US court rejects banking associations challenge to Caribbean offshore tax compliance

The DOJ said that the Florida Bankers Association and Texas Bankers Association had challenged the 2012 amendments to the Department of the Treasury’s interest-reporting regulations. 

The court upheld the regulations’ 2012 amendments, finding that the Internal Revenue Service (IRS) “reasonably concluded that the regulations will improve US tax compliance, deter foreign and domestic tax evasion, impose a minimal reporting burden on banks, and not cause any rational actor, other than a tax evader, to withdraw his funds from US accounts”.

The DOJ said the court’s decision affirms the IRS’ ongoing efforts to close the tax gap through cooperative measures with foreign governments, including the 2012 amendments. 

The regulations require US banks to report to the IRS information about accounts earning more than US$10 of interest beginning in 2013 that are held by non-resident immigrants of all countries with which the United States has a tax treaty or other information exchange agreement. 

“These new reporting requirements help the United States’ ability to comply with requests from its treaty and exchange partners and implement the Foreign Account Tax Compliance Act,” the statement said. 

Assistant Attorney General Kathryn Keneally of the DOJ’s Tax Division said the court ruling “advances the Department of Justice’s and Internal Revenue Service’s continuing efforts to pursue taxpayers trying to evade taxes through offshore accounts.

“The court’s opinion today represents an important step in our commitment to work with our treaty partners to eliminate cross-border tax evasion,” she added.

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