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The Exchange of Tax Information Portal is an initiative of the Global Forum on Transparency and Exchange of Information for Tax Purposes. The Global Forum conducts peer reviews of its member jurisdictions' ability to co-operate with other tax administrations in accordance with the internationally agreed standard. The standard provides for exchange of information on request where it is foreseeably relevant to the administration and enforcement of the domestic tax laws of the requesting jurisdiction. Effective exchange of information requires that jurisdictions ensure information is available, that it can be obtained by the tax authorities and that there are mechanisms in place allowing for the exchange of that information. The Global Forum's peer review process examines both the legal and regulatory aspects of exchange (Phase 1 reviews) and the exchange of information in practice (Phase 2). The EOI Portal will track the development of these peer reviews, including changes that jurisdictions make in response to the Global Forum's recommendations.

Peer Review: United States Second Round Review (2018)

This report for United States has been published on 16 Jul 2018. You can browse it online below.

Skip directly to the Executive Summary. You may also want to view the tables of determinations and ratings.


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Determinations and Recommendations

Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities. (ToR A.1)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   Certain beneficial ownership information (i.e. identification of the responsible party) is required to be provided by companies (including LLCs) and partnerships upon registration with the IRS. However, not all beneficial owners are required to be identified in line with the standard. Beneficial ownership information is also required to be available with certain financial institutions (including banks) but the requirements to identify the beneficial owner(s) of a customer are not fully in line with the standard. Further, all entities are not required to engage such a financial institution.  The United States should take further measures to ensure that all beneficial owners of all relevant entities and arrangements are identified in line with the standard.  
Although the United States law requires identification of the settlor, the trustee, beneficiaries, and any person who exercises control over the trust through a combination of obligations imposed primarily under the state law, federal tax law, and common law; none of these obligations explicitly requires identification of all the beneficial owners of trusts as required under the standard (i.e. including the identity of any other natural person exercising ultimate effective control over the trust through a chain of entities or arrangements).  The United States should ensure that all beneficial owners of trusts are required to be identified in line with the standard. 
Phase 2 Rating Factors Recommendations
Partially Compliant.  Although certain beneficial ownership information in respect of companies, partnerships and trusts is required to be reported to the IRS, supervisory measures to ensure that the beneficial ownership information is adequate, accurate and up to date are not sufficient.   The United States should strengthen its measures to ensure the availability of beneficial ownership information in practice in line with the standard.  
Federal tax law requiring all single-member foreign-owned LLCs to report and maintain ownership information is very recent, untested, and covers new persons who were previously not required to register and report to the IRS.  The United States should monitor the implementation of the new law to ensure that legal ownership information of all single-member LLCs is available. 
Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements. (ToR A.2)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Largely Compliant.  Federal tax law subjects all single-member foreign-owned LLCs to tax filing obligations and requires them to maintain accounting information. These requirements are very recent and cover new persons who were previously not required to register and report to the IRS. Although the IRS carries out significant number of supervisory activities, the extent to which they ensure availability of accounting information is not clear, particularly in respect of underlying documentation.   The United States should monitor the implementation of the new requirements to ensure that accounting records and underlying documentation of all single-member foreign-owned LLCs are available. The United States should strengthen its measures to ensure that accounting information is being maintained by relevant entities (including single-member LLCs) and arrangements in line with the standard in all cases.  
Banking information should be available for all account-holders. (ToR A.3)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   The United States has introduced rules requiring banks to identify beneficial owners of customers that are entities. These rules ensure that beneficial ownership is available in respect of all account-holders except in certain limited cases. In particular, there may be cases where the person identified may not be the beneficial owner as defined under the standard; where the account holder is controlled by a trust (or any arrangement considered as a trust under applicable U.S. law) the beneficial owner will be considered the trustee (or the person considered to be the trustee under applicable U.S. law); or beneficial ownership information may not be necessarily available in respect of some pre-existing accounts where the identification of the account-holder has not yet been updated.  The United States should ensure that beneficial ownership information is available in line with the standard for all account-holders that are entities. 
The U.S. rules do not ensure identification by banks of all beneficial owners of account-holders who are trusts (or any arrangement considered as a trust under applicable U.S. law). According to the U.S. rules banks are required to identify only a trustee (or the person considered to be the trustee under applicable U.S. law) of the trust where the account is opened in the name of the trust.   The United States should ensure that banks identify and verify the identity of all beneficial owners of a trust which have an account with a bank in the United States in line with the standard. 
Phase 2 Rating Factors Recommendations
Largely Compliant.  Federal rules which require banks to identify and verify beneficial ownership of legal entity customers bring substantive broadening of banks' obligations to identify beneficial owners of account-holders. As the new obligations only took effect from May 2018, their implementation in practice is not yet tested.  The United States should monitor the new obligations to identify beneficial owners of banks' account-holders to ensure they are properly implemented in practice.  
Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information). (ToR B.1)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
The rights and safeguards (e.g. notification, appeal rights) that apply to persons in the requested jurisdiction should be compatible with effective exchange of information. (ToR B.2)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
Exchange of information mechanisms should provide for effective exchange of information. (ToR C.1)
Determination Factors Recommendations
The element is in place, but certain aspects of the legal implementation of the element need improvement.   Since July 2010, the United States has not ratified any signed EOI agreement that requires U.S. ratification. Of these EOI instruments, only the ratification of the 2010 Protocol to the Multilateral Convention and the DTC with Viet Nam directly impacts the U.S. ability to exchange to the standard. It is noted that the United States is able to enter into a TIEA without going through a domestic ratification process. Nevertheless, as a result the United States currently does not have an EOI relationship in force with 38 out of 129 its EOI partners. While peers have not indicated that this has been an issue, the absence of ratification would prevent EOI in practice with these partners.  The United States should ratify its signed EOI agreements, including the 2010 Protocol to the Multilateral Convention, expeditiously so that all its EOI relationships are in force and, in the meantime, expeditiously pursue any alternative means to ensure effective EOI arrangements that meet the standard are in force with affected jurisdictions.  
Phase 2 Rating Factors Recommendations
Largely Compliant.     
The jurisdictions' network of information exchange mechanisms should cover all relevant partners. (ToR C.2)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
The jurisdictions' mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received. (ToR C.3)
Determination Factors Recommendations
The element is in place.   A summons notice requires disclosure of the name of the taxpayer, the taxpayer's contact information and the tax year to which the requested information relates. While the disclosure of the name of the taxpayer and the tax year to which information relates is usually necessary to describe the requested information, and in the majority of cases the requested information is obtained through alternative means (e.g. an IDR), nevertheless the disclosure of this information may not always be necessary to the description of the requested information.   The United States should ensure that only the minimum information necessary to obtain the requested information is disclosed to information holders.  
Phase 2 Rating Factors Recommendations
Compliant.     
The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties. (ToR C.4)
Determination Factors Recommendations
The element is in place.      
Phase 2 Rating Factors Recommendations
Compliant.     
The jurisdiction should provide information under its network of agreements in a timely manner. (ToR C.5)
Determination Factors Recommendations
The assessment team is not in a position to evaluate whether this element is in place, as it involves issues of practice that are dealt with in the Phase 2 review.   The assessment team is not in a position to evaluate whether this element is in place, as it involves issues of practice that are dealt with in the implementation of EOIR in practice.   
Phase 2 Rating Factors Recommendations
Largely Compliant.  The United States response times have increased since the first round review, as well as throughout the current period under review, with 30% of requests received throughout the current period responded to within 90 days. Although the United States took certain positive steps, the time taken to provide a response to a request does not ensure effective exchange of information in all cases as was also pointed out by a few peers.   The United States should speed up the provision of the requested information.