ELECTIONS HAVE CONSEQUENCES: WHAT TO EXPECT WITH TRUMP’S UNEXPECTED WIN

/

Download the article by GRAY TOLUB LLP
Download the LACC Winter 2016/2017 edition

Elections have consequences. Donald J. Trump, President-elect, should be sworn in as the 45th president of the United States on January 20, 2017.

Three major promises he campaigned for include
(1) trade reform,
(2) immigration reform, and
(3) tax and regulatory reform.

TRADE REFORM

We expect there be major policy shifts on trade. Specifically, US companies that attempt to move their manufacturing abroad and to outsource jobs will be penalized through tariffs or other punitive measures or, if such laws cannot pass the US Congress, by reputational risk. The President-elect has already focused on this issue as exemplified through the widely reported “Carrier” deal, in which the President elect and his Vice President negotiated a deal for some of the jobs originally announced by Carrier to be outsourced to Mexico to remain in the United States. In addition, trade deals may be renegotiated and we expect the current trade deal known as the “TTP” (at least, in its current form) to be axed. It is unclear whether his intended punitive polices will be limited to existing companies located in the United States which intend to move offshore in the future or companies that have already left.

IMMIGRATION REFORM

One of the campaign promises President-elect Trump made was significant immigration reform by, in particular, building
a wall at the southern border (and making Mexico pay for it) and to get tough on perceived immigration abuses (e.g., illegal immigration, visa overstays, and the hiring of non-lawful workers). While we expect a lot pressure on the President-elect to keep his campaign promises, we expect the President-elect to be flexible when it is in the interests of the US. In particular, we expect his original stance on highly-skilled workers (which such stance was moderated throughout his campaign) to not come to fruition; instead, we expect highly-skilled workers to continue to have paths to US
visas in order to support the tech and other industries. Such visas, may, in fact, be expanded.

TAX AND REGULATORY REFORM

The President-elect has touted tax and regulatory reform throughout his campaign to stimulate job creation in the United States. With regards to taxes, two major components of such promises are business tax reform and individual tax reform. The President-elect has promised to cut corporate tax rates significantly (to 15 percent), to provide a repatriation holiday of foreign earnings of US companies locked offshore, and to eliminate the estate tax in the case of individuals. We expect these promises to be kept to some significant degree; if these polices are enacted, taxpayers are well advised to take advantage and to restructure current holdings as some of the polices may be temporary. For example, the estate tax (and its rates) has historically shifted when Republicans and Democrats change power. With regards to regulatory policy, based on his initial cabinet and other appointments, we expect the Trump administration to initially focus first on the United States to become more energy independent; this includes reducing regulations on the oil, gas, and coal industries. Their focus will likely shift to other industries to make it easier to do business in the United States as time progresses.

While some of these changes are more than welcome, in particular, easing the ability to invest in the United States, others have some cause for concern. We recommend to pay careful attention to the first 100 days of the new administration.

By Armin Gray, Benjamin Tolub, and Hortense D.P. Massat

PANAMA PAPERS LEAKS: THE TAX MAN COMETH

/

Download Detailed Client Alert PDF

On April 03, 2016, the press reported that 11.5 million records were leaked from Panamanian law firm Mossack Fonseca. The records detail offshore holdings of the celebrities, politicians, and the mega-rich many of which were purportedly engaged in illegal activities including tax evasion. Such leaks have been referred to as the “Panama papers” or the “Wikileaks of the mega-rich” by some newspapers.[1] More details can be found at the website of the International Consortium of Investigative Journalists (“ICIJ”), which have summarized their findings as follows:

The largest cross-border journalism collaboration ever has uncovered a giant leak of documents from Mossack Fonseca, a global law firm based in Panama.

The secret files:

  • Include 11.5 million records, dating back nearly 40 years – making it the largest leak in offshore history. Contains details on more than 214,000 offshore entities connected to people in more than 200 countries and territories. Company owners in [sic] billionaires, sports stars, drug smugglers and fraudsters.
  • Reveal the offshore holdings 140 politicians and public officials around the world – including 12 current and former world leaders. Among them: the prime ministers of Iceland and Pakistan, the president of Ukraine, and the king of Saudi Arabia.
  • Document some $2 billion in transactions secretly shuffled through banks and shadow companies by associates of Russian President Vladimir Putin.
  • Include the names of at least 33 people and companies blacklisted by the U.S. government because of evidence that they’d been involved in wrongdoing, such as doing business with Mexican drug lords, terrorist organizations like Hezbollah or rogue nations like North Korea and Iran.
  • Show how major banks have driven the creation of hard-to-trace companies in offshore havens. More than 500 banks their subsidiaries and their branches – including HSBC, UBS and Société Générale – created more than 15,000 offshore companies for their customers through Mossack Fonseca.[2]

We take this opportunity to remind our clients and friends of the benefits of voluntary disclosures to the Internal Revenue Service (“IRS”) and other tax authorities for those who may be affected by such leaks or otherwise are not in full tax compliance. In general, if a taxpayer voluntarily discloses mistakes to the tax authority, whether such non-compliance was willful, negligent, or an honest mistake, monetary penalties are generally substantially reduced (the amount of reduction of monetary penalties is generally dependent on the degree of culpability) and the taxpayer can avoid criminal liability. However, such reductions are premised on the fact that the disclosure is “voluntary.” In general, to be voluntary, the disclosure must be made before the taxpayer is audited by the tax authority and otherwise before the tax authority becomes or is aware of the non-compliance. As expected, we understand that some governments have already begun examining these leaks. Thus, time can be of the essence in these situations and any disclosures should be made promptly.

 

 

 

[1]           See Toppo, Greg, “Worldwide, jaws drop to Panama Papers’ Leak”, USA Today, last accessed April 3, 2016, available at: http://www.usatoday.com/story/news/2016/04/03/reactions-panama-papers-leak-go-global/82589874/.

[2]           See “Key Findings: The Panama Papers by the Numbers”, ICIJ, last accessed April 3, 2016, available at: https://panamapapers.icij.org/blog/20160403-key-findings.html. 

 

FINCEN ISSUES GEOGRAPHIC TARGETING ORDERS CONCERNING ALL CASH DEALS FOR REAL ESTATE ACQUISITIONS IN NEW YORK CITY AND MIAMI

/

Download the article by GRAY TOLUB LLP
Download the LACC Winter 2015/2016 edition

On January 13, 2016, the Financial Crimes Enforcement Network (“FinCEN”) issued Geographic Targeting Orders (“GTOs”) that temporarily require certain US title insurance companies to identify the natural persons behind companies used in “all cash” deals for high end residential real estate in Manhattan and MiamiDade County, Florida. FinCEN was concerned that shell companies could be used in allcash transactions for money-laundering purposes. This release came a few weeks before the release of “Anonymous, Inc.,” a 60 Minutes news report that exposed certain lawyers, through the use of hidden cameras, who were inclined to assist prospective clients to move questionable funds into the US as well as other news articles expressing concern on this topic. The GTOs apply to “Covered Businesses” and to “Covered Transactions.” A Covered Business is a title insurance company and any of its subsidiaries and agents. A Covered Transaction means a transaction in which a legal entity purchases residential real property located in Manhattan, New York Miami-Dade County, Florida, for a purchase price of more than $3 million or $1 million, respectively, in an all cash deal (i.e., without bank financing), and, such purchase is made, at least in part, using currency or a cashier’s check, a certified check, a traveler’s check, or a money order in any form (“Covered Currencies”). If a Covered Business is involved in a Covered Transaction, then the Covered Business is required to collect, identify, and/or report information regarding or concerning:

  1. The individual primarily responsible representing
  2. the purchaser;
  3. The Beneficial Owners;
  4. All members of a limited liability company; and
  5. The transaction including date of closing, total amount transferred Covered Currencies, and the total purchase price.

For these purposes, Beneficial Owner is defined as each individual who, directly or indirectly, owns 25% or more of the equity interests of the purchaser. The individuals
required to be identified in items 1 and 2 above would have to provide a copy of this individual’s driver’s license, passport, or other similar identifying documentation. Members of a limited liability company would have to provide their name, address, and taxpayer identification numbers. The GTOs will be in effect for 180 days beginning on March 1, 2016 and expiring on
August 27, 2016. Of particular note, the GTO would not apply to

  • (i) any acquisition outside the 180-day window above,
  • (ii) acquisitions that use bank financing;
  • (iii) acquisitions that do not use Covered Currencies such as wire transfers,
  • (iv) acquisitions outside of Manhattan (such as Brooklyn) or Miami-Dade County,
  • (v) acquisitions below the reportable threshold,
  • (vi) acquisitions that do not use title insurance, and
  • (vii) acquisitions of commercial property.

Authors:
Armin Gray
Benjamin Tolub

FINCEN ISSUES GEOGRAPHIC TARGETING ORDERS CONCERNING ALL CASH DEALS FOR REAL ESTATE ACQUISITIONS IN NEW YORK CITY AND MIAMI.

/

Download Detailed Client Alert PDF

On January 13, 2016, the Financial Crimes Enforcement Network (“FinCEN”) issued Geographic Targeting Orders (“GTOs”) that temporarily require certain US title insurance companies to identify the natural persons behind companies used in “all cash” deals for high­ end residential real estate in Manhattan and Miami­Dade County, Florida.[1]

[1]          See https://www.fincen.gov/news_room/nr/html/20160113.html (last accessed February 16, 2016).