Luke Wagner is a 2017 JD candidate at the University of San Diego School of Law.
In this article, Wagner explains how global events have influenced the evolution of the subpart F regime, and he makes recommendations for future deferral reform.
This article was selected as a winning entry in Tax Analysts' annual student writing competition.
by Luke Wagner
Table of Contents
The highly specialized yet widespread nature of tax law in the international field has increased the importance of tax deferral on foreign-source earnings, its public policy history, and current reform proposals. Changes to deferral law have consistently occurred in close proximity to world events since World War I, indicating international affairs as a policy influence. This report briefly explains principles and terms of art regarding foreign-source income deferral before thoroughly exploring the effect of global events on the timing of and substantive changes to deferral law, recommending keeping the subpart F regime and cutting the tax rate on repatriation. This report includes an event timeline to illustrate the temporal intersections between major world events and changes in the law.
In the context of international taxation, the term "deferral" describes the procedure by which foreign-source income of American citizens and businesses is processed by the IRS for tax purposes.1 Under this policy, the United States government taxes only foreign income when it enters into American jurisdiction via dividends from a foreign subsidiary. That creates a financial dilemma for American citizens and companies that want to use the funds domestically. Citizens and companies can keep the gains abroad, thereby deferring American taxes until the funds are later repatriated (brought into American jurisdiction). Opinions vary on whether and how to change deferral policy, and therefore it is instructive to review deferral's legal development in historical context.
The ratification of the 16th Amendment in 1913 completely transformed the tax system in America by allowing Congress to convert the country to a progressive income-based system.2 Under the new system, taxes occurred only in response to recognizable realization events.3 Realization occurs whenever income is received (for example, from compensation for labor), and recognition denotes the government's ability to tax the event.4 As a general rule, governmental power to enforce laws, including taxation, historically extended only to the limits of its jurisdiction. That principle carried over into the income-based system, meaning the U.S. government by definition could not tax income outside its jurisdiction when it first introduced the income tax. The basic legal structure of the American tax system recognized political realities and therefore did not touch foreign income as long as it stayed abroad.5 However, once taxpayers brought foreign-source gains into American jurisdiction the United States recognized it as a realization event, making the funds taxable. Citizens and companies could decide when to bring funds into American jurisdiction, often waiting for a drop in tax rates.6 That ability to wait comprises the doctrine of deferral.
A. Economic Effects of World War I
The rates imposed under the post-1913 income taxation system began very low, with the maximum individual rates at approximately 10 percent,7 so the issue never significantly arose even for multinational companies working on a large scale.8 However, World War I completely changed the situation because of the high costs of American involvement.9 By 1918 the top rate for individuals reached more than 70 percent and the rate for the "excess profits" of large companies topped out at 60 percent.10 Many other nations simultaneously increased their taxes because of war as well, causing a major problem for anyone involved in international business. The problem of double taxation on international business eventually led to two major developments: the enactment of the foreign tax credit in 191811 and the abuse of deferral. This report does not address the FTC, but it must be mentioned to illustrate the importance of double taxation issue.
Contemporaries referred to World War I as "the Great War" because of its unprecedented level of destruction that dramatically changed the world12 and significantly depleted the monetary assets of the warring governments. Because the nations fought World War I as a "total war" in which civilizations fought to conquer one another,13 governments needed to generate more revenue. Once the United States intended to intervene, that involved drastically raising tax rates and incurring major debt.14 The United States participated in only about a year of the fighting, yet it still racked up a war debt of $26.4 billion ($363.1 billion in today's dollars) by the signing of the Treaty of Versailles in 1919.15 In 1916, the year before the United States declared war, the personal income tax rate in America topped out at 10.3 percent. After America's involvement, the top rate peaked at 70.3 percent in 1918 and was reduced to 66.3 percent in 1919. Those percentages factor in normal deductions, meaning they were the functional top rates.16 The fact that the U.S. government charged those rates and still incurred $26.4 billion in debt is astounding.
Even with its post-war economic problems, the United States exited the Great War lightly damaged compared with Europe.17 The European powers financed over four years of fighting, destroyed a good deal of the infrastructure in several countries, and killed off a large portion of the young men in their labor force.18 As a result, drastically increasing taxes and revenue were of paramount importance to the European powers.19 American businesses in Europe were taxed by those foreign countries because the commerce occurred in their jurisdictions. Those companies sought to exploit deferral from American taxes as much as possible in order to stay profitable.20
The Revenue Act of 1913 imposed an extra tax on companies "formed or fraudulently availed of" to avoid taxes, to prevent various abuses.21 If the commissioner believed a business was accumulating wealth "beyond the reasonable needs of the business," the commissioner held the discretion to certify the accumulation as unreasonable and impose the extra tax on the business's shareholders proportionate to their ownership.22 In short, businesses looking to use corporate status to minimize taxes were subject to the mercy of the commissioner under the black letter law. That risk motivated businesses to keep funds offshore, even after the 1921 Revenue Act made only the corporate entities liable for the additional tax.23 Businesses took advantage of deferral by keeping more of their income abroad, so foreign investment more than quadrupled between 1914 and 1929.24
Because the tax burden remained high, taxpayers developed more creative methods to avoid the American tax system. Taxpayers began transferring appreciated property to their subsidiary corporations in jurisdictions that did not tax sales of assets.25 Under U.S. law at the time, that type of transfer was a tax-free activity. The foreign corporation sold the asset for a profit and used the proceeds to purchase a more valuable asset in the United States via another tax-free exchange. Because tax-free exchanges by definition barred repatriation taxes, that process allowed businesses to bring their profits into the United States in the form of property without any repatriation tax. The Revenue Act of 1932 included a provision banning this practice and requiring IRS approval for those offshore transfers.26
A. The Tax Base Evaporates
The stock market crash of October 1929 dramatically affected both international business and government revenue because of the sudden break from the prosperity of the 1920s.27 Every year from 1920 to fiscal 1930, the federal government ran a surplus, almost always exceeding $700 million.28 Because the crash hit in late October of 1929, the government did not feel the full impact until 1931, when it collected income made in 1930. In 1931 the federal government incurred a $462 million deficit, about a $1.2 billion swing from the year before. The need for funds further intensified after President Franklin D. Roosevelt's New Deal expenditures from 1933 onward created deficits between $2.6 billion and $4.3 billion nearly every year until the Japanese attacked Pearl Harbor at the end of 1941.29
As the Depression continued, Congress found itself in the impossible situation of needing funds without a sufficient tax base, causing it to run a deficit in excess of $2.5 billion annually.30 Congress finally developed a solution: increase revenue by closing loopholes in the foreign tax system such as passive income accumulation, thereby only increasing taxes on organizations and individuals wealthy enough to use international tax deferral. While the law explicitly (1) rescinded deferral rights from foreign subsidiary corporations established for tax evasion, and (2) gave the commissioner discretion over those matters, in reality the law set an unenforceable standard.31 Taxpayers only needed to demonstrate some nontax purpose for the accumulation of wealth to avoid the law, which became an easy task even for those purposely evading the tax system. Taxpayers had exploited this loophole since the early 1920s,32 but in the Revenue Act of 1934, Congress imposed a tax on undistributed income for all "personal holding corporations" regardless of whether they were formed for tax purposes.33 A corporation qualified as a "personal holding corporation" if 80 percent of its income came from passive sources such as interest, dividends, or royalties and five or fewer individuals owned more than 50 percent of the stock.34 That measure effectively discouraged taxpayers from creating corporations abroad for the sole purpose of making money through passive income.35
On June 1, 1937, President Roosevelt sent a formal message to Congress on the issue of tax evasion. He opened the message by revealing that the secretary of the Treasury conducted a study regarding the pervasiveness of tax evasion and found disturbing results.36 Roosevelt described tax evasion efforts as "so widespread and so amazing both in their boldness and their ingenuity that further action without delay seems imperative."37 This statement reflects how even though Congress passed significant tax reform only three years earlier, it only partially combated tax evasion because of the sheer scale of the problem.
Roosevelt saw tax evasion not merely as a financial or political issue, but as a matter of national security. He considered tax evasion "a challenge to the government to collect, uniformly, fairly, and without discrimination, taxes based on statutes adopted by Congress."38 His address came just short of calling tax evasion treasonous, labeling evasion as an attack on "the whole structure of our Government" that interfered with "the maintenance of the normal processes of our Government,"39 which impliedly included the day-to-day operations of maintaining national security.
The firm language regarding tax evasion makes more sense when viewed in a historical context. Since the passage of the last Revenue Act on May 10, 1934,40 world events had taken a disturbing turn. Adolf Hitler killed off his rivals in the Nazi Party during the Night of the Long Knives41 and declared himself Führer,42 thereby taking full dictatorial control of Germany. Hitler also openly violated the Treaty of Versailles by building the German military, including the Luftwaffe (German air force).43 One year later, Hitler signed the Anti-Comintern Pact allying Germany with Japan44 and again violated the Treaty of Versailles by placing military units near the French border. Only a few months before Roosevelt's tax message, Germany infamously bombed Guernica as part of its aggressive involvement in the Spanish Civil War.45
Germany continued openly showing its strength, forming alliances, testing implements of war, and battle-hardening German soldiers in preparation for massive military conflict. Germany quickly developed into a strong military power again and posed a serious threat as a fully mobilized, advanced industrial society. Roosevelt remembered the Great War 20 years earlier in Europe, and how the United States eventually intervened after German submarines sunk the ocean liner Lusitania, which carried 123 American passengers aboard.46 If war broke out in Europe again and the United States became involved, it would need a well-funded military, necessitating a solid tax system that prevented losing large revenues to loopholes.
With these sobering thoughts as a backdrop, Roosevelt's 1937 tax message to Congress emphasized "that further action without delay seems imperative."47 The brief, strongly worded message included a letter on current abuses written by the secretary of the Treasury.48 On the issue of deferral, the secretary illustrated several specific cases of abuse by foreign personal holdings corporations in tax havens.49 In reaction to Roosevelt's tax message, Congress passed the Revenue Act of 1937, which broadened the definition of personal holdings corporations.50
The term "personal holding corporation" now included corporations with 60 percent of income from passive sources (reduced from 80 percent) and more than 50 percent of the stock shares owned by five or fewer American citizens or residents.51 While this measure included more corporations as taxable, it also gave taxpayers a solid numerical definition to work around and evade. The interaction between taxpayers and the government during the 1930s set a continuing pattern of exploiting loopholes and the government scrambling to close them, resulting in a permanent game of cat and mouse.
When political tensions came to a head, World War II broke out.52 During the fighting, the tactic of strategic bombing devastated the infrastructure and labor forces of several nations. Widely used in the war, air strikes on factories, transportation, population centers, and communication lines crippled the target nations.53 Also, many European soldiers were killed in battle, while other productive civilians died or fled because of Germany's anti-Semitic brutality.
However, the United States progressed in a drastically different manner. Thanks to its geographic location far away from the battlefields, America faced only the onslaught of strategic bombing at Pearl Harbor. The American population was not as decimated as Europe. Despite the Great Depression, the United States existed as a relatively strong economic power, sending huge amounts of arms and supplies to nations fighting the Axis powers.54 America's power before military involvement in the war paled in comparison with its position after the fighting stopped. The United States stood as the only developed industrialized nation to finish World War II with a means of production intact -- unlike Europe.55 That advantage made America an unrivaled economic superpower.56
With peace declared, business once again took precedence. The combination of an intact economy and a reduction of competition allowed the American private sector to drastically increase business abroad, especially in Europe. Because of high domestic taxes, companies began looking outside the American jurisdiction in order to take advantage of deferral because of the increase in international activity.57 As a result, the aftermath of World War II saw a sharp increase in the importance of the deferral doctrine.
To attract American business, other countries adopted policies to minimize corporate taxes and enable corporations to exploit deferral.58 For example, the Bahamas allowed American corporate subsidiaries to exist in their jurisdiction exempt from several taxes.59 Jurisdictions following those policies became known as new tax havens. Their extremely low tax rates made them an ideal location to store foreign gains in one place, making it easier to quickly transfer funds into the United States at an opportune time or conduct large transactions while still offshore. By the early 1960s, using tax havens for evasion became common practice again for Americans engaged in international economic activity.60
During the Cold War, deferral abuse became large enough that President John F. Kennedy decided to address it within a year of assuming the presidency.61 Kennedy mainly focused on foreign policy, and like Roosevelt he considered taxation a national security issue. Kennedy viewed a solid tax system as necessary to "maintain our defenses and give leadership to the free world."62 In short, any loopholes that kept the United States from collecting large amounts of tax money directly affected America's ability to defend itself and wield influence in the international community.
Historical context is incredibly important to understanding the mentality behind Kennedy's policy stance. After World War II, Russia arose as a major power.63 Although the American economy dwarfed Russia's, Russia began competing with the United States in terms of technology and military power. In 1949 Russia successfully tested its own nuclear bomb,64 beginning a power struggle with the free world spanning over four decades. The tension again escalated when Russia launched Sputnik I in 1957, making it the first nation in space. The United States directly responded to Sputnik by forming NASA,65 which sparked one of the greatest technology drives in human history. Technological advancement at the level and speed of the space race required large amounts of money provided by American taxpayers.66
Kennedy's predecessors in the White House and the opposition leadership in Russia form another important aspect of his public policy perspective. After President Harry S. Truman finished World War II by dropping nuclear bombs on Japan, his administration faced immediate challenges in the aftermath of war.67 This included the aforementioned Soviet nuclear proliferation and the Berlin Airlift, where the free world dropped supplies into West Berlin after Russia cut off road and rail access for political reasons.68
After Truman came President Dwight D. Eisenhower, the former Supreme Allied Commander who had led the entire Western Front of the European theater in World War II.69 When first elected, Kennedy had legislative experience only as a congressman, then a senator. While he served admirably as a Navy lieutenant in World War II, Kennedy's experience came nowhere near the level of a commander in chief or supreme allied commander.70 For the first time since Japan's surrender, a prominent figure from World War II did not occupy the Oval Office.
On the Russian side, Nikita Khrushchev led the Soviet Union. Khrushchev played a key role on the Eastern Front by acting as the go-between for the top generals and Joseph Stalin himself, and was directly involved with commanding the battle of Stalingrad.71 Khrushchev lived through the Russian Revolution, Stalin's purges, World War II on the Eastern Front, and the perilous nature of existing in the highest political echelon of Russia under the notoriously paranoid Stalin,72 making him an incredibly formidable man. A young Kennedy would be tested by an aggressive leader at the head of a powerful nation, which made it necessary to keep America's international presence strong.
Kennedy opened his address to Congress on April 20, 1961, by discussing the link between taxation and national security. His address occurred only a few days after the Bay of Pigs invasion73 and barely over a week after the Russians sent the first man into space on Vostok 1,74 increasing tension between the United States and Russia. Kennedy witnessed firsthand the powerful advantage of well-funded military and technological drives during World War II. He realized the importance of preserving that advantage for the conflicts he anticipated with Russia, so losing large amounts of revenue to tax expenditures like deferral abuse became unacceptable.
In order to increase revenue without straining the market, Kennedy stated a tax goal of bringing further equity to the tax system while still stimulating the economy. He proposed to implement that idea with a two-pronged approach. The first part proposed reducing general tax rates in order to stimulate the whole economy. In order to offset the tax revenue losses, Kennedy then proposed reforms to close often-exploited tax loopholes.75 Kennedy wanted to foster a degree of economic equality in the tax code and believed that allowing deferral to remain unchanged unfairly benefited wealthy taxpayers sophisticated enough to conduct business abroad. He also thought that even in the business world, deferral gave a significant disadvantage to companies that operated only in the United States, compared with American companies operating internationally.76
As part of Kennedy's goal for an equitable system, he proposed deferral rules for individual citizens abroad that paralleled the proposed rules for businesses. Citizens residing abroad in developed countries for tax purposes would no longer qualify for deferral. Those residing in less-developed countries would be allowed to defer up to $20,000 (approximately $160,000 in today's dollars).77 That policy would in theory raise some revenue from citizens abroad, but it also had a political element, because drastically changing America's international tax law would surely cause controversy. This measure helped present the new system as just and fair because of its uniform application, thereby undermining potential accusations that Kennedy's proposal only targeted businesses.
Kennedy called on Congress to eliminate deferral on business income altogether in developed countries and tax havens.78 However, Kennedy wanted to preserve deferral in developing countries that chose not to become tax havens.79 This inconsistency makes sense in the historical context. The free world and communist countries constantly fought for control of the globe after the end of World War II. European nations established their loyalties in the aftermath of the war, making it acceptable to cut deferral privilege in those countries without jeopardizing the geopolitical balance between free nations and communism. However, developing countries still hung in the balance between American and Russian influence, thereby becoming pawns in the global power struggle between both nations. Understanding Kennedy's emphasis on influencing the developing world therefore requires knowledge of the international events he observed as a young man between World War II and the beginning of his presidency.
A. China and Korea
China struggled with inner conflict between communists and the pro-American Nationalist government throughout the 1920s and 1930s. After the defeat of Japan in World War II, the conflict escalated into a full civil war in 1946. While the United States gave the Nationalists equipment and financial aid, it refrained from direct military involvement. By 1949 the communists overpowered their opponents, and the remaining Nationalist forces fled to Taiwan.80 As a result, in 1949 a nation of nearly 550 million people81 with a military hardened by decades of warfare82 sided with communism. China's geographic proximity to crucial sea lanes and America's new allies Japan and South Korea compounded the seriousness of the issue. This presence would later seriously affect the wars in both Korea83 and Vietnam.84
The first open clash between communism and the United States occurred in the Korean War.85 At the end of World War II, the Allies decided to split control of Korea along the 38th parallel, with Russia controlling the north and the United States controlling the south. Russia set up a communist regime, the United States set up a democratic nation, and both supported leaders with a desire to reunify Korea. Backed by Russia, in 1950 the North Korean military invaded across the demarcation line and nearly took the whole peninsula.86
The United States responded by forming a coalition through the United Nations and sending troops to counter the invasion. The counterattack proved effective and quickly pushed the North Korean forces nearly to the Chinese border. China, which had recently become a communist power in its own right, viewed the advancement of American-led forces as a threat to its national security. As a result, China sent its own military to push back the anticommunist army and forced the U.N. forces back behind the 38th Parallel. The sides ultimately agreed to an armistice declaring the 38th Parallel as the border and establishing the Demilitarized Zone to ensure no military encroachment from either side.87 The United States had succeeded in its mission to keep communists from completely conquering Korea and demonstrated the lengths to which it would go to stop the advance of communism.
On the matter of the developing world, Kennedy declared, "the free world has a strong obligation to assist in the development of these economies, and private investment has an important contribution to make."88 That statement reflected three of Kennedy's policy motives: spreading freedom, containing communism, and using the private sector to accomplish those goals. The "strong obligation" stems from the geopolitical goal of containing communism.89 Kennedy realized that America's wealth and business composed a powerful asset for winning over less developed countries and keeping them out of communist control, so he wanted to encourage American businesses to continue investing in those potential allies from the developing world.
Under Kennedy's proposed system, the revenue dollars denied to the government by deferral, but retained within the economies of developing nations, would theoretically help build new allies. After observing the contrasting results between inaction in China and intervention in Korea, these events probably influenced Kennedy's approach to America's presence in the developing world through tax policy. Winning territory through peaceful investment presented a much more appealing option than winning through warfare, thus Kennedy's proposal sought to encourage businesses to expand into developing countries.90
A. Tensions Escalate With the Soviet Union
Between Kennedy's proposal on April 20, 1961, and the passage of subpart F on October 16, 1962, a rapid and constant succession of world-changing events occurred. These events undoubtedly influenced how members of Congress considered their actions, especially leading into the 1962 midterm election. Comprehending the process of passing subpart F therefore requires understanding the changing world of 1961 and 1962. In the field of space exploration, NASA successfully executed its first manned mission with Mercury 3 on May 5, 1961,91 bringing the United States back on par with Russia and continuing the space race. Twenty days later, Kennedy announced directly to Congress the goal of placing a man on the moon and asked for more than $7 billion in funding,92 further accelerating the competition with Russia as Project Gemini made steady progress toward that objective.93
The sphere of international relations also encountered major developments because of the Berlin crisis, which increased confrontation between Russia and the United States. In June 1961 newly elected Kennedy faced off against Khrushchev in person for the first time at the Vienna summit, where Kennedy appeared weak to many because of his shocked reaction to Khrushchev's hostile tone and bullying.94 The summit was purportedly called to deal with a divided Berlin,95 but two months later at the end of August, Russia cut off travel from East Berlin and erected the Berlin Wall to stem the tide of emigrants fleeing Soviet control.96 For Russia, this action simultaneously stopped the loss of population to defection and strongly displayed power to its adversaries at the cost of escalating tensions with the free world.
During the summer of the Berlin crisis, the House Ways and Means Committee considered Kennedy's tax reform proposals. The impact of several major national security issues arising in rapid succession likely influenced the mindset of elected officials as they considered the tax bill. This is indicated by the temporal intersection between these events and progress on subpart F's legislative process. On August 24, 1961, the committee released a discussion of proposed tax legislation including deferral accompanied by a legislative draft of tax haven reform from Treasury97 just a week after Russia clamped down on East Berlin.98 With the 1961 session winding down, the committee decided to postpone action on the matter until the second session.99 During the committee's gap, Khrushchev broke a moratorium on nuclear bomb testing that Russia had agreed to with the United States and Great Britain in 1958; Kennedy responded by also resuming testing, kicking off a nuclear arms race.100
After the 87th Congress began its second session, in early February 1962, Kennedy declared a full embargo on Cuba because of its turn to communism under Fidel Castro, its trade agreement with Russia, and expropriation of all U.S. property,101 further escalating tensions between the United States and communist countries. Five weeks later, on March 16 the Ways and Means Committee reported its final bill, including subpart F, to the House. The bill passed within two weeks, and the Senate Finance Committee began hearings the following Monday. While the Senate debated the bill during the summer,102 a CIA spy plane on August 29 discovered surface-to-air missile sites under construction in Cuba.103 The bill passed one week later. Kennedy signed the bill into law on October 16,104 the same day the CIA informed him of nuclear missiles in Cuba.105 Potential war preoccupied Kennedy's mind that day as he considered tactical options,106 making it entirely possible that signing subpart F fit into his national security strategy.
A. Design Goals
In creating subpart F, Congress largely agreed with the objectives behind Kennedy's proposals but decided to address them with a more tailored approach resulting in more complicated legislation. Congress constructed subpart F with these goals in mind: curb the abuse of tax havens, keep American companies competitive abroad, and encourage investment in developing countries. While not often explicitly addressed, corporate competitiveness mattered because it directly affected American exports and business expansion abroad.107 Ending deferral altogether would reintroduce the problem of double taxation that plagued international business in the wake of World War I, thereby jeopardizing the economic dominance American businesses established in the 1940s and 1950s.
The Kennedy administration had no issue with American companies that legitimately conducted business in low-tax jurisdictions, just companies that funneled their foreign profits into tax havens for the purpose of avoidance.108 Kennedy considered tax havens the most important reason for reform, and cited them as the target of reform in his 1961 tax message.109 Kennedy's original proposal of full deferral elimination addressed the issue with a simple but broad method of increasing income without straining the domestic economy. Congress determined that it could meet the same goal through a more complex law focusing mainly on tax havens.110 Specifically, Congress geared subpart F toward clamping down on shell corporations and limiting the extent that tax haven jurisdictions could assist American businesses with tax evasion. Congress believed that this approach allowed the government to meet its goal without punishing companies that opted not to abuse deferral.111
Even though Congress has amended subpart F since 1962, these amendments mainly fine-tuned the law while preserving the main structure and rules.112 When enacted, subpart F was a major modification to the part of the code concerning deferral, repatriation of funds, and foreign investment in general. Part of the legislation explicitly addressed deferral abuse, making it illegal to use deferral for purposes of tax evasion by sending funds to tax havens. This rule applied to American companies if they did business in tax havens at all, not just to avoid taxes from the United States government. However, using deferral in developed countries (mainly Europe) remained acceptable in order to prevent punishing legitimate investors. To avoid international political fights regarding which nations constituted tax havens (and would therefore be cut out of American business investment), Congress chose to define tax haven abuse by the activity of the taxpayer rather than the country of origin, citing the abuse of Switzerland's policies as an example.113
Subpart F also modified what foreign income from American-owned companies qualified as taxable. To counter the loophole of storing income abroad to earn interest without taxation, subpart F created a new category of income that could be taxed even though it occurred abroad, named simply "Subpart F Income."114 As Kennedy had proposed in his tax message to Congress,115 this new category notably included passive income earned by American-owned companies abroad, meaning that income-like interest and dividends now qualified for annual taxation as general income.116 The purposes of deferral included encouraging American business to compete on the international level, and Congress believed that exempting passive income from deferral did not violate this principle. Because the gains came from "portfolio types of investments" as opposed to investment in commercial activity, Congress believed the new tax would not affect trade competitiveness.117
Evidence suggests a link between national security concerns and deferral reform. The evidence is strongest for the Roosevelt and Kennedy administrations; however, the historical record becomes less clear from then on. To the extent that subpart F has changed since 1962, the timing of those amendments is not inconsistent with foreign policy considerations playing a role.
Subpart F remained completely unchanged until a clarifying rule in 1969 and saw no other amendment until the Tax Reduction Act of 1975.118 The 1975 legislation broadened the definitions of subpart F income and corporations subject to it119 -- including more income from abroad -- while the rest of the act cut domestic taxes to address economic issues at home.120
President Gerald Ford signed the Tax Reduction Act on March 29,121 the same day Da Nang fell to the North Vietnamese army.122 Ford's decision was consistent with the historic pattern of reforming subpart F in response to national security concerns, as noted above regarding the enactment of subpart F in 1962 responding to foreign conflict with Cuba and Russia. As South Vietnam's second largest city and home to a major military base,123 Da Nang held great strategic importance. Barely one month after the North Vietnamese took Da Nang, Saigon fell, and South Vietnam surrendered on April 30.124 That aggressive action from Hanoi held the potential to instigate an international crisis because of strong diplomatic ties on both sides to major nations, creating a temporal intersection between subpart F and national security concerns.
The Tax Reform Act of 1986 increased the scope of subpart F income by adding new categories and reducing the exceptions.125 On October 22, 1986, President Ronald Reagan signed the TRA into law,126 creating a temporal intersection between subpart F expansion and national security. Less than two weeks before the TRA's enactment Reagan met with Mikhail Gorbachev, the leader of the Soviet Union, at a summit in Iceland to negotiate ballistic missile de-escalation. The two leaders nearly agreed on a reduction in missiles, but the talks broke down over including the Strategic Defense Initiative (SDI) as part of the deal. The SDI, or "Star Wars" program, sought to use space technology to defend the United States against nuclear strikes, and Reagan refused to compromise on it. The summit's failure to reach an agreement increased tensions between the United States and Soviet Union, which likely factored into Reagan's consideration of the TRA.127
From 1994 to 1997, Congress enacted and President Bill Clinton signed several measures that significantly reduced the applicability of subpart F.128 A few years earlier, in 1991, the Soviet Union had collapsed,129 eliminating America's highest national security threat. Between 1989 and 1991 all of Eastern Europe became independent from the Soviet Union and established democratic governments without Soviet intervention.130 It became clear that the collapse of the Soviet Union would not pitch the world into chaos. The lack of a major national security threat for the first time in over half a century influenced Clinton, especially because Congress could amend the law later if a new looming crisis warranted raising tax revenue.
In 2004 President George W. Bush and Congress enacted a temporary cut in the repatriation rate under subpart F,131 which was signed into law on October 22, 2004, as part of the American Job Creation Act of 2004 (AJCA).132 That caused a massive repatriation of funds,133 which meant the United States could collect taxes owed on profits accumulated abroad under the policy of deferral. The U.S. military action in Iraq followed the September 11, 2001, terrorist attacks on American soil.134 In the month before the enactment of the AJCA, the secretary of Defense and the chairman of the Joint Chiefs of Staff announced their intent to launch a campaign into central Iraq to attack insurgent strongholds including Fallujah and Ramadi.135 The War on Terror militarily began in 2002 in Afghanistan, expanded into Iraq, and Bush prematurely declared victory in 2003.136 The war took longer than expected because of factional conflict and ongoing pockets of insurgency in Iraq.137 Given the level of resources needed for the campaign, the timing of the AJCA's enactment indicates that the situation in Iraq influenced Bush's decision-making process.
The Islamic State in Iraq and Syria (ISIS) represents a new terrorist threat to national security, and the question arises whether ISIS poses enough of a danger to influence subpart F reform. This assessment requires looking to the past to find substantial commonalities with prior national security threats that correlated with deferral reform.
The Nazis infamously enforced a race-based supremacist ideology through expanded violence.138 ISIS also follows a supremacist ideology, but bases it upon religion instead of race. The structure of ISIS's ideology mirrors Nazi Germany by simply substituting their extremist version of Islam as the master group and anyone with different beliefs, especially the West, as the enemy.139
After Germany emerged as an industrial military power under Hitler's leadership, it forcefully conquered Europe. Poland fell in 1939,140 and in less than a year Germany dominated most of Western Europe not already under fascist control.141 Similarly, ISIS began by consolidating power over other insurgent groups before focusing attacks on the governments of Syria and Iraq. Since ISIS first emerged as a powerful entity at the end of 2013, it has forcefully taken over large areas of Iraq and Syria, begun expansion into Libya, and claimed statehood.142 ISIS has taken control of a large, strategically located area through force in a relatively short time.
The Nazi formula for expanding power consisted of instilling pride in a common trait and presenting a mutual enemy. The Nazis used fear and conflict as political tools to maintain the ideology keeping them in power.143 ISIS follows the same path, uniting under an extremist form of Islam and executing constant atrocities against others in the region while threatening the West.144 ISIS and Nazi Germany are both characterized by an eagerness to violently carry out their supremacist ideologies, which makes them impossible to treat dismissively.
ISIS is a modern variant of Nazi Germany because of the increased globalization since Hitler's time. In the modern world, ISIS has weaponized the internet, especially social media, to recruit and intimidate worldwide.145 That strategy has unfortunately found some success, as supporters of the Islamic State have orchestrated attacks throughout the world after social media contact with ISIS.146 That greatly increases the threat to America's home front. The fact that ISIS claims responsibility for the November 2015 attacks on Paris147 and endorses the December 2015 shootings in San Bernardino, California,148 has alarmed and concerned the American electorate. It is reasonable that such national security concerns about ISIS will influence policymakers to assess subpart F reform.
As shown above, the historical pattern indicates that major national security threats consistently precede and influence subpart F reform. The rise of ISIS and its similarities to past threats therefore necessitates an evaluation of current deferral policy proposals.
Eliminating deferral altogether and taxing all income is the simplest option in execution and enforcement, which is one reason why Kennedy used it for his initial proposal in 1961.149 In 2011 the Center for American Progress (CAP) endorsed that approach, and featured deferral as part of a series of articles intended to hold major tax breaks "to a higher scrutiny [as] part of our broader focus on making government work better and achieving better results for the American people."150 The CAP considers deferral as a major tax expenditure subsidizing large corporations, making it an expensive policy in terms of lost potential taxes. The CAP also argues that the current deferral policy discourages companies from investing their profits in the United States, thereby negatively affecting employment rates and the general economy. The CAP acknowledges that this policy would make American corporations less competitive abroad, but argues the benefits outweigh that consequence.151
President Obama also presents this approach in his fiscal 2016 budget proposal to Congress.152 The Obama administration recommends fully eliminating deferral and imposing a "19 percent minimum tax on foreign earnings" as the general policy. Because of the large amount of capital accrued abroad, the administration also proposes a one-time transitional rate of 14 percent on the previously untouchable overseas income. The revenue from this transition fee would go directly to the Highway Trust Fund to build infrastructure. It also vaguely proposes to "close loopholes under subpart F" and projects generating nearly $1.5 billion in revenue, indicating significant reform.
Forbes, a publication geared to business interests, predicts that Obama's reforms would significantly increase the corporate tax burden and are highly unlikely to pass Congress.153 According to the Tax Foundation, an independent research organization devoted to tax policy, America's corporate tax rates are high compared with the rest of the world, and deferral is essential to keeping American businesses competitive abroad.154 The American system is unique because it both taxes all worldwide income and maintains a corporate income tax rate in excess of 30 percent, which is applied to repatriated funds. The Tax Foundation finds no major issue with the current deferral policy and maintains that effective reform requires reducing the corporate tax rate. Deferral helps mitigate the heavy tax burden, making deferral essential under the current rates and international tax system.155
Another debated option is instituting a tax holiday like the one under the temporary subpart F amendments of 2004.156 Among the major policy proposals, this is the closest to prior policy that actually functioned as law before. The 2004 temporary amendments to subpart F drastically reduced the repatriation tax for one year, resulting in repatriation of $362 billion and $16.4 billion in tax revenue.157 This policy succeeded in obtaining a large amount of tax revenue, but it originally intended to stimulate domestic job growth as well. On the job front, repatriating corporations largely decided to either repurchase their own stock or use the funds in other ways that technically complied with the act but did not create many jobs, even laying off employees in the process.158 The previously unconsidered outcomes of this policy can now factor into current considerations, minimizing the risk of unforeseen consequences.
As an alternative, the Tax Foundation proposes converting from a worldwide tax system to a territorial tax system.159 A territorial tax system "only taxes active income made within its borders." Converting to a territorial system would render deferral and subpart F moot because they only concern income abroad, which a territorial system ignores. A rapidly increasing number of industrialized countries have already converted to territorial taxation, which gives foreign businesses an edge over their American counterparts when operating internationally. The Tax Foundation believes that combining a territorial system with lower corporate tax rates would produce an optimal result.160
Change to deferral policy historically resulted from the government needing a revenue infusion without straining the domestic economy, especially in response to a current or foreseeable crisis. Deferral reform closely followed the post-World War I taxation crisis, Great Depression, rise of Hitler, Cuban Missile Crisis, fall of South Vietnam, diplomatic fight over the SDI, fall of the Soviet Union, and the early stages of the War on Terror. This list of correlations contains a large portion of major U.S. international activity since 1913, making international crises a relatively consistent indicator of changes to subpart F. The expansion and escalating boldness of ISIS puts it on par with those past events, indicating a strong possibility of upcoming deferral reform.
If deferral reform is indeed around the corner, it makes sense to consider the options. Because the economy ultimately drives all tax revenue, strengthening the competitiveness of American businesses should take priority. Still, any new policies must allow the government to take some amount in taxes to supplement the domestic tax revenue, the government's main source of funding. Obama's proposal works to provide income, but would impose too high a tax burden on businesses for them to compete internationally. Converting to a territorial system presents the opposite problem: businesses would probably thrive, but the revenue from income abroad would disappear. This reform would also overturn nearly a century of tax policy, which presents a significant risk of unforeseen consequences.
With these considerations in mind, the best balance can be achieved by keeping the current system and reducing the tax rate on repatriated funds. With periodic adjustments to counter tax evasion and haven abuse, this approach allows businesses to thrive while preserving the tax revenue source. It also maintains the benefit of simply adjusting the current system, minimizing the chances of confusion and unforeseen consequences. The current repatriation rate simply discourages businesses from bringing their overseas income back to the United States. A significantly lower rate would make repatriation much less costly, which would encourage repatriation as a more routine practice instead of the current system of long-term accumulation while waiting for an opportune moment. With a lower rate and routine repatriation, the government gives up some potential tax revenue in exchange for a more regular and dependable revenue source, and businesses lose some income to taxes but can use the remaining funds in the United States, thereby bolstering the domestic economy through investment or internal development.
A. Policy Formation
1913 16th Amendment ratified, Revenue Act of 1913
1916 Personal income tax maxes out at 10.3 percent
1917 The United States enters World War I
1918 Personal income tax reaches 70 percent, excess
profits tax reaches 60 percent
1919 Treaty of Versailles signed, World War I officially
1921 Investors no longer liable for corporate deferral
1920-1929 Annual budget surpluses, lax enforcement of
B. The Great Depression and Buildup to War
Oct. 1929 Stock market crashes, Great Depression begins
1931 Federal tax revenue reduced by approximately
May 10, 1934 Revenue Act of 1934 enacted
Aug. 2, 1934 Hitler declares himself Führer
Mar. 1935 Germany openly rebuilds its military
Mar. 7, 1936 Germany places military near the French border
Nov. 26, 1936 Anti-Comintern Pact, Germany allies with Japan
Apr. 27, 1937 German bombers raid Guernica, Spain
June 1, 1937 Congress receives President Roosevelt's tax message
Aug. 17, 1937 Revenue Act of 1937 signed into law
C. The Kennedy Administration
Apr. 12, 1961 Russia sends first man into space on Vostok 1
Apr. 17, 1961 Bay of Pigs invasion begins
Apr. 20, 1961 President Kennedy's tax message to Congress
Aug. 13, 1961 Russia begins erecting the Berlin Wall
Aug. 24, 1961 Congress announces it is considering a tax
Feb. 7, 1962 President Kennedy declares an embargo on Cuba
Mar. 16, 1962 Finalized tax reform bill leaves committee in House
Mar. 29, 1962 Tax reform bill passes the House
Apr. 2, 1962 Senate begins hearings on the tax reform bill
Aug. 29, 1962 CIA discovers surface-to-air missile sites in Cuba
Sept. 6, 1962 Senate passes tax reform bill that becomes
Oct. 16, 1962 Cuban nuclear missiles discovered, subpart F signed
D. Events Since Subpart F's Enactment
Mar. 29, 1975 Da Nang falls, Tax Reduction Act signed
Oct. 11-12, 1986 Reagan and Gorbachev meet in Reykjavik
Oct. 22, 1986 Tax Reform Act signed, scope of subpart F increased
1989-1991 Eastern Europe becomes independent from Soviet Union
Fall 1991 Soviet Union collapses
1994-1997 Scope of subpart F significantly reduced
Sept. 11, 2001 9/11 attacks on U.S. soil
Sept. 26, 2001 United States begins waging war against the Taliban
Mar. 20, 2003 United States invades Iraq
May 1, 2003 President Bush declares victory in Iraq
Summer 2003 Iraq descends into factional conflict and insurgency
Sept. 7, 2004 Secretary of Defense announces offensive in
Oct. 22, 2004 President Bush signs AJCA, creating deferral tax
2013-2015 ISIS rises, consolidates power in Iraq and Syria
Feb. 2, 2015 President Obama proposes subpart F reform in
Nov. 14, 2015 ISIS attacks in Paris
Dec. 2, 2015 ISIS supporters execute mass shooting in
1 Treasury, "The Deferral of Income Earned Through U.S. Controlled Foreign Corporations: A Policy Study," at ix (Dec. 2000).
2 Bernard P. Herber, "Federal Income Tax Reform in the United States: How Did It Happen? What Did It Do? Where Do We Go From Here?" 47 Am. J. Econ. & Sociology 391 (1988).
3Section 1001. This is the modern codification of a principle that has existed in the tax system from the start.
5 Treasury, supra note 1.
6 David Kocieniewski, "Companies Push for Tax Break on Foreign Cash," The New York Times, June 19, 2011.
7 Hugh Rockoff, "Until It's Over, Over There: The U.S. Economy in World War I," National Bureau of Economic Research Working Paper No. 10580, at 33 (2004).
8 Michael J. Graetz and Michael M. O'Hear, "The 'Original Intent' of U.S. International Taxation," 46 Duke L.J. 1021, 1045 (1997).
9 Rockoff, supra note 7, at 15.
10 Graetz and O'Hear, supra note 8, at 1045.
11Id. The foreign tax credit allows American businesses to deduct foreign taxes. It initially had no limit, but has been reined in since its enactment.
12 PBS, "Introduction to the Great War," available at http://www.pbs.org/greatwar/chapters.
13 Encyclopædia Britannica definition of total war, available at http://www.britannica.com/topic/total-war.
14 Rockoff, supra note 7.
15Id. at 15.
17Id. at 21.
18 Steven Mintz, "The Global Effect of World War I," Gilder Lehrman Institute of American History, available at https://www.gilderlehrman.org/history-by-era/world-war-i/resources/global-effect-world-war-i.
19See Graetz, supra note 8, at 1044.
20See id. at 1064-1065.
21 Revenue Act of 1913, ch. 16, Section II.A, subdivision 2.
23 Treasury, supra note 1, at 4.
24 Rockoff, supra note 7, at 37.
25 Treasury, supra note 1, at 5.
27 PBS, The First Measured Century, "Stock Market Crash," available at http://www.pbs.org/fmc/timeline/estockmktcrash.htm.
28 Office of Management and Budget, "Table 1.1 -- Summary of Receipts, Outlays, and Surpluses or Deficits: 1789-2020 (2015)," available at http://www.whitehouse.gov/omb/budget/historicals.
31 Treasury, supra note 1, at 5.
32Id. at 6.
33 Revenue Act of 1934, ch. 277, section 351(a); Treasury, supra note 1, at 5.
34 Revenue Act of 1934, section 351(b)(1)(A-B).
35 Treasury, supra note 1, at 6.
36 H.R. Doc. No. 260, at 1-6 (1937) (FDR tax message).
37Id. at 1.
38Id. at 1.
39Id. at 6.
40 Revenue Act of 1934, P.L. 73-216.
41See Paul R. Maracin, The Night of the Long Knives: Forty-Eight Hours That Changed the History of the World xii (2004).
42 Bradley Lightbody, The Second World War: Ambitions to Nemesis 274 (2004).
44 Encyclopædia Britannica, "Anti-Comintern Pact," available at http://www.britannica.com/event/Anti-Comintern-Pact.
45 Lightbody, supra note 42, at 274.
46 PBS, "Lost Liners: Lusitania," available at http://www.pbs.org/lostliners/lusitania.html.
47 FDR tax message, supra note 36, at 1.
48See id. at 1-7.
49Id. at 2.
50 Treasury, supra note 1, at 7.
52See U.S. Holocaust Museum, "Invasion of Poland, Fall 1939," available at http://www.ushmm.org/wlc/en/article.php?ModuleId=10005070.
53 Encyclopædia Britannica, "Strategic Bombing," available at http://www.britannica.com/topic/strategic-bombing.
54 Bureau of International Information, "Lend-Lease: Facts and Numbers" (2010), available at http://iipdigital.usembassy.gov/st/english/article/2010/05/20100518114619zjsredna0.3529736.html#axzz3ozU4W6u4.
55 Dirk C. Van Raemdonck and Paul F. Diehl, "After the Shooting Stops: Insights on Postwar Economic Growth," 26 J. Peace Res. 249, 254 (1989).
56See State Department, "1945-1952: The Early Cold War," available at https://history.state.gov/milestones/1945-1952.
57 Treasury, supra note 1, at 8.
59 Walter W. Brudno, "Tax Considerations in Selecting a Form of Foreign Business Organization," 13 Vand. L. Rev. 151, 165-166 (1959).
60 Treasury, supra note 1, at 8.
61 H.R. Doc. No. 140 at 1 (1961) (Kennedy tax message).
63See State Department, "The Early Cold War," supra note 56.
64 Richard Rhodes, Dark Sun: The Making of the Hydrogen Bomb 580 (1995).
65 National Aeronautics and Space Administration, "Sputnik and the Dawn of the Space Age," available at http://history.nasa.gov/sputnik.
66 NASA, "A Brief History of Nasa: Launching NASA," available at http://history.nasa.gov/factsheet.htm.
67 State Department, "Occupation and Reconstruction of Japan, 1945-1952," available at https://history.state.gov/milestones/1945-1952/japan-reconstruction.
68 Harry S. Truman Library and Museum, "The Berlin Airlift: June 27, 1948 to May 12, 1949," available at https://www.trumanlibrary.org/teacher/berlin.htm.
69 U.S. Army Center of Military History, "Dwight David Eisenhower: The Centennial," available at http://www.history.army.mil/brochures/ike/ike.htm.
70 The White House, John F. Kennedy, available at https://www.whitehouse.gov/1600/presidents/johnfkennedy.
71 William Taubman, Khrushchev: The Man and His Era 150, 169-170 (2004).
72See generally id.
73 John F. Kennedy Presidential Library and Museum, "The Bay of Pigs," available at http://www.jfklibrary.org/JFK/JFK-in-History/The-Bay-of-Pigs.aspx.
74 NASA, "Yuri Gagarin: The First Man in Space," available at http://www.nasa.gov/mission_pages/shuttle/sts1/gagarin_anniversary.html.
75 Kennedy tax message, supra note 61, at 2.
76 Treasury, supra note 1, at 15.
77 Kennedy tax message, supra note 61, at 8.
78 Treasury, supra note 1, at 12.
79 Kennedy tax message, supra note 61, at 7.
80 State Department, "The Chinese Revolution of 1949," available at https://history.state.gov/milestones/1945-1952/chinese-rev.
81 "China Population Statistics," available at http://www.chinatoday.com/data/china.population.htm.
82See State Department, supra note 80.
83 State Department, "The Korean War, 1950-1953," available at https://history.state.gov/milestones/1945-1952/korean-war-2.
84 Chen Jian, "China's Involvement in the Vietnam War, 1964-69," 142 China Q. 356 (1995).
85 State Department, "The Korean War," supra note 83.
88 Kennedy tax message, supra note 61, at 7.
91 NASA, "Mercury-Redstone 3(18)," available at https://www.nasa.gov/mission_pages/mercury/missions/freedom7.html.
92 John F. Kennedy Presidential Library and Museum, "Space Program," available at http://www.jfklibrary.org/JFK/JFK-in-History/Space-Program.aspx.
93See NASA, "What Was the Gemini Program?" available at http://www.nasa.gov/audience/forstudents/5-8/features/nasa-knows/what-was-gemini-program-58.html.
94 John F. Kennedy Presidential Library and Museum, "The Cold War in Berlin," available at http://www.jfklibrary.org/JFK/JFK-in-History/The-Cold-War-in-Berlin.aspx.
96 Berlin Wall Memorial, "The Berlin Wall," available at http://www.berliner-mauer-gedenkstaette.de/en/the-berlin-wall-10.html.
97 Joint Committee on Taxation, "General Explanation of Committee Discussion Draft of Revenue Bill of 1961," at 1, 37 (Sept. 29, 1961), reprinted in Committee on Ways and Means, 90th Cong. 1st Sess., Legislative History of H.R. 10650, 87th Cong., The Revenue Act of 1962 (Part 1) 567, 559 (1967).
98 "The Berlin Wall," supra note 96.
99 Treasury, supra note 1, at 113.
100 William Burr and Hector L. Montford eds., "The Making of the Limited Test Ban Treaty, 1958-1963," The National Security Archive (2003), available at http://nsarchive.gwu.edu/NSAEBB/NSAEBB94/index2.htm.
101 Gary C. Hufbauer et al., "Case Studies in Economic Sanctions and Terrorism, Case 60-3: US v. Cuba (1960-: Castro)," Peterson Institute for International Economics (2011).
102 Treasury, supra note 1, at 113.
103 The National Security Archive, "The Cuban Missile Crisis, 1962: The Photographs."
104 Treasury, supra note 1, at 116.
105 John F. Kennedy Presidential Library, "13 Days in October: Day 1," available at http://microsites.jfklibrary.org/cmc/oct16.
107 Treasury, supra note 1, at 17.
108Id. at 18-19.
109 Kennedy tax message, supra note 61, at 7.
110 Treasury, supra note 1, at 18.
111Id. at 18-19.
112Id. at vii.
113Id. at 12-13.
115 Kennedy tax message, supra note 61, at 148.
117 Treasury, supra note 1, at 13.
118Id. at 136.
119 Melissa Redmiles and Jason Wenrich, "A History of Controlled Foreign Corporations and the Foreign Tax Credit," 27 SOI Bull. 129, 133 (Summer 2007).
120 Treasury, supra note 1, at 137.
121 Tax Reduction Act of 1975, P.L. 94-12.
122See Mary Englar, We the People: The Fall of Saigon 27 (2009).
123See id. at 22, 26.
124See Arpita Aneja and Lily Rothman, "Eyewitness to the Fall of Saigon," Time, Apr. 30, 2015.
125 Treasury, supra note 1, at 143.
126 Tax Reform Act of 1986, P.L. 99-514.
127 History Channel, "Reagan and Gorbachev Meet in Reykjavik," available at http://www.history.com/this-day-in-history/reagan-and-gorbachev-meet-in-reykjavik.
128 Reuven S. Avi-Yonah, "All of a Piece Throughout: The Four Ages of U.S. International Taxation," 25 Va. Tax Rev. 313, 333 (2005).
129See BBC News, "Soviet Union Timeline" (Oct. 31 2013).
130 State Department, "Fall of Communism in Eastern Europe, 1989," available at https://history.state.gov/milestones/1989-1992/fall-of-communism.
131 Mary Riley, "Repatriation Tax Holidays and IRC Section 965," Lexis Nexis Legal Newsroom, July 7, 2012, http://www.lexisnexis.com/legalnewsroom/tax-law/b/federaltaxation/archive/2012/07/11/repatriation-tax-holidays-and-irc-section-965.aspx.
132 American Job Creation Act of 2004, P.L. 108-357.
133 Riley, supra note 131.
134 Encyclopædia Britannica, "Iraq War," available at http://www.britannica.com/event/Iraq-War.
135 Eric Schmitt and Steven R. Weisman, "U.S. Conceding Rebels Control Regions of Iraq," The New York Times, Sept. 8, 2004.
136 Encyclopædia Britannica, "Afghanistan War," available at http://www.britannica.com/event/Afghanistan-War.
138 U.S. Holocaust Museum, "Nazi Racism," available at http://www.ushmm.org/outreach/en/article.php?ModuleId=10007679.
139See Amir Taheri, "The Ugly Attractions of ISIS' Ideology," New York Post, Nov. 2, 2014.
140 "Invasion of Poland, Fall 1939," supra note 52.
141 U.S. Holocaust Memorial Museum, "World War II in Europe," available at http://www.ushmm.org/wlc/en/article.php?ModuleId=10005137.
142 Wilson Center, "Timeline: Rise and Spread of the Islamic State" (Jan. 14, 2016).
143 U.S. Holocaust Memorial Museum, "Rallying the Nation," available at http://www.ushmm.org/wlc/en/article.php?ModuleId=10007818.
144See generally Wilson Center, supra note 142.
145 Faisal Irshaid, "How ISIS Is Spreading Its Message Online," BBC News (Jun. 19, 2014).
146 Javier Lesaca, "Fight Against ISIS Reveals Power of Social Media," Brookings Institution (Nov. 19, 2015).
147 Rukmini Callimachi, "ISIS Claims Responsibility, Calling Paris Attacks 'First of the Storm,'" The New York Times, Nov. 14, 2015.
148 Darsha Philips, "ISIS Praises San Bernardino Shooters, Does Not Claim Responsibility for Attacks," ABC7 News (Dec. 5, 2015).
149 Treasury, supra note 1, at 18.
150 Seth Hanlon, "Tax Expenditure of the Week: Offshore Tax Deferral," Center for American Progress (Mar. 16, 2011).
153 Douglas Stransky, "Obama's Proposals for Corporate Tax Reform Are a Bust," Forbes, July 17, 2015.
154 Robert Carroll, "Special Report: The Importance of Tax Deferral and a Lower Corporate Tax Rate," 174 Tax Found. Spec. Rep. 2 (2010).
155Id. at 3.
156 Riley, supra note 131.
159 Pinson and Shanley, supra note 157.
160See id. at 851.
END OF FOOTNOTES