 Aloha and welcome to Business in Hawaii with Reg Baker. We broadcast live every Thursday from 2 to 2.30, broadcasting from the downtown studios of Think Tech Hawaii in Hololulu, Hawaii. We are experiencing some interesting weather these days, so it's good to be inside. For those on the mainland, we've got severe thunderstorm warnings. So it's good to be here doing the show this time. We just had a very interesting lunch. Normally, my shows start off with a lunch to get warmed up a little bit, and we talk about the topics. Today, we really kind of got stuck on one topic, which is an emotional one for a lot of people, controversial for others, but we talked about immigration. And today's show is going to be a smuggish board of topics. It's a quarterly type show that Steve Penguin and I do, and we just talk about different topics that are current and relevant in the news. Steve, it's great to have you back. Thank you, Reg. It's always a pleasure. It is, and we always seem to have these interesting conversations. We don't always agree with each other, but that's okay because that's what keeps the friendship going. But we had an interesting conversation about immigration. We have different views on it. My wife immigrated, came over. She went through immigration from Hong Kong, yours from the Philippines. So it's not a topic that we're unfamiliar with, but we've got different perspectives on it. So can you just share with us your thoughts about some of the things that are happening in this immigration world, particularly since our Attorney General just filed another appeal or challenge today? Where do you start? From the legal point of view, on Monday, President Trump signed the second immigration executive order, which according to him cleaned up, if you will, a lot of the objections that the Ninth Circuit pointed out to the last order. But it still contains the prohibition against people coming from six countries that are basically Muslim countries. And they did eliminate Iraq because, in my opinion, the Trump administration finally figured out that American soldiers are fighting and dying alongside Iraqi soldiers over there to protect American interests, so be that as it may. The State of Hawaii, through our Attorney General, Doug Chin, on Wednesday, filed a second lawsuit. Actually it was an amended complaint to the original lawsuit that was filed. And in essence, what Hawaii is saying, and they want a national order such as the Washington Judge issued about a month ago. They want to cease it. Right, they want to cease it. They're saying that it does discriminate against Muslims and on the basis of religion and race and ethnicity. And under the U.S. Constitution, we have what's called an equal amendment rights so that all people are to be treated equal and without prejudice and discrimination and that type of thing. On its face, the new executive order is fairly straightforward. I mean, they now allow any green card holder, permanent resident aliens, to leave and come back into the country without. Regardless of the country. So those five or six that were named, if you've got a green card, you can still come and go. I think that is to be determined, quite frankly. I mean, if you're from Yemen, for example, and you've got a green card and you leave the U.S. and want to go visit family and you want to come back into the U.S., I think you might have a problem. Really? If you're a green card holder. But other green card holders from around the world should not have a problem anymore. The issue, as I see it, is the immigration legal status is one thing. And what the Trump administration says is another thing. They say, no, we're not discriminating. We're only enforcing the law. We're only going after criminals, which should be deported. And I don't think anybody disagrees with that. But in fact, if you look at what is being done, the ICE agents, the immigration customs enforcement agents, who are the Border Patrol cops, if you will, they're out arresting students who have a legitimate, what they call the DACA visa, for the kids that were brought over here when they were younger, and they have to say, they're being, these children are being arrested. Their parents are being deported. None of these people have criminal records. So the aggressive enforcement by the customs people is really what's happening. And it's kind of because, in my opinion, the tone and the whole impetus behind this immigration executive order of the Trump administration is to do what Trump said he was gonna do during the campaign, which is to basically get rid of all the people that we don't like. We build the wall and protect the borders. Exactly. Right. I guess part of what we discussed at lunch a little bit that I think we reached a common ground in agreement on is that we've got adequate laws on the books already. There's already a law in place. Aloha, this is Kili Ashina with... And it hasn't always been enforced as much as maybe it could or should have been. And if we just take the perspective to enforce the current law, then we're gonna get or make a big step in the right direction towards the protection of the borders. That's correct. The protection of the borders and also the protection of people's constitutional rights. Because even people who are in this country illegally once they get past the border, that specific border area, they have constitutional rights under our constitution. Everybody who is facing deportation should have a hearing before an immigration judge. Now the hearing might end up being five minutes, but at least they get a due process hearing. And then the judge makes a decision whether or not they should be deported. The problem is from a practical point of view that we don't have enough immigration judges. As you've probably read, there are hundreds, if not thousands, of people who've been waiting a year, up to two years for a hearing. The Trump administration recently put a federal hiring freeze on all government agencies. They exempted the Homeland Security so now they can hire another two or 300 immigration judges. That should help. But you're absolutely right. The immigration laws are quite satisfactory and they pass constitutional muster, if you will. It's the administration of them that is the real problem because it's not being followed. Yeah, and that's sad that we've had the laws on the books that's been ignored and that's kind of got us to where we're at today and now we've got to try to bring some sensible solutions, you know, together. And as far as, you know, everybody keeps talking about the illegals, you know, the illegals or the ones that's committed criminal acts. Any special provisions for anybody that's illegally in this country or has committed a crime of some sort that allows a different set of rules or regulations? For many, many years, there has been an immigration law on the books and it's supposed to be enforced. That any person who's not a US citizen, who is a green card holder or here on a tourist visa or student visa or HB1 visa or whatever, if they're here and they're not a US citizen, if they commit a crime, they are subject to deportation. And I do criminal defense work and you see people in district court, the smaller court here downtown who get convicted of drunk driving or if they wanna plead guilty to a drunk driving offense. The judge will warn them. Do you understand that because of your immigration status, your green card or your student visa or something like that, you're subject to deportation if you are convicted of this crime. And it obviously goes for felonies too. So that's an example of the law being on the books and just not adequately enforced. Very interesting. Well, I'm not sure what the solution is other than enforcement of the laws that are already there. And in a reasonable way, I mean, you said, ICE has kind of been unleashed and maybe getting a little overly aggressive in maybe interpreting the law. Maybe they need to be pulled back a little bit and just focus on the law and its pure sense and enforcing it at that level. We talked about this at lunch, but I would not use the word maybe overly aggressive. In my opinion, ICE has been unleashed. I mean, they are just out of control. They have a lot of authority and they are arresting students who have the protection that 750,000 students were given by the Obama administration. They're going to school and so on. They're arresting their parents and deporting them and that type of thing. We could go on and on. Of course. We talked about the federal staffing restriction that the Trump administration put in and we might want to talk about the IRS. Well, I was just going to say maybe we should shift over to a slightly less controversial topic and we can talk about tax reform. That was one of Trump's big selling points was that he wanted to restructure the tax process, rewrite the code and provide some cuts or reduce savings, reduce taxes. So what's your thoughts about that? From a tax defense lawyer, I always look at it from an enforcement point of view and I think the fact that the IRS has been losing employees for several years now through retirement or people just up and quit. The problem is the Internal Revenue Service is not replacing these employees. And of all of the agencies in the federal government, it's the Internal Revenue Service that brings revenue into the government much more revenue than anybody else. And it costs to run the IRS. And to not be replacing these talented, experienced IRS employees with new people and new training and the technology is you well now. I mean, you deal with it all the time. It's very outdated. So that is, in my opinion, a real failure of the Trump administration to this point. You know, the technology has helped a little bit and you're able to get information online more than you've ever been able to before, which has got its pluses and minuses when you factor in the cybersecurity issues and that sort of thing. But they have made some advancements in the technology side. What worries me and to your point is that there's an awful lot of institutional knowledge that talent is leaving and it's not being replaced. And you can't replace 25 years of experience with somebody who's just started a few years ago. There's just a lot of ways that the system works that you've got to be there to understand. And to get through the maze of trying to resolve some complicated tax issues, you need people with that experience and that's becoming difficult to find now. It is, and when you hire new people, what kind of people do you get? I mean, you get bright young college graduates with zero experience, pretty much. Yeah, it's a tough environment. And I think with the cuts too, I think some of not only the enforcement but also the audit side is gonna be hurt a little bit. And a lot of people may applaud that. But I think what's happening is that the audit function is becoming more focused and more narrow on specific areas where they will get the biggest potential return. Which means large companies, international tax issues and maybe some of the very high-end wealthy individuals are gonna be getting looked at a lot more closely than anybody else. Which means that compliance may start to suffer. The statistics of the last year or two are that a person earning less than $200,000 a year generally or a family has a less than 1% chance of being audited. If you earn over $200,000, just like you're talking about or a larger business and so on, their audit chances go up to 5% to 10%. The other emphasis that the IRS and the Department of Justice are making right now is they're going after foreign undisclosed income. They're going after foreign bank accounts, foreign assets that individuals hold that do not report. As you know, as a return preparer on the tax return, there's a question, do you have a foreign bank account or do you have foreign assets and you've gotta check yes or no? Well, let me, I think that's a topic I wanna spend a couple of minutes on but I need to go on break right now. So, this is Business in Hawaii with Reg Baker and Steve Pengre, we're talking a little bit about some of the controversial current topics in the news today. We'll be back in about 60 seconds. Okay, I'm here with Brett Overgaard of the Faculty of the School of Journalism in the Department of Communications at UH Minoa. We've had a number of shows, we have a movable feast going on and we talk about journalism, we talk about language, we talk about communication in general and we talk about the effect of that on the country and on individual people. Brett, it's so good to be able to discuss this with you in our movable feast. Oh, it's my pleasure, this is a great opportunity. You'll have to come back again and again, okay, deal? That's a deal. Brett Overgaard, I'm Jay Fiedel, we care about everything, thanks. Aloha, my name is Richard Emory, host of Condo Insider. More than a third of Hawaii's population live in some form of association and our show is all about educating board members and owners about the responsibilities and obligations and providing solutions for a great association. You can watch me live on Thursdays, 3 p.m. to 4 p.m. each week, aloha. Aloha and welcome back to Business in Hawaii with Reg Baker and today I'm interviewing Steve Pengre, who's an attorney and focuses in the tax area among other areas and we've had some interesting conversations so far about immigration, we're just now getting into tax issues a little bit about some of the changes that may be happening and we were just touching base a little bit, Steve, on the foreign bank accounts and my comment to you was that there's a large amount of people that just don't understand the implications. For example, if I had a mother or a brother or a sister or a father that I held maybe jointly or had check signing ability or access to that account that was in Hong Kong or the Philippines or Australia, Germany, wherever, that's supposed to be disclosed. And a lot of people don't appreciate that. That's right and the last, well, 10 years, but specifically in the last five years or so, the Department of Justice and the Internal Revenue Service has become extremely aggressive going after foreign bank accounts and unreported income. I mean, it's in the, according to some estimates, the trillions of dollars of unreported money that U.S. taxpayers have to, should be reported. And that's the proverbial low hanging fruit that the IRS is seeing is that that's easy pickings. They can go in and find those assets in today's environment a little bit easier than they could before and then be able to tax it accordingly. That's absolutely correct. There's two ways that the IRS does this. Number one, on the tax return, as we briefly discussed, there are two questions. Do you have a foreign bank account and do you have foreign assets? Meaning do you own a corporation or something like that overseas and you have to check the box yes or no? If you check the box, yes. You have to fill out what's called an F-bar, a foreign bank account report every year. And by the way, F-bars used to be having, you had to report the prior year in June. The IRS just in FinCEN, the Financial Crimes Enforcement Network, they just changed that deadline now to move it back to October 15th, the last day where you file an extension and it's an automatic extension, but the F-bar form has to be filled out and people don't know that. A lot of tax preparers either don't know it or they don't tell their clients. And it's not that complicated a form to fill out, at least the ones that I've been involved in and those were pretty straightforward bank account or brokerage account type of and essentially an add to this but basically name, address, count, number, balance, that sort of information, right? That's correct. The other thing, the other action that the federal government, the US federal government has taken is they passed a law called the Foreign Account Tax Compliance Act or FACTA. What this does is the American government went out to every bank in the world, in the world and all of the bank branches and said you must report to the IRS the accounts of any US citizens that are in your bank. Wow. And if you don't, you will be cut off from the using the US financial system. That's a big hammer. That's a big hammer. And so right now there's about at least 200 banks that are reporting to the IRS. So if, and the problem is if, and we have a lot of people who are dual citizens here, Philippines, Japan, China, Malaysia, Korea, if you try to open a bank account or even have a bank account in your home country, for example, they are now coming back to US taxpayers and having them fill out this FACTA information. And if the IRS learns from the foreign bank that you have an account in that bank and then they do a cross check and they find out you haven't reported it through the F-bar or you checked your tax return no when in fact it was yes, it could be a big problem. You got some explaining to do, but what are the implications to you? What happens if they do find an account that was out there that had $100,000 in it? What are the penalties and the fines involved? Are you familiar with that? Yeah, there's basically what they call a kind of a negligent, no-intent violation and that's like a $10,000 fine. If the IRS finds out that it was an intentional non-disclosure of this bank account, the fine can be up to 50% of the highest balance in that account over a five-year period. Five years, so in other words, if they had a big balance and but it came down, they'd have to pay 50% of that. That year, right, every year. So in $100,000, frankly, for a lot of offshore bank accounts, it's not a lot of money. Most people have a million or two or 10, something like that, so the fines are horrendous. They're very direct on you. So it's always better and to disclose them, it's not that hard and I guess what the IRS is really looking for is foreign source income. They want to be able to see if there's any income that's being generated offshore that they should be getting a piece of. That's correct. What a lot of people don't understand, especially green card holders, I've said this 20 times, but I still hear it, they don't understand that if you hold a green card, you are subject to U.S. tax laws just like a U.S. citizen, which means you're taxed on your worldwide income from any source. I've had clients who have actually given up their green card because in their home country, they own a lot of resources and they just didn't want to be taxed, so they just took their green card and gave it back to the embassy. Now, have you heard anything in the conversation with some of the tax reform that's going on or supposed to be going on that's going to relieve some of this or has this been kind of a quiet moot point? No, actually the emphasis on foreign bank accounts and all the reporting requirements that we've just been talking about is going to increase. And along with that is a whole area called anti-money laundering. If you've walked into a bank, got in a bank account, you have to fill out all these forms now. Now it's 10 pages of forms as opposed to five years ago, maybe two, and there's a thing called KYC, know your customer, and the banks are under a lot of scrutiny. Had to do that. In some, it's the financial intrusion or the oversight of your financial transactions by the US government is going to increase and become worldwide. One of the, and this was, they didn't make a big deal out of it. One of the comments that I read somewhere, and it could have been the Wall Street Journal, is that there's been some talk about an amnesty period where the Trump administration is considering allowing people to bring those foreign bank cash balances back into the US and waive the taxation of those balances. Have you heard anything about that? Very generally, nothing specific. And I thought it applied to foreign businesses. I think it did, yes. Rather than to individuals. They're trying to work out some programs so that American businesses will bring their profit centers back home. Because there's a lot of companies, and Microsoft and Apple, and I'm sure a lot of others have billions offshore, that they're leaving offshore because if they brought it home, they'd be taxed pretty heavily on it. That's good. And so they're leaving it off. And if we wanted to bring that money back for capital investment and for some other purposes, then there could be a period of amnesty there where they're allowed to bring it back in. I can't help but think logically, intuitively, that to pump several billion dollars back into the economy would be a good thing. Even if it costs some taxes, but they're not getting the taxes anyways, right? Well, my understanding is for the corporations what the Trump administration wants to do, instead of charging the corporations the 30 or 35% corporate tax, it would be brought down to something like 10%. So the amnesty is not really a tax-free, get out of jail, free card kind of thing. It's still 10% better than 35. Yeah, it is. And it's still a good thing. Interesting. All right, well, I know we've had some other conversations about the tax reform, reducing the rates and all that, but a lot of it is just discussion coupled in with all of that is the Affordable Care Act or Obamacare and how that's gonna change. And there's an awful lot that's going on. It's gonna cost a lot of money and then cutting taxes at the same time is potentially problematic. So we'll see how this all plays out, but it is going to be an interesting year, I think. Switching gears into a different topic that again is in the news quite often. Homelessness. Yeah, there seems to be a lot of homeless people. I hear about them. I actually see a number of them. I've seen them in Hawaii. I know you live closer to downtown and you see a lot here. What's your thoughts about the homeless situation? I do live in Chinatown and the homeless situation has increased tremendously. What I see coming out of the city and the state is all this talk about providing housing for people. Well, they're really only talking about 150 houses or 250 houses and they're arguing about the funds and all that kind of stuff. In my opinion, it doesn't get to the heart of the problem and that is 30 to 40 at least percent of the people that are homeless are mentally ill. I mean, truly unable to take care of themselves. I see them every day walking around Chinatown or lying on the street or sitting there just a little mumbling to themselves. These people need help. And the city has been defunding or not funding the few non-profit organizations in this city. That provide that. That provide that kind of help. And what the city has been focusing on is moving these people off the sidewalk because the tourists don't like to see them. And the businesses don't want the homeless people capped out in front of them. But all they're doing is they're just moving pieces on a game board. I can't help but think that some of these people wouldn't wanna go into these homes anyways. The only way to keep them in there and off the streets is to put a lock on the door and not let them out. Part of that is due to a person's mental illness. They need treatment. And the sirens in downtown area of Honolulu have increased in the last year or so. And why is that? Because the homeless people are being picked up by these ambulances and taken to Queens, for example, hospital through the emergency room. And the Queens emergency room is being overwhelmed with these people. And as one doctor was saying, these people need some type of a clinic where they can go for a $59 visit instead of a $5,900 visit to the ER. Driving health care costs up across the board. I mean, that's one big component of it. Well, then also, if you think about it, denying health care to people who really need it because they can't be seen. I think a mobile clinic, in my opinion, if the emphasis were put on mobile clinics that could go out and have some professional people, nurses and doctors and paramedics and things like that, could be on the spot and could give some treatment to some of these people would help. We're in the closing seconds of the show. And so my comment about this is that we've got this increasing need for health care and health care professionals. But at the same time, we're seeing those numbers drop. And we've got physician shortages and nurse shortages. It just seems to be opposing. It seems that if we don't do something, it's just going to get increasingly worse. So maybe our next show, we could talk a little bit about some of the solutions. That's a thought. This is Business in Hawaii with Reg Baker. We broadcast live every Thursday from 2 to 2.30. Generally, we talk about subjects of business nature, that success stories of businesses in Hawaii and individuals. But occasionally, we also talk about current topics that has some impact in the business community. And today, all of our topics, of course, did. We hope to see you next week, next Thursday, 2 o'clock. Until then, aloha.