JP McManus v IRS

Joe_90 said:
it seems extraordinary that McManus' team are claiming the benefits of the Ireland / US tax treaty when he has not been resident in Ireland for 20 years!!!
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I agree.

It appears that they tried to use the domicile angle in Article 4 of the treaty.

Because he is domiciled in Ireland and paid the Irish Domicile Levy they claimed that he was, therefore, also Irish resident!

The IRS were having none of it.

$17.4m winnings from betting on a backgammon match!
 
irishtimes said:
Mr Gores [the loser of the backgammon match] withheld the $5.2 million on the money paid to Mr McManus on the basis that the winnings might be subject to US federal income tax.
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The musky aroma of sour grapes. I love it.

Joe_90 said:
it seems extraordinary that McManus' team are claiming the benefits of the Ireland / US tax treaty when he has not been resident in Ireland for 20 years!!!
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I imagine that McManus' team find that life is extraordinarily rewarding.
 
The Irish/US tax treaty says a resident is someone who "under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management, place of incorporation, or any other criterion of a similar nature"

The domicile levy is payable by a person who is Irish domiciled and an Irish citizen. So he may have a case that the treaty applies to him. I can see why the Revenue and the IRS would not agree but don't think it is a straightforward case.

Over the last 12 months the Irish Revenue also seem to be targeting people who avail of double tax treaty provisions. I have seen a few cases of Irish Revenue challenging the payment of dividends to non-resident individuals who are resident in a tax treaty country without Irish dividend withholding tax being deducted. These have been cases where the individual does not pay tax on this income in their country of residence.
 
srase said:
The domicile levy is payable by a person who is Irish domiciled and an Irish citizen. So he may have a case that the treaty applies to him. I can see why the Revenue and the IRS would not agree but don't think it is a straightforward case.
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He might have a case if the Irish Domicile Levy was a covered tax for the purpose of the Ireland/US treaty, but I don't see how it could be.
 
Joe_90 said:
The mind boggles at the figures but it seems extraordinary that McManus' team are claiming the benefits of the Ireland / US tax treaty when he has not been resident in Ireland for 20 years!!!
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Still known as "Limerick businessman" though ;)

The amounts involved shows you how much money these guys have. Figures that your "ordinary man" only talks about when discussing winning the lotto.
 
Sophrosyne said:
He might have a case if the Irish Domicile Levy was a covered tax for the purpose of the Ireland/US treaty, but I don't see how it could be.
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This is the dispute - is the domicile levy the same as income tax? The USC is considered to be part of income tax for the purposes of the double tax treaties.

The tax treaty says it applies to income tax and it "shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of the Convention in addition to, or in place of, the existing taxes."

Section 531 AI states that "the Revenue Commissioners shall have all such powers as an inspector would have under that section in relation to making enquiries or taking such actions as he or she considers necessary to satisfy himself or herself as to the accuracy or otherwise of any statement or particular contained in a return delivered for the purposes of income tax"

Any income tax paid is allowable as a deduction against the Domicile levy. It is applied to individuals who exceed a certain income threshold.

I am not saying it is definitely covered by the tax treaties but if JP was my client I think I could put up a case to bring to court - for the right fee of course.
 
srase said:
This is the dispute - is the domicile levy the same as income tax? The USC is considered to be part of income tax for the purposes of the double tax treaties.
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I agree that this one of the main points.

I can understand his legal team making the case.

However, unlike the USC, which is proportional and based on residence, I cannot see how this flat €200,000 levy on an individual who is neither resident nor ordinary resident could be considered as identical or substantially similar to other Irish taxes.

For instance, would LPT be regarded as a covered tax?

In this case, the claim is that he is entitled to be regarded as Irish resident only for the purpose of of his gambling winnings and not for the purpose of any other income or assets.
 
LPT would not be covered as there is no income requirement.

Domicile levy has income requirement. In addition income tax paid is allowed as credit against the the charge. It is covered in the Taxes Consolidation Act which covers corporation tax, income tax, USC & Domicile levy. It would be the only one of these taxes not covered by the treaty.

I agree the weak point of the argument is that it is a flat fee and not a percentage of income.
 
Sophrosyne said:
For instance, would LPT be regarded as a covered tax?
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Not making any definite representation here one way or another but I remember Moore McDowell arguing on radio 3 or 4 years ago that if the LPT (or maybe the household charge) had a minimum income threshold, it would in effect be another income tax.
 
From the article in the Sunday Business post the IRS sought to tax him as a non resident alien.

So I'm not clear if they are saying he is subject to tax in the States anyway! And that he could get a credit for the tax paid in the US, in Ireland on the basis of the DTA. But as he is not resident in Ireland that is of no use to him.

I assume that if he were resident here that his professional gambling income would be subject to Income Tax?

It appears to be the view of most articles that income can't be taxed in both countries which is not 100% true.

I'm not familiar with the US tax law but they seem to tax everything they can except Delaware companies!
 
The introduction of the Domicile Levy was political gombeenery at its best.

If it results in a windfall for a HNW individual, I will laugh out loud.
 
There are two different issues:

Irish tax resident which is based on number of days in country. He is not claiming this as he would be taxed on worldwide income.

Irish resident under double tax treaty. This is what he is claiming as a result of paying the domicile levy.

I know it may sound unusual to claim you are resident under the treaty but are not tax resident but that is what he is claiming as the treaty includes domicile in addition to tax residency.

Even if he was tax resident gambling winnings are tax exempt in Ireland
 
Joe_90 said:
From the article in the Sunday Business post the IRS sought to tax him as a non resident alien.

So I'm not clear if they are saying he is subject to tax in the States anyway! And that he could get a credit for the tax paid in the US, in Ireland on the basis of the DTA. But as he is not resident in Ireland that is of no use to him.

I assume that if he were resident here that his professional gambling income would be subject to Income Tax?

It appears to be the view of most articles that income can't be taxed in both countries which is not 100% true.

I'm not familiar with the US tax law but they seem to tax everything they can except Delaware companies!
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Well from the limited facts available, I think the end goal is not to pay any more than €200,000.

By claiming that he is Irish resident entitles him to be taxed only in Ireland.

However since he is non-resident in Ireland he cannot be taxed here on his winnings but instead only on the Irish Domicile Levy, which he claims to have already paid.

In other words it is the difference between paying €200,000 and $5.2m.

This could be classed as treaty abuse but he might get away with it.

He has hired celebrity attorney, Terry Giles.
 
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