February 13, 2024

“Just the FACTs” is a round-up of news stories and information regarding efforts to combat corrupt financial practices, including offshore tax haven abuses, corporate secrecy, and money laundering through the financial system.

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Here’s the State of Play:
DOJ Continues Vigorous Legal Defense of the Corporate Transparency Act

Last week, the Department of Justice (DOJ) filed a strong brief in defense of the Corporate Transparency Act (CTA) in Texas Top Cop Shop, Inc., et al. v. Pamela Bondi, making a clear case that the ongoing abuse of anonymous shell companies “threatens U.S. national-security and foreign-policy interests.” The filing follows the Supreme Court’s pause of a nationwide preliminary injunction imposed by the lower court judge in Texas Top Cop Shop against CTA enforcement last month, which cleared a major hurdle to the full and faithful implementation of the most important anti-money laundering law in a generation. While the preliminary injunction is paused, the DOJ is pursuing a broader victory in the appellate court to declare that the CTA is a clearly constitutional exercise of Congress’s powers. 

On February 5, the DOJ also filed a motion to stay a separate preliminary injunction issued in Smith, et al. v. U.S. Department of the Treasury, under which enforcement of the CTA currently remains suspended. Once the DOJ’s request for a stay is granted, the Financial Crimes Enforcement Network (FinCEN) – the bureau of Treasury responsible for implementation and enforcement of the CTA – has confirmed that it will resume enforcement of beneficial ownership reporting requirements following a 30-day extension.

In a statement, FACT executive director Ian Gary welcomed the DOJ’s stay request, noting that “the U.S. is safer when the owners of anonymous shell companies are required to reveal their identities… Given recent Supreme Court action to stay an injunction in (Texas Top Cop Shop), we expect the government to be successful in this action.”

In its announcement of the DOJ’s motion, FinCEN also noted that it would use the proposed 30-day extension to “assess options to modify further deadlines or reporting requirements” under the CTA, should a stay in the Smith case be granted. FACT and other transparency advocates have repeatedly urged FinCEN not to implement any changes that would substantially compromise the ultimate efficacy of the CTA, which cracks down on the abuse of anonymous shell companies often used by criminals to launder the proceeds of drug trafficking and other crimes.

Meanwhile, legislation that would delay reporting requirements under the CTA until January 1, 2026 passed the House on Wednesday. It is unknown if, or when, the Senate will take up the delay bill.

FACT-Sponsored Bill to End Incentives for Offshoring, Profit Shifting Reintroduced

Last week, Senator Sheldon Whitehouse (D-RI) and Representative Lloyd Doggett (D-TX) reintroduced the No Tax Breaks for Outsourcing Act, which would substantially improve U.S. taxation of multinational companies by removing incentives for the offshoring of domestic jobs and profits, in line with FACT’s long standing recommendations. The bill, as introduced in the 119th Congress, is cosponsored by 18 Senators and more than 120 members of the House, and enjoys the support of more than a dozen major labor organizations.

Among the bill’s most important provisions are equalizing the tax rate for foreign income of U.S. multinationals with the domestic rate, eliminating a major tax break for U.S. firms that build factories and make other investments associated with moving good-paying jobs overseas, and repealing an exemption for the foreign earnings of U.S. oil and gas companies. The bill would also repeal a tax break for so-called Foreign-Derived Intangible Income (FDII), a wasteful handout that provides billions in savings every year to only a handful of huge multinationals.

These changes would represent a major step toward fixing what FACT and other experts have characterized as the U.S.’s “America-Last” corporate tax code, which systematically incentivizes American multinationals to prioritize foreign investment over domestic job creation. With the scheduled expiration of numerous tax provisions at the end of 2025 fast approaching, lawmakers have an opportunity to reverse these harmful incentives and build a tax code that raises more revenue, supports good-paying domestic jobs, and levels the playing field for small businesses.

FACT in the News

Accounting Today: UN Tax Deal May Replace OECD Framework After Trump Executive Order

FACT policy director Zorka Milin was quoted in coverage of the Trump Administration’s recent executive order rejecting the OECD’s two-pillar global tax reform package by Accounting Today.

“I was not so much surprised by this kind of policy direction, but just the timing,” said Milin, referring to the Administration’s public threat of retaliation to what it views as “extraterritorial” global tax policies. “I don’t think any of us who follow international tax expected this to be a day one priority issue, so that came as a surprise.”

Forbes: Supreme Court Puts Business Ownership Reporting Block on Hold. But Don’t Rush to File – Yet

FACT executive director Ian Gary was quoted in Forbes’ coverage of last month’s order by the Supreme Court rejecting a nationwide preliminary injunction against enforcement of the Corporate Transparency Act.

“For years, police and prosecutors have tried to combat a flood of dirty money associated with often violent crimes, but that can’t happen if they run into a wall of shell companies and secrecy,” said Gary. “Today’s order is a reminder of the urgency of opening the money trail so our law enforcement officials can crack down on criminals who abuse the system.”

FACT’s reaction to the Supreme Court’s order was also quoted in coverage by ICIJ, Accounting Today, the Associated Press, and Law360.

From Our Members and Allies

Transparency International U.S.: Pause on Enforcement of Foreign Anti-Bribery Law Threatens a Dangerous Race to the Bottom

On February 9, President Trump issued an executive order directing the Justice Department to pause future and ongoing enforcement of the Foreign Corrupt Practices Act (FCPA) until such time that Attorney General Pam Bondi issues new enforcement guidelines. The FCPA is a cornerstone of U.S. anti-bribery law, and outlaws the offering of bribes by U.S. persons and companies to foreign officials.

In a statement, FACT Coalition Steering Committee member TI U.S. Executive Director Gary Kalman said that the order “diminishes the crown jewel in the U.S.’s fight against global corruption,” and noted that “enforcement of the FCPA has long been a truly bipartisan commitment.”

“In the end, bribery is a lose-lose proposition,” said Kalman. “The FCPA helps make American companies and the ‘Made in America’ brand stronger and more attractive by proving that American goods and services are sought after because of their merit—not simply because they out-bribed their competition. We strongly urge President Trump and Attorney General Bondi to resume regular enforcement of the FCPA during the review period, and ensure any new guidelines are consistent with values and intent of this landmark law.”

President Trump’s order comes just days after Attorney General Bondi circulated a memorandum ordering DOJ employees to eliminate the KleptoCapture Task Force and the Kleptocracy Asset Recovery Initiative, and to deprioritize FCPA cases that are not directly connected to cartel activity.

Global Alliance for Tax Justice: As the U.S. Leaves the UN Tax Treaty Negotiations, Civil Society Calls on Countries to Continue Championing the Historic Process

Last week, the U.S. withdrew from ongoing negotiations to establish a Framework Convention on global tax reform at the United Nations. In a statement, Dereje Alemayehu, Executive Coordinator of the Global Alliance for Tax Justice (GATJ), characterized the exit of the U.S. as “a call for countries to stay committed to these historic negotiations and produce a robust framework convention.”

Despite withdrawal by the U.S., on Thursday UN negotiators approved modalities for future negotiations that are expected to result in three agreements on international tax reform by mid-2027, including a Framework Convention and a protocol detailing new rules for the taxation of income from cross-border services. These agreements, as well as any future protocols covering additional topics in international taxation, would be legally binding for signatory countries.

Foundation for Defense of Democracies: How Trump’s War on Cartel Cash Can Stop Fentanyl Enablers — and Save American Lives

In an op-ed for the New York Post, FDD’s Elaine Dezenski argues that beneficial ownership reporting under the Corporate Transparency Act has a central role to play in dismantling the financial networks that sustain cartel activities, including fentanyl trafficking, and that attempts to delay or repeal the law are “misguided”.

From the piece: “Reporting has shown a direct link between anonymous shell companies and fentanyl trafficking. These opaque corporate entities serve as fronts for fake pharmacies and cartel money laundering and obscure the transport of drugs. Chinese gangs use shell companies to hide criminals behind layers of corporate anonymity… We cannot afford to remove the handcuffs on investigators only to blindfold them. The Department of Justice and other law-enforcement agencies will need beneficial ownership information to speed up the prosecution of cartels and their enablers and seize their cash.”

Hudson Institute: Five Myths about the Corporate Transparency Act

In his latest publication, the Hudson Institute’s Nate Sibley debunks five common misconceptions about the Corporate Transparency Act, including the law’s supposed burden on small businesses, concerns surrounding data security, and – crucially – continued fearmongering surrounding penalties for noncompliance.

From the article: “Agencies can only access BOIR data to support ongoing national security, intelligence, or law enforcement investigations. This means that law enforcement will only notice noncompliance if it is interested in a company for other, more serious reasons. Failure to file must also be “willful” to beget criminal penalties. This is one of the highest forms of criminal intent under US federal law. Those who simply forget to file, or are unaware that they need to do so, cannot therefore be prosecuted.”

Campaign Launch: United to End Polluter Handouts

Wednesday’s launch of United to End Polluter Handouts – a new coalition of 36 economic justice, environmental, faith-based, youth, and anti-corruption groups – was accompanied by the release of a report on the key tax policy priorities of major U.S. oil and gas companies for 2025.

Among the policy priorities identified by the coalition were a number of international tax provisions long opposed by FACT, including so-called “Dual Capacity Taxpayer” status, which allows extractives companies to claim a tax credit even when they make non-tax payments to foreign governments, and an exemption for foreign oil and gas extraction income from domestic taxation.

From the report: “Another 2017 tax exemption just for Big Oil allowed all overseas oil and gas extraction profits to be repatriated back to the United States without paying any U.S. taxes. Such preferential treatment is not awarded to any other industry.”

Recent and Upcoming Events

FACT Hosts Coalition-Wide Strategy Retreat for 2025

FACT was proud to welcome more than 50 coalition members and allies last month for a day-long strategic retreat at our office in Washington, D.C. The retreat provided a forum for participants to discuss shared priorities, upcoming opportunities for collaboration, and the coalition’s ongoing work to defend the Corporate Transparency Act and other vital anti-money laundering reforms.

Illegal Gold Mining in Colombia: A Conversation with Duban Canal

On Friday, January 31st, FACT hosted Duban Canal from the Amazon Alliance for Reducing the Impacts of Illegal Gold Mining (AARIMO) for an in-person event on illegal gold mining in the Amazon. Over 20 experts from civil society, U.S. government, academia and philanthropy joined us to discuss new trends in illegal mining, trafficking routes for illicit gold and mercury, and convergence with other serious crimes, as well as impacts on communities, the environment, and security. 

The Amazon Alliance for Reducing the Impacts of Illegal Gold Mining (AARIMO) is a Colombian coalition that includes leading environmental civil society groups such as Gaia Amazonas, WWF, FCDS, Frankfurt Zoological Society and the Amazon Conservation team, as well as the Colombian government through the participation of the National Natural Parks Agency of Colombia. FACT previously collaborated with AARIMO at the COP16 Biodiversity Conference in Colombia, co-authoring a series of policy recommendations.

February 13: 2025 IPU Parliamentary Hearing at the United Nations

FACT executive director Ian Gary will present on the need for greater multinational tax transparency and other vital tax reforms alongside distinguished experts from the UN and foreign governments during a session of the UN Inter-Parliamentary Union from 4:30-6:00pm ET on Thursday, February 13. In attendance will be more than 300 parliamentarians from around the globe, all present to explore new approaches to achieving the UN’s Sustainable Development Goals.

Gary’s event will be broadcast live on UN TV – Click here to livestream the event.

About the FACT Coalition

The Financial Accountability and Corporate Transparency (FACT) Coalition is a non-partisan coalition of more than 100 state, national, and international organizations working toward a fair and honest tax system that addresses the challenges of a global economy and promotes policies to combat the harmful impacts of corrupt financial practices.

For more information, visit www.thefactcoalition.org

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