Beckett Cantley (Northeastern) has posted several tax papers on SSRN:
Severity Under Scrutiny: The U.S. Supreme Court Battle Over the FBAR Penalty, 16 Pepp. J. Bus., Entrepreneurship & L. 23 (2023) (with Geoffrey Dietrich)
In recent years, Congress strengthened federal regulation of foreign bank accounts held by United States citizens. In 1970, Congress passed the Bank Secrecy Act (BSA), requiring U.S. citizens to report their foreign bank accounts using a form called the Foreign Bank Account Report, or “FBAR.” However, the Treasury Department rarely enforced this requirement. After the Patriot Act’s passage came the Bank Secrecy Act 2004 amendment, allowing the Treasury Department to delegate enforcement of U.S. foreign bank account reporting to the Internal Revenue Service (IRS) through the FBAR. The amendment’s major change to the law concerned new penalties for non-willful FBAR non- compliance. The language of the amendment created ambiguity concerning how the IRS should penalize taxpayers whose non-compliance was not willful. The BSA language failed to specify whether the failure to report penalties should be calculated per account or per unreported FBAR form. The United States government argued for the calculation of penalties to be per account, and those faced with the penalties argued the calculation should be done per form. The Ninth and Fifth U.S. Circuit Courts of Appeal differed on this issue, with the Ninth Circuit ruling in favor of per form and the Fifth Circuit ruling in favor of per account. The Supreme Court ultimately granted certiorari of the case from the Fifth Circuit and ruled in favor of per form. This article examines: (1) the history of U.S. taxpayer foreign bank account reporting requirements; (2) the changes to reporting requirements over the years; (3) the decision on what penalties the IRS could impose passed down by both the U.S. Ninth and Fifth Circuit Court of Appeals; (4) the Ninth and Fifth Circuits’ arguments regarding per form versus per account; (5) an overview of the Supreme Court’s decision in Bittner v. United States; and (6) the future effects of the Supreme Court’s decision.
Reserve Mechanical Corp v Commissioner: The Judicial Capsizing of Aggressive Captive Insurance, 23 U.C. Davis Bus. L.J. 27 (2023) (with Geoffrey Dietrich):
There is a storm brewing in the tax world, and there may be no safe harbor in sight for aggressive captive insurance promoters. On May 13th, 2022, the U.S. Tenth Circuit Court of Appeals handed down a major defeat to an aggressive captive insurance program. In a landmark case, Reserve Mechanical Corp. v. Commissioner, the Court found that the transactions in which the captive insurance company, Reserve Mechanical, engaged were not insurance transactions. As a result, Reserve Mechanical was not an insurance company, and, therefore, could not take advantage of a federal income tax exemption under Internal Revenue Code (IRC) § 501(c)(15). For several years, tax promoters have used this captive insurance federal income tax exemption (and IRC § 831(b) which applies to larger captives) to save on federal income tax. Promoters of aggressive captive insurance programs convince businesses into paying them to set up captive insurance companies to utilize these exemptions, while taking a federal tax deduction for the payment to the captive for the captive insurance. However, the federal captive insurance deduction has been abused for quite some time. The usual pattern is for businesses to pay their captives premiums, which are often determined using poor or nonexistent actuarial data. Then, promoters often pool certain (or all) of the captive insurance policies. However, some or all of the premiums may subsequently be paid back to the captive-issuing businesses as loans, making the distributions tax-free. The Tenth Circuit ruled definitively that these captives are not performing actual insurance transactions.
Reserve Mechanical Corp v. Commissioner: A Potential Death Knell for Aggressive Captive Insurance (with Geoffrey Dietrich):
This article provides an overview of the May 13th, 2022, U.S. Tenth Circuit Court of Appeals decision in Reserve Mechanical Corp. v. Commissioner, and analyzes its likely impact on the aggressive captive insurance company (“CIC”) industry. A much longer and broader discussion of this topic will be published in our forthcoming article in the U.C. Davis Business Law Journal.
Civil War II: The Constitutionality of California’s Travel Ban, 32 Fla. J. L. & Pub. Pol’y 437 (2022)(with Geoffrey Dietrich):
California, along with a few other states leaning toward the liberal side of America’s political system, enacted a series of laws banning state- funded or state-sponsored travel to other states identifying more as conservative. While other states enacted these mandates through gubernatorial executive orders, California legislated its ban. Multiple states have attempted Supreme Court challenges to California’s law under the Court’s Article III original jurisdiction. Yet, the Court twice declined the opportunity to hear the issue. Justice Thomas and Justice Alito wrote extensive dissents against the majority’s rejection, arguing that the Court must exercise its jurisdiction in controversies between the states. This Article analyzes the Court’s history of original jurisdiction cases and seeks to answer why the Court likely did not address the constitutionality of California’s laws. Further, this Article analyzes whether California’s statute is unconstitutional under Article I of the U.S. Constitution and the Dormant Commerce Clause. Finally, this Article concludes with an analysis of possible likely outcomes of California’s laws and other states’ reactions.
The Constitutionality of Texas’ Executive Orders Impacting the U.S.—Mexico Border, 75 S. Ill. U. L.J. 125 (2022) (with Geoffrey Dietrich):
Federalism, a principle central to the constitutional design, adopts the principle that both the national and state governments contain elements of sovereignty which the other is bound to respect. “From the existence of two sovereigns follows the possibility that laws can be in conflict or at cross-purposes.” The Supremacy Clause “provides a clear rule that federal law shall be the supreme Law of the Land.” Under this principle, Congress may preempt state laws which interfere or conflict with federal laws. United States courts have held that issues of immigration, and as they relate to national security or border security, are clearly federal and that states are not to enact laws in conflict, or which interfere with federal immigration law or policies. Texas, a state sharing a border with Mexico, profoundly disagrees and has expressed extreme dissatisfaction with the federal government’s handling of the immigration issues and migrant surges at the Texas-Mexico border. Recently, a federal court relying on the Supreme Court decision in Arizona v. United States, held that a Texas law restricting the transportation of migrants conflicted with the federal government. In order to deal with Texas’ border situation, the Texas Governor issued a disaster declaration, and several states sent their own state law enforcement officers to assist Texas in its border operations. Though the outcomes of those legal challenges are still pending, this article analyzes the legality and possible outcomes of the actions of the states involved.
Omnibus Spending Goes to the President Without Tax Offsets (with Geoffrey Dietrich):
On March 10, 2022, the U.S. Senate voted 68-31 to pass the Fiscal Year (FY) 2022 omnibus appropriations bill, the Consolidated Appropriations Act of 2022 (H.R. 2471, hereafter, the “Omnibus Bill”), providing $1.5 trillion in federal discretionary spending across all 12 appropriations bills. The passage of this massive stop-gap spending bill averts the shutdown of the government until the end of September and was accompanied by the usual fanfare and much Congressional high-fiving—The Wall Street Journal quipped that one might think “it was the 1964 Civil Rights Act … for all the self-congratulation.” Conspicuously absent from the Omnibus Bill’s 2,700 pages are any tax provisions that would normally be part of such omnibus spending (and most legislation) to pay for the new spending provisions in the Omnibus Bill. This article briefly discusses the tax provisions from the Build Back Better Act (“BBB Act”) that Congress failed to pass earlier this year and analyzes what the absence of these tax provisions in the Omnibus Bill means and whether their absence is just a delayed reprieve for U.S. taxpayers.
https://taxprof.typepad.com/taxprof_blog/2023/08/cantley-post-several-tax-papers-on-ssrn.html
