Friday, September 29, 2017

Suing Someone for a False Information Return

Moses came down from the mount with tablets inscribed with 10 commandments. Most of us know (most of) them, and most of us fail to live by (most of) them. But if Moses had turned them over and looked in the fine print on the back, he’d have found the 11th Commandment:

Don’t get caught.

That in essence summarizes the rise and fall of the South African arm of the international accounting firm KPMG which has been caught with its hands in the slush fund jar. It stands accused of taking money from companies owned by the politically connected Gupta family 
How KPMG got caught up in the breathtaking corruption of South Africa's private sector  

“SAVING $1,000 A YEAR ON TAXES IS NOTHING. LESS THAN $100 A MONTH:” Mic senior politics writer Emily Singer responds to Trump’s tax cut proposal, smugly writes off huge chunk of America.

 Tax Cut for Cleaning? Italians Take Up Bartering in Stagnant Economy Wall Street Journal

TaxProf: Last week I went to the ABA Tax Section Meeting in Austin and really enjoyed attending a terrific panel on Section 7434.  The moderator was Professor Leslie Book, of Villanova School of Law and the presenters were Stephen Olsen, of Gawthrop Greenwood, PC; and Mandi Matlock, of Texas RioGrande Legal Aid Inc., Austin, TX.  

Section 7434(a) provides: “If any person willfully files a fraudulent information return with respect to payments purported to be made to any other person, such other person may bring a civil action for damages against the person so filing such a return.”

The panel went through the surprisingly large amount of case law on this section to address a variety of common issues that arise in these lawsuits.   For a good overview of these issues see Stephen's useful blog post here

A leopard can’t change its spots: Newest Republican tax framework is what we knew it always would be—tax cuts for the rich. Economic Policy Institute

This testimony before the US Senate Committee on Finance on individual tax reform makes five main points.

First, the current tax reform effort is occurring at a time when low- and middle-income families are facing deep financial challenges. Economic disparities are vast and have been widening for decades. The US also has one of the lowest levels of economic mobility relative to our competitors. Our debt as a share of GDP is projected to grow to unprecedented levels in coming decades, largely because of the retirement of the Baby Boom and increasing life expectancy. This growth in debt will be a drag on economic growth. For all these reasons, tax reform should increase revenues and enhance progressivity. Doing so would boost economic growth and make the tax code fairer at the same time. At a bare minimum, tax reform should maintain the current level of revenues and progressivity—and these both should be measured consistently and without resort to budget gimmicks like a “current policy” baseline.

 Rachelle Holmes Perkins (George Mason), The Threat of Law: Regulatory Blackmail or an Answer to Congressional Inaction, 65 Kan. L. Rev. 621 (2017):

In light of the obstacles affected taxpayers are up against in the face of regulations of dubious authority, Treasury is able to wield what I term an effective “threat of law.” While certainly less binding than an actual legitimately exercised “force of law,” the effects (at least in the nearterm) can be identical. For example, with respect to the Inversion Notice, taxpayers could either comply with Treasury’s Inversion Notice or potentially face a myriad of negative consequences. When faced with these options, while some taxpayers rolled the proverbial dice and found ways to structure around the Inversion Notice, others declined to play this game of tax chicken with Treasury and called off their transactions.

Via TaxProf blog: ABA Tax Section meetings are fun!  Last week I attended a fascinating panel presentation at the Austin meeting titled "Beyond Bitcoin: Blockchain and the Tax System."  The panel was moderated by Stow Lovejoy, of Kostelanetz & Fink, LLP and included Amanda Wilkie, CIO of Withum Smith & Brown; Tony Tuths, of KMPG in Short Hills; and Lisa Zarlenga, of Steptoe & Johnson.
In this Article, I will explore the contours of this so-called “threat of law” that Treasury can employ even in the absence of legitimate congressional authority to do so.

My main takeaway from the panel presentation is that the same programming ideas underlying the Bitcoin concept are being used in myriad other financial applications.  They raise not only significant tax issues but also regulatory issues, as detailed in this recent report from the SEC dealing with virtual "tokens" issued by a "Decentralized Autonomous Organization" (DAO).  DAO's are like something from the Matrix movies.  They are a “virtual” organization embodied in computer code and executed on a distributed ledger or blockchain.  The SEC report discusses how and why "tokens" function as securities.  The rise of the machine?  It's all Mr. Smith's fault.  No, not Agent Smith.  The other one, Adam.

GOP 9 page tax plan framework and corporate impact

  • Axios – “Here’s a [copy of the] summary of the plan that’s being released today, obtained by Axios from outside sources. More details to come.”
  • Axios – What you need to know about the GOP tax plan – “While it includes some key policies — like the elimination of the deduction for state and local taxes — it leaves many crucial details to congressional committees to fill in.”
  • Washington Post – GOP proposes deep tax cuts, provides few details on how to pay for them – “The nine-page framework they released to kick off negotiations left many key questions unanswered, including how they plan to avoid adding trillions of dollars to the government’s debt. The framework leaned heavily on limiting taxes paid by the wealthiest Americans, such as the alternative-minimum tax, and opposition to these changes from Democrats suggest it will be a battleground as negotiations intensify. Republicans were also careful not to identify numerous tax breaks they might remove, focusing instead of promises to lower rates so much that President Trump estimated the effort would amount to the biggest tax cut of all time. The “unified framework” was meant to serve as a starting point for negotiations on a tax deal, which lawmakers hope to complete by the end of the year. Republican leaders are now tasked with resolving controversial questions to unite their party — and possibly some Democrats — behind tax legislation, such as what corporate tax breaks to protect and how much revenue they are willing to lose in pursuit of new economic growth…”
  • The New York Times – Trump Tax Proposal Benefits Wealthy, Including Trump – “The administration’s tax plan provides large benefits for the wealthy, modest benefits for the middle class — and no direct benefit to the poor.”
  • Bloomberg – “President Donald Trump and Republican leaders launched an urgent effort to get a major legislative win this year, announcing a long-awaited tax plan that will immediately set off a fight over how much top earners should pay. The framework proposes cutting the top individual rate to 35 percent — but leaves it up to Congress to decide whether to create a higher bracket for those at the top of the income scale, according to the document released Wednesday. [Read the 9-page outline of Republicans’ tax overhaul plan here]. The rate on corporations would be set at 20 percent, down from the current 35 percent, and businesses would be allowed to immediately write off their capital spending for at least five years. Pass-through businesses would have their tax rate capped at 25 percent…”

Taxpayers can’t rely on Frequently Asked Questions (FAQs) and answers and other “unofficial” guidance that the IRS posts on its website, National Taxpayer Advocate Nina Olson recently explained in a blog post [IRS Frequently Asked Questions Can Be a Trap for the Unwary]. While tax professionals already know about this issue, you may find it unsettling. Here’s what you need to understand.