NY Times: It May Be The Biggest Tax Heist Ever. And Europe Wants Justice.

New York Times, It May Be the Biggest Tax Heist Ever. And Europe Wants Justice.:

Stock traders are accused of siphoning $60 billion from state coffers, in a scheme that one called “the devil’s machine.” Germany is the first country to try to get its money back. ...

The scheme was built around “cum-ex trading” (from the Latin for “with-without”): a monetary maneuver to avoid double taxation of investment profits that plays out like high finance’s answer to a David Copperfield stage illusion. Through careful timing, and the coordination of a dozen different transactions, cum-ex trades produced two refunds for dividend tax paid on one basket of stocks.

One basket of stocks. Abracadabra. Two refunds.

The process was repeated over and over, as word of cum-ex spread like a quiet contagion. Germany was hardest hit, with an estimated $30 billion in losses, followed by France, taken for about $17 billion. Smaller sums were drained away from Spain, Italy, Belgium, Austria, Norway, Finland, Poland and others.

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Tenured University of Minnesota Law Prof Sentenced In Tax Fraud Case

Following up on my previous post, University of Minnesota Law Professor Charged In Multi-Million Dollar Corporate Fraud Scheme:  Minneapolis Star-Tribune, University of Minnesota Law Professor Sentenced to Probation For Lying to IRS:

A federal judge sentenced University of Minnesota financial law professor Ed Adams to two years of probation and $5,000 in fines Thursday for lying to the Internal Revenue Service.

Judge Donovan Frank said Adams deserved a harsher sentence than the one year of probation that prosecutors requested because of his role as a tenured professor who should be setting an example for up-and-coming lawyers.

“You clearly knew more than most that what you were doing was illegal and unethical,” said Frank.

Still, the punishment is much lighter than what Adams could have faced if he had been convicted on the original charges.

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A Dad Allegedly Paid $220,000 To Bribe His Son's Way Into USC. Then He Claimed The Bribe As A Tax Deduction

BuzzFeed News, A Dad Allegedly Paid $220,000 To Bribe His Son's Way Into USC. Then He Claimed The Bribe As A Tax Deduction, Prosecutors Say.:

A father allegedly paid $220,000 to bribe his son's way into the University of Southern California, prosecutors said, then he listed part of the secret payoff as a tax deduction.

Since March 2019, more than 50 people have been charged in the college admissions scandal that federal prosecutors have dubbed Operation Varsity Blues. According to authorities, wealthy — and in some cases famous — families paid large sums of money to get their children into prestigious colleges across the country, often by embellishing or fabricating their children's sports careers in coordination with college officials.

But on Tuesday, prosecutors filed an additional charge of tax fraud against a Massachusetts investor who allegedly went a step further and claimed an illegal bribe as a tax write-off.

Prosecutors allege John Wilson, 59, paid life coach Rick Singer $220,000 to get his son into the University of Southern California in 2013 by lying about his son's athletic ability. ...

In his 2014 taxes, Wilson claimed a $100,000 payment to Singer's foundation as a charitable contribution, and $120,000 as business consulting fees.

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Tax Policy In The Trump Administration

• Bloomberg, Carbon Tax Won’t Be Necessary Due to Technology, Mnuchin Says
• CNBC, Patriotic Millionaires’ Letter to Davos Calls For ‘Higher and Fairer’ Taxes on the Global Elite
• Financial Times, UK to Push on With Digital Tax in Face of US Anger
• The Hill, Conservatives Hit Back on 2020 Wealth Tax Proposals
• The Hill, Mnuchin: White House Working on New Tax Package to 'Fuel the Economy'

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NY Times: There’s No Such Thing As A Free Tax Cut

New York Times editorial, There’s No Such Thing as a Free Tax Cut:

Legend has it that the British economist John Maynard Keynes, asked why he had changed his position on a question of economic policy, responded: “When the facts change, I change my mind. What do you do, sir?”

Treasury Secretary Steven Mnuchin has embraced a different approach: ignoring the facts.

This week, Mr. Mnuchin repeated the risible fantasy that the Trump administration’s 2017 tax cuts will bolster economic growth sufficiently for the government to recoup the revenue it has lost by lowering tax rates. ...

Two years later, the results are in. The annual federal budget deficit has topped $1 trillion. And it is even more difficult to understand how anyone could make such a claim. ...

The exact mechanics will be studied for years to come. Gary Cohn,  a chief architect of the tax cuts during his time as Mr. Trump’s chief economic adviser, argues plausibly that the uncertainty created by Mr. Trump’s trade policy has worked against the tax cuts, discouraging companies from making long-term investments.

A study by the International Monetary Fund [U.S. Investment Since The Tax Cuts And Jobs Act Of 2017], by contrast, found that the supply-side effects were even smaller than the total increase in investment. The study concluded that business responded to increased demand more than they did to the lower tax rates.

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Michael Avenatti Arrested By IRS Agents, Accused Of Committing More Financial Crimes While Out On Bail

Washington Post, Michael Avenatti, Arrested by IRS agents and Accused of Violating Bail Terms, to Remain in Jail, Judge Rules:

Michael Avenatti, the attorney who rose to prominence as the legal counsel for adult-film actress Stormy Daniels during her lawsuit against President Trump over a hush-money deal, will remain in jail following his rearrest by IRS agents, a judge in Los Angeles ruled Wednesday after prosecutors alleged he continued to commit financial crimes while out on bail.

Avenatti — who is accused of extorting athletic apparel maker Nike for up to $25 million and stealing millions of dollars from those he once represented, including Daniels — was arrested Tuesday evening while appearing before the State Bar Court in Los Angeles, in the middle of a disciplinary hearing alleging he stole about $840,000 from a former client.

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WSJ: The ‘Robot Tax’ Debate Heats Up

Wall Street Journal, The ‘Robot Tax’ Debate Heats Up:

In all likelihood, your co-workers pay taxes. But what happens if your boss replaces them with sophisticated software or dexterous machines—ones that perform the same tasks for less money (at least over the long run) and contribute nothing in payroll taxes?

One seemingly flip answer is starting to gain some attention: Just tax the robots.

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WSJ: Did The U.S. Tax Overhaul Do What It Promised?

Wall Street Journal, Did the U.S. Tax Overhaul Do What It Promised?:

Two years after Trump’s tax cuts, a deep dive into what happened to jobs, tax revenue, corporate profits and investment.

The Tax Cuts and Jobs Act is now two years old. So what did it do?

The tax cuts themselves are easy to see: Tax bills went down for most families and corporations. Domestic retailers and banks reaped some of the biggest savings.

How the law rippled through the economy is muddier. Employment, wages and other key indicators have improved, and the 2020 economy looks stronger than projected at the start of the Trump presidency.

But many of those metrics were already on the rise before the tax law was signed by President Trump, and most economic numbers don’t show a sharp change that coincides with the tax law. Early growth in business investment seems to have faded; overall economic growth rose before pulling back again. Cross-border investment patterns have changed only modestly.

The bottom line: It seems clear the tax cuts contributed to economic growth—but not enough to pay for themselves, as many backers promised. And even some of the intended beneficiaries say the gains haven’t been dramatic. ...

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Megxit Tax Planning For Prince Harry And Meghan Markle

Town & Country, Meghan Markle and Prince Harry's New Roles Could Impact Meghan's Immigration Status—and Their Taxes:

Now that Meghan and Harry intend to retreat from their royal roles, attain "financial independence," and live part-time in North America, Meghan and Archie's tax and citizenship plans are a little up in the air. ...

Meghan is still a US citizen, and therefore required to pay US taxes on her worldwide income. Prince Harry could technically elect to be treated as a US taxpayer and file jointly with Meghan, but "he would never do that," explains Dianne Mehany, a lawyer specializing in international tax planning." ...

When Meghan and Harry announced their engagement back in 2017, Harry's communications team confirmed to the BBC that Meghan "intends to become a UK citizen and will go through the process of that." Said process, as per the UK government's website, would require Meghan to have lived in the country for three years before becoming eligible for naturalization.

Once gaining UK citizenship, Meghan could elect to relinquish her US citizenship, and save herself the trouble and expense of filing US tax returns. "The only problem there is, she would have to pay the exit tax," Mehany notes, referencing the expatriation tax that those forfeiting US citizenship are subject to. ...

"The real tricky thing," Mehany notes, "is to make sure they don't spend too much time in the United States, so that Harry becomes a resident of the United States, at which point his entire worldwide wealth would become subject to US taxation, which I know they want to avoid."

Dan Mitchell (Cato Institute), Taxes Will Be a Royal Pain for Meghan and Harry:

As reported by the U.K.-based Telegraph, they’re minimizing their exposure to the rapacious California tax system:

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WSJ: In Florida, Homeowners Come For The Weather And Stay For The Tax Relief

Wall Street Journal, In Florida, Homeowners Come for the Weather and Stay for the Tax Relief:

There’s a way for rich homeowners to potentially shave tens of thousands of dollars from their tax bills. They can get that same savings the next year and the following years as well. They can cut their taxes even further after they die. What’s the secret?

Moving to Florida, a state with no income tax or estate tax.

Plenty of millionaires and billionaires have been happy to ditch high-tax states like New York, New Jersey, Connecticut and California. President Donald Trump and Carl Icahn both announced in the fall that they’ll be making Florida their primary residence, joining other high-profile executives like financiers Barry Sternlicht, Eddie Lampert and Paul Tudor Jones.

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$1.7 Billion Fire Settlement Could Mean $470 Million Tax Break For PG&E

Bloomberg, PG&E’s $1.7 Billion Fire Settlement Could Mean Big Tax Break:

PG&E’s $1.68 billion settlement agreement with California over wildfires sparked by its power lines could save the bankrupt utility about $470 million in taxes.

Nearly all the wildfire recovery and prevention work included in the agreement should be deductible from both its state and federal taxes, PG&E said in a regulatory filing late Friday.

The agreement reached with state regulators in December covers Northern California blazes in 2017 and the 2018 Camp Fire, the deadliest in state history. As part of the deal, PG&E agreed not to saddle customers with $1.63 billion in costs it will incur preventing and responding to fires.

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The IRS Tried To Crack Down On Rich People Using An 'Abusive' Tax Deduction. It Hasn’t Gone So Well.

ProPublica, The IRS Tried to Crack Down on Rich People Using an “Abusive” Tax Deduction. It Hasn’t Gone So Well.:

In March 2019, the IRS added a scheme to its annual “Dirty Dozen” list of “the worst of the worst tax scams.” That same scheme was targeted, just weeks earlier, when the U.S. Department of Justice filed a fraud lawsuit against a handful of promoters allegedly responsible for generating more than $2 billion in improper tax write-offs. And the Senate Finance Committee has been investigating that very same racket, recently demanding thousands of pages of documents from six promoters. Lawmakers from both parties have introduced legislation to halt the same practice.

The scheme they’re all trying to kill is what’s called a “syndicated conservation easement,” which the IRS calls “abusive” and says has resulted in bogus deductions for the rich that have cost the U.S. Treasury billions in revenues.

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Trump's Taxes And Tax Returns

• Bloomberg, Congress Went to Court for Trump’s Tax Returns. Why?
• Forbes (Joe Thorndike), There Oughta Be A Law: Why Presidents Should Be Forced To Release Their Tax Returns
• The Hill, Judge Delays Ruling in House Lawsuit Over Trump Tax Returns
• Mother Jones, Bloomberg Intends to Release His Tax Returns, Upping the Pressure on Trump
• National Law Journal, Judge Links Fate of House's Bid for Trump Tax Returns to D.C. Circuit Ruling on McGahn

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Stiglitz, Tucker & Zucman: The Starving State: Why Capitalism’s Salvation Depends On Taxation

Foreign Affairs:  The Starving State: Why Capitalism’s Salvation Depends on Taxation, by Joseph E. Stiglitz (Columbia), Todd N. Tucker (Columbia) & Gabriel Zucman (UC-Berkeley):

For millennia, markets have not flourished without the help of the state. Without regulations and government support, the nineteenth-century English cloth-makers and Portuguese winemakers whom the economist David Ricardo made famous in his theory of comparative advantage would have never attained the scale necessary to drive international trade. Most economists rightly emphasize the role of the state in providing public goods and correcting market failures, but they often neglect the history of how markets came into being in the first place. The invisible hand of the market depended on the heavier hand of the state.

The state requires something simple to perform its multiple roles: revenue. It takes money to build roads and ports, to provide education for the young and health care for the sick, to finance the basic research that is the wellspring of all progress, and to staff the bureaucracies that keep societies and economies in motion. No successful market can survive without the underpinnings of a strong, functioning state.

That simple truth is being forgotten today. In the United States, total tax revenues paid to all levels of government shrank by close to four percent of national income over the last two decades, from about 32 percent in 1999 to approximately 28 percent today, a decline unique in modern history among wealthy nations.

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Wealth Of World’s Richest Rose 25% In 2019; Jeff Bezos Stays #1 Despite $9 Billion Divorce

Bloomberg News, World’s Richest Gain $1.2 Trillion in 2019 as Jeff Bezos Retains Crown:

The world’s 500 wealthiest people tracked by the Bloomberg Billionaires Index added $1.2 trillion, boosting their collective net worth 25% to $5.9 trillion.

Such gains are sure to add fuel to the already heated debate about widening wealth and income inequality. In the U.S., the richest 0.1% control a bigger share of the pie than at any time since 1929, prompting some politicians to call for a radical restructuring of the economy.

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Nina Olson: We Need A Permanent National Taxpayer Advocate, Now.

Nina Olson (Former National Taxpayer Advocate), We need a permanent National Taxpayer Advocate, now.:

This week, the acting National Taxpayer Advocate released the 2019 Annual Report to Congress, on the heels of the IRS’s release of its own “annual report” about its performance. Reading the two documents together, one wonders whether they are reporting on the same agency. The NTA’s report focuses on the challenges the agency faces and makes concrete recommendations about how to address them; the IRS’s report celebrates the agency’s performance over the last year and how it is on track to fulfill the goals of its 2018 to 2022 strategic plan. One report is forward looking; the other is a status update.

I’ll be scouring the contents of both reports over the next month or so, but their arrival reminds me of the important and unique role the National Taxpayer Advocate (NTA) plays in U.S. tax administration today. The NTA is the protector of taxpayer rights and, according to the National Commission on Restructuring the IRS, serves as the “voice of the taxpayer” inside the agency. Each of the Most Serious Problems, Most Litigated Issues, and Legislative Recommendations in the NTA’s 2019 Annual Report to Congress is prefaced with the relevant rights enunciated in the Taxpayer Bill of Rights; they form the framework for analysis. On the other hand, the IRS annual report doesn’t get around to mentioning “taxpayer rights” until page 12. Tellingly, the words “taxpayer rights” do not appear in any of the strategic goals listed in the annual report, nor are they listed among the “core values” of the agency.

This contrast highlights why it is so important to have a permanent National Taxpayer Advocate in place, to hold the IRS’s feet to the fire about promotion and protection of taxpayer rights, especially as it hires more audit and collection employees and launches new compliance and enforcement initiatives.

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WSJ: Economists Question The Benefits Of $30 Billion/Year Spent By State & Local Governments On Targeted Tax Breaks

Wall Street Journal, Economists Question the Benefits of Targeted Tax Breaks:

State and local governments across the U.S. spend at least $30 billion a year to attract and keep companies, but the biggest deals generate little in the way of economic benefits.

The research calls into question the common practice of using narrow, firm-specific tax breaks to attract businesses and boost employment. The largest deals appear to be associated with job growth in the targeted industry but don’t clearly produce the hoped-for benefits for the broader regional economy, according to the study from Columbia Business School economist Cailin Slattery and Princeton University economist Owen Zidar [Evaluating State and Local Business Tax Incentives]. ...

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Death Of Martin Dickinson (Kansas)

KU Law Community Mourns Passing of Former Dean:

The University of Kansas School of Law community is mourning the passing of former dean and longtime professor Martin Dickinson, who died Jan. 5 in Estes Park, Colorado. He was 81.

Dickinson was KU Law’s longest-serving faculty member. He gave 48 years to the law school, from when he started teaching in 1967 until his retirement in 2015. He served as dean from 1971 to 1980, overseeing a time period that included the dedication of the law school’s current home at Green Hall.

He was a visionary leader, advocating for the advancement of diverse and female law students and faculty well before the legal profession as a whole began to do so, said Stephen Mazza, dean and professor of law. “He was also a fantastic classroom teacher who truly cared about his students,” Mazza said. “KU Law alumni across the nation frequently recognize him as one of their favorite professors.”

By Dickinson’s own estimate, 4,000 law students passed through his classes during his nearly five decades as a professor. In a recollection of his tenure for the fall 2015 edition of KU Law Magazine, Dickinson described his time as “a fascinating ride that included revolutionary changes.” ...

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Tax Policy In The Trump Administration

• Bloomberg, Base Erosion and Anti-Abuse Tax Final Regulations Roadmap
• Bloomberg, Consumers Increasingly See Tax-the-Rich Plans Hurting Economy
• Bloomberg, The Tax Decade: How the 2010s Led to Where We Are Now (Podcast)
• Bloomberg, Wealthy Investors Steer Billions Toward New Trump Tax Break
• Bloomberg, Trump Tax Breaks Seen Doing ‘Zero’ for Home Prices in Poor Areas

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Trump Rape Accuser May Seek President’s Taxes In Lawsuit

Bloomberg, Trump Rape Accuser May Seek President’s Taxes in Lawsuit:

Donald Trump can face a lawsuit in New York because his residency at the White House “is not permanent” and his tax returns would prove it, according to an advice columnist suing the president for denying he raped her two decades ago.

E. Jean Carroll, who filed a defamation suit against Trump in November, made the argument in a Monday court filing responding to the president’s request to have the case dismissed on the grounds that New York courts lack jurisdiction. Carroll’s lawyers said Trump hadn’t met the standard under New York law for formally changing his residence to Washington.

Carroll went public with her rape claim in a June magazine article, alleging Trump assaulted her in a dressing room in a Manhattan department store in the mid-1990s. Trump has repeatedly denied the allegation and called her a liar seeking to promote her career.

The filing raised the prospect Carroll would seek Trump’s taxes to prove New York was his primary home during the relevant time period. The president has aggressively fought against any effort, including by Congress, to gain access to his taxes.

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Google To End Use Of ‘Double Irish’ As Tax Loophole Set To Close

Following up on my previous posts:

• Google Lowered 2015 Taxes by $3.6 Billion Using 'Double Irish With A Dutch Sandwich' Tax Structure
• Google Reduced its Tax Rate to 2.4% With Aggressive Tax Strategies

Los Angeles Times, Google to End Use of ‘Double Irish’ as Tax Loophole Set to Close:

Google has overhauled its global tax structure and consolidated all of its intellectual property holdings back to the U.S., signaling the winding down of a tax loophole estimated to have saved American companies hundreds of billions of dollars.

The internet search company said on Tuesday the move was designed to simplify its corporate tax arrangements and was in line with OECD efforts to limit international tax avoidance, as well as recent changes to U.S. and Irish laws.

Google’s actions came ahead of the close of the so-called double Irish tax loophole, which has been used by U.S. companies to channel international profits through Ireland and on to tax havens like Bermuda — putting them outside the U.S. tax net. That led American companies to amass more than $1 trillion offshore as of the end of 2017, when President Trump’s tax overhaul changed the treatment of overseas profits.

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UC-Hastings Seeks To Hire A Tax Clinic Director

Clinic Director and Visiting Assistant Professor, UC Hastings Low-Income Taxpayer Clinic:

The University of California, Hastings College of the Law (“UC Hastings Law”), located in downtown San Francisco, seeks applicants for the position of Visiting Assistant Professor to serve as Clinic Director for the newly-formed, UC Hastings Low-Income Taxpayer Clinic (“the “Clinic”). This is a full-time, non-tenure track faculty position (lecturer) intended to support those interested in law school academic careers. Assuming successful renewal of the IRS grant, the Clinic Director position will be a two-year appointment, with possible extensions for subsequent years.

The Clinic will give free legal assistance to low-income taxpayers with active tax controversies with the Internal Revenue Service and provide education and outreach to taxpayers who speak English as a second language. Clients will be represented by students earning course credit for their enrollment in the Clinic, volunteer pro bono attorneys, and the Clinic Director. The Clinic Director will manage all aspects of the Clinic’s operations, including (but not limited to) conducting client intake, teaching students the relevant law and lawyering skills necessary for effective representation, placing clients with pro bono attorneys, and ensuring compliance with IRS grant requirements.

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Goldburn Maynard Leaves Louisville Law School For Indiana Business School

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NY Times: The Tax Break for Children, Except The Ones Who Need It Most

New York Times, The Tax Break for Children, Except the Ones Who Need It Most:

The child tax credit, begun in 1997 as a tax cut, has become an anti-poverty program. But more than a third of children don’t receive it because their parents earn too little.

The 2017 tax bill, President Trump’s main domestic achievement, doubled the maximum credit in the two-decade-old program and extended it to families earning as much as $400,000 a year (up from $110,000). The credit now costs the federal government $127 billion a year — far more than better-known programs like the earned-income tax credit ($65 billion) and food stamps ($60 billion).

But children with the greatest economic needs are least likely to benefit.

While Republicans say the increase shows concern for ordinary families, 35 percent of children fail to receive the full $2,000 because their parents earn too little, researchers at Columbia University found [Left Behind: The One-Third of Children in Families Who Earn Too Little to Get the Full Child Tax Credit]. A quarter get a partial sum and 10 percent get nothing. Among those excluded from the full credit are half of Latinos, 53 percent of blacks and 70 percent of children with single mothers. ...

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WSJ: ‘Aloha’ Increasingly Means Goodbye Thanks To High Taxes

Wall Street Journal op-ed:  ‘Aloha’ Increasingly Means Goodbye Thanks to High Taxes, by Keli‘i Akina (Grassroot Institute of Hawaii):

With an 11% top tax rate, many Hawaii residents are looking for two tickets out of paradise.

“Why would anyone leave Hawaii?” Former Hawaii residents hear the question a lot, often from someone eager to relay the details of an incredible vacation in Maui or Kauai. But when you’re living paycheck to paycheck and working two jobs, you don’t get many chances to enjoy the island archipelago’s crystal blue waters and soft white sand. People leave Hawaii for the same reasons they leave Illinois and California: high costs and lack of opportunity.

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Tax Reform Has Delivered For Workers

Wall Street Journal op-ed:  Tax Reform Has Delivered for Workers, by Gary D. Cohn & Kevin Hassett:

It’s been two years since President Trump signed the Tax Cuts and Jobs Act into law. To the delight of supply-siders, the law contained significant marginal tax rate reductions for individuals and corporations. At the time there was lively debate concerning the likely economic impact of the bill, with opponents pointing to analyses that found little effect from the rate reductions. At the White House, where we worked at the time, we produced analyses that suggested economic growth would surge. On the second anniversary of the TCJA, the numbers are in, and our projections have been vindicated.

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The Top 10 Tax Posts Of 2019

1. Bryan Camp (Texas Tech), Lesson From The Tax Court: Taxpayer’s Shell Game Defeats IRS
2. Bryan Camp (Texas Tech), Lesson From The Tax Court: Know The Difference Between IRAs And 401(k)s
3. Bryan Camp (Texas Tech), Lesson From The Tax Court: Murphy’s Law Of Mailing
4. Bryan Camp (Texas Tech), Lesson From The Tax Court: When Does A Business Start?
5. Bryan Camp (Texas Tech), Lesson From The Tax Court: The Pain of Disappointment
6. Bryan Camp (Texas Tech), Lesson From The Tax Court: Distinguishing Investment From Business Activity
7. Bryan Camp (Texas Tech), Lesson From The Tax Court: Form 2848 Does Not Change Your Address
8. Bryan Camp (Texas Tech), Lesson For Tax Day: When Tax Prep Software Gets It Wrong
9. Bryan Camp (Texas Tech), Lesson From The Tax Court: Payments v. Deposits
10. Bryan Camp (Texas Tech), Lesson From The Tax Court: Yachts Are Pigs

The Top 10 Tax Posts Of 2018

Bill Gates Pushes For Higher Taxes On Rich As His Wealth Soars

Bloomberg, Bill Gates Pushes for Higher Taxes on Rich as Wealth Soars:

Microsoft Corp. co-founder Bill Gates started the last decade worth more than $50 billion and a pledge to donate a big chunk of his fortune to charity.

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Pepperdine Welcomes Visiting Professors Mike Paulsen And Bobby Dexter

Pepperdine Caruso School of Law is thrilled to have Mike Paulsen (St. Thomas) and Bobby Dexter (Chapman) with us this semester as visiting professors.

Mike is our Straus Distinguished Visiting Professor this semester (following Dorothy Brown (Emory), who was our Straus Distinguished Visiting Professor last Spring). Mike will be teaching Constitutional Structure and a Constitutional Law Seminar. His most recent publication is To End a (Republican) Presidency, 132 Harv. L. Rev. 689 (2018).

Bobby will be teaching Federal Income Taxation of Individuals and Federal Income Taxation of Business Entities. His most recent publication is Federal Income Taxation In Focus (Aspen/Wolters Kluwer Law & Business) (2018).

The Top 10 Tax Posts Of The Decade

1. Bryan Camp (Texas Tech), Lesson From The Tax Court: Taxpayer’s Shell Game Defeats IRS (2019)
2. Bryan Camp (Texas Tech), Lesson From The Tax Court: Know The Difference Between IRAs And 401(k)s (2019)
3. Bryan Camp (Texas Tech), Lesson From The Tax Court: Murphy’s Law Of Mailing (2019)
4. Journal of Accountancy, How The Government Shutdown Affects The IRS (2018)
5. Bryan Camp (Texas Tech), Lesson From The Tax Court: When Does A Business Start? (2019)
6. New York Times, California Supreme Court Deals Major Blow To Gig Economy Business Model, Treats Workers As Employees Rather Than Independent Contractors (2018)
7. Bryan Camp (Texas Tech), Lesson From The Tax Court: The Pain of Disappointment (2019)
8. Bryan Camp (Texas Tech), Lesson From The Tax Court: The Turbo-Tax Defense (2018)
9. Bryan Camp (Texas Tech), Lesson From The Tax Court: The Substantial Substantiation Rules In §170 (2018)
10. Washington Post, IRS Ignored Recommended Security Upgrades That Would Have Prevented Last Week's Hack Of 100,000 Taxpayer Accounts (2015)

IRS Reforms Free File Program, Drops Agreement Not To Compete With TurboTax

Following up on my previous posts (links below):  ProPublica, IRS Reforms Free File Program, Drops Agreement Not to Compete With TurboTax:

Finding free online tax filing should be easier this year for millions of Americans.

The IRS announced significant changes Monday to its deal with the tax prep software industry. Now companies are barred from hiding their free products from search engines such as Google, and a years-old prohibition on the IRS creating its own online filing system has been scrapped.

The addendum to the deal, known as Free File, comes after ProPublica’s reporting this year on how the industry, led by TurboTax maker Intuit, has long misled taxpayers who are eligible to file for free into paying.

Under the nearly two-decade-old Free File deal, the industry agreed to make free versions of tax filing software available to lower- and middle-income Americans. In exchange, the IRS promised not to compete with the industry by creating its own online filing system. Many developed countries have such systems, allowing most citizens to file their taxes for free. The prohibition on the IRS creating its own system was the focus of years of lobbying by Intuit. The industry has seen such a system as an existential threat. Now, with the changes to the deal, the prohibition has been dropped.

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NY Times: Why The Impact Of The Trump Taxes Remains Partly Hidden — The GILTI Silence

New York Times, Why the Impact of the Trump Taxes Remains Partly Hidden:

New taxes should be a big expense for many companies. But they have found a way around disclosing it in annual reports.

Armed with legions of lobbyists, companies have been pushing hard — and successfully — to weaken new federal taxes that take aim at overseas tax havens.

Many of them have managed to avoid publicly disclosing how much they owe under the new taxes. Without such figures, it becomes virtually impossible for outsiders to work out how much companies are saving from the watered down tax rules.

In theory, this opacity should not exist. United States securities regulations have long required public companies to disclose even relatively minor tax expenses. Over the past year, this requirement has led to a small number of companies revealing the effect of the new taxes on overseas income.

Yet many others — including some longtime users of tax havens — appear to have found ways around disclosing how the overseas taxes will affect them. ...

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Trump's Tax Cut Has Failed Most Of Us

Los Angeles Times op-ed:  Trump's Tax Cut Has Failed Most Of Us, by Frank Clemente & William Rice (Americans for Tax Fairness):

President Trump’s radical Tax Cuts and Jobs Act, which took effect Jan. 1, 2018, has now been around long enough for a fair assessment. The verdict’s not good. The second anniversary is an apt time to review some of the law’s biggest failures — especially since the president is inviting more trouble by considering another tax-cut boondoggle as an election-year ploy.

Rushed through Congress by a Republican majority, the Trump-GOP tax cuts were promoted as a boon for the middle class. Yet in 2020, according to the Institute on Taxation and Economic Policy, the richest 1% of taxpayers will get an average tax cut of around $50,000, 75 times more than the average cut for the bottom 80%. ...

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NY Times: How Big Companies Won New Tax Breaks From The Trump Administration

New York Times, How Big Companies Won New Tax Breaks From the Trump Administration:

As the Treasury Department prepared to enact the 2017 Republican tax overhaul, corporate lobbyists swarmed — and won big.

The overhaul of the federal tax law in 2017 was the signature legislative achievement of Donald J. Trump’s presidency.

The biggest change to the tax code in three decades, the law slashed taxes for big companies, part of an effort to coax them to invest more in the United States and to discourage them from stashing profits in overseas tax havens.

Corporate executives, major investors and the wealthiest Americans hailed the tax cuts as a once-in-a-generation boon not only to their own fortunes but also to the United States economy.

But big companies wanted more — and, not long after the bill became law in December 2017, the Trump administration began transforming the tax package into a greater windfall for the world’s largest corporations and their shareholders. The tax bills of many big companies have ended up even smaller than what was anticipated when the president signed the bill.

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The Great American Tax Haven: Why The Super-Rich Love South Dakota

The Guardian, The Great American Tax Haven: Why the Super-Rich Love South Dakota:

It’s known for being the home of Mount Rushmore — and not much else. But thanks to its relish for deregulation, the state is fast becoming the most profitable place for the mega-wealthy to park their billions.

Late last year, as the Chinese government prepared to enact tough new tax rules, the billionaire Sun Hongbin quietly transferred $4.5bn worth of shares in his Chinese real estate firm to a company on a street corner in Sioux Falls, South Dakota, one of the least populated and least known states in the US. Sioux Falls is a pleasant city of 180,000 people, situated where the Big Sioux River tumbles off a red granite cliff. It has some decent bars downtown, and a charming array of sculptures dotting the streets, but there doesn’t seem to be much to attract a Chinese multi-billionaire. It’s a town that even few Americans have been to.

The money of the world’s mega-wealthy, though, is heading there in ever-larger volumes. In the past decade, hundreds of billions of dollars have poured out of traditional offshore jurisdictions such as Switzerland and Jersey, and into a small number of American states: Delaware, Nevada, Wyoming —and, above all, South Dakota. “To some, South Dakota is a ‘fly-over’ state,” the chief justice of the state’s supreme court said in a speech to the legislature in January. “While many people may find a way to ‘fly over’ South Dakota, somehow their dollars find a way to land here.”

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Death Of Robert Gordon: 'College Dropout Made Name As Tax Maven'

Wall Street Journal, College Dropout Made Name As Tax Maven:

Robert N. Gordon, a college dropout, became one of the most-quoted U.S. experts on stock-market trends and tax-efficient investing.

“To make a move solely for tax purposes is silly, but to ignore taxes when investing is equally as foolhardy,” he told The Wall Street Journal a year ago. He was quoted in the Journal more than 100 times in the past 35 years, most recently in November.

Mr. Gordon, who was founder and president of New York-based Twenty-First Securities Corp. and whose bedtime reading included the tax code, died Dec. 14 at home in Manhattan. He was 66 and had been under treatment for lung cancer.

“He would exploit inefficiencies or errors or inconsistencies in the tax code wherever he found them,” said Robert Willens, an accounting and tax adviser. “He was the best I’d ever seen at that.” His strategies survived “withering scrutiny” from tax authorities, Mr. Willens said. ...

He is survived by two children and his sister, Wendy Gordon, a law professor at Boston University.

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Effective Corporate Tax Rate Fell From 21% to 11% Under New Trump Tax Law

Following up on my previous post, Corporate Tax Avoidance in the First Year of the Trump Tax Law:  Washington Post, Corporations Paid 11.3 Percent Tax Rate Last Year, in Steep Drop Under Trump’s Law:

About 400 of America’s largest corporations paid an average federal tax rate of about 11 percent on their profits last year, roughly half the official rate established under President Trump’s 2017 tax law. ...

The 2017 tax law lowered the U.S. corporate tax rate from 35 percent to 21 percent, but in practice large companies often pay far less than that because of deductions, tax breaks and other loopholes.

In the first year of the law, the amount corporations paid in federal taxes on their incomes — their “effective rate” — was 11.3 percent on average, possibly its lowest level in more than three decades, according to a report by the Institute on Taxation and Economic Policy, a left-leaning think tank.

From 2008 to 2015, under the previous tax code, the corporations’ effective rate was about 21 percent, according to the ITEP’s prior research.

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A Third Of America’s Economy Is Concentrated In Just 31 Counties

Bloomberg, A Third of America’s Economy Is Concentrated in Just 31 Counties:

While America’s economy has grown for over a decade, that growth is increasingly concentrated in 1% of the nation’s counties.

Just 31 counties, or the top 1% by share, made up 32.3% of U.S. gross domestic product in 2018, according to data released last week by the Bureau of Economic Analysis that included nearly 20 years of county-level GDP data. ...

The nation’s economy is becoming increasingly concentrated in large cities and by the coasts—and less so in rural counties—spurring the question of whether rural areas will be increasingly left behind. ...

Top 1% of Counties
The largest 31 county economies made up 32% of national GDP in 2018

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Tax Policy In The Trump Administration

• Bloomberg Opinion, Wealth Taxes Don’t Reduce Inequality
• Cato Institute, ITEP Study on Corporate Taxes 
• Forbes, The Big Moments Of The Crypto Tax Space In 2019 And A Look Into 2020
• Forbes, Tax Law Changes: Good, Bad and Ugly
• Forbes, The Trump Tax Cut in 2020: A Calculator

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Trump's Taxes And Tax Returns

• Breitbart, Ghost Of Christmas Future Haunts Trump at Mar-a-Lago: Supreme Court Orders Release Of His Tax Returns
• Newsweek, Supreme Court to Take on Three Cases Related to Trump's Finances in 2020: What You Need to Know
• NJ.com, How Long Can Trump’s Tax Returns Be Under Audit?
• Politico, House Democrats Appealing Court Decision in Trump State Tax Return Case
• Washington Post, Don’t Assume the Supreme Court Will Give Trump a Resounding Victory

CBO: Projected Changes In The Distribution Of Household Income, 2016 To 2021

CBO, Projected Changes in the Distribution of Household Income, 2016 to 2021 (Dec. 19, 2019):

Visual Summary
In this report, the Congressional Budget Office builds on its past analyses of the distribution of household income in the United States by projecting what that distribution would look like in 2021 under current law and comparing those projections with the actual distribution in 2016. In particular, this analysis focuses on how two factors—means-tested transfers and federal taxes—affect the distribution of income. Means-tested transfers are cash payments and in-kind benefits from federal, state, and local governments that are designed to provide assistance to individuals and families with low income and few assets. Such transfers include benefits provided through programs such as Medicaid and the Supplemental Nutrition Assistance Program (SNAP) but not social insurance benefits, such as Social Security and Medicare. Federal taxes consist of individual income taxes, payroll taxes, corporate income taxes, and excise taxes. 

Average Household Income
Average inflation-adjusted household income is projected to grow for all groups. Growth in average income—both before and after means-tested transfers and federal taxes are accounted for— is projected to be fastest for households in the highest quintile (or fifth) of the income distribution.

Cumulative Income Growth
Growth in income before transfers and taxes is generally slower than growth in income after transfers and taxes. That pattern reflects rising means-tested transfer rates and decreasing federal tax rates from 1979 (the first year for which data are available) to 2016.

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IRS Releases 2019 Criminal Investigation Annual Report

IR-2019-199, IRS Criminal Investigation Releases Fiscal Year 2019 Annual Report; Celebrates 100 Years:

The Internal Revenue Service today released the Criminal Investigation Division's (CI) annual report, highlighting significant successes and criminal enforcement actions taken in fiscal year 2019. The report also commemorates CI's 100th year anniversary as a law enforcement agency.

"CI is critical to the overall enforcement efforts of the IRS in pursuing its Mission in a fair, impartial, diligent and, where appropriate, tenacious manner." said IRS Commissioner Chuck Rettig. "The Fiscal Year 2019 Annual Report summarizes various CI activities throughout the year but vastly understates the importance of CI to the overall IRS mission. CI supports the efforts of compliant taxpayers by visibly demonstrating the risks of noncompliance thereby helping otherwise honest taxpayers stay honest and compliant."

Key focuses of CI in fiscal year 2019 included cybercrimes, with an emphasis on virtual and crypto currencies, traditional tax investigations, international tax enforcement, employment tax, refund fraud and tax-related identity theft. Other areas of emphasis included public corruption, corporate fraud and money laundering.

"We are working smarter using data analytics to augment good old-fashioned police work and find those cases that have the biggest impact on tax administration," said Don Fort, Chief of CI. "We are leading the world in our ability to trace virtual currency in financial investigations while still working our bread and butter tax enforcement mission areas."

CI initiated 2,485 cases in fiscal year 2019, applying approximately 75 percent of its time to tax related investigations. The number of CI special agents dropped to 2,009 by the end of fiscal year 2019, which is the lowest level since the early 1970's. Consequently, CI has increased its usage of data analytics and strengthened its international partnerships to assist in finding the most-impactful cases.

CI is the only federal law enforcement agency with jurisdiction over federal tax crimes. CI achieved a conviction rate of 91.2 percent in fiscal year 2019, which is among the highest of all federal law enforcement agencies. The high conviction rate reflects the thoroughness of CI investigations and the high caliber of CI agents. CI is routinely called upon by prosecutors across the country to lead financial investigations on a wide variety of financial crimes.

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WSJ: The Beginning Of The End Of Tax Secrecy

Wall Street Journal, The Beginning of the End of Tax Secrecy:

While President Trump has battled to keep his tax returns private, global companies are deciding to go public with the taxes they pay—or don’t pay—before they are forced.

This week, Royal Dutch Shell voluntarily published its revenue, profit, taxes and other business details in each of 98 countries. The disclosure aligns with a drive by the energy company, which often attracts criticism from environmental activists, to present itself as forward-thinking, transparent and socially-minded.

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Tax Policy In The Trump Administration

• Bloomberg News, Opportunity Zone Tax Break Eligibility Finalized by Treasury
• Bloomberg News, Trump Tax Perk Fuels San Jose Development as Google Moves In
• Bloomberg News, U.S. Companies' Repatriated Cash Hits $1 Trillion Under Tax Law
• Bloomberg Tax, House Votes to Repeal SALT Cap in Token Win for New Yorkers
• Center for American Progress, Repealing the SALT Cap Should Not Be a Top Priority in Reforming 2017 Tax Law

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Trump's Taxes And Tax Returns

• CNBC, What Trump’s Tax Returns Might Reveal If the Supreme Court Allows Access
• The Hill, House Democrats Appeal Order in Trump's Lawsuit Over NY Tax Returns
• Law360, 9th Circ. Tosses Suits On Calif.'s Invalidated Tax Return Law
• Law360, Panel Appeals For Access To Trump's Tax Info To DC Circuit
• National Review, Will Justice Ginsburg Recuse in Trump Tax Cases? 

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Wharton: Weighing The Costs And Benefits Of A Middle Class Tax Cut

Knowledge@Wharton, A Middle-class Tax Cut: Weighing the Costs and Benefits:

Wharton’s Jennifer Blouin speaks with Wharton Business Daily on Sirius XM about the potential for “Tax Cuts 2.0” by the Trump administration.

In the run-up to the 2020 Presidential elections, the possibility that the Trump administration might offer a middle-class tax rate cut to 15% has set economists and other experts weighing the costs and benefits of such a move as well as its political implications.

To be sure, a tax rate cut to 15% for middle-income individuals would impose a higher burden on the federal debt, which is already weighed down by the 2017 tax cuts for corporations and individuals, according to experts at the Penn Wharton Budget Model (PWBM), a non-partisan research organization. Still, it would also inject a short-term boost and steady economic gains over the long run, they said.

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Renaissance Employees Could Face Clawbacks Over Hedge Fund’s Tax Maneuver

Following up on my previous posts (links below):  Wall Street Journal, Renaissance Employees Could Face Clawbacks Over Hedge Fund’s Tax Maneuver:

Jim Simons’s Renaissance Technologies LLC has produced the greatest investment returns of any hedge fund. Now, it also may be facing an unusually painful tax headache.

Last week, Renaissance sent a letter to its current and former employees warning that the Internal Revenue Service could force them to pay back taxes and penalties because they invested in Renaissance’s hedge funds through the firm’s 401(k) plan and individual retirement accounts, or IRAs, without paying fees. The warning could affect other investment firms with similar plans.

At issue is a creative strategy undertaken starting in 2012 that enabled employees to invest in Renaissance’s hedge funds—including its market-beating Medallion fund—through their retirement accounts in a tax-advantaged, fee-free fashion.

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Podcast: The Gender Gap In Tax Law

Forbes, Interview: The Gender Gap in Tax Law:

In this episode of Tax Notes Talk, Tax Notes chief correspondent Amanda Athanasiou discusses with Eversheds Sutherland partner Kriss Rizzolo the dearth of women in senior roles in tax law.

Rizzolo describes her own experience climbing the ladder and how to support other women who are doing the same.  

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Trial Begins For IRS Agent Accused Of Raping College Intern

Boston Globe, Trial Begins For IRS Agent Accused of Raping College Intern:

Weeks after a college intern in the Internal Revenue Service’s Boston office turned 21, an agent twice her age invited her for drinks at a nearby pub, where she got drunk and he showed off his gun to a woman hosting trivia night, a prosecutor told a Suffolk County jury Thursday.

The agent, James Clarke, offered the woman a ride to South Station after several hours of drinking at the Kinsale on July 26, 2017, then handcuffed her once they were inside his government-issued car with tinted windows, Suffolk Assistant District Attorney Ian Polumbaum said in his opening statement at Clarke’s trial. Clarke then shoved his gun in her mouth and raped her, he said. ...

Clarke, 45, is charged with aggravated rape, assault and battery with a dangerous weapon, and indecent assault and battery. ...

Clarke’s lawyer, Robert Sheketoff, dismissed Polumbaum’s opening statement as “a very interesting speech from someone who wasn’t there” and told jurors that the encounter between Clarke and the woman was consensual. ... “The defense is not that they didn’t have sexual relations of some sort in that car,” Sheketoff told jurors. “The defense is that it was consensual.”

Boston Globe, Woman Who Was Raped, Allegedly By IRS Agent, Gives Dramatic, Tearful Testimony:

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NY Times: The IRS Sent A Letter To 3.9 Million People. It Saved 700 Lives.

New York Times, The I.R.S. Sent a Letter to 3.9 Million People. It Saved Some of Their Lives.:

Three years ago, 3.9 million Americans received a plain-looking envelope from the Internal Revenue Service. Inside was a letter stating that they had recently paid a fine for not carrying health insurance and suggesting possible ways to enroll in coverage.

New research concludes that the bureaucratic mailing saved lives.

Three Treasury Department economists have published a working paper finding that these notices increased health insurance sign-ups [Jacob Goldin (Stanford), Ithai Z. Lurie (U.S. Treasury Department,  Office of Tax Analysis) & Janet McCubbin (U.S. Treasury Department,  Office of Tax Analysis), Health Insurance and Mortality: Experimental Evidence From Taxpayer Outreach]. Obtaining insurance, they say, reduced premature deaths by an amount that exceeded any of their expectations. Americans between 45 and 64 benefited the most: For every 1,648 who received a letter, one fewer death occurred than among those who hadn’t received a letter.

In all, the researchers estimated that the letters may have wound up saving 700 lives.

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