On June 3, 2014 the new IRS Commissioner, John A. Koskinen, gave a speech before the International Business – OECD International Tax Conference.
His speech covered the history of the offshore enforcement initiative since the UBS debacle in 2009. His remarks acknowledge what most professionals in the tax community have recognized since the inception: that OVDP needs more tweaking in order to meet the overall goals of enforcement and fairness.
The key excerpts from Commissioner Koskinen’s speech are as follows:
“Now, while the 2012 OVDP and its predecessors have operated successfully, we are currently considering making further program modifications to accomplish even more. We are considering whether our voluntary programs have been too focused on those willfully evading their tax obligations and are not accommodating enough to others who don’t necessarily need protection from criminal prosecution because their compliance failures have been of the non-willful variety. For example, we are well aware that there are many U.S. citizens who have resided abroad for many years, perhaps even the vast majority of their lives. We have been considering whether these individuals should have an opportunity to come into compliance that doesn’t involve the type of penalties that are appropriate for U.S.-resident taxpayers who were willfully hiding their investments overseas. We are also aware that there may be U.S.-resident taxpayers with unreported offshore accounts whose prior non-compliance clearly did not constitute willful tax evasion but who, to date, have not had a clear way of coming into compliance that doesn’t involve the threat of substantial penalties.
We are close to completing our deliberations on these respects and expect that we will soon put forward modifications to the programs currently in place. Our goal is to ensure we have struck the right balance between emphasis on aggressive enforcement and focus on the law-abiding instincts of most U.S. citizens who, given the proper chance, will voluntarily come into compliance and willingly remedy past mistakes. We believe that re-striking this balance between enforcement and voluntary compliance is particularly important at this point in time, given that we are nearing July 1, the effective date of FATCA. We expect we will have much more to say on these program enhancements in the very near future. So stay tuned.”
Is Commissioner Koskinen’s speech a foreshadowing of the end of the “one size fits all” offshore penalty? Does this mean that the IRS will role out a new program specifically geared for expats who are noncompliant with their tax obligations but who haven’t willfully evaded their taxes? Only time will tell. While Commissioner Koskinen tacitly recognizes that a more nuanced and customized approach is appropriate, his comments were not very specific. They were vague and general, to say the least.
Nevertheless, it is inspiring to know that Commissioner Koskinen has responded to the battle-weary cries of the “minnows” who had no real choice but to enter the program despite the fact that any failure to report an offshore account had as much to do with willful tax evasion as Captain “Sully” Sullenberger’s landing of US Airways Flight 1549 on the Hudson had to do with luck.
And so what advice should be given to those taxpayers who are still sitting on the fence? Perhaps we can turn to the last two lines of Dylan Thomas’s famous poem, “Do not go gentle into that good night,” for inspiration:
Do not go gentle into that good night.
Rage, rage against the dying of the light.