Closing the Escape Routes

The single most powerful closure is one no US administration has ever fielded, though the United Kingdom (DOTAS) and the European Union (DAC6) both run versions of it: an Advisor Disclosure and Promoter Liability regime. Promoters, counsel, and advisors must report any scheme bearing statutory avoidance hallmarks within 30 days of first marketing it. Each scheme receives a registration number that filers must carry on their returns, so a structure is identified before a single dollar moves through it — and the population of every scheme is known the day it is classified.

The penalty for non-reporting falls on the advisor, not only the taxpayer — the people who design and sell avoidance bear the duty to disclose it. The trigger is hallmarks plus principal effect, because no marketed scheme ever admits to a single purpose: a transaction bearing defined hallmarks — deferral or exemption achieved through a change of legal form without a change of economic substance — is reportable regardless of its purpose recitals, and a promoter's own marketing of the tax benefit is treated as an admission.

Treasury then classifies every registered scheme on a statutory clock — compliant, closed prospectively, or abusive — and the abusive class is unwound retroactive to the scheme's registration date, so a promoter can no longer sell certainty. Promoter penalties scale to the fees earned; users who carried the scheme's ID on their returns in good faith receive penalty protection and pay only the tax. That asymmetry keeps the disclosure incentive honest. The Accord does not wait to discover avoidance; it turns every scheme into a pre-discovered one.

The regime's largest chapter now closes by construction rather than by catalog. The Universal Realization Rule deletes the nonrecognition moment every wrapper-transmutation scheme needs — the §351 ETF conversion, the exchange fund, the insurance wrapper — so that class is never disclosed and classified; it ceases to exist. What remains for the catalog are the classes realization cannot touch: valuation games, income-shifting, and jurisdiction-shopping.

Below the headline regime, the surface is closed pathway by pathway. Each is an old route — and the block that ends it.

1. 1
   Gift–death equivalence

   A gratuitous transfer is a realization event to the giver and an accession event on the recipient's lifetime ledger — a gift and a bequest are taxed identically. Without this, giving before death simply compresses the whole settlement chain.
2. 2
   Valuation consistency

   One value per asset per year: the prepayment filing value is the estate value is the heir's accession basis. An understatement today is self-documented liability tomorrow.
3. 3
   Payroll base on active flow-through income

   Distributive shares of owners who materially participate are compensation, not passive return. The Gingrich–Edwards salary/distribution split is closed.
4. 4
   Personal-services look-through

   Income from personal services billed through an entity is attributed to the individual who performed them. Modernized accumulated-earnings rules reach closely-held passive retention.
5. 5
   Fringe imputation

   Personal use of entity assets — aircraft, housing, vessels — is imputed at fair market value into the payroll base. VAT input credits are denied on the personal-use share.
6. 6
   Retirement-account integrity

   Arms-length fair value is required at contribution, ending the under-priced-founder-share gambit. A tax-favored balance cap (~$10M) applies to legacy balances during the runoff, with mandatory distribution above it — after the deferral sunset, no new tax-favored money exists for the cap to police.
7. 7
   No family-entity valuation discounts

   Minority and marketability discounts are disallowed on transfers within family-controlled entities (the §2704 pattern). The asset is worth what it is worth, not what a contrived fraction implies.
8. 8
   Powers-based trust classification

   A trust's tier is set by its powers, not its label: any power to decant, amend, postpone distribution, or add beneficiaries makes it dynasty-class (the two-thirds excise). The $5M excise deduction aggregates across trusts sharing a grantor or beneficiary family.
9. 9
   Donor-advised-fund payout condition

   The one-third charitable rate requires a 5% minimum annual payout and genuine independent sponsoring-organization control. A warehouse with a charitable nameplate does not qualify.
10. 10
    Offshore accumulation and exit

    A throwback interest charge hits foreign-trust accumulation distributions (§665); transfers from covered expatriates to US persons are taxed to the recipient at the estate top rate — 38%, pegged so it can never be undercut by the 5% accession stamp rate (the §2801 analog); exit-tax valuations are trued up against realized prices within three to five years; and 30% withholding falls on payments to non-compliant foreign institutions (the FATCA pattern).
11. 11
    No statute of limitations on concealment

    No limitation period begins to run on an undisclosed asset until it is disclosed. Until then the back-tax compounds at the federal rate plus 8 points, with the 25% penalty and heir liability intact.

The Accord does not claim it can unilaterally monitor the world's tax havens — no government can. What it builds instead is a lattice from which concealment cannot escape over a lifetime: automatic information exchange (FATCA / CRS / CARF), recurring leak-driven discovery (empirically about once every three years), whistleblower awards at 15–30% of recovery, the advisor-disclosure regime above, and heir liability with no statute of limitations — concealment must survive the holder's death plus two heir generations, indefinitely.

The arithmetic makes the choice for the holder. At roughly a 3%-per-year discovery hazard, cumulative discovery over 30 years is about 60%, and the expected cost of concealment is a large multiple of the discounted Year-1 voluntary-disclosure terms. Coming forward is not a concession — it is the dominant strategy.