Wealth & Risk Management Blog

William Byrnes (Texas A&M) tax & compliance articles

New Paper: “The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the New Legislation”

Posted by fhalestewart on December 11, 2017


With new tax legislation comes new tax games, which is the topic the new paper, “The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the New Legislation,” available from SSRN.  I haven’t reviewed it, but it has received a large amount of publicity in the press.  It’s written by a group of tax professors.  Here is the abstract:

This report describes various tax games, roadblocks, and glitches in the tax legislation currently before Congress. The complex rules proposed in the House and Senate bills will allow new tax games and planning opportunities for well-advised taxpayers, which will result in unanticipated consequences and costs. These costs may not currently be fully reflected in official estimates already showing the bills adding over $1 trillion to the deficit in the coming decade. Other proposed changes will encounter legal roadblocks that will jeopardize critical elements of the legislation. Finally, in other cases, technical glitches in the legislation may improperly and haphazardly penalize or benefit individual and corporate taxpayers. This report highlights particular areas of concern that have been identified by a number of leading tax academics, practitioners, and analysts.

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Recent PLRs Highlight How Not to Run a Charitable Organization

Posted by fhalestewart on December 10, 2017


Every week, the IRS releases PLRs covering the gamut of tax issues.  Several released this week drive home the point that running a 501(c)(3) organization is a complex process.

From PLR 2017-49015

PLR1

From PLR 2017-49014PLR2

Neither of these releases involves complex issues.  Instead, we see organizations that are not operating charitably,  not maintaining adequate books and records or allowing the IRS to examine records as requestions.  Anyone of these problems will provide the IRS adequate reason to revoke a tax-exempt status.

As a final point, charitable giving typically ramps up at year-end.  This is a good time to contact organizations to see if they are still tax-exempt.

 

 

 

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EU Finance Minister Blacklists 17 Jurisdictions

Posted by fhalestewart on December 7, 2017


From the Financial Times

European finance ministers have blacklisted 17 countries in a key part of the bloc’s crackdown on aggressive tax avoidance, while 47 other nations promised reforms to avoid being labelled tax havens.

American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, St Lucia, Samoa, Trinidad & Tobago, Tunisia and United Arab Emirates were all listed as so-called non-compliant jurisdictions.

The grey-list of countries promising to reform to meet the European Union’s criteria has grown by nine countries since Friday. Cape Verde and Morocco were the last two countries to agree commitments; Tunisia’s reform proposal arrived too late for it to be moved off the blacklist.

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Non-Qualified Deferred Compensation: When Can You Make Distributions (pt. 2)?

Posted by fhalestewart on December 5, 2017


As I noted in my previous post, the NQDC statute specifically states there are six events when a NQDC plan can make a distribution, one of which is when the service provider “separates from service,” which is defined in the Treasury Regulations as:

An employee separates from service with the employer if the employee dies, retires, or otherwise has a termination of employment with the employer.

As with other aspects of this statute, there is little room for a liberal legal interpretation of the definition.

The statute further defines “termination of employment” as,

Whether a termination of employment has occurred is determined based on whether the facts and circumstances indicate that the employer and employee reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the employee would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to no more than 20 percent of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services to the employer if the employee has been providing services to the employer less than 36 months).

The statute provides 2 tests.  Either there is a complete termination of employment or an 80% reduction in the amount of work performed (as compared to the preceding three years) by the service provider.  This is one of the few areas where a bit of definitional “play” exists in the statute.

Finally, the statute provides the following, non-exclusive set of factors to use in a “facts and circumstances” determination as to whether termination has in fact occurred:

1.) Whether the employee continues to be treated as an employee for other purposes (such as continuation of salary and participation in employee benefit programs),

2.) Whether similarly situated service providers have been treated consistently, and

3.) Whether the employee is permitted, and realistically available, to perform services for other service recipients in the same line of business.

 

In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors. 

 

 

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Recent IRS Releases of Interest to Wealth Professionals

Posted by fhalestewart on December 4, 2017


In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors. 

 

Announcement 2017–15, page 534.

Announcement 2017–15 provides relief to victims of Hurricane Maria and the recent California wildfires. It permits easier access to funds held in workplace retirement plans and in IRAs, for periods beginning in September and October 2017 and ending March 15, 2018. The relief provided in the announcement is in addition to the relief already provided by the IRS pursuant to several recent news releases.

Notice 2017–67, page 517.

This notice provides guidance on the requirements for providing a qualified small employer health reimbursement arrangement (QSEHRA) under section 9831(d) of the Internal Revenue Code, the tax consequences of the arrangement, and the requirements for providing written notice of the arrangement to eligible employees.

 

https://www.irs.gov/pub/irs-irbs/irb17-47.pdf

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Non-Qualified Deferred Compensation: When Can You Make Distributions (pt. 1)?

Posted by fhalestewart on November 29, 2017


In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors. 

 

Section 409A contains a very strict set of times when a NQDC plan can make distributions.  They are:

(i) separation from service as determined by the Secretary (except as provided in subparagraph (B)(i)),
(ii) the date the participant becomes disabled (within the meaning of subparagraph (C)),
(iii) death,
(iv) a specified time (or pursuant to a fixed schedule) specified under the plan at the date of the deferral of such compensation,
(v) to the extent provided by the Secretary, a change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets of the corporation, or
(vi) the occurrence of an unforeseeable emergency.

Death (iii) and a specified time (iv) are not legally debatable; they simply are.

Like other key provisions of 409(A), disabled is specifically defining in the statute:

(C) Disabled: For purposes of subparagraph (A)(ii), a participant shall be considered disabled if the participant—
(i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or

(ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the participant’s employer.

This term is tightly written, offering lawyers little interpretational wiggle room.  It’s obvious that a formal medical opinion (and probably a second) is required for the client file.

Finally, there is the unforeseen emergency:

The term “unforeseeable emergency” means a severe financial hardship to the participant resulting from an illness or accident of the participant, the participant’s spouse, or a dependent (as defined in section 152(a)) of the participant, loss of the participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the participant.

The terminology strongly implies the “fortuity” element in an insurance contract, strongly hinting that the insured does not have the ability to take preventative measures to avoid the event.  It’s also highly likely that a medical opinion will also be required.

Next, we’ll discuss the “separation from service” requirement.

 

 

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Today’s Tax Legislation Headlines

Posted by fhalestewart on November 27, 2017


In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors. 

 

Republicans look at making changes (WaPo)

CBO says Senate hurts poor more than originally thought (WaPo)

New tax bill will lift the prohibition on churches engaging in political activity (NYT)

Do or die time for tax legislation (Politico)

Thune predicts that changes will occur but that the tax bill will pass (Politico)

 

 

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Happy Thanksgiving From the Wealth and Risk Management Blog

Posted by fhalestewart on November 22, 2017


On behalf of Prof. Byrnes and myself, we’d like to wish you and your family a happy Thanksgiving.

We’ll return next week.

 

 

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Today’s Tax Policy Headlines

Posted by fhalestewart on November 20, 2017


In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors. 

 

The plan is unpopular (WaPo)

Will the tax plan help the middle class?  The answer is complicated (NYT)

The Joint Committee on Taxation’s publication website has numerous studies on the tax plan (JCT)

Tax bill reflects the growing division between Republicans and higher education (WaPo)

 

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Will Trump Keep His Promise that No One’s Retirement Will Be Taken Away?

Posted by William Byrnes on November 16, 2017


The 2017 Tax Reform discussion originally was, like the 1986 discussion, about whether the Internal Revenue Code should be used for incentives and subsidy in favor of a particular activity or particular group of taxpayers. Broaden the base, lower the rates, simplify the variations, exceptions, and exemptions. But the dueling Chamber proposals are now out and tax reform based on equity and on eliminating tax-incentives was dead on arrival. It the same old ‘every interest’ vying for a portion of the pie. That’s the democratic, political “Gulchi Gulch” process. What is my interest then? I work for a public research university. I have ‘a dog in this fight’ described below. Hope that the government relations staff of NTEU, of state universities, and of other government employee stakeholder groups raise their voices like the Seraphim to the Republican members of the Finance Committee that are willing to listen.

So what’s so alarmed me to divert my attention to the retirement provisions of the Senate Chair’s mark? Did not the President state that retirement would be left alone (see his tweet here)?  Appears the Senate ignored him as usual.

The Senate Finance Committee Chair slipped in (at page 178) an explosive measure for government employees that also impacts public academic institutions. The Senate Finance Committee Tax Reform Chair’s Mark under the current status (November 9, 2017) will limit public employees to one aggregate amount of $18,500 for retirement plans 403(B) and 457 as of January 1, 2018.

Finance Committee Chair Proposal: The proposal applies a single aggregate limit to contributions for an employee in a governmental section 457(b) plan and elective deferrals for the same employee under a section 401(k) plan or a 403(b) plan of the same employer. Thus, the limit for governmental section 457(b) plans is coordinated with the limit for section 401(k) and 403(b) plans in the same manner as the limits are coordinated under present law for elective deferrals to section 401(k) and section 403(b) plans.

Government, including public educational institution, employees needs to become immediately aware that this provision will critically reduce their ability to contribute to their employer retirement plan(s) by $18,500 (or $24,500 for employees 50 years and older) as of January 1, 2018.  Thus, while there is still time to make December 1st contribution changes to preserve the last year of the additional $18,000 (or $24,000 if at least 50 years of age), these employees need to arrange with their payroll officers to contribute before December 31st any difference between what is allowed in 2017 and what has actually been contributed. As of January 1, 2018, the ability to contribute is gone forever.

Hatch Amendment #2 An amendment to the catch up contribution rules for section 401(k), 403(b) and 457)(b) retirement savings plans. Description of Amendment: This amendment would require all catch up contributions to section 401(k), 403(b) and 457(b) retirement savings plans to be Roth only, and increase the $6,000 catch up contribution annual limit applicable to such plans to $9,000.

See what he’s done here to Americans trying to save for retirement? At age 50 plus, we will pay on average – say 30 percent – for each catchup retirement dollar. How many years does it take to catchup with this 30 percent loss out the door? Based on historical annual average market returns, it will require four years to break even on the 30 percent loss. Only in year five will the 50-year-old, based on historical returns, start to earn towards retirement relative to her situation today in 2017. Where does our 30 percent loss out the door go? To pay for …. an energy credit? I don’t know. The revenue raised is relatively minuscule. The damage to retirement savings – tremendous.

Lack of Impact Analysis on Retirement and Public Employees

Curiously, I have not found many informative articles about the impact to retirement from these above-mentioned changes. Why is it silence from the public university crowd that is usually quite loud although this provision will damage their ability to attract researchers, faculty, and staff from the higher compensation opportunities of private educational institutions and for-profit industry?  Are we embarrassed to appear to be lobbying to keep a tax break? Just caught by surprise?  At least the NAGDCA has sent out an alert (Government Defined Contribution Administrators) to its members.

Instead of the beneficial retirement system, government agencies and public institutions need to find more revenue to pay competitive salaries and employee benefits to replace the loss of the retirement benefits (doubtful) Senate Finance will take away. Lacking better salaries, government agencies and public institutions will experience disproportionate employee turnover of the best performing management coupled with a declining ability to attract highly accomplished professionals and researchers to replace the pool.

Is this Payback Against the IRS?

Perhaps this provision is a Republican payback to government agencies like the IRS because Republicans think that the current government management pool is biased against Republican groups or lacks service for taxpayers? But taking out the best performing managers from government service will exasperate the challenges, not remediate them. If this is a ‘payback’, then it is “cutting off one’s nose”.  Perhaps the provision is but a Machiavellian move in a contest for talent between a state university and its private counterpart (Utah v BYU comes to mind)?

Maybe the silence from the government and public institutions employees is ‘heads in the sand’, and perhaps ‘those in the know’ think this provision will not survive because JCT scored it as only worth $100 million a year at least until 2021 (so why waste the political capital). Apportioned amongst all government employees in the US (being federal and state), state public academic institutions I suspect are less than 10 percent of this score, thus about $10 million a year for offset (inconsequential basically).

Can Public Institutions Be Saved?

A carve-out from this provision for public educational institutions would address the harmful issue and can be negotiated in response to the also proposed loss of the current carve-out for deferrals allowed for section 403(b) plan for at least 15 years of service to an educational organization, hospital, home health service agency, health and welfare service agency, and church. Seems to me that Republicans would prefer to incentivize via retirement doctors, nurses, social workers, and clergy to stay long-term in their public positions instead of paying higher government salaries.

Interested to learn the impact on your clients of the 2018 tax changes, and what to do about it?  Read the online version of Tax Facts.

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Why Do Republicans Want to Impose an Inflation Tax? Thought They Were for Lowering Taxes?

Posted by William Byrnes on November 15, 2017


 

Raising our Taxes and Killing Social Security via the Republican’s Proposal for an Inflation Tax in Tax Reform

This so-called “Tax Reform” is going to raise our tax burdens while killing social security.  The Republicans have proposed, and Democrats have agreed, that actual inflation should not be recognized in future years, limiting inflation adjustments of tax brackets to increase tax on persons who earn more because of inflation, and decreasing social security benefits by half over 20 years.  This Tax Reform, besides reducing retirement opportunities for public employees, imposes “Chained CPI” (also known as the inflation tax) upon social security benefits to keep them from increasing and upon tax brackets to keep them from increasing as well. But tax brackets not increasing is bad for taxpayers. Tax brackets that do not move up to account for actual inflation require a higher tax rate be paid on future income as actual inflation pushes it into the next bracket.

I thought Republicans wanted lower taxes imposed on people who sweat and toil? Or do Republicans actually want lower taxes only on idle passive investors?

What if I like organic apples?

How’s that again? “Chained CPI” is sold as the savior of Social Security (see Heritage Foundation explanation). The example employed by Heritage in favor of Chained CPI: if apples go up in price, then consumers stop eating apples and eat cheaper oranges instead. What if I prefer apples? What if I am allergic to oranges? To my actual point: it is not a ‘choice of apples versus oranges world. It’s a choice between quality and cheaper (generally imported) goods. Chained CPI over time eliminates the local farmer’s organic apples in favor of the imported, genetically modified, pesticide grown cheap apples. Chained CPI requires that we reduce lean meat (sorry vegans) in favor of affordable fast food.

Chained CPI is a system built on forcing a degrading quality of life onto retirees. 

Compounded over time, it’s a choice between affording medication and going without medication, giving up restaurant dates with my spouse in favor of TV dinners. The monthly annuity from social security, as little as it is relative to a 15.4% pay-in of salary (albeit capped, but so are benefits) over 40 years, could be cut significantly over 20 years (see New Republic explanation) in respect to what it can actually buy in today’s terms. In 20 years when my generations retirees wake up to this death by a thousand substitutions, the monthly social security annuity is so relatively inconsequential, it won’t be worth discussing any longer. Worse, over these 20 years, our tax bills will increase annually via the Chained CPI bracket creep that keeps brackets from adjusting upward as our wages hopefully increase. So inflationary tax takes away our ability to try to mitigate the loss of our catchup retirement and social security. We MUST work, if able, until we drop dead, assuming that we are not substituted for a cheaper wage worker.

Retired, Older Experience Hirer Inflation Than Younger Population  

The Congressional Research Service has published a study that finds that elderly persons actually experience higher inflation than younger ones (see CRS Research Report A Separate Consumer Price Index for the Elderly?).  Instead of going the wrong direction to a Chained CPI, the CRS suggests a CPI for the elderly spending patterns to be called CPI-E.

Follow the impact analysis of the 2018 tax updates after these pass by a team of experts who will map out how these affect your clients and what planning you need to do – TaxFacts Online.

 

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Non-Qualified Deferred Compensation: The “Substantial Risk of Forfeiture” Requirement

Posted by fhalestewart on November 14, 2017


In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors. 

 

Income for tax purposes is defined in the broadest possible terms.  §61 states it as “income from whatever source derived.”[1]  The case law adds further clarification and detail.  Glenshaw Glass defined income as “undeniable accessions to wealth, clearly defined, and over which the taxpayers have complete dominion.”[2]  The latter term is central to a properly structured non-qualified deferred compensation (NQDC) plan.  If the taxpayer has any control over the plan’s income, he will have to include the total income in his annual income.

Therefore, all money in a NDQC plan must be subject to a substantial risk of forfeiture.[3]  “[E]ntitlement to the amount [must be] conditioned on the performance of substantial future services by any person or the occurrence of a condition related to a purpose of the compensation, and the possibility of forfeiture is substantial.”  The future services must be performance based, and they cannot include “any amount or portion of any amount that will be paid either regardless of performance, or based upon a level of performance that is substantially certain to be met at the time the criteria is established.”[4]  These two conditions further support the requirement that the NQDC contract must be in writing.[5]  They also strongly allude to an employment law component in which the service recipient and provider agree on a basic compensation level and an additional layer, which will be paid for through the NQDC plan.

Finally, the “substantial risk of forfeiture” element can’t be met if the service provider is the sole owner of the company.  The underlying rationale is simple: he or she will not use their management position to not pay themselves – it’s simply not going to happen.  The examples in the Treasury Regulations imply that a 20% ownership stake is the maximum amount the service provider can own of the company and still benefit from the NQDC plan.  But this same section also says the ultimate determination is based on the “facts and circumstances.”[6]

[1] 26 U.S.C. §61

[2] Comm’r v. Glenshaw Glass, 348 U.S. 426 (1955)

[3] Treas. Reg. 1.409-1(a)(d)(1)

[4] Treas. Reg. 1.409A-1(e)(1)

[5] See also Treas. Reg. 1.409(A)-1(e)(“The term performance-based compensation means compensation that amount of which, or the entitlement to which, is contingent on the satisfaction of pre-established organizational or individual performance criteria relating to a performance period of at least 12 consecutive months.”)

[6] Treas. Reg. 1.409(A)-1(d)(3)

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New Limits For Qualified Plans

Posted by fhalestewart on November 12, 2017


Code section 415 specifically defines the total benefits and contributions allowed for a “qualified” plan.    Exceeding these limits will strip a plan of its tax-deferred status.  Code section 401(b) requires the Secretary to annually adjust various amounts.  A few weeks ago, the IRS released Notice 2017-64 which contains various adjustments.  You can read the entire release at this link.

 

In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors. 

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Today’s Tax Policy Headlines

Posted by fhalestewart on November 9, 2017


Senate bill differs from House’s (NYT)

Tax bill math is getting complicated (WaPo)

House leaders rounding up votes (Politico)

Support for tax plan still positive (Politico)

Election results potentially change the tax plan (Politico)

Multinational companies lobby against 20% excise tax (BB)

In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors. 

 

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Non-Qualified Deferred Compensation: Some Additional Definitions

Posted by fhalestewart on November 6, 2017


In this post, I’ll take a look at several more definitions related to non-qualified deferred compensation (NQDC) plans, beginning with the definition of “plan:”

“The term plan includes any agreement, method, program or other arrangement, including an agreement, method, program or other arrangement that applies to one person or individual.”[1]

Here, we see the Treasury using the standard definitional tactic of using several words that, while moderately different, convey the same idea.  However, the commonplace definition of the word “plan” (“a method for achieving an end.”)[2] along with its synonyms[3] would have sufficed.

The plan must be in writing.  While not explicitly stated, it is strongly implied in the regulations.

“…a plan is established on the latest of the date on which it is adopted, the date on which it is effective, and the date on which the material terms of the plan are set forth in writing.  The material terms of the plan may be set forth in writing in one or more documents.”[4]

In addition, because of the sheer complexity of NQDC, it’s best to have a governing document.  (I googled the search term “NQDC sample plan and found several online examples, here, here and here).

There are only six events that allow the plan to distribute assets:

  • separation from service as determined by the Secretary (except as provided in subparagraph (B)(i)),
  • the date the participant becomes disabled (within the meaning of subparagraph (C)),
  • death,
  • a specified time (or pursuant to a fixed schedule) specified under the plan at the date of the deferral of such compensation,
  • to the extent provided by the Secretary, a change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets of the corporation, or
  • the occurrence of an unforeseeable emergency.[5]

These terms are not subject to over-lawyering.  Potentially malleable terms (e.g. “disabled” or “separation from service”) are further defined in the statute or require the Secretary’s approval.  The underlying message is clear: don’t get cute.

In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors. 

 

[1] Treas. Ref. 1.409(A)(c)(1)

[2] https://www.merriam-webster.com/dictionary/plan

[3] Id (“arrangement, blueprint, design, game, game plan, ground plan, master plan, program, project, roadmap, scheme, strategy, system”)

[4] Treas. Reg. §1.409(A)(3)(i):

[5] 26 U.S.C. 409(A)(2)(i)-(vi)

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ICIJ Begins to Release the “Paradise Papers”

Posted by fhalestewart on November 5, 2017


As you may know, the International Consortium of Investigative Journalists released the Luxembourg Leaks database in 2014 (which you can view here).  This showed a number of EU based tax structures based in Luxembourg.  “Luxembourg Leaks” helped to jump-start the OECD’s base erosion and profit shifting initiative.

From today’s release:

The Paradise Papers is a global investigation into the offshore activities of some of the world’s most powerful people and companies.

The International Consortium of Investigative Journalists and 95 media partners explored 13.4 million leaked files from a combination of offshore service providers and the company registries of some of the world’s most secretive countries.

The files were obtained by the German newspaper Süddeutsche Zeitung.

The Paradise Papers documents include nearly 7 million loan agreements, financial statements, emails, trust deeds and other paperwork from nearly 50 years at Appleby, a leading offshore law firm with offices in Bermuda and beyond.

 

In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors. 

 

 

 

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Today’s Tax Policy Headlines

Posted by fhalestewart on November 3, 2017


In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors. 

 

Potential impact of the proposed changes (NYT)

Mortgage deduction change could hurt the housing industry (NYT)

Plan delivers a permanent corporate tax cut (NYT)

GOP plan is a “sensible framework,” but it still explodes the deficit (WaPo)

The hidden 465 tax bracket (Politico)

Who pays more under the GOP plan? (Politico)

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The Lastest Tax Policy News Headlines

Posted by fhalestewart on November 2, 2017


In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors.   

Republican tax plan to lower cap on mortgage interest deduction to $500,000 loans (WaPo)

Red State Dems are willing to work with Republicans on taxes (WaPo)

8 Charts of the US tax system from Wonkblog (WaPo)

Republicans release tax plan (NYTimes)

A list of the plans major changes (BB)

 

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Non-Qualified Deferred Compensation: Timing and Constructive Receipt Issues

Posted by fhalestewart on October 30, 2017


In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors.    

 

It’s doubtful that anybody in the Financial Services industry is unaware of qualified retirement plans such as 401(k)s and IRAs.  Knowledge of them is required to pass licensing exams and every firm includes them in sales literature.  Non-qualified plans (NQDC), however, are less well-known, largely because they are more complex and appeal to a far smaller group of potential buyers.  Although their application is narrower, in the right circumstances they can provide clients with tremendous advantages.

This post begins a series on NQDC.  We will be spending a large amount of time with the tax code and accompanying treasury regulations; this is necessary due to NQDC’s complexity and numerous regulations.  But before delving into the code, let’s use basic statutory analysis and analyze the “plain meaning” of the words, beginning with “non-qualified.”  The primary difference between NQDC and qualified plans is that the former don’t comply with §401’s safe harbors – especially the rules relating to “highly compensated individuals”[1] and the plan funds not being subject to the plan sponsor’s general creditors.[2]  In fact, the treasury regulations define NQDC as much by what it isn’t[3] as what it is.  Moving onto the other words, the Merriam Webster online dictionary defines the word “deferred” as “withheld for or until a stated time”[4] and “compensation” as “payment.”[5]  Combining these two definitions, we get: payment for services that is withheld until specifically enumerated events.

A properly implemented NQDC plan requires that the client does not formally receive income before certain events[6] or else he will become liable for the accompanying taxes at inopportune times (along with penalties).  Therefore, we need to know when a taxpayer recognizes income to avoid attribution from these events.  This naturally leads to a discussion of the two accounting methods.  The cash method stipulates that “all items which constitute gross income … are to be included for the taxable year in which actually or constructively received.”[7]  The most obvious example occurs when the taxpayer’s account increases by a specific amount of money.  The accrual method is the second system.  It has two factors: all events have occurred that fix the right to receive the income and the amount of the income can be determined with reasonable accuracy.[8]  For example, once the taxpayer has done the agreed upon work and sent an invoice, he can book the income under the accrual method.

The client must also avoid constructively receiving income, which is defined in §1.451-2(a):

Income although not actually reduced to a taxpayer’s possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given. However, income is not constructively received if the taxpayer’s control of its receipt is subject to substantial limitations or restrictions.

The service provider cannot reach, attach, pledge, or be credited with all or any portion of the money set aside under the plan.  This requires that all funds in the NQDC plan be subject to a substantial risk of forfeiture, which is discussed in treasury regulation §1.83-3(a).

a substantial risk of forfeiture exists only if rights in property that are transferred are conditioned, directly or indirectly, upon the future performance (or refraining from performance) of substantial services by any person, or upon the occurrence of a condition related to a purpose of the transfer if the possibility of forfeiture is substantial.

The most commonly used situations in NQDC contracts are continued performance by the service provider or the occurrence of a major corporate event such as a merger or acquisition, specific sales goals, going public, and the like.    

            This post only covers the surface of several key NDQC components.  However, it should provide the reader with a basic overview of these key elements.

Next, we’ll dig deeper into the definition of an NQDC plan.

 

[1] 26 U.S.C. 401(a)(4)

[2] See 26 U.S.S. 401(a)(2)

[3] The Treasury regulations define NQDC by what it isn’t.  See generally Treas. Reg. §1.409A-1(a)(2)(i) through Treas. Reg. §1-409A-1(2)(ix)

[4] https://www.merriam-webster.com/dictionary/deferred

[5] https://www.merriam-webster.com/dictionary/compensation

[6] 26 U.S.C. 409(A)(2)(A)(i)-(vi)

[7] Treas. Reg. §1.446-1(c)(i)

[8] Treas. Reg. §1.446-1(c)(ii)

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The Destination-based Approach to Business Taxation, Explained

Posted by fhalestewart on October 30, 2017


In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors.    

 

From the article:

An alternative approach has been to identify fundamental tax reforms that can deal more adequately with the new economic realities. One such approach builds on the concept of business cash-flow taxation, first proposed in the late 1970s by the Meade Committee (Institute for Fiscal Studies 1978). Originally conceived as a tax on the cash flows of domestic producers (an ‘origin-based’ tax), the cash-flow tax had many potential benefits, including eliminating the tax on normal returns to new investment, removing tax-based incentives for corporate borrowing, and eliminating the need to measure income of companies with complex business arrangements. But this standard cash-flow tax leaves in place the pressure for international tax competition via incentives for companies to shift the location of profitable activities and reported profits to low-tax countries. This shortcoming led to consideration of a destination-based cash-flow tax (DBCFT), which adds ‘border adjustment’ to cash-flow taxation and has the effect of basing the tax on the location of consumers rather than on the location of profits, production, or corporate residence.

As described in a series of papers, including Auerbach (2017), converting an origin-based cash-flow tax into a destination-based cash-flow involves relieving tax on export revenues and imposing tax on imports, in precisely the same manner as is done under existing value-added taxes (VATs). The key difference from a VAT is that the DBCFT maintains the income tax deduction for wages and salaries, and thus amounts to a tax on domestic consumption not financed by labour income, in principal a much more progressive tax than the VAT.

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IRS Reading Room Releases of Interest

Posted by fhalestewart on October 29, 2017


In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors.    

Every weekend, the Service releases PLRs and other non-precedential documents via the electronic reading room.

Electing out of GST Exemptions.

Denial of tax-exempt status

Denial of tax-exempt status

Denial of tax-exempt status

 

 

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The Latest Tax Policy Headlines

Posted by fhalestewart on October 28, 2017


In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors.    

The Republican Congress has vowed to pass tax reform by the end of the year — a very ambitious schedule.  This makes the situation very fast-moving and fluid.

What executives are saying about the tax bill (BB)

One big obstacle to tax reform (BB)

Lobbyists are swarming capital hill (BB)

Major divisions still exist for the tax bill (WaPo)

Tax bill shrouded in mystery (Politico)

 

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Today’s Tax Policy Headlines

Posted by fhalestewart on October 27, 2017


In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors.    

 

House narrowly passes budget (WaPo)

House passes budget (NYT)

Republicans from high tax states send party message (WaPo)

Major divisions remain on tax legislation (WaPo)

6 things that could derail the GOP’s tax plan (Politico)

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401(k) Contribution Cuts are Still on the Table

Posted by fhalestewart on October 25, 2017


In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance LawCaptive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors.    

 

From the Washington Post:

House Ways and Means Committee Chairman Kevin Brady on Wednesday suggested a tax bill he is preparing to introduce could force changes to 401(k) plans and other retirement accounts, potentially bucking a promise from President Trump that those accounts would be left alone.

Brady, speaking at a breakfast hosted by the Christian Science Monitor, said “we think in tax reform we can create incentives for people to save more and save sooner.”

He said he was “working very closely with the president,” but he also said many people who have tax-incentivized retirement accounts contribute $200 per month or less, a level he thought was too low.

…..

Several hours later, Senate Finance Committee Chairman Orrin Hatch (R – Utah) said he would also not agree to Trump’s vow to protect 401(k) plans, saying instead that he was open to changes if they made sense.

This situation is VERY fluid.  According to the same article, key provisions of the bill such as the actual tax brackets and specific deductions are still being hammered out.

 

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Today’s Stories on Proposed Tax Cuts

Posted by fhalestewart on October 24, 2017


In 2009, F. Hale Stewart, JD. LL.M. graduated magna cum laude from Thomas Jefferson School of Law’s LLM Program.  He is the author of three books: U.S. Captive Insurance Law, Captive Insurance in Plain English and The Lifetime Income Security Solution.  He also provides commentary to the Tax Analysts News Service, as well as economic analysis to TLRAnalytics and the Bonddad Blog.  He is also an investment adviser with Thompson Creek Wealth Advisors.    

 

Here’s a list of articles from this mornings papers

Trump’s promise narrows GOP’s options (WaPo)

Trump is making tax-cutting difficult (NYT)

Tax cuts are coming; so are the fights to pay for them (NYT)

Trump promises “No change” to 401(k) plans (NYT)

A look inside the White House’s tax planning (Politico)

Draft is coming in days (Bloomberg)

Conservative leaders open to keeping top rate (Bloomberg)

 

 

 

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Are FLP Discounts Back?

Posted by fhalestewart on October 23, 2017


From Wealthmanagement.com

In a report issued on Oct. 2, 2017, Treasury Secretary Steven Mnuchin recommended that the proposed Internal Revenue Code Section 2704 regulations be withdrawn. Those regs would have restricted the use of partnerships and other entities to generate valuation discounts. The Internal Revenue Service had released a proposal in August 2016 in an attempt to limit what it perceived as an erosion of the applicability of Section 2704 and the creation of artificial valuation discounts. A hearing was held on on Dec. 1, 2016. Almost 30,000 formal comments were submitted to the Treasury.

The report states: “Treasury and the IRS now believe that the proposed regulations’ approach to the problem of artificial valuation discounts is unworkable…. The proposed regulations could have affected valuation discounts even where discount factors, such as lack of control or lack of a market, were not created artificially as a value-depressing device.” It goes on to say that: “Treasury and the IRS plan to publish a withdrawal of the proposed regulations shortly in the Federal Register.”

In 1998, the IRS issued a series of TAMs that outlined several fact patterns the Service believed were suspect.  They then began attacking various FLP structures, winning a fair number of cases.  But at some point, enough case law developed to show practitioners what not to do.  Once jurisprudence weeded out the bad patterns, FLP discounts continued anew.

Last year, the Treasury issued revised valuation rules, essentially gutting FLPs.  But now it appears the Treasury is reversing its stance.  But before moving forward, I’d wait until we see the new regulations published.

  

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Conservation Easements Are Having a Difficult Time Qualifying

Posted by bonddad on October 22, 2017


The Service made certain conservation easements a listed transaction in Notice 2017-10.

Now we’re seeing conservation easements that aren’t subject to reporting requirements run into aggressive judicial analysis.  From Bloomberg Law:

In BC Ranch II, LP v. Commissioner, the Fifth Circuit recently reversed the Tax Court in holding that a taxpayer qualified for a charitable contribution deduction for the donation of a conservation easement. The main issue involved whether the easement in question violated the in perpetuity requirement of §170(h)(2)(C). In BC Ranch, two limited partnerships donated one conservation easement each to a qualified donee and, subsequently, sold limited partnership interests. Each limited partnership interest entitled the limited partner to one five-acre homesite parcel. Pursuant to the deed of easement, the property covered by the easements could be amended, but only to the limited extent needed to modify the boundaries of the five-acre homesite parcels. Further, any modification could only be done within the ranch property subject to the easement. The modification provision also prohibited any amendment that would increase any homesite parcel above five acres. For any such a modification to occur, the donor, the donee, and the owner of the homesite parcel in question would have to agree and the modification would be permitted only if the boundary line modification did not, in the donee’s reasonable judgment, directly or indirectly result in any material adverse effect on any of the conservation purposes.

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Texas A&M University Law seeks to hire faculty and staff

Posted by William Byrnes on September 18, 2017


  1. Associate Law Professor-Associate Director of Law Library -TX8512600: https://www.linkedin.com/jobs/view/451155511/ 
  2. Assistant Director, Academic Support: https://jobpath.tamu.edu/postings/113980
  3. IT Generalist II: https://jobpath.tamu.edu/postings/113987
  4. Program Coordinator I (Admissions): https://jobpath.tamu.edu/postings/113981
  5. Development Officer III: https://jobpath.tamu.edu/postings/113984
  6. Career Services Position Assistant Director: https://jobpath.tamu.edu/postings/112694
  7. Associate Director: https://jobpath.tamu.edu/postings/113252

 

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my nine Lexis tax titles are now available

Posted by William Byrnes on August 22, 2017


author landing page for the newly revised and updated Estate Planning Guide coming soon!

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guest blogger Hale Stewart analyzes In Re Portnoy (asset protection case)

Posted by William Byrnes on June 30, 2017


Guest submission of Hale Stewart JD, LL.M. Houston, Texas 77009 www.halestewartlaw.com

In Re: Portnoy[1] — a 1996 Bankruptcy case – was the first in a series of decisions with a foreign asset protection trust.  As with most foreign trust cases, the fact pattern alludes to several areas of law – asset protection, bankruptcy, conflict of laws and trusts.  Here are the relevant events in chronological order.

  1. 3/87: Portnoy guarantees all loans and debt of his company Mary Drawers (MD)
  2. 3/88: MD receives a $1 million dollar loan
  3. 2/89: Portnoy becomes aware that MD will not be able to repay loan
  4. 8/89: P forms offshore Jersey Trust. P is the primary beneficiary.  Jersey is known as asset protection haven.
    1. The trust document specifically states that Jersey law will govern the trust’s interpretation
    2. During 1990 and 1992, P transferred his salary and real estate to his wife and daughter.
  5. 2/90: Lawsuit against MD for defaulted loan proceeds
  6. 9/91: Judgement against MD for ~$183,000
  7. 10/95: P files for bankruptcy. As part of his bankruptcy filings, he discloses the existence of the offshore Jersey trust.  This is the first time his creditors have been informed of the trust’s existence.

Two points should be made before discussing the case’s legal reasoning.

First, Portnoy formed the trust after becoming aware that MD could not repay the loan.  The court specifically noted this timing[2] because it was clearly a fraudulent transfer.   Although the court did not connect this fact to specific badges of fraud contained in the Uniform Fraudulent Transfer Act, several are possible.  For example, Portnoy concealed the transfer, only revealing it during bankruptcy proceedings 5 years after the trust’s formation.[3]  In addition, as part of a unified series of transactions, Portnoy transferred most of his assets to the trust or family members,[4] essentially bankrupting himself in the process.[5]

Second, to attract asset protection business, some international offshore financial centers have amended their statutes to be more lenient towards debtors.  Hoping to capitalize on the friendlier legal environment, planners add a clause to transactional documents stating offshore laws will govern the transaction.  But these clauses aren’t the final choice of law arbiter; that rests with the court using the Restatement of the Conflict of Laws.  In fact, several foreign asset protection trust cases – including Portnoy — ruled against the debtor due to the conflict of laws analysis.

The court ruled against Portnoy and his structure.  The decision contains two important lines of reasoning; the first focused on the choice of law analysis, which required the court to determine whether Jersey or New York law would govern their interpretation.  It began with the court noting that settlors are allowed to specify which laws govern their trusts and, that this should not be defeated “…unless this is required by the policy of a state which has such an interest in defeating his intention, as to the particular issue involved, that its local law should be applied.[6]  Later in the case, the court observes, “`[i]t is against [New York] public policy to permit the settlor-beneficiary to tie up her own property in such a way that she can still enjoy it but can prevent her creditors form [sic] reaching it.”

The importance of the preceding line of reasoning cannot be overstated: it strongly implies that planners attempts to invoke the laws of a debtor favorable jurisdiction will be defeated if the jurisdiction hearing the case has a public policy preventing a debtor from enjoying his assets at the expense of his creditors.  Courts use this rationale in later asset protection trust cases, almost always to the debtor’s detriment.

The second important line of reasoning involved the court’s Conflict of Law’s factor analysis used to determine “the state whose interests are more deeply affected” – a factor in a Conflict of Law analysis.  Here, the court noted that Portnoy settled the trust in Jersey, and had a Jersey firm administer the trust.  But they then observed that all parties were U.S. residents.  Additionally, the creditors had no contact with Jersey while Portnoy had extensive U.S contact when he established the trust.  Due to the large number of U.S. contacts, the U.S. had the “weightier concern” about the litigation, thereby allowing the court to base its decision on U.S. law.

This part of the ruling shows the importance of “home court advantage.”  Despite the assets being subject to a foreign jurisdiction, the parties are physically located in the U.S.  Just as importantly, the creditors have no contact with trust’s jurisdiction.  Here, the court ruled that the large number of U.S. contacts shifted the factual weight, meaning the court ruled for the U.S creditors.  Finally, Portnoy’s jurisdictional contact pattern — an individual or group of U.S. based creditors sue a U.S. resident who has assets offshore – is very common in foreign asset protection trust cases.

Portnoy’s general reasoning laid a very strong groundwork for future court’s deciding FAPT trust cases.  Future courts would decide against FAPT holders on several other grounds, but at the core of future reasoning is a general disdain for debtors who try to structure their affairs in a way to defrauds creditors.  It’s simply not a practice that courts want to condone through their decisions.

[1] In re Portnoy, 201 B.R. 685 (Bankr. S.D.N.Y., 1996)

[2] (“An inference can be drawn that the timing was purposeful, for in June, two months before the trust’s creation, Portnoy knew that Mary Drawers was in trouble and by December of that same year, Mary Drawers had defaulted on its obligations to Marine.”)

[3] UFTA §4(b)(7) the debtor removed or concealed assets

[4] UFTA §4(b)(5)

[5] UFTA §4(b)(9)

[6] Portnoy at 698

Author bio: Before law school, Mr. Hale Stewart was a bond broker with Vining Sparks, where his clients were comprised of mutual funds, insurance companies and money managers.  He returned to law school in 2001, graduating from the South Texas School of Law in 2003.  After law school, he opened his law practice focusing on transactional work.  He continued his education at the Thomas Jefferson School of Law in 2007 where he obtained an LLM in domestic and international taxation, graduating Magna Cum Laude.   He has three certifications from the American Academy of Financial Management: Chartered Trust and Estate Planner, Chartered Wealth Manager and Chartered Asset Manager.  Mr. Stewart is also a member of the AAFM’s Board of Standards.  He is the author of the book U.S. Captive Insurance Law and is currently working on his Ph.D.  Mr. Stewart’s clients range the gamut from high net worth individuals who utilize one or all of his estate planning, asset protection or captive insurance skills, to small companies forming a captive, to larger associations looking for lower insurance costs. When not practicing law, he is usually writing on the economy at his blog, the Bonddad Blog.

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A Proposal to Leverage FATCA to Punish Black and Grey Hat Governments.

Posted by William Byrnes on February 16, 2017


please download my proposal https://ssrn.com/abstract=2916444

Abstract: Professor William Byrnes examines whether it is prudent for taxpayers to trust the governments of the 117 countries that scored a fifty or below on Transparency International’s Irs_logocorruption index. The complete information system invoked by the Foreign Account Tax Compliance Act (FATCA) encourages, even prolongs, the bad behavior of black hat governments by providing fuel (financial information) to feed the fire of corruption and suppression of rivals. Professor Byrnes recommends that the United States leverage a “carrot-stick” policy tool to incentivize bad actors to adopt best tax administration practices.  Article download at https://ssrn.com/abstract=2916444

Keywords: FATCA, Common Reporting Standards, OECD, Exchange of Information, Taxpayer Rights, IGA, corruption

Professor William Byrnes is the primary author of Lexis’ Guide to FATCA and Common Reporting Standard Compliance – 2017.  He designed then wrote the initial 2012 edition and has grown it to the #1 FATCA resource for advisors and institutions.  Now in its fifth edition for 2017!

Over 1,800 pages of analysis of the FATCA and CRS compliance challenges,  79 chapters by FATCA and CRS contributing experts from over 50 countries. Besides in-depth, practical analysis, the 2017 edition includes examples, charts, timelines, links to source documents, and compliance analysis pursuant to the IGA, CRS agreement, and local regulations for many financial centers.   This fifth edition will provide the financial enterprise’s FATCA and CRS compliance officer the tools for developing and maintaining a best practices compliance strategy.  No filler of forms and regs – it’s all beef !  See Lexis’ order site and request a copy of the forthcoming 2017 edition – http://www.lexisnexis.com/store/catalog/booktemplate/productdetail.jsp?pageName=relatedProducts&prodId=prod19190327

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Aggie Law Announces New Tax Clinic IRS Matching Grant Will Support Clinic for Low-Income Taxpayers

Posted by William Byrnes on September 27, 2016


Thanks in part to a grant from the Internal Revenue tamu-banner-300x250-v2Service, Texas A&M University School of Law will soon open the doors of its newest clinic, focused on serving low income taxpayers.

The grant is part of the Low Income Taxpayer Clinics (LITC) program, administered by the Office of the Taxpayer Advocate at the IRS to make the services of these clinics more widely available, particularly in underserved areas.

Under the interim direction of Jack Manhire, Director of Program Development and Senior Lecturer at Aggie Law, the Tax Clinic will provide legal counsel as defined by the LITC program criteria. Services will focus primarily on tax disputes and are available to those who qualify as low income taxpayers. The clinic also gives Texas A&M law students an opportunity to work directly on federal tax controversy cases by receiving provisional admission to represent taxpayers before the IRS.

The law school is currently seeking qualified professionals to permanently fill the leadership positions at the clinic, which will be one of nine clinics offered through the law school.

“We are very excited to be a part of the LITC community,” Manhire said. “We are fully dedicated to serving the needs of the Fort Worth area and the educational enrichment of our students. We also plan to leverage cutting-edge technology and our Aggie network to represent taxpayers in some of the most underserved communities in Texas.”

According to the Taxpayer Advocate Service, “Low Income Taxpayer Clinics (LITC) assist low income individuals who have a tax dispute with the IRS, and provide education and outreach to individuals who speak English as a second language (ESL). LITCs can represent you before the IRS or in court on audits, appeals, tax collection matters, and other tax disputes. Services are provided for free or for a small fee. Although LITCs receive partial funding from the IRS, LITCs, their employees, and their volunteers are completely independent of the IRS. In order to qualify for assistance from an LITC, generally a taxpayer’s income must be below a certain threshold, and the amount in dispute with the IRS is usually less than $50,000.”

The clinic, Aggie Law’s ninth, will be located in the Star-Telegram building in Downtown Fort Worth.

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Online Wealth Management Launched for an Industry ‘Fearless On Every Front’

Posted by William Byrnes on September 26, 2016


Texas A&M University School of Law announces the launch of its revolutionary online graduate curricula in Wealth Management  — developed as an important part of the public tamu-banner-300x250-v2university’s mission.  Delivered completely online, the Wealth Management curricula is built around the needs of wealth advisory professionals to become versed in the legal and planning aspects of financial analysis, high net wealth taxation, portfolio management, family office, charitable planning, retirement and executive compensation, securities and market regulation, and insurance/annuities. Lawyers and non-lawyers alike will take a deep dive into the intricacies of managing wealth and its associated risks, critical in a rapidly evolving workplace climate.

Texas A&M law professor William Byrnes, who conceptualized both curricula and pioneered online legal education 20 years ago, quoted an industry research report, “industry research from analytics firm Cerulli Associates uncovered that 43% of all financial advisors are either at or are approaching retirement with one-third of advisors between 55 to 64.  Advisory firm Edwardes Jones, with 12,000 locations and more than $900 billion assets under management agreed with the Cerruli report that 237,000 new financial professionals are needed to keep up with the demand of retiring baby boomers.” Says William Byrnes, “Yet universities remain stuck in a silo approach to education, with graduates unprepared for the financial advisor requirements of these firms and their clients.  Firms must be fearless pushing universities to fulfil their role for educating and training graduates for employment outcomes.”

Ernst & Young’s Tax Insights magazine, distributed to its clients and through the Financial Times,  stated “Texas A&M University is among the pioneers of change in tax education. In 2013, the State of Texas not only established a new law school at the university but also gave it carte blanche to create a new education model.”

“Very few law graduates that my company interviews studied advanced planning and thus can’t sit down with clients to address these tax and financial advisory questions,” added Robert Bloink, an attorney who has advised on over two billion dollars of insurance premium.

“For complex modern families with multiple marriages and various children, a properly educated wealth manager knows the questions to ask, then how to research and analyze the legal and financial issues associated with non-probate assets”, interjected Dr. George Mentz of the American Academy of Financial Management which is mentioned as an industry professional association for financial analysts on the Department of Labor website.

“A client-centric wealth management approach  requires that the education model be developed and taught by multi-disciplinary academics and professionals.” explains William Byrnes. “A Texas A&M graduate will be able to evidence career preparation as a financial advisor or financial analyst wealth manager with an industry tailored wealth manager curriculum that includes aspects of the Series 7, wealth, and legal planning.”   According to National Law Journal (May 20, 2013), “No one in legal academia has more experience with online master’s degrees than William Byrnes.”

 

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Texas A&M School of Law Seeks To Hire Several New Law Professors

Posted by William Byrnes on September 23, 2016


These are exciting times at Texas A&M University School of Law, which is leading Fearlessly on every Front! Since the university acquired a law school in August of 2013, the law school has embarked on a program of investment that increased its entering class credentials and financial aid budgets, while shrinking the class size; hired twenty new faculty members, including thirteen prominent lateral hires; improved its physical facility; and substantially increased its career services, admissions, and student services staff.  And now, we are again hiring additional faculty.

Texas A&M University School of Law now seeks to expand its academic program and its strong commitment to scholarship by hiring TAMU-Law-lockup-stack-SQUARE (1)multiple exceptional faculty candidates for contract, tenure-track, or tenured positions, with rank dependent on qualifications and experience.  Candidates must have a J.D. degree or its equivalent.  Preference will be given to those with demonstrated outstanding scholarly achievement and strong classroom teaching skills.  Successful candidates will be expected to teach and engage in research and service.  While the law school welcomes applications in all subject areas, it particularly invites applications from:

1)      Candidates who are interested in expanding and building on our innovative Intellectual Property and Technology Law Clinic (with concentrations in both trademarks and patents), or in one of our other acclaimed clinical areas, including Family Law and Benefits Clinic, Employment Mediation Clinic, Wills & Estates Clinic, Innocence Clinic, and Immigration Law Clinic; and

2)      Candidates with an oil and gas law and/or energy law background, either domestic U.S. or international, who are interested in interdisciplinary research, teaching, and programmatic activities.

3)      Candidates with strong classroom skills and scholarly achievement interested in teaching in our exceptional Legal Analysis, Research, and Writing Program.

While the law school is primarily interested in entry-level candidates for the above positions, more experienced candidates may be considered to the extent that their qualifications respond to the law school’s needs and interests.

In addition, the law school welcomes lateral and highly experienced professionals for the following positions:

1)      Candidates with experience in IP licensing and technology transfers, with relevant academic and/or professional science background, and who are interested in working and building synergies with the Texas A&M University’s College of Agricultural and Life Sciences

2)      Candidates in the field of Alternative Dispute Resolution with a national or international reputation and stellar credentials in scholarship, teaching, and service, and with an interest in building our nationally ranked dispute resolution program;

3)      Candidates in any field with a national or international reputation and stellar credentials in scholarship, teaching, and service;

Texas A&M University is a tier one research institution and American Association of Universities member.  The university consists of 16 colleges and schools that collectively rank among the top 20 higher education institutions nationwide in terms of research and development expenditures.

Texas A&M School of Law is located in the heart of downtown Fort Worth, one of the largest and fastest growing cities in the country.  The Fort Worth/Dallas area, with a total population in excess of six million people, offers a low cost of living, a strong economy, and access to world-class museums, restaurants, entertainment, and outdoor activities.

As an Equal Opportunity Employer, Texas A&M welcomes applications from a broad tamu-banner-300x250-v2spectrum of qualified individuals who will enhance the rich diversity of the university’s academic community. Applicants should email a résumé and cover letter indicating research and teaching interests to Professor Gabriel Eckstein, Chair of the Faculty Appointments Committee, at appointments@law.tamu.edu.  Alternatively, résumés can be mailed to Professor Eckstein at Texas A&M University School of Law, 1515 Commerce Street, Fort Worth, Texas 76102-6509.

 

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Texas A&M Launches Online Risk Management Curriculum with Fearless On Every Front Campaign

Posted by William Byrnes on September 22, 2016


Texas A&M University School of Law announces the launch of its revolutionary online graduate curricula in Risk Management — both developed as an important part of the public university’s mission.  Delivered completely online, the Risk Management curricula meets the increasing need of professionals to be versed in the legal aspects of financial transactions, risk, anti money laundering, FCPA, terrorist financing prevention, OFAC, and compliance management. Lawyers and non-lawyers alike will take a deep dive into the intricacies of managing risk, critical in the rapidly evolving global financial climate.

Texas A&M law professor William Byrnes, who conceptualized both curricula and pioneered online legal education 20 years ago, quoted a New York post article, “In a field paying anywhere from $75,000 to $250,000 in annual salary for qualified compliance pros, staffing is one of the biggest challenges for firms today.”  New York Post (Aug. 13, 2016)

“The demand of universities from firms”, says William Byrnes, is, “How are you going to give us that staff member of the future?  Although several universities are considering how to adapt their programs to the future needs of students and employers, it is easier to talk about change than actually bring it about.”

Ernst & Young’s Tax Insights magazine, distributed to its clients and through the Financial Times,  stated “Texas A&M University is among the pioneers of change in tax education. In 2013, the State of Texas not only established a new law school at the university but also gave it carte blanche to create a new education model.”

“A risk management approach means that the new model will by definition be multidisciplinary.” explains William Byrnes.   According to National Law Journal (May 20, 2013), “No one in legal academia has more experience with online master’s degrees than William Byrnes.”

Discover what the next generation of risk management thought leaders who are Fearless on Every Front: http://www.law.tamu.edu/distance-education/risk-management

tamu-banner-300x50-v2

 

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Texas A&M University School of Law Announces the Launch of Two Premier Online Curricula in Wealth Management & Risk Management

Posted by William Byrnes on September 14, 2016


Texas A&M University School of Law announces the launch of its revolutionary online graduate curricula in Wealth Management and Risk Management — both developed as an important part of the public university’s mission of training practice – readying professionals and preparing them for career success.

Delivered completely online, these curricula meet the increasing need of professionals to be versed in the legal aspects of financial transactions, financial literacy, risk, and compliance management. Lawyers and non-lawyers alike will take a deep dive into the intricacies of managing wealth or risk, critical in a rapidly evolving workplace climate.

“Our ultimate goal is to enable professional and graduate students to completely confront the complexities of modern wealth management and risk management, and to propel them for successful careers as well as for independent, lifelong learning,” explains Executive Professor and Associate Dean William Byrnes, who helped conceptualize both curricula and will teach several courses.

Byrnes pioneered online legal education 20 years ago, and is credited with creating the
first online LL.M. offered by an ABA accredited law school. According to National Law Journal (May 20, 2013), “No one in legal academia has more experience with online master’s degrees than William Byrnes.”

Courses are taught asynchronously online. Enrolled students log in and participate in course lectures and assignments on their own schedule, which provides flexibility for those with competing professional and personal obligations.

Byrnes emphasizes that the asynchronous format is “Not like binge-watching TV.” Instead, assignments are conducted on a weekly basis, and students participate via william-h-byrnes-wide-banner-2-bwdiscussion questions, online assessments, group project work, and interactions with professors during virtual office hours.

WebX recording about Risk Management: http://ccst.io/e/un64j9k9
WebX recording about Wealth Management: http://ccst.io/e/u27hw7b9

At the conclusion of the curricula, students will receive either an LL.M. or M. Jur. degree. Each takes approximately six semesters to complete; students also have the option of visiting the law school campus to accept their diploma as well as the coveted “Aggie Ring.”

The caliber and quality of the instructors is another differentiator. Some of the most well-known experts in the field, such asBruce Zagaris, George Mentz, and Robert Bloink, join with law professors, business leaders, and leading practitioners to deliver the content.

“Our goal is to provide an outstanding legal education for a nationally-based, diverse student body in a collegial and supportive environment,” says Bloink. “Our attention is focused on newly emerging areas of law, particularly those related to technological development and globalization.”

“We are excited by the opportunity to provide 21st century practical training to those who otherwise may not attend a top-tiered law school,” explains Dr. Chris Odionu, Program Director, Office of Distance Education Programs.

Both Wealth and Risk curricula are recruiting and accepting applications for its first cohort of students for the Spring 2017 semester.

To learn more about wealth management, visit www.law.tamu.edu/wealth.
To learn more about risk management, visit www.law.tamu.edu/risk.

This program is pending approval by the Southern Association of Colleges and Schools Commission on Colleges.

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Twenty Scholars Join Texas A&M Law

Posted by William Byrnes on August 21, 2016


Texas A&M University recently jumped to rank #4 among the U.S. public universities (Money 2016).TAMU-Law-lockup-white

1. Lisa Alexander

Lisa Alexander is an expert in community development law, specializing in urban real estate, low-income housing law and policy, economic development, and urban reform. She has experience at the Chicago Lawyers’ Committee for Civil Rights Under Law, Inc. and was awarded an Equal Justice Works Fellowship. She is also a former Associate Editor of the ABAJournal of Affordable Housing & Community Development Law. She was named an “Emerging Leader” by the National Congress for Community and Economic Development. Coming to us from the University of Wisconsin Law School, Professor Alexander was recently appointed to the Wisconsin State Advisory Committee for the U.S. Commission on Civil Rights.

2. William Byrnes

William Byrnes is a leading tax and financial crimes published author and co-author of eight Lexis treatises, a 10-volume Kluwer set, three Tax Facts books, and an 8-volume National Underwriter Wealth Planning treatise.   His weekly financial law and planning article is syndicated by American Legal Media (ALM).  Professor Byrnes pioneered online legal education in the early nineties and created the first online LL.M. offered by an ABA accredited law school.  He served a senior position of international tax for Coopers and Lybrand, specializing in transfer pricing.  He is a J. William Fulbright Foreign Scholarship Board (FFSB) and U.S. Department of State’s Bureau of Education and Cultural Affairs (ECA) appointed specialist for tax law and legal pedagogy.

3. Irene Calboli

Irene Calboli specializes in intellectual property, European Union law, and international trade law. She has published numerous articles in journals such as the Illinois Law Review and Florida Law Review. She is the Co-Chair of the Professor Membership Team of the Academic Committee of the International Trademark Association and a member of the Executive Committee of the Art Law Section of the Association of American Law Schools. Professor Calboli formerly taught at Marquette University Law School.

4. Vanessa Casado Pérez

Vanessa Casado Pérez is a leading scholar on property and natural resources law. In several publications, she explores the role of property rights in water scarcity mitigation. She is affiliated with the Bill Lane Center for the American West, collaborating with the Water in the West program, a joint venture between the Center and the Woods Institute for the Environment. She has served as a research assistant at Universitat Pompeu Fabra, Barcelona, Spain, and the University of Chicago and New York University law schools. Professor Casado Perez joins us from Stanford University Law School where she was a Teaching Fellow of the LL.M. Program in Environmental Law & Policy and Lecturer in Law and coordinator of the Stanford Law Fellows’ research workshop.

5. Susan Fortney

Susan Fortney is one of the country’s foremost legal ethics and attorney malpractice scholars. She has authored many books and law review articles on these and other topics. She also serves on the editorial board for two American Bar Association journals. During her impressive career, Professor Fortney has also received many awards for outstanding teaching. She comes to Texas A&M from Hofstra University Law School. She also formerly served as Interim Dean of Texas Tech University School of Law.

6. Nuno Garoupa

Nuno Garoupa is a top scholar in comparative law and law & economics. He has published dozens of articles in journals such as the Illinois Law Review and the American Law and Economics Review. He received his Ph.D. in Economics from the University of York and also holds an LL.M. from the University of London. He has a long-established research interest in the economics of law and legal institutions. Professor Garoupa currently serves as President of the Fundação Francisco Manuel dos Santos in Portugal. He formerly taught at the University of Illinois College of Law.

7. Bill Henning

Bill Henning is a preeminent scholar in commercial law. Professor Henning has served as Executive Director of the Uniform Law Commission. He is a member of the Permanent Editorial Board for the Uniform Commercial Code, the American Law Institute, and the State Department’s Advisory Council on Private International Law. He currently serves as a member of the U.S. Delegation to the United Nations Commission on International Trade Law, Working Group VI.  Professor Henning formerly taught at the University of Alabama School of Law.

8. Luz Herrera

Luz Herrera will join us from the University of California, Los Angeles School of Law. She will serve as Associate Dean for Experiential Education. A leader in clinical programs, she also specializes in civil justice and wills and trusts. A former Senior Clinical Fellow at Harvard Law School, she has been recognized by the Daily Journal as among the 100 Top Attorneys in California and by the Mexican American Bar Association with the Cruz Reynoso Community Service Award.

9. Charlotte Ku

Dr. Charlotte Ku is an expert in international law and has published numerous books and articles in the field. She has also served as acting director at the Lauterpacht Centre for International Law at the University of Cambridge, as executive director and executive vice president of the American Society of International Law, and as a chair of the Board of Directors of the Academic Council on the United Nations System. Dr. Ku is a member of the Council on Foreign Relations and is a member of the Board of Advisors, Strategic Studies Quarterly. Dr. Ku joins us from the University of Illinois College of Law, where she was a professor of law and assistant dean of graduate and international legal studies.

10. Glynn Lunney

Glynn Lunney is an expert in intellectual property law and also has a Ph.D. in economics. He specializes in patent, copyright and trademark law, unfair competition, and contracts. He has published in prestigious journals such as the Virginia Law Review and the Michigan Law Review. Professor Lunney has a special connection to Texas A&M as he attended the University as an undergraduate and received a degree in engineering. Professor Lunney formerly taught at Tulane University Law School.

11. William Magnuson

William Magnuson is a practicing attorney who focuses on mergers and acquisitions, corporate governance, and private equity. He joins us from the law firm of Graves Dougherty Hearon & Moody in Austin, Texas, and he previously worked in the mergers and acquisitions group at Sullivan and Cromwell. He has represented public and private companies in various industries involving both U.S. and cross-border transactions. He served as a Climenko Fellow and Lecturer on Law at Harvard Law School, and as a clerk to the Honorable Priscilla R. Owen of the U.S. Court of Appeals for the Fifth Circuit. While he was a student at Harvard Law School, he served as Editor-in-Chief of the Harvard International Law Journal and continues to present at the Harvard Law School Forum on Corporate Governance and Financial Regulation.

12. Jack Manhire

Dr. John T. (“Jack”) Manhire, Jr., former Chief of Legal Analysis for the IRS Office of Professional Responsibility and National Program Chair, Executive Education for the U.S. Treasury Executive Institute, is the Director of Program Development at Texas A&M University School of Law.  His prior positions include Director of Technical Analysis & Guidance (Policy and Procedure) for the IRS Taxpayer Advocate Service, Attorney-Advisor (Tax) to the IRS National Taxpayer Advocate and Division Chief, Tax Law for the U.S. Coast Guard Auxiliary National Office.  Jack’s scholarly interests primarily involve issues relating to tax compliance. His articles and essays appear in journals such as the University of Pennsylvania Law Review, Virginia Tax Review, the Iowa Law Review, and the Florida Tax Review, Journal on Policy and Complex Systems. Jack was a University Fellow (Ph.D. candidate) at Yale University where he was Editor of the Yale Journal of Law & the Humanities.

13. Fatma Marouf

Fatma Marouf, a top scholar in immigration law, refugee law and international human rights law, will create and direct our new Immigration Clinic. Her scholarship has examined issues such as the rights of mentally incompetent noncitizens, the use of restraints in removal proceedings, and the exclusion of DREAMers from the Affordable Care Act. She was also named a Bellow Scholar for her empirical research on the adjudication of immigration appeals in the federal courts. She has extensive experience representing immigrants at all levels of adjudication and has served as a consultant to the United Nations High Commissioner for Refugees. Professor Marouf joins us from University of Nevada, Las Vegas William S. Boyd School of Law, where she was co-director of the Immigration Clinic.

14. Thomas W. Mitchell

Thomas W. Mitchell is widely recognized as an expert in property law, land use, remedies and rural community development. He founded and directed the Program in Real Estate, Land Use, and Community Development, a multi-disciplinary program at the University of Wisconsin Law School where he was the Frederick W. and Vi Miller Chair in Law. He served as the primary drafter of the Uniform Partition of Heirs Property Act, which was promulgated by the National Conference of Commissioners on Uniform State Laws (commonly known as the Uniform Law Commission), endorsed by the ABA and enacted into law thus far in eight states. The Act was also selected by the Council on State Governments for its 2013 Selected State Legislation publication which characterized it as comprehensive, innovative and a model statute.

15. Angela Morrison

Angela Morrison is an expert in employment and immigration law. She was previously the Legal Director of the Nevada Immigrant Resource Project, where she conducted outreach on immigration-related issues to community partners, governmental organizations, and immigrant communities. She also worked for the U.S. Equal Employment Opportunity Commission as a trial attorney. Professor Morrison formerly taught at UNLV School of Law.

16. Srividhya Ragavan

Srividhya Ragavan is an intellectual property expert, who has published numerous books and articles in the field. Her scholarship focuses on the relationship between international trade law and intellectual property. Professor Ragavan’s work is internationally recognized, particularly in India. Professor Ragavan has been associated with the various departments of the Indian government such as the Ministry of Human Resource Development. Professor Ragavan formerly taught at the University of Oklahoma College of Law.

17. Elizabeth Trujillo

Elizabeth Trujillo is a leading scholar in international economic law, specializing in the North American Free Trade Agreement, contracts, international trade, investment, and development. Her publications, which have appeared in law reviews, books, and peer-reviewed journals such as the Journal of International Economic Law, examine the relationship between international trade and investment with domestic regulatory structures. She is currently writing a book on international trade and sustainable development with Cambridge University Press. At the University of Detroit Mercy School of Law, she founded a J.D., LLB, L.E.D. tri-lateral degree program with universities in Mexico and Canada. Trujillo was a Visiting Scholar at Harvard Law School and at the Max Planck Institute for Comparative Public Law and International Law in Germany and is an Alexander von Humboldt Foundation Research Fellow. She comes to us from Suffolk University Law School in Boston where she previously served as the director of the international law concentration and was named “Latina Trailblazer in the Law” by the Massachusetts Association of Hispanic Attorneys.

18. Saurabh Vishnubhakat

Saurabh Vishnubhakat is an expert in intellectual property and patent law. He has published articles in journals such as the Florida Law Review and the Yale Journal of Law and Technology. He previously served in the United States Patent and Trademark Office, advising the agency’s chief economist and other leadership on patent policy. Profesor Vishnubhakat was also a faculty fellow at Duke Law School, where he taught patent law and researched bioinformatics innovation as well as economic and tort-theory aspects of patent litigation.

19. Michael K. Young

Michael K. Young, President of Texas A&M University, previously served as President and tenured Professor of Law at the University of Washington and President and Distinguished Professor of Law at the University of Utah. He served as Dean and Lobingier Professor of Comparative Law and Jurisprudence at the George Washington University Law School, and he was a professor at Columbia University for more than 20 years. He also has been a visiting professor and scholar at three universities in Japan. A graduate of Harvard Law School, President Young served as a law clerk to the late Chief Justice William H. Rehnquist of the U.S. Supreme Court, and he has held a number of government positions, including Deputy Under Secretary for Economic and Agricultural Affairs and Ambassador for Trade and Environmental Affairs in the Department of State during the administration of President George H.W. Bush.

20. Peter Yu

Peter Yu is a prolific scholar and an award-winning teacher. He is the author or editor of six books and more than 100 law review articles and book chapters. He has lectured and presented in more than 25 countries on six continents. He serves as the general editor ofThe WIPO Journal published by the World Intellectual Property Organization and chairs the Committee on International Intellectual Property of the American Branch of the International Law Association. Professor Yu formerly taught at Drake University Law School.

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Lexis Advance® Tax Platform Includes Treatise Library Analyzing Management of Operational and Transactional Tax Risk

Posted by William Byrnes on August 9, 2016


The LexisNexis online tax research platform, Lexis Advance Tax (“L.A. Tax”), available to law school faculty and students, includes a rich, comprehensive package of over 1400 sources, including tax news, primary law, journals, and nearly 300 treatises, practice guides and forms products for federal tax, international tax, estates practice and SALT.

The L.A. Tax platform contains three subpages devoted to federal tax, SALT and U.S. 01701_11_1_coverInternational tax. Advisors will discover a rich selection of Lexis titles examining hot, cutting-edge issues: Practical Guide to U.S. Transfer Pricing; Lexis Guide to FATCA Compliance; Money Laundering Compliance; Taxation of Intellectual Property and Technology; Taxation of Oil & Gas Transactions; and Foreign Tax & Trade Briefs, which provides summaries of the tax laws and systems of over 120 countries.

Eight treatises are authored or co-authored by Professor William H. Byrnes (Texas A&M University Law School’s Risk Management concentration) who leads teams of contributing subject experts in analyzing the management of operational and transactional risk confronting tax officers and their advisors, and providing compliance and planning insights. For 2016, Texas A&M University is ranked 4th best public university by Money magazine. See https://law.tamu.edu/

The L.A. Tax package also includes all products from Tax Analysts, Inc., the VA-based tax news organization that publishes such dailies as Tax Notes Today, State Tax Today and Worldwide Tax Daily – all three considered “must reads” by serious tax advisors. Tax Analysts also publishes three companion weekly journals tied to the dailies.
Looking for Lexis Advance Tax?: Sign in at www.lexisadvance.com and look for the scroll-down menu called “Lexis Advance Research” in the upper left-hand corner. Click on the down arrow and select Lexis Advance Tax.

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Vote for Financial Law Prof Blog for ABA Blogger’s Top 100!

Posted by William Byrnes on August 2, 2016


The ABA is collecting votes this week for its annual list of the 100 best legal blogs, and you can vote!

Vote for the Financial Law Prof blog for top ABA 100 list here: http://www.abajournal.com/blawgs/blawg100_submit/

Use the link above or below to submit to the ABA about Financial Law Prof blog.  If there is more than one blog you want to support, feel freeAbajournal_weblogo_2015 to send the ABA several submissions. The ABA may include some of the best comments in the Blawg 100 coverage for 2016. Friend-of-the-blawg submissions are due no later than 11:59 p.m. CT on Aug. 7, 2016.

Vote for the Financial Law Prof blog for top ABA 100 list here: http://www.abajournal.com/blawgs/blawg100_submit/
 
link to Financial Law Prof blog: http://lawprofessors.typepad.com/intfinlaw/

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Texas A&M Law Faculty Recruitment for 2017-2018

Posted by William Byrnes on August 1, 2016


TEXAS A&M UNIVERSITY SCHOOL OF LAW seeks to expand its academic program and its strong commitment to scholarship by hiring multiple exceptional faculty candidates for TAMU-Law-lockup-stack-SQUARE (1)contract, tenure-track, or tenured positions, with rank dependent on qualifications and experience.

Preference will be given to those with demonstrated outstanding scholarly achievement and strong classroom teaching skills.  Successful candidates will be expected to teach and engage in research and service.  While the law school welcomes applications in all subject areas, it particularly invites applications from:

  • Candidates who are interested in expanding and building on our innovative Intellectual Property and Technology Law Clinic (with concentrations in both trademarks and patents), or in one of our other acclaimed clinical areas, including Family Law and Benefits Clinic, Employment Mediation Clinic, Wills & Estates Clinic, Innocence Clinic, and Immigration Law Clinic; and
  • Candidates with an oil and gas law and/or energy law background, either domestic U.S. or international, who are interested in interdisciplinary research, teaching, and programmatic activities.

While the law school is primarily interested in entry-level candidates for the above positions, more experienced candidates may be considered to the extent that their qualifications respond to the law school’s needs and interests.

In addition, the law school welcomes lateral and highly experienced professionals for the following positions:

  • Candidates with experience in IP licensing and technology transfers, with relevant academic and/or professional science background, and who are interested in working and building synergies with the Texas A&M University’s College of Agricultural and Life Sciences
  • Candidates in the field of Alternative Dispute Resolution with a national or international reputation and stellar credentials in scholarship, teaching, and service, and with an interest in building our nationally ranked dispute resolution program;
  • Candidates in any field with a national or international reputation and stellar credentials in scholarship, teaching, and service;

Texas A&M University is a tier one research institution and American Association of Universities member.  The university consists of 16 colleges and schools that collectively rank among the top 20 higher education institutions nationwide in terms of research and development expenditures.

Over the past two years, Texas A&M University  has embarked on a program of investment for its School of Law that increased its entering class credentials and financial aid budgets, while shrinking the class size; attracted 19 new faculty members, including 12 prominent lateral hires; and substantially increased its career services, admissions, and student services staff.   The School of Law has also hired a senior U.S. Treasury expert.  The Texas A&M Law faculty is highly published,  already ranking #41 for article downloads among the top published 350 US and foreign  law faculties (SSRN 2016).

Texas A&M School of Law is located in the heart of downtown Fort Worth, one of the largest and fastest growing cities in the country.  The Fort Worth/Dallas area, with a total population in excess of six million people, offers a low cost of living, a strong economy, and access to world-class museums, restaurants, entertainment, and outdoor activities.

As an Equal Opportunity Employer, Texas A&M welcomes applications from a broad spectrum of qualified individuals who will enhance the rich diversity of the university’s academic community. Applicants should email a résumé and cover letter indicating research and teaching interests to Professor Gabriel Eckstein, Chair of the Faculty Appointments Committee, at appointments@law.tamu.edu.  Alternatively, résumés can be mailed to Professor Eckstein at Texas A&M University School of Law, 1515 Commerce Street, Fort Worth, Texas 76102-6509.

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Texas A&M Soars to #4 for Public University Rankings

Posted by William Byrnes on July 25, 2016


The 2016 rankings have been released and Texas A&M University has soared to rank #4 money-logoamong all public universities in Money magazine’s new “Best Colleges For Your Money” report.

The top five ranked public universties in the USA are:

#1 University of Michigan

#2 University of California, Berkeley

# 3 University of Virginia

#4 Texas A&M University

#5 University of California, San Diego

Moreover, Money reported that Texas A&M University ranked #3 for number of Fortune 500 CEOs.  #1 Harvard, #2 Cornell and #3 Texas A&M University.

For this year’s “Best Colleges For Your Money” list, Money ranked 705 schools on 24 factors. Rating factors included graduation rates, alumni success, how much recent graduates earn, cost of education, and it began to incorporate data from the federal government’s College Scorecard.

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Framework for Transfer Pricing Analysis Under Treasury Regulation Section 1.482 and the OECD Guidelines

Posted by William Byrnes on July 12, 2016


This chapter from Practical Guide to U.S. Transfer Pricing, available from SSRN here,  compares the U.S. Section 482 transfer pricing regulations to the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations as revised in 2010.

Section 482’s purpose is to ensure that taxpayers subject to U.S. taxation “clearly reflect income” related to transactions with other organizations that are under common ownership or control with the taxpayer, and “to prevent the avoidance of taxes with respect to such transactions.” The desired result is “tax parity” between the “controlled taxpayer” and an “uncontrolled taxpayer,” and, thereby, to determine the “true taxable income” of the controlled taxpayer. Similarly, the 2010 Guidelines state that the arm’s length standard which flows from recognizing the separate entity status of related entities in different jurisdictions has the dual objective of securing an appropriate tax base in each jurisdiction and avoiding double taxation.

Since many U.S. trading partners follow the OECD Guidelines (and to a certain extent the Book CoverUnited States also does) similarities and differences between the OECD Guidelines and the U.S. regulations are important.

Number of Pages in PDF File: 93

Framework for Transfer Pricing Analysis Under Treasury Regulation Section 1.482 and the OECD Guidelines (July 5, 2016). William Byrnes & Robert Cole (deceased), Practical Guide to U.S. Transfer Pricing § 2.01 – § 2.19 (Matthew Bender, Third Edition). Available at SSRN: http://ssrn.com/abstract=2805279

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Texas A&M Law Partners With BarBri, Reduces Tuition by 15% and Increases Scholarships by 65%

Posted by William Byrnes on July 11, 2016


Texas A&M University School of Law is pleased to announce a partnership with the BARBRI Group that provides all1ee6c-6a00d8341bfae553ef01b7c80b4769970b-320wi incoming first-year Aggie law students the post-graduation BARBRI Bar Review course, as well as BARBRI law school materials, bar prep apps and programs while in law school.  This partnership announcement comes on the heels of Texas A&M University announcing a 15.39% reduction in the public law school’s tuition, that a student’s tuition rate will remain locked-in for the three-year education,  and that the university has increased the scholarship awards budget by 65% to attract the brightest candidates.

At Texas A&M Law, our commitment to student success starts with building a strong foundation of knowledge from the beginning of the law school experience. While law school is of course about much more than just passing the bar exam, to become the exceptional Aggie lawyers we prepare our students to be, they must first pass the bar exam.

Please watch the announcement below with Professor James McGrath, director of Academic Support and Bar Services, and Mike Sims ’87, president and CEO of BARBRI, to learn more:

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headlines from Financial Law Prof Blog – July 8

Posted by William Byrnes on July 8, 2016


Will UK Be Branded a Tax Haven by OECD and EU To Punish It for Brexit

INtelligence wheel all agencies

Financial Law Prof Blog

Turkey to grant tax-free amnesty for Turkish residents’ assets abroad

Canada Updates Money Laundering and Terrorist Financing Act, 2016

Taxpayer Advocate Mid-Year Report to Congress: IRS Implementation and Enforcement of FATCA Withholding Is Burdensome, Error-Ridden, and Fails to Protect the Taxpayers’ Rights

OECD releases revised guidance on profit splits

OECD Release of BEPS discussion draft on attribution of profits to permanent establishments

Protecting Older Americans from Financial Exploitation

Film fraudsters jailed for 27 years in £100 million tax avoidance scam

The Economic Impact of U.S. Innovation

Outcomes of the Plenary meeting of the FATF 22–24 June 2016

Chinese National Sentenced to 30 Months in Prison for Smuggling High Tech U.S. Military Hardware to China

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Distance Learning and Its Implications for Legal Education

Posted by William Byrnes on June 29, 2016


Fulbright Specialist Prof. William Byrnes (Texas A&M Law) was invited to address India’s National Board of Accreditation and receive an award for his pioneering efforts with online pedagogical methods in the early nineties.

His remarks address developing learning outcomes and effective pedagogical practices with an emphasis on distance learning. The remarks cover the following topics: Review of the Effectiveness of Distance Learning, Developing Learning Outcomes, Occupational Outcomes Framing Learning Outcomes, Information Acquisition, Information Delivery, Learning Communities, Learning Media, Learner Motivation, Knowledge Acquisition and Learning Tools.  See the distance education white paper at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2487679

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Analysis of the 2016 Final W-8BEN-E and its Accompanying Instructions

Posted by William Byrnes on June 16, 2016


IRS Releases Revised 2016 W-8BEN-E and Accompanying Instructions

William Byrnes and Haydon Perryman

This month we turn our attention to the recently revised 2016 W-8BEN-E form which has book cover30 parts over eight pages that can be catalogued into four sections. The IRS released its previous substantial update of the W-8BEN-E in February 2014 and in April 2016 its most recent revisionary updated form with accompanying updated instructions.  The 2016 revision more represents a technical correction release for the evolution of FATCA and its IGAs since 2014 than substantive changes.   The 2014 W-8 series update, on the other hand, was a major departure from the previous series, exemplified by the former W-8BEN in use since 2006 had just four parts.   The 2014 Forms may continue to be used by institutions until October 2016 when it becomes mandatory to switch to the new 2016 W-8BEN-E.  For a detailed FATCA evolution from pre-2010 through 2016, download my 118 page article.

Most Important Updates

This new 2016 W-8BEN-E includes three primary amendments.

Inclusion of Limitation of Benefits Categories

Firstly, the new W-8BEN-E contains 10 new potential items for selection to comply with a “Limitation of Benefits” (LOB) article of a double tax agreement to receive the advantages of the agreements reduced withholding provision. These new LOB boxes reside within Part III – Claim of Tax Treaty Benefits, Line 14.  The items include the nine main tests that can be met to satisfy an LOB provision, and then includes a tenth “Other” catch-all category that requires the filer cite to the treaty article and paragraph number test not covered within the nine categories.

Moreover, line 15 requires further explanation be provided of how additional conditions are met to qualify for any further exceptional reduction of withholding.  Line 15 must be used only if claiming treaty benefits that require that meeting conditions not already covered by the representations of line 14 (or other certifications on the form).

This line is generally not applicable to claiming treaty benefits under an interest or dividends (other than dividends subject to a preferential rate based on ownership) article of a treaty or other income article, unless such article requires additional representations. For example, certain treaties allow for a zero rate on dividends for certain qualified residents provided that additional requirements are met, such as ownership percentage, ownership period, and that the resident meet a combination of tests under an applicable LOB article.

New FATCA Category for Non-Financial Accounts

Secondly, a new checkbox has been added to the chapter 4 statuses in line 5 for payments made to payees for accounts they hold that are not financial accounts under the FATCA regulations [section 1.1471-5(b)(2)]. See Chapter 7A of the Guide to FATCA Compliance for a detailed analysis of this topic.

Coordination with IGAs

Finally, the new W-8BEN-E instructions are amended to coordinate qualification for the status of a nonreporting FFI under the IGA with a deemed-compliant FFI status under the chapter 4 regulations. An FFI that meets the requirements of both a nonreporting IGA FFI under the IGA and under the regulations should certify as a nonreporting IGA FFI, unless such entity meets the requirements for owner-documented FFI status for payments associated with this form, in which case it should certify to that status under the regulations only by completing Part X of the form.

The W-8BEN-E Structure

The filer’s primary focus will be on Part I.

Identifying Information and Choice of Classification part: All filers of the W-8BEN-E must complete Parts I (Identifying Information and FATCA Classification). Part I of the W-8BEN-E requires general information, the QI status, and the FATCA classification of the filer. Question 4 of Part I requests the QI status. If the filer is a disregarded entity, partnership, simple trust, or grantor trust, and also is claiming benefits under a U.S. tax treaty, then the filer must complete Part III. Part I, Question 5 requests the FATCA classification of the filer, of which the form list 31 choices. The classification indicated determines which one of the parts IV through XXVIII must be completed.

General Certification part: All filers must complete Part XXX (General Certification). Part XXX requires certification, under penalty of perjury, by the payee or a person authorized to sign on the payee’s behalf. This part of the final form also requires the signatory agree that she will submit a new form within 30 days if any certification made on this form becomes incorrect.

The signatory is certifying, subject to perjury:

The entity identified on line 1 of this form is the beneficial owner of all the income to which this form relates, is using this form to certify its status for chapter 4 purposes, … 

  • The entity identified on line 1 of this form is not a U.S. person, 
  • The income to which this form relates is: (a) not effectively connected with the conduct of a trade or business in the United States, (b) effectively connected but is not subject to tax under an income tax treaty, or (c) the partner’s share of a partnership’s effectively connected income, and 
  • For broker transactions or barter exchanges, the beneficial owner is an exempt foreign person as defined in the instructions.

Moreover, Line XXIX for identification of substantial U.S. owners is subject to the same perjury statement and other certifications made in Part XXX.

Specific Certification of FATCA Classification part: Completion of the other parts of the form W-8BEN-E will depend upon the Part I, Question 5 FATCA classification of the filer.

Substantial U.S. Owner part: The information required to answer this line may be attached to the form in a separate statement, which remains subject to the same perjury statement and other certifications made in part XXX.  A filer that is a passive NFFE and thus completes part XXVI must also complete as well as part XXIX if it has substantial U.S. owners.

For a Passive NFFE, a specified U.S. person is a substantial U.S. owner if the person has more than a 10 percent beneficial interest in the entity.  But if an applicable IGA instead employs the standard of “controlling U.S. persons”, then the filer must look to the definition of a controlling person within the IGA of the jurisdiction of the financial institution to which the W-8BEN-E is provided.

Who Must Provide the W-8BEN-E?

A foreign entity must submit a Form W-8BEN-E to the withholding agent if it will receive a FATCA withholdable payment, receive a payment subject to chapter 3 withholding, or if it maintains an account with an FFI.

Disregarded Entity

A disregarded entity with a U.S. owner or a disregarded entity with a foreign owner that is not otherwise able to fill out Part II (i.e., because it is in the same country as its single owner and does not have a GIIN) may provide this form to an FFI solely for purposes of documenting itself for chapter 4 purposes. In such a case, the disregarded entity should complete Part I as if it were a beneficial owner and should not complete line 3.

Beneficial Owners

Form W-8 BEN-E must be provided by each of the entities that are beneficial owners of a payment, or of another entity that is a beneficial owner. If the income or account is jointly owned by more than one person, then the income or account will be treated by the withholding agent as owned by a foreign beneficial owner only if Forms W-8BEN or W-8BEN-E are provided by each owner of the account.

Treatment as a U.S. Account

If the withholding agent or financial institution receives a Form W-9 from any of the joint owners, then the payment must be treated as made to a U.S. person and the account treated as a U.S. account. An account will be treated as a U.S. account for FATCA by an FFI if any of the account holders is a specified U.S. person or a U.S.-owned foreign entity, unless the account is otherwise excepted from U.S. account status for FATCA purposes.

Expiration of Form W-8 BEN-E

Generally, a Form W-8BEN-E will remain valid for purposes of both chapters 3 and 4 for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect. For example, a Form W-8BEN signed on September 30, 2014 remains valid through December 31, 2017. However, under certain conditions, a Form W-8BEN-E will remain in effect indefinitely until a change of circumstances occurs.

Change in Circumstances

If a change in circumstances makes any information on the Form W-8 BEN-E incorrect for purposes of either chapter 3 or chapter 4, then the submitting person must notify the withholding agent or financial institution maintaining the account within 30 days of the change in circumstances and must file a new Form W-8 BEN-E (or other appropriate form as applicable).

The new 2016 instructions point out that if the submitter has relied upon an IGA to respond to the form, and the country is thereafter removed from the U.S. Treasury list of current IGAs, then from the date of removal a ‘change of circumstances’ has occurred.  The W-8BEN-E will no longer be ‘fit for purpose’ after the expiration of the change of circumstance time frame. 

Which of the 30 Parts of the W-8BEN-E to Complete?

The 2014 and 2016 W-8BEN-E form has thirty parts presented over eight pages, whereas the former 2006 dual-purpose W8BEN had just four parts.  The 2016 Form W-8BEN-E, and did the 2014 version, includes both the QI (U.S. IRC Title III) and the FATCA (U.S. IRC Title IV) entity classification reporting requirements.

All filers of the W-8BEN-E must complete Parts I and XXX. The FATCA classification indicated determines which one of the Parts IV through XXVIII must be completed, and whether substantial U.S. owners must be identified under part XXIX. 

Part I – Identification of Beneficial Owner

Part I of the W-8BEN-E requires general information, the QI status, and the FATCA classification of the filer. 

Line 1. A disregarded entity or branch enters the legal name of the entity that owns the disregarded entity (looking through multiple disregarded entities if applicable) or maintains the branch. 

Line 2. A corporation must enter its country of incorporation.  Any other type of entity must instead enter the country under whose laws it is created, organized, or governed. 

Line 3. A disregarded entity receiving a payment should only enter its name on line 3 if it is receiving a withholdable payment or hold an account with an FFI and

  1. has registered with the IRS and been assigned a GIIN associated with the legal name of the disregarded entity;
  2. is a reporting Model 1 FFI or reporting Model 2 FFI; and
  3. is not a hybrid entity using this form to claim treaty benefits.

If not required to provide the legal name, then a disregarded entity receiving a payment or maintaining an account may instead enter its name on line 3.

Line 4 firstly requests the Chapter 3 status of the recipient for purposes of U.S. withholding on U.S. source income.  Question 4 formerly presented 11 entity types from which the filer may select one. The 2016 W-8BEN-E includes a new entity type, the “International Organization” and thus 12 choices.

Secondly, if the filer is a disregarded entity, partnership, simple trust, or grantor trust, then the filer must tick in the affirmative and complete Part III if the entity is claiming benefits under a U.S. tax treaty.

Line 5 requests the FATCA classification of the entity.  The W-8BEN-E currently lists 32 FATCA classifications of which the entity should check only one box, whereas the previous list contained 31 classification choices.  The previous 2014 instructions also stated that only one box should be chosen but with a caveat “unless otherwise indicated”.  The 2016 W-8BEN-E instructions have been updated to state: “Check the one box that applies to your chapter 4 status.”

Several of the 32 classifications have had internal language updates to better align with the regulations or deadlines that have passed since 2014.  By example, the classification choice of “Sponsored FFI” no longer has the reference “that has not obtained GIIN”.  These modifications will be analyzed in depth in the Guide to FATCA Compliance.

Account That is Not a Financial Account

However, noteworthy is the newly added thirty-second classification because it is causing some confusion among compliance officers.  It reads “Account That is Not a Financial Account”.  The line 5 instruction states that if the filer is merely providing this form to document an account held with a financial institution that is not a financial account under Regulations section 1.1471-5(b)(2), then check the “Account that is not a financial account” box on line 5.

Why is this category necessary?  Because the regulations limit the scope of what types of financial institution accounts are included for the FATCA definition of financial account.  By example, the regulations exclude certain escrow accounts established for commercial transactions from treatment as financial accounts. The regulations also exclude negotiable debt instruments that are traded on a regulated market or over-the-counter market and distributed through financial institutions.  The regulations limit the scope of a depository account to an account for the placing of money (as opposed to the holding of property) in the custody of an entity engaged in a banking or similar business.

The regulations also exclude certain accounts of insurance companies.  By example, the regulations provide that a depository account includes an amount that an insurance company holds under a guaranteed investment contract or under a similar agreement to pay or credit interest thereon. The regulations also provide that a depository account does not include an advance premium or premium deposit received by an insurance company, provided the prepayment or deposit relates to an insurance contract for which the premium is payable annually and the amount of the prepayment or deposit does not exceed the annual premium for the contract. Such amounts are also excluded from cash value for purposes of determining whether a contract is a cash value insurance contract.

Comments On Completion of Part I, Line 5

Where one of the following FATCA classifications is selected, then the entity’s GIIN must be obtained (in Part 1 Line 9a) and verified against the IRS GIIN list. An incomplete or truncated TIN or GIIN may not be relied upon. It is acceptable for a limited time period that instead of providing a GIIN in Part 1 Line 9a to state “Applied for.”  However, the W8-BEN-E becomes invalid if the GIIN is not provided and verified against the IRS GIIN list within 90 days.

(a) Participating FFI;

(b) Reporting Model 1 FFI;

(c) Reporting Model 2 FFI;

(d) Registered deemed-compliant FFI (other than a reporting Model 1 FFI or sponsored FFI that has not obtained a GIIN);

(e) Nonreporting IGA FFI (including an FFI treated as a registered deemed-compliant FFI under an applicable Model 2 IGA);

(f) Direct reporting NFFE; or

(g) Sponsored direct reporting NFFE;

If the country entered in Part 1 Line 2 is an IGA country then the option of “Nonparticipating FFI (including a limited FFI or an FFI related to a Reporting IGA FFI other than a registered deemed-compliant FFI or participating FFI)” is not acceptable.

If the organization is a Financial Institution in the United States maintaining its customer’s account in the U.S., then it should collect its customer’s Foreign TIN in Part 1, Line 9b. In that scenario, the lack of a Foreign TIN makes the W8-BEN-E invalid.
It is the W8-BEN-E that will identify most of the Passive NFFEs. The identification of Passive NFFE is a key concept which runs consistently not only through the U.S. Treasury version of FATCA, but also the IGAs, the latest FINCEN proposal (RIN 1506-AB25 issued July 30, 2014) and the CRS.

Passive NFFEs identify themselves as such in Part 1 Line 5 of the W-8 BEN-E. Where an entity declares itself a Passive NFFE in Part 1 Line 5 of the W-8 BEN-E, it has to complete part XXVI. Passive NFFEs are unique in that they have to declare either their U.S. beneficial owners or controlling persons on the W-8 BEN-E for the declaration to be valid. For the avoidance of doubt, the 2016 W-8BEN-E specifically includes mention of the possibility of a applicable IGA: “If providing the form to an FFI treated as a reporting Model 1 FFI or reporting Model 2 FFI, an NFFE may also use this Part for reporting its controlling U.S. persons under an applicable IGA”.

In most IGA Model 1 countries the concept of beneficial ownership is replaced by the pre-existing KYC/AML in that particular jurisdiction. In general, the concept of beneficial ownership is replaced in IGA Model 1 countries by the concept of “controlling persons” who own or control 25 percent of the entity. More accurately, in an IGA Model 1 country the U.S. beneficial ownership concept is replaced by whatever the rules are under that jurisdiction’s KYC/AML. Generally, but not always, this will be the controlling persons of at least 25 percent.

Moreover, the CRS looks to the controlling person. The latest FinCEN proposal that establishes regulations for U.S. financial institutions to apply FATCA in the U.S. includes both the “controlling person” and the “beneficial owner” concepts (see my Kluwer International Tax article of May 9, 2016: The Brave New World of AML and Tax Compliance Overlap for Tax Status Certification for FATCA, CRS and the EU. Why are so many compliance officers getting it wrong?).

32 categories to choose one from

  1. Nonparticipating FFI (including a limited FFI or an FFI related to a Reporting IGA FFI other than a deemed-compliant FFI, participating FFI, or exempt beneficial owner).
  2. Participating FFI.
  3. Reporting Model 1 FFI.
  4. Reporting Model 2 FFI.
  5. Registered deemed-compliant FFI (other than a reporting Model 1 FFI, sponsored FFI, or nonreporting IGA FFI covered in Part XII). See instructions.
  6. Sponsored FFI. Complete Part IV.
  7. Certified deemed-compliant nonregistering local bank. Complete Part V.
  8. Certified deemed-compliant FFI with only low-value accounts. Complete Part VI.
  9. Certified deemed-compliant sponsored, closely held investment vehicle. Complete Part VII.
  10. Certified deemed-compliant limited life debt investment entity. Complete Part VIII.
  11. Certified deemed-compliant investment advisors and investment managers. Complete Part IX.
  12. Owner-documented FFI. Complete Part X.
  13. Restricted distributor. Complete Part XI.
  14. Nonreporting IGA FFI. Complete Part XII.
  15. Foreign government, government of a U.S. possession, or foreign central bank of issue. Complete Part XIII.
  16. International organization. Complete Part XIV.
  17. Exempt retirement plans. Complete Part XV.
  18. Entity wholly owned by exempt beneficial owners. Complete Part XVI.
  19. Territory financial institution. Complete Part XVII.
  20. Nonfinancial group entity. Complete Part XVIII.
  21. Excepted nonfinancial start-up company. Complete Part XIX.
  22. Excepted nonfinancial entity in liquidation or bankruptcy. Complete Part XX.
  23. 501(c) organization. Complete Part XXI.
  24. Nonprofit organization. Complete Part XXII.
  25. Publicly traded NFFE or NFFE affiliate of a publicly traded corporation. Complete Part XXIII.
  26. Excepted territory NFFE. Complete Part XXIV.
  27. Active NFFE. Complete Part XXV.
  28. Passive NFFE. Complete Part XXVI.
  29. Excepted inter-affiliate FFI. Complete Part XXVII.
  30. Direct reporting NFFE.
  31. Sponsored direct reporting NFFE. Complete Part XXVIII.
  32. Account that is not a financial account.

FFIs Covered by an IGA and Related Entities

A reporting IGA FFI resident in, or established under the laws of, a jurisdiction covered by a Model 1 IGA should check “Reporting Model 1 FFI.” A reporting FFI resident in, or established under the laws of, a jurisdiction covered by a Model 2 IGA should check “Reporting Model 2 FFI.”

If the FFI is treated as a registered deemed-compliant FFI under an applicable IGA, it should check “Nonreporting IGA FFI” rather than “registered deemed-compliant FFI” and provide its GIIN in Part XII, line 26.

An FFI that is related to a reporting IGA FFI and that is treated as a nonparticipating FFI in its country of residence should check the box for nonparticipating FFI in line 5. An FFI that is related to a reporting IGA FFI and that is a participating FFI, deemed-compliant FFI, or exempt beneficial owner under the U.S. Treasury regulations or an applicable IGA should check the appropriate box for its chapter 4 status. 

Requirement to Provide a GIIN

If the entity is in the process of registering with the IRS as a participating FFI, registered deemed-compliant FFI, reporting Model 1 FFI, reporting Model 2 FFI, direct reporting NFFE, or sponsored direct reporting NFFE, but has not received a GIIN, it may complete this line by writing “applied for.” However, the person requesting this form must receive and verify the GIIN within 90 days.

For payments made prior to January 1, 2015, a Form W-8BEN-E provided by a reporting Model 1 FFI need not contain a GIIN. For payments made prior to January 1, 2016, a sponsored direct reporting NFFE or sponsored FFI that has not obtained a GIIN must provide the GIIN of its sponsoring entity in line 16. 

501(c) Organization

Only foreign entities that are tax-exempt under section 501 should check the 501(c) organization “Tax-exempt organization” box. Such organizations should use Form W-8BEN-E only if they are claiming a reduced rate of withholding under an income tax treaty or a code exception other than section 501. If claiming an exemption from withholding under code section 501, then it must submit Form W-8EXP to document the exemption and chapter 4 status. 

Non-Profit Organizations Covered by an IGA

A non-profit entity that is established and maintained in a jurisdiction that is treated as having in effect a Model 1 IGA or Model 2 IGA, and that meets the definition of Active NFFE under Annex I of the applicable IGA, should not check a box for its status on line 5. 

Completion of Parts IV through XXVIII

An entity should complete only one part of Parts IV through XXVIII certifying to the chapter 4 status. But an entity that selects nonparticipating FFI, participating FFI, registered deemed-compliant FFI, reporting Model 1 FFI, reporting Model 2 FFI, or direct reporting NFFE (other than a sponsored direct reporting NFFE) is not required to complete any of the certifications in Parts IV through XXVIII.

Part IV Sponsored FFI
Part V Certified Deemed-Compliant Nonregistering Local Bank
Part VI Certified Deemed-Compliant FFI with Only Low-Value Accounts
Part VII Certified Deemed-Compliant Sponsored, Closely Held Investment Vehicle
Part VIII Certified Deemed-Compliant Limited Life Debt Investment Entity
Part IX Certified Deemed-Compliant Investment Advisors and Investment Managers
Part X Owner-Documented FFI
Part XI Restricted Distributor
Part XII Nonreporting IGA FFI
Part XIII Foreign Government, Government of a U.S. Possession, or Foreign Central Bank of Issue
Part XIV International Organization
Part XV Exempt Retirement Plans
Part XVI Entity Wholly Owned by Exempt Beneficial Owners
Part XVII Territory Financial Institution
Part XVIII Excepted Nonfinancial Group Entity
Part XIX Excepted Nonfinancial Start-Up Company
Part XX Excepted Nonfinancial Entity in Liquidation or Bankruptcy
Part XXI 501(c) Organization
Part XXII Non-Profit Organization
Part XXIII Publicly Traded NFFE or NFFE Affiliate of a Publicly Traded Corporation
Part XXIV Excepted Territory NFFE
Part XXV Active NFFE
Part XXVI Passive NFFE
Part XXVII Excepted Inter-Affiliate FFI
Part XXVIII Sponsored Direct Reporting NFFE
Part XXIX Substantial U.S. Owners of Passive NFFE
Part XXX Certification 

Part X – Owner-Documented FFI 

Line 24a. An owner-documented FFI must check the box to certify that it meets all of the requirements for this status and is providing this form to a U.S. financial institution, participating FFI, reporting Model 1 FFI, or reporting Model 2 FFI that agrees to act as a designated withholding agent with respect to the FFI identified on line 1. Then select either 24b or 24c. 

Line 24b. Check this box to certify that the documentation set forth in the certifications has been provided (or will be provided), including the owner reporting statement described in this line 24b, or 

Line 24c. Check this box to certify that the auditor’s letter has been provided (or will be provided).

Entities Providing Certifications Under an Applicable IGA

In lieu of the certifications contained in Parts IV through XXVIII of Form W-8BEN-E, a reporting Model 1 FFI or reporting Model 2 FFI in certain cases may request alternate certifications to document its account holders pursuant to an applicable IGA or it may otherwise provide an alternate certification to a withholding agent.

A withholding agent that is an FFI may provide a chapter 4 status certification other than as shown in Parts IX through XXVIII in order to satisfy its due diligence requirements under an applicable IGA. In such a case, attach that alternative certification to this Form W-8BEN-E in lieu of completing a certification otherwise required in Parts IV through XXVIII provided that:

1) the certification accurately reflects the chapter 4 status or under an applicable IGA; and

2) the withholding agent provides a written statement that it has provided the certification to meet its due diligence requirements as a participating FFI or registered deemed-compliant FFI under an applicable IGA.

An applicable IGA certification may be provided with the W-8BEN-E if determining chapter 4 status under the definitions provided in an applicable IGA and that certification identifies the jurisdiction that is treated as having an IGA in effect and describes the status as an NFFE or FFI in accordance with the applicable IGA.

However, if under an applicable IGA the entity’s status is determined to be an NFFE, it must still determine if it is an excepted NFFE under the FATCA Regulations. Additionally, the entity must comply with the conditions of its status under the law of the IGA jurisdiction.

For more indepth analysis than we can provide within this month’s article, along with 50 contributors, we analyzed the FATCA and the CRS compliance challenges.  Besides in-depth, practical analysis, we include examples, charts, time lines, links to source documents, and compliance protocols pursuant to IGAs and local regulations.  download my 118 page introductory analysis here

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Does the tax curriculum still make the grade?

Posted by William Byrnes on June 14, 2016


Universities must transform their tax curriculum and training to equip students with the skills needed for the job market of today and tomorrow.

By Giselle Weiss

At an EY event held last year in Zurich on the future of tax, one executive remarked that just 15 years ago the tax function was “a group of technical experts who knew the law.”

But the tax profession has evolved in the ensuing years, and universities that educate the pipeline of talent now face the challenge of transforming their tax curriculum and training to equip students with the required skills for the job market of today and tomorrow.

The central function of the tax office has evolved from strategy and planning into risk management, says William Byrnes, professor of law and associate dean at Texas A&M University.

Ey-tax-magazineTexas A&M University is among the pioneers of change in tax education. In 2013, the State of Texas not only established a new law school at the university but also gave it carte blanche to create a new education model.

A risk management approach to tax means that the new model will by definition be multidisciplinary.

Financial and managerial accounting– and law– will still be important, of course.

But students will also need new “hard” skills involving big data and communications technologies and “soft” skills geared to working in multicultural settings both at home and abroad.

Employers expect entry-level employees to arrive with these skills already developed. Says Byrnes, “You don’t want to have people who are living in the ‘Stone Age’ (pre-2015) trying to work in a 2016-onward world.”

read EY’s groundbreaking report

Posted in Education Theory, Uncategorized | 1 Comment »

Drivers & Impacts of Derisking

Posted by William Byrnes on June 12, 2016


The FCA is interested in the circumstances around banks closing customers’ accounts, or restricting access for new customers, over the last few years. It wishes to know more about FCA UKwhat is driving account closure and how many customers, of which type, are affected. The FCA is also concerned as to whether ‘wholesale’ derisking and financial exclusion from the withdrawal of banking services is occurring, and if due consideration is being given to the merits of individual cases before a decision is made to terminate an existing account or not to grant a new account.

The FCA wishes to understand which impacted customers have faced difficulties, delays and account closures. The FCA believes these to include Small and Medium-sized Enterprises (SMEs), the FinTech and defence sectors, personal account holders (including minorities and vulnerable groups), and those who are discouraged from using the banking system.

Drivers of Derisking

Many banks told us that they needed to lower their overall risk profile, to realign their businesses and that they are paying closer attention to compliance since the global financial crisis. Further, we heard that derisking is partly a result of the higher costs of compliance and the increased amount of regulatory capital now required, and partly a response to criminal, civil and regulatory actions. These include regulatory settlements, including Deferred Prosecution Agreements (DPAs), especially those reached in response to AML/CFT failings.

There is also no doubt that banks are trying to do what they believe is expected of them under the risk based approach (RBA) to AML/CFT, in reducing the extent to which their services are abused for financial crime purposes, by on occasion exiting relationships that present too high a perceived risk of such abuse, regardless of the costs of compliance. These perceptions of risk stem from their own judgments, in part reflecting the signals emitted (or judged to be emitted) from the range of regulators and prosecutors who are salient to their institutions, and also the global rankings from the commercial agencies involved in risk judgments.

Higher compliance costs may also be reducing incentives for larger banks to maintain many interbank relationships, which previously were seen as providing extra cover or transactional options: a majority of the small and medium-sized banks surveyed reported difficulties, which in some cases have led to them cutting services to customers and to other banks.

We assess that other factors have combined with regulatory actions, higher compliance costs and perceived pressure from correspondent banks, to create a ‘perfect storm’ of changes which have struck banks during this decade. These include much higher capital requirements; higher liquidity thresholds and ultimately a tougher environment in which to achieve profitable relationships.

For the majority of our bank interviewees, this has resulted in a strategic review of business and functions, often in parallel with an over-arching review of compliance risk processes. In turn this has sometimes resulted in slimming down of business, resulting in many exits being driven by the assessment that relationships are ‘non-core’. So we are describing a compound situation in which a range of factors may be involved in many of the exits. Ultimately, banks may feel themselves entitled to do business or notdo business with whomever they like, subject to legal (including regulatory) requirements.

Achieving the perception of legitimacy and fairness of the regulatory system requires consistency and transparency when dealing with each type of customer. Established risk-based approaches to financial crime identify the risk associated with various factors such as sector, occupation, types of business; geography and jurisdiction risk; political risk; distribution channels; and product or services that customer requires or uses. However, by contrast to some other banking risks like consumer credit loss and fraud risks, there is not yet a generally agreed quantitative assessment methodology for assessing financial crime risk and it is difficult to determine to what extent the data are sufficient for this purpose, other than to make a broad subjective assessment.

Banks vary in their ability to ‘score’ particular customers, depending on the bank’s size, resources, geographic coverage and other factors. Decisions on what financial crime residual risks fall within acceptable parameters for a particular bank may be taken through an expression of financial crime risk appetite and/or as an output from customer risk assessment tools, using the broad risk factor categories.

Risk appetite statements often contain broad definitions of acceptable risk, such as ‘minimal tolerance for residual Financial Crime risk’, but we have also found examples where particular sectors are specifically mentioned. If this amounted to a complete prohibition it could be classified as ‘wholesale derisking’, but we have found few examples relating solely to AML/CFT issues. Reputational risk, bribery and corruption concerns and strategic business reasons also factor in to some banks ruling out the banking of certain sectors, for example the defence industry.

Download Drivers-impacts-of-derisking

Money Laundering, Asset Forfeiture and Recovery, and Compliance- A Global Guide (LexisNexis Matthew Bender updated quarterly) is an eBook designed to provide the compliance officer, BSA counsel, and government agent with accurate analyses of the AML/CTF Financial and Legal Intelligence, law and practice in the nations of the world with the most current references and resources.  Special topic chapters will assist the compliance officer design and maintain effective risk management programs.  Over 100 country and topic experts from financial institutions, government agencies, law, audit and risk management firms have contributed analysis to develop this practical compliance guide

Posted in Financial Crimes, Money Laundering | Tagged: , , | Leave a Comment »

EU & US Sign “Umbrella” agreement to protect personal data transferred by law-enforcement authorities for detecting criminal offences, like tax evasion, & terrorism

Posted by William Byrnes on June 9, 2016


The EU-U.S. Ministerial Meeting on Justice and Home Affairs, hosted by the Netherlands Presidency of the Council of the European Union, took place in Amsterdam.  This meeting is EU Commission

Signing of the “Umbrella” agreement represented a major step forward in EU-U.S. relations.  The agreement sets high standards for the protection of personal data transferred by law-enforcement authorities.  It also strengthens legal certainty and enhances the rights of citizens which in turn will facilitate EU-U.S. cooperation to combat crime, including terrorism.  The EU and the U.S. are committed to work together in the implementation of this agreement to ensure that it benefits both citizens and law enforcement cooperation.  The next step will be to seek approval by the European Parliament.

During the ministerial meeting, the delegations focused on ways to address the migration crisis, on their respective visa policies, and on information sharing in the context of security, on counterterrorism policies and terrorist financing, on money laundering, data protection and on practical cooperation to tackle transnational organised crime.  The exchange of views covered issues including the protection of refugees, global resettlement efforts, effective border management and dismantling organised criminal migrant smuggling networks.

The EU and the U.S. first discussed ways to address global migration by developing safe, regular and orderly migration processes whilst ensuring international protection for those who need it.  The discussion focused on opportunities to mutually reinforce and coordinate their actions in this respect while also establishing high security standards.  They agreed that the current migration and refugee challenges require global solutions through increased international cooperation and regional action.  In this respect they reaffirmed their commitment to work together in the lead-up to the upcoming United Nations General Assembly high level meeting addressing large movements of refugees and migrants and to the U.S. hosted Leader-Level Refugee Summit, to be held in September 2016 in New York.

The EU and U.S. exchanged views on visa issues and the respective legal frameworks.  They agreed to maintain their constructive dialogue at all levels to achieve mutually beneficial solutions.

The EU and the U.S. discussed initiatives to improve counterterrorism efforts, including border security, screening of travellers and information sharing, as well as cooperation to better identify terrorist and foreign fighter travel.  They also agreed to reinforce their dialogue on chemical, biological, radioactive and nuclear material and on its possible use by terrorist networks.  They discussed legislative initiatives to improve information sharing, and to streamline efforts to combat terrorist financing and money laundering.

They also discussed a five year review of the 2010 EU-U.S. Mutual Legal Assistance Treaty, a key mechanism for transatlantic criminal justice cooperation.  The EU and the U.S. confirmed that the treaty is working effectively and identified areas for further practical improvement.  The U.S. and the EU committed to implementing those recommendations.  These recommendations include enhancing training and specialisation of practitioners, improving the way joint investigation teams work together, using technology to avoid delays, and making it easier to track criminal proceeds by identifying bank accounts.  Facilitating access to electronic evidence is a particular concern of the review, and the participants committed to improving their practices through which they obtain such evidence.

Following up to the commitment made at the EU–U.S. Summit in March 2014, the EU and the U.S. reiterated their desire to tackle jointly the issue of transnational child sex offenders, acknowledging the operational conclusions of an EU–U.S. expert meeting held in September 2015.  The EU and the U.S. recognized the importance of improving operational cooperation to protect children from transnational sex offenders.

Concluding the discussions, Europol and the U.S. jointly presented the results of a successful EU–U.S. operation that brought together law enforcement authorities from across Europe and the US to dismantle an important drug trafficking network and seize the proceeds of their crimes.

The EU and the U.S. committed to continuing their regular dialogue and to hold another ministerial meeting in the second half of 2016.

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More than 1,700 entities disclosed on the Panama Papers leak have also registered with the IRS that they comply with FATCA

Posted by William Byrnes on May 10, 2016


FATCA & CRS Training. Advice. Consultancy.

Following yesterday’s Panama Papers Leak it can be seen that at least 1,700 legal entities on that list are also on the IRS list that “includes all foreign financial institutions and branches with approved FATCA registration at the time the list is compiled”.

This is how it breaks down by jurisdiction:

Jurisdiction Number
ANGUILLA 15
ANTIGUA AND BARBUDA 3
ARGENTINA 1
AUSTRALIA 14
AUSTRIA 1
BAHAMAS 34
BARBADOS 4
BELIZE 7
BERMUDA 34
BRAZIL 3
BRUNEI DARUSSALAM 2
BULGARIA 1
CANADA 12
CAYMAN ISLANDS 143
CHILE 1
CHINA 1
COLOMBIA 2
COOK ISLANDS 13
COSTA RICA 1
CURACAO 4
CYPRUS 31
FINLAND 1
France 5
GERMANY 6
GIBRALTAR 108
GUERNSEY 145
HONG KONG 63
INDIA 1
IRELAND 8
ISLE OF MAN 63
ISRAEL 2
JAMAICA 1
JAPAN 1
JERSEY 138
LEBANON 2
LIBERIA 7
LIECHTENSTEIN 41
LUXEMBOURG 29
MACAO 1
MALAYSIA 5
MALTA 16
MARSHALL ISLANDS 1
MAURITIUS 48
MONACO

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