“Estate Says $2,105, IRS Says $434,000,000.” [TaxProf]
Posts Tagged ‘taxes’
At Treasury’s mercy
How “money laundering” regulations give the U.S. Treasury power to destroy foreign banks [Stewart Baker, Volokh] Meanwhile, if Canadians imagine that the Foreign Account Tax Compliance Act (FATCA) is something only Canadian-Americans need to worry about, they should think again [Maclean’s]. Excerpt:
To say that FATCA is controversial is an understatement. The law is so complex and onerous to implement that some foreign banks have reportedly kicked out their U.S. clients in order to avoid dealing with it. Americans living abroad are queuing to give up their U.S. passports over it. The other problem with FATCA is that it asks foreign banks to do things that are often illegal in their home countries, such as passing on certain private information.
“IRS rides 1884 ‘dead horse’ law to defense of tax preparer rules”
Speaking of the Institute for Justice’s legal work: “The Obama administration on Tuesday defended its effort to regulate the tax return preparation business for the first time in U.S. history, basing its case largely on a 19th century law dealing with horses lost or killed in the Civil War.” Earlier here. [Reuters]
Des Moines taxpayer suit: the fee sequel
Many — most? — Des Moines taxpayers probably don’t care all that deeply whether the city extracts taxes via one broad-based method or another. But due to class-action procedure and the barriers it erects to opting out, they all get to be plaintiffs in the resulting suit, and the lawyers (self-) appointed to bring the case are expecting to pocket 37 percent, or $15 million, of the $40 million changing hands, a sum that could amount to $1,400 an hour. [Ryan Koopmans (On Brief blog), Des Moines Register, earlier]
…and the right to collect legal fees
The Washington Post splashes an investigative story about the tax lien business, in which outsiders buy up delinquent municipal property tax liens sometimes amounting to mere hundreds of dollars, then roll in lawyers’ fees and costs that can push up the bill into many thousands, eventuating in the foreclosure of family homes. The narrative is less than clear about exactly how the process works, and even leaves the impression that a tax lien purchaser owed, say, $6,000 can walk away with all the proceeds from the foreclosure of a $197,000 house without having to hand any of it over to mortgage holders, let alone the original owner. And some of the solutions offered (let’s not allow lien foreclosures on elderly people!) would have unintended consequences that are also, to be polite, underexplained. Still, enough of the story is there that an important general principle comes through: it’s dangerous for the law to put opportunistic actors in a position to run up $450/hour legal fees pursuing adversarial process that might not actually have been needed to vindicate their interests.
“NY Suspends Driver’s Licenses For Tax Delinquents”
With enough enforcement linkage between different branches of government, do we even need a Panopticon? “Beginning this year, [New York] drivers who owe more than $10,000 in state taxes face losing their license until the debt is paid.” Does this mean persons who have fallen behind on taxes won’t be able to get to their jobs to pay off the arrears? Well, it seems “there is a ‘restricted’ license that you can apply for in the event that your license is suspended” which “would allow you to commute to and from work only.” How this is to be enforced — whether the hapless motorist will be nailed for stopping off for a loaf of bread on the way home, or venturing out for a job interview — is your guess as well as mine. [Kelly Phillips Erb, Forbes]
August 2 roundup
- Radley Balko on a roll with harrowing, Louisiana-focused piece on misbehaving prosecutors and the system that protects them [HuffPo] “Former Cops Speak Out About Police Militarization” And a BBC interview (auto-plays video);
- Judge Alsup: pay-to-play allegations against Democratic Attorneys General Association, Mississippi attorney general Jim Hood, MSPERS won’t derail class action [Courthouse News]
- “Smoker’s Son Recovers $12.8M for Loss of Consortium” [NLJ]
- How easy is it to get a free federal cellphone (or two or three) without actually qualifying? [Jillian Kay Melchior, NR]
- “‘Total’ly Milking the FCPA Cash Cow?” [Koehler, FCPA Professor]
- “The unfair attack on arbitration” [Hans von Spakovsky]
- How public interest litigators got 501(c)(3) charitable status [Scott Walter, Philanthropy Daily; related earlier]
Detroit’s dismal decades, cont’d
“Detroit had the highest property tax rates of all 50 [largest U.S.] cities” [Chris Edwards/Cato, Alex Tabarrok] Some of the city’s weaknesses go back far enough that Jane Jacobs was pointing them out in 1961 [Urbanophile] How other cities avoided Detroit’s fate, and why, as Boeing shrank, “Will the last person to leave Seattle please turn out the lights?” turned out to be such a misplaced joke [Ed Glaeser, 2011 via Amy Alkon] And in two Cato podcasts on the city’s plight, Caleb Brown interviews Megan McArdle (Daily Beast, Bloomberg) and Emily Washington (Mercatus Center). Plus: Some reasons Baltimore is not Detroit [Frank DeFilippo, Splice Today] And Stephen Eide on the pension-negotiating strategies of emergency manager Kevyn Orr [Public Sector Inc.]
July 27 roundup
- Authorities arrest woman they say obtained $480,000 by falsely claiming injury from Boston Marathon bombing [CNN]
- More on the buddy system by which Louisiana officials pick private-practice pals for contingency contracts [WWL, The Hayride, Melissa Landry/La. Record; earlier on levee district’s new megasuit against oil industry]
- “Why would the President meet with the IRS chief counsel rather than his own counsel at OLC, and without the IRS commissioner present?” [Paul Caron, TaxProf] “The IRS as microcosm”: government lawyers lean left politically [Anderson, Witnesseth]
- California county lead paint recoupment case finally reaches trial, judge jawbones defendants to settle [Mercury-News, Chamber-backed Legal NewsLine]
- The insanity of film production local incentives, Georgia edition [Coyote]
- Questioning NYT’s underexplained “Goldman aluminum warehouse scam” tale [Yglesias, Stoll, Biz Insider]
- Yes, government in the U.S. does do some things to accommodate Islam, now don’t get bent out of shape about it [Volokh]
Delaware: your escheating heart
All 50 states have escheat laws awarding to state governments ownership of unclaimed property in business hands, which can range from bank, insurance, and stock holdings whose proper owners cannot be found to retail gift cards never cashed in. The revenue looms peculiarly large for the state of Delaware, because it is the state of incorporation for so many businesses. In recent years friction has been growing between the state and its corporate citizens as the state government has taken an increasingly aggressive stance in auditing corporations for unreported escheatable property. [WSJ] So far, perhaps, so routine (except for the parties to the dispute), but some accounts omit one of the most salient angles, summed up by one critic [Douglas Lindholm, IBD via Volokh] as follows:
Last year alone, Delaware seized $319.5 million from liquidated property while returning only $18.9 million of unclaimed property to its rightful owners.
Delaware does this through an unfair, onerous and expensive audit system that “looks back” to 1981, and contrives unclaimed property if the company doesn’t have records for all those years. This process often costs companies millions of dollars, mires them in years of audits, and forces them to deal with third-party auditors who are motivated by contingent fees to invent unclaimed property where none exists.
Kelmar, which conducts most of the audits for the Delaware Department of Finance and works on a contingent fee, was paid more than $30 million in the second half of 2012 alone.
Again and again — whether in forfeiture laws entitling law enforcers to a share of the booty seized, or percentage awards for informants under whistleblower laws, or traffic camera systems in which the operators of the cameras get a share of ticket revenue, contingency fees for participants in law enforcement prove deeply problematic. In my chapter on contingency fees in The Litigation Explosion, I summed things up this way:
Contingency fees tend to be disfavored in professions to whom the interests of others are helplessly entrusted, where misconduct is hard to monitor…. Giving traffic cops contingency fees by hinging their bonuses on whether they make a ticket quota arouses widespread anger because it so obviously tempts the officer running under quota to be unfair to the motorist. The same is true of giving tax collectors contingency fees by hinging their bonuses on how many deductions they disallow or how many assets they seize. (“Tax farming,” the old system where private parties were deputized to collect taxes and keep some of the haul for themselves, was abolished long ago in well-run countries, not because it was the least bit inefficient — it was a favorite way for Roman emperors to extract revenue from conquered provinces — but because it encouraged brutality and trampling of due process in tax collection.)
Delaware seems to have gotten its image in trouble through a variant on tax farming. Let’s hope a lesson is being learned.