16th Annual USD School of Law-Procopio International Tax Law Institute via Zoom

Welcome Remarks

Panel 1

Recent Developments Re: U.S.- Mexico Income Tax Treaty (Residency cases in U.S. Tax Court, Mexico’s Tax Reform, and “PE” Definitions)

• Lic. Armando Lara Yaffar - KPMG Mexico (Formerly Deputy General Director of Tax Treaties - Mexico)
• Patrick W. Martin, Esq. - Procopio
  

The IRS has recently highlighted tax residency cases for dual resident individuals (as defined under the “tie-breaker” specifically Article 4 of the U.S.-Mexico income tax treaty) and increasingly issues a statutory notice of deficiencies denying non-resident status for Mexican citizens (and citizens of other countries). This panel will discuss recent cases before the U.S. Tax Court and technical interpretations of the domestic law, tax treaty law and when they might be in conflict. A discussion of strategic considerations, choice of forum (e.g., U.S. Tax Court versus Court of Federal Claims and U.S. District Court) will be explored. Which law prevails (treaty versus domestic law) in which country and why? Further, Mexico’s 2020 tax reform expanding the definition and scope of a “permanent establishment” will be analyzed in light of the tax treaty definition of a “PE” as set forth in Article 5 of the U.S. Mexico income tax treaty. What are the implications to “business profits” as defined in Article 7 and financing transactions and the like where PE is referenced throughout the U.S.-Mexico income tax treaty? How and whether Mexico can adopt the “later in time rule” of the U.S. per Supreme Court’s decisions in The Cherokee Tobacco, 78 U.S. 616 (1870) and Johnson v. Browne, 205 U.S. 309, 321 (1907) and the U.S. Court of Appeals, D.C. Circuit decisions Jamieson v. Comm'r of IRS, No. 08-1253 (D.C. Cir. 2009) and Kappus v. Comm'r of IRS, No. 02-1145 (D.C. Cir. 2003).

Panel 2

U.S. International Investigations of U.S. Financial Accounts: (Summonses, Enablers & Limits on Privilege)

• Carolyn Schenck, Esq. - IRS National Fraud Counsel and Assistant Division Counsel (International)
• Joshua Smeltzer, Esq. - Brown Fox LLP (Formerly DOJ, Tax Division)
• Moderator: Eric D. Swenson, Esq. - Procopio (Formerly IRS attorney)

The U.S. federal government has many tools at its disposal to collect asset and income information regarding U.S. financial accounts of non-resident taxpayers who are not tax compliant in their home country. The course will review recent John Doe Summonses of U.S. financial institutions regarding foreign account holders, the FinCEN identification requirements of “beneficial owners” of foreign-owned U.S. accounts, and what to expect in future enforcement efforts. Discussions on the attorney-client privilege and discussion of the recent 5th Circuit decision that the attorney-client privilege is not violated when the IRS summons requires the firm to reveal their client lists — “that may reveal the identity and international activities.” (Taylor Lohmeyer Law Firm P.L.L.C. v. United States, No. 19-50506, 2020 WL 1966844 (5th Cir. Apr. 24, 2020))

Panel 3

Recent International Reforms Focused Toward Increasing Tax Compliance:  The Experience of Mexico and the U.S.

• Dr. Carlos Romero,Federal Attorney General for Fiscal Matters – Secretaría de Hacienda y Crédito Público
• Ladd C. Brown, Esq. - Office of Chief Counsel – IRS
• Enrique Hernandez Pulido, Esq. - Procopio (Formerly Subprocurador Jurídico de Hacienda

Many countries have recently embarked in profound legal reforms focused on increasing tax compliance and combating offshore and domestic tax evasion. Mexico has been a leader in this effort, both by adopting measures derived from the OECD’s BEPS action plan and implementing legislation that takes focuses on domestic systematic issues related to tax compliance.  This panel will explore some of the trends going on at the international level and in particular the experience in Mexico with a focus on the results of recent reforms by one of its main architects, Dr. Romero.  Furthermore, the panel will explore other potential reforms that may be discussed and implemented in the near future.

Panel 4

Legal Figures and Flow-Through Entities: Application of the Mexican Tax Reform to Cross-Border Structures

• Lic. Alil Álvarez - Álvarez Alcalá
• Lic. Juan Carlos Trujillo - Deputy General Director of International Treaties, Mexican Treasury* (invited)
• Pedro Corona de la Fuente, Esq. - Procopio

Mexico’s 2020 tax reform changed radically the taxation of foreign legal figures (e.g., trusts) and flow-through entities (e.g., LLCs).  Some of the new rules applied for 2020 and others will become effective in 2021.  This panel will analyze the controversial topics in the application of such provisions and its impact in current structures.  Also, we will discuss the main issues that should be considered when implementing new cross-border structures.

Panel 5

Problems Facing Taxpayers with Foreign Information Return Penalties (Statute of Limitations, Jurisdictional Concerns, Flora, etc.)

•  Megan L. Brackney, Esq. - Kostelanetz & Fink, LLP
•  Robert Horowitz, Esq. - Hochman Salkin Toscher Perez P.C. (Formerly DOJ, Tax Division)
•  Patrick W. Martin, Esq. - Procopio

The IRS continues to assess penalties for late filing foreign information returns, such as the Form 8938 (Report of Specified Foreign Assets or the Form 3520 (Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts).  Because these penalties are “assessable,” and ordinarily not subject to the jurisdiction of the U.S.Tax Court, it can be very difficult for taxpayers, who have to pay before bringing a refund claim, to receive judicial review.  There are issues of time limits and procedures required by both the taxpayer and the government.  This panel will discuss a few common foreign information returns, the penalties for non-filing or filing incomplete forms, defenses to penalties, and the procedures that are available for taxpayers seeking review of the assessments, including IRS Appeals, refund litigation, and Collection Due Process.”