Contact Paul +

Time limit is exhausted. Please reload CAPTCHA.
U.S. – IRS pursuing ‘stateless income’ tax enforcement official states

As reported in Reuters, the U.S. Internal Revenue Service is pursuing tax enforcement cases against companies over the issue of “stateless income,” a senior agency official said on Wednesday in a reference to corporate profits that are not taxed by any country.  Erik Corwin, an IRS deputy chief counsel, said there were international tax disputes with companies, “most involving consequences of complex restructurings designed either to create stateless income or to affect a tax efficient repatriation.”

“So those are a family of cases that are in the pipeline and being looked at,” he told tax lawyers in a speech in Washington.   Asked by reporters later to elaborate on any litigation, Corwin declined to comment. But tax lawyers said the references to stateless income and profits held offshore could signal a new enforcement approach by the IRS.

“I have not heard the IRS use the term before,” Edward Kleinbard, who coined the “stateless income” phrase in a 2007 research paper, said in a telephone interview.  He is a former chief of staff to the congressional Joint Committee on Taxation and now a professor at the University of Southern California Gould School of Law.

Concern over stateless income was raised in May when the Senate Permanent Subcommittee on Investigations released a report that found Apple Inc avoided $9 billion in U.S. taxes in 2012 using a strategy involving three offshore units with no discernible tax home or “residence.”

Companies that avoid taxes say they are doing nothing illegal, but are taking advantage of breaks offered by governments to create jobs and business.  The repatriation of profits has been a top concern for U.S. companies, which collectively have more than $1.5 trillion sitting offshore. Most say they keep the money there to avoid the taxes they would face by bringing it home.

The IRS official’s comments came days after the G20, a group of leading world economies made up of 19 countries plus the European Union, voiced support for a fundamental reassessment of the rules on taxing multinational corporations.

On July 19, the Organization for Economic Co-operation and Development, which advises the G20 on tax and economic policy, released an action plan that said existing national tax enforcement regimes do not work. The plan took aim at loopholes used by companies such as Apple and Google Inc to avoid billions of dollars in taxes.

“We must address the persistent issue of ‘stateless income,’ which undermines confidence in our tax system at all levels,” U.S. Treasury Secretary Jack Lew said in a statement on July 19 following the OECD report. (Reporting by Patrick Temple-West; Editing by Howard Goller and Andre Grenon)

Leave a Reply

Your email address will not be published. Required fields are marked *

Time limit is exhausted. Please reload CAPTCHA.

Meet Paul Raymond

Meet Paul Raymond

Mr. Raymond is a sought after speaker in tax controversy law by many attorney, accountant, and business groups and at the request of the Internal Revenue Service, has presented programs at the IRS Nationwide Tax Forum, attended by tax professionals throughout the United States.

Additionally, he continues to be an active member in the Section of Taxation, American Bar Association, where he was the Past Chair of the Employment Taxes Committee.

Read More

Connect With Paul on Social Media

Practice Areas & Information

Certifications &
Associations
Member CA Bar Member Orange County Bar US Tax Court Attorney