An Online Publication of the ABA Tax Section CONTENTS

Published in ABA Tax Times, March 2021. © 2021 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. ISSN 2381-5868.

An Online Publication of the ABA Tax Section Winter • March 2021 • Vol. 40 No. 2

CONTENTS

FROM THE CHAIRMoving Forward in 2021 ......................................... 1

PRACTICE POINTSAvoiding an Adverse Tax Impact on Death of an S Corporation Shareholder .......................................... 3

State Taxation of Employees Working Remotely from Another State ......................................................... 8

POLICY POINTThe TCJA’s International Tax Schemes ..................... 10

AT COURTNY Uber Driver a Covered “Employee” for Unemployment Insurance Purposes; CA Prop. 22 Provides Limited Employment Benefits to Gig Workers; U.S. Labor Dept. Defines “Independent Contractor” .......................................................... 19

PRO BONO MATTERSMarketing Conundrums for Virtual IRS Events ........... 25

Military State Tax Guide Now Available .................... 29

YOUNG LAWYERS CORNEREncouraging Work and Eliminating Poverty: Comparing American and Canadian Family Tax Benefits ............. 30

Winners of the 20th Annual Law Student Tax Challenge ............................................................. 38

THE INCOMPETENT AUTHORITY: QUESTIONS AND ANSWERS ................................................... 40

PEOPLE IN TAX PODCASTJuan Vasquez, Heather Fincher, and Sharon Heck ..... 44

TAX BITSTax Laws .............................................................. 45

IN THE STACKSTax Section to Publish 8th Edition of Effectively Representing Your Client Before the IRS ................. 46

SECTION NEWS & ANNOUNCEMENTS ................. 48

• Tax Section Offers Expanded Virtual 2021 May TaxMeeting

• Report of the Nominating Committee: 2020-2021Nominees

• Seeking Nominations for Vice Chair of Membership,Diversity, and Inclusion: A Message from the Chair ofthe Nominating Committee

• 2020 Distinguished Service Award Recipient:L. Paige Marvel

• Government Submissions Boxscore

• Call for Applications: Diversity and InclusionScholarships to Virtual 2021 May Tax Meeting

• The Tax Lawyer—Winter 2021 Issue Now Available

• The Practical Tax Lawyer—March 2021 Issue NowAvailable

• Support the Section’s Public Service Efforts with aContribution to the TAPS Endowment

• Get Involved in ATT

SECTION EVENTS & PROMOTIONSSection Meeting & CLE Calendar ............................. 59

Section CLE Products ............................................ 59

Sponsorship Opportunities ..................................... 60

SPONSORSHIP ACKNOWLEDGEMENTSVirtual 2021 Midyear Tax Meeting .......................... 61

Thomson Reuters | Publishing Sponsor ................... 62


ABA TAX TIMESWinter • March 2021 • Vol. 40 No. 2

EDITORIAL BOARD

COUNCIL DIRECTORT. Keith Fogg

SUPERVISING EDITORLinda M. Beale

INTERVIEW EDITORSTameka E. LesterJeremiah Coder

PODCAST EDITORJames Creech

PRO BONO MATTERS EDITORSAndrew RobersonGina Ahn

AT COURT EDITORT. Keith Fogg

PRODUCTION EDITORSGregory Peacock Todd Reitzel

ASSOCIATE EDITORSJaye CalhounAndy HowlettGuinevere MooreDavid PrattDaniel M. ReachRobert S. SteinbergRobert W. Wood

HYPERTEXT CITATIONS & LINKS

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EDITORIAL POLICY

ABA Tax Times (ATT) is published at least four times a year featuring articles covering a wide range of tax topics and areas of tax practice, interviews with diverse tax practitioners, Committee reports, Tax Section comment submissions to the government, and other news and information of professional interest to Tax Section members and other readers.

ATT is presented in digital-only format and is distributed by e-mail to Tax Section members as a benefit of membership. To learn more about joining the ABA and the Tax Section, visit http://www.americanbar.org/groups/taxation/membership.html.

ABA Tax Times welcomes the submission of manuscripts from Tax Section members. ATT does not accept articles that have been published previously or are scheduled for publication elsewhere. Publication decisions will be based on editorial consideration of topical timeliness, legal accuracy, quality of writing, tone, and consistency with ATT’s editorial policy. ATT reserves the right to accept or reject any manuscript and to condition acceptance upon revision to conform to its criteria. Members interested in authoring an article are encouraged to contact Professor Linda M. Beale, ATT Supervising Editor, at [email protected].

ATT articles and reports reflect the views of the individuals or committees that prepare them and do not necessarily represent the position of the Tax Section, the American Bar Association, or the editors of ATT. The articles and other content published in ATT are intended for educational and informational purposes only and are not to be considered legal advice. Readers are responsible for seeking professional advice from their own legal counsel.

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FROM THE CHAIR

Moving Forward in 2021

By Joan C. Arnold, Troutman Pepper, Philadelphia, PA

Happy 2021! I was more than happy to see 2020 in the rearview window, but I’m still waiting for the electric switch to be thrown to put 2021 in a new light. Somehow the ball dropping on New Year’s Eve just didn’t make it happen. I’m still working from home, still doing more Zoom calls than I care to, and still trying to chart our path as an organization without the ability to have in-person meetings.

But 2020 wasn’t all bad. On a personal level, we welcomed our first grandchild, which makes me remember what joy is all about. She is now almost one, and through the use of facetime, pictures and videos, it’s almost like we have been there to see her grow. Almost.

On a professional level, I realized how fortunate I am to have built up decades of relationships with clients and colleagues in the tax field. It sustains me through the trying times. I wonder, though, how those are faring who have many fewer years of experience and fewer colleagues to lean on. How can we make the Tax Section relevant to them, not just for substantive offerings but for the nurturing of a career and the person carrying out the career? How can we reach out to a broader, more diverse community to better advance and support the role of tax lawyers in the profession and break down implicit bias?

Improving Virtual Meetings

As the Tax Section, we are doing more than just wondering. At our all-virtual Midyear Tax Meeting, we included an increased number of networking events with the goal of inviting more people into the mix. I know that in one event that I attended there were more than a few lawyers new to the field who were there to make contacts and develop their career paths. The Women in Tax Forum held a session on developing executive presence, and it had more than 300 attendees registered.

Our attendance this year was 1,578, exceeding last year’s Midyear Tax Meeting by 400. This year’s attendance included 126 students, up from 29 students the previous year. We would not have achieved those numbers had we not been virtual. Just as at the fall meeting, we had very robust participation from the government, with 532 registered attendees.

Addressing Diversity and Inclusion

We have also been paying close attention to our efforts in advancing diversity. The Tax Section has a Diversity in the Profession Committee (DIPC) that was formed in 2018. The DIPC has taken the lead in developing programs with the goal of addressing both the need for and the means of achieving diversity.

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For example, the DIPC created the Ginsburg tribute program for the plenary session at the Fall Tax Meeting about the use of a tax case to advance equality. The DIPC has initiated and continues to run the Diversity and Inclusion Scholarship program to support diverse people or people interested in advancing diversity in attending Tax Section meetings.

As a corollary to forming the DIPC, Council in 2018 adopted a revised Diversity and Inclusion Plan. It sets forth our goals and action items for achieving more diversity in our Section. The plan is also summarized here as is relevant to the committees of the Tax Section. I hope you will take some time to read it and act on it.

For me, personally, the focus on diversity has caused me to rethink my vocabulary and how I present issues. For example, when I am making a presentation or teaching, can I get away from examples and terminology that continue to support implicit bias? Do I always need to talk about husband and wife when I want to talk about attribution between spouses? What about using husband and husband? Wife and wife? Would the change of terminology make more people feel welcome in our Section? I am of the view that making a conscious choice to use different examples makes me more aware of my implicit bias and helps to break it down. When the committees are writing those ever-important comments for submission to the government, how can they be more inclusive in their language?

On a Section level, the Council is acting to support our Diversity and Inclusion Plan. Recently, the Council approved creation of a Vice Chair, Membership, Diversity, and Inclusion (VCMDI). This position will work with staff and Section leadership to ensure we meet member needs and continually broaden our diversity and include people of diverse backgrounds in all Section activities. The Nominating Committee seeks nominations for this new Council position; see the announcement in this issue. You will see a greater emphasis on diversity and inclusion as we move forward.

Planning Future Meetings

Speaking of moving forward, our May Tax Meeting will be May 10–14. It will be all virtual. I hope you attended the Midyear Tax Meeting and saw its much-improved virtual meeting technology, which we will also use for the May Tax Meeting. We are planning additional networking events and expanded CLE opportunities. Information can be found here, and I hope to see you there.

As of now, we are looking at the possibility of a blended meeting for the Fall Tax Meeting—some in person and some virtual. The final decision will likely not be made for some time, but we’ll keep you informed.

Before signing off, I need to give a great shout-out of thanks to our staff. They have done an incredible job to pivot from in-person meetings to virtual meetings, and they work tirelessly to make them better each time.

Thanks for reading and, as always, please contact me if you have any comments, suggestions, or questions. ■

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https://www.americanbar.org/content/dam/aba/administrative/taxation/resources/2018-diversity-plan.pdf

https://www.americanbar.org/content/dam/aba/publishing/aba_tax_times/21win/att-21win-di-plan-for-committees.pdf

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PRACTICE POINT

Avoiding an Adverse Tax Impact on Death of an S Corporation Shareholder

By Herbert R. Fineburg and Charles A. McCauley III, Offit Kurman, P.A., Philadelphia, PA

I. Introduction

One of the main reasons to consider a partnership for owning a business rather than an S Corporation is the adverse impact upon death if the business is held by an S Corporation. Now there are solutions to this problem for S Corporation shareholders that tax advisers need to add to their toolbox. These solutions convert the tax status of the business from an S Corporation to a partnership for federal tax purposes, in a federal income tax-neutral manner. This can be accomplished through liquidation in

the case of a deceased shareholder or reorganization prior to death of a shareholder.

A. Upon the Death of an S Corporation Owner

Specifically, upon the death of an S Corporation owner, the heirs are denied the benefits of receiving a step-up in bases in underlying corporate assets to fair market value. In a partnership, the heirs receive a full income tax-free step-up in basis for all of the underling partnership assets and the benefits of obtaining the income tax shelter from new large depreciation deductions. However, in an S Corporation when the owner dies, the shareholder heirs only receive a step-up of basis in the corporate stock equal to the fair market value of the company at the date of death. The underlying S Corporation assets retain the same pre-death tax bases even though the decedent estates in both cases have the same federal estate tax implications and costs. Therefore, the S Corporation heirs should consider promptly liquidating the corporation to also achieve an income-tax neutral stepped-up basis for the company’s assets. This same technique can also be considered if a surviving shareholder buys out the estate of a deceased shareholder.

B. Prior to Death of an S Corporation Owner

Alternatively, with proper tax and estate planning the S Corporation shareholders have reorganization options prior to death of an S Corporation shareholder to avoid heirs being denied the benefits of receiving a step-up in bases in underlying corporate assets to fair market value upon death. The reorganization options include, but are not limited to (i) a contribution by the S Corporation of its assets to a limited partnership or limited liability company in return for issuance of a preferred interest in such entity, or (ii) a sale of the assets of the S Corporation to a limited partnership or limited liability company in consideration of a note payable to the S Corporation. If the shareholder recently purchased the stock of an S Corporation without an IRC Section

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338 Election, there is a statutory merger of the S Corporation into a limited partnership or limited liability company with such entity surviving the merger. This achieves the same result as the heirs of an estate who have a high stock basis without the underlying S Corporation assets having a stepped-up basis.

II. Achieving Step-up in Basis upon a Shareholder’s Death Through Liquidation

For the estate of an S Corporation shareholder, one of the major problems is the inability of the estate, and thus the heirs as shareholders, to achieve a step-up in basis for the underlying corporate assets. Upon death, the shareholder’s estate receives a stepped-up basis in the shareholder’s stock only equal to the fair market value of the company on the date of death. In contrast, a tax partnership (including a limited liability company (LLC) taxed as a partnership) obtains a stepped-up basis for the decedent’s partnership interest and for the decedent’s proportional interest in the underlying partnership assets through an election under sections 736 and 754.

S corporations can consider the planning option of liquidating the S Corporation or liquidating the S Corporation through a merger. Because partnership status is generally preferable to the S Corporation structure for tax purposes, the estate or heirs can also use this event to convert from an S Corporation to a partnership without the usual tax consequences of such a conversion. Under this planning technique, estates and the heirs holding S corporation stock have a unique opportunity to achieve multiple tax benefits. This article describes how this conversion to partnership status and stepped-up basis in assets can be structured with little, if any, tax cost to the estate and heirs. When an S Corporation liquidates, the corporation is treated as having sold all of its assets for their fair market value, typically resulting in taxable S Corporation gain. Likewise, the estate is treated as having sold its S Corporation stock for an amount equal to the fair market value of the assets it receives in the liquidation distribution from the S Corporation.

Fortunately, when the S Corporation recognizes taxable gain, that gain increases the estate’s basis in the stock in an amount equal to the taxable gain recognized by the S Corporation. This taxable gain is reported to the estate on the corporation’s final Schedule K-1 (Form 1020S). The estate’s tax basis in its S Corporation stock is increased to the fair market value of the S Corporation stock upon the death of the shareholder and further increased as a result of the deemed sale of the S Corporation stock upon the liquidation.

Simultaneous with the increase in basis from the liquidation, the estate recognizes a taxable loss equal to the taxable gain reported to the estate on the corporation’s final Schedule K-1. The loss on the deemed sale of the S Corporation stock in the liquidation is reported on the estate’s or heirs’ Schedule D (Form 1040 or 1041). Typically, the S Corporation gain on the Schedule K-1 (Form 1020S) reported on Schedule E (Form 1040 or 141) and the loss on the Schedule D (Form 1040 or 1041) will net out with no tax due by the estate or its heirs for the S Corporation gain on liquidation. Remarkably, the business will have a new step-up in basis in all of its assets which the heirs can contribute tax-free to a new partnership.

Consider the following hypothetical facts. Sam has two heirs and he owns 100% of Hardware Corporation (taxed as an S Corporation) with a basis in his stock of $5,000. When Sam dies, Hardware Corporation is worth $10 million and has a basis in its assets of $10,000. As a result of Sam’s death, Sam’s estate now has a stepped-up tax basis in the Hardware Corporation stock of $10 million (the fair market value of the stock on Sam’s death).

If Sam’s two heirs liquidate the corporation, Hardware Corporation will recognize gain in the amount of $9,990,000 from the deemed sale of its assets ($10 million value minus $10,000 basis). Hardware Corporation will report a gain of $9,990,000 to Sam’s estate on a Schedule K-1 (Form 1020S). Upon

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recognition of this gain by Hardware Corporation, Sam’s estate basis in the stock will increase by $9,900,000 because of the deemed sale gain, giving Sam’s estate an aggregate tax basis in the stock of $19,990,000 ($9,990,000 deemed sale gain + $10,000,000 step up to fair market value on death). The liquidation of Hardware Corporation on the Schedule D of Sam’s heirs will be reported as a loss of $9,990,000, calculated as the difference between the fair market value of the Hardware Corporation assets received by Sam’s heirs of $10 million and Sam’s estate’s stock basis of $19,990,000

It is anticipated that the Schedule K-1 gain recognized by Sam’s estate of $9,990,000 on Schedule E of the Form 1041 and the Schedule D loss on the Form 1041 recognized by Sam’s estate of $9,990,000 will mostly off-set each other even though they are reported on different Schedules. Some difference may occur because the Schedule D loss will be a capital loss but some of the gain on the Schedule K-1 may be ordinary income recapture. The benefit of the large depreciation or amortization deductions for the assets with stepped-up basis will far exceed the modest tax cost. To utilize the depreciation, Sam’s heirs can contribute the $10 million in assets tax-free to a new partnership (or LLC taxed as a partnership) under section 721. The benefit to the new partnership is the ability to depreciate $10 million of asset basis in the partnership compared to the $10,000 of asset basis in an unliquidated Hardware Corporation.

III. Reorganization Prior to Death Through Contribution to a Partnership for a Preferred Return

Another tax planning strategy available prior to the death of the S Corporation shareholder is a reorganization involving the contribution by the S Corporation of its assets to an entity electing to be taxed as a partnership in return for issuance of a preferred interest in the newly formed entity.

This type of reorganization can be illustrated by a case study and diagram in which the S Corporation (Hardware Inc.) forms an LLC taxed as a partnership (Hardware LLC) into which it transfers all of its operating assets. After the reorganization the S Corporation owner Fred Smoot, through his revocable living trust, continues to hold 100% of the outstanding shares of Hardware Inc., and directly and indirectly, owns all of the interests in Hardware LLC.

The steps to complete the reorganization are as follows. First, Hardware LLC issues a preferred membership interest to Hardware Inc. equal to the estimated value of the business ($14.0 million). The preferred interest has a liquidation preference and could also have a cumulative dividend. The preferred interest holder may also have the option to claim all or some of a distribution of profits or permit all or some of a distribution of profits to be allocated to the holders of common interests. Hardware LLC also issues a majority of Hardware LLC common interests to Fred Smoot: those common interests have a value of zero (assuming the preferred interest equals the value of the entire business). As part of Hardware’s reorganization plans, Hardware LLC’s key officers and executives may receive a grant and award of restricted common interests to enable them to share in the value creation going forward while isolating the existing business value with the preferred interest holder.

Other than the company designation as an LLC as opposed to a corporation and a contingent unvested restricted grant and award to key management to enable them to share in value creation going forward, nothing has changed. The staff, location, emails, phone numbers and all other details of Hardware as well as current contracts and other agreements remain unchanged. As a result of the reorganization, Mr. Smoot is able to remain in control of his business, isolate his prior accretion of wealth and provide valuable equity incentive grants to his key employees.

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Fig. 1: Ownership of Hardware Holdings, Inc., A Delaware Limited Liability Company

IV. Reorganization Prior to Death: A Sale of Assets for a Note

Another tax and estate planning strategy to consider is the sale of the assets of an S Corporation (or C Corporation) to a limited partnership (or LLC taxed as a partnership) for a note payable to the S Corporation. (After the reorganization, the C Corporation can make an S Corporation election).

The following case study and diagram illustrates this tax and estate planning strategy. On December 18, 2019, Hardware Inc. (a C Corporation) changed its name to Hardware Holdings Inc. and formed Hardware Holdings LLC as a subsidiary. On December 31, 2019, Hardware Holdings Inc. sold all of its assets (except cash) to Hardware Holdings LLC, based upon the appraised value of the assets as determined by outside accountants. The sale was represented by a 121-month promissory note for tangible assets and a separate 121-month promissory note for section 197 intangibles. In addition, the LLC executed a line-of-credit note payable to the corporation so that cash would be available to the LLC. The sale of assets also included the corporation’s marketable securities, which the LLC required to secure its loan. Immediately after the sale on December 31, 2019, the LLC membership interests were distributed to all of the shareholders pro-rata. Because the LLC’s assets were encumbered by promissory notes for 100% of their fair market value, the net value of the LLC interests was reported to be zero dollars. Effective January 1, 2020, Hardware Holdings Inc. elected to be taxed as an S corporation. The foregoing transactions were approved by all of the shareholders and directors of Hardware Holdings Inc. at annual and special meetings held on December 11, 2019.

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Fig. 2: Sale of Assets and Distribution of LLC Membership Interests

■

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PRACTICE POINT

State Taxation of Employees Working Remotely from Another State

By Michael McLoughlin, Kean Miller LLP, New Orleans, LA

Even though New York and Massachusetts have restricted out-of-state commuters from coming back to their pre-pandemic offices to work, they still expect them to pay personal income taxes to the state as if they were working in the state. That is, the two states are taxing nonresidents as if they continued to commute to work every day even if they do not set foot in the state and do all of their work remotely from a home office. Not surprisingly, the home states where those commuters live and (now) work are fighting back against what they see as a money grab by states that do not have any right to the tax revenue.

On October 19, 2020, New Hampshire filed a petition with the U.S. Supreme Court to overturn an April 2020 Massachusetts emergency regulation1 that requires nonresidents who were working in Massachusetts when the pandemic started, many of whom live in New Hampshire, to continue to pay Massachusetts’ personal income tax even though they have not been commuting to Massachusetts since early 2020 and will likely continue to work from home for the foreseeable future. On December 22, 2020, New Jersey—joined by Connecticut, Hawaii, and Iowa—filed an amici curiae brief supporting New Hampshire’s petition. In late January, the Supreme Court asked the Acting Solicitor General to weigh in on the debate.2 A date for argument before the Supreme Court has not yet been set.

The New Hampshire petition asserts that the Massachusetts emergency regulation violates the Commerce and Due Process constitutional provisions by imposing income tax on New Hampshire residents despite the fact that the individuals did not enter Massachusetts to work during the period at issue. Specifically, the Massachusetts regulation requires individuals who were employees performing services in Massachusetts immediately prior to the start of the pandemic to continue to pay Massachusetts personal income tax even if they are now working from home in another state due to the effects and restrictions from the pandemic. This rule could potentially result in an individual who does not enter Massachusetts for a single day in 2021 being considered to have nexus there and to be subject to income tax there, simply because that person once actually conducted the work in Massachusetts.

New Hampshire argues that Massachusetts is effectively eliminating what it has called the “New Hampshire Advantage”—i.e., the fact that a resident of New Hampshire who works in New Hampshire does not have to pay a traditional personal income tax. Thus, New Hampshire claims that Massachusetts is impermissibly

1 Massachusetts Source Income of Non-Residents Telecommuting due to the COVID-19 Pandemic, 830 CMR 62.5A.3.2 See, e.g., Mike Shaikh & Michael Tedesco, Scotus Invites Acting Solicitor General to Weigh In on Ongoing Dispute Between Massachusetts and New Hampshire Regarding Controversial COVID-19 Sourcing Rule, SaltSavvy (Jan. 27, 2021).

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https://www.supremecourt.gov/DocketPDF/22/22O154/164460/20201222111244937_22O154_Amicus%20Brief.pdf

https://www.saltsavvy.com/2021/01/27/scotus-invites-acting-solicitor-general-to-weigh-in-on-ongoing-dispute-between-massachusetts-and-new-hampshire-regarding-controversial-covid-19-sourcing-rule/

https://www.saltsavvy.com/2021/01/27/scotus-invites-acting-solicitor-general-to-weigh-in-on-ongoing-dispute-between-massachusetts-and-new-hampshire-regarding-controversial-covid-19-sourcing-rule/



interfering with New Hampshire’s right to provide its residents a planned tax benefit from working inside the state.

New Jersey elected to file an amicus brief supporting New Hampshire because it is fighting a similar battle with New York. New York has long required nonresident individuals who work for New York companies but perform their services outside of the state to pay New York personal income tax unless it was a “necessity” that the employee work outside the state. If the individual worked outside the state purely for the employee’s convenience, then the individual was required to continue to pay New York taxes. The New York Department of Taxation and Finance has recently confirmed that nonresidents who are working from home because they cannot return to their New York offices due to COVID-19 must still pay New York income tax unless a bona fide office has been established from which the employee telecommutes.

The problems that result from this taxation of non-residents for states like New Hampshire, which does not impose a personal income tax, and New Jersey, which provides a credit to residents for taxes paid to other states, are slightly different. As noted, New Hampshire claims that Massachusetts is eliminating the advantage of not having to pay an income tax that the New Hampshire legislature has provided to its residents who work in New Hampshire. New Jersey, on the other hand, asserts that it is losing tax revenue to New York on income earned by its residents who are working full time in New Jersey because New Jersey residents receive a credit against taxes owed to New Jersey for taxes they pay to other states.

The issue is an important one for the Supreme Court to resolve. The problem is not likely to go away soon, and residents of New Hampshire and New Jersey who are affected by the Massachusetts and New York provisions, respectively, do not have an adequate state forum in which to protest the imposition of the taxes at issue. Moreover, even if pandemic restrictions end within the next six to twelve months, many people will likely choose to continue to work remotely from their homes in these and other states, and employers will likely support that decision, as they realize that they save money by doing so. If states continue to struggle with declining tax revenues in 2021 and 2022, there will likely be even fiercer competition for those tax revenues between states where the employer and its primary offices are located and those whose residents, prior to the pandemic, regularly commuted to those states for work. ■

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POLICY POINT

The TCJA’s International Tax Schemes

By Benjamin M. Willis, Tax Analysts Contributing Editor to TaxNoTes

The tax bill signed into law by then-President Trump on December 22, 2017 (TCJA, an acronym for the “Tax Cuts and Jobs Act” unofficial title) is the most expansive and complex international tax reform made in a single piece of congressional legislation. The TCJA is plagued with ambiguities, gaps, uncertainties, and errors. The current economic crisis stemming from the COVID-19 pandemic makes one thing clearer than ever about the TCJA’s provisions: the need to fix them.

Taxpayers have begun to bring forward cases attacking the validity of the new international tax rules. These cases expose the inept lack of coordination among the various relevant statutory rules. Treasury simply will not be able to provide taxpayer certainty through regulations integrating scattered, incoherent, and nonexistent policies to argue that the clearly disjointed provisions sufficiently resemble an organized scheme. Congress placed an unfair burden on Treasury to expect it to justify these partisan piecemeal provisions cobbled together at lightning speed. Ultimately, this lack of coherence will result in taxpayer wins, which was perhaps the underlying unifying goal of the TCJA, which used explicit and implicit tax cuts (available through planning) to find more favorable revenue estimates but should not be allowed to survive a more thoughtful Congress.

This article makes the case that the claim that the TCJA’s international tax provisions represent a coherent statutory scheme is patently false: it is essentially one of those “alternative facts” concocted by the prior administration to conceal the true winners and losers of its single significant legislative achievement. The provisions fluctuate in their application to controlled foreign corporations (CFCs) and specified foreign corporations (SFCs) and their owners, which sometimes must only be corporations and sometimes include individuals and passthrough entities.1 The effective dates, like the provisions’ scope, do not align. Contrary to Treasury’s amusing concoction, the TCJA in no way created an “interlocking statutory scheme” through sections 245, 965, 951A, and subpart F.2 This is becoming ever clearer as the lawsuits begin to surface.

I. The Cases Against the TCJA Rules

On November 11, 2020 in Moore v. U.S., the U.S. District Court for the Western District of Washington incorrectly determined that the TCJA’s change to “a territorial tax model” is “a change in subpart F to

1 A specified foreign corporation is CFC or any foreign corporation with a corporate U.S. shareholder. Section 965(e)(1). A CFC is foreign corporation more than 50 percent owned, by vote or value, by U.S. shareholders. Section 957(a). A U.S. shareholder is a U.S. person that owns 10 percent, by vote or value, of a foreign corporation. Section 951(b). 2 See T.D. 9865, explaining why section 245A should be narrowed.

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https://www.taxnotes.com/research/federal/court-documents/court-opinions-and-orders/court-dismisses-constitutional-challenge-to-repatriation-tax/2d78d



incentivize U.S. taxpayers to repatriate foreign earnings.” The Moore court went on to explain that section 965’s mandatory repatriation tax (MRT) is not a wholly new tax but merely resolves an uncertainty because “it was unclear when and if a CFC’s earnings attributable to U.S. shareholders would be subject to U.S. tax. The TCJA and MRT remove that uncertainty.” This is the essence of the notion—that the TCJA’s international tax provisions flow from a seamless integrated statutory scheme—promulgated by the Trump Treasury in order to market the legislation as well as conceal its winners and losers.

A week after the court’s decision in Moore, Liberty Global, Inc. (a U.S. subsidiary of U.K. telecommunications giant Liberty Global PLC) sued after the government denied its section 245A deduction for the 2018 tax year.3 Liberty Global argues that “the section 245A Temporary Regulations are substantively and procedurally invalid” and that they are “contrary to the controlling statutes.” It asserts that the regulations improperly disallow the section 245A territorial dividends-received deduction (DRD) because such disallowance rules are “not found in or supported by the statute.”

These two cases have more in common than one would think at first blush. While Moore is focused on the unconstitutionality of section 965’s repatriation tax and Liberty Global on the invalidity of the section 245A regulations, the best argument supporting the taxpayers is that the TCJA’s plain language (muddled as it is) simply does not support the government’s positions.

Section 965 was not intended to remove the uncertainty of timing of taxation of a CFC’s earnings and profits: the section does not even apply to CFCs. Subpart F, of course, is the part of the Code that deals with CFCs and something of which the government could argue realistically that taxpayers had notice. To qualify as a CFC, a foreign corporation must be more than 50 percent owned by U.S. shareholders. Section 965’s new jurisdictional link, in contrast, is merely predicated on a single corporate U.S. shareholder owning 10 percent of a foreign corporation, an unusually limited jurisdictional link for international taxation. How could a foreign corporation or its owners anticipate that subpart F would (i) be expanded to govern corporations for which a de minimis portion of stock is owned by U.S. shareholders and (ii) result in retroactive taxation of 30 years of earnings and profits (E&P) that in no way reflect earnings accrued to the current 10-percent shareholder. That shareholder could well hold loss shares rather than shares with any built-in gain or other accession to wealth.4

This situation is worsened since E&P are not the same as taxable income, and the distortion is increased when decades of E&P become subject to a transition tax, raising the question whether the TCJA reflects an appropriate understanding of income. E&P is a poor barometer of income for shareholders that do not receive dividends. For example, E&P doesn’t take into account unrecognized losses.5 On an annual basis, subpart F generally withstood scrutiny as a way to flow income through to a block of majority U.S. shareholders. In contrast, forcing a minority individual shareholder to take into account decades of E&P of a majority foreign-owned corporation with neither prior notice nor any of the benefits from the new statutory scheme raises serious concerns. Given the 30 years at issue in the Liberty Global case, it is certainly possible that individuals were required to pick up income on loss shares for which there was no accession to wealth. If the E&P had been required to be adjusted, as is done under section 877A by taking into account

3 Liberty Global Inc. v. United States, No. 1:20-cv-03501 (D. CO, Nov. 27, 2020).4 Tony Nitti, “Glenshaw Glass and Defining Income,” 170 Tax Notes Federal 1257 (Feb. 22, 2021) (“Glenshaw Glass [348 U.S. 426 (1955)], however, established a general principle and corresponding three-part test that are critical to applying the tax law: The 16th Amendment grants Congress the power to tax all realized gains, and thus any item that (1) increases the wealth of a taxpayer, (2) is realized, and (3) the taxpayer has control over is income unless specifically exempted by statute.”)5 § 312(f) (indicating that only recognized losses are taken into account to determine current earnings and profits).

11

https://www.taxnotes.com/research/federal/court-documents/court-petitions-and-briefs/telecommunications-company-seeks-%24109-million-tax-refund/2d822

https://www.taxnotes.com/tax-notes-federal/income/glenshaw-glass-and-defining-income/2021/02/22/2r4k7



unrecognized losses upon a jurisdictional shift, a stronger argument could be made that the tax was in fact reaching actual income.

This brings us back to Liberty Global and whether the so-called gap period created by different effective dates for section 245A and the new subpart F rules can be altered by Treasury’s complex regulations that disallow a section 245A DRD. Ultimately, the justification for a regulatory fix, after a proper technical correction failed, illustrates clearly that the TCJA’s international provisions are no part of an integrated statutory scheme.

The Moore decision was incorrect because a CFC isn’t relevant for section 965’s tax, and this tax is certainly far more than a clarification of how a CFC’s earnings should be taxed. A CFC also isn’t relevant for section 245A’s territorial DRD, which is even further removed from subpart F: instead of using the CFC definition of U.S. shareholder that includes individual and passthrough owners, the section 245A territorial tax system only applies to a domestic corporation that owns 10 percent of the foreign corporation. These differences that expand the application of the repatriation tax and minimize the territorial DRD concurrently expand and narrow pre-existing subpart F principles, providing clear evidence of a failure to coordinate the provisions in TCJA’s so-called statutory scheme.

The other international TJCA provisions not at issue in these two cases further illustrate the lack of a coherent statutory scheme. The new subpart F provisions—including section 951A’s global intangible low-taxed income (GILTI) as well as section 965’s repatriation tax—care not who the U.S. shareholder is, while the new deductions—the 50 percent GILTI deduction and 37.5 percent foreign-derived intangible income (FDII) deduction—are only available for domestic corporations. Together, these completely different provisions maximize income for individuals and provide deductions only to corporations so it is unsurprising that neither the provisions’ terms nor their effective dates align.

II. The Disjointed International Provisions of the TCJA.

A. Transition Tax under Section 965

Section 965 imposes a one-time transition tax on post-1986 untaxed foreign E&P of foreign corporations (called “deferred foreign income corporations” or DFICs) owned by U.S. shareholders (including individuals and passthrough entities). Those individuals and pass-through U.S. shareholders of corporations that are not CFCs are likely to have little ability to extract distributions from the DFICs because of the 10-percent ownership threshold. Nonetheless, the transition tax applies to prior foreign earnings without regard to whether any of those profits are actually repatriated. (As already noted, the taxable amount does not accurately reflect income since it fails to take into account up to 30 years of unrecognized losses.)

The applicable tax rate is 15.5 percent for cash and certain cash equivalents and 8 percent for illiquid assets. The reduced tax rate for illiquid assets acknowledges the difficulty the foreign corporation would have securing cash to pay dividends to be used to pay the mandatory repatriation tax. Similarly recognizing the hardship that lumpsum payments of the repatriation tax would cause, the provision allows the repatriation tax to be paid over an eight-year period, with back-loaded payments ensuring that the bulk of payment occurs in the last three years.

While section 965 was enacted in the subpart F section of the Code to give the appearance of taxpayer notice and thus address constitutionality concerns, section 965’s tax on the E&P of DFICs represents a stark contrast to the CFC regime in which U.S. shareholders were required to own more than 50 percent of the corporation and thus could generally compel a distribution and were only taxed currently on “bad”

12



(e.g., passive) earnings. This inability to compel a distribution had also been addressed in the 1986 passive foreign investment corporation (PFIC) reforms to the Code in another situation resulting in pass-through treatment to shareholders of passive earnings, because Congress recognized that “the U.S. investors may not have sufficient ownership in the PFIC to compel distributions.”6 For PFICs, both the qualified electing fund (QEF) and mark-to-market (MTM) rules provide PFIC owners with considerable flexibility compared to the default regime.

In sum, the section 965 tax applies to an inaccurate measure of a corporation’s untaxed foreign earnings at an incredibly low rate that benefits large taxpayers but hurts many less liquid taxpayers.

Constitutionality Concerns

The title of section 965 is “Treatment of deferred foreign income upon transition to participation exemption system of taxation”. Yet section 965 taxes those individuals and passthrough entities who do not participate in the exemption system. Section 245A, which is described in the legislative history as the “provision [that] generally establishes a participation exemption system for foreign income,” applies only to domestic corporations.7 This is where constitutional concerns arise.

A new tax regime for expatriating individuals was adopted in 2008, as part of the HEART Act.8 Section 877A provides for a mark-to-market tax on the net gain in property of expatriating U.S. citizens, generally applied as though the person’s property were sold at its fair market value on the day before expatriation.9 The underlying legislative history explored the constitutionality of the tax and explained that a change in a taxpayer’s jurisdictional rights under section 877A is a realization event that permits immediate taxation of built-in gains, even without a transfer to another owner.

[W]hen property effectively is transferred to a new legal situs that alters the taxpayer’s, and the Government’s, legal relationship to the property ... it is possible to characterize expatriation as being accompanied by a ‘realization’ with respect to certain assets in view of the change of the legal attributes of such assets, so that Government’s inchoate interest in its receiving its share of any increase in value need not be extinguished.10

This realization argument was drafted in response to “opposing views on the validity” of the tax based on the Sixteenth Amendment, principles of international law, and whether economic gains have nexus to the

6 H.R. Conf. Rep. No. 99-841, 1986-3 C.B. (PART 4) 1.7 H.R. Rep. No. 115-446 (2017) (“The provision generally establishes a participation exemption system for foreign income. This exemption is provided for by means of a 100-percent deduction for the foreign-source portion of dividends received from specified 10-percent owned foreign corporations by domestic corporations that are United States shareholders of those foreign corporations within the meaning of section 951(b) (referred to here as ‘participation DRD’). A specified 10-percent owned foreign corporation is any foreign corporation with respect to which any domestic corporation is a United States shareholder.”).8 Heroes Earnings Assistance and Relief Tax Act Of 2008, P.L. 110-245 (June 17, 2008).9 Joint Committee on Taxation Report, JCX-44-08 (“Such individuals are subject to income tax on the net unrealized gain in their property as if the property had been sold for its fair market value on the day before the expatriation or residency termination (‘mark-to-market tax’)”).10 Joint Committee on Taxation, Issues Presented By Proposals To Modify The Tax Treatment Of Expatriation, JCS-17-95 (June 1, 1995) (providing a comprehensive discussion of the realization requirement with a focus on retroactivity, notice, and change in jurisdictional taxing rights as a realization).

13

https://www.congress.gov/115/crpt/hrpt466/CRPT-115hrpt466.pdf

https://www.jct.gov/publications/2008/jcx-44-08/

https://www.jct.gov/publications/1995/jcs-17-95/



United States.11 The TCJA’s new international tax provisions seem designed to fall within this description of a realization event due to the change in jurisdictional taxing rights arising from the new quasi-territorial regime. This justification does not appear to apply, however, for taxpayers who do not fall within the scope of section 245A’s participation exemption. Thus, it is not surprising that noncorporate taxpayers are arguing against the constitutionality of application to them of section 965.12

B. Territorial DRD under Section 245A’s Participation Exemption

Although individuals pay the repatriation tax designed for a transition to section 245A’s territorial deduction, they do not benefit from dividend deductions. Nor is the section 245A deduction limited to CFC distributions to shareholders that are taxed under subpart F. Section 245A provides a 100-percent dividends-received deduction to transition to the TCJA’s hybrid territorial regime equal to the foreign-source portion of any dividend received from a specified 10-percent-owned foreign corporation by its U.S. corporate shareholder.

The regulations impose taxes on some offshore earnings in apparent inconsistency with the statutory language, on the grounds that the statutory language as written inadvertently confers a benefit unintended by Congress. The unintended taxpayer benefit arises because section 245A applies to distributions after December 31, 2017, whereas the GILTI provision (discussed further below) is effective for the first tax year beginning after December 31, 2017. Treasury essentially argues that its regulatory grant requires it to read the provisions as intending to leave no gap. Strict textualists will counter, nonetheless, that the regulatory grant should not be able to disregard the difference in wording even if its impact is to provide an unreasonable benefit not intended by Congress. Further, even though Congress acted with undue haste, including without the benefit of any hearings or the ability for congressional representatives, their staffs, and the tax committees adequately to scrutinize the legislative language, it can be argued that the drafters should have been aware of the different wording of the effective dates, the common use of fiscal years rather than calendar years as the taxable year for C corporations, and the gap in time creating the benefit because of the difference in wording.

Final regulations state that the international “framework confirms that the section 245A deduction is intended to apply to residual E&P that is not subject to section 965 and properly determined to be exempt from current taxation under the GILTI and subpart F regimes.”13 This counters the statutory interpretation

11 The Joint Committee includes a clear statement of the issues raised:How one views the concept of ‘realization” is the key factor underlying the above two opposing views on the validity, under both the Sixteenth Amendment and human rights principles of international law, of the expatriation tax proposals. A secondary conceptual issue underlying the opposing views is when is it appropriate to view the income tax system and the estate and gift tax systems as separate from each other (such that determining the proper treatment of gain under one system is independent of the tax consequences that flow under the other systems) or as part of a comprehensive, inter-connected regime designed to ensure taxation, at least in the long-run, of economic gains that have a nexus to the United States, even if current income taxation of some gains is deferred for administrative or policy reasons.

Id. See also Reuven S. Avi-Yonah, Is GILTI Constitutional? 170 Tax NoTes Federal 283 (Jan. 11, 2021)(noting that arguments for unconstitutionality “rest on the assertion that deemed dividends are economically equivalent to taxing a CFC on foreign-source income, which is unconstitutional under the jurisdictional limits of Cook and is also a violation of international law”).12 See, e.g., Andrew Velarde, Silver’s Transition Tax Summary Judgment Briefing Draws to a Close, 99 Tax NoTes INT’l 1100 (Aug. 24, 2020)(noting that the reasons the taxpayers sue felt unduly harmed cannot be ignored).13 T.D. 9909 (Aug. 21, 2020).

14

https://www.taxnotes.com/tax-notes-federal/global-intangible-low-taxed-income-gilti/gilti-constitutional/2021/01/11/2dd7k



principles espoused in Gitlitz,14 the Constitution’s separation of powers, and which branch of government legislates.15

C. Global Intangible Low-Taxed Income under Section 951A

Section 951A requires U.S. shareholders (those who own 10-percent or more by vote or value, taking into account direct, indirect and constructive ownership) of any CFC to include their GILTI in respect of their direct or indirect ownership in gross income. The provision is designed to tax earnings that exceed a deemed return on qualified business asset investment (QBAI) and thus operates effectively as a minimum average foreign tax.16 The tax base comprises the aggregate net income (with adjustments) of the CFC less a deemed 10-percent rate of return on QBAI. Section 951A applies to the tax years of foreign corporations beginning after December 31, 2017. As previously discussed, the different effective date for section 951A compared to section 965, without the regulatory guidance discussed here, creates a gap period for fiscal-year corporations.

GILTI is treated as Subpart F income. Consequently, unless individual U.S. shareholders make a section 962 election,17 the GILTI amount will be subject to tax at their individual rates without the benefit of indirect foreign tax credits or the GILTI deduction (described in the next section). In some cases they would be eligible for lower rates on qualified dividends.

D. FDII and GILTI Deductions under Section 250

Section 250 creates a 37.5 percent deduction for FDII, which reduces the effective tax rate for qualifying income from the (new) standard 21 percent corporate rate to 13.125 percent. The section also allows an initial 50 percent deduction for GILTI income as determined under section 951A, resulting in a GILTI tax rate for corporations generally at 10.5 percent (half of the 21% current corporate tax rate). Both deductions are available only for domestic corporations.

The separate and distinct FDII deduction subsidizes foreign purchases from U.S. corporations, while the GILTI deduction merely reduces this includable type of subpart F income for certain domestic corporate shareholders. Any U.S. corporation can take advantage of the FDII export subsidy regardless of whether it has controlled foreign corporations or GILTI income. They are each stand-alone deductions that can each benefit taxpayers.

14 Gitlitz v. Commissioner, 531 U.S. 206 (2001) (deciding to follow the plain language of the law notwithstanding it provided a “double windfall” and disagreeing with the logic of the lone dissenting judge, Justice Stephen Breyer, who argued we “should read ambiguous statutes as closing, not maintaining, tax loopholes. Such is an appropriate understanding of Congress’ likely intent.”). 15 Willis, “Congress Expands Gitlitz to Triple Tax Benefits for PPP,” 170 Tax Notes Federal 293 (Jan. 11, 2021) (“Congress just spent months debating the proper tax benefits that should stem from PPP loans, and their conclusion was that the Gitlitz benefits were appropriate and aren’t a loophole that Breyer thought would likely be unintended by Congress. The point is that courts (and others) should be wary before making assumptions about Congress’s likely intent on tax and economic policy. The approach the Court almost unanimously rejected in Gitlitz is simply not administrable and defies the allocation of power between the courts and Congress. The potential loss of revenue Breyer was concerned with should be addressed by a concerted effort to close the tax gap. Legislative efforts along these lines now look quite likely, given Democrats will effectively control both chambers of Congress and an economic recovery later this year is probable.”).16 See, e.g., Jasper L. Cummings, Jr., GILTI Puts Territoriality in Doubt, 159 Tax Notes 161 (Apr. 9, 2018) (“As for GILTI, Republicans used a version of ‘race to the bottom’ that intricately combined drastically cutting the U.S. corporate tax rate and currently taxing foreign active income earned in countries with relatively low tax rates. Evidently, they hope U.S. corporations will locate operations in countries with rates just high enough to mostly avoid GILTI and maybe encourage foreign tax cuts — which would generate calls for more U.S. rate reductions, known in Republican circles as a ‘virtuous cycle.’”).17 The section 962 election results in a section 78 gross-up that increases the GILTI amount by the creditable foreign tax. There is also a U.S. dividend tax on any actual distribution of earnings that were subject to the U.S. tax on the GILTI amount.

15

https://www.taxnotes.com/tax-notes-today-federal/legislation-and-lawmaking/congress-expands-gitlitz-triple-tax-benefits-ppp/2021/01/11/2dczt



III. The Regulations Are Even More Disjointed

In Liberty Global Inc. v. United States, No. 1:20-cv-03501, Liberty Global argues that the section 245A regulations are invalid and are contrary to the controlling statutes. It asserts that the regulations improperly disallow the section 245A territorial DRD because that disallowance is not found in or supported by the statute. The fact that the effective date of the provision encouraging movement of property into the U.S. applies before the GILTI regime’s taxing provision kicks in is not unreasonable: the provisions were not coordinated and do not even apply to the same types of taxpayers. Both the foreign corporations (specified foreign corporations for the DRD and CFCs for subpart F and GILTI) as well as their owners (corporations for the DRD and any U.S. shareholder for subpart F and GILTI) are different.

The executive branch was unable to obtain congressional passage of a technical correction to resolve the conflicting effective dates for the DRD under section 245A and the GILTI regime under section 951A. In lieu of those technical corrections, Treasury has tried to achieve the same result through interpretation intended to coordinate the two regimes. The problem Treasury has is that section 245A explicitly allows a domestic corporation the benefit of a 100-percent DRD for the foreign-source portion of a dividend received from a CFC after December 31, 2017, even if that dividend had not also borne the burden of taxation under the GILTI rules. The taxpayer benefit Treasury claims was unintended stems from the fact that section 245A applies to distributions after December 31, 2017, whereas GILTI is effective for the first tax year beginning after December 31, 2017.

The differing effective date language, likely an implicit tax cut, results in a benefit for corporations with taxable years that are not calendar years. The gap period favors large non-calendar fiscal-year multinational corporations by allowing taxpayers to step up basis in qualified business asset investment and intangibles and generate earnings and profits for tax-free dividends relying on the 100-percent section 245A DRD before GILTI is effective. That also allows increased future depreciation and amortization deductions from the stepped-up basis to offset tested income under GILTI.

Technical corrections were not an option to salvage the partisan overhaul of the U.S. international tax system squeezed through the Senate with 51 votes through the budget reconciliation process. Accordingly, Treasury opted to resolve the issue through an interpretation of the statutory provisions necessary to carry out the congressional purpose. It was a tall tale to say the least. But what better way to help conceal hidden tax cuts used to meet budget reconciliation restrictions than spending government resources to write rules to disavow them. The fact that the rules were certain to fail doesn’t change the narrative – it only changed the financial statements of the well-informed. Perhaps the gap period satiated large constituents who were promised a 20 percent corporate tax rate.18 Conjecture aside, it can’t be denied that the TCJA is filled with massive congressionally intended benefits for large corporations that took many months to decipher. And back to the point, why would anyone think that immediate DRD benefits provided to corporate 10 percent owners of specified foreign corporations were meant to align with the GILTI regime’s delayed detriments to CFCs and their corporate, passthrough, and individual U.S. shareholders.

The June 2019 temporary19 and proposed20 regulations describe the provisions to address the gap period succinctly:

18 Scott A. Hodge, “Replacing the 20 Percent Corporate Rate with Rates of 21 or 22 Percent Has Real Economic Consequences,” Tax Foundation (Dec. 8, 2017).19 Treasury Decision 9865, 84 FR 28398, as corrected at 84 FR 38866 (June 18, 2019).20 Proposed Regulations, REG-106282-18 (June 18, 2019).

16

https://www.taxnotes.com/research/federal/court-documents/court-petitions-and-briefs/telecommunications-company-seeks-%24109-million-tax-refund/2d822

https://taxfoundation.org/replacing-the-20-percent-corporate-rate-with-rates-of-21-or-22-percent-has-real-economic-consequences/

https://www.federalregister.gov/documents/2019/06/18/2019-12442/limitation-on-deduction-for-dividends-received-from-certain-foreign-corporations-and-amounts

https://www.federalregister.gov/documents/2019/06/18/2019-12441/limitation-on-deduction-for-dividends-received-from-certain-foreign-corporations-and-amounts



Section 245A is designed to operate residually, such that the section 245A deduction generally applies to any earnings of a CFC to the extent that they are not first subject to the subpart F regime, the GILTI regime, or the exclusions provided in section 245A(c)(3) (and were not subject to section 965). That is, the text of the subpart F and GILTI rules explicitly defines the types of income to which they apply, and section 245A applies to any remaining untaxed foreign earnings. Under ordinary circumstances, this formulation works appropriately, as earnings are first subject to the subpart F or GILTI regimes before the determination of dividends to which section 245A could potentially apply. However, in certain atypical circumstances, a literal application of section 245A (read in isolation) could result in the section 245A deduction applying to earnings and profits of a CFC attributable to the types of income addressed by the subpart F or GILTI regimes — the specific types of earnings that Congress described as presenting base erosion concerns. These circumstances arise when a CFC’s fiscal year results in a mismatch between the effective date for GILTI and the final measurement date under section 965 or involve unanticipated interactions between section 245A and the rules for allocating subpart F income and GILTI when there is a change in ownership of a CFC.

Why does Treasury think section 245A should not be applied based on its literal meaning? Because of “atypical” circumstances. What circumstances are so “atypical” they could render the words of Congress meaningless? A C corporation with a non-calendar fiscal year. It is as quixotic as Don Quixote charging at a windmill thinking it was a giant.

Treasury said in its 2019 temporary regulations that “where the literal effect of section 245A would reverse the intended effect of the subpart F and GILTI regimes, this conflict is best resolved, and the structure of the statutory scheme is best preserved, by limiting section 245A’s effect.”

Section 245A(g), which the final regulations rely on, provides that the “Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section.” The final regulations describe the need to coordinate section 245A and section 965 as limiting the availability of the section 245A deduction “in certain limited circumstances where the effect would be contrary to the appropriate application of those provisions in the context of the Act’s integrated approach to the taxation of income, or E&P generated by income, of a CFC.”21

The term “appropriate” in section 245A(g) is broader than the “necessary” rules permitted by section 7805(a).22 Nevertheless, in my view the section 245A regulations at issue are in no way “appropriate to carry out” the section’s provisions. As shown in this analysis, Subpart F, GILTI, and section 965 do not apply to the same taxpayers as section 245A nor does section 245A require the foreign corporation to be a CFC. The transaction tax in section 965 applies to individual and passthrough owners. These provisions are sufficiently different that the Treasury’s efforts to reconcile them seem both overbroad and unauthorized.

It thus seems likely that courts will find Treasury Regulation section 1.245A-5 invalid.23 It is my view that Treasury cannot exercise its discretionary authority to draft regulations to cover up mistakes that should

21 Treasury Decision 9909, at 10 (Aug. 21, 2019).22 Section 7805(a) states: “Except where such authority is expressly given by this title to any person other than an officer or employee of the Treasury Department, the Secretary shall prescribe all needful rules and regulations for the enforcement of this title, including all rules and regulations as may be necessary by reason of any alteration of law in relation to internal revenue.”23 For a fuller discussion on the regulatory provisions, see Willis The Territorial DRD Regs Are Invalid, 164 Tax NoTes Federal 2265 (Sept. 30, 2019).

17

https://www.taxreformlaw.com/wp-content/uploads/2020/08/TD-9909.pdf

https://www.taxnotes.com/tax-notes-today-federal/dividends/territorial-drd-regs-are-invalid/2019/09/30/29z76



have been addressed through legislative technical corrections, even if the only way the TCJA could be salvaged as a reasonable international corporate scheme was for Treasury and the IRS to draft rules to complete the law. While it was once thought that these Herculean regulatory efforts could work, most now recognize that the task was impossible. Ultimately, it is taxpayers who will bear the burden of the TCJA’s taxing provisions—not solely by interpreting the burdensome regulations propping up the new laws but also by predicting which regulations the courts are most likely to invalidate as overreaching. This is why within days of the release of the temporary DRD regulations, practitioners warned that the participation exemption anti-abuse rule would spur litigation. Practitioners explored the uphill battle Treasury will have in defending these regulations even with its arguments about aggressive tax planning, when taxpayers should be able to rely on the effective dates provided in the statute for any change in law.24

IV. Conclusion

Treasury’s efforts represent the interests of the Treasury secretary as a member of the president’s cabinet to vigorously defend the administration’s trade policies. Treasury is clearly striving to protect executive branch goals and statements and ensure that a hastily drafted statute makes sense. Treasury took on the impossible task of making appropriate connections between the allowed deductions under sections 245A and 250 and the GILTI inclusions that Congress left undone in its haste, yet Treasury cannot ignore the law. As these broad reaches of regulatory discretion accumulate, TCJA interpretation loses any semblance of credibility.

This article argues therefore that the temporary and proposed section 245A regulations should be found invalid. Treasury should not be able to use its interpretative authority to expand the GILTI penalty tax in regulations promulgated under a Code provision intended to provide a 100-percent deduction to create a territorial tax system. These new retroactive burdens go beyond the language of the statute and, although uncertain, may well surpass congressional intent. Taxpayers will inevitably challenge the regulations in the courts, and it is almost certain that taxpayers will prevail. Congress should act now to remedy the statutory TCJA mess. ■

24 See Willis, GILTI as Charged: FDII Regulations Prove Harmful Tax Export Subsidy, 162 Tax NoTes 1481 (Mar. 25, 2019).

18

https://www.taxnotes.com/tax-notes-today-international/trade/gilti-charged-fdii-regulations-prove-harmful-tax-export-subsidy/2019/03/25/298yx



AT COURT

NY Uber Driver a Covered “Employee” for Unemployment Insurance Purposes; CA Prop. 22 Provides Limited Employment Benefits to Gig Workers; U.S. Labor Dept. Defines “Independent Contractor”

By Edward Leyden, Leyden Law LLC, Bowie, MD

The last third of 2020 saw several important developments in the arena of worker classification. For a general review of the classification issue, see the article published in the summer edition of ABA Tax Times.1

I. New York Decision on Uber Drivers

In the last weeks of the year, an intermediate appellate court for New York held, in the Matter of the Claim of Colin Lowry (Uber Tech., Inc. – Commissioner of Labor),2 that Uber Technologies, Inc. (Uber) exercises sufficient control over the drivers who utilize the company’s smart phone application (app) as to establish an employment relationship. This ruling comes in the wake of a decision in June 2020 by the New York Court of Appeals (New York’s highest court) in Matter of Vega (Postmates, Inc. – Commissioner of Labor)3 that a courier for an app-based delivery service was an employee for purposes of New York State Unemployment Insurance.

The case resulted from Uber’s appeal of two decisions by the New York Unemployment Insurance Appeal Board. The Board ruled, among other things, that Uber was liable for additional unemployment insurance contributions on amounts paid to the Claimant, Mr. Lowry, and others similarly situated to him. As a matter of judicial organization, the Third Department exercises jurisdiction generally over the New York counties surrounding Albany. The Claimant was engaged by Uber as a driver in the firm’s upstate New York market and applied for New York unemployment insurance benefits after he stopped participating with the Uber platform. Accordingly, the court cautioned that its decision was limited to drivers in upstate New York markets and expressly does not apply to the separate market that Uber operates in New York City (which lies within the purview of the First Department). Nonetheless, since January 2019 the New York City Taxi & Limousine Commission has imposed a minimum wage on Uber drivers that started at $17.22 per hour.4 It is not known at this time whether there will be an appeal to the state’s highest appellate court. The Matter

1 Jennifer D. Thayer et al., Employment Classification in an App-Based Nation, Vol 39 ABA TAx Times (Aug. 2020).2 2020 NY Slip Op 07645, 2020 N.Y. App. Div. LEXIS 7854, 2020 WL 7390888 (Dec.17, 2020).3 35 NY3d 137-139 (2020), 149 N.E. 3d 401 (NY 2020).4 This is more than the City’s then-prevailing $15 hourly minimum wage so as to provide for payroll taxes and other expenses.

19

https://www.americanbar.org/groups/taxation/publications/abataxtimes_home/20aug/20aug-pp-thayer-employment-classification/



of Vega case makes clear, however, that a majority of that court already leans towards employee-status for ride-hailing app drivers, such as the driver at issue here.

Quoting another case, the Lowry court explained the level of deference it granted to the administrative board.

[W]hether an employment relationship exists within the meaning of the unemployment insurance law is a question of fact, no one factor is determinative and the determination of the … board, if supported by substantial evidence on the record as a whole, is beyond judicial review even though there is evidence in the record that would have supported a contrary decision.5

The “relevant inquiry is whether the purported employer exercised control over the results produced or the means used to achieve those results, with control over the latter being the more important factor.”6

A. Factual Background

The court noted the basic facts regarding the operation of the Uber app. To become a driver, the Claimant had to provide Uber with a valid driver’s license, vehicle registration, and driver history check and was required to sign a technology services agreement (TSA) providing that an Uber driver must use his or her own vehicle that must be less than 15 years old and equipped with certain features (e.g., working windows and air conditioning). An approved prospective driver receives from Uber a driver ID and password to log on to Uber’s digital platform using a smartphone app. A driver has no set schedule but chooses, when available, to log onto the Uber app. Uber may, however, deactivate the account of a driver who does not provide transportation services through Uber’s app to a customer at least once a month.

The Uber platform uses its GPS navigation system to refer customers by sending the location of a customer who has requested transportation to the logged-in driver who is in closest proximity. The selected driver has 15 seconds to accept the customer’s request, or it will be sent to the next closest driver. Uber drivers are not penalized for refusing a customer request. Once a driver has accepted a customer request, the Uber platform sends the customer the driver’s location and the estimated fare. Uber calculates the fare and collects it at the end of the trip. After subtracting 20 percent to 30 percent of the collected fare as a “service fee,” Uber pays the balance to the driver, who also may keep any tip the customer chooses to include. If, on the other hand, Uber cannot collect the fee, the company absorbs the loss. Uber also pays the driver a “cancellation fee” that Uber charges if a customer cancels a trip after two minutes or does not show up after the driver has waited for more than five minutes. Uber recommends, however, that drivers wait at least 10 minutes for a customer to show up at a requested pick-up site.

A driver does not learn the requested drop-off point until after accepting a trip request and picking up a customer. A driver is permitted to use another navigation system or the driver’s personal knowledge to select a route, but the TSA entitles Uber to reduce the charge for an “inefficient” route. Drivers are similarly responsible for all their fuel and maintenance costs, but Uber provides drivers who complete a certain number of trips each month use of a gasoline credit card with discounts for gasoline and other items. Uber incorporates any tolls into the fare charged to the customer and then reimburses the driver. If a customer damages a driver’s vehicle, Uber reimburses the driver for repairs.

5 Matter of Empire State Towing & Recovery Assn., Inc. [Commissioner of Labor], 15 NY3d 433, 437 (2010).6 Matter of Dwyer [Nassau Regional Off-Track Corp. – Commissioner of Labor], 138 AD.3d 1369, 1370 (2016).

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Uber exercises various controls through prohibitions and rankings. A driver may not transport any individuals other than the customer and the customer’s authorized passengers during a trip. Uber forbids a driver from physically contacting customers during the course of a trip, using inappropriate language or gestures, and contacting a customer after the trip is over. In addition to handling all complaints by customers, the company employs an anonymous five-star rating system by which drivers and customers rate each other after a trip has been completed: the scores are available on Uber’s digital platform. Customers may rate drivers on navigation, vehicle cleanliness, and the driver’s communication with the customer, among other factors. If a driver falls below a 4.6 overall rating, Uber provides improvement tips and may deactivate a driver’s account if the driver’s score remains below 4.6.

B. Holding

The Lowry court found that there was substantial evidence in the administrative proceedings record to support the finding of the Unemployment Insurance Appeal Board that Uber exercised sufficient control over drivers under the TSA to establish an employment relationship. Uber controls the drivers’ access to Uber’s customers, calculates and collects the fares, and sets the drivers’ rate of compensation. Furthermore, even though drivers may choose the route to use, Uber provides a navigation system, tracks the driver’s location on the app throughout the trip, and reserves the right to adjust the fare if a driver takes an inefficient route. In addition, Uber controls the type of vehicle used, precludes certain driver behavior, and uses its rating system to encourage and promote drivers to conduct themselves in a way that maintains “a positive environment” and “a fun atmosphere in the car.” Accordingly, the court found no reason to disturb the Board’s finding of an employment relationship between Uber and the drivers who use its app pursuant to the TSA.

C. Impact

As was noted in the August 2020 Tax Times article, New York courts and governmental entities generally employ the same “three-pronged” (or common law) test for employment status that the IRS uses. The three categories of factors that this test examines are financial control, behavioral control, and the relationship between the parties. In determining whether the driver in this case was an employee of Uber for purposes of the New York State Unemployment Insurance law, the court appears to have focused primarily on the behavioral control and financial control factors, while placing less emphasis on the nature of the contractual relationship created by the TSA. Based on the TSA’s empowerment of Uber to influence a driver’s behavior and to dictate the fares that drivers may charge (and collect), the court seems to have treated the TSA title as a misnomer.

Significantly, this holding regarding Uber drivers is expressly limited to application of the New York State Unemployment Insurance laws. Whether a different outcome would result if these same tests were applied in connection with enforcement of the states’ wage & hours laws or worker compensation statutes, even in the wake of the holding by the New York Court of Appeals in Matter of Vega, remains an open question.

II. California Voters Pass Prop. 22 Addressing Gig Workers

In late 2019, the California legislature enacted Assembly Bill 5 (AB 5), effective on January 1, 2020. The chief impact of AB 5 was to force companies marketing ride-hailing apps—such as Uber, Lyft, and DoorDash—to recategorize as employees drivers who use their respective app that they have been treating as independent contractors.

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There were outcries from many in the business community that the “ABC Test” in AB5 would cast many who have traditionally been treated as independent contractors as employees, such as freelance writers, cartoonists, and photographers. At the center of business leaders’ concerns was category B of the ABC Test, which generally requires that a service provider that is characterized as an independent contractor must perform services that are outside the usual scope of the service recipient’s business. In response, California enacted Assembly Bill 2577 (AB 2577) to exempt certain categories of professionals from the ABC Test.

Nonetheless, imposition of this category B to ride-hailing companies, as part of the general adoption of the ABC Test, was enormously disliked by the state’s burgeoning technology industry. Consensus coalesced among Silicon Valley companies around the need for a clear-cut exemption from the B category (though these app-based company contractor roles were exactly what AB5 was intended to change). They heavily lobbied for passage of Prop. 22, with several of the prominent Silicon Valley companies that market ride-hailing applications (notably, Uber and Lyft) providing strong financial support for the Prop. 22 effort—estimated to be over $200 million.7 On November 3, 2020, 58 percent of the voters going to the polls in California endorsed ballot Prop. 22.

As enacted into law under California’s ballot measure process, Prop. 22 deems app-based ride-hailing and delivery drivers to be independent contractors by exempting the performance of such services from the ambit of AB 5. As a corollary, however, Prop. 22 also entitles these independent contractor service providers to certain employee-like benefits. For example, ride-hailing companies must now pay drivers 120 percent of the prevailing local minimum wage for each hour the driver spends driving (but not for time spent waiting for a customer). This measure is similar in economic effect to the minimum wage requirement imposed in 2019 by the New York City Taxi & Limousine Commission. In addition, ride-hailing companies must provide those drivers who work at least 15 hours a week a stipend good for the purchase of health insurance coverage, with even more to drivers who work 25 hours a week. Furthermore, drivers must now also receive occupational accident insurance, along with coverage for medical expenses and disability benefits. They may not work more than 12 hours during a 24-hour period for the same ride-hailing company. Workplace discrimination is also expressly prohibited, and companies must develop sexual harassment policies, conduct criminal background checks, and mandate driver safety training.

Prop. 22 thus seems to have created a new hybrid status for drivers, a sort of “employee-lite,” but without the express protections afforded by the full status of being an employee. Those fuller employee protections include the applicability of federal and state wage & hour laws, the availability of Title VII and other remedial statutes addressing unlawful discrimination, and, significantly, the right to collectively bargain under the National Labor Relations Act (NLRA) and similar law.

III. U.S. Department of Labor Issues Final Regulations Defining “Independent Contractor”

On January 6, 2021, the U.S. Department of Labor (DOL) finalized the regulations it had issued in proposed form in September 2020 defining an independent contractor for purposes of determining applicability of the federal wage & hours laws requiring minimum wage and overtime payments under the Fair Labor Standards Act (FLSA). Prior to these regulations, the definition for FLSA purposes was based on judicial interpretations and related state statutes. The rule was expected to be effective as of March 8, 2021, but the Biden administration has delayed implementation until May 7 to allow further consideration and possible changes to the rule.8

7 LA Times, “Prop. 22 Passed, a major win for Uber, Lyft, Doordash. What happens next?” (November 4, 2020). 8 See, e.g., John Kingston, Biden administration formally delays independent contractor rule until May, Freightwaves.com (Mar. 3, 2021).

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https://www.dol.gov/agencies/whd/flsa/2021-independent-contractor

https://www.freightwaves.com/news/biden-administration-formally-delays-independent-contractor-rule-until-may#:~:text=In%20a%20move%20that%20had,federal%20law%20until%20May%207.&text=But%20the%20Biden%20administration%20immediately,implementation%20of%20several%20proposed%20rules.



The DOL rule9 uses an “economic reality” test to determine whether a service provider is in business for himself (and thus an independent contractor) or is economically dependent on a service recipient for work (and thus an employee) for purposes of the FLSA. Under the new rule, the two core factors most important in making this determination are:

i. The nature and degree of control over the work; and

ii. The worker’s opportunity for profit or loss based on initiative and/or investment.

The final regulations also point to three other factors that may serve as additional guideposts, especially if the two core factors do not point to the same classification. These factors are:

i. The amount of skill required for the work;

ii. The degree of permanence of the working relationship between the worker and the potential employer; and

iii. Whether the work is part of an integrated unit of production.

Under the regulations, the actual practice of the worker and potential employer is more relevant than what may be theoretically or contractually possible.

IV. Impact of the Pandemic and the CARES Act

To a significant extent, the COVID-19 Pandemic and the bipartisan federal response to it have overtaken the issue of whether gig workers should be afforded the benefits of employee status. For example, Congress made sure that the benefits of the Pandemic Unemployment Assistance Program (PUA) that it enacted under the CARES Act10 were open to gig workers—i.e., individuals, such as independent contractors, who would not otherwise be eligible for assistance from state unemployment insurance programs. As a matter of evolving workforce policy, addition of this feature to the PUA is consistent with both the Prop. 22 model (i.e., an independent contractor with benefits, including entitlement to be paid a minimum wage) and the more narrowly focused mandate issued by the New York City Taxi & Limousine Commission extending a minimum wage floor to ride-hailing drivers.

By the same token, the DOL regulations, if applied to these initiatives from California and New York City, seem to mandate a finding of employee status for ride-hailing drivers, at least for purposes of the FLSA. For example, it is hard to argue that a gig worker who is entitled by state or local law to a minimum payment for each hour of labor that (for now, at least) exceeds the minimum wage amount mandated under the FLSA is not entitled to the status of employee for FLSA purposes. Similarly, it is difficult to ascertain the extent to which a driver who must wait to be connected through a ride-sharing app with a potential customer and who must then accept a fare amount that the ride-sharing app sets (after skimming its own cut off the top) is not economically dependent on someone else’s business—i.e., that of the company that owns the ride-share app.

9 29 CFR Parts 780, 788, and 795, 86 Fed. Reg. No. 4, 1168 (Jan. 7, 2021).10 P.L. 116-136 (Mar. 27, 2020).

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Conclusion

The worker classification law is in a period of intense flux and evolution. As workforce policymakers struggle to adjust to the changing nature of work—as well as to catastrophes imposed by nature—entrepreneurs continue to apply their prodigious energy and talents to introducing new ways of interacting with and compensating those who provide services. Given the unsettled independent contractor vs employee landscape, lawyers will need to exercise creativity tempered with sensitive judgment. ■

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PRO BONO MATTERS

Marketing Conundrums for Virtual IRS Events

By Gina Ahn, Community Economic Development Services, Low Income Taxpayer Clinic, Los Angeles, CA

Introduction

Even though my first pro bono columns had “virtual” in their titles, I am not enamored with all things virtual. I am in fact skeptical, even distrustful, of the occasional HMO email encouraging the booking of a tele-health check-up. Exactly how is my internist supposed to check my pulse, blood pressure, and draw blood samples to run labs from a phone call? No, thank you. I’ll wait until I can come back into the doctor’s office and actually meet him face to face so he can knock my funny bone to make sure my reflexes are in fine order.

Ironically, the physical checkup may illustrate quite well how different the practice of law is from the practice of medicine. While physicians diagnose and treat physical ailments, tax lawyers diagnose and treat governmental tax “ailments” embodied in paper—notices, substantiation (or the lack thereof), and pleadings. There may be times when the Low-Income Taxpayer Clinic (LITC) client’s sole exhibit is her own testimony: the difficulty of evaluating the strength or weakness of the taxpayer’s testimony without fully witnessing facial expressions and body language is an “equal opportunity handicap” that clinicians, counsel, and judges face when evaluating credibility via Zoom.

The practice of tax law—or more specifically the practice of pro bono tax law—has clearly had to pivot and adjust to the current context. So shared below are a few short conversations with IRS Counsel, a Local Taxpayer Advocate (LTA), and Rutger’s new LITC clinic director.

IRS COUNSEL’S PERSPECTIVE—“I thought you were a voice phishing scam when you called.”

I asked three people from IRS Counsel’s National Settlement Day Cadre: Monica Koch,1 Sarah Sexton Martinez, and Peter McClary a key question: “Why don’t more pro se litigants take advantage of Settlement Days and the opportunity to get free legal counsel from LITC’s? I don’t get it?”

Monica Koch explained that one of the highest barriers to resolving tax disputes is distrust and skepticism. Peter McClary added, “When we ask [pro se litigants] after the fact, they usually say they thought it was a scam and could not believe it really was the IRS calling them.”

1 Tragically, Monica Koch died in late January 2021, but I have included her here because she was so clearly interested in the Service being able to help pro se litigants through the Settlement Days mechanism.

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https://www.irs.gov/newsroom/irs-chief-counsel-goes-virtual-with-national-settlement-days-helps-dozens-of-taxpayers-settle-their-tax-court-cases

https://www.irs.gov/newsroom/irs-chief-counsel-goes-virtual-with-national-settlement-days-helps-dozens-of-taxpayers-settle-their-tax-court-cases



It suddenly dawned on me. I have even chastised my own mother, “MOM, don’t worry. The IRS does not just call you out of the blue! They always send letters first.” I could easily imagine her simplifying my remark to “The IRS does not call you.” On top of that, if the taxpayer had experienced long call wait times only to be disappointed with an abrupt disconnect, the disbelief that the IRS could be on the other end of the line is quite understandable.

In a noisy world of competing sound bites, sometimes messaging ultimately falls to the lowest common denominator. When Nike says: “Just Do It” they have a multi-million-dollar budget to refine and influence the consumers’ decision-making behavior. When the IRS Counsel’s Office does it; it is a simple 1-page invitation letter written by tax lawyers, not marketers.

TAS LOCAL TAXPAYER ADVOCATE’S PERSPECTIVE—“It won’t reach the right people at the right time.”

I had another call with Michelle Breed, who serves as LTA for San Diego, CA. She organized a CA statewide VPSD on January 13–14, 2021 with all 7 LTA offices across the state of CA. Curious, I asked whether she was concerned whether there would be an overwhelming response. Typically, these events are centered around a city or region, not an entire state. An entire state of 39 million people seemed a bit much for 7 offices to handle. “Aren’t you worried that there may to be too many taxpayers wanting help, and there won’t be enough staff to handle the appointments?” Her response was surprising. If anything, her concern was the opposite, that the “word would not get out in time to the right people who need help.”

Curious about scheduling, I asked “How many appointments are you targeting? Or how much time are you allocating for each appointment?” She answered that she could only tell me what her office was doing since each office had the discretion to manage the event according to the needs of their region and staffing available. At San Diego, both she and a single Case Advocate initially assumed that they would deal with simple direct calls from taxpayers, allocating about 30 minutes to each call. As the appointments began to fill with tax representatives with “messy cases,” they changed the time allocated to an hour. As a result, San Diego managed about 24 appointments over the two-day event.

For an ordinary taxpayer, calling the IRS can be an enormously frustrating experience. Too often, it feels subjectively as if the IRS is trying to avoid the phone calls; even worse, sometimes they actually are! TAS’s 2018 Report to Congress reports that “the IRS has attempted to design [ACS] letters that artificially suppress the number of follow-up calls, even when the outcome is bad for the IRS and worse for taxpayers.”(emphasis added).2 What an amazing opportunity a virtual problem-solving day (VPSD) offers: to be able to have a human one-on-one interaction with an IRS employee troubleshooter instead of being forced to find the way through an endless maze of phone menu options with pre-recorded messages. Nonetheless, Ms. Breed’s main concern was that the people who need these days the most may not be able to take advantage of them.

LITC PERSPECTIVE—“The problem is timing. Our VPSD and VSD is around the same time as EIP2.”

Frank Agostino is a new adjunct clinic director for the Rutgers LITC in New Jersey. Coming from the private sector, he brings a refreshingly pragmatic perspective. For example, in the arena of event promotion, he understands how to send timely and targeted notices.

2 Vol. 1 at 54.

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https://www.taxpayeradvocate.irs.gov/contact-us/upcoming-events/problem-solving-days-archive/


https://www.census.gov/quickfacts/CA

https://www.taxpayeradvocate.irs.gov/reports/2018-annual-report-to-congress/



Most nonprofits (my clinic included) would normally use the most rudimentary free outreach methods: facebook posts or an email blast to partner social service agencies. Unfortunately, it is not the most impactful way to promote an event. Personally, my inbox is always too full. And I know when I receive an email blast from a partner social service agency, I usually give it 2 seconds to persuade me not to delete it. Frank, however, did not limit himself to the nonprofit “way of doing things.” Instead of relying on an existing email list, he took a more pragmatic approach and bought his own list of new people who may need IRS help. Apparently, there are companies who sell different types of lists created from public records. I had always wondered how AARP knew exactly when to mail out the “Welcome to AARP” package the exact year you turn 50 years old to the exact right address. Mystery solved; they bought it. And, apparently, one can also buy a federal tax lien list as well. The lien list is a spreadsheet with column headers for name, address, tax lien amount, and date of lien filing.

So to promote the NY–NJ VPSD 1/19–1/20/2021 event, Frank’s office purchased and mailed out over 4000 postcards and letters to individuals who have a federal lien between $10,000–$25,000. Genius! It apparently worked very well, because his office averaged about 2 calls a day inquiring about VPSD. But 4000 mailers! I worried (I tend to do that). 4000 targeted letters to individuals with an existing tax lien is quite a few, and who would not want free legal advice? Frank, however, was not at all worried. The event was co-sponsored by the NY County Lawyers Association (Pro Bono Program), Tax Assistance Center, Legal Services of New Jersey Tax Legal Assistance Project, and Rutgers Law School Federal Tax Clinic. Frank was sure there would be plenty of volunteers and that the pro bono community of New York and New Jersey, along with all the co-sponsors, would rise to the occasion.

So, naturally, my follow up question was, “Well then, what IS your biggest concern? If anything?” And he had two pragmatic answers: “Gina, you know my main concern is that I won’t have the [taxpayers contact info] far enough in advance to match the right volunteer to the right problem.” I understand his concern. The one uncontrollable element for these sort of events is the timing and response rate. Your program could execute everything right with letters to a targeted lien list, but there is no guarantee that recipients will open the letters. Even if they do, there is no guarantee they won’t mistake the event for a scam or as something just “too good to be true”.

The second obstacle Frank pointed out is one that no amount of marketing can solve: human nature. “The other problem is no one wants to pay attention to [a lien] until it’s a problem [a bank levy]. And even then [the event was in the middle of January] in the middle of EIP 2,3 so they’d rather ask about that than deal with something they’ve already been procrastinating about for a while.” Sigh. Yes. These are our people. We take them as they are. After all, they do have an IRS tax lien filed against them because they had failed to respond to a stream of notices about a balance due.

What Can I Do to Help?

In short, the incredible opportunity afforded for taxpayers to have a personal IRS interaction to get clarity, if not resolution to their controversies, via VSD or VPSD will require much more community involvement and publicity from trusted local sources of information. After interviewing the three different stakeholders and hosts involved in these events; it was striking that the one commonality was essentially a marketing and trust problem. So what does this have to do with you, dear reader? May I suggest that if you (or your firm) have relationships with local community news outlets or PR firms, you should consider becoming a

3 EIP 2 stands for the second round of impact payments, generally $600 for individuals and $1200 for couples. See Treasury and IRS begin delivering second round of Economic Impact Payments to millions of Americans, IR-2020-280 (Dec. 29, 2020).

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https://www.irs.gov/newsroom/treasury-and-irs-begin-delivering-second-round-of-economic-impact-payments-to-millions-of-americans

https://www.irs.gov/newsroom/treasury-and-irs-begin-delivering-second-round-of-economic-impact-payments-to-millions-of-americans



relationship broker for your local VPSD or VSD event. If you have media contacts and would like to help overcome the “IRS scam” messaging problem, feel free to initiate a conversation with your local LITC. If you happen to be in Los Angeles, please contact me (Koreatown Youth and Community Center LITC hosts a quarterly VPSD!). If you are in a leadership position at a multicultural bar association, perhaps some members of your bar association could contextualize, translate, and suggest community news outlets or post information that their communities will see to promote the event(s). For example, many immigrant communities have community discussion boards (whether virtual or a physical corkboard at the local ethnic grocers); foreign language radio stations; foreign language print newspapers; and foreign language “yellow pages” that function as the community “water cooler.” If you have ever lived abroad as an American ex-pat, you know exactly what I mean. There are just certain unofficial places where information can be found when the country in which you live does not communicate in your native language.

Finally, the National Cadre for Settlement Days will have a National Settlement Month this March 2021 with VSDs in all 50 states. The American Bar Association, LITCs and the pro bono community will work to assist taxpayers in areas with gaps in service. Interested ABA member volunteers can contact Megan Newman at [email protected]. LITCs should contact their local Chief Counsel offices to discuss the event. There is no expectation of continued representation. ■

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https://www.taxpayeradvocate.irs.gov/about-us/low-income-taxpayer-clinics-litc/#finder

mailto:[email protected]




PRO BONO MATTERS

Military State Tax Guide Now Available

This winter, in addition to the annual Adopt-A-Base training program, the Tax Section undertook a new pro bono project to assist military service members. The new project involves annually updating a state-by-state military tax resource guide.

A number of years ago, the Navy JAG created the State Tax Guide, which briefly summarizes each applicable state’s individual income tax filing requirements and law, with a particular emphasis on issues for members of the military. The Navy JAG then researched all of the states’ laws and updated the Guide each year to keep it current. Due to resource constraints, the Navy JAG has not updated the Guide since the 2018 tax year. While the document was still a useful resource to the Military VITA sites, it was losing value over time as the laws in various states changed.

Military VITA sites and other VITA sites found the guide to be incredibly useful because military members volunteering at VITA sites often are asked to prepare returns for multiple states. Because the IRS only provides federal tax filing training, volunteers do not receive comprehensive training on state tax law provisions. The Guide thus served as a quick reference resource for volunteers faced with an unfamiliar state return. Losing the annual update to the Guide proved to be a big loss for the Military VITA community.

A Tax Section member who had previously used the Guide when volunteering at a Military VITA site reached out to Sheri Dillon, Vice Chair for Pro Bono for the Tax Section, thinking that the Tax Section might be the right partner to annually update the Guide. Sheri agreed, and Jamie Steele, a Vice Chair for the Pro Bono & Tax Clinics Committee, volunteered to lead the project for the Tax Section. Under Jamie’s leadership, dozens of volunteers from the Tax Section’s membership (listed on the second page of the Guide) were able to create an updated Guide just in time for filing 2020 tax returns. Volunteers adopted each state with a state income tax and provided appropriate updates for use by military members involved in the VITA program. The updated Guide was a collaborative effort and demonstrates what the tax community can achieve when it focuses on a worthy task.

The Tax Section circulated the Guide to Susan Mitchell, Executive Director of the Armed Forces Tax Council, to help share the resource with legal services offices and other Military VITA personnel. She expressed her gratitude saying, “On behalf of the Department of Defense, we are so thankful for this comprehensive resource. … Without a doubt, the ABA Taxation Section’s Military State Tax Guide will be an invaluable resource for our members. And perfect timing at the start of the tax season!”

Updating the guide on an annual basis will be an ongoing pro bono project for the Tax Section. We welcome volunteers to join the team at any time, but the need will be particularly acute in the fall leading up to a new filing season. This volunteer opportunity is ideal for new attorneys, retired attorneys, non-attorneys, and anyone in between. It can also be a group project at a firm or at a law school. Student members of the Section are invited to volunteer to assist. No prior experience is necessary, and the information is easily attainable by researching online. If you would like to be a part of this project next year, please contact Meg Newman, Chief Counsel for the Tax Section at [email protected]. Meg will be happy to add you to the team. ■

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https://www.americanbar.org/groups/taxation/tax_pro_bono/assist_service_members/

https://www.americanbar.org/content/dam/aba/administrative/taxation/probono/military-state-tax-guide2021.pdf




YOUNG LAWYERS CORNER

Encouraging Work and Eliminating Poverty: Comparing American and Canadian Family Tax Benefits

By Matthew Pick, Harvard Law Class of 2022

Taxes are often used to promote a smorgasbord of social policies. Governments throughout history, for example, have used tax rules to promote their concept of the ideal family. Some rather draconian taxes have been enacted to promote population growth. For example, ancient Rome taxed unmarried men and women and married couples without children.1 More recently, Ceausescu’s Romania taxed families with fewer than five children, in addition to using an array of other authoritarian policies to promote population growth. The result in Romania led to many children being abandoned to orphanages.2 Modern western democracies have used softer tax incentives and have focused on promoting work and alleviating childhood poverty. Nonetheless, colliding social policy goals can beget policies that frustrate one another.

Colliding Public Policy Goals

In Autumn 1931 sociological researchers descended on the small Austrian town of Marienthal in order to study the effects of chronic and widespread unemployment following the collapse of the town’s major employer.3 While the study chronicled many families’ struggles with material well being—having enough to eat, clothing to wear etc.—the final chapters discuss the collapse in civic life. The authors noted that residents of Marienthal were less likely to vote, join clubs, or even borrow books from the library, even though Marienthalites without a job had more time to engage in all of these activities. The lack of work began to infect the psyche of the community in peculiar ways. The men who by and large did not engage in labor walked slower through the streets than their wives who spent their days working in the home, albeit unpaid. Hopelessness, not anger, reigned supreme. Upon the conclusion of the study, the authors stated flatly, “[w]e entered Marienthal as scientists; we leave it with only one desire: that the tragic opportunity for such an inquiry may not recur in our time.”4

This study raises a question that both Canada and the United States have struggled to answer. North America has numerous cities that struggle with the societal decay that comes with chronic unemployment. Consider the Middletown of J.D. Vance’s Memoir following the slow decline of the steel industry.

1 1 Harry THursTon Peck, HarPer’s DicTionary of classical liTeraTure anD anTiquiTies 38 (1897) (“Aes uxorium. A tax paid by men who reached old age without marrying, and first imposed by the censors in B.C. 403”).2 See Daniela Dr ghici, A Personal View and Timeline of Women’s Sexual and Reproductive Lives in Romania, 9 analize—J. of GenDer & feminisT sTuD. 148, 150–53 (2017).3 Christian Fleck, Introduction to marie JaHoDa eT al., marienTHal: THe socioGraPHy of an unemPloyeD communiTy (Routledge 2017) xii (1971).4 Id. xii (quoting page 98).

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[In Middletown] … [y]ou watch as teenagers find themselves in dire straits, … the statistics are stacked high against them, and many succumb. To crime and early death at worst—to domestic strife and welfare dependency at best.5

Or consider Newfoundland’s coastal villages following the cod fishing moratorium.

Economically, the moratorium was savage. … Culturally, the hit was greater. … The historic coastal communities [of Newfoundland] … are now … shells of their former being, places to visit more than to live in, and sirens for tourists. Heartstoppingly de-animated vessels of nostalgia.6

To best promote healthy, vibrant and viable communities, how should Canada and the United States deal with their very own Marienthals? When it comes to creating a tax policy, the two goals of alleviating poverty and encouraging work can conflict with one another. A policy that puts the alleviation of poverty at the fore may discourage low-income families from employment. On the other hand, a policy that requires that parents work to receive any benefit will provide little or no benefit to the most destitute families. This is essentially the trade-off that Canadian and American policy makers have had to wrestle with when designing family tax credits. The key U.S. tax policy is the Earned Income Tax Credit (EITC), and the key Canadian tax policy is the Canada Child Benefit (CCB).7

In the United States, low-income taxpayers may qualify for the EITC, a program that was created as assistance for the working poor. It provides a subsidy to earned income by reducing the tax liability that would otherwise apply and, in some cases, provides a direct payment to the taxpayer. While the program is available to tax filers with no dependents, the credits are considerably higher for those who do have dependents.8 The EITC is a “refundable” credit, meaning that eligible persons who owe no taxes or whose tax liability is less than their EITC will receive all or part of the EITC as a payment. As the name suggests, however, the EITC only supplements earned income. A taxpayer with dependents who relies on welfare or Social Security for income will receive no benefit from the EITC. Those amounts are included in the adjusted gross income, along with any wages earned, so may push income for a low-income worker above the threshold for the EITC.9

In Canada, Canadian residents who are primarily responsible for a child under 18 are eligible for the CCB, based on the “adjusted family net income” as reported on the last year’s tax return. This provision ensures the benefit goes to those who earn the least, with the maximum payment per child ($6765 for a child under 6 and $5708 for children between 6 and 18) going to all who have an income below a certain

5 J.D. Vance, Hillbilly Elegy: A Memoir of a Family and Culture in Crisis (HarperAudio 2016) Ch. 15 at 11:32.6 CBC News: The National – How the fishery moratorium savaged Newfoundland | Rex Murphy.7 There are, of course, other programs in both countries. Americans can use Section 8 housing vouchers and, if they satisfy a work requirement, use the supplemental nutritional assistance program (SNAP). See 42 USCA § 1437f (housing vouchers); SNAP, U.S. Dep’t of Agric. There are also state welfare benefits, often with work requirements. Social Security also comprises a form of unemployment assistance for millions of Americans. See e.g. Terrence McCoy, Disabled or Just Desperate?: Rural Americans turn to disability as jobs dry up, WasH. PosT (Mar. 30, 2017). Canadians can use various provincial programs. Ontarians with no working income can enter an income support program if disabled. Ontario Disability Support Program – Income Support, onTario minisTry of cHilDren, communiTy anD social services. there is a monthly supplemental benefit for workers in need as well. Monthly Ontario Works Amounts, ciTy of ToronTo.8 For example, compare a single parent with one dependant who had $15000 in earned income with a single person with no dependents with the same earned income in 2019. The single parent would receive an estimated EITC amount of $3526, while the individual without a dependent would only receive an EITC amount of $42. See IRS, Use the EITC Assistant.9 See Social Security Administration, Social Security Programs in the United States—Earned Income Tax Credit, at 104–06.

31

https://www.youtube.com/watch?v=QTF68MAujaw

https://www.fns.usda.gov/snap/supplemental-nutrition-assistance-program

https://www.fns.usda.gov/snap/supplemental-nutrition-assistance-program

https://www.washingtonpost.com/sf/local/2017/03/30/disabled-or-just-desperate/

https://www.mcss.gov.on.ca/en/mcss/programs/social/directives/odsp/is/6_1_ODSP_ISDirectives.aspx

https://www.toronto.ca/community-people/employment-social-support/employment-support/employment-seekers-in-financial-need/ontario-works-rates/

https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/use-the-eitc-assistant

https://www.ssa.gov/policy/docs/progdesc/sspus/ernintax.pdf



amount ($31,711 in 2021).10 No distinction is made between earned income, social benefits or investment income. While there is no phase-in, there is a gradual phase-out to ensure wealthy Canadians do not receive the benefit. Thus, a Canadian with no earned income and very little other support can receive the maximum CCB per child, while an American with no earned income cannot receive the EITC, even if the American’s family has several children living in poverty.

Program Origins

The differences described above—an EITC that requires means testing and is increased for families with more earned income versus a CCB that provides the largest benefit to all families, on a per-child basis, that are below a certain income threshold—stems from the purposes driving the enactment of the two laws. In the United States, the EITC’s early champions fervently believed in the inherent dignity of work. In contrast, the CCB is the progeny of a long line of government tax benefits with the sole stated purpose of providing financial assistance to low-income families.11

The first Canadian family allowance, enacted in 1945, was the brainchild of Father Leon Lebel, a Quebec Jesuit priest who claimed that Canadians would move to the United States for better opportunities without such a benefit.12 Speeches at the time, however, urged passage to provide a minimum standard of living for children and promote equality of opportunity. At the outset, there was no means testing and nearly all families in Canada received the benefit. By 1993, the family allowance had been joined by two child tax credits– one refundable and one non-refundable.13 It was a cumbersome program.

This mismatched troika of child benefits was inequitable, complicated and surely incomprehensible to most parents. … The core aims of child benefits—reducing poverty and helping parents with their childrearing costs—were in tension.14

Canada replaced the three programs in 1993 with a single refundable Child Tax Benefit that decreased as incomes rose and then later in 1998 instituted a similar program that included a basic benefit for most Canadians and an additional targeted benefit for low-income families. The Harper government in 2006 added two new child benefits in 2006—a flat, taxable benefit available to all and a non-refundable credit—that lasted no longer than the Harper government. In 2015, the Trudeau government restored the principles of the 1993 benefit, with the main difference being that the CCB provides no benefit for high-income Canadians. The phase-out was a flagship promise of Trudeau in 2015.15 Thus, this history shows that tax benefits in Canada have largely stayed universal. Canada’s child benefits only have a phase-out and have never required earned income to receive the maximum benefit (except, arguably, in the case of the relatively short-lived non-refundable tax benefits).

The history of the U.S. EITC is more complicated. The EITC has the joint goals of helping poor families and encouraging welfare recipients to work.16 This has left many American families in the paradoxical

10 Canada Revenue Agency, Canada Child Benefit: how the benefit is calculated.11 Canada Revenue Agency, Canada child benefit: Overview.12 roberT DouGlas Weaver, unDersTanDinG THe PresenT by exPlorinG THe PasT: an analysis of family alloWance anD cHilD care in canaDa 17–19 (2000).13 ken baTTle, caleDon insTiTuTe of social Policy, cHilD benefiTs in canaDa: PoliTics versus Policy, 3 (2015).14 Id. at 4.15 “Our Canada Child Benefit helps families that need it. [Then federal Conservative party leader] Harper and [then federal New Democratic Party leader] Mulcair would keep sending cheques to millionaires.” @JustinTrudeau, TWiTTer (Sept. 17, 2015, 7:21 PM).16 marGoT l. cranDall-Hollick, THe earneD income Tax creDiT (eiTc): a brief leGislaTive HisTory, 2–3 conGressional researcH service (2018).

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https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-child-benefit-overview/canada-child-benefit-we-calculate-your-ccb.html

https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-child-benefit-overview.html

https://twitter.com/justintrudeau/status/644682646195277824



situation of being too poor to receive child benefits.17 In the 1960s-70s, U.S. legislators focussed on moving Americans away from welfare and into work. Louisiana Senator Russell Long proposed a “work bonus” in order to encourage more low-income Americans to choose paid employment over welfare.18 He argued that such a bonus would level the playing field between welfare and paid employment, and prevent taxes pushing people onto welfare. This was part of a long-term denigration of welfare as humiliating. Long stated that “it is far better to provide the working man some tax relief than it is to provide him with welfare. … It is far more dignified and the benefits are entirely work-related.”19 Florida Senator Lawton Chiles expressed his delight with the work bonus compared to welfare that “take[s] away a mans pride [in labor].”20 When the first “earned income credit” was enacted in 1975, the Senate Finance Committee report outlined three goals: (1) providing relief to families who hurt by rising food and energy prices; (2) providing an additional incentive for low-income people to work; and (3) stimulating the economy through additional spending.21 The credit was intended mostly for couples with children since such families were most likely to be using federal welfare programs, which were presumed to provide the strongest disincentive for work. Over the following decades, the EITC became more generous and broader. In 1990, the value of the credit was increased for families with more children, indicating that reducing childhood poverty had become at least a partial justification for the program.22 A paltry benefit for childless workers was added in 1993—even in 2018, about one-fifth of EITC claimants had no children, but received only $2 billion in benefits, compared to a total EITC of $64 billion. These EITC expansions occurred against the backdrop of welfare-to-work reforms that forced low-income parents to work to receive other social assistance.23 What was once a mere afterthought comprising less than half of one percent of the $300 billion in federal outlays in 1975 now costs over $60 billion and comprises one of the largest federal cash transfers.24

Non-Income Qualifications

In general, the EITC is more flexible than the CCB in terms of the relationship between the child and the claimant, in that relatives of the child, such as older siblings, may claim the credit so long as the relative lives with the child. This creates a situation where many individuals could potentially claim the same child as a EITC dependent.25 This can ensnare the very taxpayers the measure is intended to help. Furthermore, the regulations governing who can claim a dependent for EITC purposes are at best difficult to understand and at worst, Kafkaesque. Taxpayers may mistakenly claim the EITC benefit, only to have it taken away by the IRS later, possibly incurring a significant penalty. An earlier statistic touted by the IRS estimated

17 There were at least 13 million working-age Americans on disability as of 2017. The vast majority of these Americans do not have earned income. cenTer on buDGeT anD Policy PrioriTies, cHarT book: social securiTy DisabiliTy insurance 19 (2019).18 118 conG. rec. 33,010 (1972) (statement of Sen. Long). In its initial conception, the work bonus would provide 10% on every dollar that a family earns up to $4000, then would be phased out at 25%. The percentage was chosen to approximately accord with the total social security contributions paid by low-income workers (then about 12%, evenly split between employer and employee).19 Id.20 Id. at 33011 (statement of Sen. Chiles).21 s. reP. no. 94-36, at 11 (1975).22 Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508, § 11111 (1990).23 See generally roberT a. moffiTT, THe brookinGs insTiTuTion, from Welfare To Work: WHaT THe eviDence sHoWs (2002).24 IRS, Table 2.5: reTurns WiTH earneD income creDiT (2019).25 IRS, Pub. 596: earneD income creDiT 10 (2020).

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https://www.irs.gov/pub/irs-soi/18in25ic.xls



that about a quarter of all EITC claims are incorrect.26 It is likely that most incorrect claims stem from the complexity of the rules.27

In contrast, the CCB provides a benefit to a wider group of people, including temporary residents who have lived in Canada for more than 18 months and refugees before they have had their claim adjudicated.28 The CCB generally requires that the benefit follow custody of the child. One primary caregiver (in the case of a opposite-sex couple, the female parent) claims the benefit, based on who the child spends more time with. The Canada Revenue Agency will also divide the CCB evenly between two parents that share custody of children. These requirements may make it difficult to cover children who grow up in multi-generational homes that share much of the childcare responsibilities. Nevertheless, the lack of flexibility can make it simpler for taxpayers to determine if they are eligible for the benefit. This has led to a much lower rate of incorrect claims in Canada than the US.29

Comparing the Benefits under the Canadian and U.S. Programs

Let’s consider two hypothetical taxpayers in 2020.30 Andrea is a 30-year old single mother of a 5-year old daughter living in Forks, Washington, a state with no state income tax. Across the border in Bamfield, British Columbia lives Carolyn, another 30-year-old single mother of a 5-year-old daughter. Neither Andrea or Carolyn receive any child support and both have sole custody of their daughters. Both Andrea and Carolyn are employed full time and earn 30,000 USD.31 Andrea files as Head of Household in the United States and receives the EITC for her household. Carolyn, like all Canadians, files her taxes independently. She does not have any deductions outside of her deduction for her dependent.32 Carolyn receives the CCB. For the purposes of calculation, assume that both Carolyn and Andrea also fulfill any non-income requirements for their respective programs.

Andrea will qualify as a head of household for a standard deduction of $18,650. She will receive a $2,000 refundable child tax credit that eliminates the rest of her federal income tax liability and provides an $865 refund.33 Washington has no state income tax.34 In addition, Andrea will receive an EITC of $1,879. While Andrea will owe no income tax over the course of the year, she will still have FICA contributions withheld

26 The IRS webpage on EITC fraud claims is apparently no longer available. Some conservative commentators have claimed that this flexibility leads to “benefit shopping” whereby families could choose a relative to claim the EITC to procure an inflated credit. See e.g. Robert Rector & Jamie Hall, Reforming the Earned Income Tax Credit and Additional Child tax Credit to End Waste, Fraud, and Abuse and Strengthen Marriage, THe HeriTaGe founDaTion (Nov. 16, 2016).27 Robert Greenstein et al., Reducing Overpayments in the Earned Income Tax Credit, Center on Budget and Policy Priorities (Jan. 31, 2019).28 Canada child benefit: Who can apply, canaDa revenue aGency; Immigration and Refugee Protection Act S.C. 2001, c.27 s. 95(2).29 See, e.g., Ottawa on Lookout for Child Benefit Fraud, cTv neWs (0.25% fraud rate for child benefits in Canada). But see Hamilton man fined more than $155K for fraudulent child tax benefit claims, Canadian Broadcasting Corporation (man committed benefit fraud by creating fake children).30 This analysis will only consider cash tax benefits. Some of the calculators are more readily available for 2019, but there were no major tax changes in the relevant jurisdictions, so there should be minimal error.31 The USD/CAD exchange rate has hovered around 1.33 for the past few years so this assumes that Carolyn earns 40,000 CAD.32 No deductions is a far more realistic assumption for Andrea than Carolyn. Low-income Canadians can claim deductions, for example, for tuition. Eligible Tuition Fees, canaDa revenue aGency).33 The IRS Calculator for 2020. provides Andrea a standard deduction of $18,650 and taxable income of $11,350, placing her in the 10% tax bracket. She would receive a $2000 child credit, which would eliminate her $1,135 tax liability. The remainder of this tax credit is refundable since 15% of Andrea’s earned income of $30,000 is $4,500 more than the $2,000 credit, resulting in a $865 refund, in addition to a refund of any taxes that she paid over the year. I.R.C. § 24.34 Income Tax, DeParTmenT of revenue WasHinGTon sTaTe. Most states have a state income tax, and some have a state EITC. See, e.g., Maine: Me. Rev. Stat. tit. 36, § 5219-S (1).

34

https://www.cbpp.org/research/federal-tax/reducing-overpayments-in-the-earned-income-tax-credit

https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-child-benefit-overview/canada-child-benefit-before-you-apply.html

https://laws-lois.justice.gc.ca/eng/acts/i-2.5/FullText.html

https://www.ctvnews.ca/ottawa-on-lookout-for-child-benefit-fraud-1.233803

https://www.cbc.ca/news/canada/hamilton/hamilton-man-fined-more-than-115k-for-fraudulent-child-tax-benefit-claims-1.5094179

https://www.cbc.ca/news/canada/hamilton/hamilton-man-fined-more-than-115k-for-fraudulent-child-tax-benefit-claims-1.5094179

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-32300-your-tuition-education-textbook-amounts/eligible-tuition-fees.html

https://apps.irs.gov/app/tax-withholding-estimator/about-you

https://dor.wa.gov/taxes-rates/income-tax



(Social Security 6.2% and Medicare1.45%) of 7.65%, or $2,295 ($191.25 per month).35 After taxes, FICA contributions and EITC credits, Andrea would have an after-tax income of $30,449. Any refund Andrea receives for withheld taxes, her refundable child credit and her EITC credit will come to her in one fat check early in the following year.

In contrast, Carolyn will owe income taxes every month to both the federal and provincial governments, which will be deducted at source. TurboTax calculations show that she will owe 1819.58 CAD ($1364.69) to the federal government and 897.67 CAD ($673.25) to the provincial government. Carolyn will also have to contribute 5.1% of earned income to the Canada Pension Plan (1861.50 CAD or $1396.13)36 and 1.62% to Employment Insurance (648 CAD or $486).37 In total, Carolyn will pay CAD 5226.75 ($3920.06) over the course of the year in taxes and contributions. Carolyn would receive 515.39 CAD monthly in Canada Child Benefit payments. In addition, Carolyn will receive 133.33 CAD monthly in B.C. Early Childhood Tax Benefit payments. Carolyn will also receive 168.08 CAD quarterly in GST/HST credits, and 87 CAD quarterly in BC climate action tax credits.38 This totals 8,804.96 CAD per year ($6603.72). Taking into account taxes, CPP and EI contributions, and credits, Carolyn will have an after-tax income of 41,376.97 CAD ($31,032.73).

Carolyn will be in a net better position than Andrea, but the difference is not huge –$583.73 or a little less than 2% of their respective gross incomes. Carolyn will have significantly more transactions with the government. This may make the various programs less administrable and may also present logistical difficulties and check cashing fees for the underbanked and transaction fees for the overbanked. In general, Andrea will receive more tax relief and a much smaller EITC payment. Carolyn, in contrast, will pay provincial and federal taxes over the course of the year but receive more benefits over the course of the year. Since money is fungible, it probably matters very little to a low-income taxpayer whether or not they receive assistance in the form of government benefits or tax relief.

Timing of Payments

Although the magnitude of payments and taxes are almost a wash between Carolyn and Andrea, the timing of the payments is not. In the United States, an EITC tax refund provides a significant annual lumpsum to low-income families. Carolyn will likely receive a tax refund for overcontributions spread across the year.39 These refunds can have a wide array of impacts. For some who owe balances to the IRS, the entire tax refund, including EITC payments, will be applied to their tax debts.40 In these cases, the advantage of a lumpsum refund is lost. In the absence of tax debts, taxpayers may use their refunds for one-off expenses, including paying court fees to file for bankruptcy41 or paying back non-tax debts accrued over the course

35 https://www.ssa.gov/OACT/COLA/cbb.html.36 Canada Revenue Agency announces maximum pensionable earnings for 2020, canaDa revenue aGency. The first $3500 of income is exempt from CPP contributions.37 EI premium rates and maximums, canaDa revenue aGency.38 Calculator was used to arrive at this calculation. Other provinces have different child tax credits.39 A Canadian taxpayer can file form T1213 (or its provincial equivalent) to reduce the tax deducted at source. T1213 Request to Reduce Tax Deductions at Source, canaDa revenue aGency, but few do so.40 IRS, Refund Inquiries.41 See generally Tal Gross, Matthew J. Notowidigdo & Jualan Wang, Liquidity Constraints and Consumer Bankruptcy: Evidence from Tax Rebates, 96 rev. of econ. & sTaTisTics 431 (2014).

35

https://www.ssa.gov/OACT/COLA/cbb.html

https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2019/cra-announces-maximum-pensionable-earnings-2020.html

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-deductions-contributions/employment-insurance-ei/ei-premium-rates-maximums.html

file:https://www.canada.ca/en/revenue-agency/services/child-family-benefits/child-family-benefits-calculator.html

https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t1213.html

https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t1213.html

https://www.irs.gov/faqs/irs-procedures/refund-inquiries



of the year.42 Paradoxically for a program intended to encourage paid work, some Americans may use their EITC refund to extend a period of unemployment falling around the time of their tax refund.43

Canada smooths payments across the year, which may allow for more predictable budgeting and less reliance on high-interest credit. Nevertheless, for certain groups of people, receiving money even as infrequently as once a month can present risks. Paramedics in Vancouver, Canada report seeing an increase in drug overdoses on the day of the month when social assistance checks are deposited.44 In the United States, mortality increases in the first week of the month (closer to when Social Security checks are issued) than in the last week of the month.45 While issuing monthly benefit checks may solve some of the financial problems that low-income households have, it is not particularly popular. In the past, American taxpayers have had the option of receiving a portion of their estimated EITC along with their paycheck over the course of the year.46 Even though this would give EITC recipients money sooner, very few (~2%) choose this option.

Some behavioral economists consider the lumpsum nature of EITC payments a positive since taxpayers see tax refunds (and EITC payments) as a different type of income and are more likely to use them to pay for large purchases. In effect, the single payment acts as a savings plan over the course of the year, forcing self-control and allowing taxpayers to make significant financial moves that they could not have done otherwise.47 Whether or not a single lumpsum for family benefits is a positive thing probably depends mostly on what it replaces. If the lumpsum replaces a savings account, enforcing financial discipline on recipients, then an annual payment is preferable. If the lumpsum is used to pay off payday loans that would not have been taken had the benefit been paid monthly, then more frequent payments are preferable.

Marginal Tax Rates

What if Carolyn and Andrea were offered promotions? They would need to evaluate if it would be worthwhile to take the promotion based on their particular circumstances. The drawbacks of the promotion—additional time at work, additional stress, etc.—must be weighed against the additional income. These decisions are inherently personal, with multiple factors. A rational taxpayer would, however, consider any additional tax they would pay to determine the net income they would receive. Carolyn and Andrea would consider not only the additional taxes due but also any benefits foregone because of the additional income. They are both in the “phase-out” of benefits, so any additional money will be subject to clawbacks.

Since Andrea’s child tax credit is refundable, she will not have additional income tax liability but will lose her refundable benefit dollar-for-dollar, effectively making the income subject to her marginal tax rate of 10%. Andrea will also owe the 7.65% FICA tax on any additional earned income. Since Andrea is in the EITC phase-out portion, her EITC will be clawed back at 15.98%.48 Andrea’s effective tax rate on the raise is thus 33.63%, a rate that ordinarily applies to those with more than $200,000 of ordinary income.

42 Ruby Mendenhall et al. The Role of Earned Income Tax Credit in the Budgets of Low-Income Households, 86 social sci. rev. 367, 375 (2012). See also vance supra note 9, Conclusion 4:36 (noting that tax refunds were “the ultimate backstops” for poor families).43 Sara LaLumia, The EITC, Tax Refunds, and Unemployment Spells, 5 am. econ. J. econ. Pol. 188, 188 (2013). 44 briTisH columbia cenTre on subsTance abuse, THe cHeque Day sTuDy communiTy imPacT sTaTemenT 21 (2019).45 David P. Philips, Nicholas Christenfeld, & Natalie M. Ryan, An Increase in the Number of Deaths in the United States in the First Week of the Month, 341 neW enG. J. meD. 93, 93 (1999). 46 Jennifer L. Romich & Thomas Weisner, How Families View and Use the EITC: Advance Payment Versus Lump Sum Delivery, 53 naT’l Tax J.47 Id.48 § 32(b)(1).

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https://www.jstor.org/stable/pdf/41789516.pdf



Carolyn’s wide array of benefits are subject to different clawbacks. She will pay additional income taxes (and EI/CPP contributions, since she is not yet at the maximums for those benefits) on any additional income. Her marginal federal and provincial tax rates are 15%, and 5.06%, respectively. Her CPP and EI rates total 6.72%. Her CCB will be phased out at 7%.49 Her GST/HST tax credit will be clawed back at 5%.50 She has not yet reached the maximum on her B.C. Early Childhood Tax Benefit (CAD 100,000), but her Climate Action Tax credit will clawback at 2% when she reaches the maximum (CAD 41,706). Carolyn will thus face a marginal tax rate on the raise of 38.78%, a rate ordinarily applicable to Canadian incomes of considerably more than CAD 100,000.51

Carolyn thus faces a higher effective marginal tax rate than Andrea. Both are faced with far higher rates on the additional income than they might expect from their ordinary tax rates. Interestingly, this means that they both fall into a category that Senator Long wanted to avoid—one in which the economic calculation falls on the side of retaining current benefits rather than accepting additional paid employment.

Proposals for Different Family Benefits in Both Countries

In the United States, the Center for Budget and Policy Priorities has proposed a system to replace the child tax credit that is more like the CCB.52 In exchange for his support for the 2017 tax legislation, Marco Rubio proposed a significantly enhanced child tax benefit that would be refundable from the first dollar.53 The $1.9 trillion COVID-19 relief bill before Congress (the House may vote on passage of the American Rescue Plan Act, as amended by the Senate, as early as the week of March 8) expands the U.S. child tax credit to $3000 per child and $3600 for children under six years old and makes the credit fully refundable for 2021.54 It also instructs the IRS to establish a program to provide advances on the credit through monthly installments. Similarly, during the 2019 Canadian general election, party platforms reflected a relatively narrow set of changes to the CCB, possibly indicating political consensus about changes. The governing center-left Liberal Party created the current CCB version. Ironically, it offered the most substantive proposal to increase the benefit by $1000 for children under the age of 1.55 The right-leaning Conservative Party did not propose CCB changes but did call for a refundable tax credit for children to take arts classes or sports.56 Since this would be creditable at 15% long after the expenses were incurred, there would likely be little uptake from low-income households. The left-leaning New Democratic Party platform included mention of a universal income pilot that would potentially replace the CCB.57

Conclusion

Canada and the United States both use the tax code to promote work among poor families and lift children out of poverty. Whether or not the U.S. EITC or the Canadian CCB is the better program is a value judgement. Should the primary goal of low-income family tax credits be encouraging work or should it be providing financial relief to the most destitute? Decades ago, Canadian Prime Minister William Lyon Mackenzie King and Louisiana Senator Russell Long answered this question differently. Their two countries still do. ■

49 See supra n. 17.50 Goods and services tax/harmonized sales tax credit - calculation sheet for the July 2020 to June 2021 payments (2019 base year), canaDa revenue aGency.51 Canadian income tax rates for individuals – current and previous years, canaDa revenue aGency.52 arloc sHerman, cenTer on buDGeT anD Policy PrioriTies, canaDian-sTyle cHilD benefiT WoulD cuT u.s. cHilD PoverTy by more THan Half (2018).53 Jeff Stein, What Marco Rubio got for his Tax Vote, THe WasHinGTon PosT (Dec. 19, 2017).54 See, e.g., Yelena Bosovik, Senate Passes Latest COVID-19 Stimulus Bill, BKD CPAs & Advisors (Mar. 8, 2021).55 liberal ParTy of canaDa, forWarD: a real Plan for THe miDDle class 9 (2019).56 conservaTive ParTy of canaDa, anDreW scHeer’s Plan for you To GeT aHeaD 10–11 (2019).57 neW DemocraTic ParTy of canaDa, a neW Deal for PeoPle: neW DemocraTs’ commiTmenTs To you, 60 (2019).

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https://www.canada.ca/en/revenue-agency/services/child-family-benefits/goods-services-tax-harmonized-sales-tax-gst-hst-credit/goods-services-tax-harmonized-sales-tax-credit-calculation-sheet-july-2020-june-2021-payments-2019-tax-year.html

https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html

https://www.washingtonpost.com/news/wonk/wp/2017/12/19/what-marco-rubio-got-for-his-tax-vote/

https://www.bkd.com/alert-article/2021/03/senate-passes-latest-covid-19-stimulus-bill



YOUNG LAWYERS CORNER

Winners of the 20th Annual Law Student Tax Challenge

The Section is pleased to announce the winners of the 20th Annual Law Student Tax Challenge, a contest designed to give students an opportunity to research, write about, and present their analyses of a real-life tax planning problem. The competition is open to both J.D. and LL.M. law students. For the first time in the 20-year history of the competition, each team presented their oral arguments virtually before a panel of distinguished tax lawyers and tax court judges, with the winners announced at a virtual awards ceremony. Louis Couture and Michael Rios of Temple University Beasley School of Law were awarded first place in the J.D. Division. Their coach was Alice Abreu. Isaac Leon and Stefanie Pupkiewicz of the University of Denver Sturm College of Law were awarded first place in the LL.M. Division. Their coach was Sabrina Strand.

The other awardees from this year’s competition include:

J.D. Division

1st Place:Louis Couture and Michael RiosTemple University Beasley School of Law

2nd Place:Casey Bond and Brooks LindbergUniversity of Utah S.J. Quinney College of Law

3rd Place:Steven Cooper and Tyler EddingtonUniversity of Oregon School of Law

Best Written Submission:Casey Bond and Brooks LindbergUniversity of Utah S.J. Quinney College of Law

Semi-Finalists:Brett Emanuel and Allison MarshallUniversity of Nebraska College of Law

Minas Myrtidis and Jimmy PhamUniversity of Florida Levin College of Law

Baylee Beeman and Christopher RyanUniversity of San Diego School of Law

LL.M. DIVISION

1st Place:Isaac Leon and Stefanie PupkiewiczUniversity of Denver Sturm College of Law

2nd Place:Marquita Trotter and Heidi WeelborgBoston University School of Law

Best Written:Marquita Trotter and Heidi WeelborgBoston University School of Law

Finalists:Mariam Khvistani and Inri PanajotiBoston University School of Law

Elizabeth Bachmann and Zachary DeJoodeUniversity of Missouri- Kansas City School of Law

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An alternative to traditional moot court competitions, the Law Student Tax Challenge (LSTC) is organized by the Section’s Young Lawyers Form. The LSTC asks two-person teams of students to solve a complex business problem that might arise in everyday tax practice. Teams are initially evaluated on two criteria: a memorandum to a senior partner and a letter to a client explaining the result. Based on the written work product, six teams from the J.D. Division and four teams from the LL.M. Division receive a free trip to the Section’s Midyear Meeting, where each team presents its submission before a panel of judges consisting of the country’s top tax practitioners and government officials, including tax court judges. The competition is a great way for law students to showcase their knowledge in a real-world setting and gain valuable exposure to the tax law community. For more information about the LSTC, go to https://www.americanbar.org/groups/taxation/awards/law_student_tax_challenge/. ■

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https://www.americanbar.org/groups/taxation/awards/law_student_tax_challenge/

https://www.americanbar.org/groups/taxation/awards/law_student_tax_challenge/



The Incompetent Authority: Questions and Answers

By Andy Howlett, Miller & Chevalier, Washington, DC; and Guinevere Moore, Moore Tax Law Group, LLC, Chicago, IL

The Incompetent Authority: Questions and Answers, provides some useful responses to your questions about the mysteries of the tax profession, including tax career, business of tax, tax ethics, and other burning tax questions. If we don’t know the answer, we know who to ask. And we hope to offer the answer with a touch of humor. Of course, the standard disclaimer applies: this column does not dispense individualized tax advice, but merely presents the considered views of the writers about tax topics of general interest to the readers.

Andy Howlett is a member at the law firm of Miller & Chevalier in Washington D.C. He focuses his practice on tax planning and helps his clients understand and plan for the federal tax consequences of a wide range of transaction. He is married with two children, all of which made sense from a tax perspective at the time.

Guinevere Moore is the Managing Member of Moore Tax Law Group, LLC in Chicago. She’s worked at big shops (both accounting and law firms) but has found true tax bliss at her four lawyer firm. She is married with four children, all of whom are still young enough to want to spend time with her. Her favorite section of the Internal Revenue Code is § 7430. Obviously.

* * *

Dear Incompetent Authority:

Should I get an electric car? I keep hearing about tax incentives for doing so, but I’m having trouble making sense of them. Some electric cars seem to be eligible for the incentives, but others do not. Are the incentives expiring? Help!

– Life in the Fast Lane

Dear Fast Lane:

Like all major decisions in life (marriage, home purchases, having children), what vehicle to buy is primarily a tax-motivated question. KIDDING! Of course, there are lots of considerations. But your question allows us to delve into the exciting, complicated world of tax incentives for electric vehicles.

For four-wheeled electric vehicles—and let’s not even go there for vehicles with fewer than four wheels—the primary federal incentive is the nonrefundable income tax credit of section 30D(a). That provision provides a credit ranging from $2,500 to $7,500 for the purchase of any “new qualified plug-in electric drive motor vehicle,” a term of art to be sure, but one that the IRS has happily clarified by providing a list of vehicles that are eligible. In general, the amount of the credit is based on the battery capacity: the credit increases by $417 for each kilowatt hour in excess of 5 kilowatt hours, up to a maximum of $7,500. The IRS website linked earlier in this paragraph will tell you the amount of the credit for which each new electric vehicle is eligible.

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https://www.millerchevalier.com/professional/andrew-l-howlett

https://www.mooretaxlawgroup.com/attorney/moore-guinevere-m/

https://www.irs.gov/businesses/irc-30d-new-qualified-plug-in-electric-drive-motor-vehicle-credit

https://www.irs.gov/businesses/irc-30d-new-qualified-plug-in-electric-drive-motor-vehicle-credit



Section 30D(c) explicitly makes the credit nonrefundable, so even if the chosen vehicle is eligible for the full $7,500, a taxpayer will only receive that benefit to the extent he or she (or a married couple together) has federal income tax liability that exceeds $7,500. Any excess (unused) credit cannot be carried forward, so some planning may be prudent if you are considering buying a car late in the year (e.g., delaying end-of-year charitable deductions from December 31 to January 1 to ensure sufficient 2022 taxable income and tax).

Depending on the car you want, it may be advisable to run rather than walk. Unlike many tax incentives, the section 30D credit for four-wheeled electric vehicles isn’t an “extender” that’s subject to temporal expiration and renewal (sometimes after the fact) by Congress. But it does have its own, somewhat quirky, built-in expiration provision: the credit phases out on a per-manufacturer basis. The phase-out begins on the second calendar quarter after the calendar quarter in which a given manufacturer has sold 200,000 electric vehicles, starting at 50 percent of the credit (for two quarters) and then increasing to 75 percent of the credit (for the following quarter). After that, the credit is gone for electric vehicles produced by that manufacturer.

This means if you want a Tesla or Chevy Bolt, you’re out of luck. Well, not really—you can still buy those cars, but they won’t be eligible for the credit. The IRS tracks quarterly and aggregate manufacturer electric vehicle sales for Ford, Mercedes and BMW on its website. Ford and BMW cleared 100,000 electric vehicles as of June 30, 2020. Other manufacturers likely will follow soon. Of course, the astute consumer (and reader of this column) knows that there’s a one quarter grace period between hitting the 200,000 threshold and the phase-out beginning. Nevertheless, given reporting delays, consumers looking to acquire one of the most popular EV brands may want to move quickly.

What about other incentives? In 2021, these are found primarily at the state level, and they vary—in some cases dramatically—from state to state. For example, the District of Columbia (the location of ½ of Incompetent Authority headquarters) offers a credit for 50 percent of the equipment and labor costs for the purchase and installation of a home electric vehicle charging station, along with reduced registration fees and a sales tax exception for electric vehicles. Some states—like Colorado and California—also offer a rebate for purchasing an electric vehicle. While for most it won’t be worth moving to a new jurisdiction to get the best deal, the U.S. Department of Energy maintains a fairly comprehensive and up-to-date database of the various state incentives.

Happy driving, Fast Lane. Just don’t drive too fast or too far—you might run down the battery.

Want to see your questions about the mysteries of the tax profession, including tax career, business of tax, tax ethics, and other burning tax questions answered by The Incompetent Authority? Readers may submit questions anonymously for a future The Incompetent Authority column through our Submission Portal.

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https://www.irs.gov/businesses/irc-30d-plug-in-electric-drive-motor-vehicle-credit-quarterly-sales

https://afdc.energy.gov/laws

https://americanbar.qualtrics.com/jfe/form/SV_aaDfA82EasSNya9



Dear Incompetent Authority,

To what does The Incompetent Authority allude? I hope it is not the Competent Authority in the IRS.

– Anonymous

Dear Anonymous:

To go through the founding of the Incompetent Authority would spill so much ink as to make the Federalist Papers look like a haiku. Many of the decisions about this column’s establishment are lost to the status of myth now, but I can tell you from a long night in the National Archives (where the founding documents of Incompetent Authority are stored in a secure and climate-controlled environment) that the original impetus for the column may be lost to the sands of time.

Nevertheless, here’s what we were able to piece together. Article 3, paragraph 1(f) of the 2017 OECD Model Convention on the Taxation of Income and Capital defines “competent authority” as follows:

f) the term “competent authority” means:(i) (in State A): .................................(ii) (in State B): ................................

Under Article 25 of Convention, where a person considers that the actions of one or both of the Contracting States will result for him or her in taxation not in accordance with the provisions of the Convention, he or she may present his or her case to the competent authority of either state. The competent authority may resolve the case by mutual agreement with the competent authority of the other contracting state. So, it seems from this context that the term “competent authority” may well indeed have been intended to refer to the IRS or to the taxing authority of another state.

What’s more, the prefix “in” means “not, opposite, without,” from the Latin in cognate with the Old French and Middle English en-. In the case of the word “competent,” the addition of the prefix “in” simply means “without competence” or “lacking competence.”

Synthesizing these two strands of authority, it seems to us that the founders intended the title to be a gentle pun on the long-standing tax concept of a “competent authority,” appropriate for a column that—sometimes irreverently—provides advice and items of interest to tax practitioners. If that’s right, then we can take solace that the vision of the originator of this column—dearly departed for greener pastures though he may be—lives on quarterly installments. Long may it endure, and thank you for your question.

* * *

Dear Incompetent Authority:

I’ve been working from home since March in my small apartment with my spouse and my kids. My office will be closed at least through summer. I can’t believe I’m saying this, but I miss going to the office. I miss my colleagues. I miss going places. I feel like I’m missing out on professional opportunities because I haven’t seen anyone in a long time. I have young

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kids who are home as well, and there’s no good solution for childcare. I know I’m lucky to have a home, a job, food, and I feel like I have no right to complain.

– Venting

Dear Venting:

We at the Incompetent Authority feel your pain. Between us we have about 100 children—or at least it feels like that when trying to juggle everything that they need, our clients need, our colleagues need, and not to mention what we need. This has been one of the most difficult stretches of isolation any of us have felt. This situation—there’s just no other way to say it—totally and completely sucks.

You are allowed to be upset and feel trapped, and you’d be lying to yourself if you pretended like you didn’t feel that way. Yes, you are lucky to have a job, a home, food on the table. You can acknowledge and feel grateful for that and also feel lonely, trapped, and frustrated.

One thing being tax lawyers has taught us is that things that might feel or seem mutually exclusive are not. You can be both sad and frustrated and also grateful. You can be both someone who gets a really disturbing amount of enjoyment from formatting an excel spreadsheet and also from kicking butt in the courtroom.

The lesson we’ve taken away from this time—apart from the lesson that if in fact we “don’t count” calories during a pandemic then nothing in the closet will fit when we return to the office—is that it is ok to be both. Both enjoying the extra time with our kids and also super frustrated by all of the difficulties that poses. Both enjoying the time away from our colleagues and missing happy hour with them.

There’s no “answer” to your problem, but the advice we offer is this: allow yourself to not be perfect. Tell your kids when you need a break. Tell your colleagues when you need a break. Take a walk around the block, a deep breath, and maybe even scream.

Sometimes just accepting that things are outside of our control helps us feel better, and we hope it will for you, too. ■

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PEOPLE IN TAX PODCAST

Juan Vasquez, Part 1In S03E01, James Creech and Judge Juan Vasquez discuss his road to the Tax Court, the value tax lawyers bring to their clients, and the role of tax law in social justice. (Part 1 of 2). Listen here.

Juan Vasquez, Part 2James Creech and Judge Juan Vasquez discuss his road to the Tax Court, the value tax lawyers bring to their clients, and the role of tax law in social justice. (Part 2 of 2). Listen here.

Heather FincherIn S03E02, James Creech and Heather Fincher discuss the ABA Women in Tax Forum, parallels between athletics and practicing tax law, and using new methods to teach and present tax concepts to finance and treasury professionals. Listen here.

Sharon HeckIn S03E03, James Creech and Sharon Heck discuss the role of tax in running a business, how to predict the future, and how to talk to business partners about tax. Listen here. ■

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https://peopleintaxpodcasts.libsyn.com/s03e01-juan-vasquez-part-1

https://peopleintaxpodcasts.libsyn.com/s03e02-juan-vasquez-part-2

https://peopleintaxpodcasts.libsyn.com/s03e02-heather-fincher

https://peopleintaxpodcasts.libsyn.com/s03e03-sharon-heck



TAX

Tax Laws

By Robert S. Steinberg, Law Offices of Robert S. Steinberg, Palmetto Bay, FL

(To tune of “Blue Skies” words and music by Irving Berlin, as sung by Willie Nelson & Kenny Rogers in December 2011 or Ella Fitzgerald in 1958.)

Verse Tax laws— Passed a la mode. So many tax laws, We call them a Code.

Tax blues— Getting you down. An ocean of tax rules To swim in and drown.

Bridge Never see the sun, Read all the time, Make a mistake, it might be a crime. A lawyer’s work is fun. With any luck Get the law right, you might earn a buck.

Verse Tax days— Everyone hates Another new tax law’s Effective dates.

Bridge 2 Strive to be upright, Moral and pure, With OPR You’re never secure. Studying one phrase, A riddle of text, Like running a maze At each turn perplexed.

Verse Tax brains— Buzzing like saws. If you’re in the tax game, You love the tax law.

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https://www.youtube.com/watch?v=nqjepfQZwzY

https://www.youtube.com/watch?v=nqjepfQZwzY

https://www.youtube.com/watch?v=D-7vSmTxAno



IN THE STACKS

Tax Section to Publish 8th Edition of Effectively Representing Your Client Before the IRS

This spring, the Tax Section will publish the 8th edition of its popular Effectively Representing Your Client Before the IRS. First published by the Section in 2000, this comprehensive collection of everything a tax professional should know when dealing with the Internal Revenue Service is used widely by attorneys, accountants, and enrolled agents who represent clients before the IRS in controversy matters.

The new edition includes updates on the changes in tax law that have occurred since the last edition was published in 2017. There are new chapters on power of attorney, taxpayer IDs, and administrative law in tax cases. The new edition also adds two new chapters on offers in compromise and collection due process appeals, expanding on the collections chapter.

Written and updated by experienced tax controversy lawyers, this two-volume reference provides in-depth discussions of the law, replete with realistic examples and hundreds of practice tips to aid tax practitioners during all stages of representation before the IRS in controversy matters, including exam, appeals, Tax Court, refund actions, and collection matters. The companion online supplemental materials include select audio and video recordings from ABA Tax Section meetings, supplemented with meeting materials relevant to practice.

The new edition is edited by Christine Speidel and Patrick W. Thomas, both of whom served as deputy editors-in-chief of the 7th edition. Derek B. Wagner continues as the book’s research editor.

Speidel is an assistant professor of law at Villanova’s Charles Widger School of Law and is director of the Federal Tax Clinic there, where she teaches students to practice law by representing needy members of Villanova’s neighboring communities in federal tax disputes. Speidel previously directed the Vermont Low-Income Taxpayer Clinic.

Thomas is an associate clinical professor at the University of Notre Dame Law School and director of the Notre Dame Tax Clinic, which he founded in 2016. He trains and supervises law students representing low-income clients in disputes with the IRS. Thomas was previously a staff attorney at Neighborhood Christian Legal Clinic, in Indianapolis.

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https://www.americanbar.org/products/inv/book/404782279/



“Effectively Representing is an excellent reference manual for beginning and intermediate practitioners covering the important mechanics of representing individuals in federal tax controversies and collection matters,” said Speidel. “Chapters are written by exceptional practitioners from both private practice and from nonprofit low-income taxpayer clinics.”

“We’ve worked over the past year to include updates stemming from the COVID-19 pandemic and the response thereto from both Congress and the IRS,” added Thomas. “These topics range from the Economic Impact Payments to the Service’s new electronic power of attorney submission procedures. While it seems that each new week brings new developments on this front, we’ve strived to ensure that the final book is fully up to date.”

Wagner is an attorney advisor at the United States Tax Court. He previously served as an associate attorney at Daniel Rosenfelt & Associates and pro bono counsel on the ABA Tax Section staff. Wagner also served as research editor of the seventh edition.

A total of 72 authors updated this edition, and Wagner used a team of 26 reviewers to ensure citation and format correctness.

“Effectively Representing is an important Tax Section publication with its origins in the efforts of early tax clinics to provide a manual to guide them,” noted Keith Fogg, Vice Chair of Publications. “Twenty years later, with more than 10 times as many clinics, the book still serves as the primary resource for most clinics. The Tax Section is pleased to provide a free copy to each clinic. The generous donation of the book and the work of dozens of clinicians and nonclinicians volunteering their time to create the book bind the clinic community together and bind the community to the Tax Section, which has been a source of assistance to low-income taxpayer clinics since their inception almost 50 years ago. The Section is proud of this connection and of its members’ continued high level of public service.”

Effectively Representing Your Client Before the IRS is available for sale in the ABA store. ■

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https://www.americanbar.org/products/inv/book/404782279/



SECTION NEWS & ANNOUNCEMENTS

Tax Section Offers Expanded Virtual 2021 May Tax Meeting

The ABA Tax Section will offer an expanded opportunity for members to earn CLE credit and hear the latest from experts at its Virtual 2021 May Tax Meeting. Historically the most widely attended of the Section’s meetings, the Virtual 2021 May Tax Meeting will feature five full days of substantive CLE and networking sessions, an increase from the four days of the prior virtual Section Meetings. It will take place from May 10 to May 14.

The Virtual 2021 May Tax Meeting will be the third virtual full Section meeting since the start of the COVID-19 pandemic. It will be held on the same platform used for the Virtual 2021 Midyear Tax Meeting, an improved platform with fewer technical barriers for attendees and panelists.

The same platform will also be used for the Section’s other spring meetings, the Virtual 2021 ABA/IPT Advanced Tax Seminars on March 15-19 and the Virtual 21st Annual U.S. and Europe Tax Practice Trends on March 23-26.

After positive feedback from the 2021 Virtual Midyear Tax Meeting, the 2021 Virtual May Tax Meeting will include more networking opportunities and events in addition to the usual high-level analysis and up-to-the-minute developments from government and private sector panelists.

The Section is exploring a return to in-person meetings at the earliest possible date consistent with public health trends related to the COVID-19 pandemic.

Registration is open for the Virtual 2021 ABA/IPT Advanced Tax Seminars, the Virtual 21st Annual U.S. and Europe Tax Practice Trends, and the Virtual 2021 May Tax Meeting.

If you have questions about Section virtual meetings or if your organization is interested in a sponsorship, contact the Tax Section. ■

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https://web.cvent.com/event/fb8b6260-0ac9-420a-82f0-8253493b533d/summary

https://web.cvent.com/event/db1aa11d-58ef-49d2-acf8-be1ace5b78e8/summary

https://web.cvent.com/event/db1aa11d-58ef-49d2-acf8-be1ace5b78e8/summary

https://cvent.me/A38Mlx?RefId=TaxTimes





Report of the Nominating Committee: 2020-2021 Nominees

In accordance with Sections 4.2, 6.1, and 6.3 of the Section of Taxation Bylaws, the following nominations have been submitted by the Nominating Committee for terms beginning at the conclusion of the 2021 Annual Meeting in August. Under the Section Bylaws, the current Chair-Elect, Julie A. Divola of San Francisco, CA, becomes Chair of the Section at the close of the ABA Annual Meeting.

Chair-Elect: C. Wells Hall, Charlotte, NC

Vice Chairs: R. David Wheat, Houston, TX (Administration)(For a one-year term) Melissa Wiley, Washington, DC (Committee Operations)

Thomas D. Greenaway, Boston, MA (CLE)Kurt L.P. Lawson, Washington, DC (Government Relations)Sheri A. Dillon, Washington, DC (Pro Bono and Outreach)Roberta F. Mann, Eugene, OR (Publications)

Secretary: Christine S. Speidel, Villanova, PA(For a one-year term)

Assistant Secretary: Lany L. Villalobos, Philadelphia, PA(For a one-year term)

Council Directors: John M. Colvin, Seattle, WA(For a three-year term) Rachel Kleinberg, Palo Alto, CA

Robb Longman, Bethesda, MDSusan E. Morgenstern, Cleveland, OHVanessa A. Scott, Washington, DC

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Seeking Nominations for Vice Chair of Membership, Diversity, and Inclusion: A Message from the Chair of the Nominating Committee

By Eric Solomon, Steptoe & Johnson LLP, Washington, DC

The Tax Section has created a new Vice Chair position: Vice Chair for Membership, Diversity, and Inclusion. The purpose of this message is to seek nominations for the position, which will begin in August of this year.

As described in my August 2020 column, the members of each year’s Nominating Committee identify the future leaders of the Section. Each year the Nominating Committee meets at the Fall and Midyear Tax Meetings to select the nominees for Council Director positions (for three-year terms); Vice-Chair positions (one-year terms with a maximum of three years in total); the Secretary and Assistant Secretary (one-year terms with a maximum of two years in total); and the next Chair-Elect. Final selection of the individuals for the positions occurs at the annual meeting of the Section the following August (August 2021 for this year’s nominees).

After the most recent meeting of the Nominating Committee, the Council of the Section approved creation of a new Vice Chair for Membership, Diversity, and Inclusion. This new Vice Chair will work with Section leadership and a new staff Director of Membership, Marketing, and Diversity to actively support the growth of Section membership, ensure the Section meets member needs, broaden Section diversity and include diverse persons in all Section activities.

The Nominating Committee invites you to contact any member of the Nominating Committee, including me ([email protected]), to identify individuals who you believe have the necessary qualifications, experience and commitment to assume the important role of Vice Chair for Membership, Diversity, and Inclusion. If you have a serious interest in the position, please feel free to nominate yourself.

In order to be considered at the Nominating Committee meeting that is expected to occur at the beginning of April, the Nominating Committee will need to receive your nominations (with a brief statement of support) no later than close of business Tuesday, March 30, 2021. This is your opportunity to participate in filling an important role in the Tax Section. ■

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https://www.americanbar.org/groups/taxation/committees_task_forces/nominating/

mailto:esolomon%40steptoe.com?subject=




2020 Distinguished Service Award Recipient: L. Paige Marvel

By Judge Mary Ann Cohen, U.S. Tax Court, Washington, DC

The Distinguished Service Award is the highest honor awarded by the Section of Taxation of the American Bar Association. The award is given to individuals who have had a distinguished career in taxation and who have provided an aspirational standard for all tax lawyers to emulate. The 2020 recipient of this award is Judge L. Paige Marvel in recognition of her service to her former clients, the Section of Taxation, the United States Tax Court, and the tax system in general.

After graduating from the University of Maryland School of Law with honors, Paige accepted a position with a small boutique law firm in Baltimore, Maryland that specialized in tax controversy work. The firm, Garbis & Schwait, was founded by Marvin J. Garbis and Allen L. Schwait, two former Justice Department Tax Division attorneys. The firm encouraged its lawyers to work hard for its clients and to be creative in finding solutions to problems. Each attorney in the firm was also encouraged to contribute to the profession and to the community by speaking and volunteering.

Paige took those early lessons to heart. For 24 years, until her appointment as a judge on the United States Tax Court in 1998, she represented a wide variety of clients across a broad range of business and tax matters. She developed an expertise in state and local taxation, divorce taxation, civil and criminal tax controversy, and administrative law, representing individuals, corporations, partnerships, estates, and nonprofit organizations. Her legal work involved both tax and business planning, including estate planning, and civil and criminal tax controversy representation before the Internal Revenue Service and state tax agencies and in the Federal and state courts.

Following the lead of her mentors, Paige also began to develop her skills as a speaker, educator, and writer. Her first speaking engagement required her (and her colleague Marvin Garbis) to talk about the principles of divorce taxation while sitting on stepladders advising domestic relations lawyers who were negotiating a separation agreement. From that unusual beginning, Paige developed into a skilled speaker who was invited to speak at conferences and organizations throughout the United States and, eventually, abroad.

Paige also began to volunteer on a variety of nonbillable legal projects. In 1981, she agreed to serve as chair of the Procedure Subcommittee of the Tax Committee, Commission to Revise the Annotated Code of Maryland. Approximately seven years after the project started, the Maryland legislature enacted a new Tax Procedure – General Article and a new Tax Procedure – Property Article as part of the new Annotated Code of Maryland. In recognition of her contribution to the effort, Paige was awarded a pen used by the Governor to sign the Tax Procedure – General Article into law.

L. Paige Marvel

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From 1988 to 1999, she served as an adviser to the ALI Restatement of the Law Third – The Law Governing Lawyers. From 1989 to 1991, she served as a member of the Commissioner’s Review Panel on IRS Integrity. She was a member of the Advisory Group of the United States District Court for the District of Maryland that was appointed under the Civil Justice Reform Act of 1990. She has also served as a member of the Board of Trustees for the Loyola Notre Dame Library (1996–2003); the Board of Visitors, University of Maryland Law School (1995–2003); the Advisory Committee of the University of Baltimore Graduate Tax Program (1986–1998); and the Advisory Committee of the Maryland State Department of Economic and Community Development (1979–1981). Perhaps the most significant commitment that Paige made to voluntarism throughout her career, however, involved the ABA Section of Taxation and the Maryland State Bar Association Tax Section. Early in her legal career, Paige became a member of both organizations and decided to get involved. At various times, she has served as a committee chair, a member of the Board, and chair of the MSBA Tax Section. In 2002, in recognition of her contributions to the MSBA, she was selected as the recipient of the first Annual Tax Excellence Award given by the MSBA Tax Section. In the ABA Tax Section, Paige has served as a member of many committees, and as Court Procedure chair, co-chair of the TEFRA Task Force, Council member, and Vice-Chair of Committee Operations. In 2004, Paige received the Jules Ritholz Memorial Merit Award from the ABA Tax Section’s Committee on Civil and Criminal Tax Penalties. Paige has also mentored and continues to mentor many young lawyers in these organizations.

Paige has served as an adjunct professor in the Georgetown University Graduate Tax Program (2016–2018). She has authored numerous articles and chapters on tax procedure and divorce taxation including a chapter in the 2009 Careers in Tax Law: Perspectives on the Tax Profession and What It Holds For You. In the Tax Notes article “2016 Outstanding Women in Tax”, Paige was described as a “natural leader” and the “ideal tax arbiter: a sharp tactician with real-world controversy experience whose considered opinions are both respectful of views vastly different from her own and framed with a strong sense of right and wrong.” Paige was also named as one of the “Global Tax 50” for 2015 and 2017 by the International Tax Review. She has trained and is certified as a mediator. She is a fellow of the American College of Tax Counsel, the American Bar Foundation, and the Maryland Bar Foundation, and a member of the American Law Institute.

Throughout her career, Paige has been devoted to the profession and performed distinguished service. But she has also been acknowledged for her accomplishments. In 1998, President Clinton appointed Paige to a 15-year term as a judge on the United States Tax Court. She began immediately to use her skills, energy, and personal magnetism to contribute to the work of the Court. She became a friend and mentor to her colleagues, to her chambers staff, and to other employees of the Court. She has always been generous with her time and is often called upon to discuss and advise law clerks and deputy trial clerks on their future careers. She is adored by her chambers staff. Because of her caring for and advising anyone who approaches her, she maintains long relationships with former clerks and students. President Obama appointed her to a second 15-year term in 2014. During her judicial career, Paige has authored hundreds of opinions and presided over many trials. She has also served on many of the Court’s committees, has chaired the Court’s Human Resources Committee and the Rules Committee, and continues to serve as co-chair of the Rules Committee. She has also chaired the planning committee for several of the Court’s judicial conferences.

In 2016, the judges of the Tax Court elected Paige to serve a two-year term as Chief Judge. As Chief Judge, Paige coordinated administrative and operational matters for the Court and represented the Tax Court throughout the United States and abroad. She spoke at an international forum in London and represented the Court at the anniversary celebration of the Mexican Tax and Fiscal Court. She also spoke at the Annual Assemblies of the International Association of Tax Judges in Helsinki (Finland), Ottawa (Canada), and Cambridge (England) on topics of general interest to national tax courts. As Chief Judge, she hosted visits

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by domestic and foreign groups at the Tax Court to enhance the public’s knowledge about the Court and its mission.

Paige accomplished many things during her years as Chief Judge. She was proactive in the movement to modernize the Court’s systems, including backup of data to an offsite disaster recovery location and analyzing and improving the Court’s information technology programs. She presented to Congress plans for a modernized electronic filing and case management system and successfully secured funding to begin the project while finding ways to reduce Court spending in other areas. These skills, of course, are not what you learn in law school. Yet Paige approached the challenges with imagination and vigor. At the same time, she was fully engaged in the traditional chief judge duties of maximizing the quality and production of the work of the Court.

In December 2019, Paige took senior status and continues to serve the Court as a senior judge on recall. Review and consolidation of the Tax Court Rules of Practice and Procedure remains a priority of hers. The work she began to modernize the Court’s information technology systems has reached fruition with the launch of DAWSON (Docket Access Within a Secure Online Network) at the end of 2020. Her colleagues are grateful for her past achievements and look forward to benefiting from her continuing contributions to the Court and to the profession. They congratulate her on her well-earned Distinguished Service Award. ■

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Government Submissions Boxscore

Government submissions are a key component of the Section’s government relations activities. Since October 6, 2020, the Section has coordinated the following government submissions. The full archive is available to the public on the website: https://www.americanbar.org/groups/taxation/policy/.

TO DATE CODE SECTION

TITLE COMMITTEE CONTACT

Department of Treasury & Internal Revenue Service

2/10/2021 n/a Comments Concerning Form W-7 and Instructions

Pro Bono and Tax Clinics

Sarah Lora


2/2/2021 n/a Comments Regarding Form 8919 for Individual Taxpayers

Pro Bono & Tax Clinics

Nancy Rossner


2/2/2021 n/a Comments Concerning Information Reporting for SS-8 and SS-8(PR)


Nancy Rossner


2/2/2021 n/a Comments Concerning Proposed Form 15227


Nancy Rossner


1/15/2021 n/a Comments Regarding Review of Regulatory and other Relief to Support Taxpayers during COVID-19 Pandemic


Nancy A. Rossner


12/14/2020 n/a Comments on the OECD/G20 Inclusive Framework on BEPS Public Consultation Document on the Report on the Pillar One Blueprint

Transfer Pricing Elizabeth Stevens & Jenny Austin

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https://www.americanbar.org/groups/taxation/policy/

https://www.americanbar.org/content/dam/aba/administrative/taxation/policy/2021/021021comments.pdf




https://www.americanbar.org/content/dam/aba/administrative/taxation/policy/2021/020221comments-2.pdf















TO DATE CODE SECTION

TITLE COMMITTEE CONTACT


12/10/2020 163(j) Comments on the 2020 Proposed Regulations under Section 163(j) with Respect to Controlled Foreign Corporations and Their U.S. Shareholders

Foreign Activities of U.S. Taxpayers

David Levine & Amitai Barth


11/19/2020 162(m) Comments on Proposed Regulations Under Section 162(m)

Employee Benefits Rita Patel


11/2/2020 163(j) Comments on Final and Proposed Regulations under Section 163(j)

Partnerships & LLC and Real Estate

Katie Fuehrmeyer


10/20/2020 n/a Comments on Revenue Procedure 94-69

Administrative Practice

Kevin Stults

The technical comments and blanket authority submissions listed in this index represent the views of the ABA Section of Taxation. They have not been approved by the ABA Board of Governors or the ABA House of Delegates and should not be construed as representing the policy of the ABA. ■

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Call for Applications: Diversity and Inclusion Scholarships to Virtual 2021 May Tax Meeting

The Tax Section is now accepting applications for the Diversity and Inclusion Scholarships, designed to encourage members of diverse backgrounds or with a recognized commitment to diversity and inclusion to attend and participate in the Virtual 2021 May Tax Meeting, on May 10–14, 2021.

The Section embraces diversity and inclusion in every aspect of its activities, including its meetings. These scholarships defray the cost of meeting attendance, including waiver of the registration fee (and when in person meetings return will also include up to three nights stay at the host hotel, airfare, and attendance at the Plenary Session Luncheon). Applicants must meet eligibility requirements, including Section membership and understanding of the Section’s Diversity and Inclusion Plan.

Scholarship recipients will be required to fulfill several duties during and after the meeting, including attendance at certain panels and events, and subsequent reports to the Section’s Diversity and Inclusion Scholarship Selection Committee.

Full eligibility requirements, selection criteria, and recipient duties can be found along with an example scholarship application.

Applications and questions should be directed to the Section’s counsel, Meg Newman, at [email protected].

The Tax Lawyer—Winter 2021 Issue Now Available

The Winter 2021 issue of The Tax Lawyer, the nation’s premier, peer-reviewed tax law journal, is now available. The Tax Lawyer is published quarterly as a service to members of the Tax Section.

Winter 2021 Issue (Click here to read or download the complete issue.)

Articles

Nathan R. Brown, Raj A. Malviya, and Brandon A.S. Ross, Ten Common GST Planning Mistakes

Stephanie Hunter McMahon, The Taxpayer Bill of Rights and the Right to Be Informed: The Positive or Negative Way You Look at It

Shay Moyal, Section 267A and the Taxation of Hybrid Mismatches Under the Code

Anthony P. Polito, Corporate Tax Integration and the TCJA: How Near the Mark?

Laura Snyder, Taxing the American Emigrant

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https://www.americanbar.org/content/dam/aba/administrative/taxation/awards/21may-dandischolarship-app.docx

https://www.americanbar.org/content/dam/aba/administrative/taxation/awards/21may-dandischolarship-app.docx

mailto:taxlserve%40americanbar.org?subject=

mailto:taxlserve%40americanbar.org?subject=

https://www.americanbar.org/groups/taxation/publications/tax_lawyer_home/21win/

https://www.americanbar.org/groups/taxation/publications/tax_lawyer_home/21win/brown/

https://www.americanbar.org/groups/taxation/publications/tax_lawyer_home/21win/mcmahon/

https://www.americanbar.org/groups/taxation/publications/tax_lawyer_home/21win/mcmahon/

https://www.americanbar.org/groups/taxation/publications/tax_lawyer_home/21win/moyal/

https://www.americanbar.org/groups/taxation/publications/tax_lawyer_home/21win/polito/

https://www.americanbar.org/groups/taxation/publications/tax_lawyer_home/21win/snyder/



The Practical Tax Lawyer—March 2021 Issue Now Available

Produced in cooperation with the Tax Section and published by ALI-CLE, The Practical Tax Lawyer offers concise, practice-oriented articles to assist lawyers with all aspects of tax practice. The articles are written by practitioners and are reviewed by an expert board of editorial advisors who are members of the ABA Tax Section and are appointed by the Section. Published four times yearly, each issue of The Practical Tax Lawyer brings you pragmatic, nuts-and-bolts advice on how to solve your clients’ tax problems.

Michael J. Stegman, The United States Exit Tax

Jerald David August, Proceeding with a Valuation Case Involving Closely Held Business Interests Before the United States Tax Court (Part 3)

For more information, visit PTL’s webpage: https://www.ali-cle.org/legal-periodicals/PTL.

Support the Section’s Public Service Efforts with a Contribution to the TAPS Endowment

Through the Tax Assistance Public Service (TAPS) endowment fund, the Section of Taxation provides stable, long-term funding for its tax-related public service programs. The TAPS endowment fund primarily supports the Christine A. Brunswick Public Service Fellowship program, which provides two-year fellowships for recent law school graduates to work for non-profit organizations offering tax-related legal assistance to underserved communities.

In its four-year existence, the TAPS endowment fund has supported 20 fellows. Not only have the fellows produced impressive results, but many have secured positions in the field of low-income tax assistance and continue to serve low-income communities and train a new generation of law students to provide these services. Other fellows have clerked for judges of the U.S. Tax Court who value their experiences working with underserved taxpayers and their perspectives gained from their first-hand involvement in low-income tax issues. Fellows who practice tax law in other settings such as major law firms and the government, continue to contribute to the Tax Section by remaining active in pro bono initiatives, speaking on panels, leading committees, drafting comments, and mentoring fellows and other new lawyers. This program has been incredibly successful both in serving taxpayers who otherwise might not have representation, making systemic change in local communities and in providing a springboard to careers in low-income tax services.

Consider giving to the TAPS endowment fund today. Your generous support will help ensure that the Section can continue its mission to provide legal assistance to those in need.

For more information on how to get involved in tax pro bono assistance, please see our website or contact Meg Newman at [email protected].

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https://www.ali-cle.org/legal-periodicals/PTL

http://www.americanbar.org/groups/taxation/taps_endowment.html

http://www.americanbar.org/groups/taxation/awards/psfellowship.html

https://www.americanbar.org/groups/taxation/tax_pro_bono/

mailto:megan.newman%40americanbar.org?subject=



Get Involved in ATT

ABA Tax Times (ATT) is looking for volunteers to join its ranks as associate editors to assist in writing and acquiring articles for publication. This opportunity is open to Section members with significant writing or publication experience, a genuine interest in helping ATT attract great content, and a willingness to commit to at least one article a year. You can find more information about our submission guidelines here. If you are interested in a regular writing and editing opportunity with ATT, contact Linda M. Beale, Supervising Editor, at [email protected]. ■

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http://www.americanbar.org/groups/taxation/publications/abataxtimes_home/att-editorial.html

mailto:lbeale%40wayne.edu?subject=



SECTION EVENTS & PROMOTIONS

Section Meeting & CLE Calendar

ABA Tax Section meetings and webinars are a great way to get connected, get educated and get the most from your membership! Join us for high-level CLE programming and the latest news and updates from Capitol Hill, the IRS, Treasury and other federal agencies.

https://www.americanbar.org/groups/taxation/events_cle/

ABA Section of Taxation CLE Products

Listen at your convenience to high-quality tax law CLE on a variety of topics. ABA CLE downloads are generally accepted in the following MCLE jurisdictions: AK, AR, CA, CO, GA, HI, IL, MS, MO, MT, NV, NM, NY, NC, ND, OK, OR, SC, TX, UT, VT, WA, WV and WI. Recordings and course materials from the following recent Tax Section webinars and more are available through the ABA Web Store.

Recent Webinars

The Final and Proposed Section 245A Regulations

Coming in from the Cold - Risks and Rewards of the Revised IRS Voluntary Disclosure Practice

The Tax System and Social Policy

The Role of Tax Research in Tax Administration, Tax Policy, and Setting Other Government Priorities

Virtual 2020 May Tax Meeting

Tax Bridge to Practice

Corporate Tax and Affiliated & Related Corporations

Tax Accounting

Closely Held Businesses

S Corporations

State & Local Taxes

International Day 1

International Day 2

Real Estate & Partnerships & LLCs

Estate & Gift Taxes

Civil & Criminal Tax Penalties

Exempt Organizations

Financial Institutions & Products

Sales, Exchanges & Basis and Capital Recovery & Leasing

Court Procedure & Practice

Investment Management and Insurance Companies

Employee Benefits

Administrative Practice

Standards of Tax Practice

Sales, Exchanges & Basis: Part 2

Tax Collection, Bankruptcy & Workouts: Part 1

Tax Collection, Bankruptcy & Workouts: Part 2

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https://www.americanbar.org/groups/taxation/events_cle/

https://www.americanbar.org/events-cle/ecd/ondemand/407014906/































SECTION EVENTS & PROMOTIONS

Sponsorship Opportunities

ENHANCE YOUR VISIBILITY. GROW YOUR NETWORK. EXPAND YOUR REACH.

ABA Section of Taxation Sponsorship Provides Invaluable Returns.

ABA Section of Taxation Meetings are the premier venues for tax practitioners and government guests to connect on the latest developments in tax law and practice. Section Meetings draw up to 2,000 tax practitioners from across the U.S. and internationally. With over 150 panel discussions presented over two days by the country’s leading tax attorneys, government officials, and policy makers, Section Meetings are your opportunity to maximize your organization’s visibility and build relationships with key figures in the world of tax law.

The Section of Taxation is the largest, most prestigious group of tax lawyers in the country, serving nearly 16,000 members and the public at large.

• Over 10,000 Section members are in private practice

• 1,100 members are in-house counsel

• 32% of meeting attendees represent government

• 25% come from firms of over 100 attorneys

• 23% come from firms of 1-20 attorneys

Due to on-going COVID-19 pandemic we are offering various opportunities to sponsor upcoming virtual meetings. For additional information, please visit https://www.americanbar.org/groups/taxation/sponsorship.html or contact our Sponsorship Team at [email protected] or at 202/662-8680.

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https://www.americanbar.org/groups/taxation/sponsorship.html

https://www.americanbar.org/groups/taxation/sponsorship.html

mailto:taxmem%40americanbar.org?subject=

Thank You To Our Virtual 2021 Midyear Tax Meeting Sponsors

FOR INFORMATION ON SPONSORSHIP OPPORTUNITIES CLICK HERE

EMERALD SPONSORS

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https://www.americanbar.org/groups/taxation/sponsorship/

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An Online Publication of the ABA Tax Section CONTENTS

Documents

Transcript of An Online Publication of the ABA Tax Section CONTENTS