Archive for January 19, 2021

The Tax Court in Brief: Tax Court Opinions And Decisions

The Tax Court in Brief: Tax Court Opinions And Decisions

The Week of January 11 – January 15, 2021

Kenneedy v. Comm’r, T.C. Memo. 2021-3 | January 12, 2021 | Copeland, E. | Dkt. No. 5687-17W

Short Summary:  Petitioner appealed, pursuant to § 7623(b)(4), three determinations of the Whistleblower Office (WBO) of the Internal Revenue Service (IRS) that declined to make awards to him.  Petitioner filed a single whistleblower claim, but the WBO split it into three distinct claims. Petitioner’s whistleblower claim alleged that three taxpayers and related subsidiaries owed $150,103,245 in unpaid excise taxes, penalties, and interest. The IRS processed the claims, and it took no action against two of the taxpayers, and no change resulted from the examination of the third taxpayer.  Petitioner challenged the WBO’s determinations. The Tax Court held that the WBO did not abuse its discretion in declining any awards to Petitioner.

Key Issue:  Whether the WBO abused its discretion in declining to award the Petitioner any amount under his whistleblower claims when it took no action against two taxpayers and issued no changes after the examination of the third taxpayer.

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Transfer Pricing And State Aid: The Unintended Consequences of Advance Pricing Agreements

Transfer Pricing And State Aid

An advance pricing agreement (APA) is a formal arrangement between a tax authority and a multinational enterprise (MNE) in which the parties jointly agree on the MNE’s transfer pricing methodology, estimated taxable income, and tax payments for a fixed period, thus reducing the likelihood of an income tax dispute. We argue that APAs, which were developed by governments to solve MNE-state problems in one realm (international taxation of related party transactions), have had unintended consequences for both parties due to the spillover impacts of APAs into other policy realms. We explore this argument in the European Union state aid cases where, in the context of competition policy, APAs can be viewed as hidden, discretionary policies that can be misused by lower-tier governments to attract or retain inward foreign direct investment by offering individual MNEs preferential tax treatment. Our paper contributes to this literature by analyzing the unintended consequences of APAs and recommending policy changes to reduce these negative spillovers.

Written By William Byrnes and Lorraine Eden, Texas A&M

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State And Local Tax Audit Process

State And Local Tax Audit Process

This article is the third part of a three-part series regarding the State and Local Tax consequences of doing business in multiple states.  This article will discuss a State Tax Audit. Part 1 discussed Nexus and Part 2 discussed Voluntary Disclosure.

Questions we get from companies regarding its multistate activities are:  “How will states find me?”  “How will states enforce these new economic standards for sales and use taxes and income, franchise or gross receipts taxes?”   The answer is “do you really want to find out!”  The cost of states finding you and then assessing tax, interest, and penalties versus being proactive and compliant with state tax laws, as discussed in Part 1 of this series, can be a lot of money, as tax, interest, and penalties multiply very quickly.

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Taxpayer First Act Report To Congress January 2021

IRS Report To Congress

Prologue

The Taxpayer First Act (TFA) was enacted on July 1st, 2019 with strong bipartisan support to reimagine and enhance the way we serve taxpayers, continue to enforce the tax laws in a fair and impartial manner, and train IRS employees to deliver a world-class customer experience. The Act consists of 45 provisions, including specific mandates to improve the taxpayer experience. There are three critical plans included in this report (Taxpayer Experience, Training, and Organizational Redesign). These plans lay out a vision to revolutionize tax administration in our country for the 253 million citizens who interact with the IRS annually, and ensure that the $3.6 trillion of federal revenue that the IRS collects annually will continue. This is an inspirational vision that builds on work that is already underway and provides an investment framework for evaluating IRS funding levels in future years. However, without the commitment of significant multi-year funding, the IRS cannot make the taxpayer improvements necessary to maintain trust and confidence in the federal government and its tax collection system.

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