Wednesday, July 5, 2023

IRS Criminal Investigation Division Investigating the Misuse of Malta Pension Plans

The Malta Pension Plan is a tax-favorable pension plan that has been used by U.S. taxpayers in Malta. The plan allows for significant tax savings, as gains on assets contributed to the plan are not subject to tax in Malta or in the U.S. However, the IRS and Treasury have taken the position that the Malta Pension Plan is abusive and that it was not intended by the Treaty drafters.

In July 2021, the IRS added the Malta Pension Plan to its “Dirty Dozen” list of abusive tax schemes. In December 2021, Treasury published a Competent Authority Arrangement (CAA) that severely narrowed the definition of what qualifies as a pension and thus the overall tax benefits possible under the Treaty.

More recently, in early June 2023, the Treasury Department proposed regulations that would designate Malta Pension Plan arrangements as “listed transactions.” If the regulations are finalized, Malta Pension Plan arrangements will be subject to the same additional scrutiny applicable to all listed transactions, including certain disclosure requirements, increased penalty exposure, and record-keeping requirements for material advisors.

In A Significant Development Last Week, IRS Criminal Investigation (IRS-CI) Special Agents Began Visiting
Taxpayers And Advisors Who Have Participated In,
Or Advised On, Malta Pension Plans.

IRS-CI agents are issuing summons to parties to produce documents for a nationally coordinated investigation. The involvement of IRS-CI makes clear that the IRS believes that at least some Malta Pension Plan arrangements may be the product of criminal or fraudulent conduct.

We advise clients that there is no obligation to speak with an IRS-CI Special Agent and that anything disclosed to the IRS can be used in a criminal or civil case against them. If you have received an interview request from IRS CI, you should speak with an experienced tax counsel who can advise you on your rights and obligations in responding to an IRS inquiry.

Taxpayers Who Have Maltese Pension Plans Should 
Carefully Review The Underlying Legal Requirements 
And Consult Independent, Competent Advisors

Before Claiming Any Purported Tax Benefits.

Taxpayers who have already claimed the purported tax benefits of one of these four transactions on a tax return should consider taking corrective steps, such as filing an amended return and seeking independent advice. 

Where appropriate, the IRS will challenge the purported tax benefits from the transactions on this list, and the IRS may assert accuracy-related penalties ranging from 20% to 40%, or a civil fraud penalty of 75% of any underpayment of tax.


The IRS remains committed to having a strong, visible, robust tax enforcement presence to support voluntary compliance. To combat the evolving variety of these potentially abusive transactions, the IRS created the Office of Promoter Investigations (OPI) to coordinate service-wide enforcement activities and focus on participants and the promoters of abusive tax avoidance transactions. 

The IRS has a variety of means to find potentially abusive transactions, including examinations, promoter investigations, whistleblower claims, data analytics and reviewing marketing materials.

Have a Maltese Pension Plan Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at: or
Toll Free at 888 8TAXAID (888-882-9243)

1 comment:

  1. IRS Criminal Investigation (“IRS CI”) is now issuing administrative summonses to taxpayers, attorneys, accountants, and promoters involved with Malta Pension Plans. The summonses seek testimony and records from the summonsed parties regarding their involvement with Malta Pension Plans. Under section 7602 of the Internal Revenue Code (IRC), the IRS may “examine any books, paper, records or other data” that may be relevant to determine or collect tax due, and issue an administrative summons to compel a taxpayer or third party to produce such documents or testimony. If a summonsed party fails to comply, the IRS can move to enforce the summons in U.S. District Court pursuant to IRC 7402(b) and 7604(a). If the court orders enforcement and the recipient still refuses to comply, the summonsed party can face civil or criminal contempt.

    To obtain court enforcement of an administrative summons, the IRS must make a prima facie showing of what have become known as the Powell factors:
    • The summons relates to an investigation being conducted for a legitimate purpose.
    • The information summoned may be relevant to the investigation.
    • The information sought is not already within the CRS's possession.
    • The IRS has complied with the administrative steps set forth in the IRC.
    United States v. Powell, 379 U.S. 48, 58 (1964). If the IRS establishes these factors, the burden shifts to the party challenging the summons to set forth reasoning as to why the summons should not be enforced.

    In summons enforcement matters, thorny issues of privilege can arise. While materials covered under the attorney-client communication privilege may not be discoverable, where and how to draw the line on privilege can raise difficult and complex questions as to whether the documents and communications at issue were made in connection with the provision of legal advice or non-privileged business advice. Individuals and organizations receiving these summonses will need to act strategically in order to properly assert and preserve any privilege defenses they may wish to put forth in a summons enforcement proceeding.