Zurich Life Insurance Rolls Over on Their US Clients

According to DoJ, Zurich Life Insurance Company Ltd (Zurich Life), headquartered in Zurich, Switzerland, and Zurich International Life Limited (Zurich International Life), headquartered in the Isle of Man (collectively Zurich) reached a resolution with the United States Department of Justice on April 24, 2019. As part of the agreement, Zurich will pay a penalty of $5,115,000 to the United States.

 

According To The Terms Of The Non-Prosecution Agreement, Zurich AFREES To COOPERATE In Any Related Criminal Or Civil Proceedings,

to implement controls to stop misconduct involving undeclared u.s. accounts, and to pay a penalty in return for the department’s agreement not to prosecute the insurance providers for tax-related criminal offenses.

 

“The Tax Division remains steadfast in its goal of ending the use of offshore banking and insurance products when used to commit tax evasion,” said Principal Deputy Assistant Attorney General Zuckerman.

“This Resolution With Zurich Should Serve As A Strong Message To Those Who Use Offshore Bank Accounts And Insurance Products To Evade Taxation That The Department Of Justice Is Committed To Stopping Such Fraud.”  

Zurich Life was founded in 1922 and operates in Switzerland as an insurance carrier offering life insurance and investment products. As of 2016, Zurich Life had approximately $21.3 billion in assets under management and over 300,000 policies in force. Zurich International Life is based in the Isle of Man and operates as an insurance carrier offering life insurance and investment products. Zurich International Life focuses its business on the international expatriate market.  

As Of 2016, Zurich International Life Had Approximately $10.6 Billion In Assets Under Management And Approximately 300,000 Policies In Force.



Zurich Life and Zurich International Life are indirectly owned subsidiaries of Zurich Insurance Group Ltd, a Swiss holding company headquartered in Zurich, Switzerland.

 

From Jan. 1, 2008, through June 30, 2014, Zurich issued or had certain insurance policies and accounts of U.S. taxpayer customers, who used their policies to evade U.S. taxes and reporting requirements. In particular, Zurich had approximately 420 U.S. related policies, 127 with Zurich Life and 293 with Zurich International Life, with an aggregate maximum value of approximately $102 million, for which the U.S. taxpayer customers did not provide evidence that they had declared their policies to U.S. tax authorities. 

To Qualify For Favorable Tax Treatment Under The U.S. Tax Code, Insurance Must Meet Certain Minimal Requirements. The Policies Offered By Zurich Life And Zurich International Life Did Not Meet These Requirements.

The increase of the principal in these policies was therefore subject to taxation, and the policies were required to be disclosed to the Internal Revenue Service (IRS) on FinCEN Form 114 Foreign Bank Account Report, commonly referred to as an FBAR. In issuing or having undeclared U.S. related policies, Zurich knew or should have known that they were helping U.S. taxpayers conceal from the IRS ownership of undeclared assets, maintained as insurance policies or accounts.

 

Zurich International Life, in particular, sold insurance products to U.S. taxpayers that were “unit linked,” meaning the cash surrender value and death benefit amount were linked to the value of specified investments. With such policies, the U.S. taxpayer had a suite of specialized investment options, allowing them to access potentially higher returns by taking on the market risk associated with the policies.

 

Some of these unit-linked policies offered a base death benefit that was nearly equivalent to the cost of the policy itself, and in some instances was fully funded by transfers from offshore bank accounts. Upon redemption, the U.S. taxpayer would receive the premium amount plus any investment earnings on the policy less a very small percentage for putative risk and fees.

 

Despite knowing that some of these policies, which had minimal-to-no risk mitigation function and specialized investment options, were held by U.S. taxpayers, Zurich International Life failed to act appropriately to ensure timely compliance by the policyholders with U.S. tax laws. In at least one instance, uncovered during the course of Zurich Life’s internal review, a former U.S. citizen, who pled guilty to a federal fraud offense after purchasing a Zurich International Life policy, used that insurance policy to hide substantial assets, despite owing approximately $900,000 in restitution to his victims.

 

Following the commencement of the Department’s Swiss Bank Program, the Zurich Group initiated a global review of the life insurance, savings and pension business sold by all of its non-U.S. operating companies to identify policies or accounts with U.S. indicia. This review prompted an extensive customer outreach to current and former customers with a possible nexus to the United States to confirm the customers’ status as U.S. taxpayers, assess their compliance with applicable U.S. tax and reporting rules, and encourage participation in an IRS voluntary disclosure program.

 

In July 2015, Zurich contacted the Department to inform it of the initial findings of the self-review. Prior to the self-reporting, Zurich was neither a subject nor a target of any investigation being conducted by the Tax Division.

Since This Self-Disclosure, Zurich Has Conducted A Thorough Investigation And Reported Substantial Findings To The Tax Division, Including Dozens Of Detailed Summaries Of Account Information And Comprehensive Reports For U.S. Policies.

In addition to these efforts, the Companies have worked closely with non-U.S. regulators to ensure full disclosure to the Department. For instance, in 2016, Zurich Life applied to the Swiss Federal Department of Finance and received approval to waive Article 271 of the Swiss Criminal Code, which restricted the disclosures that Zurich Life could make to the Department, thereby facilitating Zurich Life’s production of certain information that would have otherwise been prohibited.

 

Do You Have Undeclared Income From

An Offshore Bank or Insurance Company?

 

 

Is Your Name Being Handed Over to the IRS?

  

Want to Know Which Remaining IRS Program

 is Right for You? 

 

Contact the Tax Lawyers at 

Marini & Associates, P.A.   

 

 

for a FREE Tax Consultation contact us at:

www.TaxAid.com or www.OVDPLaw.com or

Toll Free at 888-8TaxAid (888) 882-9243

 

 



Fisherman Gaffed for Tax Evasion

Rhode Island Man Pleads Guilty to Evading Taxes from 2005 through 2016 & Obstructing IRS From Assessing and Collecting Tax.

 

According to DoJ.  a Hope, Rhode Island, man who failed to pay hundreds of thousands of dollars in federal income taxes pleaded guilty yesterday to tax evasion.

 

According to court documents, from 2005 through 2016, Billie Schofield worked for local fishing companies and earned hundreds of thousands of dollars in income.

 

 

Schofield evaded the assessment of taxes on income earned through multiple commercial activities by causing payments to be made through a nominee business and depositing money in a nominee account.

 

He obstructed the Internal Revenue Service’s (IRS) efforts by filing false income tax returns, preventing the delivery of IRS levy notices to his employer, and by sending bogus checks to the IRS in a fraudulent attempt to pay off an IRS lien placed on his property. 

 

Schofield’s Conduct Resulted in a Tax Loss

of More Than $250,000.

 

Sentencing is scheduled for Sept. 13 before U.S. District Court Judge William E. Smith. 

 

The Defendant Faces a Statutory Maximum Sentence of 5 Years in Prison for the Tax Evasion Charge.  

 

He also faces a period of supervised release, restitution and monetary penalties.  

 

 

Have a IRS Criminal Tax Problem? 

  
Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 

 

for a FREE Tax HELP Contact Us at:

www.TaxAid.com or www.OVDPLaw.com 

orToll Free at 888-8TaxAid (888) 882-9243

9th Circ. Finds Inadequate Proof Of Mailing in Dening $167,000 Tax Refund

The Court of Appeals for the Ninth Circuit has reversed a district court decision that held that the taxpayers timely filed their refund claim because they met the requirements of the common-law mailbox rule.

The Circuit Court Held That Code Sec. 7502's Timely Mailing Rule Supplanted the Common-Law Rule

 

 and That IRS's reg under Code Sec. 7502 is a valid interpretation of that Code section.

 

So according to the Ninth Circuit, the 2011 Treasury rule is definitive on whether a tax filing is mailed on time, and taxpayers cannot rely on the common-law “mailbox rule.”

Howard and Karen Baldwin claimed to have filed an amended tax return on time via U.S. mail, but they could not show they complied with the regulation, which says the only way to establish that a document was mailed to the IRS is proof of proper use of certified mail or a private delivery service, the appeals court said in a published opinion. Therefore, their amended return was filed late and their case should be dismissed, the court said, voiding a $167,000 refund and $25,000 award of legal fees.

The Baldwins contended they followed the mailbox rule, which says testimonial or circumstantial evidence can provide sufficient proof of proper mailing, but the 2011 Treasury regulation displaced that rule, the court said.

It was reasonable for the Treasury regulation to set “the sole means by which taxpayers may prove timely delivery in the absence of direct proof of actual delivery,” the court said.

At trial, two employees of the couple testified the 2005 amended return was timely mailed just before a statutory deadline expired, according to the opinion. The IRS said it never received that amended return by the Oct. 15, 2011, deadline, but it did eventually receive the return in July 2013. (Something is Fishy Here).

The U.S. District Court for the Central District of California ruled that the Baldwins had complied with the common-law mailbox rule and awarded them the $167,000 refund that they claimed on the amended return along with $25,000 in legal fees.

In reversing the decision with instructions to dismiss the case, the Ninth Circuit said the IRS replaced the mailbox rule by promulgating Treasury Regulation Section 301.7502-1(e) in August 2011, the court said. That regulation says Section 7502 of the Internal Revenue Code provides the exclusive means to prove delivery and renders the common-law mailbox rule unavailable, the court said.

To comply under Section 7502, a document must be sent by registered mail, which provides a receipt to the person sending it, the court said. Registered mail also provides heightened security for the mailed item, such as keeping it in a locked space, and electronically tracks the chain of possession from the taxpayer to the recipient, the opinion said.

The regulation resolved a circuit split over the correct interpretation of Section 7502, which “left the law in an undesirable state, as it allowed similarly situated taxpayers to be treated differently depending on where they lived,” the court said.

Have a IRS Tax Problem?  

 

 

Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 

In


 

US S.C. Heard Oral Arguments on Whether States Can Tax Out-of-State & Foreign Trusts

On February 27, 2019 we posted US S.C. To Decide Whether States Can Tax Out-of-State & Foreign Trusts,  where we discussed that more than $120 billion of our nation's income flows through trusts and the Supreme Court will hear a case that may clarify how much states are able to tax and that in April, the Supreme Court of the United States will hear an appeal against North Carolina's practice of taxing the undistributed income of an out-of-state trust that has a beneficiary living in the state. North Carolina is one of 11 states that consider trusts taxable when they hold income for a person who is using the state's services, but US courts have reached different results about whether due process prohibits these taxes. 

According to Law360, the U.S. Supreme Court justices questioned on April 16, 2019 whether a North Carolina beneficiary’s expectation of distribution from a trust gave the state taxing rights, even though its settlor and initial trustee were out of state and distributions weren't guaranteed.

The justices heard oral arguments in a case pitting North Carolina’s Department of Revenue against the Kimberley Rice Kaestner 1992 Family Trust, whose beneficiary lived in North Carolina. The state Supreme Court ruled last June that North Carolina’s taxation of the trust based on the beneficiary’s residence was unconstitutional, prompting the Department of Revenue to appeal to the U.S. Supreme Court.

The justices were advised that the beneficiary had no guarantee of receiving money from the trust during the four years that the state taxed the trust. The mere presence of a beneficiary did not give the state the right to tax the trust, whose settlor and initial trustee were in New York, he told the justices. During the tax years, when the beneficiary received no distributions, the trustee was a Connecticut resident, and the money belonged to him, not the North Carolina beneficiary.

Justice Elena Kagan seemed skeptical. She advised that eventually the beneficiary would likely get the money from the trust and questioned why it shouldn’t be her state that taxes it. Why should New York or Connecticut have the taxing authority when a North Carolina resident would receive money from the trust, including accrued interest.

David A. O’Neil of Debevoise & Plimpton LLC, representing the Kaestner Family Trust, told the court had for decades protected a trust from taxation by the state where the beneficiary resides, if the trust has no other contacts with that state, and it should look to those precedents, including Brooke v. City of Norfolk from 1928, Safe Deposit & Trust Co. v. Virginia from 1929 and Guaranty Trust Co. v. Virginia from 1938. “They are every bit as valid today as they were then,” O’Neil said. “The court said, using the same principles of trust law that apply today,  the beneficiary really isn’t the owner of the property there, so we’re not going to allow taxation of that.”

Earlier, Justice Stephen Breyer seemed sympathetic to O’Neil’s position when he questioned Matthew W. Sawchak, solicitor general of North Carolina. He didn’t seem disposed to accept an argument from Sawchak that “the trust has no situs” and that North Carolina should impose taxation because “benefits and protections” were extended by that state to the beneficiary.

Key To The North Carolina Supreme Court’s Finding That Taxation Of The Trust Was Unconstitutional Was That Kaestner, The Beneficiary, Did Not Receive Distributions From The Trust During The Years At Issue. The Revenue Department Collected $1.3 Million In Taxes From The Trust Over Four Years.

The outcome of NC Department of Revenue vThe Kimberley Rice Kaestner1992 Family Trust will determine whether individuals are able to avoid state taxes by placing assets with trustees in states with no income tax liability.  

This Case Could Also Impact Foreign – Non-US Trusts, Who Have US Beneficiaries, Living In States Which Tax Income From Out-Of-State Trusts.

　

More than $120 billion of our nation's income flows through trusts, and this case that may clarify how much states are able to tax.

Have a IRS Tax Problem?  

Contact the Tax Lawyers at 

Marini& Associates, P.A. 

 

 

for a FREE Tax HELP ... Contact Us at:

www.TaxAid.com or www.OVDPLaw.com or

Toll Free at 888-8TaxAid (888) 882-9243



 

According to Ostrow Reisin Berk & Abrams (via Mondaq) in April, the Supreme Court of the United States will hear an appeal against North Carolina's practice of taxing the undistributed income of an out-of-state trust that has a beneficiary living in the state. North Carolina is one of 11 states that consider trusts taxable when they hold income for a person who is using the state's services, but US courts have reached different results about whether due process prohibits these taxes.
 
The outcome of NC Department of Revenue vThe Kimberley Rice Kaestner1992 Family Trust will determine whether individuals are able to avoid state taxes by placing assets with trustees in states with no income tax liability.

This may also impact Foreign – Non-US trusts, who have US beneficiaries, living in states which tax the income from Out-of-State Trusts.