Friday, January 20, 2017

The Rich Old Men: Socialising Power and Loopholes

Almanac: Ben Hecht on old men and power

“Power is the only immorality possible to old men.” Ben Hecht, A Child of the Century... read more

Theresa May lectures super-rich at Davos as Brexit plan backlash grows

 Bad news. You survived. Kansas man with gambling habit sentenced for tax fraud scheme. “After Geisler was contacted by the IRS, his accountant asked him how he thought he would get away with not reporting business income and payroll taxes. Geisler responded ‘I thought I would be dead before they caught on.'” (Hays Post)

100 Must-Follow Tax Twitter Accounts For 2017

Andrew Blair-Stanek (Maryland), Just Compensation as Transfer Prices, 58 Ariz. L. Rev. 1077 (2016):
This Article proposes using eminent domain to fight both transfer-pricing abuse and the deadweight losses created by intellectual property. IP creates deadweight losses, because the exclusive rights granted to IP owners allow them to charge higher prices that keep some customers out of the market entirely. IP also allows multinational corporations to avoid taxes on a massive scale, by transferring their IP to tax havens for artificially low prices.

Tax Policy Center, Are Entrepreneurs Overtaxed?:
Entrepreneurs play a critical role in developing new products, inventing new production techniques, creating jobs, and strengthening our economy. As lawmakers focus on tax reform, it is timely to ask whether America’s tax system treats entrepreneurs appropriately and whether reforms could improve economic performance.

News release: “Eight men own the same wealth as the 3.6 billion people who make up the poorest half of humanity, according to a new report published by Oxfam today ahead of the annual meeting of political and business leaders in Davos, Switzerland:  Oxfam’s report, “An economy for the 99 percent,” shows that the gap between rich and poor is far greater than had previously been estimated and details how big business and the super-rich are fueling the inequality crisis by dodging taxes, driving down wages and using their power to influence politics. The report also calls for a fundamental change in the way we manage our economies so that they work for all people, and not just a fortunate few.”

NY Times Dealbook (2013)New York Times Deal Book: With Competition Fierce, Even Elite Law Firms Resort to the Unusual, by Elizabeth Olson:
America’s law firms, even the most prominent, are mired in an era of noticeably modest growth and volatility in the industry, and 2017 promises to be no better.
Fierce competition is prompting firms to take unusual steps to bolster their profiles. Top firms are hiring groups of lawyers to expand specific practice areas, changing pay practices, jettisoning or demoting some partners and staff members and seeking ways to distinguish their brands to set them apart from competitors.
Beyond that, the top-drawer firms are increasingly jostling with one another to win lucrative legal work. It is getting tougher for firms to hang onto traditional portfolios of corporate business and avoid elbowing from rivals.

Plans for Australia to adopt a 'Google tax' welcomed by advocacy group  

Tax Attorney Sentenced to 48 Months of § 7202 Convictions (1/14/17)

I previously reported on a tax attorney, Steven Lynch, being convicted of charges for employment tax fraud under § 7202, here.  See Tax Attorney Convicted of Employment Tax Fraud (Federal Tax Crimes Blog 9/8/16; 9/10/16), here.  The defendant has now been sentenced to 48 months in prison (48 months on each count to be served concurrently)  See the judgment here.  Also see the docket entrieshere.

Prior to the sentencing, the sentencing judge ruled only various post-trial motions, some of which merely restated motions or claims made before or during trial.  See Memorandum Order Denying Defendant's Motion for Judgment of Acquittal or, in the Alternative, Motion for New Trial in United States v. Lynch, 2017 U.S. Dist. LEXIS 634 (WD PA 2017), here.  The matters dealt with in the Order and the rulings are more or less garden variety, so I won't discuss them here.  Rather, I just point out certain matters that caught my eye in the Order.

1.  The defendant is described as "a highly skilled tax attorney and sophisticated businessman * * * The evidence at trial fairly established that Lynch possessed superior knowledge of tax and corporate laws which he used to keep Internal Revenue Service ("IRS") agents from being able to collect taxes due for several entities that make up the Iceoplex - - a collection of businesses related to an indoor ice skating rink - - by shifting assets and employees among several entities."

2.  The defendant was charged with tax obstruction, § 7212(a), here, in addition to several counts of willful failure to pay over, § 7202.  He was acquitted of tax obstruction and some of the willful failure to pay over counts.  He was convicted of some of the willful failure to pay over counts.

3.  The Court cites as among the evidence from which the jury could have convicted Lynch of the willful failure to pay over the following (bold face supplied by JAT):
• The FBI's interview of Lynch in March of 2011, during which he was notified that he was the subject of a criminal investigation for willful failure to pay employment taxes.Doc. No. 223, p. 216-218. After the FBI interview, Lynch made full, timely payments for three subsequent quarters and substantial partial payments for two more subsequent quarters before failing to make any payment towards the taxes owed for the quarters related to the Counts for which he was convicted. See Doc. No. 201, pp. 44-49.

Steven Mnuchin, Donald Trump’s nominee to lead the U.S. Treasury Department, may be taking advantage of a loophole that allows the nation’s richest families to shield their wealth from estate taxes for generations into the future.
Mnuchin placed assets worth at least $32.9 million into the Steven Mnuchin Dynasty Trust I, according to adisclosure to federal ethics officials made public Wednesday, as well as securities filings by a company where he used to work. The assets include corporate stock and interests in a Willem de Kooning painting and a three-engine corporate jet.
Dynasty trusts are designed to foil the estate tax, which in its current form takes a 40 percent bite of a person’s fortune at death. Because the first $5.5 million of wealth is exempt from the tax, and there are ample opportunities to avoid it, in 2013 only one in 555 estates paid anything at all. 
Structured properly, dynasty trusts comply with the law and are common among the wealthiest Americans, tax professionals say. ...

PricewaterhouseCoopers and General Electric Co. have agreed to move GE’s in-house global tax team over to PwC as the accounting firm adds global expertise and the industrial conglomerate continues slimming down.
PWC will absorb more than 600 employees under the agreement announced Thursday. GE’s tax employees in 42 countries will move to PwC, where they will provide tax planning, advice, compliance and other tax services to both GE and other PwC tax clients.
PwC will also take over GE’s tax technologies as part of the five-year renewable agreement.

The unusual deal isn’t an acquisition, and no money is changing hands. PwC expects to benefit from the agreement by enhancing its operations globally. The firm already has 41,000 global tax professionals, so adding the GE workers would increase the total by only about 1.5%.
PwC’s tax business had $9.1 billion in revenue in fiscal 2016. The GE unit, known as Global Enterprise Tax Solutions, could in time bring in more than $1 billion in a year in revenue to PwC from GE and other clients, said Mark Mendola, PwC’s vice chairman and U.S. managing partner.
With tax rules changing around the world, and the “great relationships” that GE’s tax professionals have with policy makers in Washington, Brussels and elsewhere, “we think it’s a great opportunity,” Mr. Mendola said in an interview.
GE, meanwhile, expects to benefit by lowering its fixed costs and simplifying its organization. GE’s tax operation is far-ranging, as the company files more than 5,500 income tax returns a year in more than 300 jurisdictions world-wide, according to GE’s annual report. Shedding the operation is in line with GE’s push to simplify and streamline itself. The company has cut  

Contracts and convicts: how perverse incentives created the death fleet

Roger McEowenC Corporation Penalty Taxes – Time To Dust-Off and Review? “A more favorable tax climate for C corporations could spawn renewed interest in their formation and usage.  But, remember the penalty taxes that can apply.”

Robert Wood,Beware IRS Audits Of Offshore Account Filings. “Even if you can explain one failure to comply, repeated failures can morph conduct from inadvertent neglect into reckless or deliberate disregard.”