Should the United States Exempt Foreign-Source Income Similar to Foreign Business Partners?

I. Introduction

In 1918, the United States enacted a foreign tax credit (FTC) system for taxing foreign-source business income earned by multinational corporations (MNCs). (1) This system, known as “worldwide” taxation is said to implement “capital export neutrality” by neutralizing a citizen’s decision between investing domestically or abroad. (2) About half of the Organization for Economic Co-operation (OECD) countries have adopted a similar approach. (3) However, as foreign trade agreements and the complexity of U.S. tax treatment continue to increase, a “territorial” taxation system, as implemented by the other half of OECD countries, might be worth considering in the United States. (4)

This article will 1) define some of the underlying principles behind international tax policies, 2) suggest a proposal for a tax-exemption system, 3) explain how the proposal solves problems under the current system, and finally 4) attempt to rationalize potential criticisms surrounding … Read the rest

March 15, 2010

Keeping the Chicago Cubs Spring Training Facility in Arizona

I. Introduction

The Chicago Cubs are the highest drawing baseball team in the Arizona Cactus League [1] and earn nearly $52 million for the state of Arizona annually. [2] The team’s current deal with Mesa, Arizona allows the Cubs to buy out of its agreement to play in Mesa after 2012. [3] As a result, the Cubs have received pitches from groups in both Arizona and Florida trying to persuade them to choose their state for the site of their new spring training facility. In January, the Cubs and the city of Mesa, Arizona signed a memorandum of understanding which gave the city the exclusive right to negotiate an agreement for a new Spring Training facility for the Cubs. [4] Initially, an Arizona House committee proposed legislation that would approve a $1 surcharge on auto rentals in the Phoenix area and … Read the rest

February 21, 2010January 22, 2017

Is the NCAA Fulfilling its Tax-Exempt Status?

I. Introduction

In late 2006, Congress challenged the NCAA’s tax-exempt status, questioning the organization’s lucrative commercial contracts and alleged lack of emphasis on higher education. [1] Some point out that Division I football and basketball are looking more like minor leagues for the pros that benefit only a tiny portion of a university’s student body and may actually be more “detrimental to the overall education of the athlete given the amount of time they consume, and so forth.”[2] Smith College economist Andrew Zimbalist claims that “college sports has grown into a standard commercial enterprise — with only a tip of the hat to the academic environment they exist in.”[3] This article will first provide background to clarify the manner in which tax rules are applied to organizations such as the NCAA, an analysis on whether the NCAA is actually fulfilling its tax-exempt status, and some possible solutions for tax-exempt compliance. … Read the rest

November 30, 2009

Level the Playing Field: Consider State Taxes when Developing Salary Caps in the Major Sports

Level the Playing Field: Consider State Taxes when Developing Salary Caps in the Major Sports

I. Introduction

States and cities tax professional athletes in multiple ways. A traditional method, which applies to athletes and non-athletes alike, is income taxation by the state in which an individual resides. A second method, utilized by twenty states, is to tax athletes when they participate in games other than in the state they reside. [1] This second method is commonly referred to as the “jock tax.” Since the inception of the jock tax, inequality from state to state has been a prevalent issue. The combination of the jock tax and differences between how states tax its residents may make some cities in the United States and in Canada more attractive than others. “Although a player may have contract offers from different teams for the same … Read the rest

November 30, 2009

Jurisdictional Competition in a Developing Economy: Law and Policy Issues of the Offshore Structure Use in Russia

I. Introduction

Someone might view the economic crisis times as the best period to broaden one’s business horizons and invest into a new market. The fast growing markets such as China, Brazil, India and to some extent Russia are waiting for new investors. Russia, having more than 140 million inhabitants, i.e. potential consumers, and abundant natural resources remains mostly neglected by investors in many business fields. For decades Russian market was viewed as not a place for those faint-of-heart. Now the growth of political stability and positive developments in legislation make the investment less risky and more attractive. Nevertheless, the still existing differences between local and internationally recognized legislative frameworks and court practices make investors wonder if there is any possibility to opt out of the Russian legal rules.

This article will explore the reasons behind Russian corporate norms that explain the inflexibility of current legislation and court practice and … Read the rest

October 12, 2009

Free Trade versus Protectionism: A Taxing Debate

I. Introduction

President Obama’s September 11th decision to restrict imports of Chinese tires has sparked a taxing debate both domestically and abroad. On top of the preexisting four percent tariff on all tire imports, the president determined to impose additional ad valorem duties upon certain passenger vehicle and light truck tires from China, designed to taper down from 35 to 30 to 25 percent over three years. [1] China responded within days by raising a World Trade Organization ("WTO") challenge to the safeguard, alleging that Obama’s actions are inconsistent with existing international laws. [2] Meanwhile, the proclamation has incited both criticism and praise from a variety of domestic and foreign interests. This article will assess the legality, consequences, and judiciousness of implementing such a tariff and conclude with a word on the free trade versus protectionism debate.

II. Background

The tire tariffs are in response to a United Steelworkers complaint … Read the rest

October 12, 2009

Statistical Sampling: Weighing Costs versus Precision in Providing Taxpayer Guidance

I. Introduction

In the months preceding elections in the United States it is difficult to avoid statistical sampling, as polling projections are everywhere. Only a sample is used to make these projections because it would take too much time and be too expensive to determine how every voter will vote. [1] Statistical sampling has many others uses as well, including being used as evidence in a trial [2] or being used to estimate how much a taxpayer owes the government on their tax return. [3] As with elections, to determine the exact result for a tax return, every item in the population would need to be investigated. As a population gets larger, this gets more time consuming and more expensive, especially when the information is collected by experts, lawyers, and accountants. Furthermore, each additional item of the population collected will not result … Read the rest

September 21, 2009

The Skinny on Taxing Fatty Foods

I. Introduction

In case you have not read a newspaper, surfed the internet, or been outside your home recently, there is an obesity epidemic in the United States.[1] Search Google News for “’obesity epidemic’” and one will find about seven hundred stories in the last month.[2] Not to dwell on the prevalence of obesity, but according to the Centers for Disease Control and Prevention (CDC) in 2005-2006 “more than one-third of adults, or seventy-two million people [in the United States] were obese;” a number which had “doubled among adults from 1980 to 2004” and which has not decreased since.[3]

They say the first step to solving a problem is admitting one has one; America we have a problem. But simply admitting a problem exists does not necessarily mean it should be the government’s job to alleviate the problem. Even if it was the government’s … Read the rest

March 18, 2009

Honking and Swearing Never Work: An Examination of Urban Traffic Congestion Remedies

I. Introduction

As any city grows and develops a strong central business district (CBD), congestion is going to become a matter of concern for those who both live and work in that area. While this pain has been universally felt amongst metropolitan areas, the handling of this problem has varied. Despite the recognition of the issue, as the United States Department of Transportation (USDOT) has noted that congestion has nearly tripled in the last twenty five years, that same time period has seen an 239 percent increase in highway spending. [1] A recent English study estimated that a five percent reduction in travel time could generate five billion U.S. dollars in savings per year. [2] While no similar research has been commenced in the United States, American urban citizens lost 3.7 billion hours of time and wasted 2.3 billion gallons of fuel sitting in congested streets in 2003. [3] The … Read the rest

March 1, 2009

Investing in China through a Hong Kong, SAR entity – Tax considerations for riding the next wave

I. Introduction.

It is well known that the big movement of capital in the next decade is going to be to Eastern Asia, the People's Republic of China (PRC) and India being the two world's most preferred targets due to the size of their consumer martkets. This article will only focus on the PRC, and Hong Kong due to its proximity to the Chinese Mainland. As it will be further explained, although foreign capitals may be invested in the PRC directly; the Hong Kong tax system is lower and simpler than the Chinese one, and therefore, frow a taxation view point it makes sense to manage assets located in the PRC through a Hong Kong, SAR entity. Hong Kong became a Special Administrative Region (SAR) of the PRC on July 1, 1997. However, it has a high degree of autonomy, except in the areas of defense and foreign policy, and retains its own currency, laws, and border controls.

II. Investing in the Chinese … Read the rest