Beckett G. Cantley, The Tax Shelter Disclosure Act: The Next Battle in the Tax Shelter War, 22 Va. Tax Rev 105 (2002). Summary. This article analyzed the most important sections of the draft “Tax Shelter Disclosure Act” (“TSDA”), including the significant amendments to the Internal Revenue Code that would have been made by the TSDA. Two of the main provisions of the TSDA define what constitutes a “tax shelter” and raise the penalties associated with tax shelters. The article synthesized and analyzed the criticisms of several important organizations who issued public comments on the legislation and provided policy assessments of its likely benefits and burdens.
Beckett G. Cantley, Taxation Expatriation: Will the Fast Act Stop Wealthy Americans from Leaving the United States?, 36 Akron L. Rev. 221 (2003). Summary. This article analyzed the recently enacted legislative solution to the problem of wealthy American citizens expatriating to a foreign nation to avoid taxes. The article also discussed the last major attempt to prevent tax expatriation through the enactment of IRC Section 877 and the fact that Section 877 was being easily circumvented by tax expatriates and their advisors. To stem the tide of tax expatriation, certain tax provisions were added to the Foreign and Armed Services Tax Fairness Act (“Fast Act”) that would bolster the previsions existing under Section 877. Under the draft Fast Act, two of the ways tax expatriates will be punished are by (1) treating all of the tax expatriate’s holdings as if they had been sold the day before expatriation, thereby triggering all inherent capital gains on the holdings and (2) requiring that estate taxes due from the death of a tax expatriate be collected against a domestic heir of the tax expatriate, rather than the tax expatriate’s estate. The article analyzes the operational and policy implications of the FAST Act, and concluded that while it adds additional deterrents to tax expatriation, it cannot eliminate it.
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?
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.
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
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.
Beckett G. Cantley, United States v. KPMG: Does Section 6103 Allow the IRS to Put Taxpayer Names on the Front Page of the Wall Street Journal?, 50 Clev. St. L. Rev. 1 (2002-2003). Summary. This article discussed whether the IRS violated Section 6103 of the Internal Revenue Code (“IRC”) when it disclosed the names of several prominent taxpayers in a public lawsuit involving KPMG, a “Big Four” CPA firm. The disclosure lead to a Wall Street Journal article titled “IRS Releases Names of People in Disputed KPMG Tax Shelters”. Section 6103(a) sets forth the general rule that taxpayer “return information” is generally confidential, subject to certain limited exceptions. Section 6103(b)(2) provides that “return information” includes taxpayer names as well as other information. The article concluded that it is likely that the United States (“US”) violated the general rule of Section 6103 because the US improperly disclosed taxpayer names in the KPMG case. However, the article further concluded that it is unlikely that the named taxpayers would recover damages because the US is likely to meet the exception where the disclosing party has a good faith, but erroneous, interpretation of Section 6103.
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.
Beckett G. Cantley, The New Dividend Tax Cut: Bush’s Prescription for Rescuing the Economy, 19 Akron Tax J. 25 (2004). Summary. This article This article discussed President Bush’s various tax cuts contained in his 2004 “economic growth” package, including Bush’s plan to eliminate the double taxation on dividends. The article outlines the different tax cuts, the legislative process that produced them, the differing interests involved in the process and several different viewpoints on whether these tax cuts will have their intended growth effect.
Beckett G. Cantley, Congress Giveth and Congress Taketh Away: The Slow Death of the SESOP, 20 Akron Tax. J. 59 (2005). Summary. This article discusses the cat and mouse game that had taken place between the IRS and tax planners surrounding the use of the SESOP. The article outlines how the SESOP has been a very rich source of tax gamesmanship since its inception. However, while Congress and the IRS have been very effective at closing all the perceived loopholes used by tax planners, they have equally been extremely adept at dismantling the SESOP as a viable planning vehicle for the average small family business.