At Flott & Co. we are primarily international tax and commercial lawyers with specialties in international transportation and tax. Our practice is focused in the areas of:

• U.S. Taxation of International Transportation Activity
• International Business
• U.S. Taxation of the U.S. Source Income of Foreign Persons and Companies
• Taxation of U.S. Citizens and Resident Aliens Living Outside the U.S.

U.S. Taxation of International Transportation Activity

Flott & Co. is a recognized expert in the U.S. taxation of international transportation activity, which applies to all foreign transportation companies that operate to, into, or from the territory of the United States.

U.S. Taxation of International Shipping

Download the Shipping Tax Brochure

We have been assisting companies on matters involving the U.S. Taxation of International Shipping since the law affecting international shipping was changed in the Tax Reform Act of 1986. When tax returns were due in 1988 for the 1987 tax year, the first year in which the new rules applied, Stephen Flott worked with the IRS to develop an acceptable form of exemption statement. Our practice involves monitoring changes and developments in the tax and assisting foreign companies with their compliance obligations. We have advised the London Club, the Greek Shipping Cooperation Committee in London, and the Union of Greek Shipowners on the application of the tax and the exemptions since 1988. A recent presentation on the tax can be found in Publications.

Most of the firm's clients in this area of the practice are international tramp shipping operators who earn voyage and time or period charter hire. Flott & Co. keeps them regularly advised on developments on the tax and its enforcement. In addition the firm monitor's and advises clients on other developments at the IRS and the U.S. Treasury that affect ship owners with vessels calling at U.S. ports. For example, in 1997, we were successful in working with U.S. Treasury officials to eliminate any doubt about the exemption of foreign seamen's wages from U.S. withholding taxes. We also helped Malta prepare a draft note to replace its treaty exemption when the U.S. summarily cancelled the US-Malta Treaty.

By treating representation on a group basis, the firm is able to keep its fees for compliance very low. An explanation of the fee structure and standard terms can be found in How We Charge.

US Taxation of International Road Transportation

Many Canadian motor carriers are exempt from U.S. tax on their U.S. source income by reason of the U.S.-Canada Tax Treaty. However, any Canadian motor carrier who generates U.S. source income, even if that carrier is not required to pay U.S. tax, has to file an annual U.S. tax return to disclose its treaty base position. The penalty for not filing the disclosure is $10,000 per year.

Canadian based bus operators qualify to claim a refund of 17¢ per U.S. gallon on all diesel fuel purchased in the United States. Since most Canadian motor carriers purchase their fuel in the U.S. on a tax paid basis, this refund represents a direct savings. However, to obtain the refund the carrier must file a US tax return as well as additional forms. We assist carriers with compliance on this matter for a fixed fee based on the size of the refund.

International Business

As a natural outgrowth of our work with foreign transportation and other companies operating in the United States or expanding their business in this country, Flott & Co. has developed specialized expertise in advising foreign clients on their cross border activities. We provide comprehensive services to foreign companies operating in the U.S., including assisting in matters involving corporate structuring, taxation and regulatory compliance. We offer similar expertise and services to U.S. companies expanding their activities overseas.

Our combination of business, international tax, and regulatory expertise offers clients a comprehensive resource to structure their operations or business in a way that optimizes not only their management but also their profitability.

For example, over the last five years we have:

• Advised a Canadian based motor carrier on the creation of a U.S. base of operations that enabled the company to dominate its market by increasing the flexibility of its Canadian, U.S. and international operations. By taking a strong position on the application of U.S. immigration rules to the scope of work that a Canadian citizen driver can undertake in the U.S., we have helped this company fully integrate its cross border business and take advantage of local and international operations in both countries.
• Assisted a European based freight forwarder in segregating U.S. operations from the international business in order to integrate U.S. export financing of the significant transportation costs of the overall project, without exposing the non-U.S. income to U.S. taxation.
• Assisted foreign property owners with the management of their U.S.-based assets and reducing their exposure to U.S. taxation. In several cases we eliminated a significant tax liability arising from past activity.
• Helped one U.S. company explore its options for opening an office in France by evaluating tax, employment, and business issues and coordinating them with French counsel. We set up a tax-free distribution arrangement whereby a U.S. company was able to source goods in an Eastern European country without subjecting the profits on its sales activity to taxation in that country. We also helped a U.S. company convert potentially taxable profits into non-taxable income by reorganizing the business relationship between itself and its European counterpart.
• Assisted a couple of U.S. nationals with the structuring of their start up operation in South Africa to minimize taxation in both countries.

Fees for this work are done on an hourly basis. A description of our standard hourly rates and billing policies can be found in How We Charge.

U.S. Taxation of the U.S. Source Income of Foreign Persons and Companies

Every foreign person or company that receives income from sources within the United States is subject to U.S. tax on that income. In some cases, an income tax treaty between the United States and the country where the foreign person is resident will exempt or reduce the rate of tax payable on that income.

Foreign persons who reside in the United States for more than 183 days a year (or are deemed to have lived in the U.S. for that number of days in any year) are subject to tax in the United States on their worldwide income as if they were U.S. citizens or resident aliens. In some instances, individuals who are in the United States as non-immigrants, for example visiting professors, scientists, and others, may be exempt from U.S. tax on their employment earnings by reason of a tax treaty between their home country and the United States. However, several of the exemptions have conditions that, if not honored, can result in retroactive tax liability.

Foreign companies that earn income from sources in the U.S. are subject to tax on that income unless they are covered by a tax treaty between the United States and the country in which the company is headquartered or organized.

Fees for this work are usually done on an hourly basis, but other arrangements are possible. A description of our view of billing and our standard hourly rates and billing policies can be found in How We Charge.

Taxation of U.S. Citizens & Resident Aliens Living and Working Outside the U.S.

Download the Individual Tax Brochure

Every U.S. citizen and U.S. resident alien residing outside the U.S. for an extended period of time earning income from foreign or U.S. sources while overseas must file a U.S. tax return every year.  This applies to every U.S. citizen even if he or she resides outside the U.S. for an extended period of time.  The rule is if you carry a U.S. passport and earn the threshold amount of income annually, you have a tax-filing obligation and must file a return even if no U.S. tax is due.  The current issue of IRS Publication 54, Tax Guide for US Citizens and Resident Aliens Abroad, for use in preparing 2009 tax returns can be downloaded in the Other Publications section of the News & Resources page.

This area of international tax requires special attention and tax preparation expertise, especially for those US citizens or resident aliens who are married to non-US citizens or resident aliens.  U.S. citizens who are married to non-citizens have opportunities for tax planning that U.S. citizens married to U.S. citizens while residing in the U.S. do not.  Resident aliens have a narrower range of opportunities since they are not permitted to work outside of the U.S. for extended periods of time without losing their resident alien status.

We have developed a particular expertise in assisting U.S. citizens who have resided overseas for many years without making their annual filings.  We have helped a number of such persons to bring themselves into full compliance with their U.S. tax filing obligations without paying non-filing penalties.