H. Jacob Lager

Mr. Tax Lawyer goes to Washington

In FATCA, IRS regulations, U.S. Tax policies on August 31, 2012 at 9:24 am

I’ll admit it. I’m a mark for Capra films. I cheer for every ulcer Grandpa gives the IRS agent. I cry every Christmas Eve when Clarence gets his wings. And like Mr. Smith, I’ve always wanted to go to Washington and tell ’em what’s what. Sadly, the opportunity rarely arises.

However, a few brave California tax attorneys courageously face the DC humidity every summer to do that which I only dream: tell the IRS and Congress how to better administer taxes. It’s as sexy as it sounds.

This past May, the taxation section of California State Bar sent its annual Washington, DC delegation to our nation’s capital to discuss current tax issues with Treasury officials, congressmen, and other policy-makers. Their reports were just published, which included the following recommendations relating to international tax issues:

Jenna Shih, Esq. and CPA Po Han Chen recommended that regulations be issued clarifying the rules to determine whether a US-owned foreign company may be treated as engaged in the active business of developing its own intellectual property (and therefore escape US taxation on its profits). The authors noted that current case law allows such treatment where the company’s direct employees manage the business, even if independent contractors develop the IP.

Pracitioners Pedro Corona and Enrique Hernandez issued a report suggesting that Mexican pension participants should be exempted from PFIC reporting requirements.

In particular, the authors noted that participation in Mexican retirement funds represents a low-risk of tax evasion because such pensions are not created to allow foreign investment, but are actually part of a mandatory condition of Mexican employment.

Finally, Patrick W. Martin and Liliana Menzie proposed expanding the FATCA definition of “local foreign financial institutions” to ease compliance burdens for foreign banks whose clients are considered “accidental Americans” (i.e. individuals who live in other countries but retain U.S. citizenship).

If you have any interest in preparing a report or a recommendation for next year’s delegation, click here for more information, or contact me and I can put you in touch with one of the organizers.

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  1. I wish I could see that! Sweaty, bald heads, Hawaiian shirts packed so they can relax and get drinks at Islands afterward. Sexy, indeed. But, tax attorneys get stuff done!

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