if a third party is involved, it may be a bit more complicated to effectuate the delivery). Delivery of a gift can be actual, symbolic, or implied through conduct; in general, the courts look for an affirmative act made by the donor.

Finally, the fourth requirement is the acceptance of the gift by the donee – i.e. the donee unconditionally and affirmatively agrees to take the gift without any coercion or undue influence. Most courts would generally presume that a gift is accepted as long as the gift is beneficial and the donee does not expressly reject the gift.

Foreign Gift Requirements: Form 3520

If a foreign gift was effectively made by a foreign person to a U.S. person, it may need to be reported to the IRS. The disclosure of a foreign gift is done using Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts.

Form 3520 is an information return that needs to be filed with the IRS if, during a tax year, a U.S. taxpayer receives a foreign gift valued at more than $100,000 from a nonresident alien individual. Form 3520 also must be filed if a U.S. taxpayer receives a gift in excess of an annual threshold from a foreign entity (foreign corporation or a partnership). For the tax year 2015, such threshold was $15,601. Gifts from related parties should be combined.

There are also special rules concerning gifts received from what are called “covered expatriates”, which may result in an imposition of tax under IRC Section 2801. Also, an international tax attorney needs to review foreign gifts for potential re-characterization by the IRS. Gifts from foreign trusts are subject to different rules than gifts from foreign persons.

Penalties for Failure to Report Foreign Gifts on Form 3520

Failure to disclose a reportable foreign gift on Form 3520 may result in significant penalties. Under IRC Section 6039F, a monthly penalty of 5% of the value of the gift may be imposed; the penalty is capped at 25% of the total value of the gift. Additionally, penalties under IRC Section 6662(j) may be imposed for the undisclosed foreign financial asset understatement.

Contact Sherayzen Law Office for Professional Help with Your Foreign Gift Requirements

If you receive(d) a reportable foreign gift, you should contact Sherayzen Law Office for legal help. Our team of legal and tax professionals, headed by the highly-experienced international tax attorney, Mr. Sherayzen, has helped U.S. taxpayers around the world with their foreign gift issues (including helping foreign relatives with making gifts to their relatives in the United States). We can help You!

Contact Sherayzen Law Office Today to Schedule Your Confidential Consultation!