Tax Blog/Blawg

Adding a new wrinkle to this fiscal crisis is Greece's inability to use monetary policy to resolve the problem.  Historically, nations faced with unmanageable sovereign debt have often simply printed more money, thereby creating inflation, which reduces the real value of the government's typically fixed-rate debt.  As a member of the European Monetary Union, however, Greece does not have this option.  As a result, an increasing chorus of commentators and public officials have been asking whether Greece might be forced to take a "holiday" from the Monetary Union or, even worse ...

Last week, at the TEI Midyear Conference in Washington, LMSB Commissioner Heather Maloy told corporate tax executives attending the conference that “trust” was the key to successfully implementing the new reporting requirements for uncertain tax positions first set forth in Announcement 2010-9.  As reported in the April 14th edition of Tax Notes, 2010 TNT 71-2, Maloy also told the attendees that enhanced transparency through the use of this reporting mechanism would be “mutually beneficial” in terms of improved issue resolution and efficiency.

Last month, I commented ...

The New York Times and Forbes Magazine are reporting on a study by the Transactional Records Access Clearinghouse, a research group affiliated with Syracuse University, which claims to show that the number of audits of corporations reporting assets of $250 million or more has dropped between 2005 and 2009, while audits of smaller companies have increased during that same time.

Believing that the IRS has misallocated its resources, TRAC blames this development on a "perverse quota system" within the IRS.  The IRS, however, disputes the study's findings.  From the NY Times article ...

Let's face it: employees are wonderful.  We couldn't do without them.  However, they can be expensive.  Beyond their base compensation, employers must pay federal taxes – in addition to withholding the employee's share of income tax, FICA and Medicare, there is an employer’s share of Medicare and FICA that must deposited regularly.  There's also annual FUTA tax, as well as quarterly state unemployment tax.  And there are benefits, ranging from medical coverage, to vacations, to sick leave, to name just three, that employers must pay.

When business is down, it is natural to try to find ...

In her column last Monday, Lee Sheppard criticized Judge Holmes of the Tax Court for, as she put it, “strain[ing] to find a reason to hold for the taxpayer” in the recent case of Container Corp. v. Comm’r, 134. T.C. No. 5.  According to Ms. Sheppard, Judge Holmes "appears to have assumed equitable powers in deciding" the case, and "the tax law is the worse for it."

The basic issue in Container Corp. was whether guarantee fees paid by a U.S. corporation to its Mexican parent in respect of a debt guarantee provided by the parent should be treated as U.S.-source income (and therefore subject to withholding tax on payment to the Mexican parent).  Because the rules for sourcing income don't address how guarantees are to be treated, the court framed its analysis as whether the guarantee fees were more like interest (which is sourced to the location of the borrower) or more like services (which are sourced to the location of the provider).

Ms. Sheppard excoriated Judge Holmes for even contemplating that a debt guarantee could be treated as a service.  To her, it "[s]ounds pretty obvious" that the parent corporation was simply protecting its investment in the subsidiary, not providing a service to the subsidiary.

Last Tuesday, Senators Ron Wyden (D-Ore.) and Judd Gregg (R-N.H.) released a proposed tax reform bill (the "Bipartisan Tax Fairness and Simplification Act of 2010") that has received substantial press coverage. For some initial reactions, see here, here, and here.  As much for the apparent bipartisanship of its origins, the bill has received attention for the boldness of its proposals.  Many commentators have likened the Wyden-Gregg alliance to the Reagan-Bradley pairing that ushered in the Tax Reform Act of 1986.  Like its nearly 25-year-old predecessor, the current proposal ...