For more than a year, a group of wealth management advisers met regularly to devise strategies to defend their wealthy clients' keeping their riches in individual retirement arrangements based in Malta.

The pension plans—which emerged out of a loophole in a 2011 tax treaty between the US and the Mediterranean island nation widely seen as a tax haven—involved a cottage industry of advisers, accountants, and attorneys to facilitate transactions that allowed cash, business interests, and several types of income to go untaxed.

The plans were added to IRS's "Dirty Dozen" list of dubious tax schemes in July 2021. But participants in the participants' monthly Zoom meetings felt "the IRS was too simple, too lazy, or too stupid to figure out what we were doing," according to one wealth adviser who attended them. That changed in June, when the IRS served hundreds of criminal summonses on taxpayers and Malta pension plan promoters. While no charges have been filed yet, IRS Commissioner Danny Werfel has been vocal about cracking down on abusive tax schemes, especially now that his agency is infused with billions in new funding from last year's tax-and-climate law.

In this week's episode of Talking Tax, host David Schultz talks to Bloomberg Tax reporter Michael J. Bologna about his story digging into the wealth advisers' meetings, how these Malta plans were marketed to high-net-worth individuals, and what's next for the IRS investigation.

Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

The clock is ticking on Gov. Kathy Hochul (D) to take action on legislation that would make New York the first state to publicly list the owners behind limited liability companies.

The bill, A3484A, would require LLCs to disclose their beneficial owners and other identifying information, such as their business street address. Those who fail to comply for more than two years would be shown as “delinquent” on state records and subject to a $250 penalty. Entities with “significant privacy interests” could apply for a waiver to not appear in the state registry.

On this episode of Talking Tax, Bloomberg Tax spoke with state Sen. Brad Hoylman-Sigal, the Manhattan Democrat who sponsored the bill, and Chelsea Lemon, director of government affairs for the Business Council of New York, which opposes the legislation.

"The LLC Transparency Act doesn't minimize or alter the legal structure or protections of LLCs, but it provides necessary transparency for the public's benefit, as well as our law enforcement," Hoylman-Sigal said.

Other proponents, including state Attorney General Letitia James and Comptroller Thomas DiNapoli, have said the opaque structure of LLCs allow corrupt actors to hide their financial dealings and contribute to issues like tax evasion and money laundering. Opponents, such as real estate groups, have raised privacy concerns with it and said it will hurt the state's economic competitiveness.

A spokesperson for Hochul said she's "reviewing the legislation." She has until Dec. 31 to act on the bill. 

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It isn't every day that a dispute over a $14,729 tax bill gets every corner of the tax world paying attention—but the potential ramifications of the dispute now before the Supreme Court go far beyond that.

The court will hear oral arguments next month in Moore v. United States, in which Charles and Kathleen Moore, a retired couple from Washington state, are arguing that the “mandatory repatriation tax” should be declared unconstitutional. That tax, enacted as part of the 2017 tax-overhaul law, imposed a one-time levy on accumulated foreign corporate profits when the US changed its tax system so as to tax foreign profits going forward. It also led to the Moores’ $14,729 tax bill, which they had to pay on earnings of an Indian machine-tool company in which they’d invested, even though the earnings weren’t distributed to them.

If the high court rules in the Moores’ favor, it could lead to hundreds of billions of dollars in refunds to giant multinational companies that paid the mandatory repatriation tax. Some observers think it could also play havoc with other taxes on foreign income, partnership taxes, and other forms of tax that are similarly based on undistributed income.

The Moores and their supporters distinguish the mandatory repatriation tax from other provisions, and contend it can be struck down without disrupting the rest of the tax code. The US Chamber of Commerce said in a brief supporting the Moores that such concerns were "badly overblown."

Bloomberg Tax senior reporter Michael Rapoport spoke about the Moore case with Reuven Avi-Yonah, a law professor at the University of Michigan, who specializes in corporate and international taxation. Avi-Yonah filed a friend-of-the-court brief with two other law professors last month urging the Supreme Court to reject the Moores’ challenge.

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A pair of high-profile fraud trials are competing for headlines out of New York courtrooms, with accountants serving as marquee witnesses.

Accounting has been a common theme across both the criminal trial of Sam Bankman-Fried, who faces federal fraud charges for allegedly siphoning customer funds from the now-bankrupt FTX cryptocurrency exchange, and the civil trial of former President Donald Trump, who is accused by the New York attorney general of inflating the value of real estate on years of his financial statements.

As financial frauds have become more complex, accountants increasingly play a role in court—as witnesses, experts, or even the accused.

On this episode of Talking Tax, Amanda Iacone, Bloomberg Tax senior reporter, spoke with Bruce Dubinsky, a forensic accountant whose work has spanned frauds involving Enron, Parmalat, and Bernie Madoff. They talked about how the role of accountants in the courtroom has evolved and how their testimony has unfolded in these two trials.

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Legislation and proposed regulations on cryptocurrency have the potential to answer some open questions about the taxation of digital assets, though not all of the possible changes may be welcomed by industry.

A bill from Sens. Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (D-N.Y.) touches on a variety of crypto tax issues. It would provide a narrow definition of broker for tax reporting, require the marking of crypto assets to market for year-end accounting purposes, and closea tax loophole that may upset some in the industry. The Senate Finance Committee also asked for more information on those crypto taxation issues earlier this fall.

On this episode of Talking Tax, Lisa Zarlenga, the head of Steptoe & Johnson LLPs tax policy practice and a former tax legislative counsel at the Treasury Department, spoke to Bloomberg Tax about that legislation and new proposed regulations on tax reporting rules for crypto brokers.

Closing a tax loophole that allows investors to claim losses by quickly selling and repurchasing their digital assets, for example, may be difficult to implement as some investors would trigger the rule unintentionally, she said.

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The IRS's new unit to tackle pass-through entity tax-law enforcement could take years to stand up fully and for businesses to feel its impact in the form of tougher audits.

The push comes after years of concern among IRS officials that the agency lacked the expertise and resources to enforce laws around pass-through entities such as large partnerships, sparking fears some companies were manipulating the rules to pay less than they owed. But setting up and staffing up the new unit won't be easy.

On this episode of Talking Tax, Mary McNulty, a partner at Holland and Knight LLP, spoke to Bloomberg Tax about the purpose of the new unit and what it has to do to be successful.

"The wild card here is funding," she said. "So if Congress continues to cut the $80 billion of additional funding to the IRS and reduces the resources again to low levels then the IRS will lack the resources to carry out this strategic initiative, so time will tell.”

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State taxpayers have been sitting on a mountain of cryptocurrency assets for nearly a decade. According to one estimate, by the tax software and compliance firm Revenue Solutions Inc., 4.7 million California residents have stockpiled crypto assets valued at $56.2 billion, while 2.3 million New Yorkers are hoarding $27.7 billion in crypto.

Are any of them paying capital gains taxes on the accumulated wealth tied up in Bitcoin, Ethereum, Tether and other digital tokens? And what about those investments in digital art, like Bored Ape Yacht Club non-fungible tokens?

Tax compliance analysts believe barely a trickle of tax revenue linked to digital assets is flowing in the direction of state revenue departments. The reasons are varied. Revenue agencies and auditors just don’t understand the crypto landscape. States and taxpayers alike lack full guidance from the federal government. Tracking digital asset transactions is difficult, and connecting them to specific taxpayers is even harder.

Fran D’Antonio, solutions sales director at Revenue Solutions, and Miles Fuller, a 15-year veteran of the IRS Office of Chief Counsel who's now director of government solutions at digital tax compliance firm TaxBit, spoke with Bloomberg Tax senior reporter Michael J. Bologna about what they've seen in watching the crypto market closely for several years.

Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.

Overhauling how the IRS audits low-income taxpayers is a critical step toward more fair audits, many in the industry acknowledged following the agency's announcement earlier this month.

The IRS promised that it would "substantially" reduce audits on refundable tax credits that benefit low-income taxpayers, such as the earned income tax credit. That change follows a study released in January that found Black taxpayers claiming the EITC were audited at higher rates than non-Black taxpayers claiming the credit.

Former National Taxpayer Advocate Nina Olson, now executive director of the Center for Taxpayer Rights, spoke with Bloomberg Tax's Erin Slowey about the impact the audit shift will have on low-income taxpayers and the landscape for claiming the EITC leading up to this announcement.

"It is the difference between being able to have medical care or being able to pay rent or even if you're homeless, putting a deposit down and first month's rent on an apartment," Olson said. "It's life-changing funds."

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The new CEO of Deloitte's tax practice is grappling with many of the same challenges as the Big Four firm's clients: rapid shifts in how tax practitioners work thanks to artificial intelligence, a shortage of skilled staff, and reforms that will impose a new global minimum tax.

Companies are starting to get their arms around the new rules that will impose a 15% global minimum tax and whether they should tackle implementation in-house or seek outside help, said Carin Giuliante, chair and CEO of Deloitte Tax LLP.

Giuliante, the first woman to lead the firm’s US tax practice, took the helm in June and pledged to provide a “digital experience” to clients and to invest in training and career development for the firm’s professionals.

She spoke to Bloomberg Tax & Accounting senior reporter Amanda Iacone about new Internal Revenue Service regulations for cryptocurrency assets, how artificial intelligence is reshaping the tax practice, and the firm’s ongoing commitment to diversify and support its workforce.

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Sports betting is in more states than ever, with new gamblers every day wagering in person and over the internet. And the new NFL season is expected to drive up tax revenue even more in the 30 states—plus Puerto Rico and Washington, D.C.—that have legalized sports betting since a 2018 US Supreme Court ruling overturning a federal ban.

States collected an estimated $3.62 billion in direct gaming taxes generated in the second quarter, a 9.6% increase over the second quarter of 2022, according to a recent report from the American Gaming Association. While most states impose taxes ranging from 10% to 15%, some, like New York, take as much as 51% from sportsbooks.

SportsHandle senior analyst Chris Altruda spoke with Bloomberg Tax reporter Angélica Serrano-Román about the approaches states have taken to taxing sports betting and those allowing operators to deduct so-called "free bets," which some states are starting to limit.

Do you have feedback on this episode of Talking Tax? Give us a call and leave a voicemail at 703-341-3690.