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WEEKEND INSIGHTS: Facilitating Tax Fraud and Captive Insurance

Dec. 27, 2020, 3:01 PM

This is a weekend roundup of Bloomberg Tax Insights, written by practitioners and featuring expert analysis on current issues in tax practice and policy. The articles featured here represent just a handful of the many Insights published each week. For a full archive of articles, browse by jurisdiction at Daily Tax Report, Daily Tax Report: State, Daily Tax Report: International, Transfer Pricing Report and Financial Accounting.

This week we look at New York’s pursuit of businesses that facilitate tax fraud, the IRS’s crackdown on captive insurance, telecommuting tax issues, taxing foreign gifts, and more. We’ll hear from:

  • Randall Fox of Kirby McInerney on how Sotheby’s allegedly ran afoul of the New York False Claims Act
  • Philip Karter and Patrick McCann Jr. of Chamberlain Hrdlicka on the IRS’s enforcement campaign against captive insurance just when it’s showing its value
  • Corey L. Rosenthal and Lance E. Rothenberg of CohnReznick on the actions states are taking regarding newly telecommuting employees
  • Paul D’Alessandro of Bilzin Sumberg on methods to make a gift to a U.S. person without triggering a hefty federal gift tax liability
  • Mimi Song of CrossBorder Solutions outlines what tax departments need to do to prepare for transfer pricing scrutiny
  • Jason Kohout of Foley & Lardner on the possibility of tax law changes in the coming year under a Biden administration
  • Kate Barton, EY Global Vice Chair—Tax, on the headline figures to define both 2020 and the tax profession
  • Matt Waters of CoStar on easing lease accounting woes with help from FASB and technology
  • Baker McKenzie on the French permanent establishment decision
Sotheby’s in New York.
Photographer: Cindy Ord/Getty Images

New York state is going after businesses that help their clients and customers avoid taxes using the state’s False Claims Act. The targets include such esteemed businesses as Sotheby’s and its wealthy clients. Randall Fox of Kirby McInerney tells how Sotheby’s allegedly ran afoul of the Act and explains how the state is pursuing facilitators of tax fraud. Read: Facilitating Tax Fraud? Sotheby’s Faces a New York False Claims Act Action

The IRS is continuing to crack down on small captive insurance companies—even as captive insurance has been a lifeline for some businesses during the pandemic, providing coverage that wasn’t available from traditional sources. Philip Karter and Patrick McCann Jr. look at the IRS’s 2020 settlement initiative and increased audit activity along with a few U.S. Tax Court victories. Read: Looking at Small Captives in a Post-Pandemic World

The Covid-19 pandemic has caused colossal changes to the U.S. economy, including the mass shutdown of traditional commuting patterns as tens of thousands of office workers have shifted to working remotely. Corey L. Rosenthal and Lance E. Rothenberg of CohnReznick outline the helpful, and not-so-helpful, actions states are taking regarding the tax consequences of employees working in a state other than where they used to do their jobs pre-Covid. Read: Newly Remote Workers Will Bring New State and Local Tax Obligations

It is the season for gift-giving, but non-U.S. persons need to take care that they won’t be inadvertently giving too much to the IRS when making a gift to a U.S. person. Paul D’Alessandro of Bilzin Sumberg walks through methods to make a gift to a U.S. person without triggering a hefty federal gift tax liability. Read: Foreign Clients: Watch out for U.S. Gift Tax Traps this Holiday Season

Covid-19 disrupted and further complicated the never-simple world of transfer pricing. Mimi Song of CrossBorder Solutions outlines what tax departments need to do to prepare for scrutiny by tax authorities hoping to squeeze revenue out of transfer pricing in 2021. Read: Tax Scrutiny and Transfer Pricing: What You Can Expect in 2021

Jason Kohout of Foley & Lardner examines the possibility of tax law changes in the coming year under a Biden administration and the tax-planning steps high net worth individuals should consider. Read: End-of-Year Tax Planning for High Net Worth Individuals

2020 has been marked by unprecedented transformations. As the year comes to a close, Kate Barton, EY Global Vice Chair—Tax, shares the headline figures to define both the calendar year and the tax profession. Read: Tax by the Numbers

The French Supreme Administrative Court recently issued a decision involving the Irish company ValueClick International and permanent establishment in France. Baker McKenzie explores the case and its implications.

From the Archive

Bloomberg Tax contributors keep us up to date on anti-fraud statutes.

Walgreens Boots Alliance Inc. scored a victory for all Illinois vendors that were plagued by Illinois consumer fraud claims for the over-collection of sales tax. Open Weaver Banks and Justin Stone of Eversheds Sutherland outlined the difficult history for vendors and the Illinois Supreme Court’s decision allowing the “voluntary payment doctrine” as a defense. Read: Clearer Waters—Illinois Voluntary Payment Doctrine Applies to Consumer Fraud Act Claims

Beyond Tax

What’s happening outside the world of tax?

California Gov. Gavin Newsom (D) recently signed into law dozens of bills creating new obligations for employers, including pandemic-related measures and the first board of directors’ diversity mandate of its kind in the U.S. Baker McKenzie attorneys outline steps that employers should take now to ensure compliance. Read: California Employers’ To-Do List Grows With New Worker Laws

Certain aspects of Libor—the most widely used interest rate benchmark in the world—will cease to be published at the close of 2021. Taleah E. Jennings, partner at Schulte Roth & Zabel LLP, cautions against relying on a legislative fix and says those with contracts referring to Libor should understand their litigation exposure and take steps to mitigate their litigation risk. Read: Mitigating Litigation Risks Posed by Libor’s Cessation

Exclusive Content for Bloomberg Tax Subscribers

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Colleen Hart and Andrea S. Rattner of Proskauer Rose examine the key tax code Section 409A issues that distressed companies and their employees, who may be impacted by their own financial hardship, may face in the wake of an economic downturn and address the Section 409A pitfalls that may arise.

Bloomberg Tax Insights articles are written by experienced practitioners, academics, and policy experts discussing developments and current issues in taxation. To contribute, please contact Erin McManus at emcmanus@bloombergtax.com.

To contact the reporter on this story: Erin McManus in Washington at emcmanus@bloombergtax.com

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