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Tuesday, November 5, 2013

Hyans & Nogid: A Mutiny Against Tax Bounty Hunters Is Long Overdue

Tax Analysys Logo (2013)Hollis L. Hyans & Amy F. Nogid (both of Morrison & Foerster, New York), A Mutiny Against the Bounty Hunters Is Long Overdue, 70 State Tax Notes 299 (Nov. 4, 2013):

Hollis L. Hyans and Amy F. Nogid examine the use of contingent fee auditors for revenue collection, arguing that those arrangements taint the process, raise confidentiality issues, and may result in decreased accountability and increased costs to the government.

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November 5, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Monday, November 4, 2013

Sullivan: Will International Tax Reform Slow U.S. Technology Development?

Tax Analysys Logo (2013)Martin A. Sullivan (Tax Analysts), Will International Tax Reform Slow U.S. Technology Development?, 141 Tax Notes 459 (Nov. 4, 2013):

Martin A. Sullivan looks at how various tax rules interact to subsidize research and development and how U.S. tax reform could affect those provisions.

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November 4, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Friday, November 1, 2013

The Foreign Tax Credit After PPL

Tax Analysys Logo (2013)Courtney Gesualdi (Ropes & Gray, Boston),  After PPL: How to Bring Congressional Intent Back to the Foreign Tax Credit Applicability Decision, 72 Tax Notes Int'l 355 (Oct. 28, 2013):

Courtney Gesualdi argues that the development of cases involving the foreign tax credit has caused a separation between the intent of section 901 and how it has come to be applied by the courts; Gesualdi offers suggestions to help guide the courts in cases similar to PPL v. Commissioner.

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November 1, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Thursday, October 31, 2013

Inflation Adjustments Affecting Individual Taxpayers in 2014

Tax Analysys Logo (2013)James C. Young (Northern Illinois University, College of Business), Inflation Adjustments Affecting Individual Taxpayers in 2014, 141 Tax Notes 413 (Oct. 28, 2013):

In this report, Young discusses 2014 inflation adjustments to parts of the individual tax system that are tied to a consumer price index year ending in August. Items adjusted by this index include the tax rate schedules, standard deductions and exemption and itemized deduction phaseouts, several minimum tax items, the gift and estate tax exclusions, and some computational elements related to the unearned income of minor children, the child credit, the earned income tax credit, adoption expenses, educational savings bonds, education credits, education loan interest, qualified transportation fringe benefits, medical savings accounts (Archer MSAs), health savings accounts, long-term care insurance premiums, long-term care insurance benefits, traditional and Roth IRA income phaseouts and contribution limits, and the section 179 expense election. Implications of the expiring provisions from tax legislation passed in the early 2000s also are discussed.

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October 31, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Monday, October 28, 2013

Washington Post Profile of Marty Sullivan

SullivanWashington Post, Marty Sullivan Figured Out How the World’s Biggest Companies Avoided Billions in Taxes. Here’s How He Wants to Stop Them:

It was a humbling experience for the chief executive of the world’s most valuable company. Hauled before a Senate panel, Apple’s Tim Cook had to explain how an American company whose American engineers had created the iPhone and the iPad was able to avoid paying any taxes on billions of dollars in profits generated by those products — not to United States, not to any country. The only defense the Cook could conjure up for Apple “stateless” income was that it was all perfectly legal.

A few miles away in Arlington, a 55-year-old economist named Marty Sullivan sat on a folding metal chair at a card table in the garage of his modest brick home and watched the hearing unfold on his laptop computer. Sullivan is one of those unheralded members of the permanent Washington establishment who make things work, at least when the politicians let them. And for two decades, from the same home office, Sullivan has been exposing the tax-dodging schemes of multinational corporations in the columns of Tax Notes, a must-read publication for tax lawyers, accountants and policy wonks.

It was Sullivan who shined an early light on how companies had finagled “transfer prices” — the price one division charges another for parts or services — to shift profits to low-tax jurisdictions.

It was Sullivan who had called out the big drug and tech companies for transferring ownership of their patents and trademarks — the source of much of their profits — to subsidiaries in Ireland and other low-tax jurisdictions.

It was Sullivan who highlighted the absurdity of tax havens in which just a handful of multinationals claimed to earn annual profits that were several times the country’s entire GDP.

And it was Sullivan who in 2010 pieced together from public filings that Apple had understated its reported profits to hide the fact that it was paying a tax rate of less than 2 percent on its overseas profits, shining the spotlight on Apple’s tax avoidance schemes.

(Hat Tip: Joseph Burke, Bob Kamman.)

October 28, 2013 in Tax, Tax Analysts | Permalink | Comments (1)

Wednesday, October 23, 2013

Pepperdine/Tax Analysts Symposium: Tax Reform in a Time of Crisis

2014TaxSaveTheDatePlease consider joining us for the Pepperdine/Tax Analysts Symposium on Tax Reform in a Time of Crisis on Friday, January 17, 2014 in Malibu, California:

Keynote Address:  Joseph Bankman (Stanford)
Introduction:  Paul Caron (Pepperdine)
Commentary:  Edward Kleinbard (USC)

Panel #1:  Individual/Estate and Gift Tax Reform
Moderator:  Tom Bost (Pepperdine)
Papers:  Dorothy Brown (Emory), Miranda Fleischer (San Diego), James Repetti (Boston College)
Commentary:  Nancy Staudt (USC)

Luncheon Address:  Bruce Bartlett (Former Deputy Assistant Secretary of the Treasury)

Panel #2:  Business/International Tax Reform
Moderator:  Khrista Johnson (Pepperdine)
Papers:  Karen Brown (George Washington), Ruth Mason (Virginia), Richard Winchester (Thomas Jefferson)
Commentary:  Eric Zolt (UCLA)

Panel #3:  Tax Reform in a Time of Crisis: Institutional Perspectives
Moderator:  Joe Thorndike (Tax Analysts)
Papers:  Ellen Aprill (Loyola-L.A.), Donald Tobin (Ohio State), George Yin (Virginia; former Chief of Staff, Joint Committee on Taxation)
Commentary:  Donald Korb (Partner, Sullivan & Cromwell; former IRS Chief Counsel)

Closing Remarks:  What Have We Learned Today?:  Robert Popovich (Pepperdine)

October 23, 2013 in Conferences, Legal Education, Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Monday, October 21, 2013

Gibbs: Loving and the Treasury's Authority to Regulate Tax Return Preparers

Tax Analysys Logo (2013)Lawrence B. Gibbs (Miller & Chevalier, Washington, D.C.;  former IRS Commissioner (1986-89)),   Loving v. IRS: Treasury's Authority to Regulate Tax Return Preparers, 141 Tax Notes 331 (Oct. 21, 2013):

Earlier this year a federal district court held that Treasury lacked the authority to issue regulations in 2011 enabling the IRS to regulate the tax return preparation conduct of unregulated, commercial preparers who process more than 42 million individual federal income tax returns each year [Loving v. United States, No. 12-385 (D.C. D.C. Jan. 18, 2013)]. Gibbs explains why Treasury has the authority to issue the regulations and why the district court decision should be reversed.

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October 21, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Wednesday, October 16, 2013

McMillan: Transferee Shareholders and the Long Arm of the IRS

Tax Analysys Logo (2013) Lori McMillan (Washburn), Transferee Shareholders and the Long Arm of the IRS, 141 Tax Notes 223 (Oct. 14, 2013):

McMillan discusses United States v. Holmes [Nos. 12–1164, 12–1220 (10th Cir. Aug. 23, 2013)] and concludes that it has made liability management more challenging for the nonresident shareholder and has created problems for the unwary.

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October 16, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Monday, October 14, 2013

Shay, Fleming & Peroni: Territoriality in Search of Principles and Revenue

Tax Analysys Logo (2013)Stephen E. Shay (Harvard), J. Clifton Fleming Jr. (BYU) &  Robert J. Peroni (Texas), Territoriality in Search of Principles and Revenue: Camp and Enzi, 72 Tax Notes Int'l 155 (Oct. 15, 2013):

Stephen E. Shay, J. Clifton Fleming Jr., and Robert J. Peroni argue that unless a shift to an exemption system for taxing foreign income would constitute a material improvement over current law, the transition costs of such a change would outweigh the benefits.

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October 14, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Wednesday, October 9, 2013

Herzig: The Estate and Gift Tax Implications of Windsor

Tax Analysys Logo (2013)David J. Herzig (Valparaiso), Same-Sex Marriage and Estate Taxes: Why Windsor Is Still at Issue, 141 Tax Notes 79 (Oct. 7, 2013):

David J. Herzig discusses the estate and gift tax implications of United States v. Windsor.

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October 9, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Monday, October 7, 2013

Johnston: The Importance of State Tax Tribunals

Tax Analysys Logo (2013)David Cay Johnston (Syracuse), The Importance of Tax Tribunals, 70 State Tax Notes 35 (Oct. 7, 2013):

David Cay Johnston discusses the importance of state tax tribunals and fair administration of justice in tax disputes.

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October 7, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1)

Wednesday, October 2, 2013

Kennedy: DOMA Implications for Employee Benefit Plans

Tax Analysys Logo (2013)Kathryn J. Kennedy (John Marshall), DOMA Implications for Employee Benefit Plans, 140 Tax Notes 1571 (Sept. 30, 2013):

Kathryn J. Kennedy highlights the effect Windsor will have on employee benefit plans and federal laws relying on Defense of Marriage Act section 3.

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October 2, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Wednesday, September 25, 2013

The IRS Scandal: Rearranging the Deck Chairs on the Titanic

Tax Analysys Logo (2013)Alan J. Wilensky (Attorney, Minneapolis), Scandal at the IRS: Rearranging the Deck Chairs on the Titanic, 140 Tax Notes 1449 (Sept. 23, 2013):

This article discusses the IRS’s recent problems in the exempt organizations area. It recommends that these and other problems the agency has had since the enactment of the IRS Restructuring and Reform Act of 1998 be studied in detail by a bipartisan panel. It also suggests that the notion of having professional managers head the agency, rather than tax professionals, decreased the sense of duty to the tax system that has been critical to the organization’s historically high ethical and cultural standards.

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September 25, 2013 in IRS News, IRS Scandal, Tax, Tax Analysts | Permalink | Comments (2)

Tuesday, September 24, 2013

Morse: Public Talk About Taxes in Australia and the U.S.

Tax Analysys Logo (2013) Susan C. Morse (Texas),  Public Talk About Public Finance In Australia and the United States, 71 Tax Notes Int'l 1213 (Sept. 23, 2013):

Susan C. Morse explains the differences in the public discourse about taxes in Australia and the United States.

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September 24, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Monday, September 23, 2013

Don't Die in Maryland or New Jersey

Tax Analysys Logo (2013) Diana Furchtgott-Roth (Director of Economics21 and Senior Fellow, Manhattan Institute),  Where Not to Die, 69 State Tax Notes 775 (Sept. 23, 2013):

Diana Furchtgott-Roth discusses prospects for estate tax reform at the federal and state levels and concludes the worst places to die are New Jersey and Maryland.

Table 2
Table 3

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September 23, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (3)

Saturday, September 21, 2013

The Tax Analysts Story

September 21, 2013 in Tax, Tax Analysts | Permalink | Comments (0)

Friday, September 13, 2013

Ordower: Preserving the Corporate Tax Base Through Tax Transparency

Tax Analysys Logo (2013)Henry Ordower (St. Louis), Preserving the Corporate Tax Base Through Tax Transparency, 71 Tax Notes Int'l 993 (Sept. 9, 2013):

Henry Ordower contends that the adoption of a wholly transparent corporate income tax could improve existing corporate tax systems worldwide and establish tax neutrality between entities that are subject to corporate income tax and those that are not.

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September 13, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Monday, September 9, 2013

Sullivan: Political Reality Blocks Radical Tax Reform in North Carolina

Tax Analysys Logo (2013)Martin A. Sullivan (Tax Analysts), Political Reality Blocks Radical Reform in North Carolina, 69 State Tax Notes 639 (Sept. 9, 2013):

Martin A. Sullivan writes that while politics may have changed the landscape of tax reform in North Carolina, the original, radical plan would never have survived.

Table 1

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September 9, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1)

Saturday, September 7, 2013

The Tax Analysts Story

Tax Analysts Blog:  The Story of Tax Analysts, by Christopher Bergin

(Hat Tip: Joe Kristan.)

September 7, 2013 in Tax, Tax Analysts | Permalink | Comments (1)

Thursday, September 5, 2013

The Transfer Tax Trap -- It's Real

Tax Analysys Logo (2013)Maria P. Eberle & Hayes R. Holderness (both of McDermott Will & Emery, New York), The Transfer Tax Trap -- It's Real, 69 State Tax Notes 605 (Sept. 2, 2013):

Most states (and many localities) have some form of real property transfer tax (RPTT), which is generally imposed when the ownership of a piece of real property changes hands. However, not all RPTTs are created equally, and many taxpayers may find themselves with an unexpected tax bill if they don't pay close attention to each jurisdiction's rules. In our practice, we most often see RPTT issues arise in the context of corporate acquisitions, dispositions, mergers, and reorganizations -- including transactions that are generally regarded as "tax- free" because gains are exempt from income tax. This article provides an overview of the applicability of RPTTs to the most common types of transactions, and variations on those transactions, and offers insights into the numerous traps or opportunities that may exist. 

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September 5, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Wednesday, September 4, 2013

Sullivan: Brennan Study on Repatriation Tax Holiday Is Not a Game Changer

Tax Analysys Logo (2013)Martin A. Sullivan (Tax Analysts), New Insight on Repatriation Holiday Not a Game Changer, 140 Tax Notes 969 (Sept. 2, 2013):

The most common use of the $312 billion of funds repatriated under the provisions of the American Jobs Creation Act of 2004 was for cash acquisitions and not, as widely believed, distributions to shareholders. That is the finding of a new study by professor Thomas J. Brennan of Northwestern University Law School (Where the Money Really Went: A New Understanding of the AJCA Tax Holiday). [See also New York Times DealBook: A Holiday From Taxes, and Often From the Strings Attached, by Vic Fleischer (San Diego)] ...

For years it has been the accepted wisdom that most of the funds unlocked by the provisions of the Jobs Act were used for share repurchases and dividends. That conclusion is largely based on the research of economists Dhammika Dharmapala, Fritz Foley, and Kristin Forbes (Watch What I Do, Not What I Say: The Unintended Consequences of the Homeland Investment Act, Journal of Finance, 2011, p. 753). In their 2009 study, they estimated that between 60 and 92 percent of repatriated funds were used to make distributions to shareholders in 2005, mostly in the form of share repurchases. ... The main reason why their findings are important is that in most economic models, distributions to shareholders have little of the job-creating macroeconomic stimulus. Therefore, the results strongly suggest that the repatriation holiday failed to achieve its objective. To convince most economists that the funds had a significant effect on employment, the repatriated cash would have had to have been spent on direct hiring, worker training, capital spending, or research and development.

In his study, the first thing Brennan does is prove that the estimated 60 to 92 percent range is too high. ... Next, Brennan develops his own method of estimating the use of repatriated funds. ... Brennan estimates eight categories of uses of funds: cash acquisitions, share repurchases, dividends, research spending, capital expenditures, debt reduction, pension funding, and unexplained spending. (Brennan did not have data for spending on hiring or worker training.) As shown in Table 1, the leading use of repatriated funds was cash acquisitions (39 percent). Share repurchases were a distant second (27 percent). Research spending and capital spending account for only 4 percent and 3 percent, respectively. ...

Table 1

Under the Jobs Act, share repurchases and dividends were not permitted uses of funds. Acquisitions of firms, as long as their assets were primarily in the United States, were. Brennan's research shows that repatriating companies behaved more in the spirit of the law than previously thought. That may provide consolation in some quarters.  ... [N]either the Dharmapala nor the Brennan study indicates any significant increase in domestic capital spending or research. And that is not surprising given that we would expect to see this happen only if firms were cash- or credit-constrained. Most of the repatriated funds were brought home by large, financially secure U.S. firms that would have no trouble financing profitable domestic opportunities.

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September 4, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1)

Tuesday, August 27, 2013

Dolan: The Foreign Tax Credit Diaries -- Litigation Run Amok

Tax Analysys Logo (2013)Kevin Dolan (Shearman & Sterling, Washington, D.C.; Former Associate Chief Counsel (International), IRS), The Foreign Tax Credit Diaries -- Litigation Run Amok, 71 Tax Notes Int'l 831 (Aug. 26, 2013):

In a pretend brief, Kevin Dolan explains to a pretend judge why the government's arguments regarding whether foreign taxes must be deducted in determining profit motive in Compaq Computer Corp. [277 F.3d 778 (5th Cir. 2001)] and IES Industries Inc. [253 F.3d 350 (8th Cir. 2001)] are incorrect.

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August 27, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, August 26, 2013

Yin: Let's Get the Facts of the Couzens Investigation Right!

Tax Analysys Logo (2013)George K. Yin (Virginia), Let's Get the Facts of the Couzens Investigation Right!, 140 Tax Notes 950 (Aug. 26, 2013):

I am sympathetic to Jay Starkman's criticism of the practice since 1998 of appointing persons without tax experience to be IRS Commissioner [Practitioner Sees Need for Restructuring the IRS, 140 Tax Notes 837 (Aug. 19, 2013)]. Given the principal mission of the agency, it is plausible that an outstanding tax professional would be better situated to energize the workforce, instill the importance of integrity and professionalism, and provide more meaningful scrutiny of the agency's activities. We have had many examples of past Commissioners with tax backgrounds who have had those qualities. Such a person would also likely have longstanding relationships with wise colleagues familiar with the tax system that could be drawn upon when the inevitable challenging situations arise in the Commissioner's office. Arguably, the change carried out since 1998 has been exactly backwards. Rather than filling the Commissioner's slot and Oversight Board with business/"management" experts (and others with unclear qualifications), it may have been better to place Commissioner-quality tax professionals in all of those positions. Unfortunately, as Starkman notes, it appears that the shift away from tax experience in the management of the agency is going to continue.

Starkman errs, however, in repeating stale charges that the 1924-1926 Couzens investigation showed the agency to be "corrupt" and exposed a large scandal involving "plain graft." On completion of the long investigation, the chief counsel of the investigative committee testified before the Senate Finance Committee and Senator Couzens that the investigation had not uncovered corruption at the agency. To be sure, the investigation questioned many of the agency's decisions and administrative practices. There were also isolated instances of fraud which the agency had uncovered and revealed to the investigative committee at the start of its work. But the widespread allegations of corrupt practices, including favorable treatment of companies associated with Treasury Secretary Mellon, were not established.

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August 26, 2013 in Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Tuesday, August 13, 2013

Christians: The Influence of Public Opinion on the Tax Practices of Starbucks and Other Multinational Companies

Tax Analysys Logo (2013)Allison Christians (McGill),  How Starbucks Lost Its Social License -- and Paid £20 Million to Get It Back, 71 Tax Notes Int'l 637 (Aug. 12, 2013):

Allison Christians examines how public opinion has come to bear on the tax practices of Starbucks and other multinational companies.

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August 13, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, August 12, 2013

McMillan: Tax Treaty Issues in Sun Capital 'Trade or Business' Ruling

Tax Analysys Logo (2013)Lori McMillan (Washburn),  Potential Treaty Issues Arise in the 'Trade or Business' Landscape, 140 Tax Notes 721 (Aug. 12, 2013):

Sun Capital [1st Cir. July 24, 2013] has added a new layer in the determination of what is a trade or business, when activity performed by members of the same group was attributed to a private equity fund. Funds can no longer be sure that merely because their income is passive, they will not be considered engaged in a trade or business.

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August 12, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, August 5, 2013

Johnston: Manufacturing Tax Break Gone Wild

Tax Analysys Logo (2013)David Cay Johnston (Syracuse), Manufacturing Tax Break Gone Wild, 140 Tax Notes 621 (Aug. 5, 2013):

A federal judge [United States v. Dean, No. 11-01977 (C.D. Cal. May 7, 2013).] has held that putting wrapped candy bars and wine bottles into gift baskets qualifies for a 2004 tax break for manufacturing. Johnston argues that the decision is too broad an interpretation of manufacturing for the purposes of the section 199 deduction.

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August 5, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (3) | TrackBack (0)

Wednesday, July 31, 2013

Bergin: Saving Private IRS

Tax Analysts Christopher E. Bergin (President and Publisher, Tax Analysts), Saving Private IRS, 140 Tax Notes 503 (July 29, 2013):

Bergin uses Mortimer Caplin's 97th birthday as an occasion to highlight the former IRS commissioner as an example of the hardworking and dedicated people who work at the nation's tax collection agency, and he calls on congressional critics of the IRS to take a more reasonable approach to funding and supporting tax administration.

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July 31, 2013 in Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Monday, July 22, 2013

Faber: 'Ivory Tower' Economists Are Wrong: Taxes Play Major Role in Wealthy Fleeing High-Tax States

Tax Analysts Peter L. Faber (McDermott Will & Emery, New York), Taxes Play Major Role in Moving Out of State, 69 State Tax Notes 243 (July 22, 2013):

Amy Hanauer and Tim Krueger argue that taxes play no role in taxpayer decisions to move from one state to another (The Tax Flight Myth: People Move for Jobs and Family, Not Taxes, State Tax Notes, July 8, 2013, p. 97 ... ). Their conclusions are apparently based on empirical studies and computer models. They are wrong. Based on my experience as a practitioner who works with wealthy individuals and corporations every day, I can assure you that taxes often play a major role in these decisions and that in many cases, they are the sole reason for the move.  ...

The authors claim that they have been able to show the effect of taxes "while holding other conditions constant." How did they do that? Get real, folks. There are limits on what economists' computers can do. It is impossible to do this, no matter how many computer simulations one does. ...

My experience, and that of my SALT colleagues, is that taxes often play an important and decisive role in decisions to move from one state to another. Moreover, that is particularly the case for very wealthy individuals whose loss can be significant for a state. I am currently working with three wealthy individuals who have come to my firm for advice on how they can change their domicile from New York state to a low-tax state. When they do so, New York will lose between $70 million and $225 million in estate taxes (the variance will depend on which spouse survives the other). New York will also lose income taxes on their very substantial incomes. I assume that people in Ohio and other high-tax states are going through the same analysis. The issue with my clients is not whether to move, it is how to move so as to establish the change in legal domicile. We are going through the usual list of factors that the courts have considered in determining domicile (driver's license, club memberships, religious affiliations, civic activities, etc.). These people will move, and their moves will cost New York millions of dollars in taxes....

The economists can play all the number games they want to with their computers, their calculus, and their fancy equations, but they are still living in their ivory towers. The reality that my colleagues and I deal with every day is very different.

For a particularly timely example, consider yesterday's British Open champion Phil Mickelson:  Forbes: Phil Mickelson Wins British Open---And California Taxes It:

Prior TaxProf Blog coverage:

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July 22, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (13) | TrackBack (0)

Monday, July 15, 2013

Sullivan: Behind the GAO's 12.6% Effective Corporate Tax Rate

Tax Analysts Martin A. Sullivan (Tax Analysts), Behind the GAO's 12.6 Percent Effective Corporate Rate, 140 Tax Notes 197 (July 15, 2013):

On July 1 the Government Accountability Office made a lot of headlines when it released a study reporting that the average effective corporate tax rate in 2010 was only 12.6%. ... Although it is common knowledge that many U.S. multinationals have used tax planning to substantially reduce their tax bills, the GAO figure is surprisingly low. Other studies typically report average rates in the mid-20s. For example, 40 leading U.S. firms that recently formed a tax reform coalition had an average effective tax rate of 24% over the 2010-2012 period. The GAO itself (p. 28) cites eight prior studies using a variety of data, methods, and time periods, and the average rate of these studies was 28.4%, with a minimum of 22% and a maximum of 31.3%.

So what explains the difference between the GAO's 12.6 percent rate and other studies' rates? Mainly two items. First, the GAO did not include foreign taxes in the widely reported 12.6 percent figure. It did in fact provide a much more conceptually defensible measure that includes foreign taxes in the numerator and arrives at a worldwide rate of 16.9 percent as a result. The table below details the GAO calculation.

Figure 1

The second and more important reason for the GAO's low effective tax rate for 2010 compared with those found in other studies is that the effects of a recession are more dominant in 2010 than they are in other studies, which include both recession and non-recession years or no recession years at all. In 2010 the U.S. economy was still severely hobbled by the Great Recession. Figure 1 shows liability for all corporations from 1997 through 2010, as well as net and gross corporate tax receipts from 1997 through 2012. It shows that in 2010, corporate tax liabilities reported on tax returns used in the numerator of the GAO's effective tax rates were extraordinarily low in that year.

Figure 2

Putting all this together, it seems reasonable not to revise the consensus view that average worldwide effective corporate tax rates are somewhere in the mid- or upper 20s when we are not in the throes of a recession. It is important to keep in mind that these broad averages hide a lot of interesting detail. ...  It is also important to keep on the lookout for misleading effective tax rate calculations from advocacy groups. 

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July 15, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (2) | TrackBack (0)

Tuesday, July 9, 2013

Christians: The Dubious Legal Pedigree of IGAs

Tax AnalystsAllison Christians (McGill), The Dubious Legal Pedigree of IGAs (and Why it Matters), 69 Tax Notes Int'l 565 (Feb. 11, 2013):

When Congress enacted the Foreign Account Tax Compliance Act in 2010, it made no mention of any internationally-agreed alternative to its enforcement, and Congress has made no authorization since then for the president to override FATCA’s statutory provisions by international agreement. Yet due to difficulties in implementing FATCA, Treasury has entered into several ‘‘intergovernmental’’ agreements (IGAs) to essentially bypass the hurdles, even going so far as to draft model IGAs with the intent of streamlining their enactment globally. This column examines the nature of these agreements and concludes that their legal pedigree is tenuous as a constitutional matter. It argues that this pedigree implicates the rule of law in two ways: first, if the IGAs are not "good" law in the U.S., then FATCA partners incur the risk of penalties should the statute they seek to override apply in default. Second, and more fundamentally, the IGAs violate the rule of law by ignoring established procedural requirements for binding the US internationally. This undermines the legal system in the US domestically as well as hurting U.S. credibility in the international community. The column concludes by arguing that there is no benefit to be had in skirting the normal legal process for concluding international agreements in the rush to implement FATCA. Instead of jeopardizing the important and complex project of global tax compliance with such a legally dubious procedure, the obvious and straightforward approach to making FATCA work internationally is to follow the normal treaty-making procedure, time-tested through 100 years of US tax treaty-making history.

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July 9, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, July 8, 2013

Sullivan: Pfizer's Tax Picture Dominated by U.S. Losses, Repatriation

Tax Analysts Martin A. Sullivan (Tax Analysts), Pfizer's Tax Picture Dominated by U.S. Losses, Repatriation, 140 Tax Notes 103 (July 8, 2013):

Like so many of its big pharma competitors, Pfizer is having trouble replacing its blockbuster drugs of decades past. The new-product pipeline is drying up, and competition from generic drug makers is relentless. ...  Like its drug business, Pfizer's tax situation is a jumble of events and trends that eludes easy interpretation. Look, for example, at its effective tax rate, shown in Figure 1. It is a roller coaster ride of ups and downs that on its own provides little information about where the company's tax burden has been or where it is going. Is Pfizer a high-tax or low-tax company? There are no easy answers to that question, just as there is no easy answer to whether Pfizer's future is promising or whether it is a sinking ship. This article investigates the factors behind Pfizer's volatile effective tax rate, its booked tax liability ($11.4 billion over the previous five years), and its actual cash payment to tax authorities for income tax ($21.7 billion over the same period). A comprehensive collection of Pfizer's tax data from 2005 through 2009 is at the end of the article.

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July 8, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, July 1, 2013

The Impact of Same-Sex Marriage on Federal and State Budgets

Tax AnalystsDiana Furchtgott-Roth (Senior Fellow, Manhattan Institute), Same-Sex Marriage Decisions Won't Affect Uncle Sam's Bottom Line, 140 Tax Notes 75 (July 1, 2013):

Furchtgott- Roth presents data to show that the Supreme Court decisions on the Defense of Marriage Act and California’s Proposition 8 are unlikely to affect federal or state budgets. ...

The nonpartisan Congressional Budget Office last estimated the effects of same-sex marriage in 2004. It concluded that federal recognition of samesex marriage would reduce the budget deficit by $500 million to $700 million a year between 2011 and 2014, or 0.016 percent of total federal spending of $3.7 trillion. [The Potential Budgetary Impact of Recognizing Same-Sex Marriages] ...

In a December 2012 paper, University of Michigan economist Adam Stevenson estimated an annual increase of $34 million in federal revenues, or 0.001 percent of federal spending, if same-sex marriage were legalized at the federal level. He estimated a lower revenue gain than the CBO did because he assumes that many gay spouses would change their labor force participation rates in response to the marriage penalty. [The Labor Supply and Tax Revenue Consequences of Federal Same-Sex Marriage Legalization, 65 Nat’l Tax J. 783 (Dec. 2012)] ...

140TN0075_Page_2

The effects of same-sex marriage on federal and state revenues appear to be minor because of the low incidence of those marriages; the Supreme Court decision therefore will not have major fiscal consequences on a regional or national level.

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July 1, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, June 24, 2013

Johnston: IRS Employees and Contractors: Separate and Unequal Standards of Performance and Integrity

Tax Analysts David Cay Johnston (Syracuse), Separate and Unequal Standards of Performance and Integrity, 139 Tax Notes 1571 (June 24, 2013):

The IRS relies heavily on contractors, but it does not hold them to anything close to the standards of performance and integrity required of its own employees.

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June 24, 2013 in Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 18, 2013

Ault: The OECD and Sources of International Tax Law

Tax Analysts Hugh J. Ault (Boston College), Some Reflections on the OECD and the Sources of International Tax, 70 Tax Notes Int'l 1195 (June 17, 2013):

This article is the revised text of a lecture held on May 2, 2013, at the Max Planck Institute.

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June 18, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, June 17, 2013

Yin: Joint Tax Committee Should Investigate the IRS

Tax Analysts George K. Yin (Virginia), Former Chief of Staff Thinks JCT Should Investigate the IRS, 139 Tax Notes 1443 (June 107 2013):

House Ways and Means Committee Chair Dave Camp, R-Mich., has reportedly rejected use of a joint committee to investigate the IRS because such a committee would not be authorized to access confidential tax return information. Yet Camp already heads a joint committee (the Joint Committee on Taxation), which has that specific authority under sections 6103(f) and 8023. Moreover, the JCT was created for the express purpose of investigating the tax agency's administration of the tax laws, following a lengthy Senate investigation of corruption charges against the agency and possible favoritism towards companies associated with then-Secretary of the Treasury Andrew Mellon. Congress wanted a permanent organization to conduct future tax investigations, oversee the agency, and make sure it was administering the law in the manner Congress intended. Camp should make use of this valuable resource to streamline Congress's efforts and prevent the integrity of its investigation from being undermined by political squabbling.  

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June 17, 2013 in Congressional News, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 11, 2013

Johnston: IRS Management Culture Must Be Fixed

Tax Analysts David Cay Johnston (Syracuse), IRS Management Culture Must Be Fixed, 139 Tax Notes 1323 (June 10, 2013):

Serious problems in IRS management culture will only worsen as Congress focuses on trivia and ignores the problems created by conflicts in mission, law, and a lack of funds to do the work, especially training.

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June 11, 2013 in Tax, Tax Analysts | Permalink | Comments (31) | TrackBack (0)

Monday, May 20, 2013

Bergin: The IRS Is in Big Trouble

Tax Analysts Christopher E. Bergin (President and Publisher, Tax Analysts), The IRS Is in Big Trouble, 139 Tax Notes 951 (May 20, 2013):

Bergin discusses the catastrophic ramifications of the IRS’s recent apology for mishandling the applications of conservative exempt organizations and how things might be worse for the agency now than they were after the 1998 restructuring act.

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May 20, 2013 in Tax, Tax Analysts | Permalink | Comments (4) | TrackBack (0)

Monday, May 13, 2013

Olson: Loving and Tax Return Preparation

Tax Analysts Nina E. Olson (National Taxpayer Advocate), More Than a 'Mere' Preparer: Loving and Return Preparation, 139 Tax Notes 767 (May 13, 2013):

Each year, tens of millions of taxpayers hire paid practitioners to prepare their Form 1040-series returns because of the overwhelming complexity of the tax code and the amount of money at stake. That has led to significant concerns about incompetent and unscrupulous preparers and their negative impact on taxpayers and compliance. The IRS and Treasury had developed and substantially implemented standards governing preparers when, in Loving v. IRS, a U.S. district court found that Treasury lacked the authority to issue the regulations. The government has appealed the case to the D.C. Circuit. The NTA believes that the district court’s decision in Loving is based in part on an outdated understanding of return preparation and filing. This report makes the case for preparer regulation generally, explains where the district court erred, and illustrates how problems in today’s tax system are directly analogous to the problem Congress sought to address in its original grant of regulatory authority to Treasury. 

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May 13, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Monday, May 6, 2013

Maule: IRS-Prepared Tax Returns: A Theory That Doesn't Work in Practice

Tax Analysts James Edward Maule (Villanova),  IRS-Prepared Tax Returns: A Theory That Doesn't Work in Practice, 139 Tax Notes 684 (May 6, 2013):

Making taxpayers' lives easier is a matter of simplifying the tax law, not enabling the complexities by turning tax preparation over to the IRS. Fooling around with the nation's primary source of revenue in this manner is unwise, unwarranted, and dangerous.

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May 6, 2013 in Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Monday, April 29, 2013

Bergin: Real Transparency, Anyone?

Tax Analysts Christopher E. Bergin (President and Publisher, Tax Analysts), Real Transparency, Anyone?, 139 Tax Notes 571 (Apr. 29, 2013):

In a recent op-ed, House Ways and Means Committee Chair Dave Camp, R-Mich., and Senate Finance Committee Chair Max Baucus, D-Mont., said they were dedicated to working on legislation to reform the tax system in "an open and transparent fashion." Taking them at their word, Bergin urges the taxwriters to do just that.

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April 29, 2013 in Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Friday, April 26, 2013

Tax Analysts Hosts Conference Today on State Taxes and the Cloud

TAC_Cloud_topTax Analysts hosts a roundtable discussion on State Taxes and the Cloud at the National Press Club in Washington, D.C. today at 9:00 - 11:00 a.m. EST:

Please join us for a roundtable discussion in which we will consider how states are approaching the challenge of taxing cloud computing technologies, and what they should think about in doing so.

  • Christopher E. Bergin (President and Publisher, Tax Analysts) (moderator)
  • Cara Griffith (Legal Editor, State Tax Notes)
  • Kelley Miller (Reed Smith)
  • Mark Nebergall (President, Software Finance and Tax Executives Council)
  • Dylan Waits (Managing Senior Policy Counsel, Washington Department of Revenue)

April 26, 2013 in Conferences, Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Friday, April 19, 2013

Morse: Why FATCA Intergovernmental Agreements Bind the U.S. Government

Tax Analysts Susan Morse (UC-Hastings), Why FATCA Intergovernmental Agreements Bind the U.S. Government, 70 Tax Notes Int'l 245 (Apr. 15, 2013):

Susan Morse argues that U.S. bilateral intergovernmental agreements have binding legal force.

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April 19, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, April 8, 2013

Johnston: The Tax Police Budget Shrinks

Tax Analysts David Cay Johnston (Syracuse),  The Tax Police Budget Shrinks, 139 Tax Notes 211 (Apr. 8, 2013):

With the cuts under the budget sequestration, the IRS budget is down sharply from 2002 and is much too small to ensure the revenue collection necessary to sustain our democracy. 

IRS Budget Change Per Capita (in 2012 dollars)

Budget Cuts

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April 8, 2013 in IRS News, Scholarship, Tax, Tax Analysts | Permalink | Comments (6) | TrackBack (0)

Monday, April 1, 2013

Sullivan: U.S. Contract Manufacturing and Dave Camp's Option C

Tax Analysts Martin A. Sullivan (Tax Analysts), U.S. Contract Manufacturing and Dave Camp's Option C, 139 Tax Notes 10 (Apr. 1, 2013):

Martin A. Sullivan discusses how a recent proposal by Paul Oosterhuis could help the international tax reform discussion draft released by House Ways and Means Committee Chair Dave Camp, R-Mich.

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April 1, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 26, 2013

Johnston: Leaving a Big Nickel on the Table

Tax Analysts David Cay Johnston (Syracuse), Leaving a Big Nickel on the Table, 138 Tax Notes 1495 (Mar. 25, 2013):

David Cay Johnston writes that according to the Congressional Budget Office, the U.S. economy is growing at less than 95 percent of its potential, and he argues that the country is losing much more tax revenue as a result.

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March 26, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

Friday, March 22, 2013

Smith: PPL -- How to Determine Whether a Foreign Tax is Creditable

Tax Analysts Patrick J. Smith (Ivins, Phillips & Barker, Washington, D.C.), PPL: How to Determine Whether a Foreign Tax is Creditable, 138 Tax Notes 1351 (Mar. 18, 2013):

PPL Corp. v. Commissioner presents the question whether the creditability of a foreign tax must be determined by applying the requirements of the § 901 regulations to the foreign statute’s formula for the tax or by applying those requirements to an algebraically equivalent reformulation of the statutory formula. The decision will likely turn on whether the Supreme Court agrees with PPL that tax law’s general substance-over-form principle authorizes reliance on an algebraic reformulation to determine whether a foreign tax is creditable for U.S. tax purposes.  

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March 22, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 19, 2013

A Potential Game Changer in E-Commerce Taxation

Tax AnalystsAndrew J. Haile (Elon), David Gamage (UC-Berkeley) & Darien Shanske (UC-Hastings, moving to UC-Davis), A Potential Game Changer in E-Commerce Taxation, 67 State Tax Notes 747 (Mar. 11, 2013):

In this essay, we evaluate recent legislative proposals for Congress to authorize state taxation of e-commerce. We argue that these proposals contain a potential game-changing innovation—the requirement that states provide remote sellers with “adequate software” for calculating use tax due within the state. Properly implemented, we explain how this innovation could force states to internalize the compliance costs of levying tax collection obligations on remote sellers, thereby incentivizing the states to simplify their sales and use tax statutes and resolving concerns about states overburdening interstate commerce.

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March 19, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, March 18, 2013

Sullivan: Dave Camp's Quiet Tax Revolution

Tax Analysts Martin A. Sullivan (Tax Analysts),  Dave Camp's Quiet Revolution, 138 Tax Notes 1294 (Mar. 18, 2013):

Martin A. Sullivan analyzes and applauds the latest discussion draft from House Ways and Means Committee Chair Dave Camp, R-Mich.

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March 18, 2013 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Monday, March 11, 2013

Tax Profs Remember Christine Brunswick

Tax Analysts Tax Notes has reprinted our tribute in Tax Professors Remember Christine Ann Brunswick, 138 Tax Notes 1267 (Mar. 11, 2013):

Brunswick

Paul L. Caron ... shares the tributes posted by tax professors remembering Christine Ann Brunswick, former director of the American Bar Association Section of Taxation, who died last month:

  • Alice Abreu (Temple)
  • Ellen Aprill (Loyola-L.A.)
  • Paul Caron (Cincinnati & Pepperdine)
  • Cynthia Lepow (Loyola-New Orleans)
  • Francine Lipman (UNLV)
  • Roberta Mann (Oregon)
  • Deborah Schenk (NYU)

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March 11, 2013 in Obituaries, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 6, 2013

2003-2012 Tax Journal Rankings: NYU #1, Tax Notes #2

Here are the Washington & Lee tax law review combined rankings of the five major tax journals:

  • Florida Tax Review ("Florida")
  • Tax Law Review ("NYU")
  • Tax Lawyer ("ABA")
  • Tax Notes
  • Virginia Tax Review ("Virginia")

The rankings are based on the annual combined rankings in 2003-2012 among these five journals:by:

Rank

Journal

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

1.1

NYU

2

1

1

1

1

1

1

1

1

1

2.9

Tax Notes

4

3

3

2

2

2

5

3

2

3

3.0

Florida

3

4

4

4

3

3

2

2

3

2

3.1

Virginia

1

2

2

3

4

4

3

4

4

4

4.9

ABA

5

5

5

5

5

5

4

5

5

5

As I have previously noted, Tax Notes fares poorly in the Impact Factor category (citations/number of articles published) because W&L apparently counts as "articles" all of the advance sheet material in Tax Notes.

Tax Notes is #1 by a wide margin in the number of citations in law reviews, with more than double the citations of its nearest competitor:

Rank

Journal

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

1.0

Tax Notes

1

1

1

1

1

1

1

1

1

1

2.9

ABA

4

3

4

4

3

3

2

2

2

2

3.0

NYU

3

4

3

3

2

2

3

4

3

3

3.1

Virginia

2

2

2

2

4

4

4

3

4

4

5.0

Florida

5

5

5

5

5

5

5

5

5

5

March 6, 2013 in Law Review Rankings, Legal Education, Scholarship, Tax, Tax Analysts, W&L Tax Journal Rankings | Permalink | Comments (0) | TrackBack (0)