Another lawsuit challenging the IRS offshore tax programs has been dismissed. In the consolidated lawsuit, 3 plaintiffs attempted to assert that they should be able to switch to the IRS’ streamlined domestic offshore procedures, which were not available when the 3 filed applications under the OVDP or Offshore Voluntary Disclosure Program. The streamlined program was announced in 2014, two years after the trio had filed for protection under the OVDP for their offshore accounts, investments and income.
The Judge in the case dismissed the consolidated lawsuit citing the Anti-Injunction Act, which prohibits federal courts from taking actions that would restrict the collection of US taxes. Allowing the plaintiffs to switch to the streamlined option would have possibly prevented the IRS from being able to collect back taxes owed for the years in question. The Court further found:
“The court concludes that the substantial increase in the difficulty in the collection of those penalties constitutes a restraint on the assessment and collection of unpaid taxes, as well,” the order said. “That is, for both of these reasons, the requested relief constitutes a restraint on the assessment and collection of unpaid taxes.”
It is possible for those who had previously filed under the OVDP prior to the release of the streamlined domestic (foreign) offshore procedures to “transition” to the new program provided they met a series of compliance steps. The plaintiffs in the case argued that the transition rules were unlawful, and asked the Court to order the IRS to allow them to file streamlined applications.
There have been several lawsuits that have challenged many aspects of FATCA and the IRS offshore tax initiative. All have failed. The US government and the IRS in particular are focused on maximizing potential collections from those who have not complied or fully disclosed all offshore bank accounts, investments, assets, real estate or income. “This is the highest priority for 2016,” according to the IRS.
If you are concerned about IRS offshore tax programs, the OVDP or the streamlined domestic offshore procedures or any other international tax issue we invite you to contact us for a free consultation at 866-631-3470.