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Colleen Meuth - One of the best experts on this subject based on the ideXlab platform.

Arun J Prakash - One of the best experts on this subject based on the ideXlab platform.

  • The Tax Exemption to Subchapter S Banks: Who Gets the Benefit?
    Financial Review, 2016
    Co-Authors: Chun-hao Chang, Ajeet Jain, Edward R. Lawrence, Arun J Prakash
    Abstract:

    The Small Business Job Protection Act of 1996 allows U.S. banks to adopt the Subchapter S status. We investigate if the Subchapter S banks use tax benefits for the intended purposes of “protecting jobs,” “creating opportunities” and “increasing take home pay of workers.” We find that the tax benefits: (a) are not used in expenses related to protection of jobs, (b) do not lead to greater employment opportunities within the Subchapter S banks, and (c) do not benefit the employees in the form of increased salaries and benefits. Our results indicate that bank owners are sole beneficiaries of the tax exemption benefits.

Andrea Monroe - One of the best experts on this subject based on the ideXlab platform.

  • What We Talk About When We Talk About Tax Complexity
    2016
    Co-Authors: Andrea Monroe
    Abstract:

    This essay offers some preliminary evidence of the pervasive influence of legal craft values in partnership taxation. Legal craft values shape our perception of the law, and they shape the law itself, orienting Subchapter K toward partnership tax experts with little express appreciation for the costs this craft-based approach imposes on the mainstream of the partnership tax community. Two recently proposed regulations shed important light on the role of legal craft values in Subchapter K. Both proposed regulations address transactions — contributions and distributions — that are common among all partnerships. Yet both regulations are grounded in a shared contradiction. The Treasury designed each of these proposed regulations to ease the compliance and administrative burdens associated with a specific transaction, whether by simplifying the rules or ensuring that they resonate with a particular audience. At the same time, both regulations place a high premium on legal craft values, relying on targeted, technical rules in order to draw a line between permissible and impermissible transactions. Indeed, what is most interesting about these two proposed regulations are the complicated mechanisms, previously elective mechanisms, that the Treasury employs in its efforts to streamline Subchapter K, and what those mechanisms signal about the relationship between legal craft values and partnership taxation.

  • Too Big to Fail: The Problem of Partnership Allocations
    SSRN Electronic Journal, 2010
    Co-Authors: Andrea Monroe
    Abstract:

    The partnership taxation rules of Subchapter K are uniquely flawed. Designed to be flexible, Subchapter K must accommodate a diverse and growing array of business organizations, from the most simple to the most sophisticated. Yet such flexibility, combined with Subchapter K’s complexity and low enforcement resources, has made partnerships the preferred vehicle for many tax shelter transactions, imposing extraordinary costs on the public at large. The crisis in partnership taxation is well understood within the tax community, but solutions to Subchapter K’s formidable problems have been slow to emerge. This Article proposes to stabilize partnership taxation through the reform of its most critical, and most problematic, provisions: the rules governing partnership allocations. Although the partnership allocation provisions are the operational lifeblood of Subchapter K, these allocation rules have failed, no longer providing partnerships with a viable means of dividing taxable items among their partners. This Article thus offers a novel reform of the partnership allocation provisions. Specifically, it proposes that the Treasury Department adopt a penalty default approach to partnership allocations, forcing partnerships to separate themselves based on their identity as either simple or sophisticated partnerships. In doing so, the Treasury could adopt allocation rules better designed to address the diverse needs of modern partnerships; simple partnerships would allocate taxable items ratably and sophisticated partnerships would allocate taxable items under an alternative regime that preserving partnership flexibility but also subjecting such allocations to an enhanced anti-avoidance standard. Separating partnerships in this manner would simplify the partnership allocation provisions, triggering an increase in compliance rates and a decrease in abusive partnership transactions. Indeed, introducing a penalty default rule into the partnership allocation provisions would result in a more equitable and more administrable Subchapter K.

  • Saving Subchapter K: Substance, Shattered Ceilings and the Problem of Contributed Property
    2008
    Co-Authors: Andrea Monroe
    Abstract:

    Partnership taxation is in crisis, with Congress struggling to reconcile the foundational ideals of flexibility and substance. In instances where reconciliation has proven impossible, Congress has remained steadfast in its commitment to flexibility and sacrificed substance. The cost of Congress's preference has been extraordinarily high, resulting in matchless complexity and numerous tax sheltering opportunities, the costs of which are ultimately borne by the public. Partnership contributions and the rules governing how partners share the gains, losses and deductions attributable to contributed property present precisely this formidable challenge. The rules governing contributed property allocations and, hence, Subchapter K are poised for a perfect storm, and this article suggests that congressional reform of such rules is urgently needed. The number of business entities electing to be taxed as partnerships for federal income tax purposes is skyrocketing, the enforcement resources dedicated to Subchapter K remain woefully insufficient, and a 2004 statutory enactment has rendered these allocation rules entirely unworkable. After examining the history of this crisis, this articles recommends that Congress reform the rules governing contributed property allocations by adopting the deferred sales method and revitalizing Subchapter K's commitment to substance. This article concludes that the deferred sales method would greatly simplify partnership allocations and, more importantly, Subchapter K. Indeed, the deferred sales method would bring order to this chaotic and often misunderstood body of law.

C. Chadwick Cullum - One of the best experts on this subject based on the ideXlab platform.

  • A Majestic Vacation: The Third Circuit Takes a Break from the Modern Trend of Including Subchapter S Elections in the Property of a Bankruptcy Estate
    Texas A&M Law Review, 2014
    Co-Authors: C. Chadwick Cullum
    Abstract:

    Subchapter S elections provide small businesses and their owners with substantial tax benefits. These elections allow the businesses to avoid taxation at the corporate level and cause the tax liability of the company to pass through to the shareholders. When a Subchapter S entity enters bankruptcy, the company expects tax liability to continue to pass through to the shareholders, but the shareholders often want to shift the tax liability back onto the company because they do not have access to the company’s income while it is in bankruptcy. Whether Subchapter S elections are property of the company’s bankruptcy estate is a significant factor in the ability of shareholders of these entities to revoke these elections to avoid the tax liability. Until recently, courts had found that a Subchapter S election is property of the bankruptcy estate, but never addressed a situation involving qualified subsidiaries of Subchapter S Corporations. In In re Majestic Star, the Third Circuit held that these elections are not property rights and vacated the lower bankruptcy court’s order to restore the tax statuses of a subsidiary in bankruptcy and its parent corporation. Comparing the broad application of property rights in bankruptcy used in In re Dittmar, this Note demonstrates that the Third Circuit Court of Appeals improperly limited its analysis concerning the property nature of these elections. Subchapter S elections should be property of the estate because they provide an economic benefit to the company that can satisfy claims of creditors. The inequities and negative implications that resulted from the lower bankruptcy court’s order are also not as significant as the Third Circuit would make them seem. Some of these negative consequences could have been remedied by fixing an error in the order.

Chun-hao Chang - One of the best experts on this subject based on the ideXlab platform.

  • The Tax Exemption to Subchapter S Banks: Who Gets the Benefit?
    Financial Review, 2016
    Co-Authors: Chun-hao Chang, Ajeet Jain, Edward R. Lawrence, Arun J Prakash
    Abstract:

    The Small Business Job Protection Act of 1996 allows U.S. banks to adopt the Subchapter S status. We investigate if the Subchapter S banks use tax benefits for the intended purposes of “protecting jobs,” “creating opportunities” and “increasing take home pay of workers.” We find that the tax benefits: (a) are not used in expenses related to protection of jobs, (b) do not lead to greater employment opportunities within the Subchapter S banks, and (c) do not benefit the employees in the form of increased salaries and benefits. Our results indicate that bank owners are sole beneficiaries of the tax exemption benefits.

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