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CCP Operations in Cuba-2023-Lessons Not Learned

  • June 26, 2023
  • by taxpower

For years, the Communist Party of the Peoples Republic of China have been expanding their presence and influence in Latin America, and only recently news has been released to the American public of Chinese espionage activities in Cuba and their plans to expand military bases 90 miles off the United States mainland. To those who are old enough to remember, and still alive, this is eerily similar to the events of the early Kennedy administration of the 1960s. Unbeknown to the American public at the time, the botched Bay of Pigs incident of 1961 led Cuba’s Fidel Castro, to request nuclear weapons from The Soviet Union, with who it had allied and had armed Cuba with conventional weapons. In January of 1962 American intelligence had noted an alarming increase in the number of Soviet cargo vessels transiting between Russia and Cuba, increasing steadily throughout the year. The waterlines of the cargo vessels made obvious that they were transporting extremely heavy cargo.

As a precaution, the American navy had increased its military maritime training activities along the east Atlantic coast and with Latin and South American allies. In late June, America’s first nuclear powered aircraft carrier, the U.S.S. Enterprise (CVN-65), had left port from Norfolk Virginia as its initial deployment to join the 2nd Fleet carrying out a nuclear strike training exercise off the U.S. East Coast along with another American super carrier, the U.S.S. Forrestal (CVA-59) and naval assets. Unbeknown to the American public at the time, the U.S. was secretly preparing for a possible quarantine of the island of Cuba if necessary. As top secret intelligence  reports were coming out of Guantanamo Naval Base on Cuba of highly unusual Soviet activity on the island, along with belligerent Cuban air tactics including firing on American aircraft.

On 14 October, photographs taken by U-2 reconnaissance planes over Cuba revealed the presence of Soviet ballistic missile silos being constructed on the Island. As reported to the American public by the media, it was concluded by the Kennedy Administration that Soviet nuclear missiles may have already been delivered to Cuba and readiness for imminent deployment. As Cuba is only 90 miles from the U.S. state of Florida, this was obviously of grave concern. Unknown to American intelligence was that there existed 80 nuclear missiles capable of being launched against American targets.

A military quarantine of Cuba was ordered by President Kennedy to prevent further missiles from being reaching the island. Each day the Soviet ships would close the gap with American naval vessels, and over the next 14 days the world watched in fear as Soviet Nakita Khrushchev and American President Jack Kennedy exchanged secret communications to find a politically plausible solution to this dangerous situation.

Unbeknown to those outside the military, and for most of the world for many years after, October 27 was the closest the world had been, and has been since, on the verge of nuclear war. Throughout the quarantine, U.S. anti-submarine assets, that were in the forefront of the blockade, came upon a Soviet submarine, B-59, that had surfaced for air. The day had been plagued by tensions as one American U-2 spy plane disappeared while on recon in Europe, one was shot down while flying over Cuba earlier that day and word had just been received news of a second U-2 downing. The crew of Soviet submarine B-59, who had endured a long, tedious journey along with three other Soviet subs from their base in the Arctic Circle to Cuba. B-59 was not equipped for warm water operations and the cabin temperature had reached 149 degrees Fahrenheit. As it surfaced, American aircraft swooped down and circled the submarine, lighting its conning tower with glaring searchlights as they fired shots across the bow in an attempt to signal the vessel to surrender. The Soviet commander, who was by then convinced that war had already broken out panicked, giving the order for the sub to dive and prepare for nuclear torpedo launch. Under conditions such as these, a submarine commander has the authority to launch an offensive nuclear attack.

Only through divine intervention, the dive was momentarily delayed due to personnel confusion where in a split second, he realized that maybe he was being signaled by American aircraft not to dive but rather surrender. But as the sub continued its dive, American ships continued attempts to convince him to surface by dropping test depth charges in the water. As they were only capable of sounding a loud blast, some overly zealous American sailors took it upon themselves to drop hand grenades stuffed in toilet paper rolls that would delay explosion until the grenades were closer to the u boat.  The explosion and sound of shrapnel hitting the hull of B-59 only added to the confusion and nearly resulted in the order to launch the nuclear missile, comparable in strength to match the bomb dropped on Hiroshima, which would have led to a nuclear exchange between the U.S. and Soviet Russia resulting to an end of life as we know it.

Fortunately, Soviet naval officer Vasil Arkhipov, aware of the consequences, refused to fire that deadly weapon of war and the submarine surfaced. By the next day Kennedy and Khrushchev reached a solution that included the reversal of the Soviet ships and their disarmament of all nuclear missiles from Cuba.

Although I was only 10, I, and nearly all Americans of that time who are alive today, can close their eyes and recall the feeling of helplessness and emptiness, not knowing if their lives were going to end at any moment, and the feeling of relief when the news came that it was over. Yet here we are today, 61 years later, with news that the Communist Chinese have been preparing to build their own military installations in Cuba. History is repeating itself, yet few Americans realize it as they weren’t old enough or even born in 1962, and have no idea of the potential devastation that the world faces as a result of this reckless endeavor by the CCP.

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IRS May be Ending Late Filing Amnesty-FATCA, CRS, OECD…

  • June 5, 2023June 5, 2023
  • by taxpower
By Andrew Powers
Published

If you have any connection to a foreign financial asset (bank or security account, trust, gifts or inheritance from non-Americans, own an investment in a foreign business or have foreign investors in your U.S. business, you are probably required to file special information reports that carry hefty penalties for not filing. People who prepare their own return using off the shelf tax preparation software probably never looked at Part III of Schedule B that asks these questions.

The United States on one of only three counties with a citizenship taxation system. This means that all American citizens, even if they never stepped foot on U.S. soil (Accidental Americans), are responsible for reporting their worldwide income (regardless of where it is earned even if never brought into the U.S.) and even if no tax is owed (due to allowable deductions, exclusions, foreign tax credits or treaties) in addition to a host of information returns with which are associated extremely high penalties for failure to file. Not only are American expatriates (who live outside the U.S.) affected, even if you never travelled outside the U.S. but suddenly inherited or gifted certain financial asset(s) from a relative or friend, or associated with a foreign grantor trust, you may be responsible for filing these special foreign information reports, and failure to do so could lead to substantial monetary fines or worse, possible criminal charges. Fortunately, back in 2012 the IRS began to implement certain amnesty programs to allow people with compliance deficiencies to catch up without facing criminal charges and for many, to avoid penalties for willful non-compliance. From the start, IRS has always taken the position that any one or all of these amnesty programs could be terminated at any time, without notice.

Recently, while doing some digging into the IRS current position regarding Americans with unfiled tax returns, FBARs and other informational returns including issues regarding foreign gifts and inheritances from between non-U.S. persons and American citizens (and other tax residents, including cross border ownership in businesses, etc. I found information and evidence that I believe leads me to suspect that the end of the IRS amnesty programs for filing late or unfiled returns may be sooner than people think (or  may hope). Reading between the lines from IRS announcements I sense that the IRS may be preparing to end the amnesty programs soon and in so doing may be gearing up for a crack down with deficiency letters and harsh penalties. Although this wouldn’t have concerned me as much years before, since the computerization of IRS, especially with AI, I am now very concerned that a net could be cast in a way to catch all the fish, big and small, with the computer imposing automated substantial penalties across the board, leaving people to defends themselves against an under-staffed and IRS.

Over the past two years I have heard more international clients complaining about difficulties with their foreign banks, many who are now reluctant to accept Americans as customers and some who have even closed accounts due to U.S. FATCA and international Comsumer Reporting Standards. In the case that I am working on, a new client who was referred to me was born in Norway and had a Norwegian bank account her entire life, but in 2022 the foreign bank contacted all of their customers requesting information regarding their citizenship, specifically asking if they had American citizenship in addition to that stated on their account. One question frequently asked was regarding the customer’s tax filing responsibilities with any global government, especially the U.S. My client told her banker that when she was in her late 20s, 6 years prior, she had applied for and granted U.S. citizenship based on the fact that her late Norwegian father had once worked in the U.S. for a relatively short period of time but while here obtained U.S. citizenship, which he later renounced when he returned to Norway. This was information that she discovered accidently through a genealogy search and with the citizenship was able to attend a U.S. school to get her advanced degree. At the time she was never told by the Embassy, when she applied for and was granted U.S. citizenship, to obtain a U.S. SS number. As she never worked in the U.S. and returned to Norway immediately after school, she never gave it any thought until the bank asked her (and all their other customers) if they had U.S. citizenship (or tax return filing requirements). They then informed her that she was required to obtain a U.S. Social Security number (an international Number <ITIN> is not available to U.S. citizens) and she may likely be required to file U.S. tax returns. When she first approached me in 2022, she was still awaiting her SS application to be processed (which took nearly a year). She is what is commonly referred to as an “Accidental American”.

I had assisted numerous situations such as this years ago for people who were technically required to file,  but due to foreign tax credits, deductions, exclusions, treaties, etc. did not owe any U.S. tax. At the time it was straight forward and simple. But now the IRS has added a few wrinkles. They want a lot of personal information with the filing, and the IRS websites repeatedly state that although the tax returns won’t be audited upon submission, there will be no acknowledgement of catch-up filing and the returns could be subject to a future routine audit. This in itself is not that concerning except that it seems that the IRS has now been pulling returns with foreign connections (mostly die to foreign banks reporting to them U.S. account holder information) for audit, and should they determine that the explanation for past non filing was, based on a recently court decision, “willful”, or do to lack of due diligence or negligence on the part of the taxpayer, including they “should have know better”, they are sometimes assessing hefty penalties. While I can appreciate that an IRS agent in years past would do this to someone who was blatantly hiding money and lots of it, this new blanket approach, along with AI computers and possibly inexperienced agents, is alarming.

So what I am asking my clients to do is, beside taking a second look into their own affairs, especially those with foreign connections, is to ask their families and friends (and bankers if possible) to learn what the local banks may be doing to put themselves in better graces with the U.S. regarding FATCA compliance, as my gut tells me the IRS is considering shutting down the Streamlined Compliance Program without notice in the near future, once they have compiled lists of Americans with foreign bank accounts and matched them up against tax returns shown as being filed in their system.

If someone you know believes that they may have a similar situation, feel free to email me with your question to a.j.powers@tax-power.com.

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