August 30, 2010
The Supreme Court has released the oral argument schedule for its November session. The argument in Mayo Foundation is scheduled as the second case on Monday November 8, meaning it will begin around 11:00. A decision is expected to issue in the spring, almost certainly no later than June 2011. We will provide a report on the argument in November.… Read More
August 20, 2010
Confounding the expectations of this observer (and others), the government has allowed the deadline to pass without seeking rehearing of the Deloitte case in the D.C. Circuit. That development does not mean, however, that the government has decided to live with the Deloitte decision. To the contrary, the most likely explanation for the government’s inaction is that it plans to seek Supreme Court review and does not want to delay that process. A petition for certiorari is currently due on September 27. If the government files by that time, the Court will act on the petition in enough time for … Read More
August 18, 2010
On August 4, 2010, the Ninth Circuit denied panel and en banc rehearing in a case applying 8 U.S.C. § 1101(a)(43)(M)(i) to hold that a tax offense other than tax evasion is a crime involving fraud or deceit and thus an aggravated felony under the immigration laws (which allows for deportation). Kawashima v. Holder, 2010 U.S. App. LEXIS 16125 (9th Cir. Aug. 4, 2010). This is actually the fourth opinion issued by the Ninth Circuit in the case, appending a three-judge dissent from denial of en banc rehearing to the third panel opinion issued back in January 2010. Kawashima … Read More
August 16, 2010
The taxpayers have filed their opening brief in Mayo Foundation, a copy of which is attached. They argue primarily that the statutory language of the exemption unambiguously includes medical residents, and therefore there is no occasion to consider the reasonableness of the IRS regulation. Secondarily, they argue that the regulation is in any event arbitrary and unreasonable.
With respect to the question of the correct deference analysis discussed in our previous post, the brief relies heavily on the National Muffler Dealers factors. It identifies five factors that militate against the reasonableness of the regulation: (1) does not harmonize … Read More
August 13, 2010
On July 28, 2010, the IRS released AOD 2010-33; 2010-33 IRB 1. The AOD acquiesces in the result but not the reasoning of Xilinx, Inc. v. Comm’r, 598 F.3d 1191, 1196 (9th Cir. 2010) which held that stock option costs are not required to be shared as “costs” for purposes of cost sharing agreements under old Treas. Reg. §1.482-7. For prior analysis of Xilinx see this. The AOD in and of itself is relatively unsurprising. New regulations (some might say “litigating regulations”) have been issued that explicitly address the issue, and those regulations will test the question of … Read More
August 12, 2010
The last post in this series discussed differences in procedural posture that cause differences in the application of penalties. Court splits in how the various and sundry penalty provisions in the Code are applied is an even more confusing area. The two principal confusions are in the areas of TEFRA and valuation misstatements. We will deal with TEFRA in this post.
Partnerships are not taxpaying entities. They flow income, losses, deductions, and credits through to their partners who pay the tax. Nevertheless, since Congress enacted the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. No. 97-248, 96 Stat. … Read More
August 11, 2010
Virginia has filed an amicus brief in the Fourth Circuit in support of the taxpayers in the Virginia Historic case. (See here and here for previous coverage of the appeal). The brief focuses primarily on policy, arguing that Virginia created these tax credits to facilitate historic preservation and expected that partnership vehicles might be necessary for businesses and individuals to make use of the credits. According to the Commonwealth, “the IRS’s aggressive position threatens the effectiveness of the program and its benefits for all Virginians.” Although the amicus brief is light on analysis of the federal tax issues, it may … Read More
August 6, 2010
The parties are poised to brief the appeal of Tax Court’s decision in Container Corp. v. Commissioner, 134 T.C. No. 5 (Feb. 17, 2010), in the Fifth Circuit. The issue concerns the “sourcing” of income earned by a Mexican corporation from loan guarantee fees paid by its U.S. subsidiary. Code sections 861-63 identify certain items of income and specify whether they should be treated as U.S-source or foreign-source income. But there are items of income not specified in those sections, like loan guarantee fees, and it falls to the courts to determine how to source them, using analogies to … Read More
August 2, 2010
In Mayo Foundation, et al. v. United States, No. 09-837, the Supreme Court will consider whether medical residents are exempt from FICA taxation, with the decision likely to turn on the level of deference the Court is willing to accord to a recent regulatory change. Although the issue may seem obscure, there are 8,000 residency programs in the United States, and the government estimates that $700 million in taxes per year is at stake, with $2.1 billion in refund claims pending.
The issue involves the meaning of the “student exemption” to FICA, which excludes from the definition of “employment” … Read More