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  • Minutes of the Meeting of the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association October 30

    Minutes of the Meeting of the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association October 30




    (October 31, 2018) - - The Committee convened in a closed session at the Hay-Adams Hotel at 9:00 a.m. All members, with the exception of Terrence Belton and Irene Tse, were present. Counselor to the Secretary Craig Phillips, Deputy Assistant Secretary for Federal Finance Brian Smith, Director of the Office of Debt Management Fred Pietrangeli, and Deputy Director of the Office of Debt Management Nick Steele welcomed the Committee. Other members of Treasury staff present were Ayeh Bandeh-Ahmadi, Chris Cameron, Dave Chung, Tom Katzenbach, Devin O’Malley, Peter Phelan, Renee Tang, and Brandon Taylor. Federal Reserve Bank of New York staff members Lorie Logan, Nathaniel Wuerffel, Susan McLaughlin and Jake Schurmeier were also present. Director Pietrangeli opened the meeting with an overview of the fiscal situation. Pietrangeli noted that FY2018 receipts were little changed year-over-year, rising just $14 billion. Non-withheld income and SECA taxes increased by $89 billion in FY2018, with the bulk of the increase occurring in April for CY2017 tax liabilities. Withheld income and FICA taxes rose by $23 billion, reflecting growth in both employment and wages. The gains were largely offset by a $76 billion decrease in corporate taxes, a 22 percent decline year-over-year. Corporate refunds also increased by $17 billion, a 39 percent increase year-over-year. Outlays totaled $4,108 billion over the same timeframe, an increase of five percent. Notable increases include $83 billion for Treasury related to interest on the public debt and a decline in receipts from Government-Sponsored Enterprises, $43 billion for increased enrollment and increased average benefit payments for Social Security, $41 billion for Health and Human Services due mostly to increases in Medicare, $36 billion due to increased Defense expenditures, and $18 billion for the Department of Homeland Security including increased payments for disaster relief. Pietrangeli then turned to the near-term fiscal outlook, highlighting the most recent annual marketable borrowing estimates from the Office of Management and Budget, the Congressional Budget Office, and the primary dealers. All of the forecasts indicate a substantial funding gap in FY2019 and subsequent years. Estimates regarding the timing of the end of SOMA Treasury portfolio redemptions is a key factor for primary dealers in forecasting borrowing amounts over the next three fiscal years. Turning to the prior quarter, Pietrangeli noted that in the July- to-September quarter, Treasury was able to address its significant funding needs, some of which was seasonal, through coupon auction increases announced in FY2018, as well as through net bill issuance of $82 billion. Looking ahead, the recently announced privately-held net marketable borrowing estimates of $425 billion for the October-to-December 2018 quarter and assuming an end-of-December cash balance of $410 billion, indicates net bill issuance of $116 billion assuming coupon sizes are held constant at August 2018 levels. Next, Deputy Assistant Secretary Smith discussed the introduction of the new benchmark two-month bill. Smith noted that the auctions have been well received, with above average bid-to-cover ratios and stop-out rates in line with the yield curve. Smith then summarized for the Committee the feedback from primary dealers in response to the recent quarterly refunding agenda discussion topics. On the topic of the Treasury Market Practices Group’s (TMPG) White Paper on Clearing and Settlement, primary dealers generally agreed that the paper represented a thorough study of the topic and outlined a number of potential risks to the clearing and settlement process. Primary dealers focused on the volume of bilaterally cleared trading and intraday credit extension. Primary dealers suggested a number of policy recommendations for consideration, including expanding the use of central clearing, evaluating margins for bilateral trading, changing settlement timing, and increasing transparency regarding counterparties’ clearing and settlement practices. Smith strongly endorsed the TMPG’s work in this area and reiterated Treasury’s commitment to supporting the robustness of clearing and settlement practices in the Treasury market. Next, Smith summarized primary dealer feedback on the likely timing for the end of SOMA’s balance sheet normalization and the composition of Treasury securities in the SOMA portfolio after normalization. Primary dealers provided a range of estimates for the most likely timing of the end of normalization, while relaying that their estimates were subject to a substantial amount of uncertainty. Once normalization ends, dealers expect the Federal Reserve will reinvest SOMA mortgage-backed security principal payments into Treasury securities along with the purchases of Treasury securities necessary to offset currency growth. Finally, many dealers indicated the Federal Reserve would likely pursue a roughly market-weighted portfolio composition after normalization, though the balance of risks was seen as skewed toward a shorter-duration portfolio. The Committee agreed that the outlook is uncertain and that Treasury should continue to monitor expectations for the end of SOMA portfolio normalization closely to assess the potential impact to the financing outlook. Counselor Phillips then provided an update on Treasury’s efforts regarding secondary market transaction data for Treasury securities collected through FINRA’s TRACE. Phillips noted that the initial outreach phase with market participants had concluded and that Treasury was continuing to analyze the data to inform the policy decision-making process. Phillips noted that no decision has been made at this time and that Treasury plans to provide further details on this topic at the 4th Annual Conference on the Evolving Structure of the U.S. Treasury Market on December 3rd. Next, the Committee turned to a presentation updating the TBAC debt issuance model to incorporate Treasury Inflation-Protected Securities (TIPS). The presenting member emphasized that the modeling results do not constitute a specific recommendation but rather provide an approach to analyze cost and risk trade-offs under various assumptions. According to the model, debt service costs for TIPS are typically lower but more volatile than that of equivalent maturity nominal securities. Furthermore, similar to the nominal model, five-year TIPS offer a cost advantage over longer-maturity issuance. The Committee followed the presentation with a discussion, generally agreeing that the conclusions were in line with their previous recommendations to gradually increase TIPS issuance to maintain the current proportion of TIPS relative to nominals, focusing increases in the 5-year maturity. Deputy Director Steele then discussed primary dealers’ expectations for issuance over the next quarter. Dealers broadly expected an increase in coupons similar to those announced in August, with a risk towards slightly smaller increases. Most dealers also expected Treasury to announce the new October 5-year TIPS maturity and remove the October 30-year TIPS reopening in the 2019 issuance calendar, while maintaining the overall share of TIPS issuance near its recent levels through gradual increases in auction sizes. The Committee concurred that increased TIPS issuance would be well received and estimated that a range of $20 to $30 billion in additional TIPS issuance in 2019 would maintain TIPS shar...
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  • Acting Assistant Secretary Diana Furchtgott-Roth Economy Statement for the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association

    Acting Assistant Secretary Diana Furchtgott-Roth Economy Statement for the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association



    (October 29, 2018) - - Today the U.S. Department of the Treasury published the following "Acting Assistant Secretary Diana Furchtgott-Roth Economy Statement for the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association" document:

    The U.S. economy grew 3.5 percent in the third quarter, according to last week’s advance estimate. This pace confirmed the economy’s strong growth in the wake of the Administration’s tax reforms, deregulatory measures, and other business-friendly policies. Real GDP is forecast to grow 3.2 percent in 2018, which would be the first calendar year of growth above 3 percent since 2005.

    Further accelerations in private consumption and a strong build in private inventory were the main drivers of solid economic performance in the third quarter, followed by a larger positive contribution from government spending. Private non-residential fixed investment made a small positive contribution in the third quarter, although residential investment continued to decline, and net exports also subtracted from growth. Altogether, private domestic final purchases (the sum of consumption, business fixed investment, and residential investment) advanced by 3.1 percent in the third quarter, following 4.3 percent growth in the second quarter.

    In the second quarter, for the first time in history, the number of job openings climbed above the number of job seekers, and this configuration, considered indicative of a tight labor market, has continued in the third quarter. In fact, the average monthly pace of job creation continues to exceed that of 2017. The unemployment rate fell to a 49-year low of 3.7 percent in September, and growth of nominal wages and personal income continues to trend higher, with progress also apparent in real wage gains. Measures of consumer and business sentiment remain at, or very near, multi-year highs. Private forecasters are predicting solid growth in the fourth quarter as well as for the year as a whole.

    GDP Growth According to the advance estimate of real GDP, which was released last Friday, the U.S. economy grew at an annual rate of 3.5 percent in the third quarter, a strong pace if slower than the second quarter’s 4.1 percent surge. Private domestic final purchases – the sum of personal consumption, business fixed investment, and residential investment – grew in the third quarter at an annual rate of 3.1 percent, following a 4.3 percent rise in the second quarter. This measure of private demand has held above 3 percent in all but two of the last seven quarters. Over the past four quarters, private domestic final purchases have grown by 3.4 percent at an annual rate, well above the 2.7 percent average seen over the previous two years. Growth in real personal consumption expenditures accelerated further in the third quarter, growing at an annual rate of 4.0 percent, the fastest quarterly pace in four years, after an already-strong 3.8 percent advance in the second quarter. Outlays on consumer durables drove consumption, rising 6.9 percent at an annual rate, extending the momentum of the second quarter’s 8.6 percent advance. Spending on nondurables was up 5.2 percent in the third quarter, accelerating from the 4.0 percent reading in the previous quarter. Consumption of services also accelerated in the third quarter, to a 3.2 percent annual rate, after growing 3.0 percent in the second quarter. On balance, real personal consumption expenditures added 2.7 percentage points to growth in the third quarter – the largest contribution from this component in nearly four years. Business fixed investment increased 0.8 percent at an annual rate in the third quarter, after increasing 8.7 percent in the second quarter, and added 0.1 percentage point to overall growth. Since the start of 2017, real private nonresidential fixed investment has grown at a quarterly average of 6.6 percent, marking a return to the healthy pace seen in the early years of the recovery. Fixed investment in intellectual property products continued to grow at a healthy, if slower, pace, rising 7.9 percent in the third quarter after a 10.5 percent increase in the second quarter. Investment in this category has grown at an average annual rate of nearly 11 percent per quarter over the past three quarters, the fastest three-quarter clip in such investment seen in 12 years. Although investment in structures declined 7.9 percent in the third quarter after growing at double-digit paces in each of the previous two quarters, the level of investment in structures remains almost 8 percent above its level at the start of 2017. Outlays for equipment grew just 0.4 percent in the third quarter, softening after growing an average annual rate of nearly 9 percent in each of the previous six quarters. As expected, the cycle of inventory accumulation turned strongly positive in the third quarter, adding 2.1 percentage points to real GDP growth. Residential investment retrenched for the third consecutive quarter, declining 4.0 percent at an annual rate and subtracting 0.2 percentage point from growth, after making an essentially flat contribution in the previous quarter. Signs of slowing in the housing sector persist, against a backdrop of low inventories and rising mortgage rates. Existing home sales, which account for 90 percent of all home sales, have declined in each of the past six months, including a 3.4 percent drop in September, and these sales were 4.1 percent lower over the past year through September. New home sales have fallen in five of the past six months, and as of September, were 13.2 percent lower than a year ago. Total housing starts declined 5.3 percent in September, reflecting a 0.9 percent decrease in the single-family sector but also a 15.2 percent decrease in the volatile multi-family component. Although building permits fell below total starts in August, which may suggest the possibility of weaker housing activity in coming months, permits did rise back above starts in September. Homebuilder confidence remains elevated, and in October, stood only six points below the 18-year high reached in December 2017, with current as well as forward-looking components of the survey strengthening. House price appreciation remains relatively strong, exceeding core inflation and income measures, although the pace has slowed relative to a year ago, likely due to notably higher mortgage rates in recent months. Total government spending rose 3.3 percent at an annual rate in the third quarter, accelerating from a 2.5 percent pace in the previous quarter. After making an essentially neutral contribution to growth in most of 2016 and 2017, government spending has added to growth in each of the past four quarters, including a 0.6 percentage point contribution in the third quarter. Federal outlays grew 3.3 percent in the third quarter, after a 3.6 percent rise in the previous quarter, while state and local government spending growth stepped up to a 3.2 percent rate in the third quarter – the fastest pace in more than two years. The U.S. trade deficit widened in the third quarter, as import growth accelerated to an annual rate of 9.1 percent, and export growth slowed to a decline of 3.5 percent annual rate. One reason for the widening of the deficit is that the U.S. economy is growing faster than the economies of the rest of the world, so U.S. domestic demand for imports is stronger. As a result, ne
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  • U.S. Department of the Treasury Announces Marketable Borrowing Estimates

    U.S. Department of the Treasury Announces Marketable Borrowing Estimates




    Washington, DC - - (October 29, 2018) - - The U.S. Department of the Treasury today announced its current estimates of privately-held net marketable borrowing[1] for the October – December 2018 and January – March 2019 quarters:

    During the October – December 2018 quarter, Treasury expects to borrow $425 billion in privately-held net marketable debt, assuming an end-of-December cash balance of $410 billion. The borrowing estimate is $15 billion lower than announced in July 2018. The decrease in borrowing is driven primarily by changes in cash balance assumptions.[2]
    • During the January – March 2019 quarter, Treasury expects to borrow $356 billion in privately-held net marketable debt, assuming an end-of-March cash balance of $320 billion.
    • During the July – September 2018 quarter, Treasury borrowed $353 billion in privately-held net marketable debt and ended the quarter with a cash balance of $385 billion. In July 2018, Treasury estimated privately-held net marketable borrowing of $329 billion and assumed an end-of-September cash balance of $350 billion.2 The increase in borrowing resulted from the higher end-of-quarter cash balance partially offset by higher net cash flows.

    Additional financing details relating to Treasury’s Quarterly Refunding will be released at 8:30 a.m. on Wednesday, October 31, 2018.

    The U.S. Department of the Treasury indicated that Source and Use Tables may be viewed HERE



    Note: The report included explanatory information not published above.


    Credit: U.S. Department of the Treasury
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  • U.S. Departments of the Treasury, Health and Human Services, and Labor Announce Proposal to Expand Access to Quality, Affordable Health Coverage

    U.S. Departments of the Treasury, Health and Human Services, and Labor Announce Proposal to Expand Access to Quality, Affordable Health Coverage



    Washington, DC - - (October 23, 2018) - - The U.S. Departments of the Treasury, Health and Human Services, and Labor today issued a proposed regulation that expands the usability of health reimbursement arrangements (HRAs). HRAs are designed to give working Americans and their families greater control over their healthcare by providing an additional way for employers to finance quality, affordable health insurance. This proposed regulation is in response to President Trump’s Executive Order on “Promoting Healthcare Choice and Competition Across the United States,” and will benefit hundreds of thousands of businesses and millions of workers and their families in the coming years.

    “Today’s proposed regulations will expand the availability of affordable health insurance for hardworking Americans. This fulfills the commitment the President made in his October 2017 Executive Order to foster competition and choice and to provide Americans - especially employees who work at small businesses - with more options for financing their healthcare. Treasury projects that this will benefit hundreds of thousands of employers and millions of workers,” said U.S. Secretary of the Treasury Steven T. Mnuchin.

    “Today’s announcement is another example of President Trump’s delivering on his promise to provide for more affordable healthcare options for the American people. More access to association health plans, short-term insurance, and flexible HRAs complement the work we are doing at HHS to bring down drug prices and lower the cost of healthcare services. Each of these actions is focused on empowering patients through transparency, choices, and competition,” said U.S. Secretary of Health and Human Services Alex Azar.

    “Of those smaller employers that provide health benefits, 81 percent offer only a single option. This proposal is about empowering American workers to have more consumer-driven healthcare choices. Health Reimbursement Arrangements can provide another way for employers to help their employees access quality, affordable health coverage,” said U.S. Secretary of Labor Alexander Acosta.

    HRAs allow employers to reimburse their employees for medical expenses in a tax-favored way. Current regulations, issued by the previous administration, prohibit employers from using HRAs to reimburse employees for the cost of individual health insurance coverage. Undoing that prohibition, the proposed regulation would permit HRAs to reimburse employees for the cost of individual health insurance coverage, subject to certain conditions. These conditions mitigate the risk that health-based discrimination could increase adverse selection in the individual market, and include a disclosure provision to ensure employees understand the benefit.

    Because medical expense reimbursements from HRAs are tax-preferred, HRAs - that workers and their families use to purchase coverage of their choosing - provide the same tax advantage enjoyed by traditional employer-sponsored coverage. The proposed regulation would not alter the tax treatment of traditional employer-sponsored coverage. It would merely create a new tax-preferred option for employers of any size to use when funding employee health coverage. While the employer would fund the cost of individual health insurance coverage, the employee would own the coverage, allowing the employee to keep the coverage even if he or she left the employer and was no longer covered by the HRA.

    In the near term, the proposed regulation, if finalized, would provide opportunities to employers, especially small and mid-size employers who have struggled to offer coverage, to fund the cost of individual health insurance coverage on a tax-preferred basis. The fact is that, currently, many employers simply cannot afford to offer traditional, employer-sponsored coverage to their employees as a result of the significant costs, including the administrative burdens, associated with identifying and managing such health plans.

    Some small businesses and their employees have been hit hard by rising costs, driven in part by Obamacare. For firms that employ 3-to-24 workers, the percentage of workers covered by employer health benefits has fallen from 44 percent in 2010 to 30 percent in 2018. For firms that employ 25-to-49 workers, the percentage of workers covered by employer health benefits has fallen from 59 percent in 2010 to 44 percent in 2018.

    Small and mid-size businesses that continue to offer coverage to their workers generally only make a single plan available. In fact, 81 percent of small employers (fewer than 200 employees), and even 42 percent of large employers, offering health benefits only provide a single coverage option for their employees. The proposed regulation, therefore, could dramatically increase the choices of coverage available for America’s workers and their families.

    In the long term, by increasing choice, the proposed regulation, if finalized, has the potential to spur a truly competitive, value-driven health insurance market that empowers people to shop for their own health plans and, by virtue of consumer choice, drive health plans to deliver higher quality coverage at lower cost. The proposed regulation holds the potential of transformative impact on the health insurance landscape in the coming years.

    Separately, in addition to allowing HRAs to reimburse the cost of individual health insurance coverage, the proposed regulation would allow employers offering traditional employer-sponsored coverage to offer an HRA of up to $1,800 per year (indexed annually for inflation) to reimburse an employee for certain qualified medical expenses, including premiums for short-term, limited-duration insurance plans.

    According to preliminary estimates from the Treasury Department, once employers and employees have fully adjusted to the new rule, roughly 800,000 employers are expected to provide HRAs to pay for individual health insurance coverage to over 10 million employees. It is also possible that this proposed regulation would produce better incentives for both consumers and providers and thus will improve the overall healthcare system, as well as potentially increase workforce investment and wages. Moreover, the proposed regulation would better enable businesses to focus on what they do best - on serving their customers - and not on navigating and managing complex health benefit designs.

    The proposed regulation can be found here, and a fact sheet can be found here.

    Comments on the proposed regulation are requested by December 28, 2018. The regulation, if finalized, is proposed to be effective for plan years beginning on and after January 1, 2020.





    Credit: U.S. Department of Labor
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  • U.S. Department of the Treasury Releases Proposed Regulations on Opportunity Zones Designed to Incentivize Investment in American Communities

    U.S. Department of the Treasury Releases Proposed Regulations on Opportunity Zones Designed to Incentivize Investment in American Communities



    Washington, DC - - (October 19, 2018) - - The Treasury Department today issued proposed guidance related to the new Opportunity Zone tax incentive. The tax benefit, created by the 2017 Tax Cuts and Jobs Act, is designed to spur economic development and job creation by encouraging long-term investments in economically distressed communities nationwide.

    “We want all Americans to experience the dynamic opportunities being generated by President Trump’s economic policies. We anticipate that $100 billion in private capital will be dedicated towards creating jobs and economic development in Opportunity Zones,” said Secretary Steven T. Mnuchin. “This incentive will foster economic revitalization and promote sustainable economic growth, which was a major goal of the Tax Cuts and Jobs Act.”

    The proposed regulations released today clarify what gains qualify for deferral, which taxpayers and investments are eligible, the parameters for Opportunity Funds, and other guidance. The proposed regulations should provide investors and fund sponsors the information they need to confidently enter into new business arrangements in designated Opportunity Zones. The Treasury Department plans on issuing additional guidance before the end of the year.

    The Opportunity Zone incentive offers capital gains tax relief to investors for new investment in designated areas. Investment benefits include deferral of tax on prior gains as late as 2026 if the amount of the gain is invested in an Opportunity Fund. The benefits also include tax forgiveness on gains on that investment if the investor holds the investment for at least 10 years. Opportunity Zones retain their designation for 10 years, but under the proposed regulations, investors can hold onto their investments in Qualified Opportunity Funds through 2047 without losing tax benefits.

    Working with our partners in State and local governments, earlier this year, Treasury certified 8,761 communities in all 50 states, the District of Columbia and five U.S. territories. Nearly 35 million Americans live in areas designated as Opportunity Zones. These communities present both the need for investment and significant investment opportunities.

    Based on data from the 2011-2015 American Community Survey, the designated regions had an average poverty rate of over 32 percent, compared with the 17 percent national average.

    Additionally, the median family income of the designated tracts were on average 37 percent below the area or state median, and had an unemployment rate of nearly 1.6 times higher than the national average.



    Treasury says the guidance may be viewed HERE .



    Credit: U.S. Department of the Treasury
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  • Treasury Releases Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States

    Treasury Releases Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States


    Washington, DC - - (October 17, 2018) - - The U.S. Department of the Treasury today delivered to Congress the semiannual Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States. The Report concluded that while the currency practices of six countries were found to require close attention, no major U.S. trading partner met the relevant 2015 legislative criteria for enhanced analysis during the period covered by the Report. Further, no trading partner was found to have met the 1988 legislative standards during the current reporting period.

    “The Treasury Department is working vigorously to ensure that our trading partners dismantle unfair barriers that stand in the way of free, fair, and reciprocal trade. Of particular concern are China’s lack of currency transparency and the recent weakness in its currency. These pose major challenges to achieving fairer and more balanced trade, and we will continue to monitor and review China’s currency practices, including through ongoing discussions with the People’s Bank of China,” said U.S. Treasury Secretary Steven T. Mnuchin.

    While China’s exchange rate practices continue to lack transparency, Treasury estimates that direct intervention by the People’s Bank of China this year has been limited. However, recent depreciation of the renminbi will likely exacerbate China’s large bilateral trade surplus with the United States. Treasury places significant importance on China adhering to its commitments to refrain from engaging in competitive devaluation and to not target China’s exchange rate for competitive purposes. China could pursue more market-based economic reforms that would bolster confidence in the renminbi.

    Treasury found that six major trading partners continue to warrant placement on the “Monitoring List” of major trading partners that merit close attention to their currency practices: China, Germany, India, Japan, Korea, and Switzerland.

    Today’s Report is submitted to Congress pursuant to the Omnibus Trade and Competitiveness Act of 1988, 22 U.S.C. § 5305, and Section 701 of the Trade Facilitation and Trade Enforcement Act of 2015, 19 U.S.C. § 4421. Treasury is working actively across a broad range of areas to help ensure that trade expands in a balanced way that protects U.S. firms and workers against unfair foreign trade practices. The United States is committed to working towards a fairer and more reciprocal trading relationship with China. To this end, we are engaging China to address its market-distorting policies and practices.

    For more information, see Report .




    Credit: U.S. Department of the Treasury
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  • U.S. Department of the Treasury Targets Venezuelan President Maduro’s Inner Circle and Proceeds of Corruption in the United States

    U.S. Department of the Treasury Targets Venezuelan President Maduro’s Inner Circle and Alleged Proceeds of Corruption in the United States
    Link




    Editor's note: The U.S. Department of the Treasury published the following information:


    Washington, DC - - (September 25, 2018) - - Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated four members of Venezuelan President Nicolas Maduro’s inner circle, including First Lady and former Attorney General and President of the National Assembly Cilia Adela Flores de Maduro. OFAC also targeted a network supporting a key front man for designated President of Venezuela’s National Constituent Assembly (ANC) Diosdado Cabello Rondon, and identified as blocked property a $20 million U.S.-based private jet as belonging to Cabello’s front man.

    “President Maduro relies on his inner circle to maintain his grip on power, as his regime systematically plunders what remains of Venezuela’s wealth. We are continuing to designate loyalists who enable Maduro to solidify his hold on the military and the government while the Venezuelan people suffer,” said Secretary of the Treasury Steven T. Mnuchin. “Treasury will continue to impose a financial toll on those responsible for Venezuela’s tragic decline, and the networks and front-men they use to mask their illicit wealth.”

    Venezuela’s Decline

    By the end of 2018, hyperinflation in Venezuela is projected to reach over one million percent. Three million Venezuelans will have departed Venezuela for neighboring nations to escape widespread poverty and its attendant hardships. The Maduro regime, meanwhile, continues to pursue failed policies and financing schemes to mask the regime’s corruption and gross mismanagement. The United States has imposed sanctions on many who have profited during Venezuela’s decline — like former Executive Vice President Tarek El Aissami (El Aissami) and Cabello — as well as front-men like Rafael Sarria whose relative anonymity is used to the benefit of senior officials.

    The United States will continue to use every available diplomatic and economic tool to support the Venezuelan people’s efforts to restore their democracy. U.S. sanctions need not be permanent; they are intended to change behavior. The United States has made it clear that we will consider lifting sanctions for persons designated under E.O. 13692 who take concrete and meaningful actions to restore democratic order, refuse to take part in human rights abuses, speak out against abuses committed by the government, and combat corruption in Venezuela.

    Maduro’s Inner Circle

    OFAC designated Nicolas Maduro on July 31, 2017. Today’s designations target key current or former officials of the Venezuelan government. Maduro has relied on key figures, such as previously designated Cabello and El Aissami, and those officials being designated today, to maintain his grip on power. Maduro has also installed another member of his inner circle and lifelong member of the Venezuelan military, Vladimir Padrino Lopez, to help ensure the military’s loyalty to the Maduro regime. Finally, Maduro has given Delcy Eloina Rodriguez Gomez and Jorge Jesus Rodriguez Gomez senior positions within the Venezuelan government to help him maintain power and solidify his authoritarian rule.
    • Cilia Adela Flores De Maduro (Flores) is the wife of President Nicolas Maduro. She resigned from her position as a National Assembly Deputy in mid-2017 to run as a candidate for the ANC. Prior to this resignation, Flores was a principal for the Cojedes State in the Venezuelan National Assembly. In February 2017, Flores was a member of the Presidential Commission responsible for the formation and operation of the ANC process. From August 15, 2005 through January 5, 2011, Flores was the President of the Legislative Power (National Assembly). In February 2012, now-deceased former President, Hugo Chavez, appointed Flores as the Attorney General of Venezuela.
    • Delcy Eloina Rodriguez Gomez (Delcy Rodriguez) was delegated the role and authorities of the Executive Vice President of Venezuela on June 14, 2018. On August 4, 2017, Delcy Rodriguez was elected president of the new ANC, a position now held by Cabello. In December 2014, Delcy Rodriguez was named the Minister of Popular Power for External Relations.
    • Jorge Jesus Rodriguez Gomez (Jorge Rodriguez) was appointed to the position of Minister of Popular Power for Communication and Information in late 2017. On November 23, 2008, Jorge Rodriguez was elected Mayor of Caracas, Libertador District, and held the position until he was appointed to the aforementioned Minister position. On January 8, 2007, Jorge Rodriguez was sworn in as the Vice President of Venezuela.
    • Vladimir Padrino Lopez (Padrino) was appointed the Sectoral Vice President of Political Sovereignty, Security, and Peace (Venezuelan Defense Minister) in June 2018. He previously held a multitude of military posts, including Second Commander and Chief of the General Staff of the Bolivarian and Joint Chief of Staff of the Central Integral Defense Strategic Region.
    Rafael Alfredo Sarria Diaz’s Front Network

    OFAC designated Rafael Sarria on May 18, 2018 for acting for or on behalf of Cabello as his front person and maintaining an illicit business relationship with Cabello since at least 2010. During this time, Rafael Sarria owned several real estate properties in Florida that were registered under his name, but in reality he acted as the named representative for Cabello on these properties. As of 2018, Rafael Sarria continues to advise and assist Cabello, profiting from the investment of Cabello’s corruptly obtained wealth.

    Today, OFAC identified a Gulfstream 200 private jet, tail number N488RC, located in Florida, as blocked property. Rafael Sarria originally purchased the plane, but his beneficial ownership had been obfuscated through the following companies that act for or on his behalf:
    • Agencia Vehiculos Especiales Rurales y Urbanos, C.A. (AVERUCA, C.A.): AVERUCA, C.A. is a Venezuelan company that currently operates the aforementioned aircraft, and for which Rafael Sarria is identified as the President. As the President of AVERUCA, C.A., Rafael Sarria purchased the aircraft in 2008 for an approximate price of $20 million.
    • Jose Omar Paredes (Paredes): Paredes is identified as the Chief Pilot of AVERUCA, C.A., and given this role, he is responsible for the operational control of the aircraft.
    • Quiana Trading Limited (Quiana Trading): Quiana Trading is a British Virgin Islands company for which Rafael Sarria, at the time of registration in 2009, was the President and sole shareholder. Quiana Trading is the beneficial owner of the aforementioned aircraft through a trust agreement.
    • Edgar Alberto Sarria Diaz (Edgar Sarria): Edgar Sarria is identified as a Director of Quiana Trading. Additionally, Edgar Sarria is the Chief Executive Officer and sole shareholder of Panazeate SL.
    • Panazeate SL: Panazeate SL is a company based in Valencia, Spain, which is owned or controlled by Edgar Sarria.
    As a result of this action, all property and interests in property of those designated today subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with them. For additional information about the methods that Venezuelan senior political figures, their associates, and front persons use to move and hide corrupt proceeds, including how they tr...
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  • U.S. Department of the Treasury and the IRS to launch redesigned W-4 Form in 2020 to Ensure Smooth Taxpayer Experience

    U.S. Department of the Treasury and the IRS to Launch Redesigned W-4 Form in 2020 to Ensure Smooth Taxpayer Experience



    Washington, DC - - (September 20, 2018) - - Today the Treasury Department announced that the IRS will implement a redesigned W-4 form for tax year 2020, a timeline that will allow for continued work to refine the new approach for the form. As a result of the enactment of the 2017 Tax Cuts and Jobs Act, Treasury and the IRS are revising the wage withholding system and Form W-4, Employee’s Withholding Allowance Certificate. In June, the IRS released a draft redesigned form for public comment and received many helpful suggestions for improvements, which they are working to integrate.

    “The Treasury and IRS are working diligently to implement the most comprehensive tax legislation in more than 30 years,” said Secretary Steven T. Mnuchin. “Launching the redesigned form in 2020 will allow the Treasury and the IRS to properly implement changes to the withholding system and ensure taxpayers have a positive and simplified experience.”

    For tax year 2019, the IRS will release an update to the Form W-4 that is similar to the 2018 version currently in use. The 2019 form will be released in the coming weeks according to the usual practice for annual updates.

    The Treasury and IRS will continue working closely with the payroll and the tax community as additional changes are made to the Form W-4 for use in 2020. These additional changes will make the withholding system more accurate and more transparent to employees. The IRS will release the 2020 form and related guidance and information early enough in 2019 to allow employers and payroll processors ample time to update their systems.



    Courtesy: U.S. Department of the Treasury
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  • U.S. Department of the Treasury Announces Additions to Senior Leadership Team in Office of Terrorism and Financial Intelligence

    U.S. Department of the Treasury Announces Additions to Senior Leadership Team in Office of Terrorism and Financial Intelligence




    Isabel Patelunas sworn in as head of TFI’s intelligence office and Andrea Gacki named OFAC Director



    Washington, DC - - (September 17, 2018) - - The U.S. Department of the Treasury today announced two additions to the senior leadership team in its Office of Terrorism and Financial Intelligence (TFI). Isabel “Izzy” Patelunas was sworn in this morning as Assistant Secretary for TFI’s Office of Intelligence and Analysis (OIA). Andrea Gacki was named permanent Director of the Office of Foreign Assets Control (OFAC), after serving as Acting Director since May of this year.

    “Treasury plays an integral role in combating terrorism and other global illicit financial threats, and the addition of Izzy Patelunas and promotion of Andrea Gacki will further enhance TFI’s efforts to carry out its important national security and foreign policy mission. As TFI plays an ever increasing role in our country’s national security and foreign policy, Andrea and Izzy will bring tremendous experience to TFI’s leadership team,” said Treasury Secretary Steven T. Mnuchin. “I look forward to working with them to address the complex challenges ahead in the years to come.”











    “Izzy Patelunas’ accomplished tenure in the Intelligence Community and extensive background on a wide range of national security matters makes her particularly well-suited to lead Treasury’s intelligence agency. Izzy will be a terrific addition to our leadership team,” said Sigal P. Mandelker, Under Secretary for TFI. “Andrea Gacki’s insight and significant experience both at OFAC and the Department of Justice have proven invaluable to TFI for more than a decade. I look forward to continuing to work closely with Andrea and to welcoming Izzy. As we continue to deploy innovative tools and new strategies to execute our mission, I am confident that they will both play integral roles in advancing TFI’s objectives.”

    Bio of Isabel Marie Patelunas

    Isabel Patelunas was an accomplished member of the Senior Intelligence Service at the Central Intelligence Agency (CIA), where she had served since 1989. For the last 15 years, she has been in management positions at the CIA supporting the highest levels of government, including serving on rotation to the Office of the Director of National Intelligence as Director of the President’s Daily Brief staff. Ms. Patelunas previously served as Deputy Director of CIA’s Office of Middle East and North Africa Analysis, and as Director of the Advanced Analysis Training Program. She has also served in leadership positions in the National Counterproliferation Center and the Weapons Intelligence, Nonproliferation and Arms Control Office. She holds an M.A. from the University of Maryland in International Relations and a B.A. from the University of Notre Dame. She was confirmed as Treasury’s Assistant Secretary for Intelligence and Analysis by the United States Senate on August 28, 2018.

    Bio of Andrea Gacki

    Andrea Gacki has served as Deputy Director of OFAC since March of 2017, and as Acting Director since May of 2018. In addition, she led OFAC for five months in 2017 when then OFAC Director John Smith was performing the duties of the Under Secretary for TFI. Andrea first joined OFAC more than 10 years ago as a Senior Sanctions Advisor before serving as the Assistant Director for Licensing and the Associate Director for the Office of Compliance and Enforcement. Before joining OFAC, Andrea spent eight years at the Department of Justice’s Civil Division in the Federal Programs Branch, worked as an associate at a DC law firm, and served as a judicial clerk in the U.S. District Court for the Eastern District of Michigan. She holds a B.A. from the University of Michigan and a J.D. from the University of Michigan Law School




    Courtesy: U.S. Department of the Treasury...
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  • U.S. Department of the Treasury Targets Attempted Circumvention of Sanctions

    U.S. Department of the Treasury Targets Attempted Circumvention of Sanctions




    Targeting Russian actors’ efforts to circumvent U.S. sanctions



    Washington, DC - - (August 21, 2018) - - Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is targeting Russian actors’ efforts to circumvent U.S. sanctions. This action was taken pursuant to authority provided under Executive Order (E.O.) 13694, “Blocking Property of Certain Persons Engaging in Significant Malicious Cyber-Enabled Activities,” as amended, and as codified by the Countering America’s Adversaries Through Sanctions Act (CAATSA), to designate two entities and two Russian individuals in order to counter attempts to evade U.S. sanctions.

    “The Treasury Department is disrupting Russian efforts to circumvent our sanctions,” said Steven T. Mnuchin, Secretary of the Treasury. “Today’s action against these deceptive actors is critical to ensure that the public is aware of the tactics undertaken by designated parties and that these actors remain blocked from the U.S. financial system.”

    As a result of today’s action, all property and interests in property of the designated persons subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with them.

    Designated Entities and Individuals

    The individuals and entities identified below are being designated based on the actions they undertook for Divetechnoservices, a Russian entity sanctioned on June 11, 2018 pursuant to E.O. 13694, as amended, for procuring a variety of underwater equipment and diving systems for Russian government agencies, to include the Federal Security Service (FSB). The FSB was sanctioned on December 28, 2016, pursuant to E.O. 13694, as amended, and on March 15, 2018, pursuant to CAATSA Section 224.

    Vela-Marine Ltd. was designated pursuant to E.O. 13694, as amended, for having attempted to act or purported to act for or on behalf of Divetechnoservices. As of July 2018, Divetechnoservices utilized Vela-Marine Ltd. in an attempt to circumvent U.S. sanctions.

    Marina Igorevna Tsareva (Tsareva) was designated pursuant to E.O. 13694, as amended, for having acted for or on behalf of Divetechnoservices and Vela Marine Ltd. Tsareva has worked as an Import Manager for Divetechnoservices and attempted to help Divetechnoservices circumvent U.S. sanctions through Vela-Marine Ltd.

    Anton Aleksandrovich Nagibin (Nagibin) was designated pursuant to E.O. 13694, as amended, for having acted for or on behalf of Divetechnoservices. As of July 2018, Nagibin was a Divetechnoservices’ employee involved in helping the company attempt to circumvent U.S. sanctions.

    Lacno S.R.O. was designated pursuant to E.O. 13694, as amended, for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, Divetechnoservices. As of May 2018, Lacno S.R.O., which is based in Slovakia, attempted to facilitate a payment for over $20,000 on behalf of Divetechnoservices. As of April 2018, Divetechnoservices planned to utilize Lacno S.R.O. to purchase equipment.

    Identifying information on the individuals and entities designated today .




    Courtesy: U.S. Department of the Treasury...
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  • U.S. Department of the Treasury Issues Proposed Regulations on New 20 Percent Deduction for Pass-Through Businesses

    U.S. Department of the Treasury Issues Proposed Regulations on New 20 Percent Deduction for Pass-Through Businesses





    Washington, DC - - (August 8, 2018) - - The U.S. Department of the Treasury and Internal Revenue Service (IRS) issued proposed regulations today implementing a significant provision of the Tax Cuts and Jobs Act, which allows owners of sole proprietorships, partnerships, trusts, and S corporations to deduct 20 percent of their qualified business income. The proposed rules ensure that this historic tax cut will be available to the broadest spectrum of American businesses, consistent with the law, while minimizing compliance costs and streamlining the process for claiming the deduction.

    “The pass-through deduction is an important tax cut for small and mid-size businesses, reducing their effective tax rates to their lowest levels since the 1930s,” said Secretary Steven T. Mnuchin. “Pass-through businesses play a critical role in our economy. This 20-percent deduction will lead to more investment in U.S. companies and higher wages for hardworking Americans.”

    The proposed rules:

    1. Ensure that all small business income below $315,000 for married couples filing jointly (and $157,500 for single filers) is eligible for the deduction;

    2. Provide clarity and flexibility for filers over those income thresholds by:
    • Including “aggregation rules” for filers with pass-through income from multiple sources;
    • Issuing guidance relating to specified service, trade or business (SSTB) income above the thresholds, which may be subject to limitation for the purposes of claiming the deduction; and
    • Allowing a de minimis exception to avoid unnecessary compliance costs for businesses earning only a small percentage of SSTB income; and

    3. Establish anti-abuse safeguards to prevent improper tax avoidance schemes, such as relabeling employees as independent contractors.


    Qualified business income includes domestic income from a trade or business. Employee income, capital gains, interest, and dividend income are excluded from this deduction.

    View the guidance.


    Courtesy: U.S. Department of the Treasury
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  • U.S. Treasury Targets Russian Bank and Other Facilitators of North Korean United Nations Security Council Violations

    U.S. Treasury Targets Russian Bank and Other Facilitators of North Korean United Nations Security Council Violations




    Washington, DC - - (August 3, 2018) - - The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today announced additional sanctions related to North Korea, continuing the enforcement of existing UN and U.S. sanctions. Today’s action targets a Russian bank for knowingly facilitating a significant transaction on behalf of an individual designated for weapons of mass destruction-related activities in connection with North Korea. OFAC also targeted one individual and two entities for facilitating North Korean illicit financial activity. This action reinforces the United States’ ongoing commitments to upholding the decisions of the UN Security Council (UNSC).

    “The United States will continue to enforce UN and U.S. sanctions and shut down illicit revenue streams to North Korea. Our sanctions will remain in place until we have achieved the final, fully-verified denuclearization of North Korea,” said Treasury Secretary Steven Mnuchin.

    As a result of today’s action, any property or interests in property of the designated persons in the possession or control of U.S. persons or within (or transiting) the United States is blocked, and U.S. persons generally are prohibited from dealing with any of the designated persons.

    Financial and Foreign Trade Bank-Affiliated Targets

    OFAC, pursuant to Section 4 of Executive Order (E.O.) 13810, today sanctioned Russian-registered Agrosoyuz Commercial Bank (Agrosoyuz) for knowingly conducting or facilitating a significant transaction on behalf of Han Jang Su, the Moscow-based chief representative of Foreign Trade Bank (FTB), North Korea’s primary foreign exchange bank. Pursuant to E.O. 13687, OFAC today designated Ri Jong Won, the Moscow-based deputy representative of FTB. Both Han Jang Su and FTB were already designated by the United States under E.O. 13382 and by the UNSC Committee established pursuant to Resolution 1718 (2006). OFAC designated Han Jang Su on March 31, 2017, for acting for or on behalf of FTB, an entity designated pursuant to E.O.s 13382 and 13722. On August 5, 2017, Han Jang Su was designated at the UN. According to UNSC Resolution 2321 (2016), if a Member State determines that an individual is working on behalf of or at the direction of a DPRK bank or financial institution, Member States shall expel the individual from their territories. Therefore, Han Jang Su and Ri Jong Won should be expelled from Russia. Nevertheless, continuing into 2018, Russian bank Agrosoyuz continued to provide services to Han Jang Su, in violation of Russia’s UN obligations. Agrosoyuz also knowingly opened multiple bank accounts for at least three FTB front companies. Ri Jong Won also held Russian bank accounts in his name at least as of late 2016.

    In addition to Agrosoyuz and Ri Jong Won, OFAC designated two associated FTB front companies — Dandong Zhongsheng Industry & Trade Co., Ltd. (Zhongsheng), pursuant to E.O. 13382, and Korea Ungum Corporation (Ungum), pursuant to E.O. 13722.

    Agrosoyuz and North Korea have a long relationship: from 2009 to 2013, Agrosoyuz processed millions of dollars in transactions through accounts owned by North Korean commercial banks. In mid-2013, Agrosoyuz transferred more than $5.5 million on behalf of the now UN- and U.S.-designated Korea United Development Bank (KUDB). In 2014, Agrosoyuz and other Russian banks arranged to move KUDB funds. As of mid-2016, Agrosoyuz had opened new accounts for a North Korean front company, and it processed over $8 million and held the equivalent of over $3 million on behalf of KUDB. In 2017, Han Jang Su opened bank accounts for Zhongsheng at Agrosoyuz. In addition, as of early 2018, Agrosoyuz allowed a North Korean front company to invest almost $2.5 million in Russian rubles into an account with Agrosoyuz.

    Today’s action, taken pursuant to Section 4 of E.O. 13810 of September 20, 2017, blocks all property and interests in property of Agrosoyuz that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any U.S. person, and provides that such property and interests in property may not be transferred, paid, exported, withdrawn, or otherwise dealt in.

    Identifying information on the individual and entities designated today.




    Courtesy: U.S. Department of the Treasury...
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  • Treasury and IRS Announce Proposed Rule Regarding Increasing Depreciation Deduction to 100 percent, Helping American Businesses

    Treasury and IRS Announce Proposed Rule Regarding Increasing Depreciation Deduction to 100 percent, Helping American Businesses




    Washington, DC - - (August 3, 2018) - - The U.S. Department of the Treasury and Internal Revenue Service (IRS) today announced proposed regulations on increasing and expanding the first year depreciation deduction for qualified property. This increased benefit will expand opportunities for small and mid-sized businesses to expense equipment purchases and make capital investments in their companies.

    The Tax Cuts and Jobs Act (TCJA), passed into law in December 2017, increased the first year depreciation deduction from 50 to 100 percent for qualified property acquired and placed in service after September 27, 2017.

    “The Tax Cuts and Jobs Act is making it easier for businesses of all sizes to grow and create jobs for hardworking Americans,” said Secretary Steven T. Mnuchin. “This expensing provision will be a key driver in creating greater business investment and growth.”

    The TCJA expands the meaning of qualified property to include certain used depreciable property and certain film, television, or live theatrical productions. The proposed change also extends the placed-in-service date by seven years from January 1, 2021, to January 1, 2027.

    The deduction applies retroactively to qualified property acquired and placed in service after September 27, 2017. The first year allowance is 100 percent, and is then decreased by 20 percent annually for qualified property placed in service after December 31, 2022.





    Courtesy: U.S. Department of the Treasury
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  • U.S. Department of the Treasury Announces Guidance on One-Time Repatriation Tax on Foreign Earnings

    U.S. Department of the Treasury Announces Guidance on One-Time Repatriation Tax on Foreign Earnings




    Washington, DC - - (August 1, 2018) - - The United States Department of the Treasury today announced the release of proposed regulations relating to the section 965 transition tax, on U.S. multinational companies’ overseas income, which is being repatriated under section 965 of the Tax Cuts and Jobs Act. The proposed guidance affects U.S. shareholders with direct or indirect ownership in certain specified foreign corporations, as defined in the new tax code provision.

    “The Tax Cuts and Jobs Act creates a historic opportunity for American companies to bring capital back home from overseas to invest in our domestic economy and create jobs for hardworking Americans,” said Secretary Steven T. Mnuchin. “Our administration’s policies are focused on creating a more competitive system for business, which has already led to greater economic and wage growth.”

    The proposed rules address a one-time transition tax on post-1986, untaxed foreign earnings of specific foreign corporations owned by U.S. shareholders. The Tax Cuts and Jobs Act treats these foreign earnings as repatriated and places a 15.5 percent tax on cash or cash equivalents, and an 8 percent tax on the remaining earnings. Generally, the transition tax can be paid in installments over an eight-year period when a taxpayer files a timely election under section 965(h).

    View the guidance.




    Courtesy: U.S. Department of the Treasury...
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  • U.S. Treasury Department and IRS Announce Significant Reform to Protect Personal Donor Information to Certain Tax-Exempt Organizations

    U.S. Treasury Department and IRS Announce Significant Reform to Protect Personal Donor Information to Certain Tax-Exempt Organizations





    Policy Relieves Burdens on Taxpayers While Preserving Transparency




    Washington, DC - - (July 16, 2018) - - The U.S. Treasury Department and IRS announced today that the IRS will no longer require certain tax-exempt organizations to file personally-identifiable information about their donors as part of their annual return. The revenue procedure released today does not affect the statutory reporting requirements that apply to tax-exempt groups organized under section 501(c)(3) or section 527, but it relieves other tax-exempt organizations of an unnecessary reporting requirement that was previously added by the IRS.

    Nearly fifty years ago, Congress directed the IRS to collect donor information from charities that accept tax-deductible contributions. That statutory requirement applies to the majority of tax-exempt organizations, known as section 501(c)(3) organizations, receiving contributions that can be claimed by donors as charitable deductions. This policy provided the IRS information that could be used to confirm contributions to those organizations.

    By regulation, however, the IRS extended the donor reporting requirement to all other tax-exempt organizations—labor unions and volunteer fire departments, issue-advocacy groups and local chambers of commerce, veterans groups and community service clubs. These groups do not generally receive tax deductible contributions, yet they have been required to list the names and addresses of their donors on Schedule B of their annual returns (Form 990).

    “Americans shouldn’t be required to send the IRS information that it doesn’t need to effectively enforce our tax laws, and the IRS simply does not need tax returns with donor names and addresses to do its job in this area,” said U.S. Treasury Secretary Steven T. Mnuchin. “It is important to emphasize that this change will in no way limit transparency. The same information about tax-exempt organizations that was previously available to the public will continue to be available, while private taxpayer information will be better protected. The IRS’s new policy for certain tax-exempt organizations will make our tax system simpler and less susceptible to abuse.”

    Summary of New IRS Policy
    • Tax-exempt organizations described by section 501(c), other than section 501(c)(3) organizations, are no longer required to report the names and addresses of their contributors on the Schedule B of their Forms 990 or 990-EZ.
    • These organizations must continue to collect and keep this information in their records and make it available to the IRS upon request, when needed for tax administration.
    • Form 990 and Schedule B information that was previously open to public inspection will continue to be reported and open to public inspection.
    • The Internal Revenue Code expressly governs the tax-return reporting of donor information by charities that primarily receive tax-deductible contributions (under section 501(c)(3)) and political organizations (under section 527). The IRS action today does not affect those organizations.

    After careful review, Treasury and the IRS have decided to relieve these tax-exempt organizations (other than organizations described in section 501(c)(3) or section 527) of a requirement that Congress never imposed for several reasons:
    • First, the IRS makes no systematic use of Schedule B with respect to these organizations in administering the tax code. Donor information for many of these organizations was once relevant to the federal gift tax, but Congress eliminated that need in 2015 by making gifts to many of these tax-exempt organizations tax-free. The IRS has no tax administration need for continuing the routine collection of donor names and addresses as part of an exempt organization’s annual tax return. If the information is needed for purposes of an examination, the IRS will be able ask the organization for it directly.
    • Second, the new policy will better protect taxpayers by reducing the risk of inadvertent disclosure or misuse of confidential information—an especially important safeguard for organizations engaged in free speech and free association protected by the First Amendment. Unfortunately, the IRS has accidentally released confidential Schedule B information in the past. In addition, conservative tax-exempt groups were disproportionately impacted by improper screening in the previous Administration, including what the Treasury Inspector General for Tax Administration concluded were inappropriate inquiries related to donors. Ending the unnecessary collection of sensitive donor information will reinforce the reforms already implemented by the IRS in the wake of the political targeting scandal and enhance public trust in the agency.
    • Third, the new policy will save both private and government resources. On the taxpayer side, the previous policy added needless paperwork. On the government side, the IRS has been forced to devote scarce resources to redacting donor names and addresses (as required by federal law) before making Schedule B filings public. Now, the IRS will no longer require personally-identifiable donor information that the IRS does not regularly need and the public does not see. The public information will continue to be available, just as before.


    The IRS’s new policy will relieve thousands of organizations of an unnecessary regulatory burden, while better protecting sensitive taxpayer information and ensuring appropriate transparency.

    The IRS guidance is available here.

    Courtesy: U.S. Department of the Treasury...
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