Law Commons^™

Should Apb 23 Indefinite Reinvestment Be Repealed?, J. Richard Harvey

Working Paper Series

A recent letter to FASB suggested that APB 23 should be repealed. Although there is a clear lack of application guidance surrounding APB 23, repeal is not justified. Instead, FASB should address several practical uncertainties that have effectively allowed U.S. MNCs to make whatever APB 23 assumption best suits their needs.

Given that many U.S. MNCs have shifted substantial amounts of income to low-tax foreign jurisdictions and may need those foreign earnings back in the U.S. relatively soon, it is important for FASB to address these issues. If not, aggressive MNCs may continue to assert indefinite reinvestment when in fact …

Apple Hearing: Observations From An Expert Witness, J. Richard Harvey

Working Paper Series

The US Senate Permanent Subcommittee on Investigations held a highly publicized hearing on May 21, 2013 to discuss Apple, Inc.’s international tax planning. As the first expert witness, I had a ring-side seat to the hearing and Apple’s international tax planning.

One purpose of this article is to clearly identify the two key tax policy issues that need to be addressed by policymakers both in the US and internationally. Because the discussion at the hearing was very U.S. centric, these two issues may have been lost in the rhetoric.

• Should the US and the rest of the world allow …

Testimony Of J. Richard (Dick) Harvey, Jr. Before The U.S. Senate Permanent Subcommittee On Investigations May 21, 2013, J. Richard Harvey

Working Paper Series

Apple is an iconic US multinational corporation. In addition to demonstrating excellence in designing, building, and selling consumer products, Apple has been very successful at minimizing its global income tax burden. This expert testimony describes how Apple:

• allocates approximately two-thirds of its global income to Ireland, a country where only 4% of its employees and 1% of its customers are located,
• minimizes Irish tax by creating an Irish entity that is managed and controlled in the US, and
• avoids the US Subpart F rules.

More generally, the testimony illustrates techniques used by US MNCs to shift income …

History Of Low-Income Taxpayer Clinics, T. Keith Fogg

Working Paper Series

This article provides a chronological history of low-income tax clinics in the United States from their inception in 1974 to the present. It discusses leaders in the tax clinic movement such as Stuart Filler, Janet Spragens and Nina Olson and their impact on the growth of tax clinics. In addition to individual leaders, several institutions played significant roles in shaping the development of tax clinics. Tax clinics developed parallel to and then in conjunction with legal service corporation offices and academic clinics. The article discusses the growth of tax clinics within the broader growth of poverty law and the academic …

Financial Disability For All, T. Keith Fogg

Working Paper Series

The Internal Revenue Code has four discreet sections that allow late filing of claims and other documents under the circumstances described in those sections. The IRS has promulgated a procedural regulation that allows it to permit late elections under prescribed circumstances. Neither the Code sections nor the Regulation cover all of the circumstances in which taxpayers have a good excuse for missing a time frame. The current provisions have developed in an ad hoc manner. More ad hoc development of this area is possible as equitable tolling litigation seeks to open up time frames under the Code despite the efforts …

Should The States Piggyback On Federal Schedule Utp?, J. Richard Harvey

Working Paper Series

There has been much written about Schedule UTP since its announcement by IRS commissioner Shulman in January 2010. However, little has been written about issues other tax administrators may need to consider if they plan on adopting some version of Schedule UTP for their own purposes. State tax administrators are definitely thinking about Schedule UTP. In addition, the Australian Taxation Office has published a draft form for 2012 that is based, in large part, on the IRS Schedule UTP. Although corporations are hoping that most other tax administrators do not adopt some version of Schedule UTP, corporations will likely be …

Schedule Utp: An Insider's Summary Of The Background, Key Concepts, And Major Issues, J. Richard Harvey

Working Paper Series

A former IRS Commissioner has called Schedule UTP “the biggest change in tax administration in the last 50 years”. Others have made less flattering comments, but most everyone working in the corporate tax community would admit it has been a big deal.

Based upon the author’s perception as a senior IRS official, this article is intended to be a comprehensive discussion of three topics. First, it will summarize the author’s perception of what led the IRS to require the filing of Schedule UTP. Second, it will discuss the key concepts, including why certain provisions were adopted (e.g., the much misunderstood …

Schedule Utp - Two Major Issues, J. Richard Harvey

Working Paper Series

Although Corporate America is not happy about Schedule UTP, most corporations seem resigned to the schedule’s existence and are now attempting to comply. In the process, Corporations have been addressing many technical questions, but two seem to be receiving the most attention: the definition of a “tax reserve”, and the application of the transition rule to pre-2010 NOL carryforwards.

The current definition of tax reserve is circular and it is not clear whether it includes certain scenarios (e.g., deferred tax reserves). The application of the transition rule is of significant importance to corporations that incurred NOL carryforwards during the recession …

Incidence And Accidents: Regulation Of Executive Compensation Through The Tax Code, Joy Mullane

Working Paper Series

Congress has enacted a number of tax provisions that aim to penalize companies and their executives when the executive is paid more than Congress thinks is desirable. Congress was motivated to enact these provisions by intense public sentiments regarding executive compensation levels during times of economic turmoil. This article demonstrates, however, that not only are these provisions ineffective at reducing executive compensation levels, but they penalize the wrong people. This article reveals that the penalties do not significantly fall on the executives that Congress was targeting with enactment of the penalties. Instead, these penalties impose costs on a variety of …

Refund Anticipation Loans And The Tax Gap, Leslie Book

Working Paper Series

There has been a significant expansion of refundable credits over the past twenty years. This trend is likely to continue as part of federal policy to stimulate the economy and promote non-tax related social benefits. With the growing use of the tax system to deliver refundable benefits to individuals, the tax preparation industry as a whole has become, in some significant respects, a vehicle for cross-marketing of non-tax goods and services. Refund anticipation loans, or RALs, are one example of these non-tax products that paid preparers facilitate for their customers. RALS are short-term loans secured by a taxpayer's anticipated tax …

Increasing Preparer Responsibility, Visibility And Competence, Leslie Book

Working Paper Series

The insights from the responsive regulation literature present an intriguing model for IRS interaction with preparers, and provide a theoretical context for a more nuanced approach that the IRS could adopt when considering its return preparer strategies. To some extent, the IRS’s current emphasis on preparer education, including the significant resources expended on tax forums and other general outreach programs, reflects IRS awareness that its interaction with preparers must take a varied approach. In this paper, I propose a more personal contact paradigm with preparers, with those contacts facilitated by heightened identification requirements and a more dedicated IRS effort to …

A Response To Professor Camp: The Importance Of Oversight, Leslie Book

Working Paper Series

In past writings and in an upcoming article by Professor Bryan Camp, The Problem of Adversarial Process in the Administrative State, 83 IND. L. J. ### (2008), Professor Camp criticizes the procedural protections Congress added in the tax collection process, noting the limitations of adversary proceedings in the IRS’s tax collection process. In particular, Professor Camp strongly criticizes the collection due process (CDP) rights that were part of the landmark IRS Restructuring and Reform Act of 1998. Given the size of the tax gap, and likely increasing calls for the IRS to do a better job in reducing that tax …

Freakonomics And The Tax Gap: An Applied Perspective, Leslie Book

Working Paper Series

Over the past thirty years, a significant amount of research from a variety of social science disciplines has considered tax compliance. Economists, psychologists, and sociologists have contributed to the discussion, offering research and, at times, conflicting explanations regarding whether a person is likely to comply with his obligation to file an accurate tax return. The unifying theme among this research is a search for explanatory reasons which are the factors that lead to non-compliance. In broad terms, the economic models of tax compliance assume rational behavior, and that people will coldly consider compliance from the perspective as to whether the …

Preventing The Hybrid From Backfiring: Delivery Of Benefits To The Working Poor Through The Tax System, Leslie Book

Working Paper Series

This article analyzes the government’s increased use of the tax system to deliver benefits to the working poor. The hybrid in this article is the earned income tax credit (EITC), one of the country’s largest anti-poverty programs. The EITC is hybrid in that it is administered in the tax system but is increasingly redistributive, like traditional welfare programs. It reveals that the hybrid tax and welfare nature of the delivery of benefits to the working poor through the tax system results in some significant benefits, such as higher participation and lower administrative costs, but also a weakness in the form …

The Collection Due Process Rights: A Misstep Or A Step In The Right Direction?, Leslie Book

Working Paper Series

This article defends one of the more controversial parts of the Internal Revenue Service (IRS) Restructuring and Reform Act of 1998 (RRA 98) the collection due process (CDP) provisions. CDP gives taxpayers the right to independent administrative and judicial review of IRS decisions to use its awesome administrative collection powers, powers that have long made the IRS a feared creditor.

Prior to CDP’s enactment, the IRS had the power to collect taxes from taxpayers without judicial review of administrative collection determinations. This power, atypical for creditors which often must get judicial approval for summary collection action, led many observers to …