Business Organizations Law Commons^™

The Redemption Puzzle, Reuven S. Avi-Yonah

Law & Economics Working Papers

Following the adoption of partial integration in 2003, there was only a modest increase in dividends during the period 2004-7, from about 300 to about 500 (if 1987 levels are set at 100). Redemptions, however, showed a remarkable increase, jumping from about the same as dividends (300) to 1,800. This, therefore, leads to a new puzzle: Why the sudden sharp increase in redemptions following 2003?

Like the dividend puzzle, the redemption puzzle is susceptible to several explanations. For example, Bratton and Wachter note that managers who hold stock options tend to favor redemptions over dividends. But in this case, I …

The Italian Job — Voice Over Internet Protocol Mtic Fraud In Italy, Richard Thompson Ainsworth

Faculty Scholarship

On February 8, 2010 a speculative paper on the likelihood that fraudsters proficient in missing trader intra-community (MTIC) fraud might move into voice over internet protocol (VoIP) was submitted to the Boston University School of Law Working Paper Series.

Prior to that paper there was very little (if any) public discussion of VoIP MTIC. There were no assessments, no arrests, and not a hint of litigation. Fifteen days later, and before final publication the financial press exploded with coverage of a massive VoIP MTIC fraud (the Operazione “phuncards-broker” investigation). The Wall Street Journal reported: An [Italian] judge…ordered the arrest of …

Voip Mtic — Vat Fraud In Voice Over Internet Protocol, Richard Thompson Ainsworth

Faculty Scholarship

In the beginning, the VAT fraud known as missing trader intra-community (MTIC) fraud appeared to be a UK problem concentrated in the cell phone and computer chip markets. MTIC has mutated (to other commodities) and migrated (to other Member States). This paper describes how this fraud operates in the VoIP market, and how in this mutation it is no longer confined to the EU, but can infiltrate any VAT/GST anywhere.

Canada, Botswana, Japan, Iceland and Jamaica (to mention a few jurisdictions) have consumption taxes that are just as vulnerable as is the EU VAT to VoIP missing trader fraud. It …

Zappers - Retail Vat Fraud, Richard Thompson Ainsworth

Faculty Scholarship

Zappers skim cash sales at retail. Zappers are add-on programs used by merchants with electronic cash registers (ECRs) or point-of-sale (POS) systems. Zappers are smart and selective. They do not skim all sales, and they never skim credit card transactions.

Although they are present in every jurisdiction, Zappers appear to be most widely used in developed economies that combine high levels of cash sales with high rates of consumption tax. Sweden, for example, has a cash-intensive economy, one of the world’s highest VAT rates (25%), and also reports that 70% of the ECRs in the country are either “… constructed …

Co2 Mtic Fraud — Technologically Exploiting The Eu Vat (Again), Richard Thompson Ainsworth

Faculty Scholarship

On February 1, 2010 Algirdas Šemeta is expected to be confirmed as the next European commissioner for taxation, customs union, audit and anti-fraud. If his nomination passes a confirmation hearing at the European Parliament he will succeed László Kovács. At the top of Mr. Šemeta’s list of things requiring attention should be MTIC fraud in tradable CO2 permits. Political and fiscal realities make CO2 MTIC fraud a top priority.

CO2 MTIC is a technology-driven fraud that takes advantage of the same weaknesses in the EU VAT that have become well known in the cell phone and computer chip trade. The …

Quebec's Sales Recording Module (Srm): Fighting The Zapper, Phantomware, And Tax Fraud With Technology, Richard Thompson Ainsworth

Faculty Scholarship

No abstract provided.

The Public Control Of Corporate Power: Revisiting The 1909 U.S. Corporate Tax From A Comparative Perspective, Ajay K. Mehrotra

Articles by Maurer Faculty

The origins of U.S. corporate taxation are often associated with the 1909 corporate excise tax. Scholars who have investigated the beginnings of this levy have mainly focused on the legislative history of the 1909 corporate tax to argue that it was either an expression of the Progressive Era impulse to regulate large-scale corporations or an attempt to use corporations as remittance devices to collect taxes aimed at wealthy shareholders. This Article broadens the conventional historical accounts of the emergence of American corporate taxation by revisiting the 1909 U.S. corporate tax from a comparative perspective. The aim is to look both …

Running From The United States Treasury: The Need To Reform The Taxation Of Multinational Corporations, 43 J. Marshall L. Rev. 1041 (2010), Jennifer Barton

UIC Law Review

No abstract provided.

The Single Member Limited Liability Company As Disregarded Entity: Now You See It, Now You Don’T, Daniel S. Kleinberger

Faculty Scholarship

The power and complexity of the single member limited liability company (“SMLLC”) comes from a conceptual contradiction: the conflation of owner and organization for tax purposes and the separation of owner and entity for non-tax, state law purposes. The contraction has significant practical consequences, which this article explores and illustrates, considering: • The SMLLC in federal court (single member not permitted to represent the LLC) • The IRS’s tortuous path to determining whether an SMLLC’s sole member is liable for the SMLLC’s unpaid employment taxes (yes; yes vindicated by the courts; then no, as a matter of policy) • Transfer …

Excessive Executive Compensation: Prior Federal Attempts To Curb Perceived Abuses, 10 Hous. Bus. & Tax L.J. 196 (2010), Kathryn J. Kennedy

UIC Law Open Access Faculty Scholarship

No abstract provided.

Tax Fraud In The Sales Tax: Zappers — What Are They? How Can Puerto Rico Block Them?, Richard Thompson Ainsworth

Faculty Scholarship

The Sales and Use Tax is an essential part of Puerto Rico’s revenue profile. Effective only recently (November 15, 2006) the Impuesto a las Ventas y Uso (IVU) was expected to raise between $2.3 and $1.05 billion annually, and has already become the Commonwealth’s fourth largest revenue source. Actual revenue results for 2007-2008 came in at $1.1 billion, which admittedly is closer to the low end than the high end of what is possible, but now that the tax is in place the next pressing question is how can its performance be improved?

This paper generally proposes that Puerto Rico …

Between Formulary Apportionment And The Oecd Guidelines: A Proposal For Reconciliation, Reuven S. Avi-Yonah

Articles

In the last 30 years, a debate has been raging in international tax circles between advocates of the OECD Transfer Pricing Guidelines and the arm’s length standard (ALS) they embody, on the one hand, and advocates of formulary apportionment (FA) on the other. After the adoption of the 1995 regulations and the new OECD Guidelines, the debate became quieter for a while, because everyone was waiting to see whether the issue had been resolved. However, while there have been few decided cases, it is clear by now that the transfer pricing problem is as bad as it ever was. That …

Commentary: The Federalization Of Nonprofit Regulation And Its Discontents, James J. Fishman

Elisabeth Haub School of Law Faculty Publications

The Internal Revenue Service, at the instigation of the Senate Finance committee-the Service's primary congressional overseer-has commenced a corporate governance initiative by issuing announcements and guidelines, as well as providing educational advice as to how charities' internal affairs should be ordered. The Service also has revised the Form 990 Annual Information Return, a publicly available document, so that it contains mandatory corporate governance questions.2 Nonprofit organizations traditionally have been creatures of state law and overseen by state agencies and regulators.3 What is unique about the corporate governance initiative is the Service's admission that it lacks express statutory authority for this …

Stealth Preemption: The Irs's Nonprofit Corporate Governance Initiative, James J. Fishman

Elisabeth Haub School of Law Faculty Publications

The Internal Revenue Service, the primary federal regulator of charities, has initiated a corporate governance initiative. The intervention by the Internal Revenue Service into an area traditionally the preserve of state nonprofit corporate law has little relationship to issues of tax compliance. This corporate governance initiative has been accomplished in the face of IRS acknowledgement that it has no statutory authority relating to these issues. Yet, the power of the Service to recognize tax exempt status and the method it has used to ensure it vision of correct corporate governance practices through a series of questions when an organization applies …

The Anticipation Misconception, Colin P. Marks

Faculty Works

Many commentators and courts have cited to the Supreme Court decision of Hickman v. Taylor as the genesis of the work product doctrine and the requirement that, to be afforded protection, the material in question must be generated “in anticipation of litigation.” The oft quoted policy justification for the protection afforded is that attorneys should be allowed a “zone of privacy” within which to prepare their case for the client. This justification supports limiting protection only to work generated “in anticipation of litigation,” because, presumably, outside of this context there is no need for the “zone of privacy.” However, a …

A Primer On Protecting Tax Losses From A Section 382 Ownership Change, Mark C. Van Deusen

William & Mary Annual Tax Conference

No abstract provided.

Challenges And Opportunities For The Tax Professional Guiding Closely-Held Entities: 2009 & 2010 Regulatory And Judicial Developments Impacting Fourth Circuit Tax Practitioners, Rose L. Bailey

Campbell Law Review

When framing adequate tax advice to protect oneself from preparer penalties under sometimes ambiguous or unsettled tax law, or when trying to affect your best appellate argument or direct a strategic audit litigation path, there can be no doubt of the importance of considering judicial precedent developments in all of these paths. To that end, under the discretion of this Author, a selection of relevant administrative regulations and rulings as well as judicial authority rendered in 2009 through spring 2010 are contained in this Article to cover significant income taxation developments impacting certain closely-held entities. Closely-held entities are considered, for …

The People Versus Corporate Welfare: North Carolina's Forsaken Opportunity To Reverse Perversion Of The Commerce Clause And To Reinvigorate The Public Purpose Doctrine, Jeanette K. Doran

Campbell Law Review

This Article neither espouses judicial intervention in any political controversy nor offers "broad" and "sweeping" constitutional theories. Instead, this Article is calculated to recognize the efforts of taxpayers who have resorted to the very constitutional rights afforded to them as citizens and taxpayers to challenge governmental acts which are repugnant to the very foundations of our society and to encourage the judiciary to fulfill its duty to reject legislation which is contrary to the state or federal constitution. As the North Carolina Supreme Court stated in the Great Atlantic & Pacific Tea Co. v. Maxwell case: "The principle of equal …

Virtual Intermediaries Ii - Canadian Solutions (Drop Shipments) Compared With Us, Japanese & Eu Approaches, Richard Thompson Ainsworth

Faculty Scholarship

Virtual travel agents are opportunistic internet-based travel agents. They are intermediary businesses that create mutually beneficial three-party transactions that secure accommodations for a traveler that: (a) meet the basic needs of the traveler (at a discount), (b) fills vacant room for accommodation retailers with guests that pay below market, but above standard costs, and (c) profit from the extra cash, the margin in the transaction.

The virtual intermediary’s eye is always on the discount and the cash flow. One of the things that catches their attention are the accommodation taxes which they collect from the traveler in advance and remit …

The Changing Landscape Of Tax Administration: Hot Topics Of Irs Audits Of Partnerships And S Corporations (Slides), Robert D. Schachat, Deborah M. Nolan

William & Mary Annual Tax Conference

No abstract provided.

Beyond First Blushes And Gut Reactions: Planning For The Coming Tax Increases (Slides), Mitchell A. Drossman

William & Mary Annual Tax Conference

No abstract provided.

Making Chicken Salad - Monetizing Tax Losses (Slides), Steven M. Friedman, Glenn M. Johnson

William & Mary Annual Tax Conference

No abstract provided.

Debt Workouts For Partnerships And S Corporations (Slides), Peter J. Genz

William & Mary Annual Tax Conference

No abstract provided.

Corporate And Business Law, Laurence V. Parker

University of Richmond Law Review

No abstract provided.

Mtic Fraud Infects Tradable Carbon Permits, Richard Thompson Ainsworth

Faculty Scholarship

Missing trader intra-community (MTIC) fraud has been slowly morphing from cell phones and computer chips to other commodities. In the last few months however MTIC made a dramatic appearance in tradable CO2 permits. It closed exchanges and prompted France and the Netherlands to unilaterally change their tax treatment of CO2 trades. The UK has followed the French treatment in large measure. On Monday June 8, 2009 rumors of MTIC fraud in carbon emission permits closed the main European exchange for spot trading of European Union carbon emissions permits and Kyoto offsets. When BlueNext began trading permits again on Wednesday, June …

Families For Tax Purposes: What About The Steps, Wendy G. Gerzog

All Faculty Scholarship

At least 4.4 million families in the U.S. are blended ones that include step-children and step-parents. For tax purposes, these steps receive preferential treatment for their status because they are on the one hand included as family members for many income tax benefit sections, but on the other hand excluded as family members for business entity attribution purposes and for gift and estate tax anti-abuse provisions. In the interests of fairness and uniformity, steps should be treated as family members for all tax purposes where steps have in fact voluntarily acted as their biological or adoptive counterparts, both when such …

Massachusetts Zappers - Collecting The Sales Tax That Has Already Been Paid, Richard Thompson Ainsworth

Faculty Scholarship

No other New England state is as vulnerable to Zappers as is the State of Massachusetts. Zappers and related software programming, Phantom-ware, facilitate an old tax fraud – skimming cash receipts. In this instance skimming is performed with modern electronic cash registers (ECRs).

Zappers are a global revenue problem, but to the best of this author’s knowledge they have not been uncovered in Massachusetts. A global perspective says: it is highly unlikely that Zappers are not in the Commonwealth – we just need to find them. In fact, using a Quebec template, tax losses from Zappers and related frauds in …

Vat Derogations In Germany, Austria, Denmark, And Estonia: Use And Enjoyment Rules, Richard Thompson Ainsworth

Faculty Scholarship

When the Czech Republic elected (effective January 1, 2009) to derogate from the standard rules for determining the place of supply for intangible services, pursuant to Article 58 of the Recast VAT Directive (RVD), it was following the lead of ten other Member States. This paper considers four of those other jurisdictions - Germany, Austria, Estonia, and Denmark - and compares their derogations with that of the Czech Republic.

In each instance a use and enjoyment standard determines the place of supply for certain intangible services. The affected transactions are (potentially) wide ranging. In each instance non-EU countries are on …

Integrating Subchapters K And S — Just Do It, Walter D. Schwidetzky

All Faculty Scholarship

The Code contains two “pass-through” tax regimes for business entities. One is contained in Subchapter K, which applies to partnerships, the other in Subchapter S, which, unsurprisingly, applies to S corporations. In the main, both Subchapters tax the owners of the entities rather than the entities themselves. Having two pass-through tax regimes creates obvious administrative and other inefficiencies. There was a time when S corporations served a valuable purpose, particularly when taxpayers needed a fairly simple and foolproof pass-through entity that provided a liability shield. But limited liability companies (LLCs), which are usually taxed as partnerships, 1 in most contexts …

Changes To The Czech Republic's Vat Act: The Use And Enjoyment Rules, Richard Thompson Ainsworth

Faculty Scholarship

On January 1, 2009 a minor change in the Czech Republic VAT became effective. A use and enjoyment standard was added to modify the sourcing of certain service transactions. Traditional proxy-based rules, derived from Articles 43 and 56(1) of the Recast VAT Directive (RVD), are set aside by this modification when the customer receiving the services has a permanent establishment (PE) in the Czech Republic. The modification is authorized by RVD 58.

This change is a limited adoption of RVD 58(b), and functions like a full force of attraction principle in direct taxation. If caught by these rules, transactions that …