Elon Musk, Tweets, Fines, and Deductibility

By Norio Nakayama, CC BY-SA 2.0

By Sam Brunson

In the beginning of August, Elon Musk tweeted that he had secured financing to take Tesla private at $420 per share. It turned out that he, um, hadn’t. In the meantime, though, his tweet moved the market; on the day of his tweet, Tesla shares closed up 11%.[fn1]

It wasn’t only investors who noticed the tweet, though. The SEC was watching, too. And on Thursday, the SEC charged Musk with securities fraud. In its complaint, the SEC requested that the court: Continue reading “Elon Musk, Tweets, Fines, and Deductibility”

A Series of Series? Tax, Regulation, and Faculty Workshops at Boston College Law School

I do love a good faculty workshop. Reading and spiritedly discussing the work of other academics always fills me with energy and inspiration for my own projects. Plus, it’s great to be able to spend time with new and old friends and find out what’s been baking in their brains.

Here at BC Law, I’m fortunate to be involved in two exciting workshop series: the BC Tax Policy Workshop and the BC Regulation and Markets Workshop. Both kicked off this week: On Tuesday, we hosted Professor Jens Dammann from the University of Texas at Austin and heard about his paper, “Deference to Delaware Corporate Law Precedents and Shareholder Wealth: An Empirical Analysis.” Today, we welcomed Professor Ajay Mehrotra (Northwestern Law; Executive Director, American Bar Foundation) and had a lively discussion of his book project, “The VAT Laggard: A Comparative History of U.S. Resistance to the VAT.” Tomorrow, BC Law will have its first Faculty Colloquium of the semester. Professor Guy-Uriel Charles (Duke Law; visiting at Harvard Law) will present “The American Promise: Rethinking Voting Rights Law and Policy for a Divided America.”

You can never have too many workshops!

Below are the dates and speakers for the remainder of the semester. If you’re a Boston-area law professor and are interested in attending or would like to be on our workshop email list, just let me know.

Tax Policy Workshop (Fall 2018):

Thursday September 13, 2018
Ajay Mehotra (Northwestern, and American Bar Foundation):
The VAT Laggard: A Comparative History of US Resistance to the VAT
(co-sponsored with BC Legal History Workshop)

Tuesday November 6, 2018
Andrew Hayashi (UVA): title TBD

Tuesday Nov. 13, 2018
Cliff Fleming (BYU): title TBD

Tuesday November 27, 2018
Emily Satterthwaite (University of Toronto): title TBD
(co-sponsored with BC Regulation and Markets Workshop)

Continue reading “A Series of Series? Tax, Regulation, and Faculty Workshops at Boston College Law School”

A Quick Thought on the Accountable Capitalism Act and Federal Taxes

Last week, Senator Warren unveiled the Accountable Capitalism Act, setting off a firestorm of controversy. By and large, the responses have been all over the map, ranging from an argument that it will help companies do better for all constituencies, including shareholders, to the hyperbolic assertion that it would “help to destroy capitalism.”

I haven’t read the bill super-carefully (in fact, I mostly skimmed it late last night), but a Twitter discussion got me thinking about its potential tax consequences.

Continue reading “A Quick Thought on the Accountable Capitalism Act and Federal Taxes”

Update on Altera

By: Leandra Lederman

I’m currently at the #SEALS2018 conference in Ft. Lauderdale, but I wanted to quickly note that the opinion of the 9th Circuit panel in Altera Corp. v. Commissioner was withdrawn today. This follows the replacement of Judge Reinhardt, who passed away on March 29, with Judge Graber. Recall that the July 24 opinion in this important case reflected a 2-1 decision, with the late judge in the majority, as Christopher Walker and others had noted. (For my previous coverage of Altera, see here and here.)

A screenshot of the court’s order appears below.  It will be interesting to see what happens after the new panel confers!

Reversing the U.S. Tax Court, 9th Circuit Rules for IRS in Altera

In a 2-1 opinion, a panel of the Court of Appeals for the Ninth Circuit has reversed the U.S. Tax Court in Altera v. Commissioner.  (I don’t have a link yet to the opinion because it just came out this morning, but will add it as a comment when I do.) The decision is great news for IRS rulemaking: the Court of Appeals upheld a Treasury regulation in the face of a procedural challenge that alleged that “although Treasury solicited public comments, it did not adequately consider and respond to those responses, rendering the regulations arbitrary and capricious under State Farm.” Altera, slip. op. at 27.  The court found that Treasury’s approach to the regulation (a cost-sharing regulation under Code section 482) satisfied State Farm‘s requirements. Id. at 37. The Court of Appeals also accorded the regulation Chevron deference. Id. at 46.

In my view, this is the right outcome. (Full disclosure: Susan Morse and Stephen Shay spearheaded an amicus brief in the Ninth Circuit in favor of the Commissioner, in which I joined, along with Dick HarveyRuth Mason, and Bret Wells.) Treasury did consider and respond to the comments it received on the regulation; it simply had a different approach to the substance of the regulation than the taxpayers commenting did. The Court of Appeals explains:

“In short, the objectors were arguing that the evidence they cited—showing that unrelated parties do not share employee stock compensation costs—proved that Treasury’s commensurate with income analysis did not comport with the arm’s length standard. Thus, the thrust of the objection was that Treasury misinterpreted § 482. But that is a separate question—one properly addressed in the Chevron analysis. That commenters disagreed with Treasury’s interpretation of the law does not make the rulemaking process defective.”

Alterasupra, at 31-32.

It is worth noting that the court did not address larger questions of the applicability of the APA or Chevron in tax cases, stating in a footnote (and citing Stephanie Hoffer & Chris Walker and Kristin Hickman):

“Because the Commissioner does not contest the applicability of the APA or Chevron in this context, this case does not require us to decide the broader questions of the precise contours of the application of APA to the Commissioner’s administration of the tax system or the continued vitality of the theory of tax exceptionalism.”

Id. at 25 n.5. Dan Shaviro has blogged about the decision on Start Making Sense, noting that “the Chevron standard for reviewing administrative regulations . . . may well be on the Supreme Court’s chopping block in the near future.”

I would expect more coverage of the Altera decision soon. For prior Surly coverage, see here.

New Paper on Tax Legislative Process and Statutory Drafting

Shu-Yi Oei

For those readers in search of some light summer reading, Leigh Osofsky (UNC Law) and I have been working on a paper on statutory drafting, entitled “Constituencies and Control in Statutory Drafting: Interviews with Government Tax Counsels.” We finally got around to posting it on SSRN, here.

In the paper, we report findings from interviews we conducted with government tax counsels who have participated in the tax legislative process, in which we asked questions about various aspects of drafting and creating tax legislation. In addition to reporting our findings, we also discuss the implications of our research for statutory interpretation, tax system design, and the legislative process.

For readers interested in legislation, tax drafting, statutory interpretation, tax shelters, and the political process, the paper is probably worth a look. Feel free to contact either of us with comments.

 

 

 

 

 

 

More Post-Wayfair Thoughts: Sales Tax?

By now, anyone who reads this post should be aware that the Supreme Court decided South Dakota v. Wayfair and overruled its physical presence rule last week. States now have expanded authority to require the collection of their consumption taxes by remote vendors like online retailers. Coverage of the case and its impact on states and vendors has been widespread, including my preliminary thoughts offered on this blog and with Darien Shanske and David Gamage elsewhere.

One aspect of the coverage that would usually drive state tax aficionados crazy is the continued reference to the case as involving sales tax.

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For a long time, many of us have smugly corrected folks (often only in our own minds) and noted that it is the state use tax that is at issue when we are talking about online sales. That may be no more.

The South Dakota law that was challenged in Wayfair indeed requires remote vendors to collect the state’s sales tax rather than the state’s use tax. Historically, that would have been a big problem, but it didn’t trouble Justice Kennedy or the other members of the majority. This may require broader thinking than just analyzing what Wayfair means about states’ powers over remote vendors. The Court’s decision in Wayfair may have done much more than just overrule Quill; it may have unsettled some even longer-standing doctrine in this area.

Continue reading “More Post-Wayfair Thoughts: Sales Tax?”

South Dakota v. Wayfair: First Impressions

The Supreme Court issued a 5-4 decision overruling its long-standing physical presence rule in South Dakota v. Wayfair this morning. That decision provides welcomed relief to states (and to those of us who already pay use tax) and will have significant short- and long-term consequences. My reactions to Wayfair will surely extend for a long period of time, but here are some brief first thoughts.

The Basics

The Court’s holding was very limited: the physical presence rule no longer governs the determination of what constitutes a “substantial nexus” under the dormant Commerce Clause. The Court also found that nexus existed in the case based on the challengers’ connections with South Dakota. Finally, the Court did not bless the South Dakota statute completely, but remanded the decision back to the South Dakota courts to hear non-nexus based challenges to the law, if any exist.

What this means is that states will be able to continue (or expand) their efforts to require the collection of sales/use tax by online vendors. States will also need to monitor whether and how Congress responds, but they should be able to craft their laws to avoid state-court scrutiny until that time.

Continue reading “South Dakota v. Wayfair: First Impressions”

The Stages of International Tax Reform (Insights from this Weekend’s ABA Tax Section Meeting)

By: Diane Ring

Since December 2017, tax conferences in the United States have focused substantially on the H.R. 1 tax reform legislation. No surprise there — the 2017 changes are among the most significant in the past thirty years. But over the past five months, through attending numerous tax conferences featuring international tax practitioners, I’ve observed some interesting developments in the nature of the discussions and debates at these conferences. These changes are pretty revealing about the process of absorbing the true impact of the new tax law, particularly in international tax. This weekend’s ABA May Tax Section Meeting in Washington, D.C. highlighted some of these trends.

Continue reading “The Stages of International Tax Reform (Insights from this Weekend’s ABA Tax Section Meeting)”