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

An Almost Singularly Optimal Asynchronous Distributed MST Algorithm

A singularly (near) optimal distributed algorithm is one that is (near) optimal in \emph{two} criteria, namely, its time and message complexities. For \emph{synchronous} CONGEST networks, such algorithms are known for fundamental distributed computing problems such as leader election [Kutten et al., JACM 2015] and Minimum Spanning Tree (MST) construction [Pandurangan et al., STOC 2017, Elkin, PODC 2017]. However, it is open whether a singularly (near) optimal bound can be obtained for the MST construction problem in general \emph{asynchronous} CONGEST networks. We present a randomized distributed MST algorithm that, with high probability, computes an MST in \emph{asynchronous} CONGEST networks and takes $\tilde{O}(D^{1+\epsilon} + \sqrt{n})$ time and $\tilde{O}(m)$ messages, where $n$ is the number of nodes, $m$ the number of edges, $D$ is the diameter of the network, and $\epsilon >0$ is an arbitrarily small constant (both time and message bounds hold with high probability). Our algorithm is message optimal (up to a polylog$(n)$ factor) and almost time optimal (except for a $D^{\epsilon}$ factor). Our result answers an open question raised in Mashregi and King [DISC 2019] by giving the first known asynchronous MST algorithm that has sublinear time (for all $D = O(n^{1-\epsilon})$) and uses $\tilde{O}(m)$ messages. Using a result of Mashregi and King [DISC 2019], this also yields the first asynchronous MST algorithm that is sublinear in both time and messages in the $KT_1$ CONGEST model. A key tool in our algorithm is the construction of a low diameter rooted spanning tree in asynchronous CONGEST that has depth $\tilde{O}(D^{1+\epsilon})$ (for an arbitrarily small constant $\epsilon > 0$) in $\tilde{O}(D^{1+\epsilon})$ time and $\tilde{O}(m)$ messages. To the best of our knowledge, this is the first such construction that is almost singularly optimal in the asynchronous setting.Comment: 27 pages, accepted to DISC 202

Interpreting the results of chemical stone analysis in the era of modern stone analysis techniques

INTRODUCTION AND OBJECTIVE: Stone analysis should be performed in all first-time stone formers. The preferred analytical procedures are Fourier-transform infrared spectroscopy (FT-IR) or X-ray diffraction (XRD). However, due to limited resources, chemical analysis (CA) is still in use throughout the world. The aim of the study was to compare FT-IR and CA in well matched stone specimens and characterize the pros and cons of CA. METHODS: In a prospective bi-center study, urinary stones were retrieved from 60 consecutive endoscopic procedures. In order to assure that identical stone samples were sent for analyses, the samples were analyzed initially by micro-computed tomography to assess uniformity of each specimen before submitted for FTIR and CA. RESULTS: Overall, the results of CA did not match with the FTIR results in 56 % of the cases. In 16 % of the cases CA missed the major stone component and in 40 % the minor stone component. 37 of the 60 specimens contained CaOx as major component by FTIR, and CA reported major CaOx in 47/60, resulting in high sensitivity, but very poor specificity. CA was relatively accurate for UA and cystine. CA missed struvite and calcium phosphate as a major component in all cases. In mixed stones the sensitivity of CA for the minor component was poor, generally less than 50 %. CONCLUSIONS: Urinary stone analysis using CA provides only limited data that should be interpreted carefully. Urinary stone analysis using CA is likely to result in clinically significant errors in its assessment of stone composition. Although the monetary costs of CA are relatively modest, this method does not provide the level of analytical specificity required for proper management of patients with metabolic stones

Deterministic Leader Election in Programmable Matter

Addressing a fundamental problem in programmable matter, we present the first deterministic algorithm to elect a unique leader in a system of connected amoebots assuming only that amoebots are initially contracted. Previous algorithms either used randomization, made various assumptions (shapes with no holes, or known shared chirality), or elected several co-leaders in some cases. Some of the building blocks we introduce in constructing the algorithm are of interest by themselves, especially the procedure we present for reaching common chirality among the amoebots. Given the leader election and the chirality agreement building block, it is known that various tasks in programmable matter can be performed or improved. The main idea of the new algorithm is the usage of the ability of the amoebots to move, which previous leader election algorithms have not used

Establishment of clonal myogenic cell lines from severely affected dystrophic muscles - CDK4 maintains the myogenic population

<p>Abstract</p> <p>Background</p> <p>A hallmark of muscular dystrophies is the replacement of muscle by connective tissue. Muscle biopsies from patients severely affected with facioscapulohumeral muscular dystrophy (FSHD) may contain few myogenic cells. Because the chromosomal contraction at 4q35 linked to FSHD is thought to cause a defect within myogenic cells, it is important to study this particular cell type, rather than the fibroblasts and adipocytes of the endomysial fibrosis, to understand the mechanism leading to myopathy.</p> <p>Results</p> <p>We present a protocol to establish clonal myogenic cell lines from even severely dystrophic muscle that has been replaced mostly by fat, using overexpression of CDK4 and the catalytic component of telomerase (human telomerase reverse transcriptase; hTERT), and a subsequent cloning step. hTERT is necessary to compensate for telomere loss during <it>in vitro </it>cultivation, while CDK4 prevents a telomere-independent growth arrest affecting CD56+ myogenic cells, but not their CD56- counterpart, <it>in vitro</it>.</p> <p>Conclusions</p> <p>These immortal cell lines are valuable tools to reproducibly study the effect of the FSHD mutation within myoblasts isolated from muscles that have been severely affected by the disease, without the confounding influence of variable amounts of contaminating connective-tissue cells.</p