On September 4th, the IRS announced that the offshore voluntary disclosure program (“OVDP”) comes to an end on September 28, 2018, as announced in March 2018.
On September 4, 2018, the IRS reminded taxpayers that the streamlined programs often called the “Streamlined Foreign Offshore” program for those residing outside of the U.S. and the “Streamlined Domestic” program for those residing in the U.S., may also end.

Therefore as with the announcement in March 2018 on the OVDP, is it possible that the streamlined programs will also end, say in about 6 months?

The streamlined foreign offshore program has been an effective program to get delinquent U.S. tax filers compliant or up to date with the filing of 3 years of past-due (income tax and foreign information) returns and 6 years of past-due FBARs (FINCEN114) without certain penalties. It has also served to amend or correct already filed returns.

The “sprinkling” proposals issued in July 2017 were amended in December 2017 effective for the 2018 taxation year.
As you may recall, the July proposals were designed to tax at the top rate, individuals now over age 18 who are in receipt on what is called “split income” or TOSI (tax on split income). Before 2018, the TOSI was called a “kiddie tax”.
For 2018, the TOSI rules extend to family members who are not active in the business that are receiving dividend income on any type of shares they hold and on capital gains on the sale of shares that are not qualified small business corporation shares. The pre-2018 rules applying to those under age 18 did not extend to capital gains on the sale of shares.
The rules will extend to income derived indirectly from a family trust however the initial proposal to deny the multiplication of the capital gains exemption to beneficiaries has been removed and other previously proposed complexities.
Family members for purposes of the revised rules will not extend to aunts, uncles, nieces and nephews.
To simplify matters, the December revisions provide for certain exclusions for those who hold shares of an “excluded business”, hold “excluded shares”, or the payment qualifies as a “reasonable return”.
The first test has a 20-hour work week with some limitations.
The second test excludes payor corporations if it earns less than 90% of its business income from the provision of services, and it is not a professional corporation, and the individual is over age 25 and owns shares with 10% votes and value.
On the third test, if the individual is over age 24, the income is not TOSI if the payment represents a “reasonable return” based on certain criteria. If the individual is age 18-24, there is a safe harbor capital return or now a reasonable return having regard to contributions of arm’s length capital.
TOSI exemptions also apply to income recipients who are retired if over age 64 if they would have qualified under the foregoing exclusions. The non-retired spouse who is not over 64 will qualify if the retired spouse over age 64 would have qualified. Exemptions also extend to those who have inherited property from individuals that were exempted from the TOSI rules.
The legislation will not apply the 2018 TOSI rules for 2018 where restructuring is done by the end of the year that would cause the shareholder to hold “excluded shares” at some time in 2018. In this regard, those individuals holding say non-voting discretionary special/preferred shares that can’t meet the “excluded business” test or hold their shares through a family trust will have to be part of a corporate reorganization that ultimately results in them directly holding shares (likely common shares) that represent in aggregate, 10% votes and value.
Every profile/situation is different and professional advice is highly recommended in dealing with the TOSI rules.

On December 20, 2017 the “Tax Cuts and Jobs Act was passed in the United States.
CFC’s (controlled foreign corporations) or say Canadian corporations that are controlled by U.S. corporations, or by U.S. citizens or by green card holders will no longer have the luxury of deferring U.S. income tax on active business income. These are the most significant amendments to Subpart F of the Internal Revenue Code.
This transition tax is effective for 2017 for Canco’s with tax years ending on December 31, 2017; otherwise it is effective in 2018 for tax years ending in 2017 but prior to December 31, 2017.
For the following year after this transition tax is effective, a similar taxation under what is called GILTI (or “Global-Intangible Low-Taxed Income”) will apply to that year’s and the following years’ earnings.
The transition tax due this April 17th basically looks at Canco’s undistributed earnings and profits computed at two measurement dates, November 2 & December 31st and selects the greater amount. There is a procedure to pay the transition tax in eight annual instalments.
For the transition tax, a deduction is available from the computation of undistributed E&P, based on prescribed computations that reflect a portion of the undistributed E&P composed of cash assets and other assets. For an individual in the top U.S. marginal tax bracket, the effective tax on undistributed E&P from cash assets is about 17.54% and from non-cash assets it is about 9.06%.
For the GILTI taxation effective for the following year, there presently is no prescribed deduction available to individual shareholders.
The net inclusion arising from the foregoing is treated as “other income” on your U.S. tax return and not as a dividend distribution. If a dividend is paid for the taxation year, it is not taxed if it is regarded as PTI (“previously taxed income”) under the new rules or under the other subpart F rules (that are still there for passive-type income). If there is a distribution in excess of the foregoing income inclusions, it is treated as a dividend to which you may have current Canadian tax thereon, available to claim a current year’s foreign tax credit on your U.S. tax return.
Any inclusion from these new rules has an increase in basis of your shares and any distribution is a reduction to the shares which is supposed to alleviate double taxation on the sale of your shares from the U.S. perspective.
Because the income inclusion is foreign source from a U.S. perspective, if you have certain foreign tax carryovers available from prior years, you can use them to soak-up this transition/GUILTY tax. This will be important if you have not received any distributions/dividends during the year. Again, the composition of your adjusted gross income for U.S. tax purposes will ultimately affect the bottom line as the foreign tax credit allowed for a year is limited to the otherwise U.S. tax is on the foreign source income.
Going forward, it appears to avoid double taxation and the potential mismatch of foreign tax credits as a result in paying tax in one country in one year but not paying tax on the same income to the other country in a latter year, it may be advisable to either commence paying annual dividends or salaries to minimize your exposure. Every situation is different and professional advice is highly recommended.
This new taxation regime is very complex, and we are still waiting for clarification on several matters and the revised IRS Form 5471, which the U.S. foreign information return that carries the minimum $10,000U.S. penalty for not filing.