FATCA and FBAR: The IRS is discontinuing its Offshore Voluntary Disclosure Program

by Otto S. Shill, III, Member, Jennings, Strouss & Salmon, P.L.C.

The Internal Revenue Service (IRS) announced last week that it will terminate its Offshore Voluntary Disclosure Program as of September 28, 2018. Taxpayers who have not reported foreign bank accounts and income now have only six months to do so.

In the mid-2000s, the IRS began aggressively pursuing foreign financial institutions for information concerning deposits held by those institutions on behalf of U.S. taxpayers. That effort has resulted in an unprecedented period of world-wide intra-governmental cooperation to identify unreported accounts and untaxed income. The Bank Secrecy Act and the Foreign Account Tax Compliance Act require both foreign financial institutions and U.S. taxpayers to disclose the non-U.S. assets of U.S. taxpayers. Compliance failures can result in both civil and criminal penalties and interest charges. The IRS reports that its programs have gathered approximately $11 billion in delinquent tax, penalties, and interest, and more than 1,500 indictments in recent years.

In 2009, the IRS instituted voluntary compliance programs because some taxpayers either inadvertently or “willfully” failed to comply with disclosure requirements. The IRS’ primary voluntary compliance programs are the Offshore Voluntary Disclosure Program and the Streamlined Filing Compliance Procedures, which the IRS says, together have helped more than 100,000 taxpayers come into compliance. In particular, the Offshore Voluntary Disclosure Program has helped taxpayers whose nondisclosures could be classified as “willful” avoid even more stringent penalties and potential criminal prosecution.

Now, because of waning participation, the IRS is ending the Offshore Voluntary Disclosure Program. Taxpayers who are willfully concealing foreign assets may want to consider taking advantage of the program before the September 28 deadline. For now, the IRS apparently will retain its Streamlined Filing Compliance Procedures for those whose failures are non-willful; however, establishing a lack of “willfulness” is difficult under applicable legal standards, especially in light of the IRS’s efforts to publicize its compliance programs over the last few years. In addition, where potential criminal liability exists, care must be taken in determining how to come into compliance. To protect their interests and avoid potential penalties and criminal prosecution, taxpayers should seek knowledgeable legal counsel to assist with choosing the voluntary compliance alternative that is best for their individual circumstances.

The tax attorneys at Jennings Strouss are experienced in assisting clients with the reporting of foreign accounts and assets and in using the IRS’s voluntary compliance programs. If you have assets or bank accounts overseas and have postponed compliance, we encourage you to consult with your tax advisors about the Voluntary Offshore Disclosure Program while it is still available.

NOTE: This client alert has been prepared by Jennings, Strouss & Salmon, P.L.C. for informational purposes only. These materials do not constitute, and should not be considered, legal advice, and you are urged to consult with an attorney on your own specific legal matters. Transmission of the information contained in this client alert is not intended to create, and receipt by the reader does not constitute, an attorney-client relationship with Jennings, Strouss & Salmon or any of its individual attorneys.
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For more than 30 years, Mr. Shill has helped businesses and business owners comply with government regulations, navigate government investigations, and build wealth through business transactions and long-term planning.

He has significant experience in federal and state tax compliance and tax controversies; compensation, benefits, and employment regulation; and government contracting compliance and disputes.

Mr. Shill regularly represents clients before federal and state government agencies, including the Internal Revenue Service, the Equal Employment Opportunity Commission, U.S. Department of Labor (DOL), the National Labor Relations Board, Arizona Attorney General's office, Arizona Industrial Commission, Arizona Department of Revenue and other Arizona regulatory boards. Mr. Shill also drafts and lobbies for the passage of legislation to address client issues. Mr. Shill can be reached at 602.262.5956 or oshill@jsslaw.com. 

FERC Issues Final Rule Requiring RTOs to Provide for Participation of Electric Storage Resources in Organized Markets

On February 15, 2018, the Federal Energy Regulatory Commission (“FERC”) issued Order No. 841, Electric Storage in Markets Operated by Regional Transmission Organizations and Independent System Operators. Order No. 841 requires tariff reforms in order to facilitate the participation of electric storage resources in capacity, energy, and ancillary services markets operated by Regional Transmission Organizations (“RTOs”) and Independent System Operators (“ISOs”).

After soliciting public input on its Notice of Proposed Rulemaking (“NOPR”), FERC concluded that existing market rules designed for traditional generation resources create barriers to entry for many electric storage resources. Order No. 841 requires each RTO and ISO to propose tariff revisions (the “participation model”) that properly recognize the physical and operational characteristics of electric storage resources, and to allow those resources to participate in organized markets.

Each tariff’s participation model must ensure that a resource using the model: (1) is eligible to provide all capacity, energy, and ancillary services that it is technically capable of providing; (2) can be dispatched and is a price maker in the wholesale market as both a seller and buyer, consistent with existing market rules; (3) accounts for the physical and operational characteristics of electric storage resources through bidding parameters or other means; and, (4) establishes a minimum size requirement, which may not exceed 100 kilowatts. The Final Rule also requires that the sale of electric energy from the wholesale electricity market to an electric storage resource that the resource then resells back to those markets must be at the wholesale locational marginal price.

In its NOPR, FERC also had proposed reforms related to distributed energy resource aggregation. However, in issuing Order No. 841, FERC concluded that it had insufficient information to proceed with those proposed reforms. Instead, the Commission scheduled a Technical Conference in RM18-9-000 for April 10-11, 2018 to gather additional information on distributed energy resource aggregation. This Technical Conference will also provide an opportunity to discuss other impacts of distributed generation on the bulk power system. Attendance is open to all interested persons, but those wishing to participate in the conference must submit a nomination by March 15, 2018.

Order No. 841 will take effect 90 days after publication in the Federal Register. Compliance filings by RTOs and ISOs are due 270 days after the effective date. The RTOs and ISOs then will have an additional 365 days to implement the tariff revisions.

(FERC Docket Nos. RM16-23-000 | RM18-9-000 | AD16-20-000)

For more information on this topic or other energy matters, please contact any of the following attorneys at Jennings, Strouss & Salmon, P.L.C.

Debra Roby – droby@jsslaw.com
Andrea Sarmentero Garzon – asarmentero@jsslaw.com
Joel Greene – jgreene@jsslaw.com
Gerit Hull – ghull@jsslaw.com
Gary Newell – gnewell@jsslaw.com
Alan I. Robbins – arobbins@jsslaw.com
Matt Ross – mross@jsslaw.com
Debbie Swanstrom – dswanstrom@jsslaw.com
Omar Bustami – obustami@jsslaw.com