To PFIC or not to PFIC: The Tax Implications of Passive Foreign Investment Companies

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In today’s interconnected world, a country’s borders are just political concepts. It is often necessary for investors to invest internationally to diversify portfolios and maximize returns. However, investing internationally means dealing with the intricate world of international taxation. An example of this complexity is the taxation of Passive Foreign Investment Companies (PFICs). Fully grasping the tax implications of PFIC investments is essential for making informed decisions and navigating the regulatory landscape.

What are PFICs?

A foreign corporation is a PFIC if either, (1) 75% or more of its gross income is passive income, or (2) 50% or more of its assets produce passive income or are held for the production of passive income. Entities like foreign mutual funds, certain holding companies, foreign insurance companies, and offshore investment funds can be PFICs. Passive income, includes interest, dividends, rents, royalties, and capital gains.

Taxation of PFICs

In order to prevent U.S. taxpayers from deferring taxes by investing in PFICs, the Internal Revenue Code (IRC) imposes punitive tax rules under IRC §§ 1291 through 1297. Furthermore, the PFIC rules can seem like they were designed to confuse and discourage investors from getting involved with PFICs.

Investors can inadvertently be subject to PFIC rules for various reasons. A foreign fund can change its investment strategy or portfolio composition causing previously non-PFIC investments to be classified as PFICs. PFIC status may not readily be apparent to an investor, since PFIC status depends on a company’s income and asset composition. Compounding this challenge is the lack of disclosure or transparency from these foreign entities regarding the requisite PFIC information. Moreover, if a company undergoes a transition from domestic to foreign status, whether through relocation or restructuring, investors and employees who previously exercised stock options may unknowingly find themselves subject to PFIC rules.

PFIC Taxation Methods

There are three main ways for taxing PFIC investments: the Excess Distribution Method, the QEF Election, and the Mark-to-Market Election. Under the Excess Distribution Method, distributions exceeding 125% of the average in the preceding three years are taxed as ordinary income at the highest marginal tax rate. Additionally, any gains from the sale of PFIC shares are treated as excess distributions, thus, no favorable capital gains treatment, while losses are disallowed.

The QEF Election allows taxpayers to include in their taxable income each year their share of the PFIC’s ordinary earnings and net capital gain. This election allows taxpayers to circumvent the punitive tax consequences of the Excess Distribution Method. However, for this election to be viable, the PFIC must furnish sufficient information to enable shareholders to accurately compute their taxable income.

The Mark-to-Market Election allows taxpayers holding marketable stock to include in their income each year the increased value of PFIC shares. PFIC shares are treated as if they were sold at the end of each tax year. Any gain recognized is taxed at ordinary income tax rates, while losses are subject to capital loss limitations.

Annual Information Reporting

U.S. taxpayers owning PFIC shares must file an annual report using Form 8621. This form provides details on income, distributions, and tax computations under different PFIC taxation methods, ensuring adherence to tax requirements and facilitating accurate tax reporting.

Other Relevant Rules and Requirements

In addition to PFIC rules, investors should be aware of other relevant IRC provisions, such as those concerning controlled foreign corporations (CFCs), foreign tax credits, foreign earned income exclusion, and taxation of foreign trusts and estates. Knowing how PFIC rules interact with other IRC provisions is important for taxpayers involved in foreign investments to ensure compliance with U.S. tax laws.

Investors may have additional reporting requirements, including disclosing foreign financial accounts through the Foreign Bank Account Reporting (FBAR) regime via Form 114 and complying with the Foreign Account Tax Compliance Act (FATCA) via Form 8938. PFIC investments may trigger reporting requirements under the FBAR regime if the investor’s foreign financial accounts exceed a certain threshold. FATCA compels foreign financial institutions to report U.S. account holders and imposes reporting duties on U.S. taxpayers regarding specified foreign financial assets, such as PFIC investments.

Conclusion

There are several challenges when navigating PFIC rules, including but not limited to compliance burdens, the risk of potential double taxation, the interaction with other tax rules and regimes, and the complexities of strategic tax planning. It is important to have an effective tax plan to mitigate the potential adverse tax consequences of PFIC investments. While investing in PFICs may be essential for diversifying portfolios and having access to global markets, the tax implications require careful consideration. Our firm can help navigate these complex tax rules, ensuring compliance with annual reporting requirements, and devising plans to minimize adverse tax consequences. Get in touch now.

Cracking Down on Foreign Bank Secrecy While Becoming a Tax Haven: The Irony of U.S. Tax Policy

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Overview

The Foreign Account Tax Compliance Act (FATCA) has been a cornerstone of the U.S. government’s efforts to combat tax evasion involving foreign financial accounts. By imposing obligations on Foreign Financial Institutions (FFIs) to report information about financial accounts held by U.S. taxpayers, FATCA has largely eliminated overseas tax havens.

However, the reciprocal exchange of information is not as robust in the opposite direction. While the U.S. has entered into a number of Intergovernmental Agreements with other jurisdictions to facilitate the exchange of information under FATCA, the level of information the U.S. provides to other countries about their citizens’ financial accounts in the U.S. is not always equivalent. The U.S. has not committed to adopting the Common Reporting Standard, which is the global standard for the automatic exchange of financial account information, developed by the Organization for Economic Cooperation and Development.

This asymmetry in information exchange has raised concerns that the U.S. could be seen as a tax haven for non-U.S. persons. For instance, certain trusts, limited liability companies, and other investment vehicles in the U.S. can offer non-U.S. persons a degree of confidentiality about their ownership interests and assets. This is particularly true in states with favorable trust and corporate laws that do not require the disclosure of beneficial ownership information.

It is important to note that the U.S. has taken steps to address some of these concerns. The Corporate Transparency Act requires U.S. and foreign persons to report their beneficial ownership information of certain U.S. entities to the Financial Crimes Enforcement Network. This legislation is aimed at preventing and combating the misuse of legal entities for purposes of money laundering, tax evasion, and other illicit activities.

But the Corporate Transparency Act has significant limitations. It only applies to entities that are formed or registered by the filing of a document with a secretary of state or similar office. This means that certain entities, such as trusts that are not registered with a secretary of state or similar office, are still not required to disclose beneficial ownership information. This continuing lack of transparency, combined with the potentially favorable tax treatment of foreign persons, means that the U.S. has emerged as a major international tax haven.

FATCA: Legislation Passed by the U.S. in 2010 to Combat Offshore Tax Evasion by U.S. Taxpayers

  • Requires foreign financial institutions (FFIs) like banks and investment companies to report information about financial accounts held by U.S. taxpayers to the IRS.
  • Includes requirements for US taxpayers to report foreign assets and offshore accounts.
  • Imposes a 30% withholding tax on certain payments from U.S. sources made to FFIs that do not comply with FATCA reporting requirements.

U.S. Implementation of FATCA

  • The U.S. has signed intergovernmental agreements (IGAs) with many countries to facilitate implementation of FATCA and information sharing.
  • Partner countries entering into IGAs agree to share that information with the IRS.
  • These IGAs require the partner countries to share information with the IRS, but help to protect the financial institutions of partner countries from FATCA penalties.
  • More than 100 countries have entered into IGAs with the U.S., requiring FATCA compliance.
  • This effectively breaks secrecy laws in tax havens and forces disclosure of information about accounts held by US taxpayers.
  • FATCA has resulted in the disclosure of billions in previously unreported offshore assets and income, helping the IRS crack down on offshore tax evasion.

The U.S. Also Used Its Criminal Laws to Target Institutions in Foreign Tax Havens

The enforcement of FATCA went hand-in-hand with the U.S. government’s broader efforts to pursue tax compliance and combat offshore tax evasion. The aggressive enforcement actions that began around 2009, prior to FATCA’s enactment, were a clear signal of the government’s intent to crack down on noncompliance with tax obligations related to foreign accounts.

The Department of Justice, in collaboration with the IRS, targeted FFIs that they believed were complicit in helping U.S. taxpayers hide assets and income offshore. High-profile cases against Swiss banks, in particular, led to numerous deferred prosecution agreements and non-prosecution agreements. Under these agreements, FFIs were required to admit to wrongdoing, pay fines, and provide detailed information about U.S. customers who had held undisclosed accounts. These enforcement actions resulted in billions of dollars in fines and the disclosure of thousands of account holders to the IRS.

Following these disclosures, the IRS pursued U.S. taxpayers who had not reported their foreign accounts and income. The IRS offered several Offshore Voluntary Disclosure Programs and the Streamlined Filing Compliance Procedures as a way for U.S. taxpayers to come into compliance voluntarily. Taxpayers who did not take advantage of these programs and were subsequently identified faced significant penalties and potential criminal prosecution.

The International Community Seeks to Implement Financial Account Information Sharing

The larger international community has sought to implement FATCA’s information-sharing provisions on a broader scale. The Common Reporting Standard (CRS) is a global standard for the automatic exchange of financial account information between tax authorities. It was developed by the Organization for Economic Cooperation and Development (OECD) in 2014 and has been adopted by over 100 countries and jurisdictions.

  • CRS requires financial institutions like banks, brokers, and funds in participating countries to identify foreign account holders and report information on their accounts to their domestic tax authority. This includes account balances, interest/dividend payments, sale proceeds from financial assets, and other income.
  • The domestic tax authority then automatically exchanges that information with the tax authorities in the account holder’s country of tax residence. This enables tax authorities to verify if their tax residents have properly reported their offshore financial accounts and income.
  • Reciprocal exchange is a key component of CRS. If country A exchanges information about country B’s tax residents, then country B will also provide the same information about country A’s tax residents.
  • Over 100 countries and jurisdictions participate in CRS information exchange, including major economies like the UK, Germany, France, China, India, and Japan.
  • The U.S. does not participate in CRS.

The U.S. Has Not Joined CRS Due to Opposition from Congress and the Financial Industry:

  • The U.S. already unilaterally receives financial account information from other countries through FATCA. CRS is therefore seen as providing little benefit for the U.S.
  • There are concerns about the costs to U.S. financial institutions of implementing CRS due diligence and reporting systems.
  • Powerful voices in Congress oppose adopting legislation that facilitates information sharing with foreign governments to assist their tax enforcement.
  • In summary, CRS is a widely adopted global standard for reciprocal exchange of financial account information between tax authorities, but the U.S. is a notable non-participant due to political and industry opposition.

The U.S.’s Emergence as a Tax Haven

The OECD defines a tax haven as a jurisdiction that (1) has no obligation to exchange information, (2) lacks transparency, (3) does not require a local presence, and (4) has zero or nominal tax rates. For non-U.S. persons, the U.S. meets these four requirements.

  • The U.S. does not provide meaningful reciprocal reporting of financial accounts to other countries.
    • The U.S. has not adopted CRS or implement fully reciprocal information exchange under FATCA.
  • entities still can lack transparency.
    • The U.S. has taken significant steps to increase transparency of entity ownership. Prior to this year, there was no U.S. requirement to identify the beneficial owners of U.S. entities. But the Corporate Transparency Act (CTA), effective in 2024, now requires the disclosure of the beneficial owners of certain U.S. entities.
    • But the CTA only applies to entities that are formed or registered through a filing with a secretary of state or similar office. This means that certain types of legal entities, including many trusts, are not subject to the beneficial ownership reporting requirements of the CTA. The U.S. Treasury Department has been tasked with developing regulations to implement the CTA, which may in the future seek to expand its application to trusts and other entities. It is also possible that future legislation or regulatory action could expand the reporting requirements to include additional types of legal arrangements, including trusts.
    • But, at this time, there is still the potential for foreigners to shield their ownership of entities and assets in the U.S.
  • Foreigners do not need a U.S. presence to hold U.S. financial assets, entities, or trusts.
  • Foreigners can generally pay little or no U.S. tax when they invest in U.S. assets.
    • Generally, foreign taxpayers are subject to U.S. tax on (1) fixed, determinable, annual or period (known as FDAP) income and (2) income from a U.S. trade or business.
    • Foreign taxpayers generally pay no tax when selling U.S. assets other than real estate.

The Sunset of International Tax Havens

The enactment of the CTA signals a commitment by the U.S. to enhance financial transparency and combat the misuse of entities for illicit purposes, including tax evasion. The CTA, along with the aggressive enforcement of its tax laws as seen in the past decade, suggests that the U.S. is taking steps to shed any perception of being a tax haven.

As the U.S. aligns with global trends towards financial transparency, it is possible that the characteristics which have made the U.S. attractive for foreign persons seeking confidentiality may change. The playbook used by the U.S. to dismantle secrecy in offshore jurisdictions—compelling information sharing and enforcing domestic laws—could be adopted by other nations looking to protect their tax bases. This international effort is further supported by initiatives like the OECD’s CRS and the automatic exchange of information agreements.

For advisors and financial institutions in the U.S. that assist foreign persons, it is crucial to operate within the bounds of both U.S. law and international legal frameworks. The Department of Justice has the authority to prosecute U.S. persons for crimes such as aiding and abetting tax evasion, even if the tax evasion occurs under another nation’s laws. Additionally, engaging in activities that facilitate the evasion of another country’s taxes can expose U.S. persons to legal action by that foreign jurisdiction. As the Department of Justice pursued the Swiss, foreign nations can pursue U.S. institutions and persons.

Conclusion

At Kim & Rosado, our partners’ background as tax attorneys with the Department of Treasury provides us with unique insights into the government’s enforcement strategies. We understand the serious nature of these matters and the importance of proactive compliance. We offer our clients expert guidance on navigating the complex web of U.S. tax laws, including the intricacies of reporting foreign financial assets and income. Our goal is to ensure that our clients are not only compliant but also protected from the severe consequences that can arise from noncompliance.

For individuals and institutions that may already be facing scrutiny or enforcement actions, we leverage our extensive experience to advocate on their behalf, seeking resolutions that minimize exposure and penalties. Our direct partner involvement means that clients benefit from the highest level of expertise and representation in these serious and high-stakes matters.

U.S. District Court Deems Corporate Transparency Act Unconstitutional: Implications and Future Challenges

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On March 1, 2024, the U.S. District Court for the Northern District of Alabama held that “the Corporate Transparency Act (CTA) is unconstitutional because it exceeds the Constitution’s limits on Congress’ power.” The ruling permanently enjoined the U.S. Treasury Department and Financial Crimes Enforcement Network (FinCEN) from enforcing the CTA against the plaintiffs, the National Small Business Association (NSBA), a group that represents over 65,000 businesses and entrepreneurs in all 50 states. While the court’s ruling provides relief to the plaintiffs, the broader implications of the judgment and the likelihood of appeal warrant careful consideration. Who is not covered by the Court’s ruling? In the regulatory analysis section of a Notice of Proposed Rulemaking issued December 8, 2021, FinCEN estimated a population of at least 25 million “reporting companies” required to report BOI and that are not exempt.

  • What is the CTA?

Congress enacted the CTA in 2021 to combat money laundering, terrorist financing, and other financial crimes. The legislation tasked FinCEN with the responsibility to implement a mechanism requiring companies to disclose information about their beneficial owners, senior officers, and control persons to the Federal Government. FinCEN’s initial regulations, effective as of January 1, 2024, provided guidelines on reporting entities, required information, and deadlines.

  • Legal Challenge and Court Decision:

In response to the CTA’s disclosure requirements, the plaintiffs filed a lawsuit against the Treasury Department in November 2022. The plaintiffs asserted that the CTA’s mandatory disclosure requirements exceed Congress’s authority under Article I of the Constitution and violate the First, Fourth, Fifth, Ninth, and Tenth Amendments.

The Government argued that the CTA was authorized under the foreign affairs powers, the Commerce Clause, and taxing powers. However, the court held that the CTA exceeded the Constitutional limits on Congress’s power and dismissed these arguments. It held that the CTA lacked authorization under foreign affairs powers, highlighting that incorporation falls within state jurisdiction as an internal affair. Next, the court held that the CTA regulation on non-commercial activities like incorporation, did not fall within the purview of the Commerce Clause. Lastly, the court held that the CTA did not draw authority from Congress’s taxing powers, underscoring that its utility for tax collection alone was insufficient to invoke such powers.

  • How does the court’s decision affect you?

If you were part of the NSBA prior to March 1, 2024, you don’t have the file a Beneficial Owners Information (BOI) report for now… Shortly after the ruling, FinCEN released a statement, stating “FinCEN is complying with the court’s order and will continue to comply with the court’s order for as long as it remains in effect.” (emphasis added). This signals that the U.S. Treasury Department will likely appeal the district court’s decision and request a stay of judgement.

If you were not part of the NSBA, then the CTA still applies, and you may have to file a BOI report. While the court’s decision deals a significant blow to the CTA, its ultimate fate remains uncertain. This ruling is likely to serve as a precedent, sparking similar legal challenges to the CTA.

The deadline to file the BOI report is fast approaching. It will be prudent to prepare sooner rather than later.

IRS Cranks Up Scrutiny on Micro-Captive Insurance: Key Changes and What They Mean for Businesses

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Often when the IRS suffers a setback in litigation, a tendency exists to prematurely declare victory on the issue. That was certainly the reflex when the Tax Court first blessed a midco tax shelter in Starnes v. Commissioner, T.C. Memo. 2011-63. But a dozen years and several definitive circuit court opinions later, that abusive scheme had been dispatched. Similarly, promoters of micro-captive insurance arrangements undoubtedly rejoiced at first news of the result in CIC Services, LLC v. IRS, 529 F. Supp. 3d 677, 687-88 (E.D. Tenn. 2022), vacating Notice 2016-66, which had targeted such deals. Ding-dong! The Witch is dead!

Without conceding the District Court’s ruling on the failure to observe the Administrative Procedures Act, the IRS last year issued a proposed regulation obsoleting Notice 2016-66 and providing that it will not enforce its disclosure requirements. REG-109309-22. But the IRS also sounded loud and clear that such obsoletion has no effect upon the merits of the transaction itself or upon any IRS action in that regard. So, advisors may need to dial back on any “irrational exuberance” inspired by the promoters and carefully parse the language of the proposed regulation in toto.

The proposed regulation in fact raises the temperature in this area by identifying some deals as “listed transactions”; Notice 2016-66 had only classified its described deals as “transactions of interest.” From the IRS’s perspective, it might be said that the former category is more suggestive of abuse due to its attributes while the latter is less so but still subject to scrutiny. In any event, falling into either category means becoming subject to reporting requirements, under either I.R.C. §§ 6707, 6662A, or 6707A.

For a micro-captive “listed transaction,” the definition depends on either having a “financing factor” (financing by guarantee, loan, or other transfer of the captive insurance company’s capital), Prop. Treas. Reg. § 1.6011-10(c)(1), or a “loss ratio factor” below 65 percent, Prop. Treas. Reg. § 1.6011-10(c)(2). That test is met when total insured losses and claim administration expenses are less than 65 percent of total premiums earned less policyholder dividends. Thus, broadly, if an insurance company pays $60 in claims for every $100 in collected premiums, its loss ratio is 60 percent with a profit ratio of 40 percent. See michigan.gov/difs.) Under Notice 2016-66, the applicable marker was 70 percent.

Now the computation period during which such loss ratio is measured has been elongated under the proposed regulation supposedly to allow for some lenity. As the purpose of the proposed regulation is to “identify transactions involving circumstances inconsistent with insurance in the commonly accepted sense,” the pricing of premiums “far in excess of what is reasonably needed to fund insurance operations results in a lower loss ratio and is a strong indicator of abuse.” In the Federal Register explanation of the proposed regulation, the IRS accepts the possibility, however, that a captive insurance company with a loss history of fewer than ten taxable years could have a loss ratio below 65 percent, which result may not be due to abuse. Using a computation period of ten taxable years or greater in determining the loss ratio factor “allows Captives significant time to develop a reasonable loss history that supports the use of Captive for legitimate insurance purposes.”

Thus, for a captive insurance company in existence fewer than ten taxable years, including short taxable years and taxable years of predecessor entities, these “listed transaction” provisions do not apply. But while a captive insurance company in existence fewer than ten taxable years may avoid the definition of a micro-captive “listed transaction,” it may still default to a “transaction of interest,” because the applicable computation period is “the most recent nine taxable years, or the entire period of the Captive’s existence if Captive has been in existence for less than nine taxable years.” Prop. Treas. Reg. § 1.6011-11(b)(2).

The proposed regulation also expands on Notice 2016-66’s definition of a captive by providing that derivatives and interests in the assets of the captive are now to be taken into account in meeting the 20 percent related-interest threshold. Prop. Treas. Reg. §§ 1.6011-10(b)(1)(A)-(C) and 1.6011-11(b)(1). The IRS had found transactions were being structured so that the insured company, the owners, or related persons without a direct or indirect interest in the captive’s voting power or value or its outstanding stock or equity interests, were nonetheless obtaining substantially similar benefits and risk, and so improperly avoiding the 20 percent threshold.

Probably the most dramatic change in the proposed regulation is the creation of an exception for Consumer Coverage arrangements. Prop. Treas. Reg. §§ 1.6011-10(d)(2) and 1.6011-11(d)(2). According to the professional literature, the provision was primarily lobbied for by automobile dealer groups, and, hence, they are specifically mentioned in the text of the regulation, along with references to “extended warranties.” But the broad intent behind the exception appears to be that where the unrelated customer is the ultimate beneficiary, the risk of abuse is low. See IRS Hearing Transcript on Microcaptive Transactions, Tax Notes Today, July 19, 2023. But it is a good question of whether this exception is anything but a king-size “comfort ruling” dearly paid for by an industry group, as such covered scenarios would have likely fallen outside the general definitions anyway.

The IRS hinted that the proposed regulation would be finalized before the end of 2023, which did not come to pass. So, once again, taxpayers are in limbo, both the place and the game.

Our Recommendations for Complying with The Corporate Transparency Act

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Kim & Rosado LLP recommends that all businesses take the following steps:

1.  Determine if your entity is a reporting company that is required to file a Beneficial Ownership Information Report.

2.  Determine whether your entity is one of the 23 types of entities excepted from beneficial ownership information reporting.

3.  Determine who the beneficial owners of the business are.

4.  Consider amending your business’s governance documents to require all beneficial owners to comply with the beneficial ownership information reporting process (and provide remedies for noncompliance).

5.  Ensure that each beneficial owner has an acceptable, non-expired identification document.

6.  Encourage each beneficial owner to apply for a FinCEN identifier as soon possible.

7.  Develop an internal beneficial ownership information reporting program to ensure that the company stays in compliance and files timely updated beneficial ownership information reports.

8.  Dissolve any inactive entities to avoid the ongoing costs of beneficial ownership information reporting.

Lastly, we recommend that you work with qualified attorneys to meet your beneficial ownership information filing requirements.

By the Numbers: The Corporate Transparency Act and the Probable Impact to IRS Global High Wealth Taxpayer Audits Beginning in 2024

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Back in 2009, the IRS formed the Global High Wealth (GHW) unit focusing on taxpayers who had elevated income and a complexity in their financials that warranted a “holistic approach.” From 2009 through 2022, our wise partner Tony Kim served as one of five IRS attorneys working to support this new unit. He found that understanding how a web of partnerships, domestic and foreign trusts, offshore accounts and corporations linked to reveal a GHW taxpayer’s true taxable income was no easy task. But, the IRS first had to find these dots to connect them.

The IRS’s Data Book shows that the agency struggled with GHW audits. IRS Data Book Table 17. As of fiscal year 2010, 13,322 tax returns were filed by taxpayers who had total positive income of $10,000,000 or more – that’s the range to fall within this GHW population. IRM 4.52.1.2. From that number, 21.5% of the returns were audited with an average recommended adjustment of $610,397. Fast forward to fiscal year 2019, where the number of GHW tax returns filed grew to 24,457, resulting in just 10.2% audit coverage with an average recommended adjustment of $49,805. If the GHW division was a stock, we’d probably sell and take a loss. Before we do, let’s look under the hood for a moment.

In building a GHW case, the IRS prepares a review a “yK-1 analysis” for each taxpayer to gain an overview of the taxpayer enterprise that includes the taxpayer’s Form 1040 and all related entities. From this interactive link analysis of the GHW taxpayer and all of their web of entities, the IRS could then review the entire enterprise and consider how to build the case. IRM 4.52.1.1.5(1); IRM 4.52.1.3. The trouble with building this yK-1 analysis is that the IRS needs information on a GHW taxpayer’s web of entities. And, a GHW taxpayer’s ownership information in various entities is elusive.

The GHW unit’s audit results may increase dramatically in the coming years due to the recently enacted Corporate Transparency Act (CTA). Congress added the CTA section, 31 U.S.C. § 5336, to the Bank Secrecy Act to address the broader objectives of beneficial ownership transparency. The CTA requires certain types of domestic and foreign entities, called “reporting companies,” to submit specified beneficial ownership information (BOI) reports to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Treasury, that is charged with safeguarding the U.S. financial system from money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence. All of the information that connects GHW taxpayers to their holdings so critical to a yK-1 analysis will soon become available to the IRS beginning in 2024 when taxpayers are required to file BOI reports with FinCEN. The CTA provides, “[b]eneficial ownership information shall be accessible for inspection or disclosure to officers and employees of the Department of the Treasury . . . .” Couple the CTA with the additional funding provided by Congress in the Inflation Reduction Act that will lead to the hiring of more revenue agents and you have the stage set for quite a dramatic change to the landscape of GHW taxpayer audits beginning in 2024.