Corporate Inversions: Will the REPO Act Keep Corporations from Moving to Bermuda?

07-May-2019

Beckett G. Cantley, Corporate Inversions: Will the REPO Act Keep Corporations from Moving to Bermuda?, 3 Hous. Bus. & Tax. L.J. 1 (2003). Summary.  This article discussed the attempted legislative solution to the issue of “corporate inversions.”  A company undertakes a corporate inversion by forming a company in an offshore tax haven and then having the US based company become a subsidiary of the offshore company.  The result is that the offshore tax haven does not tax the offshore company on its profits and the US based company is not taxed on its offshore profits.  In addition, the US based company may also undertake an “earnings stripping” program to have significant US income redirected to the non-taxable offshore company.  The article discussed draft legislation called the “Reversing the Expatriation of Profits Offshore Act” (“REPO Act”), which would have amended the IRC in several significant ways to prevent companies from undertaking corporate inversions.  The article analyzed the draft REPO Act from an operational and policy perspective and concludes that the draft REPO Act will likely prevent corporate inversions.

How Long Must One Stay in the USVI to be Considered a ‘Resident’ to Qualify for the 90% Residency Tax Credit?

07-May-2019

Beckett G. Cantley, How Long Must One Stay in the USVI to be Considered a ‘Resident’ to Qualify for the 90% Residency Tax Credit?, 13 J. Transnat’l L. & Pol’y 153 (Fall 2003). Summary.  This article analyzed the length of stay requirement for obtaining residency in the United States Virgin Islands (“USVI”).  Residents of the USVI generally file their tax returns with the USVI tax authorities rather than the IRS.  Such residents also generally make all tax payments to the USVI taxing authorities.  Residents of the USVI can be eligible for as much as a ninety percent (90%) tax credit on their personal income or investment income from ownership in certain business entities, by taking advantage of the Economic Development Commission program for investment in the USVI.  These credits have been in existence for almost fifty (50) years and are filled with historical precedent.  These credits are also safely guarded by many members of the US Congressional Black Caucus.  The article concluded that it is clear that a person must reside in the USVI on the last day of the tax year to be considered a “resident”.  However, unlike the United States, the article concluded that there does not appear to be a one hundred eighty-three (183) day residency requirement to be considered a resident of the USVI.  The article further concluded that there are a series of possible residency requirements that depend on the facts and circumstances of each case.  The article discussed many of these facts and circumstances and provides a policy argument for which ones make the most sense.

The New Congressional Attack on Offshore Rabbi Trusts

07-May-2019

Beckett G. Cantley, The New Congressional Attack on Offshore Rabbi Trusts, 5 Or. Rev. Int’l L 5 (2003). Summary.  This article discussed certain tax provisions that were contained in the draft National Employee Savings and Trust Equity Guarantee Act (“NESTEG Act”).  These provisions would have made funds held in offshore rabbi trusts immediately subject to US income tax to the beneficiary of the offshore rabbi trust.  The estimated result to the US Treasury Department would have been a significant increase in tax collection.  Offshore rabbi trusts have become common vehicles for US persons employed abroad by foreign companies to set aside retirement funds.  In addition, many offshore hedge fund managers have used offshore rabbi trusts as a means to defer income from current taxation.  This article discussed the previously proposed legislation, the likelihood of such legislation’s passage in the next Congress and the legal doctrines and tax policy implications involved in making such a change in tax policy.

The New Tax Shelter Opinion Letter Regulations: Cutting Back a Client’s Ability to Rely on the Advice of His Counsel

07-May-2019

Beckett G. Cantley, The New Tax Shelter Opinion Letter Regulations: Cutting Back a Client’s Ability to Rely on the Advice of His Counsel, 18 Akron Tax J. 47 (2003). Summary.  This article analyzed certain Proposed Treasury Regulations (“Opinion Regs”) relating to the issuance of tax opinions by counsel on matters that are “reportable transactions”.  The Opinion Regs were the seemingly final piece in Treasury’s offensive against tax shelters.  The Opinion Regs put up significant barriers to a client being able to rely on advice of counsel in tax shelter matters.  The main question this article discussed was whether the inability of a client to rely on a client’s counsel on such complicated matters as tax shelters is good public policy.  This article answers the question by concluding that it is not good public policy.

New Tax Information Exchange Agreement: A Potent Weapon Against U.S. Tax Fraud

07-May-2019

Beckett G. Cantley, New Tax Information Exchange Agreement: A Potent Weapon Against U.S. Tax Fraud, 4 Hous. Bus. & Tax L.J. 231 (2004). Summary.  This article discussed the then-new information exchange agreement to the tax treaty between the U.S. and Switzerland.  The agreement established new guidelines on how to properly implement Article 26 (pertaining to information sharing) of the Convention between the U.S. and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income. The new agreement attempted to strengthen each government’s respective ability to combat tax fraud. The new agreement clarifies the tax treaty and provides guidance as to what constitutes “tax fraud” under the existing agreement by providing fourteen (14) hypothetical situations that constitute tax fraud.  The focus of this article was to discuss operational and policy elements of specific points of the new agreement followed by a discussion of what Switzerland and U.S. officials think about the possible long-term effects of the new agreement.