More on Section 199A and Worker Classification (**Threaded Tweet Alert!)

Shu-Yi Oei

Last Friday, Diane and I posted a new paper called “Is New Code Section 199A Really Going to Turn Us All into Independent Contractors?” on SSRN. This was something that started as a blog post but then grew too long and so became a short paper. We plan to develop the ideas in it more robustly in future work.

On Saturday, I made one of those goofy academic tweet threads summarizing the paper, and then it occurred to me that I really liked my goofy tweet thread! Therefore, I’ve taken the liberty of posting the tweets here for the marginal reader who is just interested enough in the topic to read the tweets but possibly not interested enough to read the actual paper.

Diane and I look forward to continuing conversation on this.

Is New Code Section 199A Really Going to Turn Us All Into Independent Contractors? (New Paper on SSRN)

By: Diane Ring

Shu-Yi and I started a blog post on new Section 199A that morphed into a seven-page essay that ultimately found its proper home on SSRN. Here is the abstract:

Is New Code Section 199A Really Going to Turn Us All Into Independent Contractors?

Abstract

There has been a lot of interest lately in new IRC Section 199A, the new qualified business income (QBI) deduction that grants passthroughs, including qualifying workers who are independent contractors (and not employees), a deduction equal to 20% of a specially calculated base amount of income. One of the important themes that has arisen is its effect on work and labor markets, and the notion that the new deduction creates an incentive for businesses to shift to independent contractor classification. A question that has been percolating in the press, blogs, and on social media is whether new Section 199A is going to create a big shift in the workplace and cause many workers to be reclassified as independent contractors.

Is this really going to happen? How large an effect will tax have on labor markets and arrangements? We think that predicting and assessing the impact of this new provision is a rather nuanced and complicated question. There is an intersection of incentives, disincentives and risks in play among various actors and across different legal fields, not just tax. Here, we provide an initial roadmap for approaching this analysis. We do so drawing on academic work we have done over the past few years on worker classification in tax and other legal fields.

Private IRS Debt Collection: A Surly Taxsplainer

By Sam Brunson

Picture by John Biehler. CC BY-NC-SA 2.0

You may have heard that the IRS spent $20 million last year on private debt collection, and managed to raise … almost $7 million.[fn1] So what’s up with that? A number of things.

First things first, though: in 2015, Congress mandated that Treasury enter into one or more debt collection contracts with private debt collectors. The IRS missed its initial deadline, but started the program in April 2017.[fn2] Initially, the IRS contracted with four debt collection agencies, assigning them about $920 million of inactive tax receivables.[fn3] (“Inactive tax receivables” basically means tax debt that the IRS has stopped trying to collected, and where it has had no contact with the taxpayer-debtor for at least a year.) The debt collectors receive a fee of up to 25 percent of the amounts they collect. (They seem to be paid additional amounts, too, as I’ll lay out later.) Continue reading “Private IRS Debt Collection: A Surly Taxsplainer”

GOP 2017 Tax Act Forces Nonprofits to Pay UBIT on Some Fringe Benefits

By: Philip Hackneyroad-3036620_1280

In the new tax act of 2017, Congress imposed an unrelated business income tax on transportation, parking, and athletic facility fringe benefits that a nonprofit provides to its employees. I write because I suspect there are universities or hospitals or other large nonprofits out there (pension funds maybe) that offer these types of fringe benefits that are unaware that they must pay UBIT on the total value of these benefits at the end of the year. The law went into effect for taxable years starting January 1, 2018.

In Section 13703 of the bill, Congress promulgated the following new rule: UBIT “shall be increased by any amount for which a deduction is not allowable under this chapter by reason of section 274 and which is paid or incurred by such organization for any qualified transportation fringe (as defined in section 132(f)), any parking facility used in connection with qualified parking (as defined in section 132(f)(5)(C)), or any on-premises
athletic facility (as defined in section 132(j)(4)(B)).” Continue reading “GOP 2017 Tax Act Forces Nonprofits to Pay UBIT on Some Fringe Benefits”

Giving Tuesday and State Use Taxes

By Adam Thimmesch

For a few years now, I’ve gently pushed the idea of Use Tax Tuesday to follow Cyber Monday. Why not follow one of the biggest tax-avoidance days of the year with a day dedicated to undoing that damage? As much as this makes sense to me, it appears that I have lost out to Giving Tuesday, and probably rightfully so.  Nevertheless, I want to suggest that Use Tax Tuesday can easily be folded within the more general ambit of Giving Tuesday. Maybe all is not lost.

Continue reading “Giving Tuesday and State Use Taxes”

The Senate Tax Bill’s “Clarification” of Independent Contractor Status: Tax and Employment Law Tradeoffs

By: Diane Ring

Shu-Yi Oei and I have been tracking the recent tax reform developments as well as a couple of proposed tax bills that deal with worker classification, information reporting, and tax withholding. Based on a description prepared by the Joint Committee on Taxation, it looks like the Senate Tax Bill is going to include a new safe harbor provision guaranteeing worker classification as an independent contractor and will make changes to independent contractor withholding and information reporting. We posted our analysis of this proposal and its potentially serious implications on TaxProf Blog: The Senate Bill and the Battles Over Worker Classification.

Our main points:

1. Not just tax: This worker classification safe harbor is not just about tax, it will likely have impacts on employment/labor law outcomes and protections as well.

2. Not just gig workers: Based on the Joint Committee description, the proposal is not limited to gig economy workers —anyone who meets the safe harbor requirements (which are pretty easy to satisfy in many cases) can be classified as an independent contractor. This may have the effect of encouraging employers to push workers into work relationships that come within the safe harbor. Or, in certain cases, it may facilitate the strategic movement of higher-income workers into independent contractor status — see point 4 below.

Continue reading “The Senate Tax Bill’s “Clarification” of Independent Contractor Status: Tax and Employment Law Tradeoffs”

Paradise Papers: Day 2

By: Diane Ring

The most recent big financial data leak, dubbed the Paradise Papers, is now in full swing in the media. On Monday, Shu-Yi Oei blogged the initial release and its immediate takeaways (including the revelation that U.S. Commerce Secretary Wilbur Ross continued to hold investments in a shipping business that had business connections to key Russian figures). But each passing hour brings new information and individuals into the public spotlight – and in the process sheds light on how such information is likely to be used and what the media and the public seem to find most noteworthy.

So what did Day 2 bring? . . .

Continue reading “Paradise Papers: Day 2”

Some Initial Thoughts on the Paradise Papers Leak

Shu-Yi Oei

Another data leak broke on Sunday, November 5, while I was on a plane home from Bergen, Norway. Coincidentally, Diane Ring and I were in Bergen presenting our Leak-Driven Law paper at a tax conference organized by Max Planck Institute for Tax Law and Public Finance, Norwegian Centre for Taxation, and Notre Dame University.

This new “Paradise Papers” leak involves a set of 13.4 million records from 1950 to 2016.

From the ICIJ’s website:

“The new files come from two offshore services firms as well as from 19 corporate registries maintained by governments in jurisdictions that serve as waystations in the global shadow economy. The leaks were obtained by German newspaper Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists and a network of more than 380 journalists in 67 countries.”

The two offshore services firms in question are the offshore law firm Appleby and Asiaciti Trust, an offshore specialist headquartered in Singapore. Over 7 million of the records came from Appleby and affiliates.

Diane and I argued in Leak-Driven Law that (1) the high-salience and shocking nature of tax and other leaks and (2) the interventions of the press and other actors in processing, framing, and generating publicity about these leaks are important features that can affect how legal responses and reactions occur in the aftermath of a leak. We’ll be keeping track of how events unfold in the aftermath of this latest leak and how it fits or doesn’t fit with the observations in our paper:

Some initial notes and reactions:

This was at Least in Part a Cyber Hack.

Most of the news coverage I’m seeing is focused on the content on the leak, but it’s worth noting that at least with respect to Appleby, this new leak was in part a result of a cyberattack on Appleby that happened last year. I haven’t seen anything to suggest that this was a data theft by an insider (e.g., employee) turned whistleblower. In its response to the leak, Appleby defended itself and noted the challenges of cyber-crime for individuals and businesses.

The Appleby Hack Occurred in 2016.

Continue reading “Some Initial Thoughts on the Paradise Papers Leak”

ABA Tax Section 5th Annual International Tax Enforcement and Controversy Conference (Washington, DC, Oct. 27, 2017)

 By: Diane Ring

Yesterday my frequent co-author, Shu-Yi Oei, and I attended the ABA’s conference on “International Tax Enforcement and Controversy” in DC. The panels and discussion covered a range of interesting intersecting issues. These included: (1) the relationship among international organizations and bodies (such as the OECD, UN, World Bank, IMF and G20) in directing the shape of international tax law content and enforcement; (2) the place of developing countries in the evolving international tax system; (3) competing goals of finance ministers and tax ministers in various countries and the impact of that conflict on taxpayers; (4) the consequences of and responses to limited IRS resources; and (5) continuing benefits to enforcement from the Swiss Bank Program.

But probably the most significant theme that ran through the day’s discussion was the role of data, especially “big data”. . . .

Continue reading “ABA Tax Section 5th Annual International Tax Enforcement and Controversy Conference (Washington, DC, Oct. 27, 2017)”

Tax Surveillance and Tax Design

By Adam Thimmesch

tax-890737_960_720

Late last week, I ran across an article from the UK (thanks tax Twitter!) regarding a significant uptick in the number of vehicles being “clamped” or impounded in the UK due to a failure of their owners to pay a required road tax. The story wouldn’t have really captured my attention, but for its inclusion of a quote from the Driver and Vehicle License Agency’s National Wheelclamping Manager. In response to the release of information about increased noncompliance with the tax, the DVLA posted a warning on its website: “Our enforcement teams are out and about on the roads around the UK all year. Their vans are equipped with number plate recognition cameras so any vehicle that isn’t taxed is at risk of being clamped or impounded.” As someone who has spent a lot of time thinking about tax privacy lately, this was intriguing, so I did some digging.

Continue reading “Tax Surveillance and Tax Design”