(1) What is the purpose of transitional treatment under OVDP?
Transitional treatment under OVDP allows taxpayers currently participating in OVDP who meet the eligibility requirements for the expanded Streamlined Filing Compliance Procedures announced on June 18, 2014, an opportunity to remain in the OVDP while taking advantage of the favorable penalty structure of the expanded streamlined procedures.
(2) When am I considered to be currently participating in an OVDP for purposes of receiving transitional treatment?
A taxpayer is considered to be currently participating in an OVDP for purposes of receiving transitional treatment if:
- Before July 1, 2014, he has mailed his OVDP voluntary disclosure letter and attachments to IRS Criminal Investigation, and
- As of July 1, 2014, he has either:
- Remained in OVDP but not yet completed the OVDP certification process where a Form 906 Closing Agreement has been fully executed by the IRS, or
- Opted out of OVDP, but not yet received a letter initiating an examination and enclosing a Notice 609.
A taxpayer who, as of July 1, 2014, has completed the OVDP certification process where a Form 906 Closing Agreement has been fully executed by the IRS is not considered currently participating in an OVDP. Therefore, such a person is not eligible for transitional treatment.
(3) What if I made a request for OVDP pre-clearance before July 1, 2014, but not a full voluntary disclosure?
A taxpayer is not considered to be currently participating in OVDP for purposes of receiving transitional treatment unless, as of July 1, 2014, he has mailed his voluntary disclosure letter and attachments to IRS Criminal Investigation. Thus, a taxpayer who makes an offshore voluntary disclosure as outlined in FAQ 24 on or after July 1, 2014 will not be eligible for transitional treatment under OVDP, even though he may have made a request for OVDP pre-clearance before July 1, 2014.
(4) What if I submitted my offshore voluntary disclosure prior to July 1, 2014, but my case was removed from OVDP by the IRS?
A taxpayer whose case has been removed from OVDP by the IRS is no longer participating in OVDP and thus is not eligible for transitional treatment.
(5) What will be my results if I seek and receive transitional treatment?
Upon IRS approval, taxpayers currently participating in OVDP who meet the eligibility requirements of the Streamlined Foreign Offshore Procedures will not be required to pay the Title 26 miscellaneous offshore penalty prescribed under OVDP.
Upon IRS approval, taxpayers currently participating in OVDP who meet the eligibility requirements of the Streamlined Domestic Offshore Procedures will not be required to pay the Title 26 miscellaneous offshore penalty at the OVDP rate to continue participation in OVDP. Instead, they will be subject to the miscellaneous offshore penalty terms of the Streamlined Domestic Offshore Procedures.
(6) Is transitional treatment automatic?
No. Before transitional treatment is given, the IRS must agree that the taxpayer is eligible for transitional treatment and must agree that the available information is consistent with the taxpayer’s certification of non-willful conduct.
(7) How will my request for transitional treatment be evaluated by the IRS?
Each request for transitional treatment will be reviewed to determine whether the taxpayer is eligible for transitional treatment, the taxpayer’s certification of non-willfulness is complete, and the available information is consistent with the certification.
(8) If I seek and receive transitional treatment, how will the other aspects of my OVDP case be affected?
All other terms of the OVDP in which the taxpayer is currently participating will continue to apply, including, but not limited to, the following:
- the OVDP disclosure period remains the same;
- execution of a Form 906 Closing Agreement is required;
- payment of accuracy-related, failure-to-file, and/or failure-to-pay penalties, if applicable, are required; and
- the alternative MTM PFIC resolution will continue to be available.