Washington Lawyers Under the Purview of the State Consumer Protection Act—The Entrepreneurial Aspects Solution—Short v. Demopolis, 103 Wn. 2d 52, 691 P.2d 163 (1984)

In Short v. Demopolis the Washington Supreme Court held that certain entrepreneurial aspects of the practice of law constitute trade or commerce for purposes of RCW 19.86, Washington\u27s consumer protection and antitrust law. This holding brings members of the legal community under antitrust and consumer protection scrutiny as embodied in the Consumer Protection Act (CPA). The Demopolis decision, however, only applies to the entrepreneurial aspects of the practice of law. Although many courts and commentators have struggled with the question of whether professionals should be given preferential treatment, the Washington court is the first to specifically exclude legal malpractice from consumer protection or antitrust legislation. Under this rule, a lawyer who practices law negligently or otherwise commits malpractice is not subject to liability under the CPA if the malpractice involves the actual practice of law. This Note analyzes the court\u27s decision in light of prior state cases and federal precedent and concludes that the court correctly applied the CPA to lawyers\u27 entrepreneurial activities. However, to the extent it rules that the performance of legal services is not trade or commerce, the holding is too narrow. The court should have concluded that all aspects of the practice of law are trade or commerce as defined by the CPA, but that certain acts, such as professional negligence, may not be classified as unfair or deceptive. The court could have both clarified a troublesome area of consumer protection law and avoided establishing a special exemption for the legal profession by using this analysis

Washington Lawyers Under the Purview of the State Consumer Protection Act—The Entrepreneurial Aspects Solution—Short v. Demopolis, 103 Wn. 2d 52, 691 P.2d 163 (1984)

In Short v. Demopolis the Washington Supreme Court held that certain entrepreneurial aspects of the practice of law constitute trade or commerce for purposes of RCW 19.86, Washington\u27s consumer protection and antitrust law. This holding brings members of the legal community under antitrust and consumer protection scrutiny as embodied in the Consumer Protection Act (CPA). The Demopolis decision, however, only applies to the entrepreneurial aspects of the practice of law. Although many courts and commentators have struggled with the question of whether professionals should be given preferential treatment, the Washington court is the first to specifically exclude legal malpractice from consumer protection or antitrust legislation. Under this rule, a lawyer who practices law negligently or otherwise commits malpractice is not subject to liability under the CPA if the malpractice involves the actual practice of law. This Note analyzes the court\u27s decision in light of prior state cases and federal precedent and concludes that the court correctly applied the CPA to lawyers\u27 entrepreneurial activities. However, to the extent it rules that the performance of legal services is not trade or commerce, the holding is too narrow. The court should have concluded that all aspects of the practice of law are trade or commerce as defined by the CPA, but that certain acts, such as professional negligence, may not be classified as unfair or deceptive. The court could have both clarified a troublesome area of consumer protection law and avoided establishing a special exemption for the legal profession by using this analysis

Can Reading Questions Foster Active Learning? A Study of Six College Courses

Many instructors strive to encourage student reading outside of class and active learning in class. One pedagogical tool, structured reading questions, can help do both. Using examples from question sets across six courses, the authors illustrate how reading questions can help students achieve the six active-learning principles described by Svinicki (1991). Qualitative and quantitative assessment data indicate that students often complete readings before class, that they view the questions as very helpful in their learning, and that they use the questions primarily to help understand what information is important and connect it to prior knowledge. Some differences in use are evident across class standing

Local forest structure variability increases resilience to wildfire in dry western U.S. coniferous forests.

A 'resilient' forest endures disturbance and is likely to persist. Resilience to wildfire may arise from feedback between fire behaviour and forest structure in dry forest systems. Frequent fire creates fine-scale variability in forest structure, which may then interrupt fuel continuity and prevent future fires from killing overstorey trees. Testing the generality and scale of this phenomenon is challenging for vast, long-lived forest ecosystems. We quantify forest structural variability and fire severity across >30 years and >1000 wildfires in California's Sierra Nevada. We find that greater variability in forest structure increases resilience by reducing rates of fire-induced tree mortality and that the scale of this effect is local, manifesting at the smallest spatial extent of forest structure tested (90 × 90 m). Resilience of these forests is likely compromised by structural homogenisation from a century of fire suppression, but could be restored with management that increases forest structural variability

Profit-Shifting Structures: Making Ethical Judgments Objectively, Part 1

MNCs and their advisors have seemingly taken ethics out of the mix when considering the profit-shifting tax structures they have so prolifically and enthusiastically implemented over the past several decades. There may be a variety of reasons for this. First, U.S. tax law is a self-assessment system, meaning that in most cases taxpayers compute and pay tax without advance approval of their tax positions from the IRS. No third party technical test or propriety standard has to be passed on the front end for any tax strategy or structure. Second, direct personal benefits accrue to management and advisors from implementing such structures, often measured, either, directly or indirectly, by a structure’s short-term success. Stock options and stock issued under performance share plans become more valuable more quickly, bonuses are higher, promotions may be faster, and professional advisors earn more fees and enhance their reputations and client relationships. With no up-front objective test to determine if the planning will survive later scrutiny and the fact that everyone else is doing it, there’s an easy inference that it represents good business practice. Third, some Congressional actions have encouraged and enabled such questionable and problematic tax strategies. MNC boards of directors, senior management, and professional advisors need an objective ethical benchmark to test the appropriateness of their profit-shifting structures and any new strategies they might consider. Given the strong motivation to implement such structures, a counterweight is needed to balance the unfettered acceptance and adoption of profit-shifting strategies based solely on the mere possibility that they might pass technical tax scrutiny by the government. Greater thought needs to be given to whether these plans are consistent with and serve the long term objectives of the MNC and its many global stakeholders. Stating this proposition more directly, it is time to ask if all of these stakeholders would accept the efficacy of these structures if they were made fully aware of and understood the technical basis, the strained interpretations, the hidden arrangements, the meaningless intercompany agreements, the inconsistent positions, and the lack of change in the business model for the schemes proposed or already implemented. This article presents an objective ethical benchmark to test the acceptability of certain profit shifting structures. In addition, the benchmark is defined solely from a U.S. perspective, though it is applicable to all MNCs that conduct U.S.-centric businesses. Thus, it applies to non-U.S.-based MNCs that have inverted or that have acquired U.S. MNCs. The concept behind this benchmark could also be applied in other countries in which global businesses are headquartered and conducted. In brief, this ethical benchmark requires an examination of the factual situation for each of an MNC’s low or zero taxed foreign group members regarding three factors, which are: (a) identification and location of critical value-drivers, (b) location of actual control and decision-making of the foreign group member’s business and operations, and (c) the existence or lack thereof of capable offshore management personnel and a CEO located at an office of the foreign group member outside the U.S. who has the background and expertise to manage, and does in fact manage, the entity’s business. Through this examination, it should be possible to determine whether a foreign group member is recording income that is economically earned through business decisions and activities conducted in the jurisdiction in which it claims to be doing business. Where, however, the facts indicate that a portion or all of the business of the foreign group member is done substantially in the U.S. by U.S. based affiliates, the Congressional intent is clear. And that clear intent is to directly tax such income through the effectively connected income rules of the Internal Revenue Code. This benchmark should be used by MNCs with the active participation of board and management members. An MNC could also use this approach to proactively respond to critics or to demonstrate its tax bona-fides. This article concludes by suggesting a number of steps to be considered by MNC Boards, professional tax advisors, and the Congress, Treasury and the IRS, with a view to improving the quality and outcomes of tax strategies, corporate governance, and the equitable collection of taxes. The suggestions include actions that could be instituted by Treasury and the IRS without the need for any Congressional action

Profit-Shifting Structures: Making Ethical Judgments Objectively, Part 2

MNCs and their advisors have seemingly taken ethics out of the mix when considering the profit-shifting tax structures they have so prolifically and enthusiastically implemented over the past several decades. There may be a variety of reasons for this. First, U.S. tax law is a self-assessment system, meaning that in most cases taxpayers compute and pay tax without advance approval of their tax positions from the IRS. No third party technical test or propriety standard has to be passed on the front end for any tax strategy or structure. Second, direct personal benefits accrue to management and advisors from implementing such structures, often measured, either, directly or indirectly, by a structure’s short-term success. Stock options and stock issued under performance share plans become more valuable more quickly, bonuses are higher, promotions may be faster, and professional advisors earn more fees and enhance their reputations and client relationships. With no up-front objective test to determine if the planning will survive later scrutiny and the fact that everyone else is doing it, there’s an easy inference that it represents good business practice. Third, some Congressional actions have encouraged and enabled such questionable and problematic tax strategies. MNC boards of directors, senior management, and professional advisors need an objective ethical benchmark to test the appropriateness of their profit-shifting structures and any new strategies they might consider. Given the strong motivation to implement such structures, a counterweight is needed to balance the unfettered acceptance and adoption of profit-shifting strategies based solely on the mere possibility that they might pass technical tax scrutiny by the government. Greater thought needs to be given to whether these plans are consistent with and serve the long term objectives of the MNC and its many global stakeholders. Stating this proposition more directly, it is time to ask if all of these stakeholders would accept the efficacy of these structures if they were made fully aware of and understood the technical basis, the strained interpretations, the hidden arrangements, the meaningless intercompany agreements, the inconsistent positions, and the lack of change in the business model for the schemes proposed or already implemented. This article presents an objective ethical benchmark to test the acceptability of certain profit shifting structures. In addition, the benchmark is defined solely from a U.S. perspective, though it is applicable to all MNCs that conduct U.S.-centric businesses. Thus, it applies to non-U.S.-based MNCs that have inverted or that have acquired U.S. MNCs. The concept behind this benchmark could also be applied in other countries in which global businesses are headquartered and conducted. In brief, this ethical benchmark requires an examination of the factual situation for each of an MNC’s low or zero taxed foreign group members regarding three factors, which are: (a) identification and location of critical value-drivers, (b) location of actual control and decision-making of the foreign group member’s business and operations, and (c) the existence or lack thereof of capable offshore management personnel and a CEO located at an office of the foreign group member outside the U.S. who has the background and expertise to manage, and does in fact manage, the entity’s business. Through this examination, it should be possible to determine whether a foreign group member is recording income that is economically earned through business decisions and activities conducted in the jurisdiction in which it claims to be doing business. Where, however, the facts indicate that a portion or all of the business of the foreign group member is done substantially in the U.S. by U.S. based affiliates, the Congressional intent is clear. And that clear intent is to directly tax such income through the effectively connected income rules of the Internal Revenue Code. This benchmark should be used by MNCs with the active participation of board and management members. An MNC could also use this approach to proactively respond to critics or to demonstrate its tax bona-fides. This article concludes by suggesting a number of steps to be considered by MNC Boards, professional tax advisors, and the Congress, Treasury and the IRS, with a view to improving the quality and outcomes of tax strategies, corporate governance, and the equitable collection of taxes. The suggestions include actions that could be instituted by Treasury and the IRS without the need for any Congressional action

Profit-Shifting Structures and Unexpected Partnership Status

Many U.S.- and foreign-based MNCs that have implemented carefully researched tax strategies to reduce their income taxes are coming under increased scrutiny. Most MNC tax strategies involve businesses they conduct worldwide, but which are managed from the U.S. These strategies have several factors in common: (i) Companies established in tax havens or otherwise structured to attract little if any tax; (ii) Intercompany agreements placing commercial risk and intangibles in such companies, thereby shifting profits to such companies; (iii) Conduct of centralized activities and functions in the U.S. (in addition to group senior management), which are integral to and which critically benefit all MNC group members conducting that line of business (examples of such activities include product development, product sourcing, management of contract manufacturing process, management and control of internet platforms, etc.); and (iv) No significant changes made to their business operations when tax strategies were implemented, meaning potentially that these structures lack economic substance. This article suggests that in their haste to create these profit-shifting structures, the MNCs and their advisors may have overlooked two important weapons in the IRS’s arsenal to attack profit-shifting strategies. First, because of the centralized activities and functions within the U.S. that are integral to the business conducted by various group members (including both U.S. and foreign group members), an MNC may inadvertently create through its actions and intercompany contracts a partnership that is recognized solely for U.S. tax purposes. Once such a partnership exists for tax purposes, the various group members become its partners and the partnership conducts the applicable worldwide line of business. Secondly, because the partnership conducts a portion of its activities through U.S. offices and other facilities, the foreign group member partners are treated by statute as being engaged in a trade or business in the U.S. This makes them subject to U.S. taxation on their share of effectively connected income (ECI) earned by the partnership. U.S. taxation will be imposed at effective rates of 54.5% or higher. (The effective rate could be 38.25% or higher if a tax treaty applies.) In the absence of a partnership, whether a foreign group member is engaged in a U.S. trade or business is a factual determination that may be difficult for the IRS to establish. However, to their collective detriment, MNCs whose factual situations support the existence of a partnership that conducts such a U.S. trade or business have made it a slam-dunk for the IRS to conclude that the foreign group member partner is so engaged. The U.S. tax rules are clear – if a foreign corporation is a partner in a partnership engaged in a U.S. trade or business, then that partner will be so engaged. All MNCs with this general fact pattern and their auditors should re-examine existing profit shifting structures to determine if they could withstand an IRS charge asserting both the existence of a partnership and taxable ECI

Atomic oxygen degradation of Intelsat 4-type solar array interconnects: Laboratory investigations

A Hughes 506 type communication satellite belonging to the Intelsat organization was marooned in low Earth orbit on March 14, 1990, following failure of the Titan third stage to separate properly. The satellite, Intelsat VI, was designed for service in geosynchronous orbit and contains several material configurations which are susceptible to attack by atomic oxygen. Analysis showed the silver foil interconnects in the satellite photovoltaic array to be the key materials issue because the silver is exposed directly to the atomic oxygen ram flux. The results are reported of atomic oxygen degradation testing of Intelsat VI type silver foil interconnects both as virgin material and in a configured solar cell element. Test results indicate that more than 80 pct. of the original thickness of silver in the Intelsat VI solar array interconnects should remain after completion of the proposed Space Shuttle rescue and/or reboost mission

A Case Study: Effectively Connected Income

In this report, Kadet and Koontz continue their series of articles on various aspects of applying effectively connected income taxation to multinationals by creating an ECI case study using the facts provided in a Hong Kong decision concerning an unidentified multinational that is clearly based in the United States