Last month I was quoted in a Tax Analysts article by Amy Hamilton on the lack of a California offshore voluntary disclosure program. The FTB responded that there was something in the works. As if owners of offshore bank accounts didn’t have enough in the way of tax problems, on March 25th Governor Brown signed into the law the FTB’s Compliance Initiative Two (“VCIT”). You have to love all the alphabet soup in the FBAR program. First the IRS had the Offshore Voluntary Disclosure Program (OVDP), and in February it announced their latest tax amnesty the Offshore Voluntary Disclosure Initiative (OVDI).
The VCIT applies to “offshore financial arrangements,” which are defined to mean “any transaction involving financial arrangements that in any manner rely on the use of offshore payment cards, including credit, debit or charge cards, issued by banks in foreign jurisdictions or offshore financial arrangements, including arrangements with foreign banks, financial institutions, corporations, partnerships, trusts or other entities to avoid or evade income or franchise tax.” [R&T section 19764(a)(1)(B).]
The VCIT runs from Aug. 1, 2011 until Oct. 31, 2011. It features limited penalty relief, and will be of interest to offshore bank account owners who participated in one of the two federal voluntary disclosure programs. In order to participate in the VCIT a taxpayer must make an election to participate under R & T section 19762 and (i) files an amended tax return for each year he failed to include income from the offshore financial arrangement and (ii) pays in full all taxes and interest due. No deduction is allowed for transaction or other costs associated with the offshore financial arrangement. [R&T section 19764(a).]
More on the FTB VCIT later this week.
In the meantime if you have offshore bank accounts that have not been reported to the IRS or the FTB contact the tax controversy lawyers at Brager Tax Law Group, A P.C. for a confidential consultation.