MARCH 2009 APPLICABLE FEDERAL RATES

FBAR GUIDANCE ON "DOING BUSINESS IN THE U.S."

U.S. persons with interests in or signature authority over foreign accounts are generally required to report those interests to the Treasury Department on Form TD F 90-22.1 (commonly referred to as the 'FBAR'). Internal Revenue Code definitions of "U.S. person" do not apply, and the definition includes persons in and doing business in the U.S., even if not a citizen or resident of the U.S. Failure to report can result in significant penalties.

One problem with this requirement is that the Instructions to the form provide no guidance as to what constitutes "doing business in the U.S." for this purpose. The applicable form language reads:

The IRS has now published a FAQ that provides guidance on when a person will be considered to be doing business in the U.S. Q&A 4 in this guidance provides:

1. The determination is a facts and circumstances test.


2. Regular and continuous business activities in the U.S. are needed.


3. Merely visiting the U.S., or sporadically conducting business in the U.S., will not be enough.


4. Artists, athletes, and entertainers who are not citizens or residents of the United States and who only occasionally come to the United States to participate in exhibits, sporting events, or performances, will not be considered to be conducting business in the U.S.
   

FAQs Regarding Report of Foreign Bank and Financial Accounts (FBAR)

EXTENDED NOL CARRYBACK PERIOD IN RECOVERY ACT DISAPPOINTS MANY

One of the few “business friendly” tax provisions in the recently enacted Recovery Act is a temporary extension of the net operating loss (NOL) carryback period to 5 years from the usual 2. The purported benefit is to get cash into the hands of businesses who are presently suffering losses, by allowing them to carryback current losses to those earlier years and obtain income tax refunds. The businesses can then use the cash flow to remain in business and stem the flow of layoffs.

The big problem with the new provision is that it only applies to entities with gross receipts of under $15 million. While $15 million is a lot of money, in the grand scheme of things this eliminates a great number of middle and large business enterprises from sharing in the benefits of the new provision. I know of several disappointed companies that had thought they were going to receive the benefit of the new provision, only to find out that they exceeded the threshold and thus were locked out from its benefits. At least one of those companies is now going to have to significantly cut back its work force – something it did not want to do and something the Recovery Act was supposed to help prevent.

Once upon a time, a tax break for one, was a tax break for all. In today’s world, it is difficult to find any favorable tax provision that is not phased out or made inapplicable to taxpayers once certain income, asset, or gross receipts levels are exceeded. One has to question the wisdom of such populist policies which deny benefits to the country’s significant employers, especially in regard to the Recovery Act whose avowed purpose is to maximize jobs.