The section 385 regulations on the distinction between debt and equity are now final, and despite what tax advisers and Congress have been saying for months, the world did not come to an end. In fact, the barrage of negative comments and nasty letters from lawmakers profoundly affected Treasury, and the once-sweeping regulation package was significantly carved back. In a few years, when the U.S. tax base is even further eroded, the government will almost certainly rue this guidance as a profound missed opportunity.
Tax Analysts Blog
Jeremy Scott, editor in chief of Tax Analysts' commentary, is an expert on federal issues and corporate tax policy. Scott leads the company's commentary, analysis, and opinion publishing. He contributes weekly to the Tax Analysts blog and writes periodically on federal tax issues. Before joining Tax Analysts, Scott was an associate at Silverman & Associates Chartered, where he practiced in construction law, bankruptcy, Miller Act issues, estate planning, debtor and creditor’s rights law, choice of entity, the creation of corporate and limited liability entities, and general corporate law. Scott received his BA from the University of Virginia, his JD from the William & Mary School of Law, and his LLM in taxation from Georgetown University Law Center.
By now virtually everyone is aware that Donald Trump claimed a $916 million tax loss on his 1995 returns. We know this because The New York Times obtained a partial copy of Trump's state returns and published a story speculating that Trump has been using this loss to avoid paying any income taxes for years (18 years is the number being thrown about). The Trump campaign is going to have to do a lot of damage control to mitigate the political effect of the Times' revelations, but a real estate developer claiming huge losses isn't all that remarkable from a tax perspective.
Hillary Clinton would like voters to believe she's the candidate most likely to help working Americans. After a surprisingly difficult primary fight with a socialist senator from Vermont, Clinton has adopted a lot of populist economic rhetoric. On her campaign website, she says she has an eight-point plan to help the middle class, with the first point saying, "Hillary is proposing middle-class tax breaks to help families cope with the rising cost of everyday expenses." However, Clinton actually hasn't ever released her plan to cut middle-income taxes (or really any taxes), instead relying on evasive answers and proposals for small-change tax expenditures.
The estate and gift tax has a long history in the United States. The current version celebrated its 100th birthday on September 8, but there were legacy tax experiments throughout the 19th century. The tax was relatively stable for most of its first 80 years, until Republicans made its repeal one of their central tenets and succeeded in labeling it the death tax. The battle seemed to climax in late 2012, when the American Taxpayer Relief Act (ATRA) permanently extended a compromise version. However, both 2016 presidential candidates would revisit the ATRA solution, albeit in radically different ways.
In the wake of the United Kingdom's vote to exit the European Union, another core member of Europe is facing an uncertain future because of proposed major constitutional reform. Italian voters will go to the polls in late October or early November to decide the fate of Prime Minister Matteo Renzi's leftist government. If Renzi's reform passes, it will make governing Italy much easier, but its main aim is to essentially disenfranchise a euroskeptic, populist movement similar to the U.K. Independence Party.
Apple is a major part of why the United States is the world's leading innovator on new technologies, particularly those involving telecommunications and computers. The company has over 66,000 domestic employees, and a large percentage of its customers are here -- at least 40 percent, according to its latest annual report. But Apple also aggressively avoids paying taxes in high-tax jurisdictions, particularly the United States. And Apple CEO Tim Cook's recent statements are misleading about why.
Republican presidential nominee Donald Trump has taken a lot of heat for proposing a tax plan that would cost at least $12 trillion over 10 years if enacted. In response to that criticism, Trump and his advisers have implied that a new, less costly plan is in the works. But Trump isn't the only candidate in the race who seems unconcerned about adding to the deficit.
In his acceptance speech at the Republican National Convention, Donald Trump painted a very bleak picture of a dystopian United States that is spinning out of control. Citing compelling statistics, the GOP nominee highlighted rising violent crime rates, wage stagnation, continuing unemployment, and the dangerous state of the world. And then, toward the end, Trump once again called the United States "one of the highest-taxed nations in the world."
The Brexit saga in the United Kingdom is almost ready to enter its next phase. Instead of waiting until September to elect a new Conservative leader who would then become prime minister, Andrea Leadsom's decision to drop out has conceded the race to her rival, Theresa May. May's triumph has significant ramifications for Britain's future relationship with Europe and the U.K. economy, but she also struck a blow for transparency in election disclosures. May released four years' worth of her own tax returns, while Leadsom declined to release more than one.
It is hard to overstate the magnitude of the shock wave emanating from the United Kingdom in the wake of voters' decision to exit the EU. The surprising victory of the Leave campaign will almost certainly prompt introspection on the part of EU leaders and force the next U.K. prime minister to confront the serious possibility of a major recession and tangled trade policy. Where the Brexit vote might have a more subtle impact is on the U.K. tax regime.
Donald Trump's tax plan isn't particularly well developed, but he does make his position clear on one major international tax issue. Trump would retain the United States' worldwide tax system while eliminating the deferral of taxes on foreign profits. This position is at odds with many reform plans featuring a switch to territoriality, and it is very close to the preferences of Democratic Sens. Ron Wyden and Bernie Sanders. All three politicians are right -- it is time for the United States to end deferral and finally level the playing field between domestic and foreign profits.
George Voinovich, both a two-term senator and governor of Ohio, died June 12. Voinovich was an extremely popular governor known primarily for his fiscal discipline. Many of the remembrances of the Ohio politician have praised him for standing against his Republican allies and opposing the 2003 tax cuts proposed by George W. Bush. Lost in some of the discussion is that Voinovich was a supporter of the far larger 2001 tax cut legislation and that other Republicans did much more to try to derail Bush's plans.
While the Republicans have struggled to win the presidency in the last few election cycles, the party has made impressive gains elsewhere. In fact, the GOP could set a record this fall by holding more than 32 governors' mansions at the same time. There are 31 Republican governors, and the races look set up to allow the party to add two or three more on Election Day. If they do, the tax outlook in those states will change dramatically.
Australia's 2016 election is underway. On July 2 voters will determine whether to change prime ministers for the fifth time since 2010 or to return Malcolm Turnbull's Liberal government to a full term. Because of a radical Labor proposal on negative gearing and the Liberals pushing for a major corporate tax cut, tax policy is likely to play a major (if not deciding) role in the race.
Well, that didn't take long. After hinting for months that his positions are more fluid than they sometimes appear (and telling The New York Times that he was "flexible"), Donald Trump didn't waste any time beginning his pivot for a general election matchup with Hillary Clinton.
There is growing pressure around the world for major changes to corporate tax policy. The OECD's base erosion and profit-shifting project, and the pressures that drove the G-20 to push for action in the first place, is forcing governments to reexamine everything from transfer pricing to tax enforcement. But in the United States, the BEPS project seems to have only motivated lawmakers to moan about foreign countries targeting U.S. multinationals, leading to calls for the United States to address its high corporate tax rate.
Sen. Elizabeth Warren, D-Mass., might be a polarizing figure, but she is correct about at least one issue: pre-filled tax returns. Warren introduced legislation April 14 that would require the IRS to fill out tax returns for taxpayers with relatively simple tax situations. This would, of course, deal a major blow to the so-called Free File Alliance, which is primarily led by Intuit (the maker of TurboTax), H&R Block, and Jackson Hewitt.
In September 2014 Treasury took its first stab at stopping the wave of inversions that some argued were stripping the U.S. corporate base. It issued a finely turned notice targeting the ability of companies to use cash in foreign subsidiaries without paying U.S. tax. Inversions continued. In November 2015 another notice came out, but that same month Pfizer and Allergan announced the largest inversion in U.S. history, a $160 billion deal that incensed some lawmakers.
The weird power sharing situation between London and Edinburgh was on display last week when the United Kingdom's Conservative government announced that it would push forward with tax and spending cuts. Scotland's first minister, Nicola Sturgeon of the Scottish National Party, said she wouldn't accept the Conservatives' tax changes and would instead seek to protect spending on education and elder care.
Mitt Romney is in the news a lot for a man not running for president. The 2012 GOP nominee and former Massachusetts governor has attempted to make himself the face of the #NeverTrump movement.