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October 20, 2014 / 26 Tishri, 5775
At a Glance

Posts Tagged ‘IRS’

Report: Bank Leumi to Pay NIS 1 Billion in Fines to US for Suspected Money Laundering

Sunday, June 8th, 2014

According to a report that appeared in the Israeli Channel 2 news site Mako, Bank Leumi will be required to pay NIS 1 billion in fines to the US for suspected money laundering at its American branches.

The claim is that the US branches may have made transactions on American client’s accounts in the US branches, but not all taxes were paid as required by law.

The bank’s directors held a special meeting yesterday to agree to a compromise agreement with the US government, and pay the fine.

Banks not just in Israel but around the world are also under investigation by the US government for suspected money laundering, in violation of new US laws.

Credit Suisse was recently fined $2.5 Billion USD.

The Mako report states that Mizrachi-Tefachot and Poalim may also have to pay fines.

Courts Open Window on the IRS’s Political Litmus Tests

Friday, May 30th, 2014

Interest in the Internal Revenue Service’s outrageous practice of subjecting politically conservative groups to discriminatory treatment has died down a bit since the revelations about this scandal first hit the news a year ago. But a court decision that was handed down earlier this week about a similar instance of potential government misconduct may shed more light on the way the Tea Party and other right-wing organizations were given the business by Lois Lerner and the rest of what appears to be a highly politicized bureaucracy at the heart of our tax collection system.

On Tuesday, Federal Judge Ketanje Brown Jackson issued the first substantive ruling in any suit that challenged the IRS’s pose of political neutrality under the Obama administration. The case concerns Z Street, a Philadelphia area-based pro-Israel organization that filed for tax-exempt status in December 2009 because of its role in educating the public about Israel and the Middle East conflict. The group’s founder Lori Lowenthal Marcus wrote in the Jewish Press this week about what followed:

On July 19, 2010, when counsel for Z STREET spoke with the IRS agent to whom the organization’s application had been assigned, that agent said that a determination on Z STREET’s application may be further delayed because the IRS gave “special scrutiny” to organizations connected to Israel and especially to those whose views “contradict those of the administration’s.”

Z Street subsequently sued the government and rightly argued that its constitutional rights had been violated because of the “viewpoint discrimination” that the IRS agent had openly displayed. Now after years of delays, Judge Jackson has ruled that by asserting that Z Street had no right to sue, the government had tried to “transform a lawsuit that clearly challenges the constitutionality of the process … into a dispute over tax liability.” She similarly dismissed the government’s claims of sovereign immunity.

What has this got to do with the Tea Party and its complaints? Plenty.

As the Wall Street Journal editorial page noted yesterday:

This ruling will force the IRS to open its books on the procedures it used and decisions it made reviewing Z Street’s tax-exempt application, procedures it has tried to keep shrouded. As the case proceeds, Z Street’s attorneys can seek depositions from many who have been part of the larger attempt to sit on similar applications by other conservative groups.

In other words, this case may be the straw that breaks the camel’s back of the IRS’s politically prejudicial policies. If an IRS agent can reject or stall a pro-Israel group’s application on the grounds that “these cases are being sent to a special unit in the D.C. office to determine whether the organization’s activities contradict the Administration’s public policies,” then no group, no matter what its political orientation or cause is safe from being subjected to a political litmus test designed by any administration of either political party.

Z Street’s Marcus deserves praise for having the guts to persist in her challenge to the government for years even though the media had little interest in publicizing what appeared to be an outrageous example of how the IRS had become politicized under the Obama presidency. Last year Marcus learned she wasn’t alone when the news about the Tea Party broke. Now, as her legal process unfolds, Americans may get a better idea about how broken the system has become.

Using the IRS to punish political foes is blatantly illegal. If, as we suspect, the Z Street case reveals the sort of internal email traffic that will reveal how widespread this practice has become in the last five years, perhaps even a liberal mainstream press that still thinks the problems at the IRS are a “phony scandal” will start to pay attention.

IRS Political Discrimination Suit by Pro-Israel Group OKed by Court

Tuesday, May 27th, 2014

After nearly four years of litigation, a U.S. federal district court judge instructed the Internal Revenue Service to cease “struggl[ing mightly]” to thwart a lawsuit filed by the pro-Israel organization Z STREET. That lawsuit alleges the IRS violated Z STREET’s First Amendment Constitutional rights. The judge ordered the IRS to file a substantive answer to Z STREET’s Complaint within 30 days.

Z STREET* sought tax-exempt status as a non-profit organization engaged in educating the public about Israel and the Middle East conflict. The organization filed its application in December of 2009.

On July 19, 2010, when counsel for Z STREET spoke with the IRS agent to whom the organization’s application had been assigned, that agent said that a determination on Z STREET’s application may be further delayed because the IRS gave “special scrutiny” to organizations connected to Israel and especially to those whose views “contradict those of the administration’s.”

That statement by the IRS agent, according to the Z STREET board, constituted a clear violation of the Constitution. The government may not treat an organization or person differently because of that person or organization’s political viewpoint. Such action by a government entity constitutes what is known as “viewpoint discrimination.”

Z STREET filed a lawsuit against the IRS alleging that its Constitutional rights had been violated. That lawsuit, Z STREET v. Schulman, IRS Commissioner (now Koskinen) has finally obtained its first substantive ruling.

Several years after Z STREET challenged the IRS in court, several tea party and other conservative groups also claimed the IRS had discriminated against them on the basis of their political viewpoint. On May 10 of last year, the floodgates of criticism burst open when then Director of the IRS Exempt Organizations Division Lois Lerner admitted that the IRS had engaged in certain activity that disadvantaged conservative groups. Lerner referred to that activity at the time as “absolutely inappropriate.”

The ruling in the Z STREET case by Judge Ketanje Brown Jackson on Tuesday, May 27, is the first substantive ruling by a judge in any action brought challenging the political impartiality of the IRS under the current administration.

Judge Jackson summarily rejected the three grounds raised by the government in its effort to thwart Z STREET’s day in court. The first two she rejected because she refused to accept the IRS position that Z STREET was simply complaining about the fact that its application had not been granted.

Defendant struggles mightily to transform a lawsuit that clearly challenges the constitutionality of the process that the IRS allegedly employs when it determines the tax exempt status of certain organizations into a dispute over tax liability as a means of attempting to thwart this action’s advancement.

The judge rejected the third defense – one of sovereign immunity – raised by the IRS by pointing out that the government may not claim it is immune from claims that it is acting unconstitutionally. Indeed, that is the basis for the Bill of Rights.

The IRS must file a substantive response to Z STREET’s Complaint by June 26, 2014.

Since the time the lawsuit was filed, IRS documents were released by a U.S. congressman which essentially confirm Z STREET’s claims and suggest that the IRS agents filed documents with the court that were not truthful.

*The author of this article is the president of Z STREET.

Israel, U.S. Reach Agreement on IRS Regs for Dual Citizens

Thursday, May 15th, 2014

Americans living in Israel, watch out for this year’s June 30 tax deadline.

The Israel Tax Authority has formally reached an agreement with the U.S. regarding the Model 1 FATCA agreement with the IRS, according to attorney Dave Wolf, of the firm Hacohen and Wolf.

The full details of the FATCA Agreement are yet to be published upon the signing of the FATCA Agreement, but according to the Israel Tax Authority’s spokesman, the agreement contains certain restrictions on the use of information passed to the IRS and relief of reporting for certain institutions.

According to U.S. law, all U.S. citizens — regardless where they live — have an obligation to pay taxes on their worldwide income. In addition, in cases where the aggregate value of all foreign accounts exceeds $10,000 at any time during the calendar year, they also have to report this information on a special form commonly known as the FBAR.

Since July 1, 2013, the FBAR needs to be e-filed before June 30 of the following tax year.

Under FATCA, foreign financial institutions (banks, hedge funds, pension funds, insurance companies etc.) are required to report information to the U.S. tax authorities (the IRS) information about foreign accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

This means the Israeli financial institutions will have to report to the U.S. government all their clients who are U.S. citizens and/or green card holders, disclosing all these accounts.

This has huge implications for any American living in Israel or abroad who has never reported his foreign accounts or paid taxes on its income to the IRS, and also to some states if applicable (such as NY and NJ).

Individuals have four options with which to comply, according to Wolf, who can be reached at this link for more information.

‘The IRS Wants YOU’ and Israel Is Going to Help Them

Monday, March 10th, 2014

A mini “economic social” cabinet, headed by Prime Minister Binyamin Netanyahu, soon will approve an agreement to share information on accounts of U.S. citizens with the Internal Revenue Service, sources told the Globes business newspaper.

The newspaper said the proposal will allow the IRS full access on Americans’ accounts in Israeli banks and other financial institutions.

The U.S. government is preparing to sign agreements with other countries as well, but Israel is high on its “hit list,” partly because Swiss banks have accounts in three Israeli banks. Switzerland is no longer a safe place for foreigners to hide their money from the tax man, and so Israel has become a favorite home for money launderers and tax evaders.

The Israel Tax Authority is expecting increased revenues if the measure is approved. “The agreement will include an option under which, subject to certain conditions, information will be sent from the U.S. tax authorities to the Israeli tax authorities about the income of Israeli residents in the U.S.,” the document states.

However, while all information on American accounts in Israel will be sent to the IRS, Israel will receive data only in special cases.

The proposed agreement contained clauses aimed at protecting individuals from the IRS misusing personal information, but it is not clear if the IRS has learned its lessons from recent scandals, such as hunting down those nasty pro-Israel groups, as reported here.

Big Brother in Israel also is waiting on deck.

Attorney Yael Grossman, an expert in money laundering, told Globes, “The decision paves the way for further harm to the separation between the management of money by a bank and disclosure to Income Tax. Although at the moment, the measure helps the banks and saves them the need to work directly with the IRS, but experience shows that it will later expose all of the public’s banking activities to the Israel Tax Authority.

“This will be the final burial of banking confidentiality on one hand and a signal for the strengthening and prosperity of alternative institutions, which will rush to offer alternative instruments to the public.”

Americans living in Israel have an alternative to leaving their tax records and financial activities accessible by your closest friendly IRS clerk. They can simply void their American citizenship, a growing trend that was reported here in December.

Approximately 3,000 did so in 2013, three times the number in 2012. That means the IRS cannot snoop on them, but it also means they lose their right to vote in American elections, assuming it would be worth voting.

Israeli Tax Authority Kills the Next Great Startup

Tuesday, December 24th, 2013

An innovative Israeli start-up company came up with a great idea in 2010, which it dubbed GetTaxi. The idea is simple and convenient: the GetTaxi mobile app allows you to order a taxi, pay for the ride, rate the driver, and even leave a tip. For the drivers, it offer the convenience of automation, handling the billing, and notifying drivers of potential nearby clients.

This start-up has been so successful, it has reached a million users, making 20,000 orders a day to 6000 drivers, in 20 cities, not to mention, raising $42 million in funding.

But the Israeli tax authority may have just killed this enterprising young start-up.

Last week, the tax authority concluded its investigation of 89 businesses in various sectors. A team of 102 investigators managed to collect about $2.2 million from these businesses, which had under-reported their income.

One sector the team investigated were taxi drivers, traditionally a cash business. But the tax folks had a great idea. They subpoenaed GetTaxi’s internal files, obtaining the records of some three thousand Israeli taxi drivers who used the GetTaxi service. The team then targeted 50 of them, according to a report in Globes.

They compared the orders listed in GetTaxi, and the income the taxi drivers reported, and found that most of the drivers had not recorded all their journeys.

Most of the drivers ended up with a simple fine, some of the more serious cases are undergoing further investigation.

Tax Authority chief Moshe Asher told Globes, “The Tax Authority is keeping its finger on the trigger and uses all technological means to make certain that all citizens and companies pay the true amount of tax and do not put the tax burden on law-abiding citizens.”

In the process, the same tax authority possibly just destroyed a law-abiding start-up company, which had a promising future.

Its unlikely Israeli taxi drivers will continue to completely trust GetTaxi with their business, and that could affect not only GetTaxi’s revenue, but even a future exit or IPO, potentially killing the goose that could have laid the golden income tax egg GetTaxi would have brought in.

But Israelis are a resourceful people. We’ll have to see how each side responds to this challenge.

Not to worry though, in New York and other major cities, the company continues to do well, and the Israeli tax authority is not likely to have a chilling effect on its operation. The IRS is simply less fiercely dedicated than its Israeli counterpart.

True story: A few years ago, a falafel booth owner was approached by a man from a yeshiva, who inquired if Shlomi were willing to donate to the yeshiva the edges from the pita he cuts off when he makes each falafel sandwich? It would feed poor students, the man explained, and help cut back on the yeshiva’s costs.

Shlomi agreed. It’s a good deed, and he had nothing to do with all those pita edges other than dump them in the trash. How many garlic bread crisps could he possibly make anyway?

A few months later, Shlomi and other falafel and shawarma (meat gyro) vendors found themselves inside the offices of Mas Hachnasa, the Israeli income tax authority.

They were surprised to see, sitting opposite them, the man from the yeshiva to which they had all been donating their pita edges, supposedly.

They were even more surprised with the man pulled out all the pita edges the vendors had donated to him, and said the number of edges that he, a tax investigator collected, exceeded the number of individual portions they had reported.

Needless to say, falafel and shawarma stores in Israel today slit the pita open, rather than cut off the top. There’s no evidence left behind that way.

IRS Tax Regulations Prompt Olim to Revoke American Citizenship

Thursday, December 19th, 2013

A get-tough IRS policy on Americans living abroad has encouraged some Americans living abroad, including “olim” in Israel, to revoke their American citizenship, the Globes business newspaper reported.

The United States taxes its citizens’ income even if they have been living abroad for years, and agrees with most banks in the world now expose all of their financial accounts to the IRS and make them liable for heavy dual taxation.

One way to get avoid it is to renounce citizenship, which would preclude the IRS from chasing after people to pay taxes on income that does not come from the United States.

Changes in the Israeli tax code also have given big tax breaks to new immigrants as well as Israelis returning to the country.

“Although it is not clear how widespread this phenomenon is, and what relative importance U.S. citizens who immigrate to Israel place on this aspect among the array of considerations that they take into account in deciding to immigrate to Israel, tax residency is certainly a factor,” according to Israeli lawyers Eli Doron and Eyal Peled.

Printed from: http://www.jewishpress.com/news/breaking-news/irs-tax-regulations-prompt-olim-to-revoke-american-citizenship/2013/12/19/

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