Key U.S. Tax Considerations for International Private Clients Basil Zirinis, Elizabeth Kubanik and Rebecca Szocs1 Basil Zirinis, Elizabeth Kubanik, and Rebecca Szocs provide an overview of the US tax system for individuals -- including income tax, transfer taxes, and reporting requirements -- for offshore assets. Reprinted with permission The Law Reviews Expert Panel 2022 I. INTRODUCTION This article provides an overview of the US tax system for individuals, including income tax, transfer taxes and reporting requirements for offshore assets. 2021 saw the inauguration of a new president, marking a change in political party and legislative policy. In September 2021, Democrats in the House of Representatives, with the support of the Biden administration, proposed significant changes to the tax structure to pay for the “Build Back Better Plan,” which would have included funding for expanded social welfare services, infrastructure and jobs plans, and to combat climate change. The initial budget proposals would have increased the ordinary income and capital gains rates, the corporate tax rate, and enacted substantial changes to the taxation of grantor trusts. However, the WINTER 2022
initial tax proposals did not earn sufficient support in the Senate and were removed in a later version of the budget reconciliation package for the Build Back Better plan, which, as of February 2022, has not been passed by the Senate. Additionally, separate from these recent legislative proposals, a number of developments aimed at increasing transparency have had significant implications for wealthy families and their advisers. A well-known example is the enactment of the Foreign Account Tax Compliance Act (FATCA) in 2010, which increased transparency by requiring the cross-border exchange of tax-related information. Another example is the 2016 IRS regulation that imposes additional disclosure requirements for a US disregarded entity wholly owned, directly or indirectly, by a non-resident alien. The disclosure rules are particularly relevant for non-resident aliens who wish to purchase real estate through a disregarded entity for privacy reasons. Such non-resident aliens should also be aware of the US Department of the Treasury Financial Crimes Enforcement Network’s (FinCEN) Geographic Targeting Order (GTO) that requires the disclosure of identifying information by any title company involved in a qualifying real property transaction. New reporting requirements are also set to go into effect. On January 1, 2021, the Corporate Transparency Act (CTA) was enacted as part of the Anti-Money Laundering Act of 2020 (AML). Under the CTA, corporations, limited liability companies, and similar entities must disclose to FinCEN information relating to the beneficial ownership of the entity. FinCEN is tasked with maintaining such ownership information in a non-public and secure database. In December 2021, FinCEN released proposed regulations seeking to implement the “beneficial ownership information” reporting requirement of the CTA. Final regulations should be published sometime this year. 34
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