In late 2009, officials with the Internal Revenue Service (IRS) began to examine the issue of foreign vessels operating on the Outer Continental Shelf (OCS) in the Gulf of Mexico. The agency was concerned that these vessels were registering under foreign flags in an attempt to avoid paying the required taxes. After the tragic explosion that killed 11 people aboard the Deepwater Horizon offshore drilling platform, the IRS has intensified their efforts at tracking and investigating those it believes owe back taxes.
The IRS sent letters to those foreign vessels it believes operated within the OCS over the past ten years. It is targeting those who have been engaged or contracted by U.S. companies to aid in the removal of natural resources. The letter is demanding that foreign vessel owners pay taxes, or state why they feel they are exempt. The agency will also pursue withholding taxes from U.S. companies who may have contracted with the non-U.S. vessel owners.
Those who support the IRS actions say that it will allow U.S. companies to be more competitive for work within the region, as well as ensure safer working conditions for those aboard the vessels. The Congressional hearings held on the matter attempted to allow lawmakers to get a better handle on the scope of the problem, as well as reduce any potential loopholes in the current regulations.
If you have received a letter from the IRS, take it seriously. With the potential for back taxes and penalties, the IRS will be aggressively pursuing those foreign companies and vessel owners it believes skirted tax laws. An experienced tax attorney familiar with U.S. tax laws can help you prepare a defense against these charges. Do not ignore this letter, as that could cause penalties to increase.