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Leveraging Artificial Intelligence for Tax Authority Auditing, Enforcement, and Detection of Taxpayer Evasion

Posted by William Byrnes on August 25, 2026

Tuesday 25 August, Workshop 1, 5:30 pm – 6:30 pm. Jesus College, Cambridge University (these are my lecture notes for today’s session, matching my slide deck).

Professor William Byrnes, Texas A&M University School of Law; Co-author, Money Laundering, Asset Forfeiture and Recovery and Compliance: A Global Guide (Lexis); Co-author, FATCA & CRS Compliance (Lexis)

Howdy!

Introduction: The Paradox and its Counter Paradox

Tax authorities today face a paradox. We possess more information than any revenue administration in history—electronic returns, e-invoices, customs declarations, financial reports, property records, beneficial-ownership data, automatic exchanges of information, and digital-asset reporting. Yet the volume and complexity of that information exceed the practical capacity of human auditors to analyze it unaided.

Artificial intelligence addresses that mismatch. It can identify patterns across millions of records, prioritize cases, trace relationships among entities, detect transactions inconsistent with economic reality, and help auditors retrieve and summarize evidence. AI is therefore not merely an automation tool. It is a mechanism for converting data into enforcement capacity. Based on the research and analysis of my Texas A&M colleague, Pramod Kumar, and me, we identify three principal drivers: (1) efficiency gains, (2) resource optimization, and (3) improved detection of fraud and evasion.

But the same capability creates a second paradox. The more effective a tax authority becomes at observing, profiling, and predicting taxpayer conduct, the greater its responsibility to explain how state power is being exercised. A tax authority can be technically accurate and still act unlawfully. It can increase audit yield while producing discriminatory outcomes. It can place a human at the end of an automated process while giving that person no realistic ability to challenge the machine.

So the question for this class is not, “Should tax authorities use AI?” The evidence shows that they already do. The better question is:

How can a tax authority use AI to improve compliance while preserving legality, taxpayer rights, human judgment, and public trust?

The OECD describes tax authorities as experienced public-sector users of AI, particularly in fraud detection, risk assessment, decision support, and taxpayer service. The IMF’s guidance for senior officials similarly treats AI adoption as an operational and governance decision requiring legal and ethical analysis, use-case assessment, strategy, and risk management.

Part I — What “AI” means in tax administration

For today’s purposes, AI is a machine-based system that infers from its inputs how to generate predictions, recommendations, content, or decisions. In tax administration, that definition embraces a family of tools rather than a single technology: rules engines, supervised and unsupervised machine learning, natural-language processing, network analysis, computer vision, generative AI, and emerging agentic systems.

IA. Five Levels of Analytical Capability

It is useful to distinguish five levels of analytical capability:

Rules-based automation applies an explicit test: for example, flag a refund above a threshold where required third-party documentation is missing.
Supervised learning studies previously labeled audits or fraud cases and predicts which new cases resemble productive historical cases.
Unsupervised learning searches unlabeled data for clusters, outliers, and relationships that officials did not specify in advance.
Generative AI summarizes, retrieves, translates, or drafts material from a controlled knowledge base.
Agentic AI can plan and execute multi-step tasks with greater autonomy—for example, gathering records, reconciling transactions, preparing an issue list, and routing the case for review. Greater autonomy must mean stronger authorization limits, logging, and intervention controls—not less oversight.

IB. The Distinct Tax Audit Steps: Selection, Investigation, and Decision

A fundamental distinction is among selection, investigation, and decision. A model may select a return for review. It may then help an auditor gather or organize evidence. But the ultimate assessment, penalty, collection measure, or referral for prosecution remains a legal decision. We should resist designing one undifferentiated “AI enforcement system.” Each stage has different evidentiary standards, legal authority, and potential consequences.

With that vocabulary in place, let us follow an AI system from raw data to an enforcement outcome.

The following diagram illustrates the essential separation between lawful inputs, machine analysis, meaningful human judgment, proportional response, taxpayer recourse, and model monitoring.

Figure 1: A responsible tax-AI lifecycle separates model-generated risk signals from human decisions, taxpayer safeguards, and continuous independent monitoring.

Part II — The practical AI toolkit

1. Risk scoring and predictive audit selection

Eight years ago, my colleague here today, Dr. Dionysis Demetis, and I gave a similar workshop: tax auditing with big data and machine learning. Our main point in that workshop was to show the capabilities of big data analytics, as they existed in 2018, for risk scoring to allocate government resources.

Risk scoring asks: Which returns, transactions, or taxpayers merit scarce human attention? Inputs may include filing history, sector benchmarks, related-party dealings, customs activity, e-invoices, third-party reports, prior examinations, and payment behavior.

The output should not be “this taxpayer is guilty.” It should be a ranked lead accompanied by reason codes, confidence information, and the relevant discrepancies. A defensible model might say: reported gross margin materially differs from comparable filers; purchases reported by counterparties exceed purchases claimed; and declared payroll is inconsistent with operational scale. That is actionable intelligence. A bare score of “94” is not.

Case Use Example: The U.S. IRS supplies a useful current example. TIGTA reports that the IRS uses AI-related models for individual-return classification, corporate line-anomaly analysis, and large-partnership selection. The Line Anomaly Recommender estimates expected relationships among corporate-return line items and assigns risk based on deviations; the Large Partnership Compliance model identifies outliers across complex partnership filings. Importantly, outputs undergo human classification and expert review.

The lesson is not that AI should maximize assessments. It should reduce unproductive audits and unnecessary taxpayer burden while preserving representative or random audit programs needed to understand the compliance population. TIGTA found that the IRS had not yet established sufficient processes to demonstrate that some AI models outperformed prior methods in real-world conditions. It recommended incorporating feedback from examination outcomes, defining performance metrics, using ensemble methods where appropriate, and monitoring for model drift.

2. Anomaly detection and cross-database matching

Anomaly detection asks a different question: What does not fit? An unsupervised model may compare a taxpayer with its own history, its industry, or economically similar entities. It may detect:

revenue growth without corresponding labor, inventory, or consumption changes;
deductions that move independently of business activity;
VAT purchases without corresponding seller declarations;
a refund claim inconsistent with the taxpayer’s supply chain;
property acquisitions inconsistent with reported income; or
repeated changes in identity, address, director, or bank account associated with short-lived companies.

Case Use Examples: Spain’s approach illustrates cross-database matching: property ownership, land-registry information, estate-agent records, and online rental advertisements can be compared with tax filings. The UK’s data environment similarly combines property, travel, border, vehicle, and rental information to identify undeclared income or unexplained asset acquisition.

BUT caution is critical! This, Pramod Kumar and I argue, is a critical element of good AI tax audit governance: an inconsistency may reflect timing, classification, erroneous third-party data, or a lawful business explanation.

CAUTION: The AI system should preserve the underlying source and permit correction rather than convert mismatch into presumption. [Minority Report movie sci-fi reference. But sci-fi turned real life: UK Postmaster scandal that, to this day, accountability has not been upheld]

3. Network and graph analysis

Many sophisticated schemes are not visible at the taxpayer level. They exist in the relationships among taxpayers.

Graph analysis represents taxpayers, companies, directors, addresses, bank accounts, invoices, customs declarations, and beneficial owners as nodes connected by transactions or affiliations. It can reveal circular invoice chains, repeated use of common contact information, rapidly changing shell entities, and clusters that move credits or losses without a plausible commercial pattern.

Case Use Example: This is especially valuable for VAT carousel fraud and false invoicing. A traditional audit might examine one invoice. But my colleague today Dr, Demetis was one of the very first experts in Graph and Relationship analysis which asks: (1) whether the invoice sits inside a circular or rapidly expanding network; (2) whether the supplier lacks employees, premises, or corresponding purchases; (3) whether the same bank account or address appears across nominally independent firms; and (4) whether value repeatedly returns to its origin.

If you saw our workshop in 2018 wherein Dr. Demetis presented his heat mapping exercise based on a substantial pool of the bank accounts for a EU member state, and movements among accounts, you’ll appreciate the mass data analytics capability of machine learning, but that it must be translated into something ‘usable’ by our human analytical abilities, such as visual representation via a graph and relationship analysis.

Case Use Example: China’s Golden Tax system uses data mining and anomaly detection across mandated e-invoice data to identify suspicious VAT refunds, shell companies, and illicit fapiao invoicing networks. Brazil’s electronic invoice and SPED bookkeeping environment similarly enables large-scale anomaly analysis, with human auditors validating findings before notices are issued.

4. Computer vision, images, and geospatial analysis

AI can also analyze what is visible but not declared.

Case Use Study: Greece’s Independent Authority for Public Revenue has used satellite-image analysis, that we spoke about in our 2018 workshop, to identify potentially undeclared swimming pools and property improvements and compare them with declarations. Image recognition can similarly support property-tax mapping, construction monitoring, agricultural assessments, and customs inspection.

CAUTION: Pramod Kumar and I caution in our forthcoming book: The legal and operational controls should be explicit. What imagery may be used? Is it public, acquired under statute, or purchased from a vendor? How recent and accurate is it? Can the model distinguish permanent improvements from temporary objects or visual artifacts? Before assessment, an official should verify the image, ownership, date, and governing tax rule.

5. Generative AI for auditors and taxpayers

Generative AI is most defensible where it reduces cognitive burden without determining liability. A secure system can summarize contracts, extract clauses, compare a taxpayer submission against an information request, retrieve relevant guidance, draft a factual chronology, translate correspondence, or create a first draft of an examination memorandum.

For taxpayer service, virtual assistants can answer routine questions, route correspondence, explain filing obligations, and identify omissions before submission. These functions can improve compliance because many errors arise from complexity rather than intent. Your materials emphasize chatbots and workflow support alongside enforcement; a reminder that AI should make lawful compliance easier, not merely make enforcement more powerful.

But a generative answer must not silently become official law. The system should use approved sources, display citations, distinguish authoritative law from guidance, preserve prompts and outputs where appropriate, protect return information, and require human approval for consequential communications.

Part III — How AI exposes particular forms of tax evasion

VAT and refund fraud

AI can reconcile invoice-level seller and purchaser records; detect unusual refund ratios; trace circular trading; identify missing traders; and rank networks by expected fiscal exposure. China and Brazil demonstrate the value of e-invoice infrastructure, while India has applied transaction-network analysis to shell or “bogus” firms issuing false invoices.

The practical sequence should be: mismatch → network analysis → evidence retrieval → human verification → proportionate intervention. A prompt asking a taxpayer to correct a discrepancy may be appropriate before a full audit where the risk and likely harm are limited.

Offshore noncompliance

Automatic exchange of information makes foreign account data available; AI can then match names and entities, identify non-filers, reconcile balances with declared income, and prioritize cases. Based on my research for my Lexis tax treatise called FATCA & CRS Compliance, I reported here in my 2024 Cambridge lecture about the impact from 123 million financial accounts and EUR 12 trillion of assets shared within the referenced automatic exchange of information environment; and I described as a case study about Peru receiving information from 40 jurisdictions concerning 43,000 citizens and 57,000 foreign accounts.

CAUTION: Yet ownership matching is probabilistic. Transliteration, joint ownership, trusts, and duplicated names can produce false links. Entity-resolution confidence must therefore be reviewable before contact or assessment.

Transfer pricing and complex groups

AI can compare related-party margins, customs values, country-by-country patterns, royalty flows, service charges, and year-to-year changes. Network tools can map legal ownership against functional and transaction flows. But officials should make the classroom distinction explicit:

A transfer-pricing anomaly is not itself evasion—and tax avoidance is not automatically fraud.

AI identifies questions: persistent losses in a distributor, margins outside a defensible range, unexplained payments to low-tax affiliates, or trade values inconsistent with comparable goods. But it should not be relied upon for ‘judgment’. Human auditors must still apply the law, perform functional analysis, evaluate comparability, and distinguish error, dispute, avoidance, and intentional evasion. The source materials emphasize the scale and complexity of intercompany transfers and the value of specialized audit capacity rather than treating every adjustment as proof of misconduct.

Part IV — Comparative governance models

Jurisdiction	Operational approach	Principal governance lesson
European Union	GDPR, administrative law, and the EU AI Act’s risk-based framework operate together.	GDPR Article 22 protects against solely automated legally significant decisions and provides safeguards including human intervention and contestability. Tax enforcement is not expressly listed in Annex III of the AI Act, so classification requires careful use-case analysis; nevertheless, its controls—data quality, logging, documentation, human oversight, accuracy, and cybersecurity—are a useful benchmark.
United States	AI supports classification and audit selection within a broader framework of return confidentiality, the Privacy Act, administrative law, appeals, and judicial review.	Oversight is predominantly institutional and ex post. TIGTA stresses outcome measurement and drift monitoring; GAO reported 126 active IRS AI use cases as of June 2025 but identified incomplete inventories, skills gaps, and lack of agency-wide investment management.
United Kingdom	HMRC Connect aggregates diverse data and generates intelligence for human officers; the jurisdiction favors sectoral and transparency-oriented governance.	Consequential outputs must remain explainable and contestable; publication of algorithmic transparency records offers a replicable accountability mechanism.
India	AI/ML-supported scrutiny selection draws on income, GST, high-value transaction, property, and securities data.	India relies more heavily on constitutional privacy, equality, natural justice, notification, assessment participation, and judicial review than on a GDPR-style statutory right against automated decisions.
China	Golden Tax uses e-invoice analytics, risk alerts, and cross-checking with customs, bank, and VAT data.	PIPL Article 24 emphasizes transparency, fairness, impartiality, explanation, and protections against unreasonable differential treatment, though oversight is more centralized and administrative.
Brazil	Receita Federal uses electronic invoice and SPED analytics while auditors validate findings.	LGPD Article 20 supplies review and explanation rights for decisions based solely on automated processing; the model combines advanced data use with contestability.
Japan	Data analytics and taxpayer-assistance tools operate under privacy law, administrative review, and largely soft-law AI guidance.	Executive responsibility, professional norms, and human validation can support accountability, but soft law should not substitute for clear remedies where consequences grow.

Two Dutch cases should shape every implementation discussion. In SyRI, a court rejected an opaque welfare-fraud risk system on privacy and human-rights grounds. In the childcare-benefits scandal, algorithmic profiling—including problematic use of nationality—contributed to wrongful treatment of thousands of families and prolonged difficulty obtaining human correction. These were not merely defective models; they were defective administrative systems in which suspicion hardened into adverse action and review failed.

I already mentioned the UK Postmaster scandal. The UK Postmaster scandal involved accounting software developed by Fujitsu corporation that turned out to be ‘buggy’ to say the least. In briefest summary, the system generated a consistent flow of false positives that local office postmasters were stealing. The UK government prosecuted over 900 postmasters for theft and fraud over a six-year period based on the software outputs, bankrupting most of these postmasters, imprisoning many; at least 13 postmaster suicides were attributed to these prosecutions. We only know now that the system was, as I politely call it, buggy, because of intense investigative journalism.

U.S. academic research has focused on bias evidence, raising a related concern: an algorithm need not use race explicitly to create racial disparity. A comparative survey reports audit-rate disparities associated with models that emphasize certain low-income credits. The governance response is not to evaluate intent alone; it is to measure false-positive rates, audit burdens, no-change outcomes, and other effects across legally appropriate taxpayer segments, and only then investigate causal pathways.

Part V — A practical implementation blueprint

So let me bring my address to a close, and then we can dive into the workshop discussion. Pramod Kumar and I recommend ten controls for any tax authority deploying consequential AI.

Establish statutory and policy authority. Document the legal basis, purpose, permissible data, decision stage, retention period, and responsible official.
Maintain an enterprise AI inventory. Include internally developed, vendor-provided, sensitive, generative, and experimental systems. GAO’s IRS review demonstrates that incomplete inventory information prevents strategic oversight.gdpr-info+1
Conduct an algorithmic impact assessment. Evaluate privacy, equality, due process, security, accuracy, affected populations, alternatives, and remedies before deployment.
Use representative and legally permissible data. Document provenance, missingness, label quality, and proxy variables. More data are not always better data.
Define success before piloting. Measure additional productive leads, no-change audits, false positives, processing time, taxpayer burden, appeal reversals, and distributional effects—not gross assessments alone.
Require meaningful human review. The reviewer must understand the reasons, access underlying evidence, possess authority to override, and record the independent decision.
Provide explanation and correction. Protect sensitive anti-evasion parameters, but communicate the substantive discrepancy, data sources that may be challenged, and route to reconsideration.
Create model documentation and logs. Maintain model cards, versions, training periods, features, thresholds, reason codes, overrides, access records, vendor changes, and incident reports.
Monitor outcomes and drift. Compare model recommendations with completed audit results; test error rates and burden; retrain or suspend models when laws, taxpayer behavior, or data relationships change. TIGTA made precisely this feedback-and-measurement recommendation.tigta+1
Preserve institutional capability. Pair auditors, lawyers, data scientists, privacy officers, cybersecurity professionals, taxpayer-service experts, and appeals personnel. Procurement must not transfer practical control of public authority to an opaque vendor.

Inevitably, the Ombudsman Office of a Tax Authority must have the authority and resources necessary to perform its role in the context of AI leveraging for audit. In the USA, we have the Taxpayer Advocate’s Office and TIGTA. But both would need a budget to be able to employ computer engineering technicians capable of ‘kicking the tires’ and challenging AI systems to determine annually whether it is doing what we want it to do, not doing what we do not want it to do, and whether appropriate governance and legal safeguards, like taxpayer rights, are being exercised.

QUESTION: Who, by name or office, is accountable when the model is wrong—the model owner, data steward, auditor, vendor, chief information officer, or agency head? If the organization cannot answer that question before deployment, it is not ready to deploy.

Part VI — The next frontier

[Dionysis – this is your bailiwick so feel free to jump in] Generative and agentic systems will move beyond scoring into multi-stage case preparation. They may collect approved data, reconcile documents, identify issues, draft correspondence, schedule follow-up tasks, and learn from outcomes. That could greatly increase auditor capacity—but it also creates risks of hallucinated facts, unauthorized tool use, over-collection, automation bias, and actions taken before an official notices.

The appropriate architecture is bounded autonomy: approved data only; role-based tool permissions; no autonomous assessment, penalty, seizure, disclosure, or referral; mandatory citations to source records; complete logs; confidence and exception reporting; and a readily available stop mechanism. The IMF, for example, treats AI strategy, use-case risk assessment, policy, and operational introduction as inseparable.

International coordination is also advancing. The U.N. Subcommittee on Tax Administration and Artificial Intelligence, established in October 2025, is preparing a practical guide covering fraud detection, risk assessment, taxpayer service, governance, data and gender bias, integrity, and confidentiality, with a draft due by October 2027 and a particular focus on developing countries. The OECD is examining AI across tax administration within its broader work on trustworthy government AI, while the IMF provides a use-case risk-assessment methodology for senior officials.

Finally, in our article Taxing the Intelligence Age published by Tax Notes, my colleague Prof. Pramod Kumar and I argued for a wider policy warning: AI policy can become fragmented when different levels of government pursue overlapping instruments without a common base, allocation rule, or coordinating mechanism. The administrative analog is clear—do not allow every audit division to procure its own model, use incompatible definitions, and create disconnected accountability regimes.

Conclusion

Artificial intelligence can help tax authorities see what was previously invisible: a hidden invoice network, an offshore account mismatch, an unexplained property improvement, an anomalous partnership structure, or a pattern distributed across millions of transactions.

But AI does not determine what the law means. It does not decide whether evidence is sufficient. It does not supply proportionality, judgment, compassion, or procedural fairness.

The proper formula is therefore:

High-quality data, narrow lawful purpose, explainable analytics, meaningful human judgment, proportionate intervention, taxpayer recourse, and continuous accountability.

The best AI-enabled tax authority will not be the one that generates the highest number of audit flags. It will be the one that identifies genuine noncompliance more accurately, reduces unnecessary burdens on compliant taxpayers, explains its actions, corrects its mistakes, and earns public confidence.

Our governance takeaway for today: AI should strengthen the rule of law, not become an alternative to it.

Discussion questions for tax officials in workshop today

Which compliance problem in your jurisdiction has sufficiently reliable data to justify an AI pilot?
What should count as success: additional assessments, collections, fewer no-change audits, deterrence, or reduced taxpayer burden?
At what point must a taxpayer be told that AI materially influenced the case?
What explanation can be provided without disclosing parameters that would enable gaming?
How will the authority test for indirect or proxy discrimination?
Which actions must never be delegated to an autonomous system?
Can the designated human reviewer genuinely reject the model—or will the reviewer merely rubber-stamp it?
How should closed audits, appeals, and reversals feed back into model validation?
What capability must remain in-house when a system is vendor-supplied?
If an AI-supported action is wrong, who is accountable and what remedy will the taxpayer receive?

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Taxing Criminals: An Overlooked Weapon in the Fight Against Economic Crime

Posted by William Byrnes on August 25, 2026

Tuesday 25th August, Plenary Session 5: Taxing Criminals, Jesus College, Cambridge University

Professor William Byrnes, Texas A&M University School of Law
Co-author, Money Laundering, Asset Forfeiture and Recovery and Compliance: A Global Guide

Howdy again! to the distinguished ministers, judges, prosecutors, revenue commissioners, bankers, compliance professionals, colleagues, and friends who each year traverse the globe to join together here at Jesus College, by Barry’s invitation.

It is an honor to participate in this symposium dedicated to a simple but profoundly important proposition: crime should not pay.

That proposition is at the heart of asset recovery, forfeiture, anti-money laundering regulation, sanctions enforcement, and international cooperation.

Yet today I would like to discuss a tool that often receives less attention than confiscation or criminal prosecution. I want to talk about taxation.

The idea of taxing criminals sounds counterintuitive. Albeit not to former tax authority counsel on our panel today, like Caroline and James.

Why would governments seek tax revenue from drug traffickers, corrupt officials, organized crime groups, cybercriminals, fraudsters, sanctions evaders, or money launderers?

The answer is straightforward. Because criminals make money. And governments tax income. The fundamental principle is not that tax legitimizes crime. Rather, the principle is that illegal income is still income. Criminals should not enjoy better tax treatment than law-abiding citizens.

And throughout history, tax law has succeeded where other enforcement tools have failed.

We all know the most famous example. Al Capone evaded murder convictions, extortion charges, and racketeering allegations. Yet he ultimately went to prison for tax evasion. The lesson has echoed through nearly a century of enforcement practice. Sometimes the tax authority can establish financial wrongdoing when criminal investigators cannot establish the predicate offence beyond a reasonable doubt.

This principle remains relevant today.

In many cases involving corruption, cybercrime, human trafficking, narcotics trafficking, illegal gambling, sanctions evasion, or sophisticated money laundering networks, criminal prosecution may be delayed by jurisdictional disputes, evidentiary challenges, political interference, or international barriers.

Yet the financial footprint frequently remains visible.

Criminals may hide their identity.
They may hide their assets.
They may hide their transactions.

But they cannot hide their wealth as easily.

The tax system follows wealth. It follows expenditure. It follows unexplained increases in net worth. It follows luxury consumption. It follows discrepancies between declared income and observed economic reality.

Taxation therefore provides governments with a distinct enforcement advantage.

Indeed, it creates what I call a triple threat framework.

First, tax authorities can assess previously undeclared income.
Second, tax authorities can impose penalties and interest that, in the US context of FBAR, for example, may total more than 100% of the underlying asset value.
Third, tax authorities can provide intelligence and evidence that supports broader criminal investigations.

In effect, taxation becomes both a recovery mechanism and an investigative gateway.

However, we should not think of taxing criminals merely as an additional revenue source. Revenue recovery is welcome. But deterrence is the larger objective.

Organized crime functions as a commercial enterprise. Criminal organizations invest capital, assess risk, diversify activity, and seek return on investment. Their decision-making is fundamentally economic. If we want to change behavior, we must change economics.

When criminals face the prospect of confiscation alone, they may perceive a manageable risk.
When they face imprisonment alone, they may perceive a manageable risk.
But when they face imprisonment, confiscation, civil recovery, tax assessments, penalties, interest, and continuing financial scrutiny, the economic calculation changes dramatically.

The expected return falls. The risk-adjusted reward collapses. The business model becomes less attractive. This is why coordination among government agencies matters.

Historically, many countries have maintained artificial boundaries between tax authorities, customs agencies, financial intelligence units, anti-corruption agencies, prosecutors, and police. Criminals do not respect those boundaries.

Why should governments?

The future belongs to integrated financial crime strategies.

Tax authorities possess extraordinary analytical capabilities. Revenue services often maintain the most comprehensive financial datasets available within government. Increasingly, they possess advanced data analytics, artificial intelligence systems, network analysis tools, and cross-border information-sharing mechanisms.

In many respects, tax administrations have become some of the most sophisticated financial intelligence organizations in the world. The challenge is not information. The challenge is integration.

Revenue agencies see indicators.
Banks see transactions.
FIUs see suspicious reporting.
Customs authorities see trade anomalies.
Law enforcement sees criminal networks.

Only by combining these perspectives do we see the full picture.

This brings me to the role of the private sector.

Many of the leaders present today represent banks and other financial institutions. You are not merely reporters of suspicious transactions. You are strategic partners in protecting the integrity of the global financial system.

The same transactional information that supports anti-money laundering monitoring frequently supports tax enforcement.
The same beneficial ownership information that identifies money laundering risk frequently identifies tax evasion risk.
The same analytical tools used to detect sanctions evasion frequently reveal concealed criminal profits.

Financial institutions therefore stand at the intersection of tax compliance, AML compliance, fraud prevention, sanctions enforcement, and asset recovery.

The future requires breaking down silos not only within governments but also between governments and the private sector.

Technology now gives us opportunities that previous generations of investigators could scarcely imagine.

Artificial intelligence can identify behavioral anomalies across vast datasets.
Blockchain analytics can trace cryptocurrency transactions that criminals once believed were anonymous.
Network analysis can reveal beneficial ownership structures spread across multiple jurisdictions.
Data matching can expose discrepancies between reported income and actual economic activity.

BUT technology has increased criminal opportunity. Yet, technology has also increased governmental capability. The question is whether we will employ these tools collaboratively and intelligently.

There is, however, an important caution. In our enthusiasm to target criminal wealth, we must never lose sight of the rule of law.

Tax investigations should not become substitutes for due process.
Asset recovery should not become punishment without adequate safeguards.
Information sharing should not ignore privacy and legal protections.

The rule of law is not an obstacle to effective enforcement. It is the source of its legitimacy.

History teaches us that governments may recover assets quickly through extraordinary powers, yet ultimately lose public trust if fairness is sacrificed.

The objective is not simply to seize assets. The objective is justice. And justice requires transparency, accountability, proportionality, and respect for legal rights.

As we consider the future, I suggest four priorities.

First, strengthen cooperation between tax authorities and criminal enforcement agencies.
Second, expand analytical capabilities through advanced technology and data integration.
Third, improve international information-sharing and mutual assistance.
Fourth, ensure that all enforcement measures remain anchored firmly within the rule of law.

If we accomplish those four objectives, taxation can become one of the most effective and underappreciated tools in the global fight against economic crime.

Let me conclude where I began. This symposium challenges us to move from rhetoric to results.

The criminal seeks profit. The state seeks justice. Between those two goals lies a financial battlefield.

Asset recovery is one weapon.
Confiscation is another.
Criminal prosecution is another.
But taxation remains among the oldest, most flexible, and most effective tools available to governments.

The lesson from Al Capone remains true today.

When criminals generate income, they create vulnerability.
When they create wealth, they create exposure.
And when governments follow the money intelligently, collaboratively, legally, and relentlessly, crime becomes less profitable.
And when crime becomes less profitable, society becomes more secure.

Thank you.

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Do Auditors Contribute to the Failure of Effective and Efficient Asset Recovery?

Posted by William Byrnes on August 24, 2026

Professor William Byrnes, Texas A&M University School of Law
Co-author, Money Laundering, Asset Forfeiture and Recovery and Compliance: A Global Guide

Monday 24^th August 2026 Plenary: Do auditors play a contributory role in facilitating the failure of effective and efficient asset recovery? 15:15 Session 1: Identifying and understanding assets and their contextual parts: the main challenge in recoverability?

Howdy, distinguished colleagues of our annual Jesus College, Cambridge gathering. Today, I will address the important and sometimes uncomfortable question:

Do auditors play a contributory role in facilitating the failure of effective and efficient asset recovery?

My response, from a United States perspective, and as a former accountancy department faculty member, is that the answer is “nuanced”.

Auditors are not the primary actors responsible for recovering assets. Yet, the quality of their work significantly influences whether assets are (1) identified, (2) valued, (3) preserved, and (4) ultimately recovered. When audits fall short, they can unintentionally contribute to asset-recovery failures.

Conversely, rigorous, professionally skeptical audits greatly enhance recoverability and reduce losses.

Recoverability assessments and impairment testing demonstrate that (a) identifying relevant assets, (b) estimating future cash flows, and (c) evaluating recoverability are complex tasks that require substantial judgment and accurate information.

To understand the auditor’s role, we must first understand what asset recovery means.

In the United States, asset recovery extends beyond recovering stolen funds or fraud proceeds. It includes: (1) the identification, (2) tracing, (3) valuation, (4) preservation, and (5) recovery of assets – in the context of: (a) bankruptcy proceedings, (b) fraud investigations, (c) corporate restructurings, (d) insolvencies, (e) regulatory enforcement actions, (f) financial reporting, and finally, (g) in the context of money laundering investigations regarding the proceeds of crimes and otherwise legitimate businesses, such as financial institutions.

Auditors occupy the unique position within this process. They are often the first independent professionals to comprehensively review a company’s financial condition. The auditors’ responsibilities include (1) evaluating internal controls, (2) assessing financial reporting risks, (3) examining asset valuations, and (4) identifying indicators of impairment or misstatement.

When auditors properly execute these responsibilities, they help detect (1) hidden risks, (2) overvalued assets, (3) related-party transactions, or (4) control weaknesses that threaten recoverability.

Recoverability assessments are specifically designed to determine whether assets can generate sufficient future economic benefits to justify their carrying values.

However, auditors can contribute to recoverability failures in several ways.

First, when I taught the basic audit course as a young lecturer in an accountancy department, I stressed that auditors should not place excessive reliance on management representations.

Asset recovery often depends on understanding the true nature and location of assets. Management may possess information that auditors cannot independently verify without considerable effort. If auditors fail to exercise sufficient professional skepticism, assets may be: (a) incorrectly classified, (b) concealed through complex corporate structures, or (c) valued using unrealistic assumptions.

Recoverability evaluations depend heavily on management estimates and forecasts, making independent challenges particularly important.

Second, auditors can underestimate the significance of contextual factors affecting asset value and recoverability. An asset’s recoverable value is rarely determined by its book value alone. Recoverability depends on market conditions, legal rights, competing claims, liquidity constraints, technological obsolescence, and future cash-generating ability. FASB accounting guidance emphasizes that assessing recoverability requires analyzing future cash flows and triggering events that may indicate impairment.

Third, auditors may be constrained by the scope of their engagement.

External auditors are not forensic investigators. Their objective is to provide reasonable assurance regarding financial statements, not to perform exhaustive asset-tracing exercises. As a result, sophisticated fraud schemes involving offshore structures, layered ownership arrangements, trusts, shell companies, cryptocurrency holdings, or cross-border transactions can remain undetected.

BUT when such assets later become the subject of recovery actions, investigators often discover that key warning signs were overlooked or insufficiently explored. However, I caution that it would be unfair to place primary blame on auditors. Many of the most significant barriers to asset recovery originate elsewhere.

Modern assets are becoming increasingly difficult to identify and understand. Traditionally, assets consisted of physical property, inventory, equipment, and financial accounts.

Today, organizations derive value from (a) intellectual property, (b) software, (c) algorithms, (d) digital platforms, (e) customer data, (f) cryptocurrencies, (g) tokenized assets, and (h) complex financial instruments.

The challenge is no longer simply finding an asset. It is understanding what the asset actually is, who controls it, what legal rights attach to it, and whether it possesses recoverable value.

This brings us to the critical issue of contextual factors.

Assets rarely exist in isolation. Consider intellectual property. Its recoverability depends on (a) enforceability, (b) licensing arrangements, (c) jurisdictional protections, (d) market demand, and (e) technological relevance. A patent worth hundreds of millions of dollars today may become virtually worthless tomorrow if a superior technology emerges.

Similarly, accounts receivable may appear valuable on a balance sheet, but their recoverability depends on (a) customer creditworthiness and (b) economic conditions. Guidance on revenue-cycle assets highlights how economic uncertainty can impair receivables, inventories, and contract assets, requiring significant judgment regarding future collectability and value.

Real estate presents another example. A property may have substantial appraised value, yet environmental liabilities, zoning restrictions, litigation risks, or illiquid market conditions can dramatically reduce recoverability. The same principle applies to distressed business assets whose value depends on future cash flows rather than historical cost. Recoverability testing under U.S. accounting standards specifically focuses on expected future cash generation rather than merely recorded amounts.

The challenge therefore extends beyond identification. Effective asset recovery requires a multidimensional understanding of value. Auditors, recovery professionals, attorneys, valuation experts, and regulators must all evaluate legal, operational, technological, financial, and market considerations simultaneously. Failure in any one of these areas can undermine recovery efforts.

From a U.S. governance perspective, the most effective approach is not to assign blame solely to auditors but to recognize that recoverability is a shared responsibility.

Auditors MUST strengthen (1) professional skepticism, (2) improve expertise in complex asset structures, (3) utilize advanced data analytics and especially AI, and (4) engage specialists when necessary.

Organizations should maintain stronger internal controls and asset-tracking systems – and auditors should be professionally accountable for having tested such systems.

For their part, regulators should encourage transparency and disclosure practices that make assets easier to identify and evaluate.

In conclusion, auditors can indeed contribute to failures in effective and efficient asset recovery when they fail to challenge assumptions, overlook warning signs, or inadequately assess recoverability risks. However, they are only one part of a much broader ecosystem. The growing complexity of modern assets, combined with the need to understand their legal, economic, and operational context, creates challenges that extend well beyond traditional auditing.

Ultimately, successful asset recovery depends on two fundamental capabilities: accurately identifying assets and deeply understanding the contextual factors that determine their recoverable value. Auditors have an important role in that process, but achieving effective recovery requires coordinated efforts among management, auditors, regulators, investigators, legal professionals, and valuation specialists.

Thank you, and I look forward to joining you at the college bar tonight after the dinner speeches.

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Tax Facts Intelligence (July 30 – Aug 5)

Posted by William Byrnes on August 5, 2026

Weekly newsletter of Prof. William Byrnes & Robert Bloink of Texas A&M Law’s wealth management program: full articles available on ThinkAdvisor TaxFacts (https://www.thinkadvisor.com/tax-facts/)

1. IRS Fixes 1035 Life Insurance Exchange Trap: IRC Section 1035 allows taxpayers to trade life insurance contracts and annuities for new contracts without creating an immediate taxable event. We discuss the new IRS regulations that provide clarity with respect to exchanges of life insurance contracts that qualify for nonrecognition treatment.

2. IRS Announces 2027 Contribution Threshold for Premium Tax Credit Eligibility Purposes.

3. Trump Accounts Shine Spotlight on Kiddie Tax Rules. Now that Trump accounts have officially gone live, it’s important to understand the potential application of the so-called kiddie-tax when the beneficiary becomes entitled to withdraw Trump account funds or execute taxable Roth conversions.

4. Byrnes & Bloink Debate: Should Congress deny tax benefits for retirement savings above $10 million?

5. DOL Clarifies How Mid-Day Commuting is Treated for FLSA Purposes.

Tax Facts Intelligence sample of articles from July newsletters

1. IRS Raises Standard Mileage Rates for Remainder of 2026!

2. IRS Confirms QCD Code Y Optional in 2026. Code Y was introduced in 2025 to give taxpayers a method for reporting Qualified Charitable Distributions (QCDs) to the IRS and, thus, avoiding taxable distribution treatment upon failure to report QCDs.

3. SECURE Act 3.0: What Might Be Included? We report what Congress is bipartisan negotiating.

4. NLRB Stance on Non-Competes Flips Again. Most recently, the National Labor Relations Board (NLRB) Division of Advice issued a memorandum expressing the current General Counsel’s view on the use of post-employment non-compete agreements, flipping the script in favor of employers.

5. Debate: Should Congress be barred from trading in individual stocks? Or is disclosure enough?

Illinois Enacts First State-Level Digital Asset Tax. Illinois has created the nation’s first explicit tax on digital assets. Read the full newsletter and articles on https://www.thinkadvisor.com/tax-facts
Understanding the Interaction Between Unpaid FMLA Leave and Paid Time Off. Many employers wonder whether they may require employees to use any accrued paid time off (PTO) before accessing FMLA leave.
IRS Announces Gift Tax Safe Harbor for Trump Account Contributions. Trump account contributions do not qualify for the annual gift tax exclusion (currently, $19,000).
Underappreciated Solo 401(k)s: A Game-Changer for the Self-Employed. There’s no question that the labor market has shifted in massive ways in the wake of the COVID-19 pandemic. By this point, many pre-pandemic common-law employees have no plans to return to more traditional employment settings, as they’ve found success in careers that operate entirely under their own control. Many self-employed and contract workers are at the point where they’re beginning to amass significant wealth and increasingly looking for ways to shelter larger portions of their income from taxation. Many of these so-called “gig” economy entrepreneurs have historically taken a DIY approach to their retirement income planning. In today’s market, fueled in part by President Trump’s executive orders that allow traditional retirement plans to invest in alternative assets, there is significant opportunity for advisors to introduce these entrepreneurs to the benefits of the solo 401(k).
Debate: Whether the current retirement plan startup tax credit is meaningful enough to encourage small business owners to adopt plans? William Byrnes argues yes, and Robert Bloink counters no.

1. Self-Certification for SECURE Act 2.0 Hardship Withdrawal Expansions. The SECURE Act 2.0 significantly expanded the options for taking penalty-free withdrawals from tax-preferred retirement accounts. Read the newsletter here.

2. Federal Court Finds RSUs Exempt from “Regular Rate” for FLSA Overtime Purposes. A federal court in California ruled that Apple was correct in excluding restricted stock units (RSUs) when calculating overtime under the Fair Labor Standards Act (FLSA).

3. Tax Court Holds Staking Rewards Includable in Gross Income on Receipt. In the first opinion addressing the issue, the U.S. Tax Court held that cryptocurrency staking rewards must be included in gross income upon receipt.

4. Trump Accounts – A New Employee Benefit? As of July 4, 2026, Trump accounts are officially live. Parents, grandparents, and even employers can fund these kiddie IRAs. As the rules evolve, employers and advisors should pay close attention to opportunities to provide a valuable, potentially income-tax-deferred, employment benefit to help business clients attract and retain top talent as flexible and diverse benefit programs become more in demand. Full article is here.

5. Debate about HSAs Healthcare Affordability? William Byrnes and Robert Bloink debate opposing political viewpoints about whether HSAs are the answer for making healthcare more affordable overall. The full debate is here.

Posted in Uncategorized | Tagged: Business, Finance, financial planning, Retirement, Wealth | Leave a Comment »

Is Art an Alternative Investment that Beats Inflation? What Reliable Data Shows Over the Short and Long Term.

Posted by William Byrnes on July 7, 2026

By Professor William Byrnes, Texas A&M University School of Law, and founder of the Wealth Management graduate program. This is the first part of a multi-part series regarding art from the perspective of investment and taxation.

For generations, high-net-worth families have viewed art collections as something to personally admire and display for social or status reasons. But the value of art as a tangible, movable asset was not lost on them. A robust art collection represented family wealth that served as a stable asset buffer, such as the custody of gold bars (without the weight), and could be passed to grandchildren with estate tax mitigation through favorable valuation.

Over the past two decades, however, art has been increasingly viewed through a more sophisticated financial lens: as an alternative asset class that can complement a diversified investment portfolio.[1] For example, an art-focused investment fund platform was established in 2001 that successfully launched eight art investment funds.[2]

This shift is not merely anecdotal. Family offices, wealth managers, private banks, and sophisticated investors now routinely include fine art and other collectibles (which, from a U.S. tax perspective, includes fine art) as a potential investment to mix with private equity, real estate, and venture capital strategies. These discussions are straightforward. Investors seek hard assets that may provide diversification benefits, are not necessarily correlated with public equity markets, and can preserve value during periods of inflation or market uncertainty. A Deloitte 2025 survey found that 40 percent of younger collectors (millennials and Gen Z) reported owning an art collection, and 98 percent consider these art holdings part of their overall wealth management strategy.

Yet investing in art differs fundamentally from investing in stocks, bonds, mutual funds, or real estate. Unlike publicly traded securities, art lacks standardized valuation pricing (e.g., financial ratios, EPS), transparent reporting (many sales are private or the buyer is anonymous), and liquid secondary markets (a role that auction houses, galleries, and art fairs vie for). This article surveys several reliable return-on-art financial studies that help investors considering art as an asset class understand both the opportunities and the unique risks.

Recent Market Sales Data

Fine Art Market Size

The premier fine art fair, Art Basel, and UBS co-publish the Art Market Report 2026, now in its tenth edition, authored by the fine art market specialist economist Dr. Clare McAndrew.[3] After two years of market contraction, Dr. McAndrew’s data showed that total fine art sales rose four percent in 2025 to $59.6 billion, based on 41.5 million transactions.[4] U.S. sales, she found, grew five percent to reach $26 billion, representing 44 percent of total global sales revenue. Yet, she cautions that the art market is subject to geopolitical tensions, tariff uncertainty, and economic volatility, which may suppress sellers’ willingness to dispose of their valuable artworks or limit cross-border sales.[5]

Personalized Experience for High-Value Goods

Online art sales revenue, which spiked to 25 percent during the COVID pandemic, has fallen to 15 percent of the market.[6] Moreover, online sales for auction houses focus on the middle and lower price ranges, with almost two-thirds of sales generated by artworks priced at less than $50,000, representing the $5,000 to $50,000 range. While the modern economy transforms into digital business models, high-value goods, and high net wealth individuals purchasing them overwhelmingly close a sale 87 percent in person, after inspection and human interaction.[7]

Bank of America’s U.S. Art Market Report of 2026 reported that from 2023 through 2025, the substantial growth in auction volume of Sotheby’s, Christie’s, and Philips in New York is driven by artworks priced under $50,000, the lower end of the price spectrum, which comprised 61.3 percent of total lots sold.[8] The BOA 2026 report found that the big three auction houses experienced a broad flight to quality in fine art sales of Modern, Post-War, and Impressionist artists, with other categories experiencing sharp price corrections.[9]

Historical Investment Return Data?

Stanford Business School researchers, examining data from the auction database BASI (Blouin Art Sales Index) from 1972 until 2010, concluded that art, as an asset class, generated an average annual return of 6.5 percent (though the BASI reported 10 percent).[10] These same economists computed a risk ratio, known as the Sharpe Ratio, based on 20,538 paintings repeatedly sold between 1972 and 2010, and determined that the Sharpe Ratio for art is 0.04, rather than the previously reported 0.24, compared with 0.30 for U.S. equities over the same period.^[11]

However, in 2010, Deloitte published a report based on several academic and institutional studies spanning 30 years, finding that art prices rose above inflation for other goods but were highly sensitive to economic slowdowns when demand dropped sharply.[12] The Deloitte study looked back over 10 years and found that the compounded annual return for art was 4.15 percent versus only 0.5 percent for all equities (recall the 2008 financial crisis).[13] A Morgan Stanley study concluded after the financial crisis that blue-chip fine art maintained returns during inflationary pressures.[14]

Two more academic studies found that art’s annual real return from 1951 to 2007 was 4 percent, noting that it beat bonds but trailed equities.[15] An analysis of the financial sales data over 60 years (1957 – 2016) showed a 6.24 percent nominal return, similar to the Stanford study finding.[16] From 2000 to 2025, the MM Continental Art Price Indices for the Americas, tracking auction sales of over 43,000 artworks by nearly 8,000 artists globally, using data from Sotheby’s, Christie’s and Phillips, found that art delivered a 4.4 percent CAGR.^[17]

Looking back over 50 years as a long-term investment holding, Deloitte’s 2025 report found that art’s cumulative annual return of 9.06 percent was comparable to equities’ 9.56 percent. This Deloitte study, using the Mei Moses All Art Index, concluded that the 10-year look-back risk favored art, not equities, at 13.8 percent to 20 percent.[18] However, over 50 years, the risk substantially converged until favoring equities, 17.8 percent to 17.2 percent. In 2024, Morgan Stanley began including art in its capital markets analysis and estimated that art would deliver 4.9 percent annual returns over seven- and 20-year horizons.[19]

Is Art An Accepted Investment Asset?

In its 2025 Art & Finance Report, Deloitte, based on extensive annual surveying, found 76 percent of collectors support integrating art into wealth management offerings.[20] 37 percent stated that they were collecting art for its own sake, driven by emotional, aesthetic, and cultural value, not with an investment outlook.[21] Yet, when Deloitte factored in age, the firm found that 98 percent of younger collectors consider their art holdings as part of their overall wealth management strategy. Moreover, 40 percent of the younger collectors, millennials and Gen Z, reported owning an art collection, compared to only 17 percent of baby boomers and Generation X.

Why Are Investors Turning to Art?

The appeal of art as an investment begins with scarcity. A publicly traded company can issue additional shares. Governments can issue additional debt. An established artist, however, can only create a finite body of work.

Scarcity, combined with growing global wealth and the interests of millennials/Gen Z, has assisted long-term value appreciation for many categories of art. High-net-worth individuals increasingly compete for works by established artists, while museums, corporations, and international collectors add additional demand.

Art also offers a psychological benefit that few financial assets can match. A share certificate or brokerage statement provides little emotional value. A painting displayed in a home, office, or building, can generate daily personal enjoyment, generate external social and wealth status, and simultaneously serve as a tangible investment. For many investors, that combination of personal enjoyment and potential value appreciation, or at least maintaining value in relation to inflation, creates a compelling proposition.

Opaque Valuation

But artists, artworks, and art trends present opaque valuation challenges for investment forecasting. A substantial portion, 77 percent, of sales revenue for 2025 was derived from private collectors.[22] When adding sales to art advisors and interior designers who act on behalf of private collectors, individuals account for 87 percent of fine art revenue. Many first-time collectors start off at lower price points through smaller galleries.[23]

Robust, transparent market data related to emerging artists or art trends is lacking. Time consuming substantial personal research, and reliance on curator expertise (without the legal fiduciary duties), is required if seeking to be first in on an art trend and identifying emerging artists that allow upside value growth. Determining value often requires appraisals, auction comparisons, gallery sales data, and inevitably, professional judgment.

Potential art collectors and investors read the anecdotal stories about paintings purchased for a few thousand dollars (e.g., at an estate sale, a secondhand store, or directly from an ‘unknown’ artist) that later sold for millions. It happens, and these stories attract headlines. But actual investors realize these are limited exceptions, like an angel-round investment in private equity that generates a 30x return on an earlier-than-expected exit.

Blue-chip artists whose works are regularly sold through major auction houses operate in a vastly different, data-available market than emerging artists selling through regional galleries or online platforms. Returns vary dramatically depending on timing (e.g., the adage that the death of a popular artist leads to wealthy family members with a remaining supply of finished works), the artist’s reputation as seen through a public lens, provenance, art trends, and broader economic conditions.

Inevitably, successfully earning returns for art investments requires extensive research. Yet this statement is just as true for any investment. But the data sought is different. Investors should investigate factors such as an artist’s exhibition history, gallery representation, collector base, museum exposure, auction results, and critical reception.

Also, before the purchase of a high-value artwork, an investor needs provenance diligence, which is like obtaining ‘clean title’ in real estate. The documented ownership history of a classic fine artwork is particularly important. Incomplete provenance records create legal risks of prior theft and expropriation. Moreover, the fine art market has struggled with forgeries and attribution disputes. Thus, artwork authentication is critical but adds to the transaction’s costs.

Diversification Benefits?

One of the strongest arguments collectors and curators make for art ownership is tangible asset diversification, as previously discussed. Traditional portfolios are heavily influenced by stock and bond market performance. Art values are often driven by different factors, including collector demand, cultural trends, museum exhibitions, and artist recognition. Because these drivers differ from those affecting public securities, art may provide disjunctive portfolio diversification benefits.

However, investors should avoid viewing art as a substitute for a properly diversified investment portfolio. Art is probably best approached as a complementary asset within a holding of alternative assets. It is well known that financial advisors recommend alternative assets without liquid markets, which occupy only a modest percentage of an investor’s overall portfolio.

Liquidity, Transaction Costs, and Time Horizon

The greatest challenge for art versus traditional public equities is liquidity. Art may require weeks, months, or even years to sell at an acceptable price. The liquidity challenge is not insurmountable. Selling closely held businesses, partnership interests, and collectibles also face this challenge. Finding a buyer often involves galleries, dealers, private brokers, auction houses, or collector networks, which may incur high transaction costs. Seller commissions, auction fees, insurance expenses, transportation costs, and storage fees can materially reduce the net return. Thus, art as an investment asset needs to be balanced with a longer time horizon for realization than many conventional investments.

[1] Arthur Korteweg, Roman Kräussl, and Patrick Verwijmeren, Is Art a Good Investment? Insights (Stanford Business, October 21, 2013), available at https://www.gsb.stanford.edu/insights/research-art-good-investment.

[2] See The Fine Art Group, Art Investment, at https://www.fineartgroup.com/services/art-investment.

[3] Dr. Clare McAndrew, The Art Basel and UBS Art Market Report 2026 by Arts Economics, at 19, 35 (Art Basel and UBS 2026), available at https://theartmarket.artbasel.com. Art Economics is exclusively focused on the fine and decorative art market for private and institutional clients.

[4] See also Investing in Art: A Growing Asset Class, Insights (Citron Cooperman, Aug. 4, 2025).

[5] Dr. Clare McAndrew, The Art Basel and UBS Art Market Report 2026 by Arts Economics, at 25, (Art Basel and UBS 2026), available at https://theartmarket.artbasel.com.

[6] Dr. Clare McAndrew, The Art Basel and UBS Art Market Report 2026 by Arts Economics, at 30, (Art Basel and UBS 2026), available at https://theartmarket.artbasel.com.

[7] How High–Net Worth Consumers Shop For Luxury Goods: New Research Shows Just 10% Do So Exclusively Online, Anna Perling, Forbes, Apr. 22, 2026, available at https://www.forbes.com/sites/forbes-personal-shopper/article/how-high-net-worth-consumers-shop-for-luxury-goods/.

[8] 2026 U.S. Art Market Report, Bank of America, in association with ArtTactic, at 17, https://www.privatebank.bankofamerica.com/content/dam/ust/articles/pdf/US-Art-Market-Report.pdf.

[9] 2026 U.S. Art Market Report, Bank of America, in association with ArtTactic, at 24, https://www.privatebank.bankofamerica.com/content/dam/ust/articles/pdf/US-Art-Market-Report.pdf.

[10] Arthur Korteweg, Roman Kräussl, and Patrick Verwijmeren, Is Art a Good Investment? Insights (Stanford Business, October 21, 2013), available at https://www.gsb.stanford.edu/insights/research-art-good-investment.

[11] Arthur Korteweg, Roman Kräussl, and Patrick Verwijmeren, Is Art a Good Investment? Insights (Stanford Business, October 21, 2013), available at https://www.gsb.stanford.edu/insights/research-art-good-investment.

[12] Why should art be considered an asset class? Adriano di Torcello, Deloitte Luxembourg (2010), available at https://www.deloitte.com/lu/en/services/consulting-financial/research/art-as-investment.html.

[13] Why should art be considered an asset class? Adriano di Torcello, Deloitte Luxembourg (2010), available at https://www.deloitte.com/lu/en/services/consulting-financial/research/art-as-investment.html.

[14] Reviewing Art as an Asset Class and Its Historical and Potential Returns, Global Investment Committee, March 27, 2025, available at https://advisor.morganstanley.com/the-davis-yost-group/documents/field/d/da/davis-yost-group/Research_Reviewing_Art_as_an_Asset_Class.pdf.

[15] Renneboog, L D R & Spaenjers, C 2009, Buying Beauty: On Prices and Returns in the Art Market, Center Discussion Paper, vol. 2009-15, Finance, Tilburg, available at https://repository.tilburguniversity.edu/bitstreams/311df4f3-ec07-4d7d-8569-39965eafb044/download. See also, Rachel Campbell, Art as a Financial Investment, The Journal of Alternative Investments, Spring 2008, 10(4) 64 – 81, DOI: 10.3905/jai.2008.705533 (using the Mei Moses, acquired in 2016 by Sotheby’s, and Art Market Research art indices as the two most widely quoted indicators of art market performance).

[16] Updated investment data analysis by Prof. Luc Renneboog, Investing in Art: Returns, Risks, and Market Dynamics Over Six Decades, May 22, 2025, https://financialforum.be/en/bfw-digitaal/investing-in-art-returns-risks-and-market-dynamics-over-six-decades. The dataset includes 2,874,652 auction records of paintings by 155,156 artists, with a median nominal price of $4,000.

[17] Art & Finance Report 2025, Deloitte 399 (2025).

[18] Also see, Demystifying Art Indices, Morgan Stanley (Feb. 9, 2026), https://www.morganstanley.com/articles/art-market-indexes.

[19] Reviewing Art as an Asset Class and Its Historical and Potential Returns, at 5, Global Investment Committee, March 27, 2025, available at https://advisor.morganstanley.com/the-davis-yost-group/documents/field/d/da/davis-yost-group/Research_Reviewing_Art_as_an_Asset_Class.pdf.

[20] Art & Finance Report 2025, Deloitte 193 (2025), http://www2 .deloitte.com/content/dam/Deloitte/lu/Documents/financial-services/artandfinance/lu-art-finance-report.pdf

[21] Art & Finance Report 2025, Deloitte 194 (2025), http://www2 .deloitte.com/content/dam/Deloitte/lu/Documents/financial-services/artandfinance/lu-art-finance-report.pdf

[22] Dr. Clare McAndrew, The Art Basel and UBS Art Market Report 2026 by Arts Economics, at 98, (Art Basel and UBS 2026), available at https://theartmarket.artbasel.com.

[23] Dr. Clare McAndrew, The Art Basel and UBS Art Market Report 2026 by Arts Economics, at 94, (Art Basel and UBS 2026), available at https://theartmarket.artbasel.com.

Posted in Uncategorized, Wealth Management | Tagged: alternative asset class, art, art investment, Finance, fine art, inflation hedge, Investing | Leave a Comment »

Supreme Court Nulls the Trump Tariffs

Posted by William Byrnes on February 20, 2026

On February 20, 2026, the U.S. Supreme Court in Learning Resources, Inc. v. Trump [1] (avaialble on Lexis here) provided its 6-3 majority answer in a 170-page, multi-part decision to the question whether the International Emergency Economic Powers Act’s (‘IEEPA’) authorization to ‘regulate…importation’ provides the executive branch broad power to impose tariffs?[2] And if so, under what conditions?[3]

The Brass Tacks of the Supreme Court Decision

The Court held, simply stated, that “IEEPA does not authorize the President to impose tariffs.”[4] What is relevant for our (tax) readers is that the Supreme Court remanded the case to the D.C. Federal District for dismissal for lack of jurisdiction.[5] Why for ‘lack of jurisdiction’? Recall that this case originated with the United States Court of International Trade’s nullification of the tariffs, that is, the Presidential Orders establishing them, in the May 28, 2025, decision in V.O.S. Selections, Inc. v. United States.[6]

The underlying consequence of this order, by our understanding,[7] is that the Court has also ruled that only the Court of International Trade has exclusive jurisdiction over tariff disputes. Given that the Court of International Trade vacated the tariff orders,[8] the U.S. government will need to refund approximately $200 billion to importers, by our estimates, a substantial majority of which has been collected upon goods from China.[9]

The 21-page majority decision, authored by Chief Justice Roberts, consists of five parts addressing distinct jurisprudential arguments. Four concurrence opinions add another 62 pages (for a total of 83 pages within the majority analysis). The five-part majority that attracted six votes (including the Chief Justice as author) did not attract all six Justices to sign on to each part of the underlying legal reasoning for the ultimate holding. Chief Justice Roberts authored the majority opinion in parts I, II–A–1, and II-B, which were joined by the five Justices Gorsuch, Barrett, Sotomayor, Kagan, and Jackson. Parts II-A-2 and III, only Justices Gorsuch and Barrett joined. Justice Gorsuch wrote a 46-page concurring opinion, as did Justice Barrett at four pages. Justice Kagan authored, joined by Justices Sotomayor and Jackson, an additional seven-page concurrence, followed by an independent concurrence of five pages by Justice Jackson.

In the dissent, Justice Thomas authored an initial 18-page dissent, followed by a 63-page dissent authored by Justice Kavanaugh, joined by Justices Thomas and Alito.

The Court’s six-vote summary decision language of part III is as follows:[10]

“The President asserts the extraordinary power to unilaterally impose tariffs of unlimited amount, duration, and scope. In light of the breadth, history, and constitutional context of that asserted authority, he must identify clear congressional authorization to exercise it. IEEPAs grant of authority to regulate . . . importation falls short. IEEPA contains no reference to tariffs or duties. The Government points to no statute in which Congress used the word regulate to authorize taxation. And until now no President has read IEEPA to confer such power.”

Note that Justice Sotomayor stated in the oral arguments for the case that 16 statutes used the term taxes simultaneously, “when Congress intended ‘regulate’ to mean taxing…”^[11]

What We Thought The Decision Would Be Based on Oral Arguments.

We previously read the U.S. Supreme Court’s 185-page oral argument transcript in this tariff case (Learning Res., Inc. v. Trump).^[12] We concluded in our initial discernment, based on the statements embedded in the questions of six of the justices, that the Supreme Court would likely decide that the Executive branch may not impose import duties (i.e., tariffs) under the IEEPA.^[13] Six justices asked pointed questions, indicating they would hold that the authority to levy taxes remains the exclusive purview of Congress.^[14] Our premonition was not unique, though. Several respected financial news organizations, such as the Wall Street Journal,^[15] also reported a likely six-Justice majority, as did many actual constitutional law scholars.

The Crux of the Arguments of the Executive Branch

In order to exercise powers granted by Congress within the IEEPA, the President must first declare a national emergency with respect to an “unusual and extraordinary threat” … “to the national security, foreign policy, or economy of the United States…”.^[16] In the first instance of its IEEPA analysis, the Supreme Court (the “Court”) will need to rule whether the President has met this IEEPA statutory language requirement for a declared national emergency. To this point, the Administration’s (the Executive branch, i.e., President Trump) case, represented and argued by the U.S. Solicitor General John Sauer, opened the oral arguments with the presentation of the Administration’s basis of an ‘unusual and extraordinary threat’:^[17]

“On April 2, President Trump determined that our exploding trade deficits had brought us to the brink of an economic and national security catastrophe. He further pronounced that the traffic of fentanyl and other opioids into our country has created a public health crisis, taking hundreds of thousands of American lives. … President Trump has declared that these emergencies are country-killing and not sustainable, that they threaten the bedrock of our national and economic security …”

The current administration is hardly the first to declare a national emergency pursuant to the IEEPA. The non-partisan Congressional Research Service (the ‘CRS’), which provides research reports to Congress, reports that 77 national emergencies invoking the IEEPA (which was enacted in 1977) have been declared by Presidents, of which 46 continue to be in effect as of September 2025.^[18] Moreover, the CRS found that such national emergencies often have a shelf life of nearly a decade, yet some remain considerably longer.^[19] Presidents average just under four IEEPA national emergency declarations per term.

What Powers Did Congress Grant the Executive in the IEEPA?

What Presidential remediation actions has Congress authorized in the IEEPA under a declaration of a national emergency? The pertinent language of the IEEPA that the administration relied upon for its remediation action in the form of tariffs is as follows:^[20]

“… the President may … investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States; …” (emphasis added).

The above IEEPA paragraph does not mention the term “tariffs,” as the Supreme Court majority holding points out. Part II-A-2 for which Justice Gorsuch and Justice Barrett joined the Chief Justice elaborates:[21]

“IEEPA authorizes the President to “investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit . . . importation or exportation.” §1702(a)(1)(B). Absent from this lengthy list of specific powers is any mention of tariffs or duties. Had Congress intended to convey the distinct and extraordinary power to impose tariffs, it would have done so expressly, as it consistently has in other tariff statutes.”

Typically, Presidents have exercised authority granted by the IEEPA through sanctions and the seizure of property owned by a foreign government, its nationals, or its state enterprises.^[22] Until 2025, no administration has mandated tariffs as a remedial tool under the IEEPA.^[23] Tariffs, a form of taxation collected via import duties, are an aspect of governance granted by the U.S. Constitution to Congress, as follows: “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises …”.^[24]

In the oral arguments, Chief Justice Roberts emphasized this aspect of Article I in his question to the Solicitor General:^[25] “[W]ho pays the tariffs?” The Solicitor General responded that tariffs are borne by a combination of foreign manufacturers and importers, i.e., foreign taxpayers, but, to the Chief Justice’s point, also by U.S. taxpayers.^[26] Then the Chief Justice followed: “…it’s been suggested that the tariffs are responsible for significant reduction in our deficit. I would say that’s raising revenue domestically.” To which the Solicitor General defended: “…there certainly is incidental and collateral effect of the tariffs that they do raise revenue, but it’s very important that they are regulatory tariffs, not revenue-raising tariffs.”^[27]

The Executive’s Reliance on Prior Court Decisions Related to Similar Language in Previous Legislation

The Administration argued that the language of the 1977 IEEPA should be understood in the context of prior court opinions based on substantially similar language in the 1917 Trading with the Enemy Act (‘TWEA’).^[28] The TWEA language concerning regulation of foreign commerce did not include the term tariff.^[29] The TWEA states that during war time, the President may:^[30]

“…investigate, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest …”.

Three federal appellate court decisions held that, pursuant to the language of the TWEA, President Nixon had been afforded by Congress the authority to declare a state of emergency because of an imbalance of trade of the U.S. with its trading partners, and pertaining thereto, afforded the authority of Congress to impose a 10 percent supplemental tariff on all dutiable goods entering the United States in order that the President may regulate foreign commerce.^[31] We will examine the first decision as representative of the three.

In the decision U.S. v. Yoshida International, the Appellate Court provides a contextual historical statement that is potentially applicable to President Trump’s underlying justification of a national emergency: “During the summer of 1971, the United States was faced with an economic crisis. The nation suffered under an exceptionally severe and worsening balance of payments deficit.”^[32] President Nixon’s authority for levying the 10 percent tariff on all trading partners was enunciated by the President as follows:^[33]

“… pursuant to the authority vested in him by the Constitution and the statutes, including, but not limited to, the Tariff Act of 1930, … and the Trade Expansion Act of 1962…, the President entered into, and proclaimed tariff rates under, trade agreements with foreign countries;”

In its analysis of the executive branch’s issuing of the tariff, the Appellate Court acknowledges the elephant in the room:^[34]

“But neither need nor national emergency will justify the exercise of a power by the Executive not inherent in his office nor delegated by the Congress. Expedience cannot justify the means by which a deserving and beneficial national result is accomplished. To indulge in judicial rationalization in order to sanction the exercise of a power where no power in fact exists is to strike the deadliest of blows to our Constitution.”

Thus, the Appellate Court undertook a deep dive into understanding whether Congress which levies duties as a regulatory tool to regulate imports, delegated to the President this same power to regulate imports using the same regulatory tool, for use in national emergencies.^[35] Cutting to the chase, it concluded that, via the TWEA, Congress authorized the President during an emergency: “to exercise the delegated substantive power, i.e., to “regulate importation,” by imposing an import duty surcharge or by other means appropriately and reasonably related, … to the particular nature of the emergency declared.^[36]

However, the Appellate Court cautioned that the President may not “impose whatever tariff rates he deems desirable simply by declaring a national emergency”.^[37] Each Presidential action requires a facts and circumstances analysis to determine if it is appropriate and that it will not subvert the manifest Congressional intent to maintain control over its Constitutional power to levy tariffs. In the context of President Nixon’s tariffs, the Appellate Court observed that the relevant notice specifically stated that the imposition of the additional duty of 10 percent would only be charged up to the maximum tariff rate already promulgated by Congress, i.e., the tariff rate before any concessions.^[38] The Appellate Court’s analysis found that:^[39]

“It is clear that the surcharge herein had, as its primary purpose, the curtailment, i.e., the regulation, of imports. What was sought was an offset to actions of our foreign trading partners which had led to loss of our favorable balance of trade and to a serious negative balance…”.

In conclusion, the Appellate Court reasoned that President Nixon’s limited surcharge, as a temporary measure, calculated to meet a particular national emergency, did not fall afoul of imposing “whatever tariff rates he deems desirable”.^[40]

The Supreme Court’s Rejection of the Application of the Prior Decisions

Regarding the Executive’s reasoning, the Supreme Court’s six-vote majority in Part II-B countered that:

“While this Court sometimes assumes that Congress incorporates judicial definitions into legislation, we do so only when [the] terms meaning was well-settled before the adoption. … A single, expressly limited opinion from a specialized intermediate appellate court does not clear that hurdle. The tariff authority asserted by President Nixon, moreover, was far removed from TWEAs original purposes of sanctioning foreign belligerents. We are therefore skeptical that Congress enacted IEEPA with an eye toward granting that novel power (citations omitted).”[41]

[1] Learning Res., Inc. v. Trump, 2026 U.S. LEXIS 714, 2026 LX 89981 (Feb. 20, 2026).

[2] Learning Res., Inc. v. Trump, 2026 U.S. LEXIS 714, *1; 2026 LX 89981, referring to 91 Stat. 1626.

[3] Note that we will provide a more informative, expansive article early next week. Shabbat has limited our time for this one to just two hours of discussion and writing.

[4] Learning Res., Inc. v. Trump, 2026 U.S. LEXIS 714, *3; 2026 LX 89981

[5] The Learning Resources case originated with Learning Res., Inc. v. Trump, 784 F. Supp. 3d 209 (May 29, 2025), 2025 U.S. Dist. LEXIS 103492, 2025 LX 183012.

[6] V.O.S. Selections, Inc. v. United States, 772 F. Supp. 3d 1350, 2025 Ct. Intl. Trade LEXIS 67, SLIP OP. 2025-66, 2025 LX 120769.

[7] Note that we claim a proficient understanding, even a scholarly one, of various topic areas of taxation, but we are not constitutional law scholars.

[8] V.O.S. Selections, Inc. v. United States, 772 F. Supp. 3d 1350, 1383; 2025 Ct. Intl. Trade LEXIS 67, *65; SLIP OP. 2025-66; 2025 LX 120769.

[9] Our estimate is based upon the U.S. Customs and Border Protection Trade Statistics available at https://www.cbp.gov/newsroom/stats/trade. See also CBP’s press release of Dec. 16, 2025, “Thanks To President Trump, CBP announces record-breaking $200 billion in tariff revenue”, available at https://www.cbp.gov/newsroom/national-media-release/thanks-president-trump-cbp-announces-record-breaking-200-billion. Treasury annual and monthly tariff statistics collected and disseminated by USA Facts, “How much revenue does the federal government collect from tariffs?”, available at https://usafacts.org/answers/how-much-revenue-does-the-federal-government-collect-from-tariffs/country/united-states/. We also refer to the data analysis of the Yale-hosted The Budget Lab, “Tracking the Economic Effects of the Budget (Feb. 18, 2026), available at https://budgetlab.yale.edu/research/tracking-economic-effects-tariffs.

[10] Learning Res., Inc. v. Trump, 2026 U.S. LEXIS 714, *34; 2026 LX 89981.

[11] Learning Res., Inc. v. Trump, Doc. No. 24-1287, trans. at 15.

[12] The case is a consolidation of two cases. See the previous appellate decision Learning Res., Inc. v. Trump, 2025 U.S. App. LEXIS 24105 and the Supreme Court current citation is Learning Res., Inc. v. Trump, Doc. No. 24-1287, 2025 U.S. LEXIS 2783; and the second case’s current citation, consolidated with Learning Resources, Trump v. V.O.S. Selections, Inc., 2025 U.S. LEXIS 2782. The oral arguments transcript is available at https://www.supremecourt.gov/oral_arguments/argument_transcripts/2025/24-1287_097c.pdf.

[13] The International Emergency Economic Powers Act, Title II, Pub. L. 95–223, 91 Stat. 1626 (Dec. 28, 1977). We published an article via Kluwer Law’s International Tax blog with our lengthy analysis, available at https://legalblogs.wolterskluwer.com/international-tax-law-blog/to-tariff-or-not-to-tariff-that-is-the-question-before-the-us-supreme-court/. In that article, we also asked AI what it thought and included its conclusion in the final part of that article.

[14] U.S. Constitution, Art. I, § 8, Cl. 1, available at https://constitution.congress.gov/browse/essay/artI-S8-C1-1-1/ALDE_00013387/.

[15] Supreme Court Appears Skeptical of Trump’s Tariffs, WSJ (Nov. 5, 2025), available at https://www.wsj.com/livecoverage/supreme-court-tariffs-case-stock-market-11-05-2025.

[16] 50 U.S. Code § 1701 [Unusual and extraordinary threat; declaration of national emergency; exercise of Presidential authorities] available at https://www.law.cornell.edu/uscode/text/50/1701.

[17] Learning Res., Inc. v. Trump, Doc. No. 24-1287, trans. at 4.

[18] For an overview of the history of the IEEPA, see The International Emergency Economic Powers Act: Origins, Evolution, and Use, CRS Rep. 45618 (Sep. 1, 2025) available at https://www.congress.gov/crs-product/R45618. Referred to hereafter as the ‘CRS IEEPA Report’.

[19] CRS IEEPA Report at 18, 20. President Jimmy Carter’s declaration of a national security emergency regarding Iran, pursuant to the IEEPA, remains in place over fifty years later to this day. See Executive Order 12170 of Nov. 14, 1979, 44 FR 65729.

[20] 50 U.S. Code § 1702 [Presidential authorities] available at https://www.law.cornell.edu/uscode/text/50/1702.

[21] Learning Res., Inc. v. Trump, 2026 U.S. LEXIS 714, *6; 2026 LX 89981.

[22] CRS IEEPA Report at 32.

[23] CRS IEEPA Report at 60.

[24] U.S. Constitution, Art. I, § 8, Cl. 1, available at https://constitution.congress.gov/browse/essay/artI-S8-C1-1-1/ALDE_00013387/.

[25] Learning Res., Inc. v. Trump, Doc. No. 24-1287, trans. at 37.

[26] Learning Res., Inc. v. Trump, Doc. No. 24-1287, trans. at 38.

[27] Learning Res., Inc. v. Trump, Doc. No. 24-1287, trans. at 38.

[28] An Act to define, regulate, and punish trading with the enemy, and for other purposes, Pub. L. 65–91, 40 Stat. 411. Commonly referred to as the Trading with the Enemy Act (‘TWEA’).

[29] CRS IEEPA Report at 64.

[30] 50 U.S.C. § 5(b)(1)(B).

[31] In United States v. Yoshida International, Inc., 526 F.2d 560, 573, 1975 CCPA LEXIS 119 (Cust. & Pat. App. 1975), the Court of Customs and Patent Appeals held that it was “incontestable that [TWEA] does in fact delegate to the President, for use during war or during national emergency only, the power to ‘regulate importation'” and upheld the President’s action imposing a 10 percent tariff to all trading partners because it was reasonably related to the emergency confronted. Cited at CRS IEEPA Report at 64. Also see Alcan Sales v. United States, 534 F.2d 920 (Cust. & Pat. App.), cert. denied, 429 U.S. 986, 97 S. Ct. 506 (1976). Also see Alcan Sales, Div. of Alcan Aluminum Corp., v. United States, 693 F.2d 1089 (Fed. Cir. 1982).

[32] United States v. Yoshida International, Inc., 63 C.C.P.A. 15, 17; 526 F.2d 560, 567; 1975 CCPA LEXIS 119, *5-6.

[33] United States v. Yoshida International, Inc., 63 C.C.P.A. 15, 18-19, 526 F.2d 560, 568, 1975 CCPA LEXIS 119, *8-9.

[34] United States v. Yoshida International, Inc., 63 C.C.P.A. 15, 21, 526 F.2d 560, 570, 1975 CCPA LEXIS 119, *15.

[35] United States v. Yoshida International, Inc., 63 C.C.P.A. 15, 25, 526 F.2d 560, 574, 1975 CCPA LEXIS 119, *25.

[36] United States v. Yoshida International, Inc., 63 C.C.P.A. 15, 28, 526 F.2d 560, 576-577, 1975 CCPA LEXIS 119, *32.

[37] United States v. Yoshida International, Inc., 63 C.C.P.A. 15, 28, 526 F.2d 560, 577, 1975 CCPA LEXIS 119, *33.

[38] United States v. Yoshida International, Inc., 63 C.C.P.A. 15, 28, 526 F.2d 560, 577, 1975 CCPA LEXIS 119, *34.

[39] United States v. Yoshida International, Inc., 63 C.C.P.A. 15, 31, 526 F.2d 560, 579, 1975 CCPA LEXIS 119, *40.

[40] United States v. Yoshida International, Inc., 63 C.C.P.A. 15, 29, 526 F.2d 560, 578, 1975 CCPA LEXIS 119, *35-36.

[41] Learning Res., Inc. v. Trump, 2026 U.S. LEXIS 714, *31-32; 2026 LX 89981.

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UN Tax Committee Confronts New Challenges from AI to Health Taxes

Posted by William Byrnes on October 31, 2025

By Pramod Kumar Siva and William Byrnes of Texas A&M Law

1. Previous Comments, Recommendations, and Policy Analysis to the OECD and UN

Pramod Kumar Siva and I have been closely following and engaging via comments and attendance, with the post-BEPS international tax initiatives of the OECD, the United Nations, and U.S. responses (as have our most esteemed Texas A&M faculty colleagues Dr. Lorraine Eden, Dr. Andrew Morriss, and Dr. Charlotte Ku). Since 2019, we have submitted a variety of comments and recommendations in respect of the OECD’s post-BEPS output of Pillar One and Pillar Two that are published here within the Kluwer International Tax Blog, two examples being: Comments and Recommendations for the OECD “Unified Approach” to Digital Taxation; and Recommendations for the Pillar One and Pillar Two Blueprints. Readers may further be interested in our recent Pillar Two policy recommendation: Good Intentions, Bad Tools: A Case for Repealing the UTPR.[1] Also available on the Kluwer International Tax Blog, we submitted comments and recommendations to the United Nations Intergovernmental Committee[2] as it drafted the International Tax Cooperation Convention: Comments with Proposed Text for the UN Intergovernmental Committee Drafting the International Tax Cooperation Convention.

With this article, we provide our readers an overview of the United Nations’ International Tax Committee of Experts[3] most important past initiatives and those discussed and voted upon October 21 through 24, 2025, to be addressed within work streams during the four-year term that began July 30, 2025 with the announcement of the newly appointed country-delegates (who speak in their personal capacity rather than on behalf of their government positions).

[1] Siva, Pramod Kumar and Byrnes, William, Good Intentions, Bad Tools: A Case for Repealing the UTPR (July 21, 2025). Available at SSRN: https://ssrn.com/abstract=5378629 or http://dx.doi.org/10.2139/ssrn.5378629

[2] Intergovernmental Negotiations for UN Framework Convention on International Tax Cooperation, Department of Economic and Social Affairs, United Nations. Available at https://financing.desa.un.org/unfcitc.

[3] 31st Session of the Committee of Experts on International Cooperation in Tax Matters, Department of Economic and Social Affairs, United Nations. Available at https://financing.desa.un.org/events/31st-session-committee-experts-international-cooperation-tax-matters.

2. Background of the United Nations International Tax Key Initiatives

2.1 UN Transfer Pricing Manual 2013

On May 29, 2013, the United Nations launched its “Practical Manual on Transfer Pricing for Developing Countries” (UN Transfer Pricing Manual).[1] This manual evolved from the earlier October releases of 2012 and working draft releases of 2011 and 2010. The manual was developed to respond to the need “for clearer guidance on the policy and administrative aspects of applying transfer pricing analysis to some of the transactions of multinational enterprises (MNEs) in particular.” The UN Transfer Pricing Manual states that it is designed for application of the globally accepted “arm’s length standard.” In a communique released August 9, 2013, the Committee of Experts on International Cooperation in Tax Matters stated that the Committee’s considerations upon intangibles had not yet ripened for inclusion in the 2013 version, but that the Committee was preparing a detailed guidance on intangibles in a separate chapter of the manual for the next update.[2]

At the 2014 tenth session and in preliminary meetings, the Committee discussed new commentary for the UN Model Double Tax Agreement Article 9, including:[3]

1. recognizing the arm’s length principle as found in the United Nations and OECD Model Conventions;

2. continuing to remind countries that the application of the arm’s length principle presupposed transfer pricing rules in domestic legislation;

3. replacing the statement by the former Group of Experts, the predecessor of the Committee, with quotation from the OECD commentary on article 9;

4. quoting OECD language on how that organization categorized the international significance of the OECD Guidelines; and

5. reflecting a view agreed by Committee members on the relevance of the OECD Guidelines and the Transfer Pricing Manual in helping to implement the arm’s length principle.

[1] See http://www.un.org/esa/ffd/documents/UN_Manual_TransferPricing.pdf.

[2] United Nations Economic and Social Council, Committee of Experts on International Cooperation in Tax Matters, E/C.18/2013/4 (Aug 9, 2013), available at http://www.un.org/ga/search/view_doc.asp?symbol=E/C.18/2013/4&Lang=E.

[3] Report on the tenth session of the Committee of Experts on International Cooperation in Tax Matters, United Nations (October 27, 2014). Available at http://www.un.org/ga/search/view_doc.asp?symbol=E/2014/45&Lang=E.

2.2 UN BEPS Handbook 2015
The eleventh session of the Committee of Experts on International Cooperation in Tax Matters was held from October 19 to 23, 2015, and addressed revisions to the UN Transfer Pricing Manual in consideration of the OECD’s BEPS initiatives. Following up on the previous communique, the UN Transfer Pricing Manual proposals for amendments include an additional chapter on the treatment of transactions relating to intangibles, a further chapter on intra-group services and management charges, additional text on business restructuring, and an annex on available technical assistance and capacity-building resources. The UN Committee of Experts published the United Nations Handbook on Selected Issues in Protecting the Tax Base of Developing Countries (UN BEPS Handbook 2015).[1] The Financing for Development Office (FfDO) undertook the project to supplement the OECD’s BEPS project from the perspective of developing countries. This project focused on several issues of particular interest to developing countries, including, but not limited to, matters covered by the OECD.[2]

• Neutralizing the effects of hybrid mismatch arrangements;

• Limiting the deduction of interest and other financing expenses;

• Preventing the avoidance of permanent establishment status;

• Protecting the tax base in the digital economy;

• Transparency and disclosure;

• Preventing tax treaty abuse;

• Preserving the taxation of capital gains by source countries;

• Taxation of services;

• Tax incentives.

An updated and expanded second edition of the UN BEPS Handbook was published in 2017.[3] This second edition updates the chapters from the 2015 edition to reflect the final outputs of the OECD project on BEPS, as well as the latest developments in the work of the United Nations Committee of Experts on tax base protection for developing countries. The second edition includes two new chapters that address base-eroding payments of rent and royalties and general anti-avoidance rules (GAARs).

The proposal for the chapter on intra-group services considered that tax authorities of countries of service recipients sought to ensure that only genuine service charges are allocated to service recipients, while the authorities of countries of service providers are concerned with service charges being allocated to group members with an appropriate mark up. Multinational enterprises sought to ensure that service costs are allocated to group members and have appropriate profit margins. Developing countries are concerned about base erosion through service charges, such as claiming that such high-margin services as strategic management and research and development had been rendered when it is hard to identify benefits. The proposal distinguished between high-margin and low-margin services. “Safe harbors” for non-essential services and a de minimis rule, with a focus on simplicity and resource savings, were also under discussion, as well as Cost Contribution Arrangements.

[1] Available at http://www.un.org/esa/ffd/wp-content/uploads/2015/07/handbook-tb.pdf.

[2] UN BEPS Handbook 2015 at p 8. See documents of the Subcommittee on BEPS for Developing Countries, available at http://www.un.org/esa/ffd/tax-committee/tc-beps.html.

[3] See https://www.un.org/esa/ffd/publications/handbook-tax-base-second-edition.html.

2.3 UN Transfer Pricing Manual 2017

These discussions led to the revisions of the 2017 United Nations Practical Manual on Transfer Pricing for Developing Countries, undertaken by a Subcommittee of the Committee of Experts on International Cooperation in Tax Matters. The revisions were developed from the following perspectives that:[1]

• it reflects the operation of Article 9 of the United Nations Model Convention, and the Arm’s Length Principle embodied in it, and is consistent with relevant Commentaries of the U.N. Model;

• it reflects the realities for developing countries, at their relevant stages of capacity development;

• special attention should be paid to the experience of developing countries; and

• it draws upon the work being done in other fora.

The 2017 UN Manual revisions include:

• A revised format and a rearrangement of some parts of the Manual for clarity and ease of understanding, including a reorganization into four parts as follows:

       o Part A relates to transfer pricing in a global environment;

        o Part B contains guidance on design principles and policy considerations; this Part covers the substantive guidance on the arm’s length principle, with Chapter B.1. providing an overview, while Chapters B.2. to B.7. provide detailed discussion on the key topics. Chapter B.8. then demonstrates how some countries have established a legal framework to apply these principles;

        o Part C addresses practical implementation of a transfer pricing regime in developing countries; and

        o Part D contains country practices, similarly to Chapter 10 of the previous edition of the Manual. A new statement of Mexican country practices is included and other statements are updated.

• A new chapter on intra-group services.

• A new chapter on cost contribution arrangements.

• A new chapter on the treatment of intangibles.

• Significant updating of other chapters.

• An index to make the contents more easily accessible.

[1] United Nations Committee of Experts on International Cooperation in Tax Matters’ Practical Manual on Transfer Pricing for Developing Countries (Apr 4, 2017) (hereafter “2017 UN Manual”). Available at http://www.un.org/esa/ffd/wp-content/uploads/2017/04/Manual-TP-2017.pdf.

2.4 UN Transfer Pricing Manual 2021

On April 27, 2021 the Committee of Experts on International Cooperation in Tax Matters published the third edition of the United Nations Practical Manual on Transfer Pricing for Developing Countries.[1] In its third edition, the 2021 UN Manual revises existing text and adds new chapters and sections, including more country practice chapters. Note that the transfer pricing issues specific to the extractive industries is addressed in a transfer pricing chapter within the United Nations Handbook on Selected Issues for Taxation of the Extractive Industries by Developing Countries.[2]

The 2021 UN Manual contains new and revised content for financial transactions,[3] profit splits,[4] centralized procurement functions,[5] on group synergies,[6] on customs valuation,[7] and comparability issues.[8] The third edition also includes new content on establishing transfer pricing capabilities within tax administrations.[9]

The UN Manual addresses the practical implementation of a transfer pricing regime in developing countries and shares examples of country practices from developing countries, such as Brazil, China, India, Kenya, Mexico, and South Africa.[10]

The 2021 UN Manual adopted a four-digit paragraph numbering system, and the inclusion of additional paragraphs necessitated a citation change for most content from the second edition of 2017 to the third edition. This treatise is updated to reflect the most current 2021 UN Manual.

[1] United Nations Practical Manual on Transfer Pricing for Developing Countries, Third Edition (April 27, 2021), hereafter referred to as the “2021 UN Manual”. Available at https://www.un.org/development/desa/financing/document/united-nations-practical-manual-transfer-pricing-developing-countries-2021.

[2] United Nations Handbook on Selected Issues for Taxation of the Extractive Industries by Developing Countries (2018) available at https://digitallibrary.un.org/record/3801187?ln=en.

[3] 2021 UN Practice Manual ¶ B.9.

[4] 2021 UN Practice Manual ¶ B.4.6.5.10.

[5] 2021 UN Practice Manual ¶ B.5.7.

[6] 2021 UN Practice Manual ¶ B.6.2.5.13.

[7] 2021 UN Practice Manual ¶ B.4.2.7.

[8] 2021 UN Practice Manual ¶ B.3.

[9] 2021 UN Practice Manual ¶ C.11.1.1.

[10] 2021 UN Practice Manual Part D.

3. UN Framework Convention on International Tax Cooperation

December 22, 2023, the United Nations General Assembly adopted resolution 78/230, “Promotion of inclusive and effective international tax cooperation at the United Nations.” The General Assembly directed that the UN develop a framework convention on international tax cooperation, which is fully inclusive for all UN member countries, most specifically, the non-OECD countries. Its design and drafting aim is to make international tax cooperation more accessible for non-OECD members and thus effective for all and also to accelerate the implementation of the Addis Ababa Action Agenda on Financing for Development and the 2030 Agenda for Sustainable Development. Inclusive and effective participation in international tax cooperation requires procedures that take into account the diverse needs, priorities, and capacities of all countries, enabling them to contribute meaningfully to norm-setting processes without undue restrictions and to receive support in doing so, including the opportunity to participate in agenda-setting, debates, and decision-making.

For three weeks through August of 2024, a Member State-led, open-ended ad hoc intergovernmental committee drafted the terms of reference for the framework convention.^[1] The terms of reference were finalized and recommended to the General Assembly.^[2]

Protocols are separate, legally binding instruments under the framework convention to implement or elaborate on the framework convention. Each party to the framework convention should have the option to become a party to a protocol on any substantive tax issue, either at the time of becoming a party to the framework convention or at a later date. The subject of early protocols will be decided at the organizational session of the intergovernmental negotiating committee and drawn from the following specific priority areas: (a) taxation of the digitalized economy; (b) measures against tax-related illicit financial flows; (c) prevention and resolution of tax disputes; and (d) addressing tax evasion and avoidance by high-net-worth individuals and ensuring their effective taxation in the relevant Member States. Moreover, protocols addressing the following topics may also be considered: (a) tax cooperation on environmental challenges, (b) exchange of information for tax purposes, (c) mutual administrative assistance on tax matters, and (d) harmful tax practices.

The framework convention negotiating committee will meet for two weeks at least thrice annually in 2025, 2026, and 2027 to submit the final text of the framework convention and the two early protocols to the General Assembly for its consideration in the first quarter of the eighty-second session 2028.

[1] Second Session, Ad Hoc Committee to Draft Terms of Reference for a United Nations Framework Convention on International Tax Cooperation, available at https://financing.desa.un.org/un-tax-convention/second-session.

[2] Available at https://financing.desa.un.org/sites/default/files/2024-08/Chair%27s%20proposal%20draft%20ToR_L.4_15%20Aug%202024____.pdf.

4. What About the Next Four Years (2025-2029) – An Overview of the UN’s 31st Session (October 2025)

A United Nations tax committee of 25 experts, drawn from the staff of member states’ tax authorities, is currently meeting in Geneva this week to set its agenda for the next four years. The talks cover challenging global tax issues, including taxing tech giants and curbing corporate tax avoidance, as well as governments leveraging AI for tax audits and implementing green levies – issues with high stakes for both developing countries and U.S. multinationals.

The 31st session of the United Nations Committee of Experts on International Cooperation in Tax Matters runs from October 21 to 24, 2025 at the U.N. Headquarters Office of Geneva. This committee, often referred to as the UN Tax Committee, is a technical body of 25 independent experts (drawn from national tax authorities) that develops guidance on international tax policy and administration, with a special focus on the needs of developing countries. Committee members, appointed for a 2025–2029 term, come from diverse regions and serve in their personal capacities (they are nominated by governments but do not represent them directly). The group’s mandate is to help countries craft “stronger and forward-looking” tax policies suited to a globalized, digital economy, while preventing double taxation and curbing tax evasion and avoidance. In practice, the UN Tax Committee produces practical tools, including a competing model tax treaty (to the OECD version), a negotiations handbook for developing countries to approach tax treaties, and tax-regime specific handbooks (e.g. transfer pricing; extractive industries; dispute resolution), aimed at strengthening countries’ tax systems and boosting domestic resource mobilization (raising revenue at home) for development. This week’s gathering marks the first meeting of the newly appointed membership. The primary focus of the agenda is to decide the Committee’s work program for the next four years and set timeframes for deliverables.[1]

Stakeholders, including national governments, academic experts, civil society organizations, and private sector representatives, have submitted a wide range of proposals aimed at modernizing global tax norms for the Committee’s 2025–2029 work program. While many contributions revisit established debates such as the taxation of multinational technology corporations and the mitigation of corporate tax avoidance, others highlight emergent concerns pertaining to artificial intelligence (“AI”), health-related taxes, informal economies, and gender equity in taxation. This breadth of input evidences the increasing intersection of tax policy with developmental, technological, and social considerations, bearing potential implications for jurisdictions including the United States.

[1] United Nations, Committee of Experts on International Cooperation in Tax Matters, Provisional Agenda of the Thirty-First Session (21–24 Oct. 2025, Geneva).

4.1 From Digital Taxes to Green Levies: The Usual Suspects (and More)

A significant proportion of submissions advocate for the continued development of digital economy taxation, focusing on the allocation of taxing rights over corporate profits earned via online activities in countries where a company maintains users or customers but lacks physical presence. Of fifty-one written inputs received, thirty-eight addressed taxation of digital services or related “nexus without presence” issues. Many developing countries are seeking enhanced source-based taxing rights over technology multinationals, building on recent UN initiatives such as Article 12B which targets taxation of digital services and the conceptualization of “digital permanent establishment.”[1] Relatedly, numerous stakeholders advocate for stricter transfer pricing regulations to curb profit shifting by multinational enterprises, primarily through the complex valuation of intangibles and intra-group transactions, which facilitate the relocation of profits to low-tax jurisdictions and result in substantial revenue losses for governments.[2] There is considerable support for adopting simplified, formulaic profit allocation methods, as opposed to the current arm’s-length principle, which is widely viewed as both administratively burdensome and susceptible to manipulation.[3] Some contributors further propose the creation of safe harbors or shared databases of comparable pricing data to help developing nations audit multinational activities.

Environmental taxation has also emerged as a priority, with over a dozen submissions—including those from France and several African states—requesting comprehensive guidance on carbon pricing, the taxation of carbon credits, and the structuring of green incentives.[4] Recent UN work, including the publication of the Carbon Taxation Handbook, marks significant progress. Yet, stakeholders are seeking additional resources, including model carbon tax frameworks, assistance in navigating the European Union’s Carbon Border Adjustment Mechanism, and recommendations regarding the taxation of emissions from the aviation sector.[5] These developments reflect a broader movement toward “greening” tax systems, which simultaneously generate revenue and incentivize sustainable behaviors.

Tax fairness and transparency remain central themes, with particular advocacy from U.S.-based organizations. For example, the Washington, D.C.-based FACT Coalition has urged the UN to promote public country-by-country reporting of corporate profits and tax payments, arguing that such disclosures would benefit developing countries that currently receive information only through restrictive and confidential intergovernmental exchanges.[6] Presently, the United States shares multinational tax reports with only two African nations under strict secrecy provisions, thereby limiting broader access.[7] The FACT Coalition contends that public reporting would eliminate costly legal barriers and facilitate oversight by tax authorities and investigative journalists, ultimately enhancing corporate accountability. Similarly, civil society groups from Latin America and Africa have called for the establishment of public beneficial ownership registries to expose illicit financial flows, a global transparency initiative that the United States has tentatively supported through measures such as the Corporate Transparency Act.[8]

While these established issues—digital taxation, corporate avoidance, environmental taxes, and transparency—already present substantial challenges, the Committee’s agenda has expanded further in response to new stakeholder concerns. Notably, the feedback from the thirty-first session reveals the emergence of topics that have seldom been addressed in prior international tax forums. The following section examines several of these new themes and their significance, including for U.S. policy.

[1] United Nations, Dept. of Econ. & Soc. Affairs, Article 12B: Income from Automated Digital Services, in United Nations Model Double Taxation Convention between Developed and Developing Countries: 2021 Update (2021) (introducing a new treaty provision to tax digital services).

[2] Organisation for Economic Co-operation and Development (OECD), Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022

[3] U.N. Committee of Experts on Int’l Tax Matters, Secretariat Note on Taxation of the Digitalized and Globalized Economy, U.N. Doc. E/C.18/2025/CRP.24 (Oct. 7, 2025), at 2–3.

[4] United Nations, Financing for Sustainable Development Office, “Environmental Taxation” Submissions (Oct. 2025) (compiling stakeholder proposals for guidance on carbon pricing, carbon credit taxation, and green incentives).

[5] United Nations Dept. of Econ. & Soc. Affairs, Carbon Taxation Handbook (2024) (a 204-page technical handbook on designing carbon taxes in developing countries, produced in cooperation with USAID).

[6] Financial Accountability & Corporate Transparency (FACT) Coalition, Submission to the U.N. Tax Committee on Public Country-by-Country Reporting (Sept. 2025) (urging adoption of public reporting of multinationals’ tax payments).

[7] Id. at 3 (noting that as of 2025 the United States shares corporate tax reports with only two African nations – Mauritius and South Africa – under strict confidentiality, limiting broader African access)

[8] Corporate Transparency Act, Pub. L. No. 116-283, 134 Stat. 4604 (2021) (codified at 31 U.S.C. §§ 5331–5333) (establishing U.S. beneficial ownership disclosure requirements.

4.2 Taxing the Rise of AI and New Technologies

Artificial Intelligence has rapidly ascended as a focal point in international tax discourse.[1] Stakeholders note that AI is revolutionizing tax administration, from enhancing compliance and fraud detection to automating audit processes, and urge the UN to ensure that developing countries are not left behind in this technological transition. AI tools offer the potential to analyze vast datasets, automate routine tasks, and improve taxpayer services; however, resource-constrained nations often lack the technical expertise and funding necessary to implement such systems, raising concerns about a widening “tax tech” divide. Experts have recommended that the Committee develop guidelines or establish a dedicated task force on AI in tax administration, focusing on best practices for algorithmic design, data privacy safeguards, and vendor selection by revenue authorities. Additionally, the protection of taxpayer rights in the context of AI-driven audits has been emphasized, with proposals suggesting that individuals flagged by AI for audit should retain the right to human review.[2] Absent global standards, the deployment of AI in tax administration risks outpacing the evolution of legal protections.

AI is not solely a tool for tax authorities; it is also giving rise to new tax bases and avenues for tax avoidance. As AI-enabled enterprises generate profits through intangible means, countries are debating mechanisms for capturing a fair share of this value.[3] The debate mirrors ongoing discussions regarding the taxation of highly digitalized businesses, many of which are headquartered in the United States. It has prompted consideration of an “AI tax” or the inclusion of AI services within digital services tax regimes.[4] Some scholars have even proposed a “robot tax”—a levy on corporations that substitute human labor with AI and automation—as a means of addressing growing economic inequality.[5] Although consensus on such innovative tax measures remains elusive, their appearance on the UN agenda signals the urgency with which policy must adapt to technological change.[6] For U.S. policymakers, these developments may foreshadow future disputes, as the United States has opposed unilateral digital services taxes and could similarly resist the imposition of AI-specific taxes aimed at major Silicon Valley firms.[7] Nonetheless, the Internal Revenue Service (“IRS”) has begun deploying AI systems to enforce existing laws; for instance, in the current year, the IRS announced the use of AI to detect tax evasion patterns among large partnerships, a move that has prompted legislative scrutiny regarding privacy implications.[8] As AI continues to reshape economic activity, the UN Tax Committee is poised to play a critical role in formulating guidance on the responsible taxation and utilization of this technology at the global level.[9]

[1] U.N. Committee of Experts on Int’l Tax Matters, Secretariat Note on Tax-Related Artificial Intelligence Issues, U.N. Doc. E/C.18/2025/CRP.25 (Oct. 7, 2025), at 1 (observing that Artificial Intelligence is a “powerful tool for tax administrations” but comes with significant risks and resource gaps for developing countries).

[2] Pramod Kumar Siva, Legal and Regulatory Implications of Agentic AI in Tax Administration, 118 Tax Notes Int’l 1711 (June 16, 2025) (analyzing privacy, bias, due process, and accountability challenges posed by autonomous AI in tax enforcement), available at SSRN: https://ssrn.com/abstract=5333340.

[3] U.N. Committee of Experts on Int’l Tax Matters, Secretariat Note on Taxation of the Digitalized and Globalized Economy, supra note 9, at 6 (noting that some submissions proposed expanding digital services taxes to cover AI-enabled services, mirroring debates on taxing highly digitalized businesses).

[4] See, e.g., BEPS Monitoring Group, Stakeholder Input to UN Tax Committee Work Programme 2025–2029 (Sept. 2025), at 2–3 (advocating inclusion of digital services and possibly certain AI-based services in new taxing-rights rules); Tax Justice Network, Submission to UN Tax Committee (Sept. 2025), at 4 (proposing that digital services tax measures be considered if consensus on Pillar One falters).

[5] Ryan Abbott & Bret Bogenschneider, “Should Robots Pay Taxes?”, 12 Harv. L. & Pol’y Rev. 145, 146–53 (2018) (exploring the rationale for a tax on robots or AI that displace human labor).

[6] U.N. Committee of Experts on Int’l Tax Matters, Secretariat Note on Taxation of the Digitalized and Globalized Economy, supra note 9, at Annex (reflecting that even though novel ideas like an “AI tax” lack consensus, their emergence on the UN agenda underscores the urgency of adapting tax policy to technological change).

[7] U.S. Dep’t of the Treasury, Press Release: United States and Five European Countries Extend Transition Agreement on Digital Services Taxes (Feb. 15, 2024) (reaffirming U.S. opposition to unilateral DSTs and extending a moratorium on DST measures pending a multilateral OECD solution).

[8] I.R.S. News Release IR-2023-166 (Sept. 8, 2023) (announcing a sweeping enforcement initiative using AI to detect tax evasion patterns – including opening audits of 75 large partnerships – as part of efforts to restore fairness in the tax system.

[9] Letter from Rep. Jim Jordan, Chairman, H. Comm. on the Judiciary, & Rep. Harriet Hageman to Hon. Janet L. Yellen, U.S. Treasury Secretary (Mar. 20, 2024) (inquiring into the IRS’s use of AI to monitor taxpayers’ financial data without warrants, and citing concerns of “AI-powered warrantless financial surveillance”).

4.3 Health Taxes for Development – Tobacco, Sugar, and Beyond

Several developing country submissions implored the Committee to champion health taxes – excise taxes on products like tobacco, alcohol, and sugary drinks that raise revenue and improve public health. Such taxes are sometimes called “sin taxes,” but stakeholders frame them as smart fiscal policy: easy to administer, hard to evade, and yielding a double dividend of funds and healthier populations.[1]

The African Alliance for Health Research and Economic Development, for example, noted that many low-income countries struggle to finance healthcare and climate adaptation, and argued that targeted levies on harmful products could help fill the gap. They urged the UN experts to develop technical guidance on designing and implementing health-related taxes (on tobacco, alcohol, sugary drinks) and to share best practices on monitoring their impacts. Such guidance could include model legislation for tobacco taxes or sugar-sweetened beverage taxes, as well as advice on setting rates high enough to deter consumption but not so high as to encourage black markets.[2]

The push for health taxes also has a U.S. angle. In the United States, federal and state governments have long taxed cigarettes and alcohol (with proven public health benefits), and cities like Philadelphia and Berkeley pioneered soda taxes. American health advocates, including some foundations and researchers, have promoted similar measures abroad as a win-win for achieving Sustainable Development Goals. Notably, no U.S. government entity weighed in at the UN to advocate for health taxes; the submissions primarily came from African and international health groups. However, U.S.-based organizations, such as Bloomberg Philanthropies, have funded technical support for such taxes globally. For the UN Tax Committee, incorporating health taxes into its work program would align with broader development priorities and World Health Organization recommendations, signaling that tax policy is not just about macroeconomics, but also about saving lives. It might even nudge U.S. policymakers to consider strengthening health-related taxes at home (e.g., revisiting federal soda tax proposals) if framed as part of a global best practice.

[1] World Health Organization, WHO Technical Manual on Tobacco Tax Policy and Administration, at 1–3 (2021) (noting that well-designed health taxes on products like tobacco, alcohol, and sugary drinks can both raise revenues and significantly reduce harmful consumption – a “double dividend”).

[2] African Alliance for Health, Research and Economic Development, Stakeholder Submission on Health Taxes (Sept. 2025) (arguing that excise taxes on tobacco, alcohol, and sugary drinks could help low-income countries finance healthcare and climate adaptation, and urging the UN to develop model health tax legislation).

4.4 Minimum Taxes and the “STTR” Debate

Even as the OECD’s global 15 percent minimum corporate tax (Pillar Two) inches toward implementation, developing countries are advocating tweaks to ensure it works for them. A key request in the UN submissions is support for the Subject To Tax Rule (STTR) – a treaty-based measure that allows source countries to impose a withholding tax on certain cross-border payments (such as interest and royalties) that would otherwise go untaxed or lightly taxed in the recipient’s country. Essentially, STTR is designed to prevent “double non-taxation” by ensuring a modest tax (typically 9 percent) on these outbound payments. The UN Tax Committee has approved its own version of an STTR, and stakeholders like Nigeria’s Federal Inland Revenue Service urged that it be prioritized and broadened. Nigeria noted some current proposals are too limited – for example, the OECD’s version excludes many transactions and has complex carve-outs – and it recommended a simpler rule to catch any payment that isn’t taxed because the payee lacks a permanent establishment in the source country. Such a rule would strengthen developing countries’ hand in taxing services or royalties being paid to offshore affiliates.[1]

Alongside STTR, there were calls to refine the implementation of the global minimum tax. Some civil society groups from Latin America argued that the 15 percent rate might be too low to curb harmful tax competition, and that developing nations should explore complementary measures. One idea floated is a Domestic Minimum Top-up Tax (DMTT) – basically, if a multinational’s local effective rate falls below the agreed minimum, the source country itself would collect the top-up to 15%, rather than leaving that to the company’s home country. This aligns with OECD Pillar Two rules; however, developing countries seek UN guidance to ensure they can easily adopt DMTTs and avoid missing out on revenue. Another idea (championed by an academic from India) is to consider a “Significant Economic Presence” concept or other alternatives if the traditional permanent establishment threshold becomes obsolete in a digitalizing economy. The subtext in many submissions is wariness that the OECD-led deal, while a milestone, might skew benefits toward rich countries unless additional source-based tools, such as a robust STTR, are in place. In fact, analysis shows the UN’s simpler STTR would likely yield more revenue for developing countries than the OECD’s narrower version.[2]

For the United States, these discussions are highly pertinent. The U.S. helped design Pillar Two but has not yet implemented it domestically, and it has an extensive network of tax treaties that could be affected by an STTR multilateral instrument. U.S. companies could face those source-country withholdings if an UN-driven STTR becomes common. At the same time, the U.S. Congress’ reluctance to adopt the 15 percent minimum (due to partisan gridlock) means the U.S. might see other countries scoop up tax revenue that could have gone to the IRS – a scenario some lawmakers want to avoid. The UN Tax Committee’s work on these rules could thus influence the global playing field on which U.S. firms and tax policymakers operate. Any concrete UN guidance or model treaties on STTR and minimum taxes will be closely monitored by both multinationals and Treasury officials.

[1] Federal Inland Revenue Service (Nigeria), Stakeholder Submission to UN Tax Committee (Sept. 2025) (calling for prioritization of a robust Subject-to-Tax Rule and noting shortcomings of the OECD’s 9 percent STTR scope).

[2] South Centre & G-24, Press Release: Country-Level Revenue Estimates – A Comparative Analysis of UN and OECD Subject to Tax Rules for 65 Member States (July 23, 2025) (reporting that the UN’s broader STTR would yield substantially higher tax revenues for developing countries than the narrower OECD version).

4.5 Balancing Ambition with Practicality

AAs the UN Tax Committee convenes in late October for its 31st session (now with a new 25-member roster of experts from around the world), it faces the daunting task of sifting through this rich array of stakeholder proposals. There is a clear momentum toward a more inclusive international tax dialogue – one that not only continues technical work on treaties and transfer pricing, but also integrates tax with digital innovation, health policy, climate action, and social justice. For an advisory body that operates by consensus and whose outputs are often non-binding, selecting priorities will require striking a balance between ambition and feasibility. Not every idea will make the cut; some issues might be referred to other forums (for instance, the IMF or World Bank may take on informal sector taxation, or the UN’s New York process on the tax convention may tackle overarching principles like global wealth taxation that were also floated).

Stakeholders are clearly thinking beyond the status quo. Whether it’s carving out a role for AI in easing tax compliance burdens, enacting excise taxes that fight diabetes and smoking, or rewriting tax rules to account for remote workers and carbon traders, the submissions urge the Committee to be forward-looking. There is also an implicit call for the UN to assert a more decisive leadership role in global tax norm-setting, reflecting the frustration of developing countries with the slower, consensus-bound OECD process. The recent UN General Assembly resolution to initiate negotiations on a Framework Convention on International Tax Cooperation heightens the stakes; the Committee’s work program may shape what ultimately goes into that treaty.

For American observers, who are traditionally more focused on domestic tax issues or OECD initiatives, the flurry of activity at the UN is worth paying attention to. U.S. companies and civil society alike have a stake in the game: how digital profits are distributed, how transparent corporate finances are, and how new taxes (from carbon to AI) are designed will all impact the U.S. in the long run. Encouragingly, at least one U.S.-led coalition (FACT) and several U.S. academics engaged with this UN process, emphasizing that global tax fairness can advance both development and American interests by leveling playing fields. The tone of the submissions is cooperative mainly – stakeholders aren’t looking to punish any one country, but to ensure all countries, especially poorer ones, have the tools to raise revenue fairly in the 21st century.

As the session unfolds, expect detailed agenda items on topics such as updating the UN Model Tax Convention, enhancing tax dispute resolution, and providing new guidance on tax incentives. However, also expect the unexpected: discussions of topics like a “Gender and Taxation” toolkit or an AI ethics charter for tax administrations could emerge, which would have been unthinkable in this arena just a decade ago. The breadth of stakeholder input ensures that Committee members will have exposure to diverse ideas. If they manage to translate even a portion into concrete outputs – say, a new UN handbook on health taxes or an outline for taxing remote work – it could mark a significant broadening of international tax cooperation. In the end, the 31st session’s expanded brief shows that tax is no longer a dry, isolated field; it’s at the heart of debates on sustainable development, technology, and equity. And what happens in this realm will reverberate far beyond the United Nations, reaching policymakers in the OECD and capitals of member states, such as Washington, Paris, Lagos, Beijing, Mumbai, Brasilia, and everywhere in between.

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My Cambridge Plenary Presentation: Why is $5.5 Trillion of U.S. AUM Exempt from the BSA’s AML, CIP & SAR Rules?

Posted by William Byrnes on September 8, 2025

William_Byrnes_FINCEN_Revokes_BSA_for_Investment_Advisors_4 Sept_2025 Download

primary sources and data referred to within my presentation include:

Foreign Portfolio Holdings of U.S. Securities end of 2Q 2024 (published by U.S. Treasury April 2025)

SEC monthly information and data of Registered Investment Advisers and Exempt Reporting Advisers

FinCEN revised final rule link (December 2024) and FinCEN revocation of rule July 21, 2025

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International Tax & Transfer Pricing Certificates or LL.M. / Master Legal Studies at Texas A&M

Posted by William Byrnes on August 21, 2025

International Tax & Transfer Pricing (non-degree) Certificates or LL.M. (for law graduates) / Master Legal Studies (for accountants, economists, and financial professionals) are designed for an in-depth study of tax risk management. Texas A&M Law, as a public university, offers its graduate degree for a total tuition cost of $36,000, making it the most corporate-reimbursement/budget/investment-return-friendly competitive program in the U.S.

Sample of Courses (see graduate programs catalog)

Transfer Pricing l – Methods, Econometrics, and Tangibles – January start
Transfer Pricing II – Services and Intangibles – March start
International Tax Risk Management I – Data, Analytics, and Technology
International Taxation and Treaties I – residency issues – August start
International Taxation and Treaties II – source issues – October start
Inhouse Tax Counsel: Tax Systems and Risk Management – Summer
Domestic (Inbound) Tax Risk Management – August start
U.S. International Tax Risk Management – Data and Analytics – Spring
U.S. International Tax Risk Management – Law and Regulation – Summer
FATCA, CRS, and AEoI Risk Management – Summer
European Union Tax Risk Management – March start

Example of Weekly Case Study for Domestic (Inbound) Tax Risk Management Week 1 (last week of August)

A seven-week course case study, where you will serve as the new in-house international tax team, focused on its foreign operations, of Natmed Serland SA, one of the leading global FMCG Companies. The week before you must report to the office, your inhouse team has been provided Natmed’s operational briefing, department (functional) interviews briefing, and all relevant financials. Your team must come together before the first week and discuss Natmed because for your first week in the office, your team will hit the ground running. The Board of Directors has instructed the in-house tax department to brief the Operational Board weekly for one hour, over six weeks, on a specific tax risk topic area related to NatMed’s overall tax risk management and financial health. In the seventh week, at the annual Full Board meeting, your team has been granted an hour, hard-stop time slot on the agenda to provide its final tax risk management prognosis of Natmed Serland.

Your faculty case study facilitators consist of Pramod Kumar (International Tax Director, Michelin North America); Hafiz Choudhury (M Group Principal); Dr. Maji Rhee (Dean, Center for International Education; Professor, Faculty of International Research and Education, School of International Liberal Studies, Waseda University); and the course leader Professor William Byrnes.

For week 1, Pramod Kumar, our in-house tax director expert, will lead the week 1 and week 2 learning on tax risk management concerning our fictional Natmed Serland SA, one of the world’s largest natural-healthcare groups with revenues exceeding €1.28 billion and a legacy that stretches back more than a century, earns 95 percent of its turnover outside its small European home market. Natmed’s corporate managerial and tax department briefs, the corporate financials, and ancillary research information are posted in your Canvas classroom case study folder. Please review the weekly pre-recorded video lectures and podcasts as well.

During mid-August orientation week, U.S. trade officials announce an immediate 18 percent customs duty on imported herbal creams and toothpastes—core items within Natmed’s flagship “Natmed” and “Natca” ranges. Overnight, margins on American sales collapse. During mid-August Orientation week, the chief executive summons the in-house tax team. A lifeline has appeared: the founding family of GreenLeaf Botanicals LLC, a New Jersey contract manufacturer that already toll-produces half of Natmed’s leading balm for private-label chains, is willing to sell. For USD 640 million in cash, Natmed can acquire 100 percent of GreenLeaf, re-domesticating production and escaping the new tariff. Exclusivity on the offer, however, expires in ten calendar days. The tax department must determine whether the deal truly neutralizes the duty hit, estimate the combined U.S. effective tax rate under domestic tax rules, and craft the deal’s tax covenants before the board votes.

The chief executive officer and an operating officer (Professors Kumars and Byrnes), representing the executive team, will hold a Zoom Q&A with a representative(s) of the tax department during week 1 on Monday and Thursday evenings for corporate brainstorming (and office hour Q&A).

The executive leadership has entrusted the mandate to its in-house tax team with full autonomy—ask any questions, run any model, and decide based on the best information you can gather, submitting the report to the executive leadership before 8 pm Central time on Sunday of Week 1. The executive team will hold a Zoom presentation/Q&A with a representative(s) of the tax department on Monday evening in week 2 to discuss the tax department’s recommendations.

Week 1 Analysis and deliverables

As the tax department, draft a one-page “Go / No-Go” executive memorandum that frames the deal’s upside, flags the unresolved risks, and proposes a tax covenant that the board could insist on before signing. This must be submitted to the board by 8 pm Central (Dallas) on Sunday of week 1.
Prepare and deliver the tax department’s presentation to the executive board members’ meeting via Zoom on Monday evening. A hard-copy presentation, such as a PPT, is NOT allowed. An agenda and any show-and-tell images, if helpful for understanding the recommendations, may be provided if not clearly presented in the executive memorandum.
Meanwhile, William Byrnes will lead this week’s learning for U.S. international tax updates, such as the CFC’s Subpart F and NCTI regimes.
Research Practicum: This week, William Byrnes will undertake a show-and-learn using the IBFD based on the case study.

Certificate and Degree candidates are exposed to (i) international tax laws, regulations, and policies in the international tax risk management field, (ii) technology and tax data management, and (iii) weekly practice case studies using Zoom and team groups. Individuals who complete the program will be able to synthesize scenarios, practice, and legal regulation in the international tax risk management field, providing analysis or judgments for consideration to organizational leadership with a nuanced perspective.

Courses are offered by asynchronous distance learning to provide a flexible schedule for working professionals. Interactive coursework includes case study assignments and regular interaction with classmates & the faculty through twice-weekly Zoom meetings (recorded), pre-recorded videos, audio casts, discussion boards, and group breakout sessions. For more information, contact Admissions: https://www.law.tamu.edu/admissions-aid/how-to-apply/index.html

Most competitive tuition in the U.S. Texas A&M Law, as a public university, offers its graduate degree for a total tuition cost of $36,000, making it the most corporate-reimbursement/budget/investment-return-friendly competitive program in the U.S.

Top-ranked. Texas A&M law school is ranked #1 in the U.S. for employment outcomes (“gold standard” law jobs) for 2025 and 2026 – its sixth consecutive year ranked in the top 10 nationally. The law school is ranked in the first tier (#22 overall). The Wall Street Journal, focusing on career outcomes, ranks Texas A&M #12 of public universities and #1 in Texas. In addition, Texas A&M has surged to the No. 2 spot for most visible public universities and No. 8 among all U.S. institutions, according to American Caldwell’s 2025–2026 Global University Visibility (GUV) Rankings. Texas A&M’s $20 billion (2025) foundation endowment is #2 for U.S. public universities. Texas A&M has the most CEOs (#1) of Fortune 500 and Fortune 100 multinationals. Texas A&M is among the top three largest U.S. public universities, with 80,000 students enrolled in undergraduate, graduate, and doctoral/postdoctoral programs. Almost 600,000 former Aggies live worldwide and form a lifelong network across ages and academic disciplines, hosting many annual events and university-sports watch parties.

150-year old foundation. Texas A&M system’s operating budget of $9.2 billion (FY2027), R&D grants & expenditure exceed $1.5 billion, and capital budget of $6 billion includes the new billion-dollar Fort Worth integrated law-engineering-medical/public health, pharmacology, and multi-media five-building academic and research campus! Texas A&M is one of only 60 accredited universities of the Association of American Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 24 universities that hold the triple crown of universities: the U.S. statutory federal grants of Land, Sea, and Space.

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Is bringing investment advisors with the scope of KYC and SAR rules too much or much needed?

Posted by William Byrnes on July 23, 2025

Over $5.5 trillion of assets under management (AUM) by U.S. investment advisors is exempt from customer identification program (CIP) obligations, customer due diligence (CDD) requirements, and the filing of suspicious activity reports (SARs), which are essential aspects of the federal defense mechanism against criminal and terrorist organizations. Why is this so? Because the U.S. money laundering detection laws, which are found within the Bank Secrecy Act (BSA), apply to financial institutions and investment advisors, they are not within the scope of that term.

Investment advisors come in different shapes and sizes, thus with varying profiles of risk based on size of AUM, the type of clients, and the type of investments. Some investment advisors are departments of large financial institutions, and as such are within the BSA’s scope. Some are broker-dealers registered with FINRA, and FINRA has robust BSA-aligned rules that it can actually enforce. Some are pension investment advisors – subject to ERISA and IRS rules. Some are family office investment advisors. Investment advisors with $100 million or more in AUM generally must register with the SEC, and the SEC has BSA-aligned rules but not really enforcement power. The SEC and FINRA are both responsible for regulating to protect investors. Thus, there is some trade-off of resource time between enforcing AML reporting rules versus ‘checking the books’ and investment marketing.

However, about 23,000 investment advisors are ‘Exempt Reporting Advisers’ (ERAs). State-registered investment advisers are generally prohibited from registering with the SEC because they do not exceed the $100 million threshold. Thus, these investment advisors are registered and supervised by one of the fifty States’ relevant authority. And not within scope of the BSA record keeping and SAR reporting rules By the end of 2022, 17,063 State-registered investment advisers reported approximately $420 billion in AUM. But $5.2 trillion is managed by 5,846 ERAs who are statutorily exempt from registering with the SEC because the ERA: (1) is an adviser solely to one or more venture capital funds; or (2) is an adviser solely to one or more private funds and has less than $150 million AUM in the United States. Private funds, including private hedge funds, private equity funds, and venture capital funds, among others, do not register with the SEC.

FinCEN analyzed 12,000 SARs filed over a seven-year period by financial institutions within scope of the BSA reporting rule. FinCEN found that just over 15 percent of registered investment advisors (RIAs) and ERAs were associated with or referenced in at least one SAR filed between 2013 and 2021. Investment advisers were identified either as the subject of the SAR or in the narrative section of the SAR about the suspicious financial activity. Certain investment advisers were found to manage billions of dollars ultimately controlled by U.S.-sanctioned entities and persons.

The U.S. Treasury Department’s FinCEN (the Financial Crimes Enforcement Network) crafted a proposed rule to bring most, but not all, investment advisors as of January 1, 2026, within the scope of the BSA by categorizing them as financial institutions. Industry responded. FinCEN reconsidered its position and issued a revised final rule (link is here) in December 2024, explaining why it chose to disregard specific comments. Investment advisors were generally unhappy with any rule, as rules often incur compliance costs. Smaller investment advisors, though with fewer clients to comply about, still, it’s a burden in time and costs. Anyway, that rule was the last administration’s FinCEN.

This administration’s FinCEN renounced the rule (see link) on July 21, 2025. Why? One size doesn’t fit all. FinCEN now stated that any rule would need to be effectively tailored to the diverse business models and risk profiles of the investment adviser sector. FinCEN also said it intends to walk back its proposed rule requiring each investment advisor to maintain a customer identification program (a ‘know your client’ or ‘KYC’ rule). See Customer Identification Programs for Registered Investment Advisers and Exempt Reporting Advisers.

Is bringing investment advisors with the scope of ‘know your client’ rules and requirements to file a suspicious activities report too much or much needed?

Let me walk through a scenario and provide some thoughts. A client indeed undertakes due diligence of the investment advisor before wiring, say $20 million, into the investment advisor’s fund account. Is my investment safe? What is the investment return history? Will the advisor look the other way and not ask (many) questions about where my money and wealth originate? This last question, of course, is FinCEN’s concern.

Does the investment advisor know the client? Typically, yes, when it is an individual. After all, the advisor wants to establish a comprehensive investment strategy and foster a good client relationship to sustain business and generate new investor leads. Or the investment advisor has targeted an investor for a private equity fund, and the investment requires a significant amount of legal work and confidence-building in the investment advisor. But then I recall my binge weekend of watching Breaking Bad.

Walter White, a middle-aged high school chemistry teacher, earned $100 million or more during the five seasons. He should have retired after he clearly had ‘enough’ ($20 million?) and let the investment industry invest his wealth for his family to live on after the cancer took him (wouldn’t have made for a really engrossing series if he didn’t spiral out of control though and go out in a Butch Cassidy blaze of glory). In the Ozark version of Breaking Bad, Walter White contacts an investment advisory firm and lives off the investment returns from his $20 million meth earnings for the next 10 years – then passes the estate to his wife.

Does the investment advisor find Walter White’s story of a dead uncle in Scotland who left him $20 million a bit suspicious? Even if so, is that investment advisor going to kibosh $20 million of new business by asking to see the estate letters and other due diligence when not required? And what to do with the suspicion because the investment advisor is not registered with FinCEN to report SARs? On the other hand, should not the investment advisor be able to rely on the larger financial institutions in the system to ask these questions, gather the necessary documentation, and file the SARs when required? For the investment advisor to receive a $20 million wire, a financial institution had to first onboard Walter White and receive $20 million in deposits. Would not FinCEN’s rule be an unnecessary, costly regulatory overlap?

Walter White, the chemistry teacher, does not have $20 million in the following scenario. Instead, he introduces his lawyer, Saul Goodman, to an investment advisor, who represents a Delaware LLC that has $20 million to invest (whose shareholders are two Panamanian foundations). Saul tells the curious advisor that the money, sitting in an account of a large financial institution, originated from a wealthy but very private Hong Kong family with real estate investments. But it didn’t. It’s Walter’s meth earnings. How did it end up in the large financial institution? Spend a weekend bingeing Ozark to watch its laundering operation. Same question as before: should the advisor be able to rely on that large financial institution regarding the origin of the $20 million?

The soon-to-be-revised or buried FinCEN rule would have required most investment advisors to file a Currency Transaction Report (CTR) for transactions involving a transfer of more than $10,000 in currency by, through, or to the investment adviser. Investment advisors already have to file a CTR if a client brings in $10,000 or more of cash, so from FinCENs perspective, what’s a few more filings? From an investment advisor’s perspective, how many is a few? And how does providing this data to FinCEN help fight crime?

I’m of the (perhaps naive) belief that most financial advisors do not want to facilitate investment of criminals’ proceeds. How would my ethical investment advisor even inform law enforcement if, for example, a Walter White becomes a client with a mere $500,000, but then his dead uncle gifts him $20 million? Then he introduces a friend who also inherited $20 million from a dead uncle. A BSA exempt investment advisor is prevented from participating in law enforcement information sharing programs and thus cannot provide helpful information on suspected illicit finance activity to law enforcement or to other financial institutions. Moreover, attempting to do so exposes the investment advisor to civil liability for violating the client’s right to privacy. The BSA affords protection from civil liability (a safe harbor) to a financial institution that files an SAR about a client or potential client. Even though an investment adviser could, in theory, file a voluntary SAR to FinCEN, without this BSA safe harbor, the civil liability legal risk from customers or other counterparties would weigh against it.

If I am correct that most financial advisors want to be part of the ‘good guys’, then FinCEN needs to convene investment advisor workgroups based on their shapes and sizes and ask them how to best achieve the mutual goal of a lowest-cost, liability-risk-free process, for investment advisor SAR reporting. If I am wrong, then it will take a lot of enforcement resources to compel investment advisors to ‘do the right thing,’ when the right thing may not even be fit for its purpose.

I am confident that this topic warrants a scholarly paper. But it’s time for me to get back to updating and revising my Think Advisor/Tax Facts books for financial advisors for the 600+ pages of OBBBA tax changes. Meanwhile, let me know your thoughts: Is bringing investment advisors with the scope of ‘know your client’ rules and requirements to file a suspicious activities report too much or much needed?

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Who is Responsible for Increasing Health Care Costs?

Posted by William Byrnes on June 19, 2025

Professor William Byrnes, Texas A&M University School of Law, Risk Management Graduate Program.

Based on my recent debate with Robert Bloink, “Should the Tax Bill Expand HSAs?”, a reader asked me to comment on both parties’ failure to address the central issue of costs regarding the sustainability of Medicare and Medicaid. This is my part one response, focused primarily on physicians. I plan to author a part two focused on other stakeholder roles in health care costs.

The sustainability of Medicare and Medicaid, and U.S. healthcare in general, is a challenging topic, especially when considering the political hurdles associated with reducing medical care costs and enhancing efficiency. Despite past efforts like the ACA, which aimed to address healthcare costs, the actual regulatory impact on reducing inflationary trends in medical services remains, at best, questionable.

Let’s consider health care expenditure data pre- and post-ACA and then what portion physicians take.[1] Before the ACA in 2010, U.S. health care services expenditures were $2.6 trillion (inflation-adjusted for 2023, it’s $3.4 trillion). In 2023, $4.9 trillion. Arguably, health care expenditures grew more slowly between 2011 and 2020 compared to the previous decade of 2000 through 2010. Yet, the 2011 – 2020 cost growth was still well above the inflation rate (more than double the national annual inflation rate in most years). Whether the Titanic sank in two and a half hours or five hours, the (mostly poor) passengers without access to lifeboats died.

Alarmingly, the post-COVID yearly inflation costs of medical services have accelerated well beyond their pre-ACA years. The American Medical Association (AMA), the lobby trade organization of medical professionals, has no interest in alerting the public or Congress to the inflationary cost of physicians. Its members’ interests are to point the blame for rising medical expenses toward anyone but physicians (e.g., ruthless insurance companies, bureaucrats in hospitals, greedy pharma, greedier trial lawyers, inept regulatory bodies, overbearing student loan debt of $264,000 on average).[2] Yet, the AMA reported in its most recent Trends in Health Care Studies that from 2014 until 2023, physician services costs grew at an average annual rate of 5.3 percent – double inflation in several years.[3] In 2023, spending on physician services jumped by 7.6 percent, more than double the consumer price index inflation rate of 3.4 percent.[4]

Physicians’ annual income rose correspondingly, by varying degrees, across all practice areas. Medical industry reports (e.g., Medscape, Doximity, White Collar Investor) range from 3 to 6 percent overall increases. Some groups, like primary care, fared much better in 2023, with 11 percent.[5] Looking at average physician compensation by specialty provides some context for medical costs. Across all medical specialties without regard to U.S. regional variances, the average 2023 compensation was $398,000, yet for primary care, $281,000.[6] The highest average compensation for a specialty is orthopedics, a range of $543,000 to $745,000, depending on the industry survey. Other specialty examples: radiologists $520,000 to $620,000, plastic surgeons $516,000 to $620,000, general surgeons $420,000 to $512,000, emergency medicine $374,000 to $406,000, psychiatry $336,000 to $339,000, family medicine $276,000 to $301,000, and pediatrics $236,000 to $260,000.

With high incomes relative to other professions, it’s not surprising that 2023 was a bumper year for first-time state board-licensed physicians, 30,924, which followed a record year of 31,504 in 2022.[7] From 2010 until 2022, the U.S. expanded its total number of physicians by 23 percent.[8] The total U.S. licensed physician population has, as of 2025, reached 1.1 million. The number of physicians per hundred thousand persons has increased from 277 to 313, albeit rural areas (131 per hundred thousand) have much less than half.[9] However, the U.S. population is older. The CDC reported that 84.5 percent of U.S. adults had a medical visit in 2023.[10] In 2019, before COVID, the total number of physician visits had already reached 1.0 billion, with 320.7 visits per 100 persons, half of which were primary care, 29 percent specialist, and 20 percent for surgeons.[11] As the numbers indicate, annual visits per physician would be above 1,000. But some, like primary care physicians, will experience more visits per physician than, for example, an orthopedic surgeon.

For a comparable trading partner comparison, Canada, France, and Germany have physicians per 100,000 population of 243, 330, and 452, respectively.[12] France’s health expenditure per capita is $4,865, Canada’s is $5,922, Germany’s is $6,182, and the U.S.’s is double that: $12,434. But the U.S.’ double the per capita health care spend does not buy better health outcomes. For 2022, the U.S.’s life expectancy of 77.43 was the worst of the four countries, Germany’s 80.71, Canada’s 81.30, and France’s 82.23. Of course, the other countries partly achieve lower costs through much lower physician compensation. These countries’ physicians earn approximately one-third to one-half of their U.S counterparts, depending on whether they undertake private work outside the public health system.

As the physicians’ lobby, the AMA deflects attention rather well. All U.S. health spending increased by 7.5 percent in 2023, the highest growth rate since 2003.[13] Personal health care spending rose 9.4 percent, the most considerable annual growth since 1990. The two most significant components of 2023’s increase were pharma (prescription drugs, 11.4 percent) and hospital care (10.4 percent). Hospital care accounted for 31.2 percent of all health care expenditures, and physicians accounted for under half that, at 14.8 percent.

Hospitals may take home the largest share of health care expenditures, but not the largest net margin, 6.97 percent.[14] The Medical Group Management Association reports that hospitals generally had negative net margins for the COVID year of 2022. Median medical revenue per full-time physician was $1.578 million, but the median provider physician cost was $627,000 in addition to a $1,015 million median operating cost per physician.[15] KFF found that for 2023, the average hospital margin stood at 6.4 percent, but it differed significantly between for-profit and nonprofit hospitals: 14.4 percent versus 4.4 percent.[16] One explanation of the decline of hospital net margin may be found in the Congressional Budget Office report that Medicare’s payment-to-cost ratio for hospitals decreased from 99 percent in 2000 to 87 percent in 2018.[17] Meanwhile, the share of physicians with private practices dropped between 2012 and 2024 from 60.1 percent to 42.2 percent, the rest working for hospitals or private equity purchasers of a practice.[18] Physician private practices may earn net margins up to 20 percent. In contrast, large (‘AmLaw’) law firms generate from 35 to 45 percent net margin on average.[19] Medical insurers, like hospitals, earn net margins in the 3 to 6 percent range, with an industry average of 3.4 percent.[20]

Back to the subscriber question of Medicare and Medicaid sustainability, technological advancements, such as Robot AI medical providers and gene modification therapies, promise to transform healthcare delivery costs. However, regulatory bodies and legislative decisions ultimately shape the future of healthcare practices.

In a hypothetical scenario, envisioning significant reductions in billable charges within law firms and restructuring compensation models for partners and associates could potentially make legal services more accessible. Similarly, advocating for substantial pay cuts in public company management and investment firm staff aims to prioritize investor interests. While these measures may seem logical for economic sustainability, the complex political landscape often hinders their implementation. For example, 140 members of the House (31.7 percent) and 47 Senators are lawyers, whereas 21 House members and 5 Senators are physicians or dentists.[21] In 2020, government relations expenditures by the health care industry exceeded $700 million.[22] 116 healthcare and pharma companies contributed $16 million to candidates in the 2024 Congressional election cycle.[23] Achieving a sustainable healthcare system involves navigating intricate political dynamics supported by substantial political funding while regulatorily embracing innovative technological solutions prioritizing affordable care.

[1] Matthew McGough, Emma Wager Twitter, Aubrey Winger, Nirmita Panchal, and Lynne Cotter; How has U.S. spending on healthcare changed over time?, Peterson KFF, Dec. 20, 2024.

[2] What is the Average Medical Student Debt?, laurel road for Doctors, May 12, 2025.

[3] Trends in health care spending, American Medical Association, Apr. 17, 2025.

[4] Consumer Price Index: 2023 in review, U.S. Bureau of Labor Statistics, Jan. 19, 2024.

[5] Cathy Kibbe, New Data Shows Strong Physician Compensation Growth, Gallagher, 2024.

[6] Josh Katzowitz, How Much Money Do Doctors Make a Year? Salaries Have Yet Another Disappointingly Small Increase, The White Coat Investor, May 21, 2025.

[7] Physician Licensure in 2023. Federation of State Medical Boards, 2024.

[8] Aaron Young, PhD; Xiaomei Pei, PhD; Katie Arnhart, PhD; Jeffrey D. Carter, MD; Humayun J. Chaudhry, DO, MS; FSMB Census of Licensed Physicians in the United States, 2022. Journal of Medical Regulation (2023) 109 (2): 13–20.

[9] About Rural Health Care. National Rural Health Association, 2025.

[10] Ambulatory Care Use and Physician office visits. National Center for Health Statistics, Center for Disease Control, Dec. 12, 2024.

[11] Characteristics of Office-based Physician Visits by Age, 2019. National Health Statistics Reports, Number 184, Center for Disease Control, Apr. 19, 2023.

[12] Global Health Expenditure Database, World Health Organization, June 2025. Physicians and physiotherapists in the EU: how many? Eurostat, Aug. 18, 2023.

[13] National health expenditure data Historical. Centers for Medicare & Medicaid Services, Dec. 18, 2024.

[14] Margins by Sector (US). Stern School of Business, NYU, Jan. 2025.

[15] Nearly all medical groups still feeling the squeeze of rising operating expenses. MGMA Stat, June 26, 2024.

[16] Zachary Levinson, Scott Hulver, Jamie Godwin, and Tricia Neuman. Key Facts About Hospitals. KFF, Feb. 19, 2025.

[17] Cohen, M., Maeda, J., & Pelech, Daria. The Prices That Commercial Health Insurers and Medicare Pay for Hospitals’ and Physicians’ Services. Congressional Budget Office, Jan. 2022.

[18] Physician Practice Benchmark Survey. AMA, Jun 12, 2025.

[19] Madhav Srinivasan, Shape of the Profit Margin Curve. Penn Carey Law School, Mar. 28, 2023.

[20] U.S. Health Insurance Industry, 2023 Mid-Year Results. National Association of Insurance Commissioners.

[21] Membership of the 119th Congress: A Profile (2025), https://www.congress.gov/crs-product/R48535.

[22] Schpero WL, Wiener T, Carter S, Chatterjee P. Lobbying Expenditures in the US Health Care Sector, 2000-2020. JAMA Health Forum. 2022 Oct 7;3(10):e223801.

[23] Pharmaceuticals/Health Products PACs contributions to candidates, 2023-2024. Open Secrets.

Posted in Uncategorized | Tagged: Health, Health insurance, healthcare, insurance, Medicare | Leave a Comment »

How May Chevron’s overruling Impact Treasury Regulations?

Posted by William Byrnes on June 28, 2024

The U.S. Supreme Court today issued its expected overruling of the Chevron doctrine, which has been relied upon in 70 past Supreme Court decisions and approximately 17,000 in the Appellate and District courts.[1]

Brief Overview of the Chevron Doctrine

In a landmark unanimous decision in 1984, the Supreme Court established the Chevron doctrine. Only six justices participated due to the recusal of Justices Rehnquist, O’Connor, and Marshall.[2] The case, Chevron U. S. A. v. Natural Resources Defense Council, concerned whether a regulation issued by President Ronald Reagan’s administration’s EPA that, in the perspective of environmental groups, watered down the requirements of the Clean Air Act Amendments of 1977, permissibly defined a statutory term. The previous administration’s EPA regulation defined the term differently and had the support of environmental groups.

The Supreme Court, analyzing the statute’s language, ascertained that Congress did not intend a particular regulatory definition and instead intended to grant the EPA broad scope to effectuate the policies of the Clean Air Act.[3] The Supreme Court stated that policy arguments regarding regulatory choices “are more properly addressed to legislators or administrators, not to judges.”[4] When a court determined that Congress has not spoken directly on a statutory issue (the first step of analysis), then the Chevron doctrine established a threshold of deference in favor of an Executive branch agency’s regulatory choices if (the second step of analysis) – (a) the regulatory scheme is technical and complex, (b) the agency considered the matter in a detailed and reasoned fashion, and (c) the decision involves reconciling conflicting policies.[5]

Today’s Decision Overruling the Chevron Doctrine

On June 28, 2024, the Supreme Court published its decision for Loper Bright Enterprises v. Raimondo, Secretary of Commerce, known colloquially as the ‘New Jersey Fisheries case’.[6] A six-justice majority held that the Administrative Procedure Act requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and thus, courts may not defer to an agency’s interpretation of the law simply because a statute is ambiguous.[7] A three-justice dissent defended the Chevron doctrine’s allocation of deference to the executive branch based on the presumption that Congress favors an agency exercising the discretion allowed by a statute rather than the courts.[8]

In 1976, Congress promulgated the Magnuson-Stevens Fishery Conservation and Management Act (the “MSA”) to address overfishing in U.S.-controlled waters.[9] The MSA established eight regional fishery management councils each comprised of members of the regional fishing industry, the regional states, and the federal regulatory agency National Marine Fisheries Service (“NMFS”).[10] The MSA requires that fishing businesses allow an observer on fishing voyages to collect data necessary for the conservation and management of the fishery. The MSA specifies three industry groups that must cover the costs of the observer program, of which only one is a regional fishery management council (North Pacific).

In 2020, the NMFS published a final rule initiated by the New England Fishery Management Council (“NE-FMC”)that required New England-based fishing businesses to cover the costs of monitoring the Atlantic herring fishery when the NMFS elected not to do so.[11] The NMFS estimated that such costs would be approximately $710 daily, reducing annual returns to the vessel owner by up to 20 percent.[12] The New Jersey Fisheries case involved herring fishing family businesses who argued the NMFS is not authorized by the MSA to impose these costs upon them because their businesses fall within the non-specified NE-FMC.

The majority opinion provides an overview of the history of judicial interpretation, beginning with the seminal Marbury case, continuing through the New Deal period, the 1946 enactment of the Administrative Procedures Act, and ending with the present line of Chevron cases.[13] A foretelling statement regarding deference is made in its overview:

“Respect,” though, was just that. The views of the Executive Branch could inform the judgment of the Judiciary, but did not supersede it.[14]

The majority noted that the APA explicitly directs a reviewing court to decide all relevant questions of law, interpret constitutional and statutory provisions, determine the meaning or applicability of terms of an agency’s actions, and set aside agency action, findings, and conclusions not per a statute.[15] The majority concludes: “The deference that Chevron requires of courts reviewing agency action cannot be squared with the APA.”[16]

Thus, the majority decision was: “Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires. Careful attention to the judgment of the Executive Branch may help inform that inquiry. And when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring that the agency acts within it. But courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.”[17]

Impact on Treasury/IRS Regulations?

On April 8, 2024, the Congressional Research Service (the “CRS”) published an In Focus article regarding “The Possible Elimination of Chevron Deference: Potential Implications for Tax Revenue and Administration”.[18] The CRS stated that without Chevron’s deference, the 2019 Altera regarding the regulations for cost-sharing arrangements may have been decided in favor of the taxpayer.[19] You may find my previous articles about the Altera decision by linking here, as well as my 2017 article about Treasury regulation jurisprudence in light of the Amazon decision by linking here.

The most telling statement of the CRS is that without Chevron deference, Treasury may draft more taxpayer-friendly regulations. Why? CRS states that a survey found that:

88 percent of agency rule drafters either “agreed” or “somewhat agreed” that Chevron made them more willing to adopt “a more aggressive interpretation.”

Well, I must shut down now to prepare our Shabbat meals. But on Sunday, I’ll add more thoughts and analysis about the end of Chevron on tax regulations and, in particular, for transfer pricing.

[1] Adam Liptak, Supreme Court Imperils an Array of Federal Rules, NY Times, June 28, 2024. See https://www.nytimes.com/live/2024/06/28/us/supreme-court-chevron/heres-the-latest-on-the-decision?

[2] Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 104 S. Ct. 2778 (1984).

[3] Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 839, 104 S. Ct. 2778, 2780 (1984).

[4] Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 864, 104 S. Ct. 2778, 2792 (1984).

[5] Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 865, 104 S. Ct. 2778, 2792-93 (1984).

[6] Loper Bright Enters. v. Raimondo, Nos. 22-451, 22-1219, 2024 U.S. LEXIS 2882 (June 28, 2024).

[7] Loper Bright Enters. v. Raimondo, Nos. 22-451, 22-1219, 2024 U.S. LEXIS 2882, at *1 (June 28, 2024).

[8] Loper Bright Enters. v. Raimondo, Nos. 22-451, 22-1219, 2024 U.S. LEXIS 2882, at *114 (June 28, 2024).

[9] Pub. L. 94-265 (1976), 90 Stat. 331.

[10] Loper Bright Enters. v. Raimondo, Nos. 22-451, 22-1219, 2024 U.S. LEXIS 2882, at *18 (June 28, 2024).

[11] 85 FR 7414, 7414.

[12] Loper Bright Enters. v. Raimondo, Nos. 22-451, 22-1219, 2024 U.S. LEXIS 2882, at *20-21 (June 28, 2024).

[13] Marbury v. Madison, 5 U.S. (1 Cranch) 137 (1803); The Administrative Procedure Act (APA), Pub. L. 79–404 (1946), 60 Stat. 237.

[14] Loper Bright Enters. v. Raimondo, Nos. 22-451, 22-1219, 2024 U.S. LEXIS 2882, at *26 (June 28, 2024).

[15] Loper Bright Enters. v. Raimondo, Nos. 22-451, 22-1219, 2024 U.S. LEXIS 2882, at *32-33 (June 28, 2024).

[16] Loper Bright Enters. v. Raimondo, Nos. 22-451, 22-1219, 2024 U.S. LEXIS 2882, at *38 (June 28, 2024).

[17] Loper Bright Enters. v. Raimondo, Nos. 22-451, 22-1219, 2024 U.S. LEXIS 2882, at *61-62 (June 28, 2024).

[18] See https://crsreports.congress.gov/product/pdf/IF/IF12630/2.

[19] See William Byrnes, An ‘arm’s length result is not simply any result that maximizes one’s tax obligations’, Kluwer International Tax Blog (June 14, 2019), https://kluwertaxblog.com/2019/06/14/an-arms-length-result-is-not-simply-any-result-that-maximizes-ones-tax-obligations/.

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Supreme Court holds constitutional tax on U.S. shareholders for imputed undistributed income of foreign corporations but limits holdings’ impact on future taxes.

Posted by William Byrnes on June 20, 2024

At the end of 2017, Congress passed a once-off Mandatory Repatriation Tax (the “MRT”) of 8 to 15.5 percent of the undistributed total accumulated income of American-controlled foreign corporations over the past thirty years (since 1987).[1] This accumulated income, if distributed, would be taxed in the hands of the American shareholders. However, because Congress cannot force a foreign corporation to repatriate income, Congress instead imposed the tax by imputing pro rata the accumulated income to American shareholders who owned at least 10 percent of a foreign corporation’s shares.

A couple filing jointly as married taxpayers, Charles and Kathleen Moore (the “taxpayer”), invested in the American-controlled foreign (India) corporation KisanKraft. From 2006 to 2017, KisanKraft earned profits supplying farm equipment to customers in India but did not distribute any of it to its American shareholders. The taxpayer paid the tax and then sued for a refund, alleging that the MRT violated the Direct Tax Clause of the Constitution because it was an unapportioned direct tax on their property (the shares of KisanKraft stock). The taxpayer also argued that income should be ‘realized’ to be taxed. The Federal District Court dismissed the suit, and the Ninth Circuit Court of Appeals affirmed that dismissal.

In Moore v. United States, No. 22-800, 2024 U.S. LEXIS 2711 (S.Ct. June 20, 2024) (slip opinion from Court’s website here), in a five to two decision, the five Justice majority held the MRT was an indirect tax on income and thus constitutional.[2] Justice Kavanaugh authored the 24-page majority opinion, joined by Chief Justice Roberts and the Court’s three liberal Justices (Sotomayor, Kagan, and Jackson). Justice Jackson also wrote an ancillary concurring opinion.

The Court found that the MRT taxed the ‘realized’ income of the underlying foreign corporation KisanKraft, which the MRT attributed pro rata to the American shareholders. The five-judge majority stated that the Court’s longstanding precedents confirm that Congress may attribute an entity’s realized but undistributed income to its shareholders and then tax the shareholders on their portions of that undistributed income. In an interesting historical anecdote, the Court cited that Congress passed an 1864 income-tax law that taxed shareholders on “the gains and profits of all companies.”[3]

Also very interesting is what the Court did not decide upon. The Supreme Court limited its holding only to entities treated as pass-throughs. Specifically, the Court stated that the opinion does not authorize a hypothetical congressional effort to tax an entity and its shareholders on the same undistributed income realized by the entity. Also, the Court cautioned that its decision does not address the parties’ disagreement over whether realization is a constitutional requirement for an income tax.

Justice Barrett, joined by Justice Alito, authored a 17-page concurring nonconcurrence that concurs only because the taxpayer did not challenge the constitutionality of Subpart F. Justice Thomas wrote a 33-page dissenting opinion joined by Justice Gorsuch. Had the taxpayer challenged the constitutionality of Subpart F, this may well have been a 5 to 4 split decision that set up a future constitutional challenge of Subpart F imputation of income wherein the taxpayer prevails.

Justice Barrett’s concurrence presented contrarian arguments that will certainly be the focus of many tax professors’ wrath and scowls: “Subpart F and the MRT may or may not be constitutional, nonarbitrary attributions of closely held foreign corporations’ income to their shareholders.”[4] The Justice first parsed “derived” and “realized”.[5] Then she diverged to set up the contrarian arguments.

She states that the government conceded “…that a tax on the “total value of” the shares “at a particular point [in] time” is a “quintessential tax on property” that must be apportioned.” She continued with the government’s approach: “… looking at property value across two points in time makes a difference, … because then the tax targets appreciation rather than the asset’s value. As the Government sees it, Congress may tax without apportionment “all economic gains” measured “‘between two points in time.’” And the increase in value between Time A and Time B is “income.””

At this point, Justice Barrett delivers the punch line: “The Government is unable to cite a single decision upholding an unapportioned tax on appreciation. … That is no surprise, because our precedent forecloses the Government’s argument.” Then she lays out the contrarian argument:[6]

In upholding the tax, the Ninth Circuit opined that “[w]hether the taxpayer has realized income does not determine whether a tax is constitutional.” 36 F. 4th 930, 935 (2022). In its view, the “Supreme Court has made clear that realization of income is not a constitutional requirement.” Id., at 936. The Ninth Circuit misread our cases. Contrary to its assertion, this Court has “never abandoned the core requirement that income must be realized to be taxable without apportionment.”

Justice Barrett concludes: “In sum, realization may take many forms, but our precedent uniformly holds that it is required before the Government may tax financial gain without apportionment. … None of these cases contradicts Macomber’s admonition that Congress cannot “look upon stockholders as partners . . . when they are not”; Congress may not “indulge the fiction that they have received and realized a share of the profits of the company” when they have not.”[7] Justice Thomas, as the author of the 33-page dissent, is more pointed: “…the majority’s “attribution” doctrine is an unsupported invention.”[8] He analyzes attempts to pass federal tax laws and their constitutionality from the nation’s founding through the Sixteenth Amendment, finding that Sixteenth Amendment “income” is only realized income. He states in pertinent part: “The Court strains to uphold the Mandatory Repatriation Tax without addressing whether the Sixteenth Amendment includes a realization requirement, the question we agreed to answer in this case. The majority starts by surveying a scattered sampling of precedents—mostly about tax avoidance—to invent an “attribution” doctrine that sustains the MRT.”

[1] I.R.C. §§965(a)(1), (c), (d).

[2] U.S. Const. §8, cl. 1 and 16th Am.

[3] Rev. Act of 1864, § 117, 13 Stat. 282.

[4] Moore v. United States, No. 22-800, 2024 U.S. LEXIS 2711, at *66-67 (June 20, 2024).

[5] Moore v. United States, No. 22-800, 2024 U.S. LEXIS 2711, at *49 (June 20, 2024).

[6] Moore v. United States, No. 22-800, 2024 U.S. LEXIS 2711, at *52-53 (June 20, 2024).

[7] Moore v. United States, No. 22-800, 2024 U.S. LEXIS 2711, at *60-61 (June 20, 2024).

[8] Moore v. United States, No. 22-800, 2024 U.S. LEXIS 2711, at *69 (June 20, 2024).

Posted in Uncategorized | Tagged: economics, Politics, tax, Tax law, Taxes | Leave a Comment »

Texas, California, and New York expenditure, debt, tax burden for 2024

Posted by William Byrnes on May 28, 2024

I am contrasting state and locality living for 2025 updates. I am sharing what I found for Texas, California, and New York state and local budget expenditures, followed by accumulated state and locality debts for FY2024. Then, I contrast the total income tax and the property tax for living in Dallas, Fairmont-Los Angeles, and Nassau County. There is no particular reason for these three locals; with the footnote links, you can do your own calculations.

Texas’ state budget for FY2024 is approximately $160 billion (it is enacted biennially, the total spending amount for 2024 and 2025 being $321.3 billion). Texas had a rolling forward $32.7 billion surplus from its previous biennial budget and an additional $23.5 billion in its rainy day (Economic Stabilization) fund. Public schools and higher education comprised 50 percent of the budget. Health and human services comprised 30 percent. For the upcoming biennium budget, Texas estimates revenue from state funds to reach $342.3 billion that may, under its balanced budget requirement, be appropriated. The Economic Stabilization Fund (ESF) is projected to grow to $27.1 billion through FY2025.

Contrast California’s state budget which for FY2024 was $327 billion with an anticipated deficit of $14 billion, with a projected FY25 deficit of between $58 billion and $73 billion.[1] California, like Texas, maintains a similarly sized rainy day fund (Budget Stabilization Account) of approximately $22 billion, and $900 million of additional safety net reserves. California’s FY2025 budget proposes total state expenditures (excluding federal funds) of $291.5 billion. This FY2025 budget proposal projects a reduction in reserve balances to $11.1 billion for the rainy day fund but with an additional $3.9 billion held for the Public School System Stabilization Account (PSSSA).[2] Considering the forecast FY2025 deficit, the Governor and Legislature have been working toward some FY2025 spending reductions and spending delays.[3]

Texas’ potential budget spending approximately doubles when factoring in local general revenues, to $310.1 billion for FY2021 for example. California’s combined state and local direct general expenditures were $574.8 billion in FY2021.[4]

Consider one other state. New York state’s All Funds budget which includes federal government funds for FY2024 is $236.8 billion of which $140.2 billion emanates from state revenues.[5] The budget is balanced with a negligible gap between revenue and expenditure. New York’s combined state and local direct general expenditures were $315.7 billion in FY 2021.[6]

The Texas state debt is $70.94 billion.[7] Texas’ nonstate local debt (e.g. county, school board, localities, water utilities, community colleges, hospitals) debt stood at $308 billion. California’s state debt of $70.9 billion is nearly the same as Texas. But if Lease-Revenue bond debt is included, it totals $78.7 billion with an additional $30 billion debt authorized but not yet sold. Including county and local debt of approximately $325 billion,[8] as well as the unfunded pension obligations that come due as employees retire, the total California state government debt reached approximately $1.6 trillion in 2022.[9] The New York state-related debt which includes debt issued by the state, by public authorities on behalf of the state and other debt obligations for which the State is responsible is projected to grow from $58.5 billion in FY 2023 to $66.7 billion by the end of FY 2024.[10] In addition, New York City has issued over $90 billion of outstanding debt as of FY2023.[11] The cumulative debt of New York’s 1,178 state and local public authorities is $329 billion as of 2023.[12]

For a married couple earning $200,000 annually, the annual state and local income tax burden for Texas would be nil because Texas does not impose an income tax, for California $12,222, and for New York $9,897.[13] Property tax for a home assessed at $600,000 in Dallas is $10,860, in Fairmont-Los Angeles is approximately $5,000, and in Nassau County $6,300.[14] Income and property tax together for the three states of Texas, California, and New York is comparatively $10,860, $17,222, and $16,197, respectively. Federal income tax is estimated at $41,353.[15] Thus, total tax for the couple earning $200,000 and living in a $600,000 home in the three states of Texas, California, and New York is $52,213, $58,575, and $57,550.

I can add a couple more comparisons that impact the tax calculations. Calculating the average sales tax paid for the hypothetical couple in each state is relatively easy. Dallas’ sales tax rate is 8.25%, Los Angeles’ is 9.5%, and New York City’s is 8.875%. Very roughly, for the couple’s $50,000 annual sales taxable expenditure (restaurant tax considerations are left out), New York will be about $300 more sales tax a year considering a 20% higher cost for expenditure over Dallas, and roughly $687.50 more in Los Angeles using a 10% price difference.

A harder one to determine and then calculate but still impactful is the average annual transportation cost for the three states’ municipalities selected. For example, the average gasoline tax paid annually by a family. Yet the gasoline tax is a bit tricky because California is about to initiate a mileage tax to begin replacing its gas tax because, with hybrids and electric vehicles, petrol tax revenue has plummeted well over $1 billion annually, causing a deeper hole in the state road budget. Also, comparing a gas or mileage tax in Texas and California is relatively straightforward where, in general, cars are an aspect of life. But for New York, the tax comparison may instead need to factor in the average annual spend on public transport such as daily trains, busses, and the subway.

Then there is the matter of tolls. These can be estimated for Dallas and for Los Angeles. New York is a bit trickier. Residents outside Manhattan who drive (for example, New Jersey) pay the bridge (e.g. $15.38 for the GW with EzPass during the day) or tunnel toll and, beginning in June, the new $15 a day New York congestion tax.[16] Take an example of our couple, one partner must go to the Manhattan office, say, four days a week (note: banks are recalling their employees to the office, and FINRA/securities dealer rules do not allow work from home without the same periodic compliance inspections required at the bank, administratively challenging to say the least). That’s today $60 a week (i.e. about $280 a month) versus the doubling of it from June 1, $560 a month. That extra congestion toll, rounding it to $3,300 annually, must be enough to change behavior (because, with the regular toll, it is $6,600 annually, post-tax, i.e. about $10,000 earnings spent on tolls). Thus, the hypothetical person will switch to the bus or train into the city, then the subway or transfer bus. In conclusion, regarding a comparison between a Texas gasoline tax versus a California mileage tax and the New York public transportation cost, my guess is that Texas is less cost for the couple but perhaps at the expense of environmental impact. That’s a cost-discussion for another day.

Let me know about your state and locality burdens in the comments. And thank you for your readership of my weekly Tax Facts articles. Prof. William Byrnes

[1] 2024-25 Budget California’s Fiscal Outlook, Legislative Analyst’s Office, December 7, 2023. https://lao.ca.gov/Publications/Report/4819; 2024-25 Budget Deficit Update Legislative Analyst’s Office, February 20, 2024. https://lao.ca.gov/Publications/Report/4850.

[2] Proposed Budget – Fiscal Year 2025, National Assn of State Budget Officers. https://www.nasbo.org/mainsite/resources/proposed-enacted-budgets/california-budget.

[3] 2024-25 Budget Deficit Update, Legislative Analyst’s Office, February 20, 2024. https://lao.ca.gov/Publications/Report/4850.

[4] State Fiscal Briefs, California, April 2024. https://www.urban.org/policy-centers/cross-center-initiatives/state-and-local-finance-initiative/projects/state-fiscal-briefs/california. Texas, April 2024. https://www.urban.org/policy-centers/cross-center-initiatives/state-and-local-finance-initiative/projects/state-fiscal-briefs/texas.

[5] Summary of Recommended Changes to the Executive Budget State Fiscal Year 2024-25, NY State Assembly Ways & Means Comm., May 2024. https://nyassembly.gov/Reports/WAM/2024summary_changes/.

[6] State Fiscal Briefs, New York, April 2024. https://www.urban.org/policy-centers/cross-center-initiatives/state-and-local-finance-initiative/projects/state-fiscal-briefs/new-york

[7] Texas Bond Review Board, August 31, 2023. https://www.brb.texas.gov/state-of-texas-debt/.

[8] Annual Debt Transparency Report (ADTR) – Principal Outstanding by Issuer Group, FY2023 data, Ca. State Treasurer. https://debtwatch.treasurer.ca.gov/reports/adtr-outstanding-principal.

[9] California State and Local Liabilities Total $1.6 Trillion. California Policy Center, February 28, 2022. https://californiapolicycenter.org/california-state-and-local-liabilities-total-1-6-trillion/.

[10] Debt Service, Division of the Budget, NY State. https://www.budget.ny.gov/pubs/archive/fy24/ex/agencies/appropdata/DebtService.html. See also, FY 2024 Bond Caps and Debt Outstanding. https://www.budget.ny.gov/investor/bond/BondCapChart.html.

[11] Annual Report on Capital Debt and Obligations Fiscal Year 2024, NY City Comptroller. https://comptroller.nyc.gov/reports/annual-report-on-capital-debt-and-obligations/.

[12] Public Authorities by the Numbers 2022, Reinvent Albany, Jan. 13, 2023. https://reinventalbany.org/2023/01/public-authorities-by-the-numbers-2022/.

[13] Income tax estimation collected using Talent.com’s calculator. https://www.talent.com/tax-calculator.

[14] State property tax was estimated using SmartAsset for Dallas, Los Angeles, and Munsey. https://smartasset.com/taxes/california-property-tax-calculator.

[15] Married couple earning $200,000 without pretax contributions for medical or retirement. https://smartasset.com/taxes/income-taxes.

[16] MTA projects Central Business District Tolling Program. https://new.mta.info/project/CBDTP#:~:text=Starting%20on%20June%2030%2C%202024,district%20in%20the%20United%20States.

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Texas A&M University Law Professor Honored with Distinguished Achievement Award

Posted by William Byrnes on May 24, 2024

Professor William Byrnes of Texas A&M University School of Law received the Association of Former Students Distinguished Achievement Award for Professional Development, which includes a monetary gift and an engraved gold Texas A&M watch. Texas A&M President Mark Welch stated in his letter to Professor Byrnes:

“The Distinguished Achievement Award, generously funded by The Association of Former Students, is among the most prestigious awards presented to Texas A&M faculty and staff. The review process is rigorous and recipients are selected by a campuswide committee, a true testament to the esteem in which you are held by your colleagues.”

Professor Byrnes was recognized for an academic career pioneering online legal education while authoring a dozen legal treatises, 50 book chapters, and over 1,500 financial media articles. Since joining Texas A&M Law a decade ago, Professor Byrnes initiated and helped grow the online graduate programs that now enroll more than 1,500 professionals.

“Congratulations again on this honor and thank you for your outstanding contributions to our university!”, President Welch wrote in closing.

Professor Byrnes responded, “I am humbled that my Dean Bobby Ahdieh, faculty colleagues, and several Deans from other law schools, wrote letters of nomination to the committee in support of my publication record and my impact on legal education.”

“This award and research grant allows me to focus my summer on the research and writing of two new academic journal articles for the fall submission cycle”, added Professor Byrnes. “One of the articles will be a policy analysis of Congress and the IRS’ definition of charitable activities. The other is in the formative stage but will analyze the practicability of leveraging a Shapley approach for intangible intensive groups – a topic my Texas A&M colleague Dr. Lorraine Eden is the prominent academic expert on and supporter of.

Beginning in 1955, via a rigorous review by a university-wide committee composed of faculty, staff, students and former students, the Distinguished Achievement Awards have been granted to those who exhibit the highest standards of excellence at Texas A&M. Donors to The Association of Former Students provide funding for this award program.

Find out more about Texas A&M’s online graduate wealth management program: https://law.tamu.edu/distance-education/wealth-management

Posted in Courses, Education Theory, Uncategorized | Tagged: academic-freedom, education, featured, Higher education, news | Leave a Comment »

Who should inherit a $750,000 retirement account: a former romantic partner of 25 years ago named as a beneficiary back then or the surviving family and current romantic partner of the past 25 years?

Posted by William Byrnes on May 24, 2024

Howdy! I’m Professor William Byrnes of Texas A&M University School of Law, where I founded the graduate program for wealth management. Today, I want to share with you a cautionary tale about estate planning, specifically focusing on retirement accounts, designated beneficiaries, and former romantic partners.

Three-Part Discussion Overview:

Misconceptions about Retirement Accounts and Wills: Clients often assume their retirement accounts will automatically pass to the heirs named in their will. This is a common misconception.
Case Study: Federal Court Ruling: We’ll explore a federal court case where an ex-girlfriend from a two-year relationship, named as a 401(k) beneficiary over 27 years ago, was found entitled to inherit a substantial balance—over $750,000.
Advisors’ Role in Ensuring Up-to-Date Beneficiary Designations: The conclusion emphasizes the importance for advisors to proactively communicate with clients to regularly update their beneficiary designations on all accounts, including retirement plans and insurance policies.

Part 1: Misconceptions about Retirement Accounts and Wills

Beneficiary designations are often overlooked and neglected during the estate planning process. Clients typically execute a will or create a trust with their financial advisor and assume that all their assets, including retirement accounts and insurance policy proceeds, will pass to the heirs named in their will, such as their children or grandchildren. However, retirement accounts, including 401(k)s and IRAs, follow their own specific rules.

For example, the fiduciary and operating standards of a typical 401(k) retirement plan are governed by a federal statute known as ERISA. ERISA, shorthand for the Employee Retirement Income Security Act of 1974, is a comprehensive statute that establishes the standards of conduct and responsibility for fiduciaries of employee benefit plans.

When opening a 401(k) plan account with the plan administrator appointed by the employer, the employee can designate one or more beneficiaries to inherit the account. If no beneficiary is designated, the account balance generally will be distributed to the deceased account holder’s estate.

The estate administrator should, in turn, distribute the proceeds from the 401(k) account according to the deceased person’s will. But if no will was created by the deceased, which is true in a majority of cases, then the estate must distribute the assets of the estate, including the retirement account proceeds, according to the intestate succession laws of the state or country with jurisdiction over the estate. Normally, the intestate succession laws provide first for a surviving spouse, and secondarily for children. If the deceased isn’t married and does not have children, then the succession law will favor the immediate family. In the federal court case I’ll mention next, the deceased was not married and did not have children.

Part 2: Case Study: Procter & Gamble v. Estate of Jeffrey Rolison

Let’s dive into a real-world example that illustrates the importance of maintaining current beneficiary designations.[1]

Jeffrey Rolison, a long-term employee of Procter & Gamble for 30 years, participated in the Procter & Gamble employee retirement plan. In 1987, when Mr. Rolison provided his personal information to his employer’s retirement plan administrator, he named his then-girlfriend as the beneficiary in 1987. The couple ended the relationship two years later, in 1989. Then for 25 years until he died in 2015 at the age of 59, Mr. Rolison had a close relationship with a girlfriend. However, during these 25 years, he did not update the beneficiary designation for his retirement plan.

Upon his death, the Procter & Gamble retirement plan paid out the account balance, which had grown to $754,000, to the ex-girlfriend. The administrator of Jeffrey Rolison’s estate sued the Procter & Gamble retirement plan, arguing that the retirement plan administrator failed to adequately inform Rolison about changing the beneficiary designation. From the perspective of the estate, whose immediate family was his two brothers, Jeffrey Rolison did not intend for the ex-girlfriend of 25 years ago to inherit over $750,000.

The U.S. District Court for the Middle District of Pennsylvania ruled against the estate in April 2024. The court found that Procter & Gamble had provided sufficient notifications to Mr. Rolison over the years with instructions regarding changing the account beneficiary. Moreover, Mr. Rolison had accessed his retirement account online multiple times and did not change the beneficiary. Thus, the court concluded that Rolison had the opportunity to change the beneficiary but chose not to do so.

Part 3: Ensuring Up-to-Date Beneficiary Designations

This case highlights the critical role of advisors in estate planning. Advisors should engage with their clients to review all past and current retirement account plan documents and any amendments to ensure that the rules within these documents align with the client’s desired estate plan.

When a participant designates a beneficiary, that individual will likely receive the funds from the plan, regardless of any intervening facts. Retirement plan administrators require a beneficiary’s name, contact information, and often a Social Security number for verification to be able to reach out to the designated beneficiary to facilitate the distribution after the death of an account holder.

Conclusion

Advisors need to regularly contact and communicate with their clients to ensure that all designated beneficiaries are current on retirement accounts and other assets, such as insurance policies. Courts will almost always uphold a retirement plan account holder’s beneficiary designation, even if it seems the decedent would have chosen a different result in hindsight.

If you’re interested in reading more about this topic or hundreds of our other articles, please visit Tax Facts (American Legal Media). For wealth management studies, contact the admissions department at Texas A&M University School of Law for information about our courses and degrees.

[1] The Procter & Gamble U.S. Bus. Servs. Co. v. Estate of Rolison, Civil Action 3:17-CV-00762, 6 (M.D. Pa. Apr. 29, 2024).

Posted in Uncategorized | Tagged: estate planning, financial planning, Retirement Planning, trusts, wills | 2 Comments »

Byrnes and Bloink’s Tax Facts Intelligence July 2023 wealth building strategy articles

Posted by William Byrnes on August 9, 2023

Robert Bloink and William Byrnes’ 12 Tax Facts Intelligence articles of July 2023 analyzing tax strategies and wealth building techniques. Available with the 4 volume Tax Fact book series, and additional retirement planning analysis at http://www.alm.com/taxfacts

Each week, Professor William Byrnes of Texas A&M and industry insider Robert Bloink analyze four retirement, wealth, tax, and alternative strategies or IRS notices for financial advisors and their clients.

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International Tax & Transfer Pricing Certificates or Master Degree at Texas A&M

Posted by William Byrnes on July 6, 2023

The International Tax Certificate and Master Degree are designed for international tax professionals (lawyers, accountants, economists, and finance) for an in-depth study of tax risk management.

Degree candidates are exposed to (i) international tax laws, regulations, and policies in the international tax risk management field, (ii) technology and tax data management, and (iii) weekly practice case studies using Zoom and team groups. Individuals who complete the program will be able to synthesize scenarios, practice, and legal regulation in the international tax risk management field, providing analysis or judgments for consideration to organizational leadership with a nuanced perspective.

Courses are offered by asynchronous distance learning to provide a flexible schedule for working professionals. Interactive coursework includes case study assignments and regular interaction with classmates & the faculty through twice-weekly zoom meetings (recorded), pre-recorded videos, audio casts, discussion boards, and group breakout sessions. For more information, contact Admissions: law.tamu.edu/distance-education/international-tax.

Texas A&M’s operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is one of only 60 accredited universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 universities that hold the triple U.S. federal grant of Land, Sea, and Space! Texas A&M law school ranked in the top 30 and has a placement rate above 98%, ranked #1 in the nation for “gold standard” jobs for 2022 – the third consecutive year the law school has ranked in the top 10 nationally for gold-standard employment outcomes. The law school’s new campus is the anchor of the Texas A&M AggieLand North $1.2 billion dollar investment.

Sample of Courses (see graduate programs catalog)

Transfer Pricing l – Methods, Econometrics, and Tangibles – January start
Transfer Pricing II – Services and Intangibles – March start
International Tax Risk Management I – Data, Analytics, and Technology
International Taxation and Treaties – residency issues – August start
International Taxation and Treaties – source issues – October start
Inhouse Tax Counsel: Tax Systems and Risk Management – Fall
International Tax Risk Management II – Data, Analytics, and Technology
U.S. International Tax Risk Management – Data and Analytics – Spring
U.S. International Tax Risk Management – Law and Regulation – Summer
FATCA, CRS, and AEoI Risk Management – Summer

Texas A&M Rankings and Stats

Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2022)
#1 endowment for U.S. public universities, #8 overall (US News 2022)
#1 of U.S. public universities for a superior education at an affordable cost (Fiske 2021)
#1 for most CEOs employed by Fortune 500
#1 Gold Standard employment outcome in U.S. Third year in top 10 in the U.S.
Rank #11 by Money Best Colleges Report, 2021 and #5 in US among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20

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Transfer Pricing Risk Management Zoom-Based Case Studies Start Tuesday, Jan 18, 2022 through April 30 (graduation May 6 on campus)

Posted by William Byrnes on November 9, 2021

Based on weekly case studies created by the faculty, supported by reading/text materials, pre-recorded videos with PPTs, and audio podcast files made by the faculty – twice-weekly Zoom (optional) live sessions (recorded for those unable to attend) of 90 – 120 minutes wherein students may work with teams through the case studies generally from an assigned stakeholder perspective. Access to the extensive Texas A&M library for case study research includes by example: Lexis, Westlaw, IBFD, Kluwer-Cheetah, Thomson OneSource, BvD (Moodys), S&P CapIQ, FITCH, among several others. Apply for Texas A&M’s courses here.

Professor William Byrnes’ leverages the expertise of weekly case study experts that draw from a variety of disciplines including accounting, economics, finance, international business, management, and law. The textbook is authored by Professor William Byrnes and provided within the course [William Byrnes, Practical Guide to Transfer Pricing, 4th ed, 2022 version, published by Matthew Bender via LexisNexis and available in the law library in hardcopy].

Transfer pricing is the valuation of cross-border transactions between units of a multinational enterprise. This course introduces students to both theoretical and practical aspects of transfer pricing. This course deep dives into the legal issues (regulations and jurisprudence); accounting systems and variances among (managerial, financial, tax, and public accounting); financial data analytics through the lens of economic methods and profit level indicators; functional analysis and global value chain; contrasts with the OECD Transfer Pricing Guidelines and UN Transfer Pricing Manual. Each week, an industry-based case study is undertaken in a team-based learning approach of student groups generally consisting of three team members each. The industry case studies include, as examples, agriculture (coffee supply chain), technology services, and petroleum.

Part I and Part II of this course both address strategy, compliance, and risk management. Transfer Pricing Part I focuses on the topics of comparability, the transfer pricing methods, functional analysis, and global value chain analysis, and transfer pricing analysis for tangibles. Transfer Pricing Part II focuses on the transfer pricing methods and analysis for intangibles and for services. Topics more specifically that are addressed in this course via its textbook, video and audio lectures, weekly team-based case studies, and weekly live sessions, include the arm’s length standard, comparability analysis, risk analysis for tangibles and intangibles, transactional methods (CUP, CUT, Cost Plus, Resale Minus, Commodity), profit methods (e.g. comparable profits method, transactional net margin method, profit level indicators, key performance indicators, commensurate with income), functional analysis (supply chain, global value chain analysis, DAEMPE functions), industry economic data gathering and analysis, cost-sharing arrangements, profit splits and residuals, platform contributions, and safe harbors. Apply for Texas A&M’s courses here.

Prof. William Byrnes Course Topics and Subject Matter Expert Calendar

Week 1 January 17 Arm’s Length Standard case study by Dr. Bruno da Silva

Jan 18 Tuesday at 9am – 10:30am (2-minute student introductions, orientation to teamwork and case studies, expectations and obligations regarding participation asynchronously or synchronously, discuss the syllabus, set up first-week case study)

2nd live session for 2022 to be determined, for 2021 it was: Friday at 9am – 10:30am (presentations, peer feedback)

Review the orientation video and slides
Read textbook chapter 40
Review the analysis of the historical and more recent arm’s length cases (watch videos and review slides)
On Tuesday January 18^th, the first day of the course, we will discuss the optional use of teams by students, the case study, the team’s roles for the case study, and how team’s should operate, or how individual students may do the work without using a team approach. Students are not required to join a team and may undertake the work/projects individually. This choice is decided weekly.

Week 2 Jan 25: CUP & Comparables, Eden Hofert – the Christmas Tree case (Canadian)/Compaq by Dr. Lorraine Eden

Jan 26 Tuesday at 9am – 10:00am (2-minute student introductions, orientation to teamwork and case studies, expectations and obligations regarding participation asynchronously or synchronously, discuss syllabus, set up first week case study)

Jan 29 Friday at 9am – 10:30 (presentations, peer feedback)

Read textbook chapter 5 then read chapter 4
Review the analysis within the comparables cases (watch videos and review slides)
Prepare team approaches for the case study of the Christmas Tree scenario.

Week 3 Jan 31: Cost Plus & Resale Minus (Byrnes’ Starbucks case study) by Dr. George Salis

Feb 1 Tuesday at 9am – 10:00am

second session at 9am – 10:30 (presentations, feedback)

Watch background and overview videos of big data & econometrics as it is used in transfer pricing.
Read textbook Chapter 7 then read chapter 6.
Contrast the analysis within the Cost Plus Method and Resale Minus Method cases.
Each team has a stakeholder role in Byrnes’ case study of Starbucks cost inclusion and exclusion, agriculture supply chain, and coffee global value chain.

Week 4 Feb 7: Comparable Profits Method & TNMM by Dr. George Salis

Feb 8 Tuesday at 9am – 10:00am (discussion about Byrnes’ case study and the CPM)

second session at 9am – 10:30 (presentations, peer feedback)

Read textbook chapters 8 and 9.
Watch second set of videos of big data & econometrics.
Review the CPM/TNMM examples.
Teams prepare the Case Study.

Week 5 Feb 14: functional analysis & global value chain, profit split methods by Dr. George Salis

Feb 15 Tuesday at 9am – 10:00am (discussion about Byrnes’ case study and the CPM, GVC)

second session at 9am – 10:30 (presentations, peer feedback)

Read textbook chapters 11 and 12, skim chapters 97 and 98
Watch videos about FA and GVC.
Review the GVC examples (chapters from textbook regarding coffee, technology, tobacco).
Team’s prepare the Case Study.

Week 6 Feb 21 Best Method – Snowin’ and Blowin’ case study by Dr. Lorraine Eden

Feb 22 Tuesday at 9am – 10:30am

second session at 9am – 10:30 (presentations, peer feedback)

Read textbook chapters 15 and 16
Watch video.
Team’s prepare the Case Study.

Week 7 Feb 28 Capstone summation and tax risk technology presentations

March 1 Tuesday at 9am – 10:30am (counsel litigation discussion)

second session to be determined (at 9am – 10:30 (tech provider training))

March 7-11 Spring Break for distance education graduate programs

Week 1 of Course 2 (week 8 of both courses) March 14: Intangibles Royalty Rates CUT and CPM by Dr. Debora Talutto

March 15 Tuesday at 9am – 10:30am (counsel litigation discussion)

second session (presentations, peer feedback)

Read textbook chapter 10
Analyze the CUT cases
Case Study presentation

Week 9 March 21: Intangibles Buy In/Out Cost Sharing Arrangements, Platform Contribution Transactions by Dr. George Salis

March 22 Tuesday at 9am – 10:30am

second session (presentations, peer feedback)

Read textbook chapter 13
Analyze the CSA/PCT cases
Case Study presentations

Week 10 March 28: Digital; Unitary Apportionment; Pillar 1; EU State Aid

by Dr. Bruno da Silva dasilva.brunoaniceto@gmail.com

March 29 Tuesday at 9am – 10:30am

April 1 Friday at 9am – 10:30 (presentations, peer feedback)

Read textbook chapters 44 and 75
Review Pillar One
Case Study presentation

Week 11 April 4 Digital –Amazon, Internet of Things (IOT) by Dr. Lorraine Eden and Dr. Niraja Srinivasan

April 5 Tuesday at 9am – 10:30am

April 8 Friday at 9am – 10:30 (presentations, peer feedback)

Read OECD Pillar 1 comment letters in the course folder
Read Lorraine Eden’s articles
Read Chapter 46

Week 12: April 11 Services by Hafiz Choudhury

April 12 Tuesday at 9am – 10:30am

April 15 Friday at 9am – 10:00 (presentations, peer feedback)

Week 13 April 18: Restructuring (and extractive industry experience) by Hafiz Choudhury

April 19 Tuesday at 9am – 10:30am

April 22 Friday at 9am – 10:30 (presentations, peer feedback)

Read textbook chapters 27, 43
In the second week, the investors find out that the state owned off take customer is not utilizing the full capacity of the FSRU

Week 14 April 25 Capstone presentations for comment letters

April 26 Tuesday at 9am – 10:30am

April 29 Friday at 9am – 10:00 (presentations, peer feedback)

Review past comment letter submissions

**Texas A&M**, an annual budget of $6.3 billion (FY2020), ***is the largest U.S. public university***, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
#1 endowment for U.S. public universities, #7 overall
#1 of U.S. public universities for a superior education at an affordable cost
#1 for most CEOs employed by Fortune 500
Rank 11th “Best Public Colleges” Money’s Best Colleges Report, 2019
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20

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Pandora Papers

Posted by William Byrnes on October 13, 2021

Like many of my subscribers, I’ve been following the Pandora Papers and the previous ICIJ releases (Panama papers, Bermuda-Paradise papers, Lux-Leaks et al..). Read the latest Pandora series of articles of the ICIJ here.

Some of the ICIJ writeups of the stolen documents are sensationalism, some are shocking, some surprising and thus truly shocking, and some are just salacious like a John Grisham novel (but a fun read if you like Grisham novels).

While I am strongly bothered by stolen confidential (by law) documents being glorified (though the relevant law of confidentiality of one jurisdiction is rarely relevant for another jurisdiction), the challenge is that if the confidential documents include information about corruption and other crimes then the confidentiality is waived (and the document drafter is may be part of the conspiracy to commit the crime). Then the ‘informant’ of the papers becomes a ‘whistleblower’ and should be rewarded. The challenge is: who is to decide which documents tend toward whistleblower-like and which tend toward just stolen legal-protected confidential papers that while salacious are really publicly newsworthy (maybe to TMZ)?

We all support the fundamental need for the free press to publish. But is the ICIJ the best positioned to decide the question of what papers may include crimes (and what may not)? I trust the ICIJ to bring to light these stories regardless of the pressure not to (thank goodness the Pentagon Papers were published by example), but journalists are not necessarily experts in the area of writing. I hope that the ICIJ has brought on board for vetting the trove of information a panel of experts that are able to advise on these issues (and probably has done as I think that would be best practice for journalism).

What I think would be interesting is for the ICIJ to keep a running tab on the number of investigations and audits (as best it can gather such information) that each trove of documents (Panama, Lux, Paradise/Bermuda, Pandora, etc) leads to on a country by country basis, and the outcomes (as best ICIJ can gather such information). Are countries acting on such information? For the U.S., are banks meeting their FATCA compliance requirements?

Anyway, glad the ICIJ has put together such a large and robust effort, especially as it regards corruption, sometimes at threat of life in some countries, and we should support the organization.

Transfer Pricing Risk Management Zoom Team-Based Case Studies Start Jan 19, run until May

Course Topics and Calendar

Week 1 January 17 Arm’s Length Standard case study by Dr. Bruno da Silva

Friday at 9am – 10:30am (presentations, peer feedback)

Review the orientation video and slides
Read textbook chapter 40
Review the analysis of the historical and more recent arm’s length cases (watch videos and review slides)
On Tuesday January 18^th, the first day of the course, we will discuss the teams, the case study, the team’s roles for the case study, and how team’s should operate. Students are not required to join a team and may undertake the work/projects individually, decided on a weekly basis.

Week 2 Jan 25: CUP & Comparables, Eden Hofert – the Christmas Tree case (Canadian)/Compaq by Dr. Lorraine Eden

Jan 29 Friday at 9am – 10:30 (presentations, peer feedback)

Read textbook chapter 5 then read chapter 4
Review the analysis within the comparables cases (watch videos and review slides)
Prepare team approaches for the case study of the Christmas Tree scenario.

Week 3 Jan 31: Cost Plus & Resale Minus (Byrnes’ Starbucks case study) by Dr. George Salis

Feb 1 Tuesday at 9am – 10:00am

second session at 9am – 10:30 (presentations, feedback)

Watch background and overview videos of big data & econometrics as it is used in transfer pricing.
Read textbook Chapter 7 then read chapter 6.
Contrast the analysis within the Cost Plus Method and Resale Minus Method cases.
Each team has a stakeholder role in Byrnes’ case study of Starbucks cost inclusion and exclusion, agriculture supply chain, and coffee global value chain.

Week 4 Feb 7: Comparable Profits Method & TNMM by Dr. George Salis

Feb 8 Tuesday at 9am – 10:00am (discussion about Byrnes’ case study and the CPM)

second session at 9am – 10:30 (presentations, peer feedback)

Read textbook chapters 8 and 9.
Watch second set of videos of big data & econometrics.
Review the CPM/TNMM examples.
Teams prepare the Case Study.

Week 5 Feb 14: functional analysis & global value chain, profit split methods by Dr. George Salis

Feb 15 Tuesday at 9am – 10:00am (discussion about Byrnes’ case study and the CPM, GVC)

second session at 9am – 10:30 (presentations, peer feedback)

Read textbook chapters 11 and 12, skim chapters 97 and 98
Watch videos about FA and GVC.
Review the GVC examples (chapters from textbook regarding coffee, technology, tobacco).
Team’s prepare the Case Study.

Week 6 Feb 21 Best Method – Snowin’ and Blowin’ case study by Dr. Lorraine Eden

Feb 22 Tuesday at 9am – 10:30am

Feb 25 Friday at 9am – 10:30 (presentations, peer feedback)

Read textbook chapters 15 and 16
Watch video.
Team’s prepare the Case Study.

Week 7 Feb 28 Capstone summation and tax risk technology presentations

March 1 Tuesday at 9am – 10:30am (counsel litigation discussion)

March 4 Friday at 9am – 10:30 (tech provider training)

March 7-11 Spring Break for distance education graduate programs

Week 1 of Course 2 (week 8 of both courses) March 14: Intangibles Royalty Rates CUT and CPM by Dr. Debora Talutto

March 15 Tuesday at 9am – 10:30am (counsel litigation discussion)

second session (presentations, peer feedback)

Read textbook chapter 10
Analyze the CUT cases
Case Study presentation

Week 9 March 21: Intangibles Buy In/Out Cost Sharing Arrangements, Platform Contribution Transactions by Dr. George Salis

March 22 Tuesday at 9am – 10:30am

second session (presentations, peer feedback)

Read textbook chapter 13
Analyze the CSA/PCT cases
Case Study presentations

Week 10 March 28: Digital; Unitary Apportionment; Pillar 1; EU State Aid

by Dr. Bruno da Silva dasilva.brunoaniceto@gmail.com

March 29 Tuesday at 9am – 10:30am

April 1 Friday at 9am – 10:30 (presentations, peer feedback)

Read textbook chapters 44 and 75
Review Pillar One
Case Study presentation

Week 11 April 4 Digital –Amazon, Internet of Things (IOT) by Dr. Lorraine Eden and Dr. Niraja Srinivasan

April 5 Tuesday at 9am – 10:30am

April 8 Friday at 9am – 10:30 (presentations, peer feedback)

Read OECD Pillar 1 comment letters in the course folder
Read Lorraine Eden’s articles
Read Chapter 46

Week 12: April 11 Services by Hafiz Choudhury

April 12 Tuesday at 9am – 10:30am

April 15 Friday at 9am – 10:00 (presentations, peer feedback)

Week 13 April 18: Restructuring (and extractive industry experience) by Hafiz Choudhury

April 19 Tuesday at 9am – 10:30am

April 22 Friday at 9am – 10:30 (presentations, peer feedback)

Read textbook chapters 27, 43
In the second week, the investors find out that the state owned off take customer is not utilizing the full capacity of the FSRU

Week 14 April 25 Capstone presentations for comment letters

April 26 Tuesday at 9am – 10:30am

April 29 Friday at 9am – 10:00 (presentations, peer feedback)

Review past comment letter submissions

This image has an empty alt attribute; its file name is 500k-grad-group.jpg — **Texas A&M**, an annual budget of $6.3 billion (FY2020), ***is the largest U.S. public university***, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
#1 endowment for U.S. public universities, #7 overall
#1 of U.S. public universities for a superior education at an affordable cost
#1 for most CEOs employed by Fortune 500
Rank 11th “Best Public Colleges” Money’s Best Colleges Report, 2019
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20

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TaxFacts Intelligence August 2, 2021

Posted by William Byrnes on August 2, 2021

This week’s newsletter offers the download to the Infrastructure Investment and Jobs Act of 2021 plus insight into different issues that may be important to clients who sponsor employee benefit plans. It’s time to file annual Form 5500—and this year, potential penalties for noncompliance may be higher than ever. We also offer analysis of the newly-popular retirement plan auto-enrollment features—and a reminder that small business clients may now benefit from a new post-SECURE Act tax credit for adopting the feature—as well as information about the ARPA pension relief law. Read on for more!

$1.2 Trillion Infrastructure Bill Released Sunday night (August 1, 2021)

The 2,702-page bi-partisan “Infrastructure Investment and Jobs Act of 2021” has been released by the Senate. The bill may be downloaded from the U.S. Senate website here. The bill contains approximately $550 billion of new project spending and carries over an additional $650 billion from previously funded projects for a total of over $1.2 trillion in infrastructure spending that will begin in 2021 and most end in 2026.

But the bill contains many energy provisions and excise taxes as well as fees that will impact all segments of the energy industry. These provisions include billions of dollars for the industry for expenditure and incentives for carbon capture; clean hydrogen R&D; nuclear; among others. By example, $500,000,000 is provided for clean hydrogen technology R&D (see page 1550 at section 40314). The excise taxes and fees include the extensions of the highway-related taxes, superfund excise taxes, and customs user fees.

The major tax reform provisions addressing estate and gift tax, capital gains, carried interests, real estate exchanges, retirement plans, and high-income earners have been reserved to the forthcoming yet-to-be-agreed/released Democratic reconciliation bill. However, the Infrastructure Investment and Jobs Act of 2021 contains some new tax provisions including:

Sec. 80501. Modification of automatic extension of certain deadlines in the case of taxpayers affected by Federally declared disasters.
Sec. 80502. Modifications of rules for postponing certain acts by reason of service in combat zone or contingency operation.
Sec. 80503. Tolling of time for filing a petition with the tax court.
Sec. 80504. Authority to postpone certain tax deadlines by reason of significant fires.
Sec. 80601. Modification of tax treatment of contributions to the capital of a corporation.
Sec. 80602. Extension of interest rate stabilization.
Sec. 80603. Information reporting for brokers and digital assets.
Sec. 80604. Termination of employee retention credit for employers subject to closure due to COVID–19.

The automatic extension for certain tax deadlines for Federally declared disasters addresses the situation of multiple declarations relating to a disaster area which are issued within a 60-day period. A separate 60-day period shall be determined with respect to each such declaration pursuant to the bill’s language.

The bill contains hundreds of not-obvious federal grants and contract opportunities for business. By example of one provision related to education and training of workers, section 401513 includes $10 million dollars for FY2022 for government grants of 50 percent of the cost to provide ‘career skills training’ to identify and involve in training programs target populations of individuals who would benefit from training and be actively involved in activities relating to energy efficiency and renewable energy industries; and the ability to help individuals achieve economic self-sufficiency. The program students must concurrently receive classroom instruction and on-the-job training for the purpose of obtaining an industry-related certification to install energy efficient buildings.

Look in your Tax Facts Online app for our continuing analysis of this bill, the tax reform in the reconciliation bill, and other weekly intelligence.

Reminder: It’s Time to File Form 5500 for Employee Benefit Plans

It’s that time of year again. The deadline for filing Form 5500 for health plans and retirement plans with the IRS and DOL is July 31 for most calendar-year plans. The deadline is seven months after the end of the plan year. However, clients who aren’t yet ready to file should be advised that they may obtain a filing extension of up to 2.5 months. Penalties for failure to file Form 5500 on time have increased in recent years—and can equal as much as $2,000 per day in some cases. The forms are used by the IRS and DOL to identify potential compliance issues, so small business clients with employment benefits offerings should be advised to prepare the forms carefully and expect scrutiny. Form 5500 is filed under the penalty of perjury—for the employer who signs the document, not the service provider who prepared the document. For more information on Form 5500 filing requirements and increased penalties under the SECURE Act, visit Tax Facts Online. Read More

Related Questions:

3774. What requirements apply to matching contributions in the context of a 401(k) safe harbor plan?

3777. What are the requirements for a SIMPLE 401(k) plan?

Auto-Enrollment Popularity Soars Post-COVID

According to recent surveys, the majority of workers who have been automatically enrolled in employer-sponsored retirement savings plan have indicated that they are pleased with the decision. On the other hand, only about 30 percent of U.S. employers currently provide an auto-enrollment option. When asked whether they hoped their employer would offer financial wellness programs to help them better understand savings options, 80 percent of employees surveyed answered “yes”. At least one version of the “SECURE Act 2.0” bill would require a minimum 3 percent auto-enrollment rate for most newly adopted 401(k)s. Under the existing SECURE Act, small business owners may be entitled to a tax credit for adopting a plan that automatically enrolls employees. For more information on the tax credit, visit Tax Facts Online. Read More

Related Questions:

8553. When does a taxpayer qualify for the tax credit for the elderly and the permanently and totally disabled and how is the credit computed?

8554. When is a taxpayer entitled to claim the child tax credit?

PBGC Issues Interim Guidance on ARPA Special Financial Assistance for Multiemployer Pension Plans

The PBGC issued an interim final rule implementing the special financial assistance (SFA) rule for multiemployer pension plans in the American Rescue Plan Act. Eligible plans may apply to receive a lump-sum payment from a new Treasury-backed PBGC fund. Under the new rules, eligible plans are entitled to amounts that are sufficient to pay all benefits for the next 30 years. According to the PBGC interpretation, that means sufficient funds to forestall insolvency through 2051 (but not thereafter). Plans are entitled to receive the difference between their obligations and resources for the period. Surprisingly, the PBGC rule provides that SFA funds will be taken into account when calculating a plan’s withdrawal liability. However, plans are required to use mass withdrawal interest rate assumptions published by the PBGC when calculating withdrawal liability until the later of (1) 10 years after the end of the year in which the plan received the SFA or (2) the time when the plan no longer holds SFA funds. For more information on multiemployer pension plan withdrawal liability, visit Tax Facts Online. Read More

Related Questions:

3740. Are there any limitations on a pension plan’s ability to reduce participant benefit levels under the Multiemployer Pension Reform Act of 2014?

3741. What procedures and notices are required in order for a pension plan to reduce participant benefit levels under the Multiemployer Pension Reform Act of 2014?

Wealth & Risk Management Studies for Industry Professionals

The Texas A&M graduate programs for risk management for areas like wealth management, tax risk management, financial risk, economic crimes, ESG risk, are accepting applications for fall. Over 500 candidates are currently enrolled in the graduate courses yet maximum enrollment per course section is maintained at 30 so that each student receives meaningful feedback throughout the course from the full-time academic and professional part-time faculty. Check out the graduate program here: https://law.tamu.edu/distance-education

Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)

Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
#1 endowment for U.S. public universities, #7 overall
#1 of U.S. public universities for a superior education at an affordable cost
#1 for most CEOs employed by Fortune 500
#1 employment outcome for law schools in Texas and in top 10 in the USA
#1 bar passage in Texas
Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20

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TaxFacts Intelligence June 24, 2021

Posted by William Byrnes on June 24, 2021

Both the Courts and the IRS have had a busy week. The Supreme Court rejected the latest challenge to the Affordable Care Act and the ACA remains the law of the land–although the next ACA challenge has already been filed in Texas. On the IRS side, we have a new online tool designed to help lower-income taxpayers take advantage of the advance child tax credit benefits for 2021. Read on to make sure you’re up to date on the latest news.

Supreme Court Dismisses Latest ACA Challenge

In a 7-2 vote, the Supreme Court dismissed the latest challenge to the constitutionality of the Affordable Care Act (ACA). Rather than addressing the case on the merits, the Court determined that the plaintiffs did not have standing to sue–meaning that the plaintiffs had no legal right to launch the challenge in the first place. Because the individual mandate was reduced to $0 by the 2017 tax reform legislation, the plaintiffs would suffer no adverse consequences if they simply chose to not purchase health insurance. Therefore, there was no government action connected to their injury. However, yet another constitutional challenge to the ACA has already been filed. The next lawsuit challenges the law’s zero dollar coverage for preventative services–including vaccines, contraceptives and other preventative services. For more information on the ACA employer mandate, visit Tax Facts Online. Read More

Related Questions:

8845. How does an employer that has been in existence for less than one year determine whether it is subject to the ACA shared responsibility provisions?

8846. How does an employer that has a common owner with another employer determine whether it is subject to the ACA shared responsibility provisions?

Considerations for Resuming RMDs in 2021

The 2020 CARES Act suspended all RMD requirements for the 2020 tax year. That relief was not extended into 2021, although taxpayers have no obligation to “make up” their skipped 2020 RMDs. However, many taxpayers may be surprised to see that the amount they’re required to withdraw in 2021 is larger than distributions prior to the pandemic. The amount of a client’s RMD is determined based upon their account balance and life expectancy factor. Strong market performance means that many clients will have larger retirement account balances, meaning that the percentage of withdrawal required has also increased. Taxpayers who reached age 70½ in 2019 are required to resume taking RMDs. However, taxpayers who had not reached age 70½ in 2019 are not required to begin RMDs until April 1 of the year after they reach age 72. These RMD rules apply to traditional retirement accounts and inherited accounts—but not to Roth IRAs. For more information on the RMD rules, visit Tax Facts Online. Read More

Related Questions:

3683. What can be done before the IRA required beginning date in order to minimize required minimum distributions?

3684. How are minimum distribution requirements calculated if an individual owns more than one IRA?

IRS Releases New Online Tool to Help Taxpayers Register for Monthly Child Tax Credit Payments

The IRS has launched a new online tool to help taxpayers who may not be required to file a federal income tax return register to receive installment payments for the 2021 child tax credit. The tool provides a way for eligible people who don’t make enough income to have an income tax return-filing obligation to provide the IRS the basic information to figure and issue their Advance Child Tax Credit payments beginning next month. Eligible individuals can visit IRS.gov to access the tool and provide their name, address, Social Security numbers and direct deposit information so that the IRS can deposit their installment payments. Taxpayers who have already filed a return are not required to take any other action to receive installment payments of the child tax credit. The IRS release noted that these are the only two options to sign up for advance payment benefits–any other method offered is a scam. For more information on the child tax credit in 2021, visit Tax Facts Online. Read More

Related Questions:

756. What credits may be taken against the tax?

757. Who qualifies for the tax credit for the elderly and the permanently and totally disabled and how is the credit computed?

758. Who qualifies for the child tax credit?

Wealth & Risk Management Studies for Industry Professionals

Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
#1 endowment for U.S. public universities, #7 overall
#1 of U.S. public universities for a superior education at an affordable cost
#1 for most CEOs employed by Fortune 500
#1 employment outcome for law schools in Texas and in top 10 in the USA
#1 bar passage in Texas
Rank #11 by Money Best Colleges Report, 2021 and #5 in U.S. among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20

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TaxFacts Alert June 21, 2021 for wealth managers representing NCAA athletes

Posted by William Byrnes on June 22, 2021

The Supreme Court upheld, in a unanimous decision of all nine Justices, the District Court’s injunction against the NCAA. The injunction allows the NCAA to maintain rules limiting undergraduate athletic scholarships and other compensation related to athletic performance. BUT the injunction stops as unlawful NCAA rules limiting the education-related benefits schools may make available to student-athletes.

Colleges and universities across the country have leveraged sports to bring in revenue, attract attention, boost enrollment, and raise money from alumni. That profitable enterprise relies on “amateur” student athletes who compete under horizontal restraints that restrict how the schools may compensate them for their play. The National Collegiate
Athletic Association (NCAA) issues and enforces these rules, which restrict compensation for student-athletes in various ways. These rules depress compensation for at least some student-athletes below what a competitive market would yield.

Against this backdrop, current and former student-athletes brought this antitrust lawsuit challenging the NCAA’s restrictions on compensation. Specifically, they alleged that the NCAA’s rules violate §1 of the Sherman Act, which prohibits “contract[s], combination[s], or conspirac[ies] in restraint of trade or commerce.”

Regarding today’s Supreme Court decision (entire 45-page opinion is available here), first it was expected by industry analysts and court watchers after the Court’s oral arguments March 31, 2021 with an foretelling Q&A session. We are already preparing Tax Facts Intelligence and Q&A for the books/app for financial advisors to leverage the new athletics marketplace and revenue streams and best represent their clients. I know of financial advisory firms that as of Tuesday will be hanging up a ‘sports agent financial advisor shingle’ and trolling SEC high schools, especially Texas, recruiting for tomorrow’s top collegiate athletes to sign up the talent.

Why not? That is how the market already works outside the USA for soccer (what everyone else calls football) and to a lesser extent baseball (albeit not nearly as popular as soccer so we hear much less about baseball camps for Dominican rising star 12 year old players like we hear about for the 12-year-old next Brazilian Pele).

Interaction with social media followers is the currency of this new era for young athletes and can lead to a couple of hundred thousand during college for the star players, and even millions for the SEC Heisman level types. But, not having the ultimate talent and thus top sports ranking in a field does not also mean that an interactive social media following of millions cannot be created. The Russian tennis star Anna Kournikova, case in point, though she was just a little too early for the modern social media movement. Johnny Manziel, another case in point: had this decision been in place already and had he contracted a great wealth management advisor (thus great personal agent) with social media and promotional background, his life would have been very financially comfortable before his drug abuse ruined him in the pro league (talent or not aside). He certainly could have afforded a stint at the Betty Ford clinic to sober up and clean out.

Via the advice of a great wealth manager, a personality can be leveraged into millions of dollars before the athlete graduates university, or at least hundreds of thousands.

It is clear from the unanimous ruling and the judges questioning and opinions that this is not a restrictive ruling. NCAA proponents are trying to spin that some restriction remains allowable like direct payments to players. But all it takes is one school that has money that wants to break into the big league to beat ‘Bama and LSU. Kind to think of it, I know that school… and don’t think Bama and LSU are just going to let that happen. Let real market competition begin!

An interesting question that I think will lead to much future litigation: How this ruling plays out throughout all sports regarding Title IX (such as a school spending money on men’s football, basketball, baseball, must by federal and state law also spend an equal amount on the equivalent sports for women). I am for market opportunity and thus I think it is an exciting preposition that opportunities will open up in all sports for athletes and wealth manager advisors alike (to negotiate the optimum financial rewards for the athletes).

Also, if athletic programs, such as golf or hockey, are forced to ‘come up’ with additional dollars to attract the star players to remain competitive, will the programs themselves start to think like SEC football (the most profitable league and sport) to generate additional income to meet the demands of staying or obtaining high ranking? After all, whether it be academics or sports, it is all about ranking. Deans and Provosts rise and fall based on academic rankings. Coaches based on league rankings and national championships. Sports rankings and academic rankings have connection via alumni fundraising as of course voter university name / brand awareness and recognition. Basketball in particular through March madness has supported the academic rankings of universities though academic and sports ranking are not directly connected in voting and evaluation scoring, the indirect connect in undeniable.

This Supreme Court decision is great news for wealth managers / financial advisors who subscribe to Tax Facts because we are well-positioned to enter the new market of clientele representation created for the high school athlete seeking to share in the value that the athlete creates for a university and for the athlete through social media leveraged revenues. Understanding that “value”, generating more of it, and ‘sharing’ in the value is the bread and butter of a holistic wealth manager’s representation of athletes and entertainers.

Texas A&M already has education in this regard for our wealth management students and JDs who focus on such emerging artist/athlete/entertainer representation. We even have a law clinic for this emerging artists run by JD students supervised by my colleague that joined me at Texas A&M from our former law school in SoCal.

Byrnes & Bloink’s Tax Facts Offers a Complete Web, App-Based, and Print Experience: Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.

all Tax Facts books
Tax Facts Intelligence weekly newsletters
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Questions? Contact customer service: TaxFactsHelp@alm.com| 800-543-0874

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TaxFacts Intelligence June 17, 2021

Posted by William Byrnes on June 22, 2021

Taxpayers have a number of valuable tax planning opportunities in 2021. One of the recent changes allows more taxpayers to take advantage of the often-overlooked child and dependent care tax credit for work-related childcare expenses. Another lets clients leverage historically low tax rates to mitigate the impact of future estate tax changes. Are your clients taking advantage of these and other limited-time planning strategies?

IRS Issues FAQ on Child and Dependent Care Tax Credit for 2021

Last week, the IRS released new FAQ to help taxpayers understand the expanded child and dependent care tax credit in 2021. For 2021, eligible taxpayers can claim qualifying work-related expenses up to $8,000 for one qualifying person, or $16,000 for two or more qualifying persons (up from $3,000 and $6,000 in prior years). To claim the credit, taxpayers are also required to have earnings. The FAQ is clear that the amount of qualifying work-related expenses claimed cannot exceed the taxpayer’s earnings. Additionally, the taxpayer must subtract employer-provided dependent care benefits, including those provided through a flexible spending account, from total work-related expenses when calculating the credit. As in prior years, the more a taxpayer earns, the lower the percentage of work-related expenses that are taken into account in determining the credit. However, the credit is fully refundable for the first time in 2021. This means eligible taxpayers can receive the credit even if they owe no federal income tax. To be eligible for the refundable credit, a taxpayer (or the taxpayer’s spouse on a joint return) must reside in the United States for more than half of the year. For more information on the credit, visit Tax Facts Online. Read More

Related Questions:

757. Who qualifies for the tax credit for the elderly and the permanently and totally disabled and how is the credit computed?

758. Who qualifies for the child tax credit?

Roth IRA Planning Now for Higher Estate Taxes Later

With tax rates at historic lows, many clients have already evaluated the Roth conversion strategy as a retirement income tax minimization strategy. However, high net worth clients who anticipate estate tax liability in the future might also be attracted to the Roth strategy. IRAs are generally included in calculating the taxable estate. If the estate is subject to estate taxes, that reduces the value of assets left to beneficiaries. Once a beneficiary receives the IRA (after taxes), they generally must deplete the funds within 10 years under the SECURE Act. That means beneficiaries will be required to quickly pay income taxes after the estate taxes have been levied. Distributions from inherited Roth IRAs are not taxable. Further, because the client has paid income taxes during life, they’ve presumably reduced the value of the taxable estate in the process. Given current uncertainties about Biden’s estate tax plans, high net worth clients may be particularly interested in this strategy. For more information on Roth conversions, visit Tax Facts Online. Read More

Related Questions:

3661. Can a taxpayer whose income level exceeds the limitations for Roth IRA contributions maintain a Roth IRA?

3662. Can an individual roll over or convert a traditional IRA or other eligible retirement plan into a Roth IRA?

3664. Can an individual correct a Roth conversion? What is a recharacterization?

RMD Rules Might See Big Changes in Next Round of Retirement Reform

The latest round of retirement reform provisions might include big changes for required minimum distributions (RMDs). Most taxpayers must start taking distributions from traditional retirement accounts when they turn 72. Under the new proposal, the RMD beginning age would increase to age 75. Further, the law would exempt taxpayers with account balances under $100,000 from the RMD rules entirely. In other words, those taxpayers would not be required to take annual distributions from 401(k)s and IRAs. The law would also reduce the penalty for incorrect RMDs from 50 percent of the shortfall amount to 25 percent—and as low as 10 percent if the taxpayer took advantage of the IRS self-correction procedures to correct the mistake. Access to qualified longevity annuities would also be expanded—giving taxpayers an option to minimize their RMDs in future years by purchasing a deferred annuity within their retirement plan. For more information on the current RMD rules, visit Tax Facts Online. Read More

Related Questions:

3683. What can be done before the IRA required beginning date in order to minimize required minimum distributions?

3684. How are minimum distribution requirements calculated if an individual owns more than one IRA?

The Texas A&M graduate programs for risk management for areas like wealth management, tax risk management, financial risk, economic crimes, ESG risk, is accepting applications for fall. Over 500 candidates are currently enrolled in the graduate courses yet maximum enrollment per course section is maintained at 30 so that each student receives meaningful feedback throughout the course from the fulltime academic and professional part-time faculty. Check out the tax risk management program here as an example of the curriculum and courses: https://law.tamu.edu/distance-education/international-tax

Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)

Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
#1 endowment for U.S. public universities, #7 overall
#1 of U.S. public universities for a superior education at an affordable cost
#1 for most CEOs employed by Fortune 500
#1 employment outcome for law schools in Texas and in top 10 in the USA
#1 bar passage in Texas
Rank #11 by Money Best Colleges Report, 2021 and #5 in US among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20

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Texas A&M’s International Tax Certificate or Master Degree Curriculum – online using Zoom

Posted by William Byrnes on June 15, 2021

The International Tax Certificate and Master Degree are designed for international tax professionals (either lawyers or accountants, economists, and finance) to deliver specialized legal training for an in-depth understanding of the international tax risk management field’s changing complex legal aspects. Courses begin in late August, mid-January, and mid-May each year.

This graduate-level International Tax certificate or Master’s degree will prepare new and experienced international tax professionals to effectively address complex legal and policy challenges with respect to global tax risk. Specifically, participants will be exposed to (i) important U.S. and international laws, regulations, and policies in the international tax risk management field, and (ii) technology, data, and practice, as well as applications of law and regulation through case studies through a weekly-based structure. Individuals who complete the program will be able to synthesize scenarios, practice, and legal regulation in the international tax risk management field, providing analysis or judgments for consideration to organizational leadership with a nuanced perspective.

Courses are offered by asynchronous distance learning to provide a flexible schedule for working professionals. Interactive coursework includes case study assignments and regular interaction with classmates & the faculty through twice-weekly zoom meetings (recorded), pre-recorded videos, audio casts, discussion boards, and group breakout sessions. For more information, contact Admissions: law.tamu.edu/distance-education/international-tax.

Example courses:

LAW 625 Spring Term A Transfer Pricing l – Methods, Econometrics, and Tangibles
LAW 626 Spring Term B Transfer Pricing II – Services and Intangibles
LAW 627 International Tax Risk Management I – Data, Analytics, and Technology
LAW 647 Fall Term A International Taxation and Treaties – residency issues
LAW 649 Fall Term B International Taxation and Treaties – source issues
LAW 719 Fall A Domestic Tax Systems Risk Management
LAW 720 Fall B International Tax Risk Management II – Data, Analytics, and Technology
U.S. International Tax Risk Management – Data and Analytics Spring Term A
U.S. International Tax Risk Management – Law and Regulation Summer
FATCA, CRS, and AEoI Risk Management – Summer

Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! Dep’t of Education ranks Texas A&M #14 in the U.S. for research grants/expenditure ($1.13B in 2020). The law school is ranked in the 1st tier and in the U.S. top 10 for employment outcomes of its graduates. Texas A&M is building a new law campus as the integrated centerpiece of its $1.5 billion interdisciplinary Law-STEM Fort Worth campus.

Ranked top 20 public universities by Wall Street Journal / Times Higher Education (2020)
#7 endowment for U.S. universities
#1 of U.S. public universities for a superior education at an affordable cost
#1 for most CEOs employed by Fortune 500
Rank #5 by Money Best Colleges Report, 2021 for public universities (Data sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations, US News Rankings, Forbes)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20

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TaxFacts Intelligence June 14, 2021

Posted by William Byrnes on June 14, 2021

Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
#1 endowment for U.S. public universities, #7 overall
#1 of U.S. public universities for a superior education at an affordable cost
#1 for most CEOs employed by Fortune 500
#1 employment outcome for law schools in Texas and in top 10 in the USA
#1 bar passage in Texas
Rank #11 by Money Best Colleges Report, 2021 and #5 in US among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20

ARPA Expands Child Tax Credit for 2021

The ARPA expanded and enhanced the child tax credit for the 2021 tax year. For tax years beginning after December 31, 2020 and before January 1, 2022, the child tax credit amount increased from $2,000 to $3,000 per qualifying child. The credit amount is also fully refundable for the 2021 tax year only (under TCJA, $1,400 was refundable). The $3,000 amount is also further increased to $3,600 per qualifying child under the age of six years old as of December 31, 2021. For more information on the child tax credit, visit Tax Facts Online. Read More

Eligibility for 2021 Child Tax Credit and Advance Child Tax Credit Payments

A taxpayer can receive advance Child Tax Credit payments even if earning zero income in 2020 or 2021, if eligible for the credit otherwise.

IRS online tool to help low-income families register for monthly Child Tax Credit payments

The IRS unveiled an online Non-filer Sign-up tool designed to help eligible families who don’t normally file tax returns register for the monthly Advance Child Tax Credit payments. The IRS will begin disbursing advance Child Tax Credit payments on July 15. After that, payments will be disbursed on a monthly basis through December 2021. In June 2021, the IRS will send each eligible taxpayer a “Letter 6417” that informs the amount of the estimated Child Tax Credit monthly payments.

This tool, an update of last year’s IRS Non-filers tool, is also designed to help eligible individuals who don’t normally file income tax returns register for the $1,400 third round of Economic Impact Payments (also known as stimulus checks) and claim the Recovery Rebate Credit for any amount of the first two rounds of Economic Impact Payments they may have missed.

The IRS will automatically determine eligibility for most families

Eligible families who already filed or plan to file 2019 or 2020 income tax returns should not use this tool. Once the IRS processes their 2019 or 2020 tax return, the information will be used to determine eligibility and issue advance payments. Families who want to claim other tax benefits, such as the Earned Income Tax Credit for low- and moderate-income families, should not use this tool and instead file a regular tax return.

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TaxFacts Intelligence June 3, 2021

Posted by William Byrnes on June 4, 2021

Happy Summer, readers! This week’s newsletter is dedicated to helping clients—both employers and employees—maximize their health-related benefits and tax credits (even when those benefits are only available for a limited time). Do you have questions about situation-specific COBRA eligibility, little-known HSA tricks or the ever-evolving EEOC vaccine guidance for employers? Read on to see if we’ve got the answers this week.

EEOC Updates Vaccine Incentive Guidance for Employers

The EEOC has posted an update to its vaccine guidance for employers. Under the new guidance, employers are permitted to offer incentives to employees who voluntarily provide confirmation that they have received the COVID-19 vaccine from a third party. Requesting these confirmations will not be treated as disability-related inquiries under the ADA or requests for genetic information under GINA. Employers should be aware that these incentives are treated differently than incentives offered for employer-provided vaccines. If the incentive is actually for the purpose of encouraging an employee to receive the vaccine from the employer or an agent, employers should continue to use caution against offering an incentive that can be construed as “coercive”. That’s because employees must provide certain health information before receiving the vaccine—and employees should not be pressured to disclose medical information to their employers. For more information on the available tax credit for employers who offer paid vaccine leave to employees, visit Tax Facts Online. Read More

Related Questions:

773. What happens when the employee has exhausted the paid time off under the Families First Coronavirus Response Act (FFCRA)? Does the employee have the right to return to work?

8895. What is a “de minimis” fringe benefit?

Am I Eligible for Federal COBRA Assistance? Case-Specific IRS Guidance

The IRS guidance on the availability and implementation of the ARPA 100 percent COBRA premium assistance provides some useful guidance on specific scenarios that employers and employees may now be facing. Generally, individuals remain assistance-eligible individuals (AEIs) during eligibility waiting periods if the period overlaps with the subsidy period. For example, the individual will be an AEI during periods outside the open enrollment period for a spouse’s employer-sponsored health coverage. Employers who change health plan options must place the AEI in the plan that’s most similar to their pre-termination plan, even if it’s more expensive (and the 100 percent subsidy will continue to apply). Importantly, employers who are no longer covered by federal COBRA requirements may still be required to advance the subsidy (for example, if the employer terminated employees so that the federal rules no longer apply). If the employer was subject to COBRA when the individual experienced the reduction in hours or involuntary termination, the employer must offer the subsidy. For more information on the COBRA premium subsidy, visit Tax Facts Online. Read More

Related Questions:

0121. COBRA Subsidies Back on the Table for 2021

371. When must an election to receive COBRA continuation coverage be made?

Maximizing Post-Pandemic HSA Benefits

HSAs and other tax-preferred health benefits have taken on a whole new meaning in the wake of the pandemic. It’s important that clients fully understand the rules so that they aren’t leaving valuable benefits on the table. In 2022, annual HSA contribution limits will rise to $3,650 for self-only coverage or $7,300 for family HDHP coverage. (HDHPs are health insurance plans that have a minimum annual deductible of $1,400 for self-only coverage ($2,800 for family coverage).). Taxpayers aged 55 and up can contribute an extra $1,000 per year. Taxpayers don’t have to fund an employer-sponsored HSA. Even if the client has been laid off or furloughed, clients with HDHP coverage can open an HSA at their bank and fund the account independently. Additionally, clients who have lost their jobs continue to have access to the funds in their old HSA, and can even transfer that HSA to a new provider. In other words, as long as the client remains covered by a HDHP, there is no “use it or lose it” rule. The funds simply roll over from year to year and continue to grow tax-free. For 2021, that same benefit has been extended to health FSAs. With an HSA, however, the rollover benefit is even more substantial because once the participant reaches age 65, the account can be accessed without penalty for any reason—much like a typical retirement account. The funds are simply taxed as ordinary income upon withdrawal, like a 401(k) or IRA. For more information on HSA advantages, visit Tax Facts Online. Read More

Related Questions:

388. What is a Health Savings Account (HSA) and how can an HSA be established?

391. Who is an eligible individual for purposes of a Health Savings Account (HSA)?

DOL Released Final Rule on Considering Non-Financial Factors in Selecting Retirement Plan Investments The DOL released a final rule on whether environmental, social and governance (ESG) factors can be considered when retirement plan fiduciaries are selecting plan investments without violating their fiduciary duties. Plan fiduciaries are obligated to act solely in the interest of plan participants and beneficiaries when making investment decisions. The final rule confirms the DOL position that plan fiduciaries must select investments based on pecuniary, financial factors. Fiduciaries are required to compare reasonably available investment alternatives–but are not required to scour the markets. The rule also includes an “all things being equal test”–meaning that fiduciaries are not prohibited from considering or selecting investments that promote or support non-pecuniary goals, provided that they satisfy their duties of prudence and loyalty in making the selection. For more information, visit Tax Facts Online. Read More We are curious for your feedback on the rule and its impact on your function as a financial advisor, if any? Email me at williambyrnes-gmail

Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
#1 endowment for U.S. public universities, #7 overall
#1 of U.S. public universities for a superior education at an affordable cost
#1 for most CEOs employed by Fortune 500
#1 employment outcome for law schools in Texas and in top 10 in the USA
#1 bar passage in Texas
Rank #11 by Money Best Colleges Report, 2021 and #5 in US among public universities (Sources: U.S. Department of Education, Peterson’s, PayScale.com, Money/College Measures calculations)
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20

Posted in Uncategorized | Tagged: CFP, financial planning, Retirement planning, tax planning | Leave a Comment »

Transfer Pricing Risk Management Zoom-Based Case Studies Start Tuesday, Jan 18, run until May 5 (graduation May 6 on campus)

Posted by William Byrnes on January 8, 2021

Part I and Part II of this course both address strategy, compliance, and risk management. Transfer Pricing Part I focuses on the topics of comparability, the transfer pricing methods, functional analysis and global value chain analysis, and transfer pricing analysis for tangibles. Transfer Pricing Part II focuses on the transfer pricing methods and analysis for intangibles and for services. Topics more specifically that are addressed in this course via its textbook, video and audio lectures, weekly team-based case studies, and weekly live sessions, include the arm’s length standard, comparability analysis, risk analysis for tangibles and intangibles, transactional methods (CUP, CUT, Cost Plus, Resale Minus, Commodity), profit methods (e.g. comparable profits method, transactional net margin method, profit level indicators, key performance indicators, commensurate with income), functional analysis (supply chain, global value chain analysis, DAEMPE functions), industry economic data gathering and analysis, cost-sharing arrangements, profit splits and residuals, platform contributions, and safe harbors. Documentation, advance pricing agreement procedures, and mutual agreement procedures are topics addressed in the courses of “International Tax Risk Management I” and of “FATCA, CRS, and CbCR”. Apply for Texas A&M’s courses here.

Course Topics and Calendar

Week 1 January 17 Arm’s Length Standard case study by Dr. Bruno da Silva

Friday at 9am – 10:30am (presentations, peer feedback)

Review the orientation video and slides
Read textbook chapter 40
Review the analysis of the historical and more recent arm’s length cases (watch videos and review slides)
On Tuesday January 18^th, the first day of the course, we will discuss the teams, the case study, the team’s roles for the case study, and how team’s should operate. Students are not required to join a team and may undertake the work/projects individually, decided on a weekly basis.

Week 2 Jan 25: CUP & Comparables, Eden Hofert – the Christmas Tree case (Canadian)/Compaq by Dr. Lorraine Eden

Jan 29 Friday at 9am – 10:30 (presentations, peer feedback)

Read textbook chapter 5 then read chapter 4
Review the analysis within the comparables cases (watch videos and review slides)
Prepare team approaches for the case study of the Christmas Tree scenario.

Week 3 Jan 31: Cost Plus & Resale Minus (Byrnes’ Starbucks case study) by Dr. George Salis

Feb 1 Tuesday at 9am – 10:00am

second session at 9am – 10:30 (presentations, feedback)

Watch background and overview videos of big data & econometrics as it is used in transfer pricing.
Read textbook Chapter 7 then read chapter 6.
Contrast the analysis within the Cost Plus Method and Resale Minus Method cases.
Each team has a stakeholder role in Byrnes’ case study of Starbucks cost inclusion and exclusion, agriculture supply chain, and coffee global value chain.

Week 4 Feb 7: Comparable Profits Method & TNMM by Dr. George Salis

Feb 8 Tuesday at 9am – 10:00am (discussion about Byrnes’ case study and the CPM)

second session at 9am – 10:30 (presentations, peer feedback)

Read textbook chapters 8 and 9.
Watch second set of videos of big data & econometrics.
Review the CPM/TNMM examples.
Teams prepare the Case Study.

Week 5 Feb 14: functional analysis & global value chain, profit split methods by Dr. George Salis

Feb 15 Tuesday at 9am – 10:00am (discussion about Byrnes’ case study and the CPM, GVC)

second session at 9am – 10:30 (presentations, peer feedback)

Read textbook chapters 11 and 12, skim chapters 97 and 98
Watch videos about FA and GVC.
Review the GVC examples (chapters from textbook regarding coffee, technology, tobacco).
Team’s prepare the Case Study.

Week 6 Feb 21 Best Method – Snowin’ and Blowin’ case study by Dr. Lorraine Eden

Feb 22 Tuesday at 9am – 10:30am

Feb 25 Friday at 9am – 10:30 (presentations, peer feedback)

Read textbook chapters 15 and 16
Watch video.
Team’s prepare the Case Study.

Week 7 Feb 28 Capstone summation and tax risk technology presentations

March 1 Tuesday at 9am – 10:30am (counsel litigation discussion)

March 4 Friday at 9am – 10:30 (tech provider training)

March 7-11 Spring Break for distance education graduate programs

Week 1 of Course 2 (week 8 of both courses) March 14: Intangibles Royalty Rates CUT and CPM by Dr. Debora Talutto

March 15 Tuesday at 9am – 10:30am (counsel litigation discussion)

second session (presentations, peer feedback)

Read textbook chapter 10
Analyze the CUT cases
Case Study presentation

Week 9 March 21: Intangibles Buy In/Out Cost Sharing Arrangements, Platform Contribution Transactions by Dr. George Salis

March 22 Tuesday at 9am – 10:30am

second session (presentations, peer feedback)

Read textbook chapter 13
Analyze the CSA/PCT cases
Case Study presentations

Week 10 March 28: Digital; Unitary Apportionment; Pillar 1; EU State Aid

by Dr. Bruno da Silva dasilva.brunoaniceto@gmail.com

March 29 Tuesday at 9am – 10:30am

April 1 Friday at 9am – 10:30 (presentations, peer feedback)

Read textbook chapters 44 and 75
Review Pillar One
Case Study presentation

Week 11 April 4 Digital –Amazon, Internet of Things (IOT) by Dr. Lorraine Eden and Dr. Niraja Srinivasan

April 5 Tuesday at 9am – 10:30am

April 8 Friday at 9am – 10:30 (presentations, peer feedback)

Read OECD Pillar 1 comment letters in the course folder
Read Lorraine Eden’s articles
Read Chapter 46

Week 12: April 11 Services by Hafiz Choudhury

April 12 Tuesday at 9am – 10:30am

April 15 Friday at 9am – 10:00 (presentations, peer feedback)

Week 13 April 18: Restructuring (and extractive industry experience) by Hafiz Choudhury

April 19 Tuesday at 9am – 10:30am

April 22 Friday at 9am – 10:30 (presentations, peer feedback)

Read textbook chapters 27, 43
In the second week, the investors find out that the state owned off take customer is not utilizing the full capacity of the FSRU

Week 14 April 25 Capstone presentations for comment letters

April 26 Tuesday at 9am – 10:30am

April 29 Friday at 9am – 10:00 (presentations, peer feedback)

Review past comment letter submissions

Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
#1 endowment for U.S. public universities, #7 overall
#1 of U.S. public universities for a superior education at an affordable cost
#1 for most CEOs employed by Fortune 500
Rank 11th “Best Public Colleges” Money’s Best Colleges Report, 2019
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20

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U.S. / E.U. International Tax Risk Management Zoom Team-Based Case Studies Start Jan 19 – April 25 (14 weeks)

Posted by William Byrnes on December 9, 2020

Based on weekly case studies created by the faculty, supported by reading/text materials, pre-recorded videos with PPTs, and audio podcast files made by the faculty – twice-weekly Zoom live sessions (recorded as well) of 90 – 120 minutes wherein students in teams work through the case studies generally from an assigned stakeholder perspective. Access to the extensive Texas A&M library for case study research includes by example: Lexis, Westlaw, IBFD, Kluwer-Cheetah, Thomson OneSource, BvD (Moodys), S&P CapIQ, FITCH, among several others. Apply for Texas A&M’s courses here.

Transfer Pricing Risk Management I Tangibles, Methods, Economics, and Data
Transfer Pricing Risk Management II: Intangibles, Services, Pillar 1/Digital, Formulary
U.S. Tax Risk Management (Data, Analytics & Technology)
E.U. Tax Risk Management

U.S. Tax Risk Management (Data, Analytics & Technology) syllabus

Week 1 January 19, 2021 Outbound / FDII Melissa Muhammad (IRS LB&I)
Week 2 January 25, 2021 Inbound / BEAT Melissa Muhammad
Week 3 February 1, 2021 International Reporting/Technology Documentation (Forms 5471, 8865, 8858, 8832): Neelu Mehrotra: EY
Week 4 February 8, 2021 [Understanding Subpart F & Form 5471 and 1120 Documentation}: Neelu Mehrotra: EY
Week 5 February 15, 2021 Understanding Subpart GILTI and PTEP and Form 8992: Neelu Mehrotra: EY
Week 6 February 22, 2021 FTCs; wrap-up: Melissa Muhammad
Capstone Week March 1

E.U. Tax Risk Management syllabus

Week 1 March 8, 2021 E.U. General Framework of Compliance Tax Risk Management Dr. Eva Andrés (Barcelona)
Week 2 March 15, 2021 Parent Subsidiary Directive, Interest, Royalties. Dr. Santiago Ibañez Marcilla
Week 3 March 22, 2021 The European Union proposal on a carbon border tax and its compatibility with the World Trade Organization rules Dr. Xavier Fernández Pons
Week 4 March 29, 2021 Free Movement of Capital (investment funds) and others Fundamental Freedoms. Dr. Eva Andrés & Dr. Andreu Olesti
Week 5 April 5, 2021 Cross-Border Losses – Dr. Bruno Da Silva
Week 6 April 12, 2021 ATAD, DAC 6, Abuse – Dr. Bruno da Silva
Capstone Week April 19-25: Build a client case study, wrap up

Transfer Pricing Risk Management: Tangibles, Methods, Economics, and Data (William Byrnes course materials) syllabus

Week 1 January 19 Arm’s Length Standard (v Formulary Approach) Dr. Bruno Da Silva & William Byrnes
Week 2 Jan 25 CUP & Comparables Dr. Lorraine Eden
Week 3 Feb 1 Cost Plus & Resale Minus Dr. George Salis
Week 4 Feb 8: Comparable Profits Method & TNMMDr. George Salis
Week 5 Feb 15 Profit Split Dr. George Salis
Week 6 Feb 22 Best Method Dr. Lorraine Eden
Capstone Week March 1

Transfer Pricing Risk Management: Intangibles and Services (William Byrnes course materials) syllabus

Week 1 March 8 Intangibles Royalty Rates CUT, CPM Dr. Debora Correa Talutto
Week 2 March 15 CSA Intangibles Buy In/Out Dr. George Salis & William Byrnes
Week 3 March 22 Digital Business Unitary Apportionment Dr. Bruno Da Silva
Week 4 March 29 Digital Value Chain, Internet of Things Dr. Lorraine Eden
Week 5 April 5 U.S. v OECD v UN Manual case study Extractive Industries, Financing Hafiz Choudhury
Week 6 April 12 Restructuring the Business, Services case study Hafiz Choudhury
Week 7 April 19 Capstone Hand-On Week with Financial databases “Tax Technology and the future of Transfer Pricing” Dr. Debora Correa Talutto Thomson OneSource, BvD (Moodys), and CrossBorder AI Solutions Dr. Debora Correa Talutto & William Byrnes

Texas A&M, an annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
#1 endowment for U.S. public universities, #7 overall
#1 of U.S. public universities for a superior education at an affordable cost
#1 for most CEOs employed by Fortune 500
Rank 11th “Best Public Colleges” Money’s Best Colleges Report, 2019
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20

Posted in Courses, Uncategorized | Tagged: international tax, risk management | Leave a Comment »

TaxFacts Intelligence December 1, 2020

Posted by William Byrnes on December 1, 2020

This week we analyze important end of tax year issues for businesses and Social security recipients. First, the SBA has announced a new streamlined forgiveness application for PPP loans of $50,000 or less (which is most of them). This is important for both the businesses that received the PPP funds and for the banks that will have to process the forgiveness applications; both should see their workloads greatly reduced. We also see the new Social Security COLA numbers for 2021, which as expected do not contain any dramatic changes.

Streamlined PPP Loan Forgiveness for Small Loans

Many small businesses that received Paycheck Protection Program (PPP) loans are now near or past the end of their “covered period”–meaning that it’s time to apply for loan forgiveness. Determining eligibility for loan forgiveness is much more complex than expected. The Small Business Administration (SBA) has released a streamlined application that can be used by business owners who borrowed $50,000 or less. For more information on the PPP loan program, visit Tax Facts Online. Read More

2021 Inflation-Adjusted Limit for Excepted Benefit HRAs

In 2019, the IRS created a new “excepted benefit” HRA structure. Unlike the also-new individual coverage HRAs, employers can offer both the excepted benefit HRA and group health insurance coverage to the same employee. The employee is not required to actually enroll in the group health coverage. For 2021, the contribution limit for these savings vehicles is $1,800 per year. For more information on the new HRA rules, visit Tax Facts Online. Read More

2021 Cost-of-Living Adjustments for Social Security Recipients

The Social Security Administration has announced the cost of living adjustments applicable for 2021, including a 1.3 percent increase in monthly benefits paid to Social Security recipients (the COLA increase for 2020 was 1.6 percent). Social Security “COLA” adjustments are tied to the consumer price index each year. Based on the 1.3 percent increase, it is estimated that the annual Social Security earnings cap will be increased from $137,700 to $142,800 for 2021. For more information on the Social Security tax, visit Tax Facts Online. Read More

Texas A&M University School of Law’s online wealth and international tax risk management graduate curricula for industry professionals has attracted over 160 enrollment this fall semester. Apply now for courses that begin on January 18 spring semester. See the international tax course list by > weekly topic here. < Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)

#1 endowment for U.S. public universities, #7 overall

#1 of U.S. public universities for a superior education at an affordable cost

#1 for most CEOs employed by Fortune 500

Rank 11th “Best Public Colleges” Money’s Best Colleges Report, 2019

Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20

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TaxFacts Intelligence Nov 25, 2020

Posted by William Byrnes on November 25, 2020

This week we analyze the proposed regulations from the DOL on determining who is (and is not) an independent contractor. This has become a hot issue in light of the new rules that California has passed for companies operating there and the impact that they may have on “gig economy” companies. California’s rules are still tied up in litigation, and it remains to be seen how the new DOL rules might affect them. We also have updates on new rules for bonus depreciation for partnerships and withholding on periodic retirement and annuity payments.

DOL Proposes New Test for Determining Independent Contractor Status

The DOL released a proposed rule that would address when a worker will be treated as an independent contractor for tax purposes. A new economic reality test would apply and consider (1) the nature and degree of the worker’s control over the work and (2) the worker’s opportunity for profit or loss. If the worker sets their own schedule, chooses assignments, works with little or no supervision and can work for others, the circumstances weigh in favor of independent status. For more information on employment classification, visit Tax Facts Online. Read More

Final Bonus Depreciation Rules Give Partnerships a Valuable Tax Break

The IRS final bonus depreciation rules made one change that could prove valuable to partnerships. The 2017 tax reform legislation allows certain used property to qualify for bonus depreciation. However, anti-churning rules apply to prevent abuse. Under the 2019 proposed rules, a partner was treated as having a prior interest in property if the partner was a partner in a partnership at any time that the partnership owned the property. The final regulations revoked the look-through rule because of the administrative burden of enforcement. Under the final rules, taxpayers are not considered to have previously owned property if that property is disposed of within 90 days of its placed-in service date, as long as the asset is not purchased and placed in service again within the same tax year. For more information on the bonus depreciation rules, visit Tax Facts Online. Read More

IRS Releases Final Regs on Withholding on Periodic Retirement and Annuity Payments

The IRS has finalized regulations that clarify tax withholding rules for periodic retirement and annuity payments. Pre-tax reform, the default withholding rate was based on a married taxpayer with three withholding exemptions. Post-reform, the personal exemption has been suspended and Congress directed the Treasury to provide updated withholding rules The IRS has also announced that it intends to release a revised 2021 Form W-4P. The regulations apply to payments made after December 31, 2020. For more information, visit Tax Facts Online. Read More

Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)

#1 endowment for U.S. public universities, #7 overall

#1 of U.S. public universities for a superior education at an affordable cost

#1 for most CEOs employed by Fortune 500

Rank 11th “Best Public Colleges” Money’s Best Colleges Report, 2019

Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20

Posted in Uncategorized | Leave a Comment »

What will be the biggest tax implications for tax season 2021 for your financial advisory clients? free TaxFacts webinar

Posted by William Byrnes on November 17, 2020

Wed, Nov 18, 2020 1:00 PM – 2:00 PM CST (Dallas time) Register for the Webinar Here

Between an election year and a worldwide pandemic, 2020 has left tax and financial planners with a LOT to consider, and the new year is just around the corner. Join the expert-authors behind Tax Facts in this free, live webinar as they discuss important questions many will have about the state of tax in 2021, including potential changes, implications, and more.

It can be difficult to keep up with the latest industry changes – make sure you’re prepared for next year and how certain policies may affect your clients and their retirement plans, both immediately and long-term!

If you have questions about the webinar, please contact Dana Wan at dwan@alm.com. Register for the Webinar Here

Byrnes & Bloink’s Tax Facts Offers a Complete Web, App-Based, and Print Experience: Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone. All four volumes of Tax Facts in print PLUS

Tax Facts Intelligence weekly newsletters
weekly strategy articles for client advisory
weekly transcribed debate discussion for client soft-skill discussion
among other weekly client advisory critical updates

Questions? Contact customer service: TaxFactsHelp@alm.com| 800-543-0874

From Tax Facts Online Q3757. What is the limit on elective deferrals to employer-sponsored plans?

By way of example, here is the recently updated Tax Facts Q&A on the 2021 retirement plan contribution limits. Look for more great updates from Tax Facts soon! Read More

From Tax Facts Weekly September 10, 2020: The Trump payroll tax deferral has been announced, and we have details below. It’s optional, and there are a lot of questions about how it will work now and in early 2021 when the deferred payroll taxes would be due (assuming no legislative changes occur between now and then). We also have an interesting update from the DOL on how schools’ reopening plans might impact employees’ right to paid leave under the Families First Coronavirus Response Act (FFCRA). Given the wide variety in schools’ opening plans there may be some interesting scenarios to play out related to staff paid leave if they are affected by the Corona virus.

Trump Payroll Tax Deferral Program Now Available

Beginning September 1, employers have the option of deferring the employee portion of the payroll tax through December 31, 2020. Employers can choose to stop withholding the 6.2% employee portion of the Social Security tax for employees who earn less than around $4,000 bi-weekly (pre-tax), but are required to continue contributing the employer half. However, employees should note that under current IRS guidance, deferred payroll taxes must be repaid during the period beginning January 1, 2021 and ending April 30, 2021. Taxes that are not repaid during that period will accrue interest and penalties, and employers can pass those amounts on to employees who have not repaid their deferral amounts. While it remains possible that Congress could pass legislation to forgive any payroll taxes that are deferred during 2020, it is far from certain. For more information on payroll tax relief provided in response to COVID-19, visit Tax Facts Online. Read More

DOL Releases New Guidance in Response to School Reopening Plans

The DOL has released additional FAQ on how a school’s reopening plans might impact employees’ right to paid leave under the Families First Coronavirus Response Act (FFCRA). The IRS examined various scenarios and provided clarification on each. If the child’s school remains closed to in-person instruction (so that only remote learning is offered), the employee has a qualifying reason to take FFCRA leave. If the school offers a hybrid program, so that students attend school in-person on certain days and receive remote instruction on other days, employees have a qualifying reason, but only with respect to the days that their children are not eligible for in-person instruction. If it is completely up to the family whether to send the child to school every day or keep the child home for remote instruction, the employee does not have a qualifying FFCRA leave reason. This is true regardless of whether the family keeps the child home out of fear of contracting COVID-19. For more information on the availability of FFCRA leave, visit Tax Facts Online. Read More

IRS Provides Relief for Victims of Hurricane Laura

The IRS has extended various deadlines for victims of Hurricane Laura. Victims located in FEMA-designated disaster areas qualify to extend tax filing and payment deadlines that occurred starting August 22, 2020 through the end of the year. Taxpayers who extended their 2019 federal income tax filing deadline to October 15 now have until December 31, 2020. For information on the casualty loss rules, visit Tax Facts Online. Read More

Posted in Retirement Planning, Taxation, Uncategorized | Tagged: CARES Act, taxfacts | Leave a Comment »

Estate Planning Update 2020-21 (Lexis)

Posted by William Byrnes on October 22, 2020

Texas Estate Planning Publication Update (2020) [Lexis permalink is here]

Highlights

Current Developments: In this Release 27 of Texas Estate Planning, Prof. William Byrnes analyzes the latest developments and decisions in the federal and Texas courts, including the 2017 Tax Cuts and Jobs Act, the Bipartisan Budget Act of 2018, the SECURE Act of 2019, as well as legislation and consideration resulting from the 2020 COVID-19 pandemic that impact estate planners.

Release 27 of Texas Estate Planning includes 21 chapter revisions of the latest rulings, regulations, cases, and inflationary adjustments, as well as the amendments and additions to law by the biennial 2019 86th Texas legislative session, the Tax Cuts and Jobs Act, the Bipartisan Budget Act of 2018, the SECURE Act of 2019, and CARES Act of 2020. Highlights of this release include:

The SECURE Act. The SECURE Act that took effect in 2020 specifically targets estate planning opportunities for individual retirement accounts. The impact is analyzed in Chapter 1.

T.D. 9884; Treas. Reg. § 20.2010-1(c). The I.R.S. confirmed that gifts made during 2018 through 2025 will attach the transfer tax exemption amount applicable on the date of the gift, and thus allow credit for the higher pre-2026 amount post-2026 even though the transfer tax exemption will have reverted to the pre-2018 amount (adjusted for inflation). The impact is analyzed in Chapter 2.

State Imposition of Tax on Trust Income. Some states attempt to tax trust income based on the residency of the beneficiary. In North Carolina Department of Revenue v. The Kimberly Rice Kaestner 1992 Family Trust, the State of North Carolina imposed an income tax on accumulated income of an irrevocable trust created in New York because of the residency of three beneficiaries in North Carolina. The U.S. Supreme Court in a decision based on the specific facts of the case held that the tax violated the Due Process Clause. See Chapter 31.

Impact of Tax Cuts and Jobs Act Exclusion. The IRS for 2018 reported that it received 34,092 total estate tax returns and 245,584 gift tax returns. Of the estate tax returns for 2018, the IRS reported that it received 5,484 taxable returns (which most likely relate to deaths in 2017) reporting $106 billion of estate gross assets and a tentative estate tax liability of $34 billion. The Urban Institute Tax Policy Center estimates that for 2020 only 1,900 estate tax returns will have tax owing of a total $16 billion.

Tax Cuts and Jobs Act Exclusion. The Tax Cuts and Jobs Act of 2017 (“TCJA”) increases from 2018 until 2026 the transfer tax exemption to $10 million per individual indexed for inflation so that for 2020 the amount is $11.58 million or $23.16 million per married couple. The 2020 annual gift tax exclusion for gifts made to a non-citizen spouse is $157,000. In 2026, the transfer tax exemption reverts back to the 2017 level indexed for inflation (in 2018 it would have been $5.6 million). All chapters have been updated to reflect these changes as well as the inflation adjustments of Rev. Proc. 2019-44.

U.S. Estate Tax Regime On High Net Wealth Immigrants. Chapter 7 analyzes planning strategies to mitigate exposure of foreign assets to U.S. estate tax.

IRS Settlement Offer For Microcaptives. See Chapter 5.

See the full chapter list here

Author and Contributors

Professor William Byrnes of Texas A&M University School of Law and author of ten Lexis legal treatises is the author of Texas Estate Planning. He has assembled a team of preeminent subject matter experts as chapter contributors, including: Tena Fox (Leach & Fox), Terry Leach (Leach & Fox), Patrick McCormick (Drucker Scaccetti), Benjamin Terner (The Einstein Group), Kim Donovan Uskovich (Kelly Hart), and James Weller (Greenway Capital Advisors).

Interested in the two volumes of Estate Planning book? See here

Posted in Pensions, Retirement Planning, Taxation, Uncategorized, Wealth Management | Tagged: estate planning | Leave a Comment »

USA and EU international tax case studies start on January 19

Posted by William Byrnes on October 19, 2020

U.S. Tax Risk Management (Data, Analytics & Technology) (Zoom Wednesday and Sunday at 8am Central Standard Dallas time zone)

Orientation
Week 1 January 19, 2021 Outbound / FDII Melissa Muhammad
Week 2 January 25, 2021 Inbound / BEAT Melissa Muhammad
Week 3 February 1, 2021 [check the box] Form 1120 Documentation: Neelu Mehrotra
Week 4 February 8, 2021 [Subpart F & GILTI, PTEP ] Form 5471 Documentation
Week 5 February 15, 2021 M&A
Week 6 February 22, 2021 FTCs; wrap-up
Capstone Week March 1: tax compliance and technology

E.U. Tax Risk Management 3 credits (Zoom Wednesday and Sunday at 8am Central Daylight Dallas time zone)

Week 1 March 8, 2021 General Framework & Fundamental Freedoms
Week 2 March 15, 2021 P/S + Interest / Royalty
Week 3 March 22, 2021 M&A directive
Week 4 March 29, 2021 Free Movement of Capital (investment funds)
Week 5 April 5, 2021 Cross-Border Losses
Week 6 April 12, 2021 ATAD, DAC 6, Abuse
Capstone Week April 19: tax compliance and technology

Weekly course materials include the written materials, pre-recorded videos, PPTs, and audio files (listen at the gym or when driving). Access to the extensive Texas A&M library for case study research includes as examples: Lexis, Westlaw, IBFD, Kluwer-Cheetah, Thomson OneSource, BvD (Moodys), and S&P CapIQ.

Courses are limited to maximum 20 participants: Application HERE

Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

Rank in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
#1 endowment for U.S. public universities, #7 overall
Rank #1 of U.S. public universities for a superior education at an affordable cost
#1 for most CEOs employed by Fortune 500
Rank 11th “Best Public Colleges” Money’s Best Colleges Report, 2019
Texas A&M rank #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20

Posted in Courses, Uncategorized | Tagged: international tax degree | Leave a Comment »

Byrnes & Bloink’s TaxFacts Intelligence (October 15, 2020)

Posted by William Byrnes on October 15, 2020

Questions? Contact customer service: TaxFactsHelp@alm.com| 800-543-0874

This week we have new info on the definition of “business interest” as it relates to the 2017 tax reform and CARES Act modifications. The IRS has released both final and proposed regs on the matter, and there are new rule changes regarding some of the ancillary costs that can come with debt issuance, such as commitment fees and guaranteed payments that are broadly categorized as “substitute” interest costs. We also see new regs on the elimination of qualified transportations benefits and updated deadlines for Form 1095.

Final Business Interest Regs Relax Definition of “Business Interest”

The IRS has released final regulations and a new set of proposed regulations on the deduction for business interest, which was modified by the 2017 tax reform legislation. The new proposed IRS regulations on the business interest expense implement many of the new CARES Act provisions designed to help small business owners in 2020 and future years. While the final regulations largely mirror earlier proposed rules, one significant change relaxes the previous definition of “business interest”. Under the proposed regulations, interest included commitment fees, debt issuance costs, guaranteed payments and other “substitute” interest costs. Under the final rules, commitment fees and debt issuance costs are excluded from the definition of interest. For more information on the business interest deduction and the 2020 CARES Act changes, visit Tax Facts Online. Read More

IRS Proposes Regs on TCJA Elimination of Qualified Transportation Benefits

The IRS issued proposed regulations on the 2017 tax reform legislation’s elimination of deductions for certain employer-provided transportation benefits. Under the proposed rules, if the employer owns or leases the parking facility, the employer can elect to apply a general rule, or one of three simplified methods, for calculating the amount of nondeductible expenses. Taxpayers may elect to apply the general rule or a simplified methodology for each taxable year and for each parking facility. For more information on the simplified methods, visit Tax Facts Online. Read More

IRS Provides New ACA Transition Relief for Employer Reporting

As usual, the IRS has released transition relief to extend the deadline for providing Form 1095-C to individuals from February 1, 2021 to March 2, 2021. However, unlike other years, the IRS has indicated that absent comments indicating a need for future extensions, this will be the last year the extension applies. The due date to furnish the Forms 1095-B and 1095-C to requisite individuals is extended from February 1, 2021 to March 2, 2021. Form 1094-C and Form 1095-C that must be provided to the IRS are not subject to the extension. The employer must furnish these filings to the IRS by March 1, 2021 if the filing is on paper and March 31, 2021 if the employer is filing electronically. For more information, visit Tax Facts Online. Read More

Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
#1 endowment for U.S. public universities, #7 overall
#1 of U.S. public universities for a superior education at an affordable cost
#1 for most CEOs employed by Fortune 500
Rank 11th “Best Public Colleges” Money’s Best Colleges Report, 2019
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20

Posted in Retirement Planning, Taxation, Uncategorized, Wealth Management | Tagged: tax facts | Leave a Comment »

Pillar 1 and 2 Reports from the OECD

Posted by William Byrnes on October 13, 2020

Texas A&M University School of Law’s online international tax risk management graduate curricula for industry professionals has attracted over 160 enrollment this fall semester. Apply now for courses that begin January 11 spring semester. See example case study team based discussions, library access, meet the faculty via the YouTube link weekly topic here. Courses are limited to maximum 30 participants.

Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
#1 endowment for U.S. public universities, #7 overall
#1 of U.S. public universities for a superior education at an affordable cost
#1 for most CEOs employed by Fortune 500
Rank 11th “Best Public Colleges” Money’s Best Colleges Report, 2019
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20

Transfer Pricing Risk Management: Tangibles, Methods, Economics, and Data (William Byrnes lead professor, weekly leader below, several other guests join for discussions and case studies)

Team-based case studies are live each Monday and Friday at 9am Central time.

Week 1 January 13 Arm’s Length Standard (v Formulary Approach) Dr. Bruno Da Silva
Week 2 Jan 20 CUP & Comparables Dr. Lorraine Eden
Week 3 Jan 27 Cost Plus & Resale Minus Dr. George Salis
Week 4 Feb 3: Comparable Profits Method & TNMMDr. George Salis
Week 5 Feb 10 Profit Split Dr. George Salis
Week 6 Feb 17 Best Method Dr. Lorraine Eden

Transfer Pricing Risk Management: Intangibles and Services (William Byrnes lead professor) Team-based case studies are live each Monday and Friday at 9am Central time.

Week 1 March 2 Intangibles Royalty Rates CUT, CPM Dr. Debora Correa Talutto
Week 2 March 16 CSA Intangibles Buy In/Out Dr. George Salis
Week 3 March 23 Digital Business Unitary Apportionment Dr. Bruno Da Silva
Week 4 March 30 Digital Value Chain, Internet of Things Dr. Lorraine Eden
Week 5 April 6 U.S. v OECD v UN Manual case study Extractive Industries, Financing Hafiz Choudhury
Week 6 April 13 Restructuring the Business, Services case study Hafiz Choudhury
Week 7 Capstone Hand-On Week with Financial databases “Tax Technology and the future of Transfer Pricing” Dr. Debora Correa Talutto April 20 – 26: Thomson OneSource, BvD (Moodys), and CrossBorder AI Solutions Dr. Debora Correa Talutto & William Byrnes

U.S. Tax Risk Management (Data, Analytics & Technology) 3 credits (Tuesday and Sunday at 8am Central Standard Dallas time zone)

Week 1 January 10, 2021 Outbound / FDII Melissa Muhammad (IRS LB&I) melissamuhammadesq@gmail.com
Week 2 January 17, 2021 Inbound / BEAT Melissa Muhammad
Week 3 January 24, 2021 [check the box] Form 1120 Documentation: Neelu Mehrotra: EY mehrotra.neelu@gmail.com
Week 4 January 31, 2021 [Subpart F & GILTI, PTEP ] Form 5471 Documentation: Neelu Mehrotra: EY
Week 5 February 7, 2021 M&A or topic and Neelu Mehrotra: EY
Week 6 February 14, 2021 FTCs; wrap-up: Melissa Muhammad

E.U. Tax Risk Management 3 credits (Tuesday and Sunday at 8am Central Dallas time zone)

Week 1 February 28, 2021 General Framework & Fundamental Freedoms
Week 2 March 7, 2021 P/S + Interest / Royalty
Week 3 March 21, 2021 M&A directive
Week 4 March 28, 2021 Cross-Border Losses
Week 5 April 4, 2021 Free Movement of Capital (investment funds)
Week 6 April 11, 2021 ATAD, DAC 6, Abuse – Dr. Bruno da Silva
Capstone Week: Build a client case study, wrap up

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14 weeks of U.S. international tax, EU tax, and transfer pricing case studies starts January 11

Posted by William Byrnes on October 6, 2020

Ranked in top 20 public universities by Wall Street Journal / Times Higher Education (2020)
#1 endowment for U.S. public universities, #7 overall
#1 of U.S. public universities for a superior education at an affordable cost
#1 for most CEOs employed by Fortune 500
Rank 11th “Best Public Colleges” Money’s Best Colleges Report, 2019
Texas A&M ranks #1 in Texas, #1 in the SEC, and #12 in the U.S. in Washington Monthly’s 2020 overall college rankings based on the quality of education, accessibility, graduation rates, student involvement, and research: see tx.ag/WashMonth20

Transfer Pricing Risk Management: Tangibles, Methods, Economics, and Data (William Byrnes lead professor, weekly leader below, several other guests join for discussions and case studies)

Team-based case studies are live each Monday and Friday at 9am Central time.

Week 1 January 13 Arm’s Length Standard (v Formulary Approach) Dr. Bruno Da Silva
Week 2 Jan 20 CUP & Comparables Dr. Lorraine Eden
Week 3 Jan 27 Cost Plus & Resale Minus Dr. George Salis
Week 4 Feb 3: Comparable Profits Method & TNMM Dr. George Salis
Week 5 Feb 10 Profit Split Dr. George Salis
Week 6 Feb 17 Best Method Dr. Lorraine Eden

Transfer Pricing Risk Management: Intangibles and Services (William Byrnes lead professor) Team-based case studies are live each Monday and Friday at 9am Central time.

Week 1 March 2 Intangibles Royalty Rates CUT, CPM Dr. Debora Correa Talutto
Week 2 March 16 CSA Intangibles Buy In/Out Dr. George Salis
Week 3 March 23 Digital Business Unitary Apportionment Dr. Bruno Da Silva
Week 4 March 30 Digital Value Chain, Internet of Things Dr. Lorraine Eden
Week 5 April 6 U.S. v OECD v UN Manual case study Extractive Industries, Financing Hafiz Choudhury
Week 6 April 13 Restructuring the Business, Services case study Hafiz Choudhury
Week 7 Capstone Hand-On Week with Financial databases “Tax Technology and the future of Transfer Pricing” Dr. Debora Correa Talutto April 20 – 26: Thomson OneSource, BvD (Moodys), and CrossBorder AI Solutions Dr. Debora Correa Talutto & William Byrnes

U.S. Tax Risk Management (Data, Analytics & Technology) 3 credits (Tuesday and Sunday at 8am Central Standard Dallas time zone)

Week 1 January 10, 2021 Outbound / FDII Melissa Muhammad (IRS LB&I) melissamuhammadesq@gmail.com
Week 2 January 17, 2021 Inbound / BEAT Melissa Muhammad
Week 3 January 24, 2021 [check the box] Form 1120 Documentation: Neelu Mehrotra: EY mehrotra.neelu@gmail.com
Week 4 January 31, 2021 [Subpart F & GILTI, PTEP ] Form 5471 Documentation: Neelu Mehrotra: EY
Week 5 February 7, 2021 M&A or topic and Neelu Mehrotra: EY
Week 6 February 14, 2021 FTCs; wrap-up: Melissa Muhammad

E.U. Tax Risk Management 3 credits (Tuesday and Sunday at 8am Central Dallas time zone)

Week 1 February 28, 2021 General Framework & Fundamental Freedoms
Week 2 March 7, 2021 P/S + Interest / Royalty
Week 3 March 21, 2021 M&A directive
Week 4 March 28, 2021 Cross-Border Losses
Week 5 April 4, 2021 Free Movement of Capital (investment funds)
Week 6 April 11, 2021 ATAD, DAC 6, Abuse – Dr. Bruno da Silva
Capstone Week: Build a client case study, wrap up

Posted in Uncategorized | Leave a Comment »

Will New York’s businesses suffer because the state tax system rejected adopting the CARES Act tax reliefs?

Posted by William Byrnes on April 15, 2020

Deloitte covers New York’s new budget that purposefully ‘decouples’ from the CARES Act tax relief for New York based business and other states’ business that have income within New York.
BDO explains it here as well.
Pillsbury here.

Anything that improves the employment of tax professionals, I am for. Thus, states with their own tax codes that do not correspond to the federal Internal Revenue Code, at least for my students and alumni, are OK by me. Unless I own a business. Then it’s maddeningly complex, and compliance expensive, to operate in several tax regimes.

Not saying that the CARES Act provisions made good tax policy sense. But unless New York state (and city) has something better to offer, the Covid-19 meltdown does not seem like an opportune time to ‘stick it’ to Congress’ because Congress seems to enact ineffectual tax provisions. Not that the typical New York voter understands or cares about 163(j) relief or NOL. And arguably, most voters do not feel sympathy for the large business and investment partnership vehicles (at least until I remind them that it is their retirement accounts that own the majority of the publicly held businesses and investment vehicles, and thus they’ll be working a little longer than they hoped for).

New York based business in particular may come to understand when the CPA / tax advisor informs that on the federal return Covid-19 stimulus relief is allowable but not so on the NY state return. Some NY based businesses are going to feel that their state didn’t have their backs. Other businesses that are large enough and able because of industry to relocate operations have time a plenty at this moment to think about such relocation. (Texas will be open for business again soon).

Should a New York business look toward the SBA loan to the tax provisions like the employee retention tax credits? New York’s decoupling (where a state goes its own way) may impact the analysis. In general, leaving aside the decoupling issue, for a business with by example 400 employees, a $5,000 credit per employee is worth $2,000,000 of tax-free tax credit that can be more beneficial than an SBA Loan. The SBA loan is not straight forward and regardless, is not in general allowed for business above 500 employees. The taxpayer must choose either one or the other – the PPP (forgivable employee retention) SBA loan or the employee retention tax credit. For small employers with less than say 250 employees (not exactly ‘small’ in most American minds) the answer is probably the SBA loan. But above 250, careful consideration and analyzing the benefits/outcomes of each program must be weighed.

For a business with by example 400 employees, a $5,000 credit per employee is worth $2,000,000 of tax-free tax credit that may be more beneficial than an SBA Loan depending on the ‘facts and circumstances’ of the business. The SBA loan is not straight forward and regardless, is not in general allowed for the business above 500 employees. The SBA loan is allowed, for the small businesses that qualify, for up to 2.5 times a business’ average monthly payroll costs, up to $10 million. So by example, just to put some numbers to this statement, if a business has 400 employees, and each employee is paid $3,000 a month with benefits (basically 22 days a month at $15 / hour with full medical), the monthly payroll will be $1.2 million. 2.5 times is thus $3 million even. A forgiven tax-free $3 million is great.

The $5,000 worth of employee retention tax credit is only worth $2 million for the 400 employees, right? Not necessarily. Maybe but we need to work through the numbers of the business. Another way to look at the value of the tax credit is that it is worth the tax rate cost to generate the income for the taxpayer for which the tax credit offsets the tax due. Say this taxpayer is a pass-through and pays an effective 33% (after the Internal Revenue Code Section 199A “20% deemed business income deduction” reduces the 37% highest rate, and factoring in the state tax burden). So the taxpayer’s $2 million credit offsets the tax on $6 million income (assuming the state recognizes the credit).

So now another step in the potential analysis. Let’s say the business recovers and both businesses earn $6 million income. The business with the SBA loan has $3 million taxfree after forgiveness plus $4 million aftertax, thus $7 million. The tax credit business has $6 million tax-free. The tax credit company appears worse off but not by the initial $3 million SBA loan, right? Many other factors are required for the analysis to weigh both paths. The 2-year deferred payroll tax, whether the business will generate net earnings this year, the SBA additional forgiveness potential for non-employee expenses, whether the SBA loan money has already run out, how long to monetize the tax credits, .. these issues come to mind.

Watch the webinar below or the one forthcoming Thursday, April 16th (Register now for our webinar on Thursday, April 16, at 2:00 EDT)

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone. Questions? Contact customer service: TaxFactsHelp@alm.com| 800-543-0874

Posted in Uncategorized | Leave a Comment »

SBA Information on How Much Money, To Whom, to Which States

Posted by William Byrnes on April 14, 2020

Byrnes and Bloink analyze the SBA loans, Tax Credit, and Retirement Planning Impact for Small Business because of Covid-19 economic stimulus (Families First, CARES Acts, IRS Notices) on Thursday, April 16th (Register now webinar)

Small Business Application Stats.
PPP Loan Application Status / CASE STUDY
SBA’s 2020 Weekly Lending Reports: SBA offers a variety of loan programs for very specific purposes. These reports detail weekly lending activity for SBA loan programs.
ABA Data Bank: Paycheck Protection Program Loans Total $205 Billion

Texas A&M University School of Law has launched a Covid-19 expert response team. Listen to Professor Neal Newman and William discussing the Covid-19 SBA forgiveness loans, deferral on paying the employer’s Social Security tax, and the Employee Retention Tax Credit (YouTube). Find the response team members from all disciplines here: Download Texas A&M Coronavirus_Experts

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Posted in Retirement Planning, Taxation, Uncategorized | Tagged: #CARES, #FamiliesFirst, Covid-19 | Leave a Comment »

SBA (Forgivable) Employee Retention Loan or Tax Credit for Employee Retention? Which is best for my business?

Posted by William Byrnes on April 14, 2020

The IRS provided concrete responses to the COVID-19 virus in the tax field. First, the IRS has now formally extended the income tax filing deadline for tax year 2019 to July 15, as well as the FBAR form, FATCA form, and several other reporting forms initially left out of the IRS extension. Because this is an extension of the actual filing deadline (not just an extension of time to pay owed taxes) it also pushes a number of related deadlines (e.g. for qualified plan contributions) back to July. April 15ths Estimated Tax Payments for 2020 (the first one) is also postponed. But not the estimated tax payment due June 15th as of yet (I expect Treasury to postpone it as well. September 15 and January 15, 2021 are the 3rd and 4th required estimated tax payments.

President Trump also signed the Families First Coronavirus Response Act, which creates a paid sick leave program and related tax credits for small businesses, as well as the CARES Act calling for forgivable SBA loans (without tax consequences) or a $5,000 tax credit per employee retained for medium and large size businesses.

Byrnes and Bloink comment from Tax Facts: For a business with by example 400 employees, a $5,000 credit per employee is worth $2,000,000 of tax-free tax credit that can be more beneficial than an SBA Loan. The SBA loan is not straight forward and regardless, is not in general allowed for business above 500 employees. The taxpayer must choose either one or the other – the PPP (forgivable employee retention) SBA loan or the employee retention tax credit. For small employers with less than say 250 employees (not exactly ‘small’ in most American minds) the answer is probably the SBA loan. But above 250, careful consideration and analyzing the benefits/outcomes of each program must be weighed. Watch the webinar below or the one forthcoming Thursday, April 16th (Register now for our webinar on Thursday, April 16, at 2:00 EDT)

Texas A&M University School of Law has launched a Covid-19 expert response team. Find the response team members from all disciplines here: Download Texas A&M Coronavirus_Experts Listen to Professor Neal Newman and William discussing the Covid-19 SBA forgiveness loans, deferral on paying the employer’s Social Security tax, and the Employee Retention Tax Credit (YouTube).

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Posted in Uncategorized | Leave a Comment »

What will be the impact of the 2017 Tax Cuts Act, Covid-19 (coronavirus), a Zombie Apocalypse, on Estimated Tax due by April 15?

Posted by William Byrnes on March 15, 2020

If a zombie apocalypse does not emanate from the illness known as Covid-19 caused by the coronavirus, then we still need to plan for our 2020 tax payments. It is likely that taxpayers with business or investment income will be able to reduce the 2020 quarterly estimated tax payments that will be due April 15 this year, June 15, September 15, and January 15 of 2021. Why?

2019 was a good income year for most taxpayers earning investment and business income. But 2020 will likely be a depressed income year, maybe even a recession (for those not eaten by zombies). Thus, estimated tax payments to avoid a penalty, generally, 90% of the tax that is estimated to be due for 2020, should be much reduced from the 2019 level paid. (Contrarian investor taxpayers that shorted the market may actually need to make higher estimated taxpayers because the contrarians are likely to have a great capital gain year).

What are the changes enacted in the Tax Cuts and Jobs Act of 2017 that, because of the coronavirus, impact 2020’s estimated tax payments?

A taxpayer’s ability to reduce tax because of a net operating loss (“NOL”) in 2020 has been reduced by the TCJA. An NOL resulting in 2020 cannot be applied to taxes paid in the previous two-years of 2019 and 2018 to claw those taxes back. Before the TCJA, the NOL “carry-back” of two-years was allowed. NOLs may still be carried forward. Excess NOL in 2020 may be used to reduce 2021’s income and thus tax due.

However, the TCJA even modifies how much NOL may be used to reduce 2020’s taxable income. Starting in 2018, the TCJA modified the tax law on “excess business losses” by limiting losses from all types of business for noncorporate taxpayers. An “excess business loss” is the amount of a taxpayer’s total deductions from business income that exceeds a taxpayer’s “total gross income and capital gains from business plus $250,000 for an individual taxpayer or $500,000 for married taxpayers filing a joint return.” Said another way, the business loss in 2020 is limited to a maximum of $250,000 for an individual taxpayer. Yet, the remainder does not evaporate like a vampire stabbed with a stake in the heart. The remainder may be carried forward to 2021. The remainder is called a “net operating loss” or NOL.

But the TCJA has another limitation for the carry forward of an NOL. The NOL may only be used in 2021 to reduce the taxpayer’s taxable income by 80%. The remainder NOL in 2021, if any, that resulted from 2020’s original loss and 2021’s limitation to just 80% of taxable income may again be carried forward, to 2022, yet again subject to the 80% of taxable income limitation. The NOL may keep rolling forward indefinitely, subject to the 80% limitation until it is all used.

High net wealth taxpayers that generate gross receipts greater than $26 million may be subject to the TCJA’s limitation of interest expense for 2020. The TCJA included a rule that limits the amount of interest associated with a taxpayer’s business income when the taxpayer has on average annual gross receipts of more than $26 million since 2018. The limitation does not apply to a taxpayer whose business income is generated from providing services as an employee, and a taxpayer that generates business income from real estate may elect not to have the limitation apply.

The amount of deductible business interest expense that is above a taxpayer’s business interest income is limited to 30% of the taxpayer’s adjusted taxable income (called “ATI”). For 2020, ATI will probably be significantly lower than in 2019 and 2018. A taxpayer calculated ATI taking the year’s taxable income then reducing it by the business interest expense as if the limitation did not apply. The remaining amount is then further reduced by any net operating loss deduction; the 20% deemed deduction for qualified business income, any depreciation, amortization, or depletion deduction, and finally, any capital loss. The business interest expense allowable for 2020 is 30% of that remainder. The lost business income resulting from the coronavirus in 2020 may lead the remainder to be zero, and 30% of zero is zero. Like the NOL above, the business interest expense if not usable in 2020 does not vanish. It carries forward to 2021 and each year thereafter, applying the same limitation rules each year.

Many taxpayers may end 2020 in a capital loss position if the stock market does not fully recover by December. If a taxpayer’s capital losses are more than the year’s capital gains, then $3,000 of that loss may be deducted from the taxpayer’s 2020 regular income. Remaining capital loss above the $3,000 may be carried forward to apply against 2021 income, and so on until used up.

The IRS may offer taxpayers more time beyond the April 15th deadline to file and pay 2019’s tax in 2020. The filing and payment for 2019, and estimated tax for 2020, is due on or before April 15. But the IRS has indicated that it may extend that deadline. A taxpayer may, regardless, file a request for a six-month extension on or before April 15, 2020, that is automatically granted if filed on time. But any tax owing for 2019 will still be due April 15, 2020, after which interest begins to be charged by the IRS to the taxpayer’s tax debt. Check the IRS website here for whether, because of the coronavirus, it has extended the payment deadline beyond April 15, 2020. Can the IRS extend the deadline, legally? Yes. Because Congress enacted a section of the Internal Revenue Code (our tax law) “§ 7508A” which is aptly named “Authority to postpone certain deadlines by reason of Presidentially declared disaster or terroristic or military actions”. The President declared an official national emergency (see here).

Taxpayers are not required to exhaust the deductible required by a high-deductible health plan (called “HDHP”) before using the HDHP to pay for COVID-19 related testing and treatment.

I have four tax policy suggestions for Congress that it can include in a taxpayer coronavirus relief bill. I welcome acronym suggestions for this proposed bill’s name, especially a creative bill name whose acronym is “Zombie” or “Eat Brains”. The four tax relief suggestions that will mitigate damage caused by Covid-19 are:

Proposal 1 (stop medical bankruptcy): In 2020 the itemized deduction for medical expenses is reduced by 7.5% of a taxpayer’s AGI. For 2020, I propose eliminating the 7.5% reduction of medical expenses attributed to the coronavirus or any 2020 flu (or zombie bite), such as hospitalization. Medical diagnosis should suffice. Not going to be used by many people. But the people who do use will really need it – those that do not awake as zombies that is.

Proposal 2 (stop restaurant bankruptcy): The administration proposes the suspension of the Social Security and Medicare payroll tax to jump-start consumer spending, presumably after the removal of quarantine orders to stay indoors or at least six feet away from each other. Not very targeted. Someone like me may just shift the payroll tax relief and use it instead to upward adjust my 403(b) retirement savings for 2020, taking advantage of my full $19,500 contribution allowance for 2020 (and because I am 50 years old or older – add another $6,000 retirement ‘catchup’ to that $19,500 for a full $25,500), Not only have I not spent the money to help the economy rebound, I have reduced my tax due for 2020 because my retirement contributions reduce my taxable income. I have saved tax twice!! While I quite like that idea personally, I feel empathy for all the local restaurant owners who may go bankrupt unless I go out to eat at more local restaurants once I assured that 2020 was not the year of the zombie apocalypse.

A better-targeted proposal to save our nation’s local restaurants and the local farmers that supply them is to allow taxpayers an itemized deduction up to $1,000 for an individual and $2,000 for a married filing jointly 2020, beyond the standard deduction, of 100% of restaurant meals expense between June 1 and October 31, at U.S. restaurants with the last three years gross annual receipts averaging less than [$5 million – whatever is reasonable so that big chains are not included, Small Business Administration uses a maximum of $8 million for full-service restaurants (NAICS 722511)- I’m OK with that]. I know – many reasons not to do this, such as Americans will become hooked on eating out at local restaurants. Wait, why is that a bad thing? And we will need to address the tax abusers who will order one slice of pizza and 20 bottles of wine, to go. So maybe the maximum meal receipt must be set at $100 per meal receipt per adult. That should allow plenty of food for a couple, and alcohol, and leave enough for the children to still have mac & cheese. Plus it requires ten different restaurant trips. Local restauranteurs and the local farmers can hold out hope that 2020 will not require filing for bankruptcy protection. November is Thanksgiving when people eat out anyway, at least in the restaurants that have remained open. By the way, I am purposely leaving business out of this. Business has a 50% business meal deduction anyway. And my policy suggestion is about Americans being social and not talking business at the dinner table (and perhaps not politics either).

Proposal 3 (stop hotel bankruptcy): And let’s not forget about locally-owned hotels with average gross receipts below $8 million (SBA uses $35 million for hotels and $8 million for B&B Inns so maybe I am way off base with just $8 million – see NAICS subsector 721 Accomodation). A $500 itemized deduction for 2020 for a U.S. hotel stay (not Air BnB homes or apartments, actually licensed hotels/BnB Inns) for an individual or couple between June 1 and October 31. Might not buy a weekend at the Ritz but the Ritz probably exceeds the small business amount of revenue a year. Is it sound tax policy? Huey Long (I’m from Louisiana) promised a chicken in every pot and a car in every yard. I promise a get-a-way weekend at a small(ish) hotel.

Proposal 4 (keep employees employed): A tax credit (I am not sure the right amount, let the Labor Secretary decide, something around $5,000 an employee) to employers of less than 500 employees who do not reduce the monthly payroll of the employees, or fire any employees, between June 1 and September 30. October 1 employers start thinking about Christmas hiring for the shopping season. I can imagine some mathematically-inclined employees thinking “I am going to walk into my boss’ office and projectile vomit because the cost of losing the tax credits for firing me is too high.” OK, so firing ‘for cause including projectile Zombie vomiting on the boss ‘ will be allowed without loss of the tax credit. Now if a business wants to expand and hire a lot of employees up to 500 that’s great. I propose that all employees employed and start fulltime work before June 1st qualify for a reduced $4,000 tax credit (basically $1,000 a month of employment for June through September).

These four proposals are enough to keep the economy, restaurants, hotels, and employees out of recession and bankruptcy. But I have more proposals not currently part of the current bill, but common sense dictates should be (well, maybe not). Why have we heard nothing from the House to encourage donations of toilet paper rolls to local shelters? And why hotels and restaurants, but not spas? I’ll leave it to the politicians (and lobbyists) to argue about. Meanwhile, I look forward to receiving your comments while I set up my anti-zombie chicken wire barricade around the yard.

I’ll be covering these and related issues in my weekly Tax Facts Intelligence Newsletter.

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Posted in Tax Policy, Taxation, Uncategorized | Tagged: coronavirus, Covid-19, estimated tax, tax, tax policy, Taxation | Leave a Comment »

State Aid: What is the Arm’s Length Return for Starbucks Netherlands?

Posted by William Byrnes on October 28, 2019

For the complete paper see https://ssrn.com/abstract=3464990

The crux of the legal issue is the EU Commission’s contention, required as the third condition for a finding of State aid, that the Netherlands-Starbucks APA conferred a selective advantage on Starbucks’ Netherlands manufacturing subsidiary (SMBV, aka the “roasting operation”) that resulted in a lowering of SMBV’s tax liability in the Netherlands as compared with what SMBV would have paid under the Netherlands’ general corporate income tax system dealing with third parties.

And the crux of the dispute that determines the legal issue outcome is whose choice of transfer pricing method (the Commission or The Netherlands/Starbucks) is the most reliable.

However, the most interesting aspect of the controversy is how to allocate the residual between SMBV and Starbucks intermediary IP management limited partnership? In a broader framework, not part of the analysis contemplated by the applicable 1995 OECD Transfer Pricing Guidelines, is how to allocate the residual among Starbucks’ global value chain. For the complete paper see https://ssrn.com/abstract=3464990

Posted in Transfer Pricing, Uncategorized | Leave a Comment »

TaxFacts Intelligence Weekly of September 13, 2019 – Actionable Analysis for Financial Advisors

Posted by William Byrnes on September 14, 2019

2019’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Texas A&M University School of Law has launched its International Tax online curriculum for graduate degree candidates. Admissions is open for Spring (January) semester for the transfer pricing courses. Texas A&M University is a public university of the state of Texas and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

IRS PLR Approving CLAT Structure Provides Option for High-Net Worth Estate Planning

The IRS has recently released a private letter ruling approving a charitable lead annuity trust (CLAT) structure that may prove useful in estate planning for high net worth clients. In the case at issue, the taxpayer proposed to set up a revocable trust where the trust would first pay certain debts and expenses and then distribute the trust assets to other individuals and trusts if the taxpayer predeceased his spouse. Should the spouse die first, the trust would have paid the relevant debts, made distributions to individuals and trusts and then transfer the remaining assets to the CLAT, which would then pay a 5% annuity to the charity based upon the initial trust’s fair market value. The IRS approved this structure even though in most cases, the CLAT must have a payout stream that lasts a predetermined number of years to qualify for tax preferential treatment (deduction of the present value of annuity payments for the estate). Here, the IRS determined that it would eventually be possible to calculate that specified payout term once the CLAT was funded from the revocable trust after payment of debts, expenses and distributions to other beneficiaries. For more information on charitable lead trusts, visit Tax Facts Online. Read More

Recent Ninth Circuit Case Highlights Importance of Disclosing Transactions Substantially Similar to “Listed Transactions”

The IRS identifies certain types of transactions as having the potential for tax avoidance, and thus requires that taxpayers disclose these transactions affirmatively in order to avoid penalties. The IRS can impose penalties for failing to disclose a listed transaction, but also has authority to impose penalties for failure to disclose a transaction that it deems to be “substantially similar” to a transaction that is specifically listed. The case at hand involved a situation where a company participated in a group life insurance term plan in order to fund cash-value life insurance that the sole shareholder and employee owned. While the structure at issue was not specifically listed, the IRS determined that the transaction was substantially similar to other listed transactions and imposed a $10,000 penalty for every year that the taxpayer failed to disclose the transaction. For more information on the exemptions that may apply in cases involving prohibited transactions, visit Tax Facts Online. Read More

Reminder to Clients: 401(k) Exceptions for Early Withdrawal Liability Differ From IRAs

Most clients understand that they may be entitled to claim an exemption from the generally applicable 10 percent early withdrawal penalty if retirement accounts are tapped prior to age 591/2 where the funds are used for certain specified purposes. However, a recent Tax Court case highlights the need for clients to understand that the exceptions vary depending upon whether the account is a 401(k) or an IRA. In this case, the taxpayer used 401(k) account funds withdrawn early to fund the purchase of her home and attempted to claim an exception to the penalty. However, the exception for purchasing a home only applies in the case of IRA funds–and the courts strictly apply the exception even in cases where the error resulted from an honest mistake. Because of this, it’s important that clients be advised as to the detailed requirements that apply depending upon the type of account involved. For more information on the exceptions to the early withdrawal penalties, visit Tax Facts Online. Read More

Tax Facts Team

Molly Miller Publisher	William H. Byrnes, J.D., LL.M Tax Facts Author

Jason Gilbert, J.D. Senior Editor	Robert Bloink, J.D., LL.M. Tax Facts Author

Connie L. Jump Senior Manager, Editorial Operations	Alexis Long, J.D. Senior Contributor

Patti O’Leary Senior Editorial Assistant	Danielle Birdsail Digital Marketing Manager

Emily Brunner Editorial Assistant

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Seeking inaugural cohort of tax professionals to pilot Texas A&M’s International Tax online curriculum starting August 26, 2019

Posted by William Byrnes on July 29, 2019

Texas A&M University School of Law will launch August 26, 2019 its International Tax online curriculum for graduate degree candidates. Admissions is open for the inaugural cohort of degree candidates to pilot the launch of the Fall semester introductory courses of international taxation and tax treaties.

How do I apply for the inaugural cohort? Only for this inaugural cohort, completed applications may be submitted directly, via the below-expedited process, to the law school’s admission office until noon central daylight time (CDT – Dallas) on August 22, 2019. A completed Fall application must include four items:

(1) the completed and signed law school application (application fees and letters of recommendation are waived for Fall 2019 international tax);

(2) statement of interest for the international tax program that includes mention of prior tax or related experience.

(3) resume/CV reflecting at least three years of employment as a tax advisor or five years employment in a related field; and

(4) an official transcript from the highest academic degree awarded by an accredited University sent to Texas A&M University: Official electronic transcripts can be sent to law-admissions@law.tamu.edu FedEx, UPS, DHL express mail can be sent to Attn: Office of Graduate Admissions 1515 Commerce Street Fort Worth, TX 76102-6509

To apply for the inaugural cohort opportunity, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/international-tax

What is the proposed curriculum of 12 international tax courses?

International Taxation & Treaties I (3 credits) International Taxation & Treaties II (3 credits)

Transfer Pricing I (3 credits) Transfer Pricing II (3 credits)

Tax Risk Management (3 credits) FATCA & CRS (3 credits)

International Tax Planning (3 credits) Country Tax Systems (3 credits)

U.S. Int’l Tax (3 credits) EU Taxation (3 credits)

VAT/GST/Sales (3 credits) Customs & Excises (3 credits)

Ethics in Decision Making (1 credit required to graduate)

What distinguishes Texas A&M’s International Tax curriculum?

Since the original 1994 curriculum focus on tax risk management and methodology, the curriculum and the program operational structure continue to evolve based on in-depth industry research. “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. “This evolution has been accelerated by trends — primarily globalization, transparency and regulatory reform — and by the OECD (through the project on Base Erosion and Profit Shifting, or BEPS), the United States (through the Foreign Account Tax Compliance Act) and the European Union.”

In 2019, Hanover Research on behalf of Texas A&M undertook an extensive long-form survey, including interviews, of 146 tax executives about the needs and value-added of Texas A&M’s new international tax curriculum. The surveys 2019 tax professionals included: 29% U.S. and 71% foreign resident. Half the participants were tax professionals of AmLaw 100 firms (27%) or of Big 4 accounting (21%). The other half of participants were tax professionals of large multinational tax departments in the following industries: Finance / Banking / Insurance; Consulting; Business / Professional Services; Computers (Hardware, Desktop Software); Telecommunications; Aerospace / Aviation / Automotive; Healthcare / Medical; Manufacturing; Food Service; Internet; Mining; Pharmaceutical / Chemical; Real Estate; and Transportation / Distribution. Four percent of survey participants were executive-level government tax authority staff.

Besides the actual design of the course curriculum, two interesting outcomes from the industry interviews are:

The faculty and graduate degree candidates must be multidisciplinary, including both tax lawyers and non-lawyer tax professionals (e.g. accountants, finance executives, and economists) engaged together in learning teams with practical case studies and projects that are “applicable in a real-world context”.
The curriculum must include the perspectives of tax mitigation and of tax-risk management with exposure to state-of-the-industry data analytics.

In its Tax Insights magazine that is distributed globally to clients, the Big 4 firm EY stated: “Texas A&M University is among the pioneers of change in tax education”.

Texas A&M professor William Byrnes explains: “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.” 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.”

What is the proposed course schedule during an academic year?

Fall 2019 Part A (6 week term) Fall 2019 Part B (6 week term)

International Taxation & Treaties I International Taxation & Treaties II

Spring 2020 Part A (6 week term) Spring 2020 Part B (6 week term)

Transfer Pricing I Transfer Pricing II

Summer 2020 concurrent 6 week term

Tax Risk Management & Data Analytics FATCA & CRS

Fall 2020 Part A Fall 2020 Part B

International Tax Planning Country Tax Systems

International Taxation & Treaties I International Taxation & Treaties II

Spring 2021 Part A Spring 2021 Part B

U.S. Int’l Tax EU Taxation

Transfer Pricing I Transfer Pricing II

Summer 2021 concurrent term

VAT/GST/Sales Customs & Excises

Tax Risk Management FATCA & CRS

When are the semesters?

Fall: August 26 until December 14, 2019

Spring: January 9 until April 30, 2020

Summer: May 18 until July 11, 2020

Who is leading and creating this International Tax curriculum?

The International Tax curriculum has been developed and is led by Professor William Byrnes (Texas A&M University Law). In 1994, Professor William Byrnes founded the first international tax program leveraging online education and in 1998 founded the first online international tax program to be acquiesced by the American Bar Association and the Southern Association of Colleges and Schools. He is recognized globally as an online education pioneer focused on learner outcomes and best practices leveraging state of the art educational technology. William Byrnes is also an international tax authority as LexisNexis’ leading published author of nine international tax treatises and compendium, annually updated, and a 10 volume service published by Wolters Kluwer. His LinkedIn group International Tax Planning Professionals has over 25,000 members and is the largest international tax network on LinkedIn.

If you want to ask questions about the curriculum or how the online courses are as effective as residential ones, reach out to Professor William Byrnes at williambyrnes@law.tamu.edu.

How much time per week does a course require?

Each course unfolds over six weeks, designed to require 15 to 20 hours of input each week. This weekly input includes reviewing materials, listening to podcasts, watching video content, participating in discussion forums, engaging in live class sessions, and working with classmates on team-based learning projects. Working with the colleague groups on real-world case studies is critical to the educational experience. Potential applicants must have available three to five hours per week to spend developing and working with colleagues on group case studies using communications technologies like Zoom video.

What is the title of this graduate degree?

For lawyers, it is a Master of Laws (LL.M.) and for accountants, tax professionals and economists, it is a Master of Jurisprudence (M.J.). The degree is awarded by Texas A&M University via the School of Law. Completion of a curriculum, which is like a ‘major’ for university studies, is also recognized with a frameable certificate issued by the School of Law.

What are the minimum requirements of the application for each degree?

All applicants must have previous domestic tax or accounting professional experience reflected on the CV of work experience.
The Master of Laws (LL.M.) is awarded to successful graduates who hold a law degree from a law school or faculty of law that is accredited by the American Bar Association or if a foreign law degree then accredited by a governmental accreditation body and that allows the graduate eligibility for that country’s practice of law.
The Master of Jurisprudence (M.J.) is awarded to all other successful graduates. Applicants for the Master of Jurisprudence must hold a prior degree from an accredited academic institution in business, accounting, finance, economics, or related business field.

What are the program requirements to graduate?

The Master of Laws candidates must complete at least 24 credits to be eligible to graduate. The Master of Jurisprudence candidates must complete at least 30 credits to be eligible to graduate.

All candidates must complete the Ethics in Decision Making course to be eligible to graduate, which presents networking opportunities with candidates of the Risk management and Wealth Management curricula. Master of Jurisprudence candidates must also complete an Introduction to U.S. Law course which will include networking among all law graduate curricula.

Candidates must complete at least six courses specific to a curriculum in order to be eligible for a degree. Without permission, candidates are allowed to enroll in up to two courses from another curriculum.

How many months to graduate?

Normally, candidates will enroll in two courses during Fall and Spring semester, focusing on one course each term (Fall and Spring have two terms of six weeks each). Candidates may enroll in one or two courses for the Summer semester, which is only one six-week term. Thus, most candidates will reach eligibility to graduate within two years. Candidates have the flexibility as to how many or few courses to enroll each term, subject to university graduate program rules. Candidates may complete the program in one year to as long as four years. Each course in a curriculum is offered once per year.

Are these degrees eligible for the Aggie Ring and membership in the Texas A&M Former Student Network (Texas A&M alumni)?

Yes, all international tax graduates will become a member of the Texas A&M family. Texas A&M is renown for the loyalty and engagement among its former students within the Texas Aggie clubs established throughout the world. Texas A&M has graduated over 500,000 “Aggies” who are eligible to wear the Texas A&M ring to identify each other throughout the world. See https://www.aggienetwork.com/

Will there be on-campus opportunities?

Yes. Graduation, with on-campus activities hosted at the law school, is May 1, 2020. October 24-25, 2019 is a networking conference of the risk, wealth, and international tax graduate students piggybacking on Texas A&M’s Financial Planning conference: Thursday night networking banquet and Friday conference activities. See https://financialplanning.tamu.edu/events/conference/ Saturday, October 26, 2019 is a Texas A&M football game at the on-campus Kyle stadium that two years ago underwent a $485 million renovation. The graduate program office has inquired about a block of tickets in the same section for students interested in purchasing a ticket and staying over for the game. Texas A&M football games are sold out with a capacity of over 100,000 seats and thus, Friday night hotel reservations in College Station should be made ASAP. Other opportunities will be announced during the program year.

What is Texas A&M University?

Texas A&M, the second largest U.S. public university, is one of the only 60 accredited U.S. members of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity), and one of the only 17 U.S. universities that hold a triple U.S. federal designation (Land, Sea, and Space). As one of the world’s leading research institutions, Texas A&M is at the forefront in making significant contributions to scholarship and discovery: research conducted in fiscal year 2017 at Texas A&M represented an annual expenditure of more than $900 million. The Texas A&M University system’s operating budget exceeds $4.6 billion and Texas A&M’s combined endowments are 7^th largest among universities in the world.

Texas A&M is ranked 1st among national public universities for a superior education at an affordable cost (Fiske, 2018); ranked 1st of Texas public universities for best value (Money, 2018); and ranked 1st in nation for most graduates serving as CEOs of Fortune 500 companies (Fortune, 2019). During the program, a candidate learns Texas A&M’s traditions and six core values that are grounded in its history as one of the six U.S. senior military colleges: Loyalty, Integrity, Excellence, Leadership, Respect, and Selfless Service.

Which government and professional organizations accredit Texas A&M University?

For the complete list, see https://www.tamu.edu/statements/accreditation.html

What are the other curricula’s courses that are available to international tax candidates?

Risk Curriculum Wealth Curriculum

Enterprise Risk & Data Analytics Taxation of Business Associations

Information Security Management Systems Securities Regulations

Counter-Terrorism Risk Management Financial & Portfolio Management

Cybersecurity Income Tax Financial Planning

Anti-Money Laundering & Bank Principles of Wealth Management

Principles of Risk Management Estate Planning, Insurance, and Annuities

Foreign Corrupt Practices Act Advanced Wealth Management

Fiduciary & Risk Management Non-Profit & Fiduciary Administration

White-Collar Crime Retirement & Benefits

Legal Risk Management Insurance Law (& Alternative Risk Transfer)

Financial Innovations

What is the tuition? Normal Texas A&M University tuition and available financial aid applies after the Fall term and is available at https://tuition.tamu.edu/ Texas A&M University is a public university of the state of Texas and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

Posted in Courses, Uncategorized | Tagged: graduate degree, international tax, LL.M. | 2 Comments »

Texas A&M Law Solicits Bids for ONLINE GRADUATE PROGRAMS Service Providers, deadline August 2

Posted by William Byrnes on July 25, 2019

Status	Details
Open	TEXAS A&M UNIVERSITY ONLINE GRADUATE LAW PROGRAMS The Texas A&M University School of Law seeks proposals from qualified vendors for the creation of On-Line Graduate Programs per the Request for Proposal herein. Close 8/2/2019 2:00 PM CDT Type RFP on AggieBid Vendor Portal Number TAMU-RFP-1418 Contact Clyde Oberg CO@TAMU.EDU Details View as PDF

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Texas A&M Hiring Senior Associate Vice President positions

Posted by William Byrnes on July 10, 2019

The Division of Research at Texas A&M University is seeking applications for one or more positions at the Senior Associate Vice President (AVP) level.

The retirement of the Executive Associate Vice President for Research (EAVP) provides an opportunity to realign and expand the portfolios overseen by the EAVP and the two current Senior AVPs. Senior AVPs report directly to the Vice President for Research and each has a portfolio of administrative, compliance, and research advancement responsibilities. Responsibilities to be covered by the appointment of new Senior AVP(s) include:

Oversight of the Comparative Medicine Program (CMP), as well as supervision of the Attending Veterinarian. The CMP is the centrally administered support service for research and teaching programs at Texas A&M and provides high quality animal care consistent with the standards established by the Guide for the Care and Use of Laboratory Animals and all pertinent local, state, and federal laws. The Attending Veterinarian is responsible for the health and well-being of all animals used for research, teaching, and testing at Texas A&M.
Leadership of The Texas A&M University System’s expanding emphasis on interdisciplinary life sciences, health, biomedical activities, and multidisciplinary research initiatives for the Division.
Oversight of the membership of compliance committees (IACUC, IRB, IBC).
Oversight of facilities-related issues for the Division; and developing campus-wide policies for research space.
Oversight of the development and recognition of University researchers at all levels.
Development of external partnerships.
Serving as the University’s Research Integrity Officer (RIO).

Ideal candidates will communicate effectively and work well with all segments of the University and its external constituencies. In addition, these positions require a demonstrated commitment to diversity, equity, and inclusion. Experience implementing and designing processes and projects is ideal. Familiarity with faculty-associated rules, guidelines, and administrative procedures is preferred.

Applications should include a cover letter with a clear statement of why the applicant believes they are qualified for the position, a description of key relevant experience, a vision statement for the position and its role in the Division of Research, a vita, and names and contact information of three references. For full consideration, applications should be received no later than July 22, 2019. These positions will remain open until filled. Applications should be submitted through email to Dr. Mark Barteau.

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TaxFacts Intelligence Weekly of June 27

Posted by William Byrnes on June 28, 2019

2019’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

William H. Byrnes, J.D., LL.M. and Robert Bloink, J.D., LL.M.

Jun 27, 2019

IRS Clarifies Employer Withholding Obligations for Retirement Account Distributions to Non-U.S. Destinations

The IRS has released long-awaited proposed regulations clarifying the income tax withholding obligations when distributions from employer-sponsored plans (including pension, annuity, profit sharing, stock bonus or deferred compensation plans) are made to destinations outside the U.S. While U.S. payees can elect to forgo withholding, non-U.S. payees cannot. In general, the participant cannot elect to forgo withholding with respect to these distributions even if the participant provides a U.S. residential address, but directs funds to be delivered to a destination outside the U.S. If the participant provides a non-U.S. residential address, withholding obligations cannot be waived even if the participant directs that the funds be distributed to a U.S. financial institution. When the participant provides no residential address, withholding obligations cannot be waived. For more information on retirement plans and nonresident taxpayers, visit Tax Facts Online. Read More

Administration Releases Final Regs Expanding HRA Use

The regulations expanding the use of HRAs to purchase individual health insurance in the marketplace have now been finalized. The regulations largely follow the proposed regulations, but differ in that they place limits on the ability of an employer to vary HRA contributions by age. For more information on the new rule, visit Tax Facts Online. Read More

Buy-Sell Agreement Did Not Create Second Class of Stock for S Corp Qualification Purposes

The IRS recently ruled that, for purposes of the “one class of stock rule”, it would disregard a buy-sell agreement that provided if the S corporation shareholder-employee was terminated for cause, the company could repurchase his or her shares at the lesser of (1) fair market value or (2) the price paid for the shares (a forfeiture price, which could have been zero). To qualify as an S corporation, the entity must only have one class of stock, a determination that is primarily based on whether the shares confer equal rights as to distribution and liquidation proceeds. The Treasury regulations, however, provide that buy-sell and redemption type agreements will be disregarded for purposes of the one class of stock rule unless its principal purpose is to avoid the one-class rule and the agreement establishes a purchase price significantly above or below the fair market value of the stock when the parties entered the agreement. Bona fide buy-sell agreements providing for redemption or repurchase of S corporation shares in the event of death, divorce, disability or termination of employment are always disregarded, regardless of price. S corporations should review their buy-sell agreements to ensure that they satisfy guidance as to the one-class rule. For more information on the one class of stock rule, visit Tax Facts Online. Read More

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TaxFacts Intelligence Weekly June 6 – 12 by William Byrnes & Robert Bloink

Posted by William Byrnes on June 6, 2019

2019’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

IRS Releases 2020 HSA Inflation-Adjusted Amounts

The IRS has released Revenue Procedure 2019-25, which provides the 2020 inflation adjusted amounts for taxpayers who contribute to health savings accounts (HSAs). For 2020, the annual contribution limit for taxpayers with self-only coverage under an HDHP is $3,550 ($7,100 for family coverage). Relatedly, a high deductible health plan (HDHP) for 2020 is one with an annual deductible of not less than $1,400 for self-only coverage ($2,800 for family coverage), with annual out-of-pocket expenses for self-only coverage that do not exceed $6,900 ($13,800 for family coverage). For more information on the contribution limits that apply to HSAs, visit Tax Facts Online. Read More

PBGC Releases Final Regulations on Valuation and Notice Requirements for Insolvent Multiemployer Plans

Under the final regulations, insolvent plans that are receiving financial assistance or terminated via amendment, but expected to become insolvent, must only perform actuarial valuations once every five years if the plan provides nonforfeitable benefits of $50 million or less. Under prior law, valuations were required every three years and the nonforfeitable benefit threshold was $25 million. In the alternative, the plan may, within 180 days, submit their current SPD, most recent actuarial report and certain other information to allow the PBGC to complete the valuation. Additionally, plan sponsors of insolvent or terminated plans now must file information about their withdrawal liability payments and withdrawal of employers who have not yet been assessed withdrawal liability with the PBGC within 180 days of the earlier of the end of the plan year in which the plan terminates or becomes insolvent. This filing is due annually. For more information on multiemployer pension plans, visit Tax Facts Online. Read More

IRS Expands Determination Letter Program

The IRS has released guidance expanding the determination letter program for individually designed cash balance plans and certain plans that have merged. Revenue Procedure 2019-20 now allows both hybrid plans and merged plans to obtain a favorable determination letter. Hybrid plans can submit determination letter applications during the 12-month period beginning September 1, 2019 and ending August 31, 2020. During this period, the IRS will not penalize these plans for plan document failures related to the final hybrid plan regulations and will cap the penalty amounts for certain other good faith amendments. Merged plans that survive after two plans have merged into a single individually designed plan. To be eligible, the plan merger must occur no later than the end of the plan year after the corporate merger transaction took place and the application for the determination letter program must be submitted after the date of the plan merger, but no later than the end of the plan year after the plan merger. For more information on plan qualification requirements, visit Tax Facts Online. Read More

LL.M. or M.Jur. Curriculum in Wealth Management at Texas A&M Law

Our Wealth Management program gives you the knowledge and skills you need to advise wealthy clients and help manage their assets. Because wealth management involves professionals with various backgrounds, we’ve designed the program with both lawyers and non-lawyers in mind. This program is offered completely online, which gives professionals the flexibility they need to learn and to meet the increasing need of being versed in the legal aspects of financial transactions and in the legal aspects of financial investment and portfolio management. Contact us to learn more

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TaxFacts Intelligence Weekly

Posted by William Byrnes on April 10, 2019

IRS Explains Impact of SALT Cap on Taxpayers Receiving State and Local Tax Refunds

The IRS has provided guidance explaining the relevance of the “tax benefit rule” for taxpayers who receive a refund of state and local taxes in years when the post-reform limit on deducting state and local taxes (the “SALT cap”) is in effect. For more information on the impact of the SALT cap, visit Tax Facts Online. Read More

Federal Court Invalidates DOL Rules Expanding Association Health Plans

A Washington, D.C. federal court struck down the final regulations released by the DOL in effort to expand the availability of association health plans for various smaller employers and owner-employees, which would have given these groups access to less expensive plans that offered fewer benefits and did not satisfy ACA requirements. The fate of the actual expansion of association health plans remains unclear, however, as the DOL has indicated it will explore all available options and continue to work toward expanding access. For more information on the tax rules for self-employed business owners’ health coverage, visit Tax Facts Online. Read More

Employer Stock & 401(k) Plans: The Bad, the Ugly…and the Potentially Good?

In recent years, many employers have begun shying away from offering employer stock to employees as 401(k) investments. Fiduciary liability concerns and lack of diversification, especially amid dramatic decreases in value in some cases, have made the strategy risky for some companies. However, this does not mean that any client who currently holds employer stock in a 401(k) should immediately liquidate all employer stock. Clients should first be advised that the potential to take advantage of a net unrealized appreciation (NUA) strategy could provide a more valuable way to sell off employer stock. For more information on the NUA strategy, visit Tax Facts Online. Read More

Tax Facts Team

Molly Miller Publisher	William H. Byrnes, J.D., LL.M Tax Facts Author

Jason Gilbert, J.D. Senior Editor	Robert Bloink, J.D., LL.M. Tax Facts Author

Connie L. Jump Senior Manager, Editorial Operations	Alexis Long, J.D. Senior Contributor

Patti O’Leary Senior Editorial Assistant	Danielle Birdsail Digital Marketing Manager

Emily Brunner Editorial Assistant

For questions, contact Customer Service at 1-800-543-0874.

2019’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

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Request for Applications: Associate Dean of Faculties, Texas A&M University

Posted by William Byrnes on March 26, 2019

Dear Faculty,

The Office of the Dean of Faculties seeks applications for the position of Associate Dean of Faculties. This is an internal search with an expected completion by the end of the Spring semester.

The Associate Dean of Faculties reports to the Dean of Faculties and Associate Provost and plays a major role in the proactive planning for the Office of the Dean of Faculties, representing faculty needs and issues. The Associate Dean of Faculties works with multiple university constituencies to facilitate an environment in which each faculty member can achieve his or her maximum potential. The Associate Dean of Faculties oversees and/or collaborates in administrative aspects of key faculty-related processes such as recruiting, hiring, evaluation, tenure and promotion, and grievances. This position is part-time (50-70% time) and it is limited to senior tenured faculty members. The Associate Dean of Faculties is expected to maintain a faculty appointment, with associated responsibilities in teaching and/or research.

The ideal candidate will have the ability to communicate effectively and evaluate all requests objectively. The individual must also be able to work well with all segments of the University and external constituencies and have demonstrated a commitment to diversity, equity and inclusion. The applicant must possess the ability to verbalize the office goals to both large and small groups. Experience implementing and designing processes and projects is ideal. Familiarity with faculty associated rules, guidelines, and administrative procedures is helpful. Further, acumen and expertise with database management and data presentation are important.

The position description can be found at dof.tamu.edu/Associate-DOF.

Applications should include a cover letter with a clear statement of why the applicant believes he or she is qualified for the position, a description of key relevant experience, and a vision statement for the position and its role in the Office of the Dean of Faculties; a vitae; and names of three references. For full consideration, applications should be received no later than COB Wednesday April 3, 2019. The position will remain open until filled. Applications should be submitted through email todof@tamu.edu.

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2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

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Byrnes and Bloink analyze the SBA loans, Tax Credit, and Retirement Planning Impact for Small Business because of Covid-19 economic stimulus (Families First, CARES Acts, IRS Notices) on Thursday, April 16th (Register now webinar)

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

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2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

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2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

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2019’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

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2019’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

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2019’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

LL.M. or M.Jur. Curriculum in Wealth Management at Texas A&M Law

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2019’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

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