The Tax Update is participating in the Waterloo session of the ISU Center for Agricultural Law and Taxation tax school today, so the roundup is up late, assembled in pieces as I can during the school.
One more Brutal Assault on Reason Watch.*
Joseph Henchman, State and Local Ballot Initiative Results
Martin Sullivan, Tax Reform 1986 Is No Model for 2013 (Tax.com)
Howard Gleckman, Five Challenges for Obama’s Tough Second-Term
*I explain the title of the Brutal assault on Reason Watch here.
Phil Hodgen, Yet another FBAR minnow to the guillotine. Doug Shulman is gone at the end of the week, but his agency will continue to torture foot-faulting offshore account holders. An anonymous taxpayer writes to Phil:
Whether stupidly or not, I came forth this last March, because I did not disclose two or three of my [Country] savings accounts (I’ve lived in [Country] for almost 20 years) over my covered years (2003-2010).
I got a letter from the OVDI people in [recent month], to ask me to submit 1040X’s, submitted FBAR’s and their paperwork. The latter is essentially asking me to provide the rope to hang myself.
Tallying the results? I owe [under $200] in aggregate back taxes to the IRS, yet will very likely end up paying the 27.5% FBAR penalty of around $80-$90,000.
Asserting the FBAR penalties when there isn’t tax avoidance involved is outrageous, little more than legal theft. The vote yesterday probably means current policy continues.
TaxProf, Thimmesch: KFC Corp. Repudiates Quill’s Physical Presence Test. The TaxProf links an article about last year’s Iowa decision pulling KFC into the Iowa corporation tax:
In that analysis, the KFC court adopted a unique functional-equivalency standard under which it held that KFC’s contacts with Iowa satisfied the demands of the physical-presence test despite KFC having no direct physical connection to the state. This Article evaluates the KFC decision, discusses the apparent source and scope of the court’s rationale, and explains that KFC can only be interpreted as a direct repudiation of the Court’s physical-presence mandate. The Article concludes with a defense of the ongoing validity of that rule despite many calls to the contrary.