Wrapping Up July – and Looking Forward to August

Top July Posts You Might Have Missed

IRS Releases Practice Unit on Examining Transaction Costs

Recent Developments in US Federal Income Tax Litigation

LB&I Announces Six New Campaigns

Upcoming Tax Controversy Activities in August

Our lawyers will present on key tax topics during the month of August. We hope to see you.

August 7, 2018: Thomas Jones is presenting on Captive Insurance Tax Issues at the Vermont Captive Insurance Association’s annual conference in South Burlington, Vermont.

August 23, 2018: Laura Gavioli is presenting “Recent IRS OVDP Developments: How Will It Impact the 2018 Landscape” for a Knowledge Group webcast.

On May 3 and 4, 2018, the 3rd International Conference on Taxpayer Rights was held in The Netherlands. Participants from every continent (except Antarctica) attended the conference, which focused on good governance and legal remedies. From a US perspective, there were significant discussions on the Taxpayer Bill of Rights (which we have previously written about here. Overall, the conference was tremendously insightful and helpful in understanding tax issues throughout the world and we are very appreciative for being allowed to participate in the panel discussion on Preventing Disputes 2: Taxpayer Rights in the Administrative Phase.

Videos of each panel discussion are now available on YouTube:

Day One:

Day Two:

 

The 4th International Conference on Taxpayer Rights will be held May 23-24, 2019, in Minneapolis, Minnesota. The focus will be on administrative positions and transparency, with issues such as how governments issue guidance, how taxpayers learn about guidance and how much weight is afforded to guidance. More information can be found here.

On June 27, Supreme Court Justice Anthony Kennedy announced his retirement, effective July 31, 2018. This announcement follows last week’s 5-4 decision in South Dakota v. Wayfair, authored by Justice Kennedy, which reversed the physical presence requirement originally established in National Bellas Hess and reaffirmed in Quill. Other important tax (and tax-related) cases have decided by the Supreme Court during Justice Kennedy’s tenure include: Commissioner v. Clark, 489 US 726 (1989); United States v. Goodyear, 493 US 132 (1989); Commissioner v. Soliman, 506 US 168 (1993); Commissioner v. Banks, 543 US 426 (2005); United States v. Home Concrete & Supply, LLC, 566 US 478 (2012); Obergefell v. Hodges, Sup. Ct. Dkt. No. 14-566 (2015); and Pereira v. Sessions, No. 17-459 (2018).

Justice Kennedy was appointed by President Ronald Reagan, and sworn in on February 18, 1988. He won unanimous confirmation. Although considered a conservative jurist, he was also the swing vote in favor of various social issues including same-sex marriage and the right to seek an abortion.

President Trump has already begun the search for Justice Kennedy’s replacement, but confirmation of the president’s nomination will not come without a serious fight. Indeed, whomever President Trump nominates, we can expect the same level of bipartisan animosity for the confirmation hearings as has marred his presidency thus far. Of course, any confirmation will require the Senate’s approval, and given the erosion of a conservative majority in the Senate, confirmation will be no small feat!

On June 21, 2018, the US Supreme Court issued its highly-anticipated decision in South Dakota v. Wayfair, Inc., et al., No. 17-494. The 5-4 opinion was authored by Justice Kennedy and concluded that the physical presence requirement established by the Court in its 1967 National Bellas Hess decision and reaffirmed in 1992 in Quill is “unsound and incorrect” and that “stare decisis can no longer support the Court’s prohibition of a valid exercise of the States’ sovereign power.” This opinion will have an immediate and significant impact on sales and use tax collection obligations across the country and is something every company and state must immediately and carefully evaluate within the context of existing state and local collection authority.

Summary of Opinions

The majority opinion was authored by Justice Kennedy and was joined by Justices Thomas, Ginsburg, Alito and Gorsuch. In reaching the conclusion that the physical presence rule is an incorrect interpretation of the dormant Commerce Clause, the opinion states that the Quill physical presence rule: (1) is flawed on its own terms because it is not a necessary interpretation of the Complete Auto nexus requirement, creates market distortions and imposes an arbitrary and formalistic standard as opposed to the case-by-case analysis favored by Commerce Clause precedents; (2) is artificial in its entirety and not just at its edges; and (3) is an extraordinary imposition by the Judiciary. The majority went on to conclude that stare decisis can no longer support the Court’s prohibition of a valid exercise of the States’ sovereign power, noting that “[i]t is inconsistent with this Court’s proper role to ask Congress to address a false constitutional premise of this Court’s own creation.” The majority noted that the South Dakota law “affords small merchants a reasonable degree of protection” and “other aspects of the Court’s [dormant] Commerce Clause doctrine can protect against any undue burden on interstate commerce.” The majority opinion specifically notes that “the potential for such issues to arise in some later case cannot justify an artificial, anachronistic rule that deprives States of vast revenues from major businesses.” Finally, the majority decision provides that in the absence of Quill and Bellas Hess, the first prong of Complete Auto simply asks whether the tax applies to an activity with substantial nexus with the taxing State and that here, “the nexus is clearly sufficient.” Specifically, the South Dakota law only applies to sellers that deliver more than $100,000 of goods or services into the State or engage in 200 or more separate transactions, which “could not have occurred unless the seller availed itself of the substantial privilege of carrying on business in South Dakota.” With respect to other principles in the Court’s dormant Commerce Clause doctrine that may invalid the South Dakota law, the majority held that “the Court need not resolve them here.” However, the majority opinion does note that South Dakota appears to have features built into its law that are “designed to prevent discrimination against or undue burdens upon interstate commerce” including: (1) a safe harbor for small sellers; (2) provisions that prevent a retroactive collection obligation; and (3) the fact that South Dakota is a member of the Streamlined Sales and Use Tax Agreement.

Continue Reading US Supreme Court Overrules Quill

Wrapping Up May – and Looking Forward to June

Top May Posts You Might Have Missed

LB&I Announces Six New Campaigns

SOL and the 1603 Cash Grant – File Now or Forever Hold Your Peace

IRS Implementation of Tax Reform Continues to Move Forward

Upcoming Tax Controversy Activities in June

Our lawyers will present on key tax topics during the month of June. We hope to see you.

June 21, 2018: Britt Haxton, Kristen Hazel, Enrica Ma, Jane May, Sandra McGill, Alysse McLoughlin, Maureen O’Brien and Diann Smith are presenting at Tax in the City® New York about the various impacts of tax reform on state and local taxes, on digital commerce, on cross-border transactions, and on compensation structures and fringe benefits, along with a CLE/CPE session on the ethical considerations around tax reform. Email Maria Dubinets at mdubinets@mwe.com to register.

June 21, 2018: Todd Welty is presenting a tax court update as part of the “Tax Compliance and Enforcement Update Part I” panel at the New York University Tax Controversy Forum in New York, NY.

Chambers USA released its 2018 edition of annual rankings of law firms and lawyers in various practice areas. We are honored that Chambers USA has recognized McDermott’s tax practice and several of its lawyers in the latest rankings. A summary of McDermott’s tax rankings is listed below along with a complete list available here to all McDermott rankings.

On the tax controversy side, our team was recognized as known for a “Dominant presence in high-value tax disputes across the USA, fielding particular expertise in transfer pricing litigation and SALT work.” Clients said we are “very responsive and very good advisors,” and added, “they are very cohesive and have vast experiences.” Clients agreed that they get good value from the Firm; “It’s outstanding client service and worth every penny. Billing has been very detailed and understandable.Continue Reading McDermott Continues to Receive Top Rankings in Tax in Chambers USA 2018

Wrapping Up April – and Looking Forward to May

Top April Posts You May Have Missed

President Trump Announces Intent to Nominate Emin Toro to Tax Court

IRS Releases Practice Unit on Statutes of Limitation

National Taxpayer Advocate Reminds Congress of IRS Deficiencies

Tax Controversy Activities This Week

May 1, 2018: Elizabeth Erickson is on “Exchange of Information – The New Landscape” at the TEI Audits and Appeals Seminar in New Orleans, LA.

May 3, 2018: Andrew Roberson is presenting “Preventing Disputes 2: Taxpayer Rights in the Administrative Phase” at the International Conference on Taxpayer Rights in Amsterdam, Netherlands.

Upcoming Tax Controversy Activities in May

Our lawyers will present on the following key tax topics during the month of May. We hope to see you.

May 7, 2018: Kristen Hazel and Michael Louis will present “Navigating Tax Reform: BEAT and FDII” at TEI-Houston Chapter 2018 Tax School in Houston, TX.

May 10, 2018: Robin Greenhouse and Kevin Spencer are going to speak about tax controversy and privilege at the International Fiscal Association’s New York/Connecticut Region meeting in Old Greenwich, CT.

May 11, 2018: Elizabeth Erickson will discuss “Section 162(q) – No Longer Silent” at the ABA Section of Taxation Meeting in Washington, DC.

May 11, 2018:  Stephen Kranz will present “Handling Tax Controversy to Win” and “The Digital Tax Tsunami:  What You Need to Know to Help Your Clients” at Avalara’s CRUSH DC 2018 in Washington, DC.

May 21-22, 2018: Thomas Jones is presenting “Impact of the Change in Corporate Tax Rates & Other Tax Developments” at the Texas Captive Insurance Association 5th Annual Conference in Houston, TX.

Wrapping Up March – and Looking Forward to April

Top March Posts You May Have Missed

White House Intends to Nominate Michael J. Desmond to High-Level Roles in the IRS and the Department of Treasury

The IRS May Be Coming for Your Bitcoins

Tax Court Judicial Conference This Week in Chicago

Upcoming Tax Controversy Activities in April

Our lawyers will present on key tax topics during the month of April. We hope to see you soon.

April 24, 2018: Todd Welty, Kristen Hazel, Elizabeth Erickson, John Lutz and Andrew Roberson will present “Taking Reasonable Positions and Retroactive Regulations” at McDermott’s Inaugural Tax Symposium in our Chicago office. The panel will address Gottesman, the ability of IRS to issue retroactive regulations, IRS authority issues, and impacts on return positions.

Led by our senior practitioners, our 2018 Symposium is a must-attend event for senior tax and employee benefits leaders seeking to optimize the opportunities and navigate the risks brought about by tax reform legislation.

April 30, 2018: Thomas Jones will present “Captive Insurance Tax Reform Update” at the Captive Insurance Council of the District of Columbia in Washington, DC. Captive Insurance has undergone a number of changes since the tax reform movement and our partner Tom Jones will cover the new regulations that your organization should be aware of.

The Tax Court’s 2018 Judicial Conference starts tomorrow morning on the campus of Northwestern University’s Pritzker School of Law. For prior coverage, see here. The many panels taking place tomorrow and Wednesday include:

  • Mediation in the Tax Court
  • Discovery and Stipulations Process
  • Litigating Individual Cases
  • Large Case Litigation
  • Whistleblower Jurisdiction
  • A Trip Through the Tax Court’s Exotic Jurisdictions
  • Ethical Issues in Representing Clients
  • The Future of Tax Court Practice and Litigation

I will be participating on the Discovery and Stipulations Process panel along with Tax Court Judges Kathleen Kerrigan and Joseph Goeke, Peter Reilley (Special Counsel IRS), and Jenny Johnson Ware (Johnson Moore).

Wrapping Up December – and Looking Forward to January

You can view all of the topics we discussed over the last month, and take a look at the upcoming tax controversy events where our lawyers will be speaking in January.

Upcoming Tax Controversy Activities in January:

January 23, 2018: Diann Smith will be presenting “State Transfer Pricing Audits: Effective Strategies to Minimize Your Risk” at the 27th Annual Ohio Tax Conference in Columbus, Ohio.

January 24, 2018:  Stephen Kranz is presenting “Handling State Tax Controversies to Win!!” at the 27th Annual Ohio Tax Conference in Columbus, Ohio, solving tax problems holistically to achieve success, understanding the offensive and defensive tools available and the avenues for relief when interacting with the government, planning and building the team to effectively work all avenues the government offers, tools available including FOIA, policy solutions, and litigation, with Jeff McGhehey, Senior Manager, Indirect Tax, The Home Depot.