Formulary Apportionment in the U.S. International Income Tax System: Putting Lipstick on a Pig?

Perhaps surprisingly, this Article has shown that the debate over formulary apportionment is little more than an alternative path to the larger debate over worldwide taxation versus territorial taxation. The present U.S. international income tax regime for U.S. MNEs is an implicit, overly-generous, and incoherent quasi-territorial system that relies on residence rules, source rules, and the arm’s-length approach to apportion international business profits between domestic income that is currently taxable by the United States and foreign income that is effectively exempt, or nearly so, from U.S. taxation because of deferral and cross-crediting. This version of territoriality is quite ugly because it is highly complex and it imposes only modest restraints on the ability of U.S. MNEs to shift income out of the U.S. tax base to low-tax foreign countries. Four forms of explicit territoriality have been proposed as alternatives to the current U.S. system. The first is traditional territoriality, which relies on source rules and the arm’s-length approach to apportion international business profits between taxable domestic income and exempt foreign income. This is a simpler regime than the current U.S. system because it confers exemption directly rather than implicitly through deferral and cross-crediting. It does, however, preserve the capacity of taxpayers to shift income to low-tax foreign countries subject only to the modest restraint imposed by the arm’s-length approach. Most importantly, it is inconsistent with the principle of ability-to-pay and it provides a powerful incentive to locate business activity in low-tax foreign countries. The other three forms of territoriality that are currently part of the debate are three-factor, two-factor, and single-factor global formulary apportionment. Each of them is simpler than either the current U.S. system or traditional territoriality, but each of them leaves U.S. MNEs with considerable capacity to accomplish erosion of the U.S. tax base through income shifting and each of them shares the defects of traditional territoriality regarding inconsistency with the ability-to-pay principle and distortion of business activity. Thus, U.S. policy makers are left with a choice between a normatively flawed and distortive territoriality that imposes modest restraints on income shifting through the arm’s-length approach (i.e., both the current U.S. system of de facto territoriality and traditional territoriality) and a simpler but normatively flawed and distortive territoriality that still allows a substantial amount of income shifting (i.e., three-factor, two-factor, and single-factor global formulary apportionment). This unhappy dilemma can be avoided by adopting real worldwide taxation or, alternatively, by keeping the current regime while creating a Subpart F income category for low-taxed foreign income and insulating that category from cross-crediting with a separate foreign tax credit limitation basket. A more limited form of formulary apportionment then should be used for, and tailored to, particular forms of income, such as intangible income and global trading income, that present discrete taxation problems. Nevertheless, when such income is earned by a U.S. MNE, allocation of income to a foreign jurisdiction under this more limited form of formulary apportionment should not ipso facto result in the income being exempted from U.S. taxation

Defending Worldwide Taxation With A Shareholder-Based Definition Of Corporate Residence

This Article argues that a principled, efficient, and practical definition of corporate residence is necessary even if some form of corporate integration is adopted, and that such a definition is a key element in designing either a real worldwide or a territorial income tax system as well as a potential restraint on the inversion phenomenon. The Article proposes that the United States adopt a shareholder-based definition of corporate residence that is structured as follows: 1. A foreign corporation is a U.S. tax resident for any year if fifty percent or more of its shares, determined by vote or value, was beneficially owned by U.S. residents on the last day of the immediately preceding year (or was the average ownership for the year by U.S. residents as determined by averaging U.S. resident ownership on the last day of each quarter of the preceding year). A foreign corporation presumptively satisfies this test if any class of its shares is regularly traded in one or more U.S. public capital markets or is marketed to U.S. persons. 2. This presumption can be rebutted by the foreign corporation showing that U.S. resident beneficial ownership of its shares is below the fifty-percent threshold. 3. The presumption can be overcome in the same way by the IRS if it encounters cases where a foreign corporation that is actually foreign-owned lists a class of shares on a U.S. exchange in order to achieve U.S. resident status for tax-avoidance reasons. This proposed shareholder-ownership test, however, would be an alternate definition; a corporation would continue to be a U.S. tax resident if it were formed under the law of a U.S. jurisdiction. Finally, this Article examines the common objections to a shareholder-based definition of corporate residence and explains why those objections are unpersuasive

Defending Worldwide Taxation With A Shareholder-Based Definition Of Corporate Residence

This Article argues that a principled, efficient, and practical definition of corporate residence is necessary even if some form of corporate integration is adopted, and that such a definition is a key element in designing either a real worldwide or a territorial income tax system as well as a potential restraint on the inversion phenomenon. The Article proposes that the United States adopt a shareholder-based definition of corporate residence that is structured as follows: 1. A foreign corporation is a U.S. tax resident for any year if fifty percent or more of its shares, determined by vote or value, was beneficially owned by U.S. residents on the last day of the immediately preceding year (or was the average ownership for the year by U.S. residents as determined by averaging U.S. resident ownership on the last day of each quarter of the preceding year). A foreign corporation presumptively satisfies this test if any class of its shares is regularly traded in one or more U.S. public capital markets or is marketed to U.S. persons. 2. This presumption can be rebutted by the foreign corporation showing that U.S. resident beneficial ownership of its shares is below the fifty-percent threshold. 3. The presumption can be overcome in the same way by the IRS if it encounters cases where a foreign corporation that is actually foreign-owned lists a class of shares on a U.S. exchange in order to achieve U.S. resident status for tax-avoidance reasons. This proposed shareholder-ownership test, however, would be an alternate definition; a corporation would continue to be a U.S. tax resident if it were formed under the law of a U.S. jurisdiction. Finally, this Article examines the common objections to a shareholder-based definition of corporate residence and explains why those objections are unpersuasive

Designing a 21st Century Corporate Tax—An Advance U.S. Minimum Tax on Foreign Income and Other Measures to Protect the Base

The 21st Century has seen unprecedented levels of corporate tax aggressiveness and avoidance. This Article continues our exploration of second-best international tax reforms that would protect the U.S. corporate tax base and have some likelihood of adoption. In this case, we consider how a U.S. minimum tax on foreign income earned by a controlled foreign corporation should be designed to protect the United States against erosion of its corporate income tax base and to combat tax competition by low-tax intermediary countries. In the authors’ view, a minimum tax should be an interim levy that preserves the residual U.S. tax on foreign income, as distinguished from a final minimum tax that partially eliminates the U.S. residual tax. An interim minimum tax would be a significant improvement over current law and would more effectively limit incentives to seek low-taxed foreign income while ameliorating pressure to retain excess earnings abroad. To achieve the objectives of such a minimum tax, corresponding changes should be made to the U.S. corporate resident definition, the source taxation of foreign multinational corporations, and the residence taxation of U.S. portfolio investors in foreign corporations to reduce tax advantages under current law for investments in foreign corporations. These changes would reduce tax advantages for foreign parent corporate groups and thereby further protect the U.S. tax base, as well as reduce incentives for U.S. corporations to expatriate as a consequence of increased U.S. taxation of foreign income under an interim minimum tax

A simple blood tests, such as complete blood count, can predict calcification grade of Abdominal Aortic Aneurysm.

Objective. The pathogenesis of abdominal aortic aneurysm (AAA) is complex and different factors, including calcification, are linked to increased complications. This study was conducted in order to verify if classical risk factors for AAA and cell blood count parameter could help in the identification of calcification progression of the aneurysm. Design. Risk factors were collected and cell blood count was performed in patients with AAA and patients were analyzed for the presence of aorta calcification using CT angiography. Results. We found no association of calcification grade with risk factors for AAA but we found a strong association between MCV, MCH, and calcification grade. Instead, no association was found with the other parameter that we analyzed. Conclusions. In this study, we demonstrate that biomarkers such as MCV and MCH could have potential important information about AAA calcification progression and could be useful to discriminate between those patients that should undergo a rapid imaging, thus allowing prompt initiation of treatment of suspicious patients that do not need imaging repetition

Mild AgOTf Catalyzed Synthesis of 1-Carbosubstituted-isochromenes

One of the most efficient methods for the construction of 1-substituted isochromenes (and related heteroaryl compounds such as pyrano[4,3-b]pyridines) is the metal catalyzed regioselective domino cycloisomerization/nucleophilic addition reaction of a properly substituted 2-alkynyl(hetero)arylaldehyde in the presence of a suitable nucleophile. The reaction with oxygen nucleophiles is the most studied and several metal catalyst, i.e., Pd(II), Cu(I), Ag(I), Au(I) and In(III), demonstrated to be effective for synthesis of 1-alkoxyisochromenes. Conversely, the reaction with carbon nucleophiles, and in particular with enolizable carbonyl compounds, is relatively less investigated. In connection with our ongoing interest in the development of silver catalysed domino approaches involving alkyne derivatives, we report here a silver catalyzed domino approach to isochromenes starting from 2-alkynyl(hetero)arylaldehydes and enolizable carbonyl compounds. The reaction yields range from fair to very good. The reaction mechanism is also investigated and the formation of by-products discussed