Tax Notes

💡 On the cover of Tax Notes Federal: Michael J Graetz argues that the United States must reassert its primary taxing rights over income long conceded to other countries, especially income from intellectual property created in the United States, and he explains some changes necessary to make that happen.

The Tax Court incorrectly endorsed the IRS’s violation of its own transfer pricing regulations and its sudden method change in a bait and switch, Coca-Cola Co. said in its opening brief at the Eleventh Circuit. The taxpayer's opening brief in The Coca-Cola Co. v. Commissioner, filed February 25, says the IRS issued a “$3 billion jaywalking ticket in the form of a transfer-pricing bill,” which ran contrary to the company’s reliance on the administration’s previous actions. The government also used “apples-to-oranges comparisons” by juxtaposing the routine functions and returns of its bottling companies with the more sophisticated group service entities (“supply points”), the brief alleges. Coca-Cola says the IRS lacks the authority to allocate blocked income from the Brazilian supply-point company to the U.S. parent company and asks the Eleventh Circuit to nix two Tax Court decisions of 2018 (155 T.C. 145) and 2023 (T.C. Memo. 2023-135) on the matters. Read more ⬇️

The IRS said a contractor leaked personal data of more than 400,000 taxpayers, and the agency is “actively working” to gather details on which taxpayers were targeted and if they were notified, according to a letter to the House Judiciary Committee chair. Charles Littlejohn admitted he stole tax return information of President Trump and Elon Musk while working as a government contractor at the IRS and leaked it to news outlets that published articles about the tax returns of the wealthiest Americans in 2019 and 2020. Littlejohn was sentenced to five years in prison in January 2024. A letter from acting Commissioner Douglas O’Donnell, who is stepping down on February 28, confirmed that Littlejohn leaked 405,427 taxpayers’ data, with about 89 percent of that data belonging to business entities. Judiciary Committee Chair Jim Jordan, R-Ohio, had sought information about the precise number of taxpayers affected. Read the full story. 👇

I consider it a momentous professional honor to have won Tax Notes annual Tax Valentines Contest — and for the second year in a row! It has provided an opportunity for professional reflection and has reminded me of some important career lessons I’ve learned, which I think are worth sharing: 1) Celebrate your wins; if you don’t, no one else will. 2) Always be humble, not too showy or over-the-top. 3) When interacting with clients, don’t be afraid to speak your truth in your own authentic voice and not, for example, Randy “Macho Man” Savage’s.

This week's #EditorsPick selected by Jéanne Rauch-Zender: Jakob Bundgaard, Karl Berlin, and Daniel Rath examine the role of taxation in the future development of carbon capture and storage markets, focusing on the EU’s Net-Zero Industry Act regulation. Read the full report outside of the paywall. ⬇️

Great article today by Andrew Velarde on the IRS’ Voluntary Disclosure Practice (VDP). I appreciated the opportunity to provide comments for the article. Since the IRS has been less than transparent about administering the VDP in recent years, investigative articles using the Freedom of Information Act are crucial for the practitioner community to understand the behind the scenes changes to the VDP. https://lnkd.in/gXR_Ufss #tax #taxlawyer #taxpenalties #voluntarydisclosure #FBAR #form14457 #VDP

Join us in ONE HOUR for a webinar discussion on the possible changes to partnership taxation in the coming legislative efforts to update the Tax Cuts and Jobs Act. Register now: https://hubs.ly/Q036DPJS0 #TaxReform2025 #TaxCutsAndJobsAct #TaxLegislation #TCJA

A group of more than 20 employees at the United States Digital Service (USDS), an agency involved in the design and implementation of the IRS’s Direct File program, have quit their posts. Twenty-one staff members at USDS — which has been integrated into Elon Musk’s intragovernmental Department of Government Efficiency (DOGE) — submitted a joint resignation letter February 25 citing their unwillingness to “dismantle critical public services,” according to a report by the Associated Press. The White House confirmed the resignations. The creation of an IRS-run, free online tax filing service was a key component of the Biden administration’s push for additional funding for the agency. After securing the extra resources as part of the Inflation Reduction Act, the IRS, in coordination with the USDS and later the General Services Administration’s 18F team, launched the Direct File platform in January 2024. The platform is currently available to taxpayers with a Form W-2 in 25 participating states. While it is unclear whether any of the USDS employees who resigned were involved in the IRS’s Direct File program, Musk has targeted other government entities involved in Direct File, having already, in his words, “deleted” 18F. Continue reading. ⬇️ (Photo by Gage Skidmore via Flickr)

🟡 Les États membres discutent ce 26 février de la taxation du tabac, grande absente du programme de travail 2025 de la Commission. 👀 Et c'est une bonne chose, vu les rumeurs qui circulent à propos de possibles lettres appelant à ne pas procéder à la révision ou à l'aligner avec celle sur les produits du tabac... qui n'est, elle, pas du tout prête. 👉 More info in Tax Notes i.e Coincidentally, in a presentation delivered to member states ahead of the February 26 meeting, the EU Council's Polish presidency clearly said the tobacco taxation debate "should not wait until health regulations are proposed.” https://lnkd.in/erR95YWg

Are taxpayers putting themselves at risk when they use free tax filing software embedded into finance apps? Tax Notes investigations editor Lauren Loricchio explains why some experts are concerned. Listen to the full discussion: https://lnkd.in/eU8HhzYY