The Stop Tax Haven Abuse Act aims to curb abuses of international tax laws.
It aims to close a variety of offshore tax loopholes, eliminate many of the existing incentives for companies to operate offshore, and impose stricter tax rules on corporations formed in mergers between U.S. and foreign companies.
Specifically, the legislation would amend the Internal Revenue Code to:
Expand reporting requirements for Americans who own shares in certain types of foreign companies.
Clarify when foreign financial institutions and U.S. citizens must report foreign financial accounts to the IRS under the Foreign Account Tax Compliance Act.
Prevent companies that are primarily managed and controlled in the U.S. from claiming foreign status for tax purposes.
Close the “credit default swap” loophole that allows corporations to avoid taxes by sending income offshore.
Strengthen the IRS’s ability to use “John Doe summons,” which are used in tax investigations to obtain information on a class of people when the names of offending taxpayers are unknown.
Forbid "earnings stripping," when a U.S. subsidiary decreases its taxable income by borrowing from and making large interest payments to a foreign subsidiary of the same corporation.
Under the legislation, multinational corporations would be required to file a report to the SEC each year listing their employees, sales, finances, tax obligations, and tax payments on a country-by-country basis. Companies failing to disclose any holdings or transactions would be fined.
The bill would also authorize a fine of up to $1 million for corporate insiders who illegally hide offshore holdings. It would increase the maximum fine for aiding and abetting tax evasion to 150 percent of any illegal gains.
It would also require bank examiners to use techniques that detect and prevent tax shelter abuse and tax evasion, and would require hedge funds and private equity funds to enact anti-money laundering programs.