June 2022 / United States

On 17 June 2022, the Financial Action Task Force (FATF) issued its updated lists of jurisdictions that have strategic deficiencies in their regimes for anti-money laundering, countering the financing of terrorism, and countering the financing of proliferation of weapons of mass destruction (AML/CFT/CPF).

The FATF added Gibraltar to its list of Jurisdictions under Increasing Monitoring and removed Malta therefrom. The FATF's list of High-Risk Jurisdictions Subject to a Call for Action remains the same, with Iran and the Democratic People's Republic of Korea (i.e. North Korea) thereon.

The FATF is an intergovernmental body that was founded in 1989 on the initiative of the G7 countries to establish international standards for AML/CFT/CPF. It publicly identifies:

• Jurisdictions under Increased Monitoring, which refer to jurisdictions with strategic deficiencies in their AML/CFT/CPF regimes that have committed to, or are actively working with, the FATF to address those deficiencies in accordance with an agreed-upon timeline; and
• High-Risk Jurisdictions Subject to a Call for Action, which refer to jurisdictions with significant strategic deficiencies in their AML/CFT/CPF regimes to which enhanced due diligence, or in the most serious case, countermeasures must be applied.

The US Financial Crimes Enforcement Network (FinCEN) announced the update in its 23 June 2022 news release, urging US financial institutions to consider the FATF's stance toward the listed jurisdictions when reviewing their obligations (including the due diligence obligations) and risk-based policies, procedures and practices.

The FinCEN noted that US financial institutions must comply with the extensive US restrictions and prohibitions against opening or maintaining any correspondent accounts, directly or indirectly, for North Korean or Iranian financial institutions.

In a 7 June 2022 testimony before the US Senate Finance Committee on the Biden Administration's fiscal year (FY) 2023 budget proposals, US Treasury Secretary Janet Yellen appealed to the US Congress to implement the global minimum tax as part of its legislative agenda.

Secretary Yellen highlighted that the global agreement on international tax reform, agreed to last year by 137 countries representing about 95% of the world's GDP, would level the playing field, ensure that corporations share their fair burden of financing government and raise crucial revenues that could be used in investing in security and crisis response.

In addition, Secretary Yellen stated that she is looking forward to working with the US Congress to ensure progress in "[b]uilding a fair and stable tax system that promotes broadly shared growth" which is crucial to "adequately funding investments and to reducing deficits and debt." She noted that the proposed FY 2023 budget investments have more than enough funding "through tax code reforms requiring corporations and the wealthiest Americans to pay their fair share, closing loopholes, and improving tax administration."

She also thanked the US Congress for supporting the Department's endeavours in responding to "Russia's illegal and unprovoked war against Ukraine" and providing USD 40 billion in security, economic and humanitarian aid for Ukraine.

The US Department of Treasury's Office of Foreign Assets Control (OFAC) has clarified the US's prohibition against providing accounting, trust and corporate formation and management consulting services (covered services) to persons in Russia. The White House announced the prohibition last month after President Joe Biden and G7 leaders met through a virtual conference with Ukraine President Volodymyr Zelensky and committed to take further measures to "strengthen Ukraine's position on the battlefield and at the negotiating table".

The OFAC issued clarification on the prohibition of covered services through the Treasury's FAQs on the Financial Sanctions webpage on 9 June 2022 (US Dept. of Treasury: Financial Sanctions FAQ). According to the OFAC, the prohibition applies to:

• tax preparation and filing services to any person in Russia, unless otherwise exempt or authorized by the OFAC;
• nominee officer or director services in which a US person is contracted to serve as a nominee officer, director, shareholder, or signatory of a legal person on behalf of a person located in Russia;
• services to a parent company located in Russia by a US subsidiary;
• trust and corporate formation services to persons located in Russia, regardless of whether the services are performed as part of the formation of a new trust or company, or as part of the administration or maintenance of an existing trust or company;
• services related to strategic business advice, organizational and systems planning, evaluation, and selection, development or evaluation of marketing programs or implementation, mergers, acquisitions, and organizational structure, staff augmentation and human resources policies and practices and brand management; and
• voting trustee services on behalf of, or for shares of, persons located in Russia, unless otherwise exempt or authorized by the OFAC.

In addition, the FAQs clarify that the prohibition does not apply to providing services:

• to persons located outside Russia that are owned or controlled by persons located in Russia, provided that the benefit of the services is not ultimately received by (i.e. an indirect export to) a person in Russia;
• as members of the board of directors of a company located in Russia;
• other than the covered services;
• on education (e.g. online university courses) regarding the subjects of the covered services to persons located in Russia, provided that they do not evade or avoid the prohibition on providing the underlying services; and
• associated with the export of software (e.g. software design and engineering) related to the covered services.

WASHINGTON — The Internal Revenue Service announced today that more forms can now be amended electronically. These include people filing corrections to the Form 1040-NR, U.S. Nonresident Alien Income Tax Return and Forms 1040-SS, U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico) and Forms 1040-PR, Self-Employment Tax Return – Puerto Rico.

"This initiative has come a long way from 2020 when we first launched the ability to file amended returns, which was an important milestone to help taxpayers and the tax community," said IRS Commissioner Chuck Rettig. "This new feature will further help people needing to make corrections. This development will also assist the IRS with its inventory work on the current backlog of amended returns. This is another tool we're using to help get us back on track."

Additionally, a new, electronic checkbox has been added for Forms 1040/1040-SR, 1040-NR and 1040-SS/1040-PR to indicate that a superseding return is being filed electronically. A superseded return is one that is filed after the originally filed return but submitted before the due date, including extensions.

Taxpayers can also amend their return electronically if there is change to their filing status or to add a dependent who was previously claimed on another return.

About 3 million Forms 1040-X are filed by taxpayers each year. Taxpayers can still use the Where's My Amended Return? online tool to check the status of their electronically-filed Form 1040-X.

Forms 1040 and 1040-SR can still be amended electronically for tax years 2019, 2020 and 2021 along with amended Form 1040-NR and corrected Forms 1040-SS and Form 1040-PR for tax year 2021.

In general, taxpayers still have the option to submit a paper version of the Form 1040-X and should follow the instructions for preparing and submitting the paper form.

The IRS continues to look at this important area, and more enhancements are planned for the future.

The US Supreme Court's landmark 2018 South Dakota v. Wayfair decision has increased state sales tax revenues as well administrative compliance costs for multi-state businesses according to a recent report from the US Government Accountability Office (GAO). The GAO presented its findings to the US Senate Finance Committee on 14 June 2022.

According to the GAO report, state revenue collections from remote sales increased steadily from USD 3.2 billion in 2018 to USD 23.1 billion in 2021 following the Wayfair decision. Collections from marketplace sales similarly increased from USD 344 million in 2018 to USD 9.5 billion (41% of total collections were from remote sales reported that period) in 2021.

The GAO also reported that during the same period, businesses incurred increased costs associated with multi-state sales tax collection compliance, such as:

• software-related costs for expanded multi-state collection;
• audit and assessment costs due to increased exposure to more tax jurisdictions; and
• research and liability costs to stay current.

During the 14 June 2022 Senate Finance Committee hearing, Committee Chairman Ron Wyden (D-OR) called on his fellow lawmakers to provide small businesses relief as long as the Wayfair decision stands, in response to the GAO's findings. Chairman Wyden asked for "clear, standardized rules that lay out what states can require of small businesses outside their borders." Committee Ranking Member Mike Crapo (R-ID) also advocated for "a more efficient and less burdensome approach" to sales tax collection for the benefit of small businesses.

Note: As of June 2021, all 45 states with a state-wide sales tax and the District of Columbia have adopted requirements governing sales tax collection by remote sellers based on an economic presence (e.g. a certain amount of sales into the state), as opposed to a physical presence standard. All except one state also adopted requirements shifting primary tax collection obligations from remote sellers to marketplace facilitators (e.g. Amazon, eBay, and Etsy).