Democratic Senator Challenges Tax Shelters and Offshore Havens

Jul 19, 2011   
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Senator Carl Levin (D-Mich) unveiled legislation last week that seeks to limit offshore tax loopholes and strengthen American enforcement capabilities. The senator has introduced similar measures in the past, but is hopeful that Washingtons current focus on the deficit will carry his latest proposal “over the goal line.”

Amid concerns about $100 billion in lost annual tax revenues and the resulting burden on middle America, the bill aims to give the Treasury department new tools to collect its share. One section would authorize the Treasury Secretary to take special enforcement measures against uncooperative offshore institutions. Another section would create rebuttable presumptions to give the IRS more power over offshore entities. Other provisions seek to define foreign companies with most of their management or operations in the U.S. as domestic companies for tax purposes. Additionally, the bill would require multinationals to provide the Securities and Exchange Commission with basic information about its operations in other countries, for example, its number of employees and tax obligations.

The bill would also make all credit default swaps (“CDS”) that originate in the U.S. subject to U.S. taxation. Currently, CDS payments are taxed according to where the money is sent, meaning not all swaps sourced in the U.S. are taxed here. The bill would deem CDS funds deposited into U.S. accounts as taxable distributions by the foreign subsidiaries to their U.S. parents.

One particular feature of the bill would toughen penalties on tax shelter promoters and aider and abettors of tax evasion by increasing the maximum fine to 150% of any illegal gains.

The bill, entitled the Stop Tax Haven Abuse Act, is supported by a wide array of small business, labor, and public interest groups, including the Financial Accountability and Corporate Transparency (FACT) Coalition, American Sustainable Business Council, Business for Shared Prosperity, and others.

Read about other features of the Stop Haven Abuse Act on Sen. Levins website.

Although Sen. Levin was unable to estimate how much tax revenue his bill would recover, he wants any new revenues to be used for paying down the deficit. “Offshore tax abuses are not only undermining public confidence in our tax system, but increasing the tax burden on middle America,” stated Levin. “People are sick and tired of tax dodgers using offshore trickery and abusive tax shelters to avoid paying their fair share.”

The attorneys at Fuerst Ittleman are current and knowledgeable on todays pressing tax issues. If you have any domestic or offshore tax concerns, email an attorney at