The Connolly Law Firm Announces New Offshore Asset Reporting Laws Could Prove Costly to Investors

Harrison, MI, May 14, 2010 --( The Connolly Law Firm and its associates is one of the Nation’s leaders in providing offshore asset protection structures.

For many years the Connolly Law Firm has warned individuals, who establish offshore asset protection structures and accounts, that proper reporting is a key to their success. A Foreign Bank Account Report (i.e., Treasury Department Form TD F 90-22.1) is required annually for offshore “financial accounts” which exceed $10,000 at any time during the year.

For those who believe in “gambling,” the Connolly Law Firm warms that they who wish to challenge FBAR penalties cannot do so in the US Tax Court. Instead, they must pay the tax penalties and interest up front and then sue in a US District Court for a refund. In addition, FBAR penalties are not dischargeable in a bankruptcy proceeding. These little-known, but very costly tax traps, are revealed in the cases of Williams v. Commissioner, US Tax Court 2008, and United States v. Simonelli, D. Conn. 2008.

The Connolly Law Firm notes that the “Hiring Incentives to Restore Employment Act of 2010,” signed into law by President Obama on March 18, 2010, increases reporting requirements for individuals who transfer assets offshore, and, additional penalties for those who fail to report such accounts, entities and/or investments. This latest is designed to encourage “Foreign Financial Institutions” to report information to the IRS about their US account holders, and, will impose a “30% withholding tax” on those who fail to do so and will require the FFI to close the account of any “recalcitrant account holder” who refuses to waive bank secrecy laws.

The Connolly Law Firm further warns that this law imposes new penalties that are in addition to those imposed under the traditional FBAR reporting requirements. Reporting is now required for those who hold interests valued at more than $50,000 in the aggregate in: (i) depository or custodial accounts maintained by a non-US-financial institution; (ii) non-US stock, interests in non-US entities, and financial instruments or contracts with a non-US counterpart not held within a custodial account of a financial institution.

On February 23, 2010 the US Financial Crimes Enforcement Network (“FinCEN”) released a Notice of Proposed Rulemaking which it hopes to make effective “for filings due on or after June 30, 2010.” The Connolly Law Firm warns that this Rule expands the definition of “other financial accounts” to include any account that is an insurance policy with a cash value or an annuity policy, any account with a person that acts as a broker or dealer for futures or options transactions in any commodity on or subject to the rules of a commodity exchange or association; or any account with a mutual fund or similar pooled fund which issues shares.

Finally, the Connolly Law Firm warms the “recalcitrant” with offshore “financial accounts” that under the framework established as early as 1987 by the US Supreme Court in Societe Nationale Industrielle Aerospatiale, US District Courts are quite willing to order offshore financial institutions to produce records despite that countries law imposing criminal penalties for those who provide such prohibited disclosures.

The Connolly Law Firm warns US individuals and businesses to not gamble with their financial future by engaging in faulty offshore asset protection structures. Proper reporting, where applicable, is a key to sound offshore asset protection planning. Additional information is immediately available by visiting, or, by calling (989) 539-3996.

Connoly Law Firm
William Comer
(989) 539-3996