Tax Procedure: Corporate Inversion Regulation Invalidated

Corporate InversionCorporate inversions have been controversial for some time. In these transactions, a U.S. company is acquired by a foreign corporation that has its tax residence in a jurisdiction with a lower corporate tax rate. Many in Congress considered these transactions to be abusive; in response, the American Jobs Creation Act of 2004 added section 7874 to the Internal Revenue Code.

Last week, a district judge in Texas invalidated an inversion regulation that the Treasury Department issued under section 7874, holding that the regulation had been promulgated in violation of the Administrative Procedure Act (the “APA”). Chamber of Commerce of the United States v.Read More

Oops, I Forgot To Create Standing: A Challenge To The Parsonage Exemption Fails.

Section 107 of the Code creates an exemption for “a minister of the gospel:” who can exclude from income either the value of housing provided as part of his compensation or the value of a housing allowance.

Of course, there’s an obvious question: how is this constitutional?

The Freedom from Religion Foundation, a group of agnostics and atheists, has been mounting a challenge to this parsonage exemption as a violation of the Establishment Clause. On the merits, they probably have a decent argument. But to reach the merits they have to demonstrate standing, which can be tricky in Establishment Clause cases because the mere fact that someone is taxpayer is not sufficient.… Read More

Not an Everyday Tax Case.

The Sixth Circuit’s opinion in United States v. Carroll, 2012 U.S. App. LEXIS 1688 (6th Cir. Jan. 30, 2012) indicates that “[t]his is not an everyday case,” which is certainly true. The opinion involves interesting principles of Article III standing that do not generally arise in tax cases.

The backdrop to Carroll was a problem observed by bankruptcy judges in the Eastern District of Michigan: too many Chapter 13 cases were failing. The judges determined that many low income taxpayers have meaningful tax refunds, and when they received their tax refunds from the IRS, they tended to spend them, rather than making payments to their creditors.Read More