Announcement 2012-40

The Office of Professional Responsibility (OPR) announces recent disciplinary

sanctions involving attorneys, certified public accountants, enrolled agents, en

rolled actuaries, enrolled retirement plan agents, and appraisers. These individuals

2012–47 I.R.B. 556 November 19, 2012

for an indefinite term; conditions that the individual must observe during the suspension; and the individual’s opportunity, after a stated number of months, to file with OPR a petition for reinstatement affirming compliance with the terms of the consent and affirming current eligibility to practice ( i.e ., an active professional license or active enrollment status). An enrolled agent or an enrolled retirement plan agent may also offer to resign in order to avoid a disciplinary proceeding.

Suspended by decision in expedited proceeding, Suspended by default de- cision in expedited proceeding, Sus- pended by consent in expedited pro- ceeding —OPR instituted an expedited proceeding for suspension (based on certain limited grounds, including loss of a professional license and criminal convictions).

OPR has authority to disclose the grounds for disciplinary sanctions in these situations: (1) an ALJ or the Secretary’s delegate on appeal has issued a decision on or after September 26, 2007, which was the effective date of amendments to the regulations that permit making such decisions publicly available; (2) the individual has settled a disciplinary case by signing OPR’s “consent to sanction” form, which requires consenting individuals to admit to one or more violations of the regulations and to consent to the disclosure of the individual’s own return information related to the admitted violations (for example, failure to file Federal income tax returns); or (3) OPR has issued a decision in an expedited proceeding for suspension.

Announcements of disciplinary sanctions appear in the Internal Revenue Bulletin at the earliest practicable date. The sanctions announced below are alphabetized first by the names of states and second by the last names of individuals. Unless otherwise indicated, section numbers ( e.g ., §10.51) refer to the regulations.

are subject to the regulations governing practice before the Internal Revenue Service (IRS), which are set out in Title 31, Code of Federal Regulations, Part 10, and which are published in pamphlet form as Treasury Department Circular No. 230. The regulations prescribe the duties and restrictions relating to such practice and prescribe the disciplinary sanctions for violating the regulations.

The disciplinary sanctions to be imposed for violation of the regulations are:

Disbarred from practice before the IRS —An individual who is disbarred is not eligible to represent taxpayers before the IRS.

Suspended from practice before the IRS —An individual who is suspended is not eligible to represent taxpayers before the IRS during the term of the suspension.

Censured in practice before the IRS —Censure is a public reprimand. Unlike disbarment or suspension, censure does not affect an individual’s eligibility to represent taxpayers before the IRS, but OPR may subject the individual’s future representations to conditions designed to promote high standards of conduct.

Monetary penalty —A monetary penalty may be imposed on an individual who engages in conduct subject to sanction or on an employer, firm, or entity if the individual was acting on its behalf and if it knew, or reasonably should have known, of the individual’s conduct.

Disqualification of appraiser —An appraiser who is disqualified is barred from presenting evidence or testimony in any administrative proceeding before the Department of the Treasury or the IRS.

Under the regulations, attorneys, certified public accountants, enrolled agents, enrolled actuaries, and enrolled retirement plan agents may not assist, or accept assistance from, individuals who are suspended or disbarred with respect to matters constituting practice ( i.e ., representation) before

the IRS, and they may not aid or abet suspended or disbarred individuals to practice before the IRS.

Disciplinary sanctions are described in these terms:

Disbarred by decision after hearing, Suspended by decision after hearing, Censured by decision after hearing, Monetary penalty imposed after hear- ing, and Disqualified after hearing —An administrative law judge (ALJ) conducted an evidentiary hearing upon OPR’s complaint alleging violation of the regulations and issued a decision imposing one of these sanctions. After 30 days from the issuance of the decision, in the absence of an appeal, the ALJ’s decision became the final agency decision.

Disbarred by default decision, Sus- pended by default decision, Censured by default decision, Monetary penalty im- posed by default decision, and Disqual- ified by default decision —An ALJ, after finding that no answer to OPR’s complaint had been filed, granted OPR’s motion for a default judgment and issued a decision imposing one of these sanctions.

Disbarment by decision on appeal, Suspended by decision on appeal, Cen- sured by decision on appeal, Monetary penalty imposed by decision on ap- peal, and Disqualified by decision on appeal —The decision of the ALJ was appealed to the agency appeal authority, acting as the delegate of the Secretary of the Treasury, and the appeal authority issued a decision imposing one of these sanctions.

Disbarred by consent, Suspended by consent, Censured by consent, Mone- tary penalty imposed by consent, and Disqualified by consent —In lieu of a disciplinary proceeding being instituted or continued, an individual offered a consent to one of these sanctions and OPR accepted the offer. Typically, an offer of consent will provide for: suspension

November 19, 2012 557 2012–47 I.R.B.

City & State Name Professional Disciplinary Sanction Effective Date(s) Designation

California

Palm Desert Bonnheim, William S. Attorney Suspended by default decision in expedited proceeding under §10.82 (suspension of attorney license)

Florida

Gulf Breeze Hanley, Jane B. Enrolled Agent Suspended by consent for admitted violation of §10.51 (failure to timely file Federal individual income tax returns for tax years 2003, 2004, 2005, and 2006)

Kentucky

Paducah Christian, Charles E. Attorney Suspended by default decision in expedited proceeding under §10.82 (attorney disbarment)

Massachusetts

Southborough Uhl, Christopher M. Attorney Suspended by default decision in expedited proceeding under §10.82 (suspension of attorney license)

Michigan

Charlotte Carter Jr., David B. Attorney Suspended by default decision in expedited proceeding under §10.82 (conviction under 26 U.S.C. §7203, willful failure to file U.S. Income Tax Returns)

Minnesota

Mendota Heights Fairbairn, Jo M. Attorney Suspended by default decision in expedited proceeding under §10.82 (suspension of attorney license)

Indefinite from August 28, 2012

Indefinite from July 25, 2012

Indefinite from September 18, 2012

Indefinite from July 31, 2012

Indefinite from September 13, 2012

Indefinite from September 24, 2012

2012–47 I.R.B. 558 November 19, 2012

City & State Name Professional Disciplinary Sanction Effective Date(s) Designation

Missouri

Leasburg Basham, Angela D. Enrolled Agent Suspended by default decision in expedited proceeding under §10.82 (conviction under 26 U.S.C. §7206(2), aiding and assisting in the preparation and filing of a false income tax return)

St. Louis Lowery, Martha L. Attorney Suspended by default decision in expedited proceeding under §10.82 (suspension of attorney license)

New York

Katonah Fecci, Eric J. CPA Suspended by default decision in expedited proceeding under §10.82 (convicted of failure to file a New York state personal income tax return)

New Jersey

Morris Plains Lewis, David A. Attorney Suspended by default decision in expedited proceeding under §10.82 (conviction under 26 U.S.C. §7206(1), filing fraudulent income tax return)

Chester Williamson, Kevin P. CPA Suspended by default decision in expedited proceeding under §10.82 (conviction under 26 U.S.C. §7206, tax fraud)

North Carolina

Highlands Sossomon, Creighton W. Attorney Suspended by default decision in expedited proceeding under §10.82 (suspension of attorney license)

Indefinite from August 14, 2012

Indefinite from August 9, 2011

Indefinite from September 24, 2012

Indefinite from August 15, 2012

Indefinite from August 15, 2012

Indefinite from August 9, 2011

November 19, 2012 559 2012–47 I.R.B.

City & State Name Professional Disciplinary Sanction Effective Date(s) Designation

Ohio

Aurora Crow, Alan B. CPA Suspended by default decision in expedited proceeding under §10.82 (revocation of CPA license)

Ripley Welti, Robert C. CPA Suspended by default decision in expedited proceeding under §10.82 (conviction under 26 U.S.C. §7212(a), attempting to obstruct or impede the due administration of the Internal Revenue Code)

Oregon

Saint Helens Bunn, Barbara Enrolled Agent Censured by consent for admitted violation of §10.51(a)(6) (failed to timely file Federal income tax return for tax years 2007, 2008, 2009, and 2010)

Pennsylvania

Minersville Troese Sr., Stephen J. Attorney Suspended by default decision in expedited proceeding under §10.82 (conviction under 18 U.S.C. §1343, wire fraud)

South Carolina

Bamberg Smith, Flint P. CPA Suspended by default decision in expedited proceeding under §10.82 (revocation of CPA license)

South Dakota

Box Elder Fitch, Nakata S. Attorney Suspended by default decision in expedited proceeding under §10.82 (suspension of attorney license)

Indefinite from September 24, 2012

Indefinite from August 14, 2012

Indefinite from July 13, 2012

Indefinite from September 10, 2012

Indefinite from July 30, 2012

Indefinite from July 30, 2012

2012–47 I.R.B. 560 November 19, 2012

City & State Name Professional Disciplinary Sanction Effective Date(s) Designation

Virginia

Richmond Smith, William O. Attorney Suspended by default decision in expedited proceeding under §10.82 (attorney disbarment)

Indefinite from July 27, 2012

required to undertake duplicative efforts to verify an FFI’s status as a participating, deemed-compliant, or nonparticipating FFI. Furthermore, comments have indicated that global financial institutions intend to implement uniform due diligence procedures for all affiliates. Accordingly, these comments have suggested aligning the timelines for due diligence for U.S. withholding agents, FFIs in countries with Intergovernmental Agreements, and FFIs in countries without Intergovernmental Agreements in order to significantly reduce administrative burden.

In addition, the Treasury Department and the IRS have received comments requesting that obligations that may give rise to foreign passthru payments, but not to withholdable payments, be treated as grandfathered obligations if such obligations are executed prior to the issuance of final regulations that define foreign passthru payments. Comments also have requested that an obligation to make payments with respect to collateral posted in connection with a grandfathered derivative transaction be treated as a grandfathered obligation. Finally, comments have expressed concern over the treatment of existing financial transactions that may begin to give rise to withholdable payments for purposes of chapter 4 due to the promulgation of regulations under section 871(m) (treating certain payments on notional principal contracts and certain other financial instruments as U.S. source dividends).

In consideration of these comments, the Treasury Department and the IRS intend to issue regulations that modify the rules set forth in the proposed regulations as follows. Unless otherwise defined, terms used in this announcement have the meanings set forth in the proposed regulations.

Timelines for Due Diligence and Other Requirements under FATCA

Announcement 2012–42

I. PURPOSE

This announcement outlines (i) certain timelines for withholding agents and foreign financial institutions (FFIs) to complete due diligence and other requirements and (ii) certain additional guidance concerning gross proceeds withholding and the status of certain instruments as grandfathered obligations under sections 1471 through 1474 of the Internal Revenue Code (Code). The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) intend to incorporate the rules described in this announcement in final regulations under sections 1471 through 1474.

II. BACKGROUND

On March 18, 2010, the Hiring Incentives to Restore Employment Act of 2010, Pub. L. 111–147 (H.R. 2847), added sections 1471 through 1474 (chapter 4) to Subtitle A of the Code. These provisions are commonly referred to as the Foreign Account Tax Compliance Act, or FATCA. Chapter 4 requires withholding agents to withhold 30 percent of certain payments to an FFI unless the FFI has entered into an agreement (FFI agreement) with the IRS to, among other things, report certain information with respect to U.S. accounts. Chapter 4 also imposes on withholding agents certain withholding, documentation, and reporting requirements with respect to certain payments made to certain other foreign entities.

On February 15, 2012, the Treasury Department and the IRS published proposed regulations under chapter 4 in the Federal Register (REG–121647–10, 77 Fed. Reg. 9022) (proposed regulations). On May 15, 2012, the IRS held a public hearing on the proposed regulations. On July 26, 2012, the Treasury Department released a model for bilateral agreements with other jurisdictions (in both reciprocal and nonreciprocal versions) under which FFIs would satisfy their chapter 4 requirements by reporting information about U.S. accounts to their respective tax authorities, followed by the automatic exchange of that information on a government-to-government basis with the United States. The model agreement outlines time frames for FFIs in partner jurisdictions to complete the necessary due diligence to identify U.S. accounts. On June 21, 2012, the Treasury Department announced its intent to develop a second model agreement, under which financial institutions in the partner jurisdiction would report specified information directly to the IRS in a manner consistent with the FATCA regulations, supplemented by government-to-government exchange of information on request. The Treasury Department intends to conclude bilateral agreements (“Intergovernmental Agreements”) based on the model agreements.

The Treasury Department and the IRS have received comments identifying certain practical issues in implementing the chapter 4 rules within the time frames prescribed in the proposed regulations. In particular, comments have noted that the chapter 4 status of entity account holders may change during 2013 as FFIs enter into FFI agreements with the IRS, with the result that withholding agents that put in place new account opening procedures by January 1, 2013, could be

November 19, 2012 561 2012–47 I.R.B.

Participating FFIs . The final regulations will modify the rule set forth in Prop. Reg. §1.1471–4(c)(3) to provide that a participating FFI will be required to perform the requisite identification procedures and obtain the appropriate documentation to determine whether an entity, other than a prima facie FFI, is itself a participating FFI by the later of December 31, 2015, or the date that is two years after the effective date of its FFI agreement. In addition, the final regulations will provide that a participating FFI will not be required to apply the presumption rules (currently set forth in Prop. Reg. §1.1471–3(f)) to such accounts until the day after the date (described above) by which the participating FFI is required to perform the identification procedures and obtain the appropriate documentation.

3. Withholding and Documentation Requirements of Participating FFIs for Preexisting Individual Accounts

Preexisting High-Value Accounts . A participating FFI must perform the requisite identification procedures and obtain the appropriate documentation to identify preexisting individual accounts that are high-value accounts (as described in Prop. Reg. §1.1471–4(c)(8)(i)) by the later of December 31, 2014, or the date that is one year after the effective date of the FFI’s FFI agreement. Accordingly, the final regulations will modify the rule set forth in Prop. Reg. §1.1471–5(g)(3)(i)(B) to provide that after the date described above, a participating FFI must treat any preexisting account that is a high-value account as held by a recalcitrant account holder unless the participating FFI has performed the requisite identification procedures and obtained the appropriate documentation.

Preexisting Accounts other than High Value Accounts . A participating FFI must perform the requisite identification procedures and obtain the appropriate documentation to identify preexisting individual accounts (other than high-value accounts) prior to the later of December 31, 2015, or the date that is two years after the effective date of the FFI’s FFI agreement. Accordingly, the final regulations will modify the rule set forth in Prop. Reg. §1.1471–5(g)(3)(i)(A) to provide that after the date described above, a participating FFI must treat any preexisting individual

III. DUE DILIGENCE TIMELINES

A. Timeline for Implementing New Account Opening Procedures and the Definition of Preexisting Obligations

Withholding agents, including participating FFIs and registered deemed-compliant FFIs, generally will be required to implement new account opening procedures by January 1, 2014. Accordingly, the definition of the term “preexisting obligation” (currently set forth in Prop. Reg. §1.1471–1(b)(48)) will be modified in the final regulations to include: