US Malta Pension Plan 2023

The IRS has rescinded some criminal summonses from its crackdown on Malta pension plans, raising questions about whether the agency is backing off or retooling its aggressive campaign targeting the offshore tax schemes.

Three Attorneys Interviewed By Bloomberg Tax Said More Than 30 Of Their Clients Had Received A Withdrawal Letter Last Week.
The IRS declined to comment. It’s not clear whether the withdrawal letters represent a revision to the investigation’s focus into the potentially abusive schemes. If so, it would be a striking reversal after the agency sent out hundreds of summonses in June to wealthy Americans sheltering assets in Malta and their advisors. A letter announcing the rescinded summons, obtained by Bloomberg Tax, states that

"The Agency’s June Demand For Information Had Been
Withdrawn And Advised, “Do Not Take Further Efforts
To Comply With The Summons Referenced Above."
The brief letter, dated Dec. 4, specifies the agency hasn’t used any information or records collected by IRS Criminal Investigation, adding physical records will be returned and “any electronic responsive records have been destroyed.” The letter, signed by IRS Criminal Investigation special agent Brian Visalli, gives no rationale or legal basis for the agency’s decision, but advises taxpayers to retain any records responsive to the summons “as you may receive subsequent legal process for those records.”

Former IRS commissioner Charles Rettig said any adjustment to the criminal probe wouldn’t affect the current pattern of civil audits. “Withdrawing the Summons’ does not translate, at least not yet, into walking away from civilly examining the transaction, ” he said in an emailed message.

Bryan Skarlatos, a partner in the New York office of Kostelanetz, characterized the action as “a recognition that the summonses were improperly issued” and a decision to “focus the criminal investigation more narrowly while allowing many of the civil audits to proceed.”

Tom Cullinan, a shareholder in the Atlanta office of Chamberlain Hrdlicka, suspects Criminal Investigation concluded it wouldn’t be able to demonstrate criminal fraud because the tax controversies boil down to technical interpretations of a treaty.

Ventry, the California law professor, said IRS shouldn’t back down if it has reasonable evidence of fraudulent conduct and to the extent the agency’s information demands might have been “over-inclusive, ” the IRS could and should issue a narrower batch of summonses targeting the individuals and the conduct of greatest concern.

Taxpayers Who Have Maltese Pension Plans Should
Carefully Review The Underlying Legal Requirements
And Consult Independent, Competent Advisors

Before Claiming Any Purported Tax Benefits.

Taxpayers who have already claimed the purported tax benefits of one of these four transactions on a tax return should consider taking corrective steps, such as filing an amended return and seeking independent advice.

Where appropriate, the IRS will challenge the purported tax benefits from the transactions on this list, and the IRS may assert accuracy-related penalties ranging from 20% to 40%, or a civil fraud penalty of 75% of any underpayment of tax.

International Tax Planning