All sessions meet from 4 to 5:50 pm at NYU Law School, Vanderbilt 202. For papers by the co-convenors (Lily Batchelder on September 3, and mine on October 1), we’ll have NYU colleagues as guest commentators: Liam Murphy for her paper and Mitchell Kane for mine.
I’m not quite ready to post it on SSRN yet, but I’ll be discussing it: (1) at the NYU Tax Policy Colloquium on October 1, (2) at the University of Toronto Law School on October 16, (3) at the National Tax Association’s Annual Meeting in Tampa, exact date & time still TBD but November 21, 22, or 23, and (4) at the National University of Singapore on January 14 of next year.
This is a bit of a hot topic, although I’m taking a big-picture conceptual view rather than zeroing in on particular versions. (But I do use the recently announced UK DST as an illustrative example). It’s probably fair to say that I diverge from hyperventilating American quasi-orthodoxy about (i.e., against) the DST.
Subject to competing time demands, etc., I’d be happy to hit the road & discuss the piece and the underlying issues that it raises, be it inside or outside the U.S. (I’ll be on sabbatical in winter/spring 2020, hence with some scheduling flexibility.)
It’s rather an odd duck. One set piece after another, usually entertaining but without much forward momentum. Also, it feels incredibly tailored to his personal obsessions – e.g., his pro-old Hollywood, anti-hippie nostalgia, and his wanting to re-create what a pool party at a Playboy mansion in the late 1960s might have been like – without entirely making the sale to the audience that we should share them at least for the film’s duration. (Cf. Hitchcock, who specialized in effectively transmitting his dark personal obsessions to the audience.)
Brad Pitt was very charismatic in the classic old Hollywood manner. DiCaprio, interestingly, was deliberately made far less so, although as an actor he obviously has similar chops.
The ending, not to issue undue spoilers to any few of you out there who might not know it yet (but who still plan to see the film), drew power from the (altered) historical event’s having such a huge cultural resonance, at least to anyone old enough to know and care about it. So there was a point at which the tension rises because one is thinking, my gawd, here it comes. But I still was left with a sense of a bunch of different things thrown together because they’re all stuff from 1969 that the director wanted to play with
I worked at Caplin & Drysdale in the early 1980s, and I agree with Scott Michel (who started the same year I did but stayed a lot longer, and is quoted in the above article) that Mort set a crucial positive tone regarding the office atmosphere, as well as one about serving clients assertively if needed but ethically. He was also affable and charming, including to junior associates.
Only on one occasion did I work with Mort directly on a project, but it left a good taste. He was interested in a live issue at the time, concerning the IRS’s ability in audits to access tax accrual workpapers that a given taxpayer’s accountants had used to evaluate tax risks for financial accounting purposes.
Mort was thinking about pursuing in litigation a legal position to the effect that the IRS should generally be denied access to such workpapers, on the view that allowing it would undermine financial accounting by inducing accountants (or taxpayers in discussions with them) to pull punches regarding soft spots, the taxpayer’s possible settlement strategy, etc.
This concern is clearly a meaningful one, even if on balance one nonetheless favors granting access. But my task (obviously) wasn’t to figure out what I thought about the merits, but rather to look at precedents, etc., for a sense of how strong the case would be. I concluded from my research that, based on the case authorities etc. to date, the IRS was extremely likely to win on this issue. (As indeed was soon confirmed – see U.S. v. Arthur Young, decided by a 9-0 Supreme Court in 1984.)
After working all day on a Saturday or Sunday to finish the memo, I per instructions took a taxi up to Mort’s rather nice home (in NW Washington, I think? – but I could be mistaken) to hand him the memo and briefly discuss it. Given the circumstances, I was grungily dressed and unshaven, and I recall having a harder time getting a cab to stop for me than would usually have been the case when I was wearing my regular weekday suit and tie.
When I got there, Mort, though gracious, was clearly not pleased with my conclusion, as it was not what he wanted to hear. But I got the sense that he accepted both its legitimacy (although obviously he didn’t read it in detail until I had left), and that I had properly done my job.
I’m still trying to learn more about the tax (my French might not be good enough for reading an untranslated text to do me much good). But it is summarized, for example, here,
The NYT discusses the possible U.S. response – tariffs, of course, as no matter the question they are often the current Administration’s preferred answer – here.
Perhaps unusually among tax experts (and Americans!), I am inclined to be sympathetic to properly designed DSTs, for reasons that I discussed here and here in response to Wei Cui’s very interesting paper on the topic (presented this past April 30 at the winter-spring 2019 NYU Tax Policy Colloquium). And I also think that an aggressive American response would be unwise, among other reasons because our friends – as I hope they still are – across the pond are addressing reasonable concerns about tax avoidance and locally generated rents.
The French DST appears to be aimed primarily at the likes of Facebook and Google Per the EY summary (and translation of some provisions) that I linked above, it would apply to:
1. “The supply, by electronic means, of a digital interface that allows users to contact and interact with other users, including for the delivery of goods or services directly between those users.”
2. “Services provided to advertisers or their agents enabling them to purchase advertising space located on a digital interface accessible by electronic means in order to display targeted advertisements to users located in France, based on data provided by such users. These services include, among others, the buying, stocking and diffusion of advertising messages and the management and communication of users’ data.”
But it would exclude, inter alia, digital interfaces that provide users with digital content, communications services, and payment services (e.g., Youtube, Netflix, and the financial intermediation industry). As I’ll discuss in my article, if one otherwise views the tax favorably, such exclusions may not be well rationalized – leaving aside the financial sector, which might call for separate and more comprehensive treatment.
Obviously this is what they call a developing story, and I’ll try to comment here when appropriate although at the moment I’m more focused on getting my arms around the issues from a broader and more conceptual standpoint.
The majority opinion appears to have wholly adopted the viewpoints expressed in amicus briefs that multiple law professors signed, one lead-penned by Clint Wallace (I was among the signatories) and the other by Susan Morse. Whether or not the court thought about it this way, the fact that so many law profs were on one side, without any financial stake, remuneration, etc. (and I believe none were on the other side, at least on this basis) may conceivably have served as a useful signal. There have been quite a few recent international or state tax cases in which law profs were on both sides, and there the proper takeaway was indeed that, in those cases, the merits were far more substantially in dispute among experts than here.
In Altera, the Tax Court unfortunately lost its way, and adopted the views both that stock options cost the issuer zero (in which case I’d like some, please) and that particular details of exchanges between unrelated parties in wholly different contexts should be used mechanically as evidence of “arm’s length,” without an adequate analysis of actual comparability or of how incentives and circumstances might differ as between the settings. The Ninth Circuit’s Altera opinion does a nice job in explaining why the so-called comparable transactions, in which costs of incentive compensation were apparently ignored in particular deals between unrelated parties, weren’t actually comparable in any serious or realistic sense.
The majority opinion also offers a useful and instructive primer on both the history of, and the legislative rationales for, the U.S. transfer pricing rules, in particular as they apply to intangibles. And it sensibly explains why the trap that taxpayers tried to set for the government in the regulatory “notice and comment” stage, by submitting an avalanche of not very relevant material that they correctly guessed the Treasury preamble wouldn’t spend countless pages rebutting point by point, shouldn’t be treated as showing a process failure on the Treasury’s part.
The just-released decision is in effect a do-over. It came out the same way a couple of years ago, but Judge Stephen Reinhardt’s death, after he had signed the majority opinion but before it was reissued, persuaded the Ninth Circuit that the case should be reheard. Given the merits. I’m not at all surprised that Judge Graber, who replaced Reinhardt on the panel, ended up voting the same way.
My talk discussed the completed book, along with what I might (or might not) write about P.G. Wodehouse. Its title is “Reading Wodehouse Seriously (?!),” with the ?! serving to acknowledge the point, why on Earth would one want to be such a spoilsport as to do that? The slides are available here.
Conference aside, it was nice to be back in Washington (my home base for six years in the 1980s), and I also briefly got to meet these individuals.