Tax Law Commons^™

Payroll Tax Compliance And Blockchain, Richard Thompson Ainsworth, Ville Viitasaari

Faculty Scholarship

Bitcoin is an application that runs on blockchain technology. Blockchain is a foundational technology that is bringing in the second era of the Internet – the era where value can be transferred, rather than just information.

Blockchain is developing along a four-stage path similar to that which TCP/IP took. Both are foundational technologies. TCP/IP brought the Internet, and eventually brought significant (transformational) technological changes in business like Amazon.com and Skype. These are changes that could not have been forecast at the beginning of the Internet age.

Blockchain is an immutable distributed ledger. It replaces the inefficient use of multiple centralized …

Irs's Cp-2000 E-Mail Scams - Never In Dubai - Common In Canada & The Uk, Richard Thompson Ainsworth

Faculty Scholarship

On September 22, 2016 the Internal Revenue Service (IRS) and its Security Summit partners issued an alert to taxpayers and tax professionals to be on guard against fake e-mails purporting to contain a tax bill related to the Affordable Care Act. Surprisingly, this e-mail scam works. It really should not.

Modern technology is facilitating many contemporary tax scams. In recent years the US has seen false (refund) return scams, phone scammers impersonation IRS agents, and now e-mail scams with fraudulent CP-2000 notices attached to a demand for payment. The same phone and e-mail frauds have appeared in both Canada and …

Blockchain, Bitcoin, And Vat In The Gcc: The Missing Trader Example, Richard Thompson Ainsworth, Musaad Alwohaibi

Faculty Scholarship

Blockchain is coming to tax administration and will cause fundamental change. This article considers the potential for blockchain technology as it applies to the introduction of a value added tax in the Gulf Cooperation Council.

Blockchain technology disrupts centralized ledgers. Blockchain improves efficiency, security and transparency. Perhaps no centralized ledger system presents more challenges than that of the modern tax administration. The central data storage system of a modern tax authority contains all return, payment, and audit activity for all taxpayers arranged tax-by-tax for three years or longer periods of time.

It is likely that blockchain will come first to …

Finding The Pearl In The Oyster: Supercharging Ipos Through Tax Receivable Agreements, Christopher B. Grady

Northwestern University Law Review

A new, “supercharged” form of IPO has slowly developed over the last twenty years. This new form of IPO takes advantage of several seemingly unrelated provisions of the tax code to multiply pre-IPO owners’ proceeds from a public offering without reducing the amount public investors are willing to pay for the stock. Supercharged IPOs use a tax receivable agreement to transfer tax assets created by the IPO back to the pre-IPO ownership, “monetizing” the tax assets. As these structures have become more efficient, commentators have expressed concerns that these agreements deceive shareholders who either ignore or do not understand the …

Putting The Substance Back Into The Economic Substance Doctrine, Nicholas Giordano

Brooklyn Journal of Corporate, Financial & Commercial Law

The foreign tax credit, which saves U.S. taxpayers from paying both foreign and domestic income taxes on the same income, is critical to facilitating global commerce. However, as savvy taxpayers discover increasingly complicated ways to abuse the foreign tax credit regime through the structuring of business transactions, courts have become increasingly skeptical of the validity of those transactions. Using the economic substance doctrine, a common law doctrine codified in 2010 at I.R.C. § 7701(o), courts will disallow tax benefits stemming from a transaction that is not profitable absent its tax benefits, and which the taxpayer had no incentive to undertake …

The Other Eighty Percent: Private Investment Funds, International Tax Avoidance, And Tax-Exempt Investors, Omri Marian

BYU Law Review

The taxation of private equity managers’ share of funds’ profits—the twenty percent “carried interest”—received much attention in academic literature and popular discourse. Much has been said and written about the fact that fund managers’ profits are taxed at preferred rates. But what about the other eighty percent of funds’ profits? This Article theorizes that the bulk of such profits are never taxed. This is a result of a combination of three factors: First, private equity, venture capital, and hedge funds (collectively, Private Investment Funds, or “PIFs”) are major actors in cross-border investment activity. This enables PIFs to take advantage of …

Mandatory Third Party Compliance Examinations For Investment Advisers: An Sec Waterloo?, Mercer Bullard

Brooklyn Journal of Corporate, Financial & Commercial Law

The Securities and Exchange Commission (SEC or Commission) appears to be on the verge of requiring investment advisers to undergo third party examinations. One justification for the rulemaking is that the Commission lacks sufficient resources to examine advisers frequently enough. Another is to create indirectly a self-regulatory organization (SRO) for investments advisers. Both may leave a rulemaking particularly vulnerable to challenge as arbitrary and capricious under the Administrative Procedures Act. This Article considers three novel grounds on which a rulemaking may be successfully challenged. Congress has repeatedly rejected SEC requests to provide additional funding for examinations or to create an …

Gcc Vat: The Intra-Gulf Trade Problem, Richard Thompson Ainsworth, Musaad Alwohaibi

Faculty Scholarship

It seems reasonably clear that by January 1, 2018 events will be set in motion for the adoption of a community-wide 5% value added tax (VAT) in the six Member States of the Gulf Cooperation Council (GCC).

The GCC’s Framework VAT document is expected to be published by the end of October 2016. One of the clearest, consistently placed observations is that the Arabian VATs will be destination-based and modeled on a European credit-invoice design. Intra-Gulf business-to-business (B2B) transactions will be effectively zero-rated by the supplier, and the buyer’s VAT will be directed to the destination jurisdiction. It is not …

Zappers - Technological Tax Fraud In New Hampshire, Richard Thompson Ainsworth

Faculty Scholarship

No other State is as vulnerable to Zappers as is the State of New Hampshire. 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 New Hampshire. Seen from a global perspective however, it seems unlikely that they are not here.

New Hampshire’s fiscal vulnerability to Zappers comes from its heavy reliance on precisely the industry segment that has been found to be …

Sales Suppression: The International Dimension, Richard Thompson Ainsworth

Faculty Scholarship

Sales transaction taxes are highly susceptible to technology fraud, which is an inevitable result of today’s widespread reliance on technology to document taxed transactions. Technology can be (and is) manipulated to defeat the collection of these taxes. Both the U.S. retail sales tax (RST) and the European value added tax (VAT) are vulnerable to technology-based fraud. This Article concerns sales suppression — intentionally not recording sales — in the RST, and at the final stage of the VAT, the retail stage, when tax is collected from final consumers.

The modern electronic cash register (ECR)/point of sale (POS) system is vulnerable …

Vatcoin: The Gcc's Cryptotaxcurrency, Richard Thompson Ainsworth, Musaad Alwohaibi, Mike Cheetham

Faculty Scholarship

Bitcoin is the world’s first peer-to-peer cryptocurrency. VATCoin is similar, but it is used in tax compliance. Both Bitcoin and VATCoin are distributive ledger applications built upon blockchain technology. Bitcoin’s ledger is public; VATCoin’s is private. If adopted, VATCoin could well become the world’s first government-mandated cryptotaxcurrency. Unlike Bitcoin, VATCoin will not be a speculative currency. It is always fixed to the home currency.

This paper proposes that the Gulf Cooperation Council (GCC) adopt VATCoin in its VAT Framework. The GCC is expected to have multiple 5% VATs in place by January 1, 2018. There is an ample amount of …

Vat In The Gcc - Missing Trader Frauds, Richard Thompson Ainsworth, Musaad Alwohaibi

Faculty Scholarship

All VATs are susceptible to missing trader (MT) fraud. VATs adopted in an economic community are particularly more susceptible. The EU, for example, loses in excess of €100b annually to this fraud. Given the anticipated adoption of a European-style credit-invoice VAT in the GCC by January 1, 2018, this paper offers a technology-based solution involving the real-time tracking of taxable transactions with centrally collected (securely encrypted) data flows that are risk-analyzed by artificial intelligence (AI).

Replacing Havoc: Creating Rules For Sovereign Default, Edward J. Kelley

Cleveland State Law Review

Sovereign debt is an ongoing threat to a State’s economic stability and its citizens’ standard of living. A single occurrence of default begins a cycle in which it becomes increasingly more difficult for an indebted State to pay its debts and ensure the survival of its citizens. Because central banking systems and direct spending are often inadequate methods to boost an indebted State’s economy, a more expansive solution to sovereign debt is required. The initial solution to the growing problem of sovereign debt is an international treaty that will allow the world economy to establish monitoring mechanisms to prevent debt …

Bringing Continuity To Cryptocurrency: Commercial Law As A Guide To The Asset Categorization Of Bitcoin, Evan Hewitt

Seattle University Law Review

This Note will undertake to analyze bitcoin under the Uniform Commercial Code (UCC) and the Internal Revenue Code (IRC)—two important sources of commercial law—to see whether any existing asset categories adequately protect bitcoin’s commercial viability. This Note will demonstrate that although commercial law dictates that bitcoin should—nay must—be regulated as a currency in order to sustain its existence, the very definition of currency seems to preclude that from happening. Therefore, this Note will recommend that we experiment with a new type of asset that receives currency-like treatment, specifically designed for cryptocurrencies, under which bitcoin can be categorized in order to …

The Foreign Account Tax Compliance Act: The Solution Or The Problem?, Sophie S. Chou

CMC Senior Theses

Tax evasion has been happening for decades, but after the highly publicized cases with two foreign banks, LGT and UBS, the United States (US) is cracking down on tax evaders. The latest addition to the Internal Revenue Service (IRS)’s repertoire of enforcement tools is the Foreign Account Tax Compliance Act, otherwise known as FATCA. The Act was enacted to incentivize tax information release by foreign financial institutions (FFIs) who would otherwise face a 30% withholding tax on any US source income. The question was whether or not the design of the Act and its implementation successfully met this goal.

This …

Cooperating Individual Or Entity: Law Enforcement's Friend In A Time Of Escalating Deficits And Tight Budgets, Albert F. Tellechea

Florida A & M University Law Review

No abstract provided.

Bitcoin Transactions: A Bit Of Financial Privacy, Sumit Agarwal

Cardozo Arts & Entertainment Law Journal

No abstract provided.

The Evolution Of Giving: Considerations For Regulation Of Cryptocurrency Donation Deductions, Ashley Pittman

Duke Law & Technology Review

This Issue Brief looks at the rapidly growing area of cryptocurrency donations to nonprofit organizations. Given the recent IRS guidance issued on taxation of Bitcoin, specifically its decision to treat cryptocurrencies as property, questions now arise as to how charitable contributions of the coins will be valued for tax deductions. Though Bitcoin resembles most other capital gain property, its volatility, general decline in value, anonymity, and potential for abuse require specific guidance on valuation and substantiation so as to handle its unique nature and prevent larger deductions for charitable contributions than those to which taxpayers are entitled.

Of More Than Usual Interest: The Taxing Problem Of Debt Principal, Charlene D. Luke

Seattle University Law Review

Leverage is an essential but often troubling component of the U.S. market. The financial crisis highlighted the risks and complexity of a leverage web that includes flesh-and-blood people from all walks of life and paper people from all corners of the business and investment world. In the tax area, the potentially problematic incentive effects of interest deductibility have long engaged a wide array of tax commentators and policymakers. While interest deductibility rightly receives widespread scrutiny, a more comprehensive approach to leverage is needed. This Article focuses on the surprisingly complicated tax treatment of cash (and cash equivalent) borrowings. This Article …

International Tax Considerations: Inbound & Outbound, Seth Green, Monica Zubler

William & Mary Annual Tax Conference

No abstract provided.

International Tax Considerations: Inbound & Outbound (Slides), Seth Green

William & Mary Annual Tax Conference

No abstract provided.

Business Law Bulletin, Fall 2015

Business Law Bulletin

No abstract provided.

I.R.C. §(A)(3)(D): Reorganizing An Insolvent Savings And Loan Association, Brenda D. Crocker, Michael L. Unti

Akron Law Review

Whether or not the new reorganization provision, section 368(a)(3) (D), succeeds in inducing the acquisition of insolvent savings and loan associations, it is likely to be viewed as a creative attempt at a solution. To best illustrate the novelty of Congress's approach, the ensuing sections begin with an explanation of federal tax law as it has evolved in the context of insolvency reorganizations.

Dickman And Code Section 7872: The Death Knell To Interest-Free And Below-Market Loans, Beverly Mcdonel

Akron Law Review

This comment will discuss the history of interest-free and below-market rate loans, including recent changes in the law from Dickman and the Internal Revenue Code (Code) revision in 1984. In addition, some of the tax planning alternatives to interest-free loans will be briefly examined.

The Development Of Foreign Investment Law In Egypt And Its Effect On Private Foreign Investment, George E. Bushnell Iii

Georgia Journal of International & Comparative Law

No abstract provided.

Annual Survey Of Developments In International Trade Law: 1985, Georgia Journal Of International And Comparative Law

Georgia Journal of International & Comparative Law

No abstract provided.

Phishing And Vat Fraud In Co2 Permits: The Digital Invoice Customs Exchange Solution, Richard Thompson Ainsworth

Faculty Scholarship

In accordance with Directive 2003/87/EC of October 13, 2003, trade in greenhouse gas emissions commenced in the European Union (EU) on January 1, 2005. The EU-Emissions Trading System (EU-ETS) was born.

The EU has a Value Added Tax (VAT). VAT is a transaction-based levy on all trade in goods and services. Each Member State has a VAT as a condition of membership. Until January 3, 2017 transactions in CO2 permits are taxed as services. After this date they are exempt as financial instruments.

This change in VAT treatment of CO2 permits is directly attributable to rampant fraud in the market. …

Going Green: Legal Considerations For Marijuana Investors And Entrepreneurs, Frank Robison

American University Business Law Review

No abstract provided.

The Historical Origins Of The Debt-Equity Distinction, Camden Hutchison

All Faculty Publications

The U.S. tax code favors corporate debt over corporate equity, a distinction long criticized by economists, legal scholars, and other tax commentators as both theoretically and practically unsound. For decades, academics and policymakers from a variety of disciplinary and political backgrounds have argued that this so-called “debt-equity distinction” distorts corporate financing decisions, encourages excess borrowing, and invites troublesome tax-avoidance behavior. Surprisingly, despite widespread critical attention, the origins of this policy remain a mystery. Primarily focused on its contemporary significance, scholars have disregarded the distinction’s past. This article uses historical evidence to trace the debt-equity distinction’s origins, development, and continuing evolution. …

Advising Venture & Early-Stage Client: Issues Confronting Early-Stage Companies, Carroll D. Hurst

William & Mary Annual Tax Conference

No abstract provided.