U.S. Federal Tax Reconciliation Plan and Lichtenstein “Stiftung” Investment Vehicle
On October 20, 2021, Bob Adler and Doug Schwartz gave presentations on the U.S. federal tax reconciliation plan and Lichtenstein “Stiftung” investment vehicle during a joint session of CONSULEGIS’ Tax & Accounting and Corporate groups.
During this virtual event, Doug gave the participants – who included attorneys from the United Kingdom, France, Italy and Cyprus, among others – a 10-minute civics lesson on U.S. tax and fiscal lawmaking, such as how the House and Senate are elected and how they pass legislation, what a “filibuster” and “reconciliation” are and why Senators Joe Manchin and Kyrsten Sinema (as well as Senate Parliamentarian Elizabeth MacDonough) are among the most powerful people in Washington these days.
Bob then addressed the U.S. tax treatment of a “Stiftung,” a German word that translates to “foundation.” With over 400 reported U.S. Federal Court decisions dealing with Stiftungs, he stated they are in common use and that the IRS generally treats them as trusts if their purpose is to protect assets for the benefit of named beneficiaries. Bob mentioned that many of these Stiftungs are treated as grantor trusts – in situations where the person establishing the trust retains control over such things as distributions – meaning that the income is treated as the income of the person providing the funds. He continued to explain that if it is a grantor trust, the IRS requires annual reporting. Otherwise, substantial penalties are assessed.