Tax Blog/Blawg

Adding a new wrinkle to this fiscal crisis is Greece's inability to use monetary policy to resolve the problem.  Historically, nations faced with unmanageable sovereign debt have often simply printed more money, thereby creating inflation, which reduces the real value of the government's typically fixed-rate debt.  As a member of the European Monetary Union, however, Greece does not have this option.  As a result, an increasing chorus of commentators and public officials have been asking whether Greece might be forced to take a "holiday" from the Monetary Union or, even worse ...

You might recall our prior post on the Wyden-Gregg tax reform proposal in which we discussed the proposed limitation on corporate interest deductions.  To summarize, the legislation would limit the deductibility of payments on corporate debt to the amount of the interest in excess of the annual rate of inflation, thereby discouraging the use debt to finance corporate operations.

We previously asked: “Why use inflation as the index for disallowing interest deductions, rather than simply disallowing, say, a fixed portion of the interest deduction?”  Thanks to the efforts of Greg ...

Last week, at the TEI Midyear Conference in Washington, LMSB Commissioner Heather Maloy told corporate tax executives attending the conference that “trust” was the key to successfully implementing the new reporting requirements for uncertain tax positions first set forth in Announcement 2010-9.  As reported in the April 14th edition of Tax Notes, 2010 TNT 71-2, Maloy also told the attendees that enhanced transparency through the use of this reporting mechanism would be “mutually beneficial” in terms of improved issue resolution and efficiency.

Last month, I commented ...

The New York Times and Forbes Magazine are reporting on a study by the Transactional Records Access Clearinghouse, a research group affiliated with Syracuse University, which claims to show that the number of audits of corporations reporting assets of $250 million or more has dropped between 2005 and 2009, while audits of smaller companies have increased during that same time.

Believing that the IRS has misallocated its resources, TRAC blames this development on a "perverse quota system" within the IRS.  The IRS, however, disputes the study's findings.  From the NY Times article ...

President Obama's health-care legislation is becoming more of a tax issue on a daily basis.  In addition to the codification of economic substance (discussed here; see also yesterday's TNT story featuring our own Phil Karter) contained in the reconciliation bill, the consequences of the legislation seem to be increasingly a matter of tax, rather than health-care, policy.

Of particular relevance here is the brewing confrontation between Reps. Waxman and Stupak and the companies who have announced substantial hits to their financial statements as a result of provisions in the health-care legislation. In response to these announcements, Reps. Waxman and Stupak have requested that companies provide documentation verifying their assessment of the impact of the legislation and have indicated an intention to hold a hearing to examine the impact of the new law on these companies.  (Presumably, the documentation provided by the companies will be a central basis for whatever questions are directed at the executives who appear at these hearings.)

Without taking a position about the politics of the matter, the dynamics of the request (and any responses to it) may implicate sensitive areas of tax policy and procedure. At this point, Reps. Waxman and Stupak have merely requested that the corporate taxpayers provide information about the impact of the health-care legislation. Suppose, though, that one or more companies decline to produce the requested information.  The perceived costs and benefits of the health-care legislation are likely to be key issues in the upcoming Congressional races this fall.  If the request is declined, and Congressional Democrats fear that their signature achievement is being negatively perceived, would subpoenas to the taxpayers, demanding that they produce the information, come next?

Assuming that scenario, would taxpayers then be obligated to provide the information being sought?  Perhaps more importantly, would Congress be authorized to use that information in a public hearing?