TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

A Member of the Law Professor Blogs Network

Tuesday, August 19, 2014

Johnston: Kinder Morgan’s Evolving Tax Strategy

Tax Analysys Logo (2013)David Cay Johnston (Syracuse), Kinder Morgan’s Evolving Tax Strategy, 144 Tax Notes 881 (Aug. 18, 2014):

Johnston looks at Kinder Morgan’s recent announcement that it would be folding two master limited partnerships into a C corporation holding company.

August 19, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

NY Times: Behind Closed Doors, Obama Crafts Executive Action on Tax Inversions

Following up on yesterday's post, WSJ: Meet the Law Professor Who’s Crashing the Inversion Party: New York Times, Behind Closed Doors, Obama Crafts Executive Actions:

When President Obama announced in June that he planned to bypass congressional gridlock and overhaul the nation’s immigration system on his own, he did so in a most public way: a speech in the White House Rose Garden.

Since then, the process of drafting what will likely be the only significant immigration changes of his presidency — and his most consequential use of executive power — has been conducted almost entirely behind closed doors, where lobbyists and interest groups invited to the White House are making their case out of public view.

Mr. Obama’s increasingly expansive appetite for the use of unilateral action on issues including immigration, tax policy and gay rights has emboldened activists and businesses to flock to the administration with their policy wish lists. It also has opened the president, already facing charges of executive overreach, to criticism that he is presiding over opaque policy-making, with the potential to reward political backers at the expense of other interests, including some on the losing side who are threatening to sue. ...

Consumer groups and organized labor want the Treasury Department to act on its own to limit financial incentives for companies that move overseas for tax breaks and stop so-called inversions. ... One group, Change to Win, a labor union-backed consumer advocacy organization that has pressed for congressional action to block corporate inversions, sought out a legal expert with Obama administration ties, Stephen E. Shay, to press its case.

Continue reading

August 19, 2014 in Tax | Permalink | Comments (0)

Tax Inversions Often Don't Produce Big Returns for Investors

Reuters,  When Companies Flee U.S. Tax System, Investors Often Don't Reap Big Returns:

Establishing a tax domicile abroad to avoid U.S. taxes is a hot strategy in corporate America, but many companies that have done such "inversion" deals have failed to produce above-average returns for investors, a Reuters analysis has found.

Looking back three decades at 52 completed transactions, the review showed 19 of the companies have subsequently outperformed the Standard & Poor's 500 index, while 19 have underperformed. Another 10 have been bought by rivals, three have gone out of business and one has reincorporated back in the United States. ...

It is impossible to know how the companies might have fared in the market had they not inverted. Innumerable factors other than taxes influence a stock's performance, and no two of these deals are identical, complicating simple comparisons. But the analysis makes one thing clear: inversions, on their own, despite largely providing the tax savings that companies seek, are no guarantee of superior returns for investors.

Continue reading

August 19, 2014 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 467

IRS Logo 2Forbes:  Are 'Expendables 3' & IRS Equally Expendable?, by Robert W. Wood:

The Expendables 3 is a little like the IRS. Did we need this third installment of the action movie franchise? It had a lackluster opening weekend and tepid reviews, so perhaps with ‘Expendables 3′ the Third Time’s Not a Charm. But it may have a hidden message.

An expendable movie about a cadre of aging action stars is a little like the sagging IRS. The IRS may never have been a star, but its star has fallen in recent years. For over a year now, it has been plagued by scandal and what sometimes seems like downright arrogance at the top. Even in the face of these sad developments, some claim there is not a ‘Smidgen Of Corruption’ at the IRS.

Like an aging action star demanding too much money and being frozen out, such behavior doesn’t bode well for the IRS. ... Expendables—the IRS—features an agency that collects billions and is charged with administering the nation’s tax laws. Make no mistake, that’s no easy job. Yet on the whole, I still think the IRS does a generally good job (no hate mail please). That is why it’s so terribly important that we restore some trust and accountability. ...

Does our our country have more important problems? Sure we do. But it’s still wrong that we cannot seem to get straight answers. The latest order from Judge Emmet G. Sullivan in the litigation filed by Judicial Watch asks for answers about the recently ‘lost’ emails of Lois Lerner and other IRS officials. See Judicial Watch v. IRS (No. 1:13-cv-1559).

The fact that a federal judge has had to launch this inquiry into the issue of the missing emails is a sad day for the IRS, regardless of whether the IRS realizes it. The IRS filings were at least lackluster and seemed not to take seriously the judge’s request for sworn declarations about the IRS email issue. The judge really means it.

Continue reading

August 19, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, August 18, 2014

Ajay Mehrotra's Making the Modern American Fiscal State Wins 2014 U.S. Intellectual History Book Award

Ajay2014 Society for U.S. Intellectual History Book Award Winner:

We are pleased to announce our selection of Ajay K. Mehrotra’s Making the Modern American Fiscal State: Law, Politics, and the Rise of Progressive Taxation, 1877-1929 (Cambridge University Press, 2013) as this year’s winner of the S-USIH annual book award for 2014.

Mehrotra’s important and ambitious book chronicles the early 20th-century transformation in American tax policy and public finance. It analyzes the shift from the nineteenth-century “regime of indirect, hidden, partisan, and regressive taxes” to the “direct, transparent, professionally administered, and progressive tax system” we know today. A book on taxation may well seem a curious choice for an intellectual history prize, but we were struck by how successfully Mehrotra weaves together the intellectual, legal, administrative threads of his argument. Mehrotra takes ideas seriously. He traces legal and administrative change to a prior “conceptual revolution,” wrought primarily by a cohort of professionally trained intellectuals, including Henry Carter Adams, Richard Ely, and Edwin R.A. Seligman. And he shows how notions of economic justice, political obligation, ethical duty, and democratic reciprocity underwrote the new progressive conception of what Mehrotra aptly labels “fiscal citizenship.” He also shows what happened to those ideas as they traveled through a contested political process and were embodied in a complex administrative apparatus with paradoxical and often unintended consequences. Mehrotra’s book is thus a history of ideas in action. It makes a signal contribution to the field by demonstrating how even the most seemingly mundane features of our world have strikingly rich intellectual histories.

August 18, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (0)

Johnston: Income of Highest Earners Fell From 2000 to 2012

Al Jazeera:  Highest Earners Making Less, Social Security Data Show, by David Cay Johnston (Syracuse):

It is getting much harder to earn big bucks in America, my new analysis of official wage data shows.

The number of workers making $2 million or more per year declined almost 5 percent, from 39,650 in 2000 to 37,714 in 2012. This decline is especially remarkable, given 11 percent population growth.

These top jobs paid less too, despite 22 percent real growth in the economy over those 12 years. Measured in 2012 dollars, average pay at the top was $5.04 million, down from $5.27 million in 2000. That’s 4.3 percent less pay per top worker.

Combined, the decline in big bucks jobs and average pay meant top earners got a smaller slice of the national wage pie. The pie grew 7.2 percent. But the $2 million and up workers saw their slice shrink from 3.4 percent to 2.9 percent. ...

Continue reading

August 18, 2014 in Tax | Permalink | Comments (3)

Financial Times Offers $25k Prize for Business Book of the Year

FTThe Bracken Bower Prize:

The Financial Times and McKinsey & Company, organisers of the Business Book of the Year Award, want to encourage young authors to tackle emerging business themes. They hope to unearth new talent and encourage writers to research ideas that could fill future business books of the year. A prize of £15,000 [$25,000] will be given for the best book proposal. ...

The inaugural prize will be awarded to the best proposal for a book about the challenges and opportunities of growth. The main theme of the proposed work should be forward-looking. In the spirit of the Business Book of the Year, the proposed book should aim to provide a compelling and enjoyable insight into future trends in business, economics, finance or management. The judges will favour authors who write with knowledge, creativity, originality and style and whose proposed books promise to break new ground, or examine pressing business challenges in original ways. Only writers who are under 35 on November 11 2014 (the day the prize will be awarded) are eligible.

Continue reading

August 18, 2014 in Scholarship, Tax | Permalink | Comments (0)

Tax Man Too Incompetent to be Trusted With Tax Grab Powers

The Telegraph, HMRC Too Incompetent to be Trusted With Tax Grab Powers:

HMRCThe taxman is too incompetent to be trusted with powers to raid people's bank accounts, according to Britain's banking industry.

In a letter to the Chancellor, the British Bankers' Association, which represents UK lenders, said HM Revenue and Customs could not be trusted with the power to grab money directly from the accounts of people with unpaid tax bills.

(Hat Tip:  Andy Morriss.)

August 18, 2014 in Tax | Permalink | Comments (0)

WSJ: Meet the Law Professor Who’s Crashing the Inversion Party

Following up on my previous posts (here and here):  Wall Street Journal, Meet the Law Professor Who’s Crashing the Inversion Party:

ShayHarvard Law School professor Stephen Shay may have single-handedly crashed the corporate inversion party.

The U.S. Treasury Department has in recent days begun weighing how it could use its power to write regulations that would eliminate some of the key economic benefits U.S. corporations get when they acquire a non-U.S. company.

Mr. Shay, who served for seven years in the Treasury during two different administrations and spent 22 years as a tax partner at Ropes & Gray LLP, appeared to be the first person to make the government aware of its powers to crack down on the advantageous tax treatment of inversions in an article published on July 29, 2014 in Tax Notes, a publication closely followed by tax professionals.

“I just started asking the question, ‘What could be done with regulation rather than legislation’,” Mr. Shay said in an interview.

His answers — in the article entitled Mr. Secretary, Take the Tax Juice Out of Corporate Expatriations — have sent chills through corporate boardrooms and the law firms that have been profiting off the recent merger mania.

August 18, 2014 in Legal Education, Scholarship, Tax | Permalink | Comments (1)

The IRS Scandal, Day 466

IRS Logo 2New York Observer: Deadline: Judge Emmet Sullivan Lays Down the Law:

On behalf of the country, Judge Emmet Sullivan is pounding the IRS and appears as unsatisfied as most of America with the agency’s stalling, side-stepping, neglect, arrogance, and cavalier attitude toward its legally required record-retention responsibilities. Late yesterday afternoon, Judge Sullivan entered an order that demands answers to a lot more questions.

The IRS’s filing in Judge Sullivan’s court Monday evidenced no interest in finding the emails all of us know are out there somewhere. The fact that the IRS took thirty days to file its meager declarations, which actually said less than it had disclosed to Congress, is truly insulting. The agency better take Judge Sullivan seriously—and fast—or he’s the one who will be furious. Have IRS officials Kane and Koskinen still not reviewed what this fearless enforcer of the law did to the last Department of Justice prosecutors who played games with the truth in his courtroom? ...

The IRS is represented by Department of Justice attorneys. Do they not read the news, the latest books, or the law? This column has tried to warn them repeatedly that, like Toto, they’re not in Kansas any more. They are in the federal courtroom of a real Article III judge who has powers they should bloody well know not to ignore—the same kind wielded by Judge John Sirica, whose integrity and persistence in dealing with the Watergate case led to the resignation of Richard M. Nixon.

This is the same Emmet Sullivan who appointed a special prosecutor and initiated criminal contempt proceedings and a full investigation of the Department of Justice attorneys who played unethical and dishonest games in the prosecution of United States Senator Ted Stevens.

Someone in DOJ or the IRS better find those emails, fast, or this Judge will do it for them and they’ll just think they were caught up in a Category V tornado—or wish they had been and carried off to Oz instead. Judge Sullivan will keep on until he finds the man behind the curtain.

One of the things I can’t help but continue to wonder is, if the emails and all the information truly were not recoverable from the Lerner hard drive, why did the hard drive have to be “degaussed” and destroyed to “protect taxpayer privacy”? And why did someone testify to Congress that an IRS IT expert said it should be given to an outside vendor to retrieve the messages—and instead, the hard drive was degaussed and shredded?

With each turn, the IRS has raised more questions than it has answered. But this time it’s not the media and the citizens doing the asking. They’ve now got a week to answer to a judge.

Continue reading

August 18, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, August 17, 2014

Hit the Reset Button in Your Brain

New York Times Sunday Review:  Hit the Reset Button in Your Brain, by Daniel J. Levitin (McGill) (author, The Organized Mind (2014)):

Organized MindThis month, many Americans will take time off from work to go on vacation, catch up on household projects and simply be with family and friends. And many of us will feel guilty for doing so. We will worry about all of the emails piling up at work, and in many cases continue to compulsively check email during our precious time off.

But beware the false break. Make sure you have a real one. The summer vacation is more than a quaint tradition. Along with family time, mealtime and weekends, it is an important way that we can make the most of our beautiful brains. ...

If you’re feeling overwhelmed, there’s a reason: The processing capacity of the conscious mind is limited. This is a result of how the brain’s attentional system evolved. Our brains have two dominant modes of attention: the task-positive network and the task-negative network (they’re called networks because they comprise distributed networks of neurons, like electrical circuits within the brain). The task-positive network is active when you’re actively engaged in a task, focused on it, and undistracted; neuroscientists have taken to calling it the central executive. The task-negative network is active when your mind is wandering; this is the daydreaming mode. These two attentional networks operate like a seesaw in the brain: when one is active the other is not. ...

Every status update you read on Facebook, every tweet or text message you get from a friend, is competing for resources in your brain with important things like whether to put your savings in stocks or bonds, where you left your passport or how best to reconcile with a close friend you just had an argument with.

If you want to be more productive and creative, and to have more energy, the science dictates that you should partition your day into project periods. Your social networking should be done during a designated time, not as constant interruptions to your day.

Continue reading

August 17, 2014 in Book Club, Legal Education, Tax | Permalink | Comments (0)

Top 5 Tax Paper Downloads

SSRN LogoThere is quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads on SSRN, with a new #1 paper and new papers debuting on the list at #4 and #5:

  1. [370 Downloads]  Guide to FATCA Compliance (Chapter 1, Background and Current Status of FATCA) (LexisNexis 2d ed. 2014), by William Byrnes (Thomas Jefferson), Denis Kleinfeld, & Alberto Gil Soriano
  2. [228 Downloads]  Desperate Retirees: The Perplexing Challenge of Covering Retirement Health Care Costs in a YOYO World, by Richard L. Kaplan (Illinois)
  3. [203 Downloads]  Unconstitutional Perpetual Trusts, by Steven Horowitz (Sidley Austin, Chicago) & Robert Sitkoff (Harvard)
  4. [153 Downloads]  The Futility of Tax Protestor Arguments, by Allen D. Madison (South Dakota)
  5. [128 Downloads]  The Most Critical Issue Facing Tax Administration Today -- And What to Do About It, by George K. Yin (Virginia)

August 17, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 465

IRS Logo 2Bloomberg: Federal Judge Wants Answers From the IRS on Missing E-mails:

A federal judge signaled that he doesn’t believe the Internal Revenue Service did all it could to unearth the missing e-mails at the heart of a Congressional investigation into the agency’s treatment of Tea Party organizations.

U.S. District Judge Emmet Sullivan late yesterday asked the IRS for a list of steps it took to retrieve e-mails of Lois Lerner, who was the official in charge of determining whether the antitax Tea Party groups could qualify for nonprofit status. The IRS has said a crash of her hard drive wiped out e-mails from 2009 to 2011.

Sullivan, appointed to the court by former President Bill Clinton in 1994, gave the IRS until next week to answer several questions about how it decided the e-mails were beyond recovery. Among them, he asked the agency whether it sought e-mails from alternate sources, such as a BlackBerry, iPhone, or iPad; to explain how it tracks computer parts when they’re serviced or taken out of use; and to provide a statement from an outside vendor “who can verify the IRS’ destruction policies concerning hard drives.”

Continue reading

August 17, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Saturday, August 16, 2014

Dear Mr. President, Why I'm Leaving America

America Getting OutForbes, Dear Mr. President, Why I'm Leaving America:

Dear Mr. President,

I am writing with a heavy heart as I, my husband, and our daughter are all seriously contemplating giving up our U.S. citizenship. We are doing this not to avoid paying U.S. taxes but because we strongly object to a system that is blatantly discriminatory and unfair to law-abiding Americans living outside the country. In addition, it has become too expensive, too difficult, and frankly, too frightening, to try to comply with all of the tax filing requirements that now apply to citizens living abroad. ...

[T]he overall burden and the unfairness have become too heavy to reasonably bear. My earliest known American ancestor, who sailed from Europe and settled in Kentucky 166 years ago, is probably “rolling over in his grave” to think that I am giving up my U.S. citizenship. However, growing up in Colorado I was raised and educated to stand up for what is right. I have been doing that ever since.

Continue reading

August 16, 2014 in Tax | Permalink | Comments (2)

The IRS Scandal, Day 464

IRS Logo 2Legal Insurrection:  Judge Launches Special Inquiry Into Missing IRS Emails and Lerner Hard Drive, by William Jacobson (Cornell):

Judicial Watch has sued over missing IRS emails in the federal district court in D.C., pursuant to its FOIA request for such documents.

The IRS was ordered to provide explanations as to missing emails, particularly Lois Lerner.

The IRS provided explanations, but those were not good enough for the Judge, who launched his own inquiry into the matter, as Judicial Watch explained in a statement posted on its website.

Here is the Judge’s Order (emphasis added, hard paragraph breaks inserted for ease of reading):

MINUTE ORDER. In light of [26] the Declarations filed by the IRS, the IRS is hereby ORDERED to file a sworn Declaration, by an official with the authority to speak under oath for the Agency, by no later than August 22, 2014.
In this Declaration, the IRS must:
(1) provide information about its efforts, if any, to recover missing Lois Lerner emails from alternate sources (i.e., Blackberry, iPhone, iPad);
(2) provide additional information explaining the IRS’s policy of tracking inventory through use of bar code property tags, including whether component parts, such as hard drives, receive a bar code tag when serviced. If individual components do not receive a bar code tag, provide information on how the IRS tracks component parts, such as hard drives, when being serviced;
(3) provide information about the IRS’s policy to degauss hard drives, including whether the IRS records whose hard drive is degaussed, either by tracking the employee’s name or the particular machine with which the hard drive was associated; and
(4) provide information about the outside vendor who can verify the IRS’s destruction policies concerning hard drives.
Signed by Judge Emmet G. Sullivan on August 14, 2014.

Continue reading

August 16, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Friday, August 15, 2014

Weekly Tax Roundup

August 15, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

Weekly Student Tax Note Roundup

Johnson: Repealing the Tax Subsidies to Qualified Retirement Plans

Tax Analysys Logo (2013)Calvin H. Johnson (Texas),  Amazing Waste: Tax Subsidies To Qualified Retirement Plans, 144 Tax Notes 727 (Aug. 11, 2014):

The proposal would repeal the tax advantages given to qualified retirement plans. Qualified plans are ineffective or counterproductive for their given rationales, which makes them a rich source of revenue when the United States needs money. Johnson argues that qualified plans provide a safety net where there is little need for it and provide no safety net where it is needed. Qualified plans are said to improve the value of a dollar by moving it from high-income working years to low-income retirement years. However, the tax advantages are distributed under a reverse-Robin Hood pattern to high income groups (many with soaring salaries) and by negating the tax brackets. That distribution of benefits can be expected to reduce the utility of a dollar. Qualified plans are said to be an incentive for savings, but when government cost and deficits are considered, the plans reduce net national savings. It would be cost free and effective to increase retirement savings by mandating savings for retirement or by imposing default rules without a tax subsidy.

August 15, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1)

Have You Had Difficulty Using the Internet This Week? 512k Is the Culprit.

Wall Street Journal, Engineers Buzz That Internet Is Outgrowing Its Gear; Routers That Send Data Online Could Become Overloaded as Number of Internet Routes Hits '512K':

InternetNetwork engineers are buzzing this week as the Internet outgrows some of its gear.

Internet providers, corporations and universities all rely on a common map of routes to send emails, videos and everything else on the Web where it's supposed to go. That Internet atlas has thickened, and some of the machines that read it are now straining to hold all the pages.

While a precise count is elusive, many technicians are reporting that the total number of world-wide Internet routes is near or already past half a million, usually abbreviated 512K. Older network routers from Cisco and other makers can't hold any more unless they are tweaked.

The fix is simple. Engineers can buy new gear or raise their routers' memory caps and reboot. But some Web companies need to reconfigure each device one at a time, and the fallout is hard to judge given the numbers involved. The work already caused some websites to go offline Tuesday. ... More websites and broadband firms are likely to feel the pinch in coming days as they hit the seemingly arbitrary limit.

August 15, 2014 in Legal Education, Tax | Permalink | Comments (0)

The IRS Scandal, Day 463

IRS Logo 2Bloomberg, Judge Prods IRS on Effort to Save Lois Lerner’s E-Mail:

A federal judge asked the U.S. Internal Revenue Service for more information on efforts it made to recover missing e-mail from the computer of an agency official at the heart of a quarrel between Congress and the Obama administration.

U.S. District Judge Emmet Sullivan’s order today giving the IRS until Aug. 22 to come up with further details on what it did to retrieve e-mail from the malfunctioning computer of Lois Lerner signals his dissatisfaction with the agency’s earlier explanation, contained in an Aug. 11 filing. 

The order comes in a Freedom of Information Act lawsuit filed by the activist group Judicial Watch. The complaint seeks Lerner’s e-mail and other communications concerning the processing of applications for tax-exempt status.

Continue reading

August 15, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Thursday, August 14, 2014

Fleischer: Kinder Morgan Is Playing Tax Arbitrage With Itself

New York Times DealBook:  Kinder Morgan Is Playing Tax Arbitrage With Itself, by Victor Fleischer (San Diego):

NY Times Dealbook (2013)Kinder Morgan’s plan to “roll up” its affiliated master limited partnerships into a single behemoth corporation makes little sense from a tax perspective. Kinder Morgan is swapping a tax-efficient structure for an inefficient one.

Such a move can only be justified by large nontax benefits. The company projects that it will have a lower cost of capital for future acquisitions and investments. But is a projected economic benefit tomorrow worth a higher tax bill today?

Kinder Morgan is organized as a “C corporation” that pays corporate taxes, but it currently conducts most of its business through two affiliates — Kinder Morgan Energy Partners and El Paso Pipeline Partners — that are organized as master limited partnerships with separate shareholders, known as unit holders, who own about half of each company.

The master limited partnerships are publicly traded. Unlike most publicly traded businesses, however, they qualify as partnerships for tax purposes and pay no corporate tax. Instead, gains and losses are passed through to individual shareholders, who pay tax on their individual tax returns. And like other energy sector partnerships, generous depreciation and amortization allowances pass through to individual unit holders in each partnership, who can often use those tax losses to shelter income from the partnership. (The losses typically cannot be used to offset other income.) ...

[A] significant portion of the value created by the deal is merely being shifted from unit holders to KMI shareholders. Unit holders will benefit indirectly if they continue to hold the KMI stock they receive in the exchange, but they are, in effect, sharing a tax benefit that they paid for. The bottom line is that under the old structure, when an oil pipeline is depreciated, the tax benefit mostly flows to the unit holders. Under the new structure, those deductions will shelter corporate income instead. ...

Continue reading

August 14, 2014 in Tax | Permalink | Comments (0)

TIGTA: IRS Puts Confidential Taxpayer Information at Risk By Giving It to Contractors Without Required Background Checks

TIGTA The Treasury Inspector General for Tax Administration today released Some Contractor Personnel Without Background Investigations Had Access to Taxpayer Data and Other Sensitive Information (2014-10-037):

IRS policy requires contractor personnel to have a background investigation if they will have or require access to Sensitive But Unclassified (SBU) information, including taxpayer information. Allowing contractor personnel access to taxpayer and other SBU information without the appropriate background investigation exposes taxpayers to increased risk of fraud and identity theft.

Taxpayer and other SBU information may be at risk due to a lack of background investigation requirements in five contracts for courier, printing, document recovery, and sign language interpreter services. For example, in one printing services contract, the IRS provided the contractor a compact disk containing 1.4 million taxpayer names, addresses, and Social Security Numbers; however, none of the contractor personnel who worked on this contract were subject to a background investigation. In addition, TIGTA found 12 contracts for which IRS program and procurement office staff correctly determined that contractor personnel required background investigations because they would have access to SBU information; however, some contractor personnel did not have interim access approval or final background investigations before they began working on the contracts. Further, TIGTA identified 20 contracts for which either some or all contractor personnel did not sign nondisclosure agreements. In June 2013, after the period covered by our audit, the IRS issued more explicit guidance requiring the execution of nondisclosure agreements.

August 14, 2014 in Gov't Reports, IRS News, Tax | Permalink | Comments (1)

Another Tax Reform Solution: Taxing Consumption

Washington Post op-ed:  Another Tax Reform Solution: Taxing Consumption, by Charles Lane:

According to much conventional wisdom, the flap over corporate “tax inversions” is just the latest evidence that the tax code needs a comprehensive overhaul like the one agreed to by congressional leaders and President Reagan in 1986. Whether you consider it greedy and unpatriotic for U.S. companies to establish corporate headquarters in lower-tax foreign countries, or merely regrettable but rational, part of the solution is to lower that rate and recoup lost revenue by closing loopholes, it is said.

“Lower rates, broader base” was the cardinal principle of the 1986 reform. And it is still the mantra of tax reformers today. House Ways and Means Committee Chairman Rep. Dave Camp (R-Mich.) unveiled a 1986-style plan in March that would trim the top individual and corporate rates, while pinching popular breaks such as the mortgage interest deduction.

There’s just one problem: In 2014, the 1986 model looks like “a dead end.” Or so argues Michael J. Graetz, a former Treasury official in the first Bush administration and longtime advocate of radical tax reform who teaches at Columbia Law School. In his latest paper [The Tax Reform Road Not Taken -- Yet, 67 Nat'l Tax J. 419 (2014)], Graetz contends, plausibly, that the 1986 tax reform worked because it was then possible to pay for rate reductions by eliminating billions of dollars in individual and corporate tax shelters without tackling middle-class breaks like the mortgage interest deduction. Today, though, there’s less low-hanging fruit; a 1986-style reform would be politically difficult because it would be financially difficult, as Camp’s plan and similar attempts at “revenue-neutral” reforms suggest.

Even if our politicians did manage to push this boulder up the hill, Graetz notes, it would roll right back down. At the behest of lobbyists, Congress began fiddling with the 1986 reform almost as soon as it was enacted, giving us today’s loophole-ridden mess.

The United States’ real problem, according to Graetz, is its undue dependence on income taxes — corporate and individual — in the first place. ... Graetz would put a 12.9 percent VAT at the center of a new system — using the revenue to slash the corporate tax rate to 15 percent and eliminate income taxes for all households earning less than $100,000 ($50,000 for singles), that is, 80 percent of current filers. For those above that threshold, there would be two rates, 16 percent and 25.5 percent. Payroll tax rates would stay the same, with credits for low-income workers to offset the regressive impact of the VAT, as well as an additional child tax credit. ...

Continue reading

August 14, 2014 in Tax | Permalink | Comments (0)

Ryznar: Incentivizing Parental Support for College Tuition through the Tax Code

Margaret Ryznar (Indiana-Indianapolis), Incentivizing Parental Support for College Tuition through the Tax Code, 2013 Mich. St. L. Rev. ___:

University tuition costs continue to increase, while education continues to be important. Efforts to alleviate this problem must be undertaken carefully as to not simply aggravate the problem. To this end, this Article proposes that parental contribution towards university tuition be treated more favorably by the tax code, and in particular, be treated as tax deductible. Universities already expect parental contributions as part of a child’s financial aid package, and this proposed tax deduction may help fulfill that expectation. Furthermore, this proposed deduction would spare students some reliance on the loan system, including the risk of default. This proposed deduction, finally, may be structured in a cost-neutral way. Specifically, the funds used for this deduction would be the taxpayer funds saved from the decrease in loan defaults and loan interest subsidies, which currently cost tens of billions of tax dollars.

August 14, 2014 in Scholarship, Tax | Permalink | Comments (0)

More Tax Inversion, MLP News

The IRS Scandal, Day 462

IRS Logo 2New York Observer:  Time’s Up for Lois Lerner and the IRS, by Sidney Powell:

On July 10, D.C. federal judge Emmet Sullivan gave the IRS thirty days to provide him sworn declarations in the Freedom of Information Act suit filed by Judicial Watch, seeking much of the same information the IRS has effectively kept from Congress. After an “extraordinary” hearing, Judge Sullivan ordered the IRS to tell him under oath exactly what happened to Lois Lerner’s hard drive. He demanded sworn declarations specifying what the agency had done to recover the thousands of emails missing. Time’s up.

The IRS filed its “declarations” yesterday. As an attorney who has read the filings and who has written extensively about this dedicated judge in my book Licensed To Lie, I could not in good conscience sign those filings. It’s not that they are false. Oh no, . . .each is very carefully worded to be literally true (hence, not perjurious). But, each says little, answers less, and reveals nothing that would actually lead to recovery of the emails or to anyone’s accountability for their disappearance in any form. In fact, the few pages say less than has already been revealed elsewhere. ...

[S]omeone in the IRS recommended that Lerner’s hard drive be given to an outside technician to retrieve the emails, but instead, it was destroyed. Who made that recommendation? Who over-rode it? Who authorized the destruction of a hard drive containing evidence of correspondence with the White House? How would that excuse work for a taxpayer’s records? Oooops, sorry. That’s a felony. ... The only thing these miserly declarations prove is that IRS has abdicated all responsibility and has no interest in finding the emails. But Judge Emmet Sullivan does.

Continue reading

August 14, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Wednesday, August 13, 2014

TIGTA: Tax Exempt Tax Deadbeats -- Nonprofit Groups Owe the IRS Nearly $1 Billion in Payroll Taxes

TIGTA The Treasury Inspector General for Tax Administration today released Some Tax-Exempt Organizations Have Substantial Delinquent Payroll Taxes (2014-10-012):

IRS records indicate that the majority of tax-exempt organizations pay their Federal taxes. However, a small percentage are not paying their taxes. More than 64,200 (3.8%) tax‑exempt organizations had nearly $875 million of Federal tax debt as of June 16, 2012. While some organizations owed minor amounts, approximately 1,200 tax‑exempt organizations owed more than $100,000 each. Unpaid taxes were often associated with multiple tax periods. For example, nine organizations each had Federal tax debt spanning 10 or more years that collectively totaled more than $5.5 million.

Continue reading

August 13, 2014 in Gov't Reports, IRS News, Tax | Permalink | Comments (1)

Obama Donors Show No Aversion to Tax Inversions

Bloomberg, Obama Donors Altman, Effron Embrace Deals President Slams:

President Barack Obama has been bashing companies that pursue offshore mergers to reduce taxes. He hasn’t talked about the people behind the deals -- some of whom are his biggest donors.

Executives, advisers and directors involved in some of the tax-cutting transactions include Blair Effron, an investment banker who hosted Obama for a May fundraiser at his two-level, 9,000-square-foot apartment on Manhattan’s Upper East Side.

Others are Jim Rogers, co-chairman of the host committee for the 2012 Democratic National Convention; Roger Altman, a former senior Treasury Department official who raised at least $200,000 for Obama’s re-election campaign; and Shantanu Narayen, who sits on the president’s management advisory board.

The administration’s connections to more than 20 donors associated with the transactions are causing tensions for the president as he urges Congress to act against the deals and prods the Treasury Department for short-term steps to curb them.

The president’s tough talk also may become a liability as Democrats seek corporate America’s cash this year as they try to preserve their majority in the U.S. Senate.

August 13, 2014 in Tax | Permalink | Comments (0)

Colinvaux: Political Activity Limits and Tax Exemption

Roger Colinvaux (Catholic), Political Activity Limits and Tax Exemption: A Gordian's Knot, 33 Va. Tax Rev. ___ (2014):

The article considers the correct tax treatment of political activity by the tax system and discusses the problems that have arisen from political activity depending on whether the organization is a charity, a noncharitable exempt, or a political organization. The article then examines administrative and legislative options to the problems raised by political activity. Quantum-based solutions to the problem of political activity by noncharitable exempts do not provide a clear advantage over present law. Formally quantifying the “primarily” test would result in more certainty, but would also require that the Service be more, not less, involved in the regulation of political activity. If the policy goal is to curb political activity by noncharitable exempts, changing the test from “primarily” to something more restrictive like “substantially” or “exclusively” would be effective, but would create new categories of taxable nonprofits that are treated worse than political organizations for engaging in less political activity, which is irrational. Further, it is not clear, especially after the Citizens United decision, why as a matter of tax exemption the regulations decree that political activity may not further noncharitable exempt purposes. Before Citizens United, the political activity limits were not especially relevant, but at least helped to differentiate organization types. However, Citizens United largely rendered existing tax law limitations obsolete by making a new kind of multi-purpose organization possible. As a result, definitional political activity limits are no longer justified and should be eliminated, but only if the 527(f) tax on investment income remains vital and the differences in the disclosure regimes between political organizations and noncharitable exempts are erased. In addition, Congress should affirm that the gift tax does not apply with respect to political contributions, but also extend the income tax to transfers of appreciated property to noncharitable exempts. Further, Congress should acknowledge that the increase in political speech by noncharitable exempts will lead to abuse of charitable organizations, and take steps to prevent the laundering of independent expenditures through the charitable form. Congress also should recognize that Citizens United has led to a need to develop a new tax baseline for political activity conducted “for profit” or outside of section 527.

August 13, 2014 in Scholarship, Tax | Permalink | Comments (0)

U.S. Expats Sue in Canada to Block FATCA

Wall Street Journal, U.S. Expats Sue Over Canadian Deal to Tell Washington About Their Accounts:

A group representing American expatriates is taking legal action against the Canadian government for its role in implementing a U.S. law designed to clamp down on tax evasion.

The lawsuit, filed Monday in the Federal Court of Canada in Vancouver, challenges the constitutionality of a Canada-U.S. intergovernmental agreement reached in February that forces domestic banks to comply with the U.S. Foreign Account Tax Compliance Act, or Fatca. The agreement requires Canadian banks to share account information about U.S. citizens with the U.S. Internal Revenue Service via Canadian tax authorities.

(Hat Tip: Allison Christians.)

August 13, 2014 in Tax | Permalink | Comments (1)

The IRS Scandal, Day 461

Tuesday, August 12, 2014

Walker Reviews Hickman's Administering the Tax System We Have

JotwellChristopher Walker (Ohio State), Taking Administrative Law to Tax Exceptionalism (Jotwell), reviewing Kristin Hickman (Minnesota), Administering the Tax System We Have, 63 Duke L.J. 1717 (2014):

I’ll focus on the Duke Law Journal’s Taking Administrative Law to Tax Symposium, which was published in May. There is a lot to like about this symposium, starting with a refreshingly succinct foreword from Andy Grewal and followed by articles from Ellen Aprill, Bryan Camp, Kristin Hickman, Steve Johnson, Leandra Lederman, and Lawrence Zelenak. [Video of the symposium is available here, and the written issue is here.]

As the title suggests, the symposium focuses on tax exceptionalism, or “tax myopia” as Paul Caron coined the phenomenon two decades ago [Tax Myopia, or Mamas Don't Let Your Babies Grow Up to be Tax Lawyers, 13 Va. Tax Rev. 517 (1994)]. Tax exceptionalism is the misperception that tax law is so different from the rest of the regulatory state such that general administrative law principles do not apply. But tax exceptionalism is dying—something my tax colleague Stephanie Hoffer and I document in a forthcoming article on the Tax Court and the Administrative Procedure Act (“APA”). In Mayo Foundation v. United States, for instance, the Supreme Court refused to apply a standard less deferential than Chevron to the Treasury Department’s interpretation of the tax code, noting that it was “not inclined to carve out an approach to administrative review good for tax law only.” That same year (2011), in Cohen v. United States, the D.C. Circuit held that the judicial review provisions of the APA apply to IRS notices: “The IRS is not special in this regard; no exception exists shielding it—unlike the rest of the Federal Government—from suit under the APA.”

It is thus only fitting that Professor Hickman contributed to the symposium. After all, as a scholar at the intersection of administrative law and tax, she has spent nearly a decade calling for the reconsideration of tax exceptionalism.

Continue reading

August 12, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

George Washington Seeks to Hire a Tax Prof

George Washington Law Logo (2014)The George Washington University Law School is seeking to hire a tenure-track or tenured tax professor in a variety fields, including tax:

The George Washington University Law School may make one or more full-time faculty appointments in subject areas that may include Corporate Finance, Intellectual Property, Health Law, and/or Tax, among others. In addition, it is possible that we will make one or more faculty appointments in clinical teaching. Appointments will be for either tenure-track or tenured positions.  ...

Continue reading

August 12, 2014 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)

Kinder Morgan Abandons MLP Structure It Pioneered, Sticking Investors With Big Tax Bill

New York Times, Kinder Morgan’s Reorganization Puts Master Limited Partnerships in Question, by David Gelles:

KinderWhat happens when the pioneer of an industry abandons its own legacy?

When Kinder Morgan announced on Sunday that it was consolidating its four related pipeline companies into one, executives and bankers from Houston to New York, particularly those in the merger and energy sectors, were stunned.

With the move, Kinder Morgan, a $100 billion empire that transports much of America’s oil and natural gas, was abandoning the master limited partnership structure it helped popularize. Largely because of Kinder Morgan’s success, the partnerships have become increasingly popular for energy companies. The structure allows them to pass all profits along to their investors as dividends, and pay no corporate taxes (though the investors are subject to taxes on the distributions).

But now, with Kinder Morgan restructuring as a traditional corporation, questions have emerged about what will happen to the many other master limited partnerships. If Kinder Morgan no longer wants to be one, does the structure still make sense for other companies?

Adding to the sense of uncertainty was the Treasury Department, which said on Monday that it was examining whether the partnerships were depriving the government of needed tax revenue. Although the partnerships have mostly managed to fly under the radar, the renewed focus on the corporate tax code and its loopholes is putting the structure under new scrutiny.

Despite the move by Kinder Morgan, and saber-rattling from Washington, master limited partnerships are for the most part seen as safe for now.

August 12, 2014 in Tax | Permalink | Comments (1)

Benshalom: Mechanisms to Promote Global Wealth Redistribution

Ilan Benshalom (Hebrew University of Jerusalem, Faculty of Law), How to Redistribute? A Critical Examination of Mechanisms to Promote Global Wealth Redistribution, 64 U. Toronto L.J. 317 (2014):

The literature on global redistributive justice deals primarily with the important, yet unresolved issues of why global wealth redistribution may be morally justified or beneficial. However, philosophers and economists who address these issues often do not address the question of how such redistribution should take place. This article seeks to rectify this deficiency and argues that, if a certain level of global wealth distribution is morally justified and, more importantly, beneficial, the question of how it should be promoted is far from trivial. In this context, the analysis opens a new discussion of what form of redistributive measures should be adopted in a multistate reality.

Continue reading

August 12, 2014 in Scholarship, Tax | Permalink | Comments (0)

Zelinsky: Wynne and the Double Taxation of Dual Residents

Tax Analysys Logo (2013)Edward A. Zelinsky (Cardozo), Wynne and the Double Taxation of Dual Residents, 73 State Tax Notes 259 (July 28, 2014):

Zelinsky discusses Maryland State Comptroller of the Treasury v. Wynne [431 Md. 147 (2013), cert. granted (May 27, 2014)]. He writes that the U.S. Supreme Court should decide the case narrowly and in a way that does not prevent it from ruling later that the dormant commerce clause requires tax credits to abate the double taxation of individuals who are residents of two or more states but lack the ability to vote in a state that taxes them as residents on their worldwide income.

August 12, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Olson: Rat Out Your Employer On Taxes. Win Cash Rewards!

Reason:  Rat Out Your Employer On Taxes. Win Cash Rewards!, by Walter Olson (Cato Institute):

VanguardA former employee has filed a lawsuit charging that Vanguard Group, the gigantic ($2 trillion under management) and very successful mutual fund company, provides services to the funds it manages at "artificially low," "at-cost" prices, which may be beneficial to investors in those funds but (the suit argues) results in lowering the federal and state income taxes it pays. 

New York's False Claims Act, under which the employee is suing, entitles him to a generous share of any tax proceeds as well as attorneys’ fees if successful.

The Philadelphia Inquirer and Wall Street Journal have more; the complaint is here courtesy of TaxProf. The company denies wrongdoing, and the general question of transfer pricing on which the claim hinges is very well aired in the tax and accounting literature, which makes it seem unlikely that auditors would have neglected the issue.

Continue reading

August 12, 2014 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 460

IRS Logo 2Biz Pac Review:  Sharyll Attkisson’s Impressive Account of How Watergate Would Play Out in Obama Era:

Sharyl Attkisson, the former CBS News reporter who left the network complaining because of liberal bias, offered a sobering account of Sunday how she thinks Watergate would play out today in the Age of Obama.

And it sounds awfully familiar.

Appearing on ABC’s “This Week,” Attkisson described what has basically been the pattern for every scandal of the Obama years – dubbed “phony scandals” by all the president’s men.

“I think that we’ve gone backwards since that time when we really felt empowered as journalists,” Attkisson said. “And all I can think is: What would happen today during a Nixon-type scandal?”

“Nixon would basically refuse to turn over tapes to Congress,” she said, in an apparent allusion to the IRS simply “losing” emails key to investigations of its targeting conservative groups.

“His aides would refuse to testify to Congress, or would take the Fifth, or would like to Congress with a fair amount of immunity,” Attkisson continued, describing the refusal of former IRS official Lois Lerner to testify before Congress and the stonewalling other administration officials have engaged in.

The Hill op-ed:  More Lost Emails — When Will Democrats Have Enough?, by Rick Manning (Citizens for Limited Government):

Twenty different Obama administration officials have lost or destroyed a portion of their email traffic. Email traffic that was, in some cases, under subpoena or in others requested as part of a larger inquiry into the conduct of the executive branch. ...

The brazenly contemptuous stonewall-and-erase-evidence approach to congressional inquiries preferred by the Obama administration is perhaps this president's greatest affront to our constitutional system of government.

When you have records going missing across an administration, it is impossible to conclude anything other than it is a coordinated and condoned cover-up, and not just a series of incompetent, coincidental keystrokes wiping out information.

The conclusions get even uglier when you realize that the IRS dismissed the government contractor responsible for maintaining back-up files of their emails concurrent with Lois Lerner and her band mysteriously having their computers flatline.

The question is, where are the Democrats in the face of this obvious malfeasance?

During the Watergate scandal that brought down the presidency of Richard Nixon, a few Republicans came forward and urged the president to come clean. Yet, the silence is deafening from Democrats in both the House and Senate in the wake of this obvious obstruction of the congressional oversight function.

Where are the patriots on the Democratic side, who are willing to stand up to an executive branch that has declared them inconsequential?

National Review op-ed:  Stonewaller-in-Chief: We’re Transparent, but Don’t Ask For Any Documents, Says the Obama White House, by John Fund:

The most valuable lesson I’ve learned in reporting about Washington is a simple one: watch what politicians do, not what they say. There can be no better illustration of this than Obama’s summit meeting with African leaders last week. He used the meeting as an opportunity to tout the positive role inspectors general can play in fighting corruption in government agencies; at the same time that he was speechifying about this, some two-thirds of President Obama’s own inspectors general wrote a scathing letter to Congress complaining that his administration was placing “serious limitations” on their ability to do their jobs.

Wall Street Journal editorial:  Justice's IRS Connection: The Lawyer Who Had Tax-exempt Cases Coming and Going:

It was fishy enough when Democratic donor Barbara Bosserman was appointed to lead the Justice Department investigation of IRS targeting of conservative groups. Now there are new questions about Justice's staffing choice on one of the private lawsuits brought against the IRS.

We've been telling you about the pro-Israel group Z Street, which sued the IRS in 2010 on grounds that the agency engaged in viewpoint discrimination when it singled out 501(c) groups with Israel-related missions for additional scrutiny. The case has been handled by Justice Department trial attorney Andrew Strelka, who previously worked in the IRS office run by Lois Lerner that handled tax-exempt applications. ...

[R]ecently Mr. Strelka was withdrawn as the Justice Department's counsel of record on the Z Street case. A review of court dockets showed that he has also withdrawn from two other cases involving tax-exempt groups, including Judicial Watch's suit against the IRS. ...

If Mr. Strelka had personal knowledge of the processing of tax-exempt applications for groups like Z Street while he was assigned to the IRS, he should have recused himself from handling the case at Justice.

Continue reading

August 12, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, August 11, 2014

Virginia Tax Review Publishes New Issue

Virginia Tax Review 2The Virginia Tax Review has published Vol. 33, No. 3 (Winter 2014):

August 11, 2014 in Scholarship, Tax | Permalink | Comments (0)

GiveWell Considers Funding Tax Reform

Give WellGiveWell is considering selecting tax reform as one of the causes to fund:

Tax policy, like macroeconomic policy, has theoretically huge economic stakes and a good deal of attention from intellectuals. We see it as having substantially more attention from funders and nonprofits, and (likely as a consequence) fewer gaps in the work done by intellectuals (particularly with regard to developing workable policy proposals). We also see less room for impact from new academic research on related matters, as the main bottleneck to improved policy seems to be politics (in particular, resistance from groups like Americans for Tax Reform to changes that would involve new taxes or reduced tax expenditures) rather than knowledge. We have done a shallow investigation of this area and will be writing it up in the future.

As part of its due diligence, GiveWell has interviewed two experts:

August 11, 2014 in Tax | Permalink | Comments (0)

Task Force of Mayors Assails Growing Income Inequality

The United States Conference of Mayors, Income and Wage Gaps Across the U.S.:

Report coverThe Wage Gap in the US:

  • The US has regained the 8.7 million jobs that were lost during the Great Recession, and employment has surpassed its pre-­‐recession peak of 138.4 million jobs in 2008.
  • Average annual wage of jobs lost in 2008-­‐09 was $61,637, and average wage of job gains through the second quarter of 2014 equaled $47,171. This wage gap of 23% is significantly larger than that of the earlier recession and recovery (2000-­‐2006), and implies $93 billion in lower wage income.
  • In comparison, the wage gap following the 2000-­‐2003 recession was 12%. Wages earned in advancing sectors fell $27 billion short of the annual wages lost in the declining sectors over 2000-­‐2003.
  • Extensive job losses in high-­‐wage manufacturing ($63K) and construction ($58K) sectors were replaced by jobs in the lower wage sectors of hospitality ($21K), health care ($47K), and administrative support ($37K). 

The Income Distribution in the US:

  • The 2012 household median income of $51,017 was, in real terms, the lowest since 1995. The median was greater in the West ($55,157), and Northeast ($54,627), than in the South ($48,033) and Midwest ($50,479).
  • The highest-­‐earning 20% of households saw their share of income rise from 43.6% in 1975 to 51.0% in 2012. Most of this gain was among those in the highest 5% of income, which rose from 16.5% in 1975 to 22.3% in 2012, a gain of $490 billion in 2012.
  • Each of the lower quintiles experienced a declining share of income since 1975. The lowest two quintiles, or 40% of households, received just 6.6% of all US income gains since 2005, and 9.5% of gains since 1995.
  • The highest 20% of households captured 60.6% of total income gains from 2005 to 2012, and the top 5% received 27.6% of total gains.
  • In 2012 the 80th percentile (the lowest income in the top 20%) income of $104,906 was more than double (2.04x) the median. That ratio has increased from 1.73 in 1975.

August 11, 2014 in Tax | Permalink | Comments (0)

Schler: International Mismatches on Hybrid Instruments

Tax Analysys Logo (2013)Michael L. Schler (Cravath, New York), OECD vs. D/NI: International Mismatches on Hybrid Instruments, 75 Tax Notes Int'l 485 (Aug. 11, 2014):

Michael L. Schler discusses technical and policy issues, as well as unexpected results, that arise under the OECD's proposals to eliminate mismatches of income and deduction resulting from hybrid instruments.

August 11, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

The IRS Scandal, Day 459

TaxProf Blog Weekend Roundup

Sunday, August 10, 2014

NY Times: A Corporate Tax Break That’s Closer to Home

New York Times:  A Corporate Tax Break That’s Closer to Home, by Gretchen Morgenson:

Rage is rising over American corporations that chop their tax bills by acquiring entities in lower-tax countries. Medtronic, AbbVie and Mylan have all announced such plans — known as inversions — in recent months. And Walgreen was poised to relocate to Switzerland after it completes its purchase of Alliance Boots, but did an about-face last week in the face of widespread denunciation.

Some in Congress have proposed legislation to shut the door on this tax-savings tactic. But across town at the Internal Revenue Service, officials have recently opened the window to another. They did so in a ruling disclosed late last month by Windstream Holdings, a telecommunications company based in Little Rock, Ark.

The ruling allows Windstream to spin off its copper and fiber network into a real estate investment trust, or REIT. That sounds pretty ho-hum until you realize it means that Windstream won’t have to pay hundreds of millions of dollars in taxes. ...

How did the I.R.S. conclude that a telecom network is a real estate asset? As with all things tax-related, the details are somewhat complicated. ...

Continue reading

August 10, 2014 in Tax | Permalink | Comments (0)

Byrnes: Charity and the Jurisprudential Lessons from History

William Byrnes IV (Thomas Jefferson), The Development of Charity: Jurisprudential Lessons from History:

This article describes the ancient legal practices, codified in Biblical law and later rabbinical commentary, to protect the needy. The ancient Hebrews were the first civilization to establish a charitable framework for the caretaking of the populace. The Hebrews developed a complex and comprehensive system of charity to protect the needy and vulnerable. These anti-poverty measures, including regulation of agriculture, loans, working conditions, and customs for sharing at feasts, were a significant development in the jurisprudence of charity.

The article begins with a brief history of ancient civilizations, providing context for the development of charity by exploring the living conditions of the poor. The second half of the article provides a searching analysis of the rabbinic jurisprudence that established the jurisprudence of charity. This ancient jurisprudence is the root of the American modern philanthropic idea of charitable giving exemplified by modern equivalent provisions in the United States Tax Code.

Continue reading

August 10, 2014 in Scholarship, Tax | Permalink | Comments (0)

Top 5 Tax Paper Downloads

The IRS Scandal, Day 458