Foreign Ship Owners
Foreign ship owners who hold permits to operate on the US outer continental shelf and have not filed US tax returns are being contacted by the IRS.
About 100 companies have been contacted so far. The IRS notified Adams Offshore Services, Ltd. in March 2013 that the company owes back taxes and penalties of $23.9 million for the period 2005 through 2008 on $45.57 million earned from operating support vessels that help with subsea exploration or production of natural resources.
The company is based in Bahrain. There is no statute of limitations on IRS claims where a company failed to file tax returns.
The company challenged the IRS assessment in March 2014 in the US Tax Court. The IRS moved to dismiss the case on grounds that the company had only 150 days to file after the notice date. The company said the notice was sent to an old address, and it filed within 150 days of actual receipt.
The IRS takes the position that any activity related to oil and gas or other mineral exploration or production on the US outer continental shelf subjects a foreign company to US taxes on its income from such activity. The US outer continental shelf can extend 200 to 350 miles offshore.
The IRS lost a case in 1991, and again two years later on appeal, where it tried to collect US taxes on premiums a foreign insurer earned from writing insurance on offshore oil rigs. The US Claims Court said the activity was too far removed from exploration or production of natural resources. The IRS has taken the position in several rulings that companies that transport oil workers to offshore rigs are engaged in activity in the United States for tax purposes.