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Happy Thanksgiving From the Wealth and Risk Management Blog

Posted by fhalestewart on November 22, 2017


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

We’ll return next week.

 

 

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Today’s Tax Policy Headlines

Posted by fhalestewart on November 20, 2017


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

 

The plan is unpopular (WaPo)

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

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

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

 

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

Posted by fhalestewart on November 14, 2017


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

 

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

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

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

[1] 26 U.S.C. §61

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

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

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

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

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

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New Limits For Qualified Plans

Posted by fhalestewart on November 12, 2017


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

 

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

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Today’s Tax Policy Headlines

Posted by fhalestewart on November 9, 2017


Senate bill differs from House’s (NYT)

Tax bill math is getting complicated (WaPo)

House leaders rounding up votes (Politico)

Support for tax plan still positive (Politico)

Election results potentially change the tax plan (Politico)

Multinational companies lobby against 20% excise tax (BB)

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

 

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Non-Qualified Deferred Compensation: Some Additional Definitions

Posted by fhalestewart on November 6, 2017


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

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

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

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

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

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

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

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

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

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

 

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

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

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

[4] Treas. Reg. §1.409(A)(3)(i):

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

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ICIJ Begins to Release the “Paradise Papers”

Posted by fhalestewart on November 5, 2017


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

From today’s release:

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

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

The files were obtained by the German newspaper Süddeutsche Zeitung.

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

 

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

 

 

 

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Today’s Tax Policy Headlines

Posted by fhalestewart on November 3, 2017


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

 

Potential impact of the proposed changes (NYT)

Mortgage deduction change could hurt the housing industry (NYT)

Plan delivers a permanent corporate tax cut (NYT)

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

The hidden 465 tax bracket (Politico)

Who pays more under the GOP plan? (Politico)

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The Lastest Tax Policy News Headlines

Posted by fhalestewart on November 2, 2017


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

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

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

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

Republicans release tax plan (NYTimes)

A list of the plans major changes (BB)

 

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Non-Qualified Deferred Compensation: Timing and Constructive Receipt Issues

Posted by fhalestewart on October 30, 2017


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

 

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

[7] Treas. Reg. §1.446-1(c)(i)

[8] Treas. Reg. §1.446-1(c)(ii)

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The Destination-based Approach to Business Taxation, Explained

Posted by fhalestewart on October 30, 2017


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

 

From the article:

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

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

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IRS Reading Room Releases of Interest

Posted by fhalestewart on October 29, 2017


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

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

Electing out of GST Exemptions.

Denial of tax-exempt status

Denial of tax-exempt status

Denial of tax-exempt status

 

 

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The Latest Tax Policy Headlines

Posted by fhalestewart on October 28, 2017


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

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

What executives are saying about the tax bill (BB)

One big obstacle to tax reform (BB)

Lobbyists are swarming capital hill (BB)

Major divisions still exist for the tax bill (WaPo)

Tax bill shrouded in mystery (Politico)

 

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Today’s Tax Policy Headlines

Posted by fhalestewart on October 27, 2017


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

 

House narrowly passes budget (WaPo)

House passes budget (NYT)

Republicans from high tax states send party message (WaPo)

Major divisions remain on tax legislation (WaPo)

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

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401(k) Contribution Cuts are Still on the Table

Posted by fhalestewart on October 25, 2017


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

 

From the Washington Post:

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

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

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

…..

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

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

 

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Today’s Stories on Proposed Tax Cuts

Posted by fhalestewart on October 24, 2017


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

 

Here’s a list of articles from this mornings papers

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

Trump is making tax-cutting difficult (NYT)

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

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

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

Draft is coming in days (Bloomberg)

Conservative leaders open to keeping top rate (Bloomberg)

 

 

 

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Are FLP Discounts Back?

Posted by fhalestewart on October 23, 2017


From Wealthmanagement.com

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

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

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

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

  

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Conservation Easements Are Having a Difficult Time Qualifying

Posted by bonddad on October 22, 2017


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

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

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

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

Posted by William Byrnes on September 18, 2017


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

 

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my nine Lexis tax titles are now available

Posted by William Byrnes on August 22, 2017


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

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

Posted by William Byrnes on February 16, 2017


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

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

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

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

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

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

Posted by William Byrnes on September 27, 2016


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

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

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

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

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

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

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

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

Posted by William Byrnes on September 26, 2016


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

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

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

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

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

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

 

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

Posted by William Byrnes on September 23, 2016


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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

Posted by William Byrnes on September 22, 2016


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

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

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

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

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

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

tamu-banner-300x50-v2

 

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

Posted by William Byrnes on September 14, 2016


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted by William Byrnes on August 9, 2016


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

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

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

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

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

Posted by William Byrnes on August 2, 2016


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

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

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

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

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

Posted by William Byrnes on July 25, 2016


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

The top five ranked public universties in the USA are:

#1 University of Michigan

#2 University of California, Berkeley

# 3 University of Virginia

#4 Texas A&M University

#5 University of California, San Diego

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

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

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

Posted by William Byrnes on July 12, 2016


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

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

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

Number of Pages in PDF File: 93

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

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

Posted by William Byrnes on July 11, 2016


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

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

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

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headlines from Financial Law Prof Blog – July 8

Posted by William Byrnes on July 8, 2016


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

INtelligence wheel all agencies

Financial Law Prof Blog

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

Canada Updates Money Laundering and Terrorist Financing Act, 2016

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

OECD releases revised guidance on profit splits

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

Protecting Older Americans from Financial Exploitation

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

The Economic Impact of U.S. Innovation

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

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

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Distance Learning and Its Implications for Legal Education

Posted by William Byrnes on June 29, 2016


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

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

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Does the tax curriculum still make the grade?

Posted by William Byrnes on June 14, 2016


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

By Giselle Weiss

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

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

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

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

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

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

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

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

read EY’s groundbreaking report

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

Posted by William Byrnes on May 10, 2016


FATCA & CRS Training. Advice. Consultancy.

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

This is how it breaks down by jurisdiction:

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

View original post 117 more words

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Panama Papers Leading to 30 Country Interlinked Beneficial Ownership Registry for Company and Trusts

Posted by William Byrnes on April 25, 2016


Over 20 countries have joined the UK-led pilot to automatically share ownership information for companies. As such their tax and law enforcement agencies will now exchange data on company beneficial ownership registers and new registers of trusts enabling more effective investigation of financial wrongdoing and tax-dodging.  [See free SSRN download of Lexisnexis® Guide to FATCA Compliance 2016]

Statement by: UK, France, Germany, Italy, Spain, Netherlands, Romania, Sweden, Finland, Croatia, Belgium, Slovakia, Latvia, Lithuania, Ireland, Slovenia, Denmark, Malta, Cyprus, EU CommissionGibraltar, Isle of Man, Montserrat, Bulgaria, Estonia, Portugal, Greece, Czech Republic, Luxembourg, Austria and Hungary

As recent events have shown we need to take firm collective action on increasing beneficial ownership transparency, building on our actions to date. Criminals continue to find ways to exploit the cracks in the current system, setting up complex structures in various and often multiple locations to hide their activities, be it money laundering, tax evasion or illicit finance. As with tax evasion, this requires a global response.

On beneficial ownership, it is essential to apply enhanced standards of transparency at European and international level. In this spirit, we have committed to establishing as soon as possible registers or other mechanisms requiring that beneficial owners of companies, trusts, foundations, shell companies and other relevant entities and arrangements are identified and available for tax administration and law enforcement authorities. We call on all other Member States, countries and jurisdictions to do so.

We also commit to the new pilot initiative for automatic exchange of information on beneficial ownership launched by the UK, France, Germany, Italy and Spain.  This will give our tax and other relevant authorities full knowledge on vast amounts of information and help them track the complex offshore trails used by criminals. The intention is that this will mirror the ground-breaking steps we have taken on tax evasion under the CRS. In this regard we also call on all jurisdictions to implement the CRS to the agreed timetable and for those not yet committed to do so rapidly.

Automatic exchange of beneficial ownership information will, as with the CRS, be subject to the usual data and confidentiality protections and to any appropriate exceptions. We will look to ensure that this information is in a fully searchable format and that it also contains information on entities and arrangements closed during the relevant year. To be effective this should be a global system and we call for the rapid establishment of a global standard.

We also call for the development of a system of interlinked registries containing full beneficial ownership information and for common international standards for these registries and their interlinking. We intend to start this project as soon as is practicable. In our view, this new initiative will take a significant step forward in improving the transparency of beneficial ownership information and in removing the veil of secrecy under which criminals operate.

[See free SSRN download of Lexisnexis® Guide to FATCA Compliance 2016]

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The Top 5 Tax Paper Downloads

Posted by William Byrnes on April 11, 2016


See Paul Caron’s TaxProf Blog for the top 5 downloaded tax papers

http://taxprof.typepad.com/taxprof_blog/2016/04/the-top-5.html

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EY Report: State of the Tax Industry and Tax Education

Posted by William Byrnes on March 21, 2016


“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.  Read Full Report here E&Y tax industry report

E&Y reports that “According to a 2015 report by the Institute of Management Accountants (IMA), which launched a Competency Crisis website to deal with the talent gap in 2013, 90% of North American organizations cannot find the entry-level management accounting and finance talent they need.”

“The educational curriculum isn’t keeping up with the needs of business, and employers expect more advanced skills at entry level, according to the report.”

E&Y finds: “Texas A&M University is among the pioneers of change in tax education. …the State of Texas not only established a new law school at the university but also gave it carte blanche to create a new education model.”

 

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2016 Lexis Guide to FATCA Compliance SSRN download

Posted by William Byrnes on March 8, 2016


http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2742383

The LexisNexis® Guide to FATCA Compliance provides a framework for meaningful interactions among enterprise stakeholders, and between the FATCA Compliance Officer and theFATCA_rollFATCA advisors/vendors. Analysis of the complicated regulations, recognition of overlapping complex regime and intergovernmental agreement requirements (e.g. FATCA, Qualified Intermediary, source withholding, national and international information exchange, European Union tax information exchange, information confidentiality laws, money laundering prevention, risk management, and the application of an IGA) is balanced with substantive analysis and descriptive examples. The contributors hail from several countries and an offshore financial center and include attorneys, accountants, information technology engineers, and risk managers from large, medium and small firms and from large financial institutions. Thus, the challenges of the FATCA Compliance Officer are approached from several perspectives and contextual backgrounds.

Several new contributing authors joined the FATCA Expert Contributor team this fourth edition. This fourth edition has been expanded by 19 new chapters and from a total of 54 to 73 chapters, with over 500 new pages of regulatory and compliance analysis based upon industry feedback of internal challenges with systems implementation. The previous 54 chapters have been substantially updated and expanded, including many more practical examples to assist a compliance officer contextualize the regulations, IGA provisions, and national rules enacted pursuant to an IGA. The new chapters include by example an in-depth analysis of designing a FATCA internal policy that is compliant with the initial two year soft enforcement initiative, designing an equivalent form to the W-8, reporting accounts, reporting payments, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, insights as to the application of FATCA and the IGAs within new BRIC and European country chapters, and a project management schedule for the compliance officer.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2742383

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New Generation of Tax Graduates – An Innovative Evolution

Posted by William Byrnes on March 7, 2016


Haven’t sat down with Kat in couple years (she’s the nation’s leading tax recruiter, all the big companies and Big 4 hiring partners know her), but she wrote this entertaining and highlyTax-connections-logodescriptive story yesterday to her 100,000 tax folks worldwide that leverage her tax recruitment site.

“… What I shall never forget was the experience that summer day in 2007 in an old dilapidated building. There I was sitting in a wobbly old chair to the right side of a scholarly, forward thinking tax law Professor sitting in front of a computer that looked like the very first “Lisa” computer that Steve Jobs built. Although it was probably not that one, it sure looked like it! The old computer had loose wires hooked up to another old computer with a video fixture added to the mix of wires and computer equipment. I sat there next to Professor Byrnes and experienced my very first distance course with students from Asia, South Africa, Brazil, Europe, U.S. and some other countries. It was fascinating to observe him teaching his tax students online from multiple countries. The experience in this old building with old computers hooked together with loose wires in what appeared to look like an old scientist experiment had me thinking privately… ”

https://www.taxconnections.com/taxblog/new-generation-of-tax-graduates-find-tax-jobs-an-innovative-evolution-by-taxconnections/

From when I started in 1994 until recently, technology and education had been totally disconnected, so much so that I had to build my own computers and servers from parts I scavenged from the computer lab discarded machines, like old Gateways and IBMs, because faculty administration would not budget for technology build out for a professor. Anyway – blast from the past that I thought may be interesting to anyone in tax education.

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Deciding Whether to Itemize Deductions or Use the Standard Deduction?

Posted by William Byrnes on February 17, 2016


Most people claim the standard deduction when they file their federal tax return, but you may be able to lower your tax bill if you itemize. You can find out which way saves you the most by figuring your taxes both ways. The IRS offers these six tips to help you choose:

 

Figure Your Itemized Deductions. Add up deductible expenses you paid during the year. These may include expenses such as:

  • Home mortgage interest
  • State and local income taxes or sales taxes (but not both)
  • Real estate and personal property taxes
  • Gifts to charities
  • Casualty or theft losses
  • Unreimbursed medical expenses
  • Unreimbursed employee business expenses

Special rules and limits apply to each type of itemized expense which may lead to less of a tax deduction than the actual expense.

Know Your Standard Deduction. If you don’t itemize, your basic standard deduction for 2015 depends on your filing status:

  • Single $6,300
  • Married Filing Jointly $12,600

If you’re 65 or older or blind, your standard deduction is higher than these amounts. If someone can claim you as a dependent, your deduction may be limited.

IRS YouTube Videos: Standard vs. Itemized DeductionsEnglish

Tax Facts Online is the premier practical, useful, actionable, and affordable reference on the taxation of insurance, employee benefits, investments, small tax-facts-online
business and individuals. This advisory service provides expert guidance on hundreds of the most frequently asked client questions concerning their most important tax issues.

Many ongoing, significant developments have affected tax law and, consequently, tax advice and strategies. Tax Facts Online is the only source that is reviewed daily and updated regularly by our expert editors.

In addition to completely current content not available anywhere else, Tax Facts Online gives you exclusive access to:

  • Robust search capabilities that enable you to locate detailed answers—fast
  • Time-saving calculators, tables and graphs
  • A copy/paste capability that speeds the production of presentations and enables you to easily incorporate Tax Facts content into your workPlus, the recent addition of current news, case studies, commentary and competitive intelligence serves our customers well as the only tax reference that a non-professional tax expert will ever need.

Tax Facts Online Core Content

Tax Facts on Insurance provides definitive answers to your clients’ most important tax-related insurance questions, while offering insightful analysis and illustrative examples. Numerous planning points direct you to the most recent and important insurance solutions.

Tax Facts on Employee Benefits provides current in-depth coverage of important client-related employee benefits questions. Employee benefits affect most everyone2015_tf_triple_combo_cover-m, and your clients must know how to deal with often complex issues and problems. Tax Facts on Employee Benefits provides the answers in a direct, concise, and practical manner.

Tax Facts on Investments provides clear, detailed answers to your difficult tax questions concerning investments. You must know what investments best suit your clients from a tax standpoint. You will discover questions that directly provide insightful answers, comparison of investment choices, as well as how investments have changed in recent years.

Tax Facts on Individuals & Small Business focuses exclusively on what individuals and small buisnesses need to know to maximize opportunities under today’s often complex tax rules.  It is the essential tax reference for financial advisors, & planners; insurance professionals; CPAs; attorneys; and other practitioners advising small businesses and individuals.

  • Charles Calello Enterprise/Group Inquiries 201-526-1259 Email Me
  • Customer Service 800-543-0874 8am – 6pm ET Monday – Thursday 8am – 5pm ET Friday Email Customer Service

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Tax Facts about Taxable and Non-Taxable Income

Posted by William Byrnes on February 16, 2016


All income is taxable unless a law specifically says it isn’t. Here are some basic rules you should know to help you file the 2015 – 1040 tax return due April 15, 2016.

  • Taxable income.  Taxable income includes money you earn, like wages and tips. It also includes bartering, an exchange of property or services. The fair market value of property or services received is normally taxable.

Some types of income are not taxable except under certain conditions, including:

  • Life insurance.  Proceeds paid to you upon the death of an insured person are usually not taxable. However, if you redeem a life insurance policy for cash, any amount you get that is more than the cost of the policy is taxable.
  • Qualified scholarship.  In most cases, income from a scholarship is not taxable. This includes amounts used for certain costs, such as tuition and required books. On the other hand, amounts you use for room and board are taxable.
  • Other income tax refunds.  State or local income tax refunds may be taxable. You should receive a Form 1099-G from the agency that paid you. They may have sent the form by mail or electronically. Contact them to find out how to get the form. Report any taxable refund you got even if you did not receive Form 1099-G.

Here are some items that are usually not taxable:

  • Gifts and inheritances
  • Child support payments
  • Welfare benefits
  • Damage awards for physical injury or sickness
  • Cash rebates from a dealer or manufacturer for an item you buy
  • Reimbursements for qualified adoption expenses

Tax Facts Online is the premier practical, useful, actionable, and affordable reference on the taxation of insurance, employee benefits, investments, small tax-facts-online
business and individuals. This advisory service provides expert guidance on hundreds of the most frequently asked client questions concerning their most important tax issues.

Many ongoing, significant developments have affected tax law and, consequently, tax advice and strategies. Tax Facts Online is the only source that is reviewed daily and updated regularly by our expert editors.

In addition to completely current content not available anywhere else, Tax Facts Online gives you exclusive access to:

  • Robust search capabilities that enable you to locate detailed answers—fast
  • Time-saving calculators, tables and graphs
  • A copy/paste capability that speeds the production of presentations and enables you to easily incorporate Tax Facts content into your workPlus, the recent addition of current news, case studies, commentary and competitive intelligence serves our customers well as the only tax reference that a non-professional tax expert will ever need.

Tax Facts Online Core Content

Tax Facts on Insurance provides definitive answers to your clients’ most important tax-related insurance questions, while offering insightful analysis and illustrative examples. Numerous planning points direct you to the most recent and important insurance solutions.

Tax Facts on Employee Benefits provides current in-depth coverage of important client-related employee benefits questions. Employee benefits affect most everyone2015_tf_triple_combo_cover-m, and your clients must know how to deal with often complex issues and problems. Tax Facts on Employee Benefits provides the answers in a direct, concise, and practical manner.

Tax Facts on Investments provides clear, detailed answers to your difficult tax questions concerning investments. You must know what investments best suit your clients from a tax standpoint. You will discover questions that directly provide insightful answers, comparison of investment choices, as well as how investments have changed in recent years.

Tax Facts on Individuals & Small Business focuses exclusively on what individuals and small buisnesses need to know to maximize opportunities under today’s often complex tax rules.  It is the essential tax reference for financial advisors, & planners; insurance professionals; CPAs; attorneys; and other practitioners advising small businesses and individuals.

  • Charles Calello Enterprise/Group Inquiries 201-526-1259 Email Me
  • Customer Service 800-543-0874 8am – 6pm ET Monday – Thursday 8am – 5pm ET Friday Email Customer Service

Posted in Taxation, Uncategorized | Tagged: , , | 2 Comments »

Can Employers Obtain Tax Advantages Complying with Obama Care?

Posted by William Byrnes on February 15, 2016


It has been several years since President Obama pushed the Patient Protection and Affordable Care Act of 2010 (the “ACA”), which is a health care overhaul aimed at providing millions of American with health insurance, through Congress. Read the article here.

According to the White House, the goal of the ACA is to improve health security by: (1) creating comprehensive health insurance reform that provides more ways to hold insurance companies accountable, (2) lowering health care costs, (3) guaranteeing more health care options, and (4) enhancing the overall quality of the American health care system.

As many American, corporations and small businesses are aware, the gateway to an improved healthcare system commenced October 1, 2013 with the implementation of the exchange system. However, some may not be aware of the potential tax benefits awaiting employers. This highlight will specifically address the tax incentives that are available to both large and small businesses.

Read the Mertens Highlight here.

Posted in Tax Policy, Uncategorized | Leave a Comment »

OECD Common Reporting Self Certification Tax Forms Now Available

Posted by William Byrnes on February 10, 2016


hat tip: Prof. Haydon Perryman: OECD Self-certification forms

The Business and Industry Advisory Committee to the OECD (BIAC) has drafted the following self-certification forms –  

Financial institutions should consult their advisers to ensure their CRS-related operations, including the self-certification forms collected from accountholders, comply with all applicable national laws. 

Guide to FATCA Compliance (New 2016 Edition includes) over 1,500 pages of analysis of the FATCA and CRS compliance challenges,  73 chapters by FATCA and CRS contributingOECDexperts from over 30 countries.  Besides in-depth, practical analysis, the 2016 edition includes examples, charts, time lines, links to source documents, and compliance analysis pursuant to the IGA and local regulations for many U.S. trading partners and financial centers.   The Lexis Guide to FATCA Compliance, designed from interviews with over 100 financial institutions and professional firms, is a primary reference source for financial institutions and service providers, advisors and government departments.  The 19 newest chapters include by example an in-depth analysis of designing a FATCA internal policy that is compliant with the initial two-year soft enforcement initiative, designing an equivalent form to the W-8, reporting accounts, reporting payments, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, insights as to the application of FATCA, CRS, and the IGAs within BRIC, SEA and European country chapters.

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New Tax Strategy Articles

Posted by William Byrnes on January 26, 2016


Exploring the Extent of the Like-Kind Nonrecognition Treatment (and its Potential Demise) | Mertens – Law of Federal Income Tax – Developments & Highlights

May a Proposed Expansion of Master Limited Partnerships’ (MLP) Tax Benefits for “Renewable” Energy Lead to America’s Energy Independence?| Mertens – Law of Federal Income Tax – Developments & Highlights

Tax Considerations of Foreign Individual Investors in U.S. Real Estate Investment |
Mertens – Law of Federal Income Tax – Developments & Highlights

Has the Individual Retirement Account Lost its Luster? Recent Scrutiny of Rollovers and Non-Spousal Inheritance Rights May Dull the Ira for Retirement and Estate Planning | Mertens – Law of Federal Income Tax – Developments & Highlights

Can Employers Obtain Tax Advantages Complying with the Affordable Care Act? |
Mertens – Law of Federal Income Taxation – Development & Highlights

Posted in Uncategorized | Leave a Comment »

Texas A&M Law Seeks to Recruit 2 Additional Law Librarians

Posted by William Byrnes on January 22, 2016


Texas A&M University School of Law seeks to expand our team of law library faculty by recruiting two dynamic and innovative law librarians who can successfully advance library TAMU-Law-lockup-stack-SQUAREinitiatives in one of two specialties.  Faculty rank and salary are commensurate with qualifications and experience; each position may be hired as either long-term contract or tenure-track.  Excellent benefits include a health plan and paid life insurance; several retirement plans including TIAA-CREF; paid holidays and vacation; no state or local income tax. Funding is available for professional travel and development activities.

Texas A&M University, founded in 1876, is one of only 17 triple federally designations “Land, Sea, and Space grant” research universities, and is one of only 62 US and Canadian lead research universities of the Association of American Universities.  Texas A&M University is the sixth largest university in the nation.  The signature Aggie Spirit captures and embodies the university’s traditions and core values: Excellence, Integrity, Leadership, Loyalty, Respect, and Selfless Service.  The university has an enrollment of more than 55,000 students and 2,800 instructional faculty, and over 6,000 foreign students and scholars.  Based on Vision 2020, Texas A&M’s goal is to be ranked among the top 10 public universities.

International Law Reference: Provides expertise in international law research and augments the Public Services Department’s ability to provide increased research and reference services to faculty and students. This position also aids collection development by identifying appropriate international materials to acquire in both paper and electronic formats.

Electronic Services: Leads not only the marketing of the faculty’s scholarship but also advertises the library’s electronic databases and instructs in using these databases. Also participates in reference services to the law school community. This position is the point person for overseeing the law school’s institutional repository of scholarship and its components.

Applications:  Applications received by February 23, 2016 will be given first consideration. The letter of application should identify the position for which you are applying and address the responsibilities, qualifications, and experiences listed for the position. Please submit application letter, vita, and the names, email addresses and telephone numbers of three professional references.  References will not be contacted without contacting the candidate first and verifying permission.  Send nominations and applications via email to Professor Joan Stringfellow, Chair of the Law Library Search Committee at libappointments@law.tamu.edu

Posted in Uncategorized | Leave a Comment »

Deducting Moving Expenses

Posted by William Byrnes on December 9, 2015


If you move because of your job, you may be able to deduct the cost of the move on your tax return. You may be able to deduct your costs if you move to start a new job or to work at the same job in a new location. The IRS offers the following tips about moving expenses and your tax return.

In order to deduct moving expenses, your move must meet three requirements:

1. The move must closely relate to the start of work.  Generally, you can consider moving expenses within one year of the date you start work at a new job location. Additional rules apply to this requirement.

2. Your move must meet the distance test.  Your new main job location must be at least 50 miles farther from your old home than your previous job location. For example, if your old job was three miles from your old home, your new job must be at least 53 miles from your old home.

3. You must meet the time test.  After the move, you must work full-time at your new job for at least 39 weeks the first year. If you’re self-employed, you must meet this test and work full-time for a total of at least 78 weeks during the first two years at the new job site. If your income tax return is due before you’ve met this test, you can still deduct moving expenses if you expect to meet it.

If you can claim this deduction, here are a few more tips from the IRS:

  • Travel.  You can deduct transportation and lodging expenses for yourself and household members while moving from your old home to your new home.  BUT you cannot deduct your travel meal costs.
  • Household goods and utilities.  You can deduct the cost of packing, crating and shipping your things. You may be able to include the cost of storing and insuring these items while in transit. You can deduct the cost of connecting or disconnecting utilities.
  • Nondeductible expenses.  You cannot deduct as moving expenses any part of the purchase price of your new home, the cost of selling a home or the cost of entering into or breaking a lease. See Publication 521 for a complete list.
  • Reimbursed expenses.  If your employer later pays you for the cost of a move that you deducted on your tax return, you may need to include the payment as income. You report any taxable amount on your tax return in the year you get the payment.
  • Address Change.  When you move, be sure to update your address with the IRS and the U.S. Post Office. To notify the IRS file Form 8822, Change of Address.

Tax Facts Online is the premier practical, useful, actionable, and affordable reference on the taxation of insurance, employee benefits, investments, small tax-facts-online
business and individuals. This advisory service provides expert guidance on hundreds of the most frequently asked client questions concerning their most important tax issues.

Many ongoing, significant developments have affected tax law and, consequently, tax advice and strategies. Tax Facts Online is the only source that is reviewed daily and updated regularly by our expert editors.

In addition to completely current content not available anywhere else, Tax Facts Online gives you exclusive access to:

  • Robust search capabilities that enable you to locate detailed answers—fast
  • Time-saving calculators, tables and graphs
  • A copy/paste capability that speeds the production of presentations and enables you to easily incorporate Tax Facts content into your workPlus, the recent addition of current news, case studies, commentary and competitive intelligence serves our customers well as the only tax reference that a non-professional tax expert will ever need.

Tax Facts Online Core Content

Tax Facts on Insurance provides definitive answers to your clients’ most important tax-related insurance questions, while offering insightful analysis and illustrative examples. Numerous planning points direct you to the most recent and important insurance solutions.

Tax Facts on Employee Benefits provides current in-depth coverage of important client-related employee benefits questions. Employee benefits affect most2015_tf_triple_combo_cover-meveryone, and your clients must know how to deal with often complex issues and problems. Tax Facts on Employee Benefits provides the answers in a direct, concise, and practical manner.

Tax Facts on Investments provides clear, detailed answers to your difficult tax questions concerning investments. You must know what investments best suit your clients from a tax standpoint. You will discover questions that directly provide insightful answers, comparison of investment choices, as well as how investments have changed in recent years.

Tax Facts on Individuals & Small Business focuses exclusively on what individuals and small buisnesses need to know to maximize opportunities under today’s often complex tax rules.  It is the essential tax reference for financial advisors, & planners; insurance professionals; CPAs; attorneys; and other practitioners advising small businesses and individuals.

  • Charles Calello Enterprise/Group Inquiries 201-526-1259 Email Me
  • Customer Service 800-543-0874 8am – 6pm ET Monday – Thursday 8am – 5pm ET Friday Email Customer Service

Posted in Taxation, Uncategorized | Tagged: , | Leave a Comment »

Texas A&M University Law School Lowers Tuition 15%, Boosts Scholarship Budget by 65%, Improves Student to Faculty ratio of 11:1

Posted by William Byrnes on December 9, 2015


Texas A&M University has announced it will lower its full-time resident tuition and fees for the School of Law by more than 15 percent, beginning with the fall 2016 semester.

In embracing its public mission Texas A&M regularly reviews its tuition and fees to ensure affordability and quality. With the acquisition of the Texas A&M University School of TAMU-Law-lockup-stack-SQUARE (1)Law (TAMU Law) in 2013, recent evaluation of the tuition and fees has resulted in an announcement to lower full-time resident tuition and fees by 15.39% percent from $33,092 to $28,000, effective academic year 2016-2017.

“This is an important part of our transition of the law school from the private to public institution model,” Texas A&M University President Michael K. Young said. “By lowering tuition, we are working to ensure our students have much broader opportunities for serving the public at all levels once they graduate. This is an important part of our land-grant mission that benefits not just our students as individuals, but each of us across society.”

This adjustment will also benefit currently enrolled students. Beginning with the fall 2016 semester, Texas A&M Law will guarantee a locked tuition rate for entering and continuing law students. This annual tuition rate will be locked in for four academic years from the first date of enrollment. After the expiration of four academic years, students will pay the current year’s rates each term until completion; this is consistent with Texas A&M University’s approach and commitment to students enrolled in other academic programs including all undergraduate and select graduate degrees.

“Texas A&M University School of Law is transforming legal education in Texas while effectively managing resources entrusted by students and the state,” said John Sharp, Chancellor of the Texas A&M University System. “This decision is further evidence of how Texas A&M seeks to deliver the best education at the best value to parents, students and taxpayers.”

The move is the latest in a series of transitions demonstrating Texas A&M’s commitment to enhancing legal education for Texas.

“As the newest public law school in Texas, our focus is on adding value for our students and preparing them to lead. We embrace our University commitment to transforming the destinies of Texans by connecting with first-generation law students across the state, particularly from underserved communities,” Dean Andrew P. Morrisssaid. “This approach helps our state by building a legal profession that will make Texas even better.”

The school has boosted the overall scholarship budget by 65% and launched new programs. These include five clinics (Trademarks, Patents, Entrepreneurship, Wills & Estates, andInnocence), as well as a Professionalism & Leadership Program building on the Aggie Core Values of Excellence, Integrity, Leadership, Loyalty, Respect, and Selfless Service. TAMU Law has also reduced its entering class size and added 12 new faculty resulting in a dramatically improved student to faculty ratio of 11.1:1.

Posted in Uncategorized | Leave a Comment »

Starbucks’ Transfer Pricing & The EU Commission Decision

Posted by William Byrnes on December 7, 2015


Starbucks Manufacturing BV (SMBV), based in the Netherlands, is the only coffee roasting company in the Starbucks group in Europe. It sells and distributes roasted coffee and coffee-related products (e.g. cups, packaged food, pastries) to Starbucks outlets in Europe, the Middle East and Africa.

The EU Commission’s decision challenges the outcome of the Advanced Pricing Agreement (APA) between the Netherlands Tax Authority (Tax Authority) and SMBV. The Tax Authority respondedEU Commission that within the Dutch tax system profit is taxed where value is created. The Tax Authority concluded an Advance Pricing Agreement (APA) with SMBV which includes an arm’s length business remuneration for the roasting of coffee beans.  The Tax Authority collects taxes on profit made by SMBV for roasting coffee beans. Because the intellectual property rights of Starbucks are not located in The Netherlands, the royalties for the use of these cannot be taxed in The Netherlands.

The Tax Authority, acting in accordance with the international OECD framework for transfer pricing, agreed with Starbucks that it may apply the Transactional Net Margin Method (TNMM) to determine an arm’s length result to attach to its Netherlands based activities. The TNMM requires that members of multinational enterprises be treated as independently operating national enterprises: profits are taxed wherever value is created, attaching to the specific enterprise of the activity creating the value.

In its decision, the Commission establishes a unique interpretation the OECD guidelines concerning the choice and application of the globally accepted transfer pricing methods.  Based upon its interpretation, the Commission’s alleges that Starbucks should have applied the Comparable Uncontrolled Price (CUP) method to each activity of each enterprise instead of the TNMM. However, the Netherlands Tax Authority does not agree that the CUP method should have been applied in the Starbucks case in this fashion because of the absence of suitably similar, comparable data to the situation of Starbucks’ operations and value creating activities and assets. Starbucks graph

After its misapplication of CUP to Starbucks’ operations, the Commission then creates a new criterion for profit calculation.  While the methodologies and underlying criteria of application are not a closed universe for determining an arm’s length price, the Commission’s new criterion is incompatible with domestic regulations and the OECD framework. The Tax Authority will contend that the Commission does not adequately understand the nature and context of the value add of Starbucks’ myriad of activities.

The Commission states in its Starbucks decision that the arm’s length principle it has applied is not the same as the arm’s length principle stemming from Section 9 of the OECD treaty. The Commission’s application of a variant will cause confusion and uncertainty among tax authority of member states, among trade partners’ tax authorities, and the underlying enterprises subject to their audit authority.  For a tax authority, such uncertainty relates to the question of what rules are to be applied and in which fashion. And for enterprises, such uncertainly relates to the proper application of rules in rulings. So as to obtain more clarity and jurisprudence in this matter, the Dutch Cabinet has appealed the Commission’s Starbucks decision.

The Commission alleges that the methodological choices in the transfer pricing report provided by the tax adviser for Starbucks to the Netherlands Tax Authority, and agreed to in the APA between Starbucks and the Tax Authority, are not a reliable approach to a market result and thereby do not fulfil the arm’s length principle. The Commission alleges that the transactional net margin method (TNMM) is not the most appropriate method to forecast a taxable profit because the OECD guidelines and the Transfer Pricing Decree show a preference for the Comparable Uncontrolled Price Method (CUP).  The Commission determined that if the CUP had been applied to Starbucks’ coffee roasting of SMBV, the taxable profit would be substantially higher.

Most Appropriate Method?

The OECD adopted in 2010 a “most appropriate method” concept, similar to the U.S. “best method rule”. The most appropriate method concept replaced the previous OECD rule that transactional profit methods, profit split and TNMM were only to be leveraged as methods of last resort (with TNMM being in last spot). Regarding the “most appropriate method” the 2010 Guidelines states:

[T]he selection process should take account of the respective strengths and weaknesses of the OECD recognised methods; the appropriateness of the method considered in view of the nature of the controlled transaction, determined in particular through a functional analysis; the availability of reliable information (in particular on uncontrolled comparables) needed to apply the selected method and/or other methods; and the degree of comparability between controlled and uncontrolled transactions, including the reliability of comparability adjustments that may be needed to eliminate material differences between them. No one method is suitable in every possible situation, nor is it necessary to prove that a particular method is not suitable under the circumstances.

However, in spite of the foregoing, the 2010 Guidelines indicate a preference for traditional methods in applying the most appropriate method rule:

[W]here, taking account of the criteria described at paragraph 2.2, a traditional transaction method and a transactional profit method can be applied in an equally reliable manner, the traditional transaction method is preferable to the transactional profit method.

Comparability Analysis?

The 2010 OECD Guidelines for comparability analysis contains nine, non-linear, steps.

Step 1: Determination of years to be covered.

Step 2: Broad-based analysis of the taxpayer’s circumstances.

Step 3: Understanding the controlled transaction(s) under examination, based in particular on a functional analysis, in order to choose the tested party (where needed), the most appropriate transfer pricing method to the circumstances of the case, the financial indicator that will be tested (in the case of a transactional profit method), and to identify the significant comparability factors that should be taken into account.

Step 4: Review of existing internal comparables, if any.

Step 5: Determination of available sources of information on external comparables where such external comparables are needed taking into account their relative reliability.

Step 6: Selection of the most appropriate transfer pricing method and, depending on the method, determination of the relevant financial indicator (e.g. determination of the relevant net profit indicator in case of a transactional net margin method).

Step 7: Identification of potential comparables: determining the key characteristics to be met by any uncontrolled transaction in order to be regarded as potentially comparable, based on the relevant factors identified in Step 3 and in accordance with the comparability factors ….

Step 8: Determination of and making comparability adjustments where appropriate.

Step 9: Interpretation and use of data collected, determination of the arm’s length remuneration.

What Is the Value of Starbucks Roasting “Know How”?

The Commission alleges that the payment of royalties by SMBV to the Starbucks UK subsidiary (Alki) owning the “know-how” intellectual property rights does not provide a correct representation of the value of the intellectual property rights and therefore cannot be deemed to be arm’s length. This incorrect representation led Starbucks to exaggerate the value attaching to its coffee bean roasting “know-how”, in turn leading to an excessive royalty payment.

The royalty payment is based upon an “adjustment variable”, the level of which is determined by the accounting profits of SMBV subtracting the compensation agreed in the APA in the form of a fixed mark-up on the operational costs of SMBV.  The APA does contain a fixed method of being able to assess the arm’s length nature of the level of the royalties.

The Commission alleges that, on the basis of its application of an arm’s length transaction price via a CUP test, SMBV would not have been willing to pay any royalty for know-how.  The Commission’s allegation is based upon a comparison of Starbuck’s agreements for roasting coffee with other coffee roasters worldwide. Thus, Alki should not have been paid any royalties. Moreover, the Commission contends that the royalties, paid over for many years, cannot be arm’s length because SMBV does not appear to gain any business advantage from the use of the intellectual property in the area of roasting coffee.  An independent company, argues the Commission, will not pay for a license if it is unable to earn back the royalties paid.

Additionally, the Commission contends that payment for royalties does not represent a payment for Alki taking upon itself the risks of SMBV. The Commission dismissed the Tax Authority argument that Alki bore the economic risk of SMBV’s loss of stock (wastage).  The Commission points to Alki’s lack of  employees as justification that Alki’s capacity is too limited to actually bear such risk.  Finally, the Commission dismissed Alki’s payment for technology to Starbucks US as a justification of its royalty payment from SMBV.

What Is the Value of Starbucks Sourcing of Green Beans?

The Commission alleges that SMBV overpays Starbucks coffee sourcing operation in Switzerland (SCTC) for acquisition of ‘green beans’, which are then roasted by SMBV and distributed to Starbucks’ various national operations.  The purchase price of green beans paid by SMBV to SCTC is abnormally high and therefore does not comply with the arm’s-length principle.

The Commission alleges that Starbucks did not investigate an arm’s length relationship for which the transactions between SCTC and SMBV, being the purchase and delivery of green coffee beans.  Secondly, the Commission did not accept Starbucks’ underlying grounds for the justification of the significant increase from 2011 of the mark-up in the costs for the green beans supplied by SCTC.  Starbucks’ contends that SCTC’s activities became increasingly important from 2011 partly due to the evolving “C.A.F.E. Practices” program (e.g. ‘fair-trade’).  Comparing the costs of similar fair-trade programs, the figures provided by Starbucks in connection with its C.A.F.E. Practices program, argues the Commission, are problematic both in terms of consistency as well as the arm’s length nature. The Commission contends that the Tax Authorities should have rejected the additional deduction from the accounting profits. Moreover, the increased mark-up can be connected directly to the losses incurred by SMBV’s coffee roasting activities since 2010, which highlights the non arm’s length relationship of this mark-up.

Least complex function

The Commission posits a secondary argument that Starbucks misapplied the TNMM to its supply chain.  Firstly, the Commission alleges that Starbucks incorrectly categorized SMBV as the “least complex function” of the Starbucks’ value added supply chain, basically as a contract manufacturer, in comparison with Starbucks’ UK subsidiary that owns the manufacturing and processing “know how”.  This misapplication of the TNMM led Starbucks to incorrectly led Starbucks to select SMBV as the subsidiary to be the “tested party”.  Secondly, the Commission posits that when SMBV is compared to other market participants in the coffee trade sector, SMBV incorrectly applied two upward adjustments to its cost base.  Consequently, Starbucks inappropriately limited its Netherlands taxable basis.

Determining the least complex function takes place prior to the application of the TNMM as transfer price method. In order to determine the entity with the least complex function, a function comparison must be made. The outcome of the function comparison indicates an entity, to which the transfer price method can be applied in the most reliable manner and for which the most reliable comparison points can be found.

In its coffee roasting function, the Commission contends that SMBV does not only carry out routine activities. SMBV conducts market research reflected by its payments for market research.  Also, SMBV holds significant intellectual property reflected by the amortisation of intangible assets in its accounts.  Moreover, SMBV performs an important resale function. A routine producer is not involved in such activities. On the other hand, Alki activities are very limited. Alki does not have employees and it thus operates with limited capacity.  The Commission contends that the financial capacity of Alki is not the total financial capacity of the worldwide Starbucks Group.

StarbStarbucks_Coffee_Logo.svgucks Reaction?

Starbucks released a statement: “The dispute between the European Commission and the Netherlands as to which OECD rules we and others should follow will require us to pay about €20m to €30m on top of the $3 billion in global taxes we have already paid over the seven years in question (2008-2014).  Starbucks complies with all OECD rules, guidelines and laws and supports its tax reform process. Starbucks has paid an average global effective tax rate of roughly 33 percent, well above the 18.5 percent average rate paid by other large US companies.

Netherlands Government Reaction?

In October the European Commission has decided that the Netherlands provided State aid to Starbucks Manufacturing. The Commission decision is placed in the context of the fight against tax avoidance by multinationals.  The Dutch government greatly values its practice of offering certainty in advance. The Dutch practice is lawful and compliant with the international system of the OECD. However the European Commission’s verdict in the Starbucks case deviates from national law and the OECD’s system. In the end this will cause a lot of uncertainty about how to enforce regulations.

In order to get certainty and case law on the application of certainty in advance by way of rulings, the government appeals the Commission decision in the Starbucks case. The government is of the opinion that the Commission does not convincingly demonstrate that the Tax Authority deviated from the statutory provisions. It follows that there is no State aid involved.

AmCham Reaction?

OECD rules for setting internal transfer prices constitute an international standard whereby double taxation is prevented. These rules require that each transaction is assessed on the basis of the most appropriate transfer pricing method. The TNMM method can be used to establish an at arm’s length remuneration for production activities, such as those of the Dutch coffee roaster Starbucks Manufacturing BV, and is widely used internationally.

“This decision is a staggering,” says Arjan van der Linde, Chairman of AmCham’s Tax Committee and fiscal spokesman for AmCham. “By disregarding OECD rules, the European Commission is creating considerable uncertainty about the tax implications for foreign investment in the Netherlands. This has a direct effect on new investments and future employment. Uncertainty about such a fundamental component of an investment is unacceptable for many companies,” predicts Van der Linde.

He also highlights the expertise of the Dutch tax authorities, “The Dutch tax authorities have years of experience with the application of OECD rules and work thorough and carefully in considering transfer pricing requests.  A separate APA practice exists.  In addition, the Dutch tax authorities are consistent in their approach, with all sorts of coordination groups looking over the shoulder of the inspector. This thorough approach cannot simply be cast aside.”

 

Professor William Byrnes’ Reaction?

Starbucks represents the first salvo by the EU Commission to establish that it has the authority, under a State Aid premise, to step into the shoes of the national revenue authority and re-allocate profits of an enterprise according to the EU Commission’s interpretation and analysis of the arm’s length concept.  American attorneys will appreciate that this is a Marbury v Madison moment of Adam’s Federalists v. Jefferson’s Anti-Federalist.

The EU Commission’s finding of a range of two – three Euro million annual difference from its own assessment of the scenario versus the assessment of the Dutch revenue authority likely reflects its trepidation to venture into the area of interposing its own judgement call for that of a sovereign national revenue authority’s arm’s length determination, especially one memorialized in an advance pricing agreement (APA) with a taxpayer.  The trepidation probably results from several causes, including weaknesses of the EU Commission’s choice and implementation of an arm’s length methodology, justification thereof, and even more so, from the geopolitical ramifications of its decision.

The trepidation is exemplified by the very low adjustments the EU Commission found, after its nearly year of investigation.  The adjustments are enough to be noticed by the EU state authorities and the companies, but de minimis in the context of corporate annual profits, corporate profit accumulation over time (e.g. perpetual deferral), corporate tax reserves, and de minimis in the context of revenue collection for either The Netherlands or Luxembourg.

Starbucks’ potential 30 million Euro re-capture tax bill by The Netherlands (EU Commission required), dating back to accumulation from 2008, will, assuming the tax bill stands after Starbucks’ appeal and after Starbucks’ challenge the decision up through the EU Court Of Justice, be offset by a US tax credit of like amount.  Consequently, the low adjustment is a wash out, albeit could require a cash flow payment in the nearer future than the perpetual one under U.S. tax deferral accounting.  30 million Euro is too small to be noticeable to Starbucks shareholders or to the U.S. Treasury, especially when the tax credits are applied.  Viewed from an annual perspective though, the two to three million Euro per annum over 10-years finding against Starbucks annual three billion dollars paid in global taxes from a global effective tax rate of 33%, it is not even a rounding error.

Had the EU Commission found, as it alluded that it is able to, that the State Aid amounted to the hundreds of millions or even billions of Euro, the intensity of the EU Commission-National government conflict would have changed, and the EU Commission would have lost that battle with the stakes so high.  Fiat would have drawn Italy into the fray, to align with Netherlands, Ireland and Luxembourg.  As more advance pricing agreements are challenged, more national government would align against the EU Commission.  At some tipping point, the EU Commission would have to withdraw from the fight or face a bloodied nose.

Yet, more so a danger for the EU Commission, had the EU Commission’s decision been an exaggerated amount, then the U.S. Treasury would have been forced to act as if a trade war had broken out. Treasury beating up on Starbucks for transfer pricing out of the U.S. tax base is OK because Starbucks in a U.S. company, as far as the U.S. Treasury is concerned.  Starbucks represents potential U.S. deficit reduction tax dollars.

Had the EU Commission decided for a large amount well beyond any tax credit relief, thus which would have represented a significant subsidy from the U.S. to EU national budgets and/or a significant subsidy from US retirement system shareholders to EU budgets, one might imagine the joint-Republican Democratic Senate hearing called by Washington state’s two Democratic senators Patty Murray and Maria Cantwell. That hearing would conclude a joint statement to Treasury demanding it report back how it intends to implement a tit-for-tat strategy against EU companies to extract an equal amount to that the EU Commission pulled from the bowels of Starbucks reserves.

Throw in enough U.S. multinationals with HQs in the various states such as New York, Illinois, California and Texas,  Congress may actually in rare bipartisan stature pass tit-for-tat legislation by year end requiring Treasury to act.  Perhaps a $5 billion Section 482 adjustment against each of the top 50 European companies measured by revenues.  The EU would respond, and the U.S. retort, to and fro, until the weight of taxation slowed cross border investment to a trickle.

But the EU Commission instead chose to bark very loudly and withhold its bite.  Probably it has avoided the worst case scenarios of political warfare presented above.  With such a small award, the various stakeholders will let the appeals and ECJ process run its course before acting.  The US Congress and US Treasury may not understand the Marbury v Madison moment of the EU Commission’s decision – that the “perpetual deferral” reserves of U.S. MNEs such as Starbucks, Apple, Microsoft, Google, Amazon etc, may be put “up for grabs” by European revenue authorities to fill their bloated social spending expenditure gaps (instead of flowing into U.S. investment needs or back to U.S. institutional shareholders representing our collective national retirement savings).  [But Treasury has now released the below response to the EU Commission decision].

US Treasury Response

Treasury has followed the state aid cases closely for a number of reasons. First, we are concerned that the EU Commission appears to be disproportionately targeting U.S. companies.

Second, these actions potentially undermine our rights under our tax treaties. The United States has a network of income tax treaties with the member states and has no income tax treaty with the EU because income tax is a matter of member state competence under EU law.  While these cases are being billed as cases of illegal state subsidies under EU law (state aid), we are concerned that the EU Commission is in effect telling member states how they should have applied their own tax laws over a ten-year period.  Plainly, the assertion of such broad power with respect to an income tax matter calls into question the finality of U.S. taxpayers’ dealings with member states, as well as the U.S. Government’s treaties with member states in the area of income taxation.

Third, the EU Commission is taking a novel approach to the state aid issue; yet, they have chosen to apply this new approach retroactively rather than only prospectively. While in the Starbucks case, the sums were relatively modest (20 to 30 million Euros), they maybe substantially larger – perhaps in the billions – in other cases. The retroactive application of a novel interpretation of EU law calls into question the basic fairness of the proceedings. Fourth, while the IRS and Treasury have not yet analyzed the equally novel foreign tax credit issues raised by these cases, it is possible that the settlement payments ultimately could be determined to give rise to creditable foreign taxes. If so, U.S. taxpayers would wind up footing the bill for these state aid settlements when the affected U.S. taxpayers either repatriate amounts voluntarily or Congress requires a deemed repatriation as part of tax reform (and less U.S. taxes are paid on the repatriated amounts as a result of the higher creditable foreign income taxes).

Finally, and this relates to the EU’s apparent substantive position in these cases, we are greatly concerned that the EU Commission is reaching out to tax income that no member state had the right to tax under internationally accepted standards. Rather, from all appearances they are seeking to tax the income of U.S. multinational enterprises that, under current U.S. tax rules, is deferred until such time as the amounts are repatriated to the United States. The mere fact that the U.S. system has left these amounts untaxed until repatriated does not provide under international tax standards a right for another jurisdiction to tax those amounts. We will continue to monitor these cases closely.

Book CoverProfessor William Byrnes is the primary author of Practical Guide to U.S. Transfer Pricing that is used extensively by multinationals to cope with the U.S. transfer pricing rules and procedures, taking into account the international norms established by the Organization for Economic Co-operation and Development (OECD).

Download Summary-of-the-decision-from-the-european-commission-concerning-the-starbucks-tax-ruling

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EU State Aid – Starbucks Webpage

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Financial Law Professor Headlines

Posted by William Byrnes on December 2, 2015


 

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