A few weeks ago,  Treasury and the IRS released the long awaited proposed regulations on the Foreign Account Tax Compliance Act (FATCA).  FATCA was enacted as part of the Hiring Incentives to Restore Employment (HIRE) Act in March 2010.  As a result of its enactment, chapter 4 was added to the Internal Revenue Code.  The proposed regulations are intended to prevent U.S. taxpayers from playing “hide and go seek” with Uncle Sam by holding assets and investments offshore.   Below is a very general discussion of FATCA and describes some of the basic concepts in the proposed regulations by creatively adopting a “fact or fiction” format to this post.

The proposed regulations are really long.

• FATCA.  Prior to publication in the Federal Register, the proposed regulations amounted to nearly 400 pages.  The guidance took up about 90 pages in the February 15, 2012 edition of the Federal register
• Bonus: The IRS initially released the proposed regulations without any page numbers.  FATCA.

The proposed regulations impose a 30% withholding tax on certain payments.

• FATCA.  Under the proposed regulations, a 30% withholding tax is applied to “withholdable payments.” Such payments include payments that are ordinarily subject to withholding tax (e.g. FDAP), including interest, dividends, and rents.  This category of payments also includes gross proceeds from the sale of any property that could produce interest or dividends from sources within the U.S.

The withholding tax applies to all “withholdable payments.”

• FICTION.  The proposed regulations provide a number of significant exceptions to the withholding regime.  For example, certain “grandfathered obligations” are not subject to FATCA.  An “obligation” for purposes of the proposed regulations is essentially any legal agreement that could produce a withholdable payment.  The grandfather provision applies to obligations outstanding on or before January 1, 2013 and not materially modified thereafter.

A “foreign financial entity” (FFI) can also avoid the 30% withholding if they are a “deemed compliant FFI” or a      “participating FFI.”  Under the first category, certain FFIs are considered to be in compliance with the FATCA rules by meeting certain requirements.  For example a deemed compliant FFI that certifies its status to a withholding agent is a “certified deemed compliant FFI.” (Note: In general, only certain entities are considered to be “deemed-compliant” ). Participating FFIs are required to enter into an agreement with the IRS in order to avoid withholding.  Under the agreement, the participating FFI will be required to obtain certain information about its account holders in order to determine which are U.S. accounts as well as report certain information on those accounts, among other things.

FATCA starts tomorrow.

• FICTION.  The proposed regulations provide an effective date of January 1, 2014 for withholding of FDAP and other pass-thru payments and a September 30, 2014 effective date for reporting identifying information.

I remember this time of year in the LL.M. program being somewhat bittersweet. Like in law school, I had just finished finals, which meant no more long days at the library sipping gallons of coffee, surrounded by coughing, sneezing, yawning, nervous students (including students who were not in law school, but were using the law school library). Despite the end of this terrible time, I did not feel satisfied because I knew it meant that I needed to kick my job search into high gear. Although I knew that I had the time to spend on my job search, I didn’t really know what the most effective way to use this time was.

During the school year, I did what many law students and LL.M. tax students do – I went on law firm websites, looked for a partner that went to my undergraduate, law school, or LL.M. program, and emailed them my resume. This method produced a lot of what I like to call “fan mail” (i.e. rejection letters). I recall receiving at least 3 of the same “no thank you” letter from one recruiting coordinator. At one point I thought she wanted to be my pen pal.

At some point I realized that I was going to have to find a more effective way of reaching out to employers. Here are a three techniques I used to help with my job search:

1. Contact prior colleagues. One thing that I found was really helpful was contacting attorneys that I had worked with during summers or while in law school to see if they could put in a recommendation or put me in touch with a contact. For example, I sent one email to an attorney who i had worked with and who had worked at a big law firm early in her career. My email to her led to a recommendation and an eventual part-time job while I was in the LL.M program in New York City.

2. Pick up the phone. I was at lunch with one of my friends in the LL.M. program one day and he asked me how I went about my job search. He wasn’t sure how to locate firms in the area he wanted to work, so I suggested that he pull up the U.S. News Best Law Firms list and locate firms in the areas he wanted to work. Once he did that I told him he should try picking up the phone and calling those firms. Because he was looking in a smaller job market, the firms he would be a candidate for would likely not be traveling to New York to interview on campus. I suggested that placing a call would provide a personal touch and provide a quick answer to the question of whether the firm was hiring. One phone call later and my friend landed an interview and eventually a job.

3. Look for a part-time job. As a follow-up to my first suggestion, I found that having a part-time job was very helpful in landing the job I have now. First, landing a part-time job gets your foot in the door with a law firm. Second, it is a resume builder. One of the things I lacked on my resume prior to working part-time was private law firm experience. Working part-time in New York gave me valuable job experience in tax law as well as a foot in the door at a firm.

Right now, I feel like a kid that just got out of time-out.  I had some time to reflect on what I have done, but I am left still feeling ashamed of myself.

I started Tax Docket in order to create a platform to reach out to other practicing and aspiring tax professionals, while furthering my interest in taxes and the law.  While I was able to keep this going for a few months, I did what many “bloggers” stop doing — blogging.  I let other things get in the way and repeated to myself the infamous line I often tell myself when I  don’t want to do something — “I’ll do it tomorrow.”

Running a blog, let alone a tax blog, requires a commitment to keeping up with current events including what others are saying about whatever it is you blog about, staying in touch with your audience, and continuing to communicate content consistently and reliably.  I may have been steeped (oftentimes buried) in the world of tax during my time in the Graduate Tax Program at NYU and now as a first-year tax associate, however, it meant nothing to my blog, because I put off sharing the information for another day.  Here are a few lessons I want to share with you about my experience that I intend on incorporating into my blogging routine moving forward with Tax Docket:

Take it slow. One of my regrets is blogging to often.  In the early days of Tax Docket, I tried to update the blog 4-5 times-a-day.  For a full-time student and now full-time associate, that is an unreasonable posting goal.  Also, posting a few times a week, rather than a few times a day, would have allowed me to post more thoughtful articles.  From now on, I will leave it to my long-lost pals over at Going Concern to provide you with your more than once-a-day tax fix.

Provide a point-of-view.  As I scroll back through my past blog posts, I realize a lot of what I did was post “up-to-the-minute” tax news, instead of focusing on providing the news, in addition to some analysis.  As an attorney, there is always that “legal advice” line you have to worry about crossing, but I think there are still ways of providing thoughtful posts without stepping over to the “unethical” side of the profession.

Keep going.  If you are like me, blogging is a part-time gig (and as of late, not a gig at all).  Like everything else that is not your full-time job, you have to find time to put blogging in your already busy schedule.  One thing my wife does, is write multiple posts in one sitting.  This is a great time management technique that ensures that your blog stays fresh with new posts.

Yes, I know. It has certainly been awhile. In my first post back, I thought I would fill you in on a few things I have learned while on my blog-cation (vacation from blogging – a.k.a. my lame play on words).

1. Patience is a virtue. When I first started law school, I assumed, like many others, that I would have a full-time job lined up by the time I started my 3L year. Times have certainly changed, and what I have learned since attending an LL.M. Tax Program is that patience and persistence will eventually pay off. Rather than doing a lot of hiring in the Fall, I have seen an increase in the number of interviews for Tax LL.M. students this semester. If you are considering an LL.M. program next year, be ready to wait until Spring to have your job lined up.

2. iPad 2 is great. Yes, I am the proud owner of a new iPad. Although I have certainly gotten my Angry Birds fix, there are plenty of apps that I have been using that are great for school, especially, tax students. One app in particular is LawToGo’s Internal Revenue Code and Treasury Regulations. This app aims to replace those heavy code and reg books that you are required to have with you at all times in the Graduate Tax program. Below is a video demonstration of the app.

3. March Madness Brackets > Tax Brackets. Around this time of the year, individuals are gathering information to complete two important documents: A March Madness Bracket and a Tax Return. Fortunately, for ESPN, CBSsports, Yahoo and the like, everyone seems to get their brackets filled in on time. Unfortunately, for the Internal Revenue Service and Treasury, some people don’t want to pay to play. As I watched President Obama fill out TWO brackets (a Men’s and Women’s bracket) on ESPN, I thought to myself, “What if a tax return were as easy as filling out an NCAA Tourney Bracket?” Obviously, the guess work that is involved in filling out an NCAA Bracket would have to be taken out of filling out your “bracket-style” tax return. But I think there is something to be said for the fact that thousands of people pay money to fill out a bracket sheet with little or no knowledge about the teams competing. While I don’t think we will be seeing new tax forms anytime soon, one thing is for sure: I will be leaving the University of Pittsburgh out of my final four as long as I continue filling out a March Madness bracket.

Tax Docket Readers -

February was a crazy month for me and I will be regularly posting starting soon.

The University of Florida Tax Moot Court Team earned first place in this year’s National Tax Moot Court Competition sponsored by the Tax Section of the Florida Bar. This is the third consecutive year the UF Tax Moot Court Team advanced to the final round in the competition. The team argued against Ohio Northern University in the final round before a panel United States Tax Court Judges. The panel included Senior Judge Renato Beghe and Special Trial Judges Lewis R. Carluzzo and John Dean.

Competitors at oral argument were James Baley (3L) and Michael Bruno (2L).  Kevin Hall (3L) was part of the team through the brief writing portion and helped prepare the team for oral argument.  Todd Lewis (LL.M.) and Professor Steven Willis co-coached the team.  James Baley also received the award for Best Individual Oralist.

This year’s case required competitors to consider whether an installment sale payment received on the sale of a capital asset which was required to be put into court-ordered escrow during the same taxable year is nonetheless required to be included in income in the year of receipt under the claim of right doctrine.  The doctrine, established in North American Oil Consolidated v. Burnet, 286 U.S. 417 (1932), requires inclusion of income in the year of receipt despite potentially imperfect rights to retain the income.  In the case at hand, the income was received for the sale of stock in a Subchapter-S corporation and a state court lawsuit alleging breaches of warranties and representations had been filed prior to the payment.

The second issue involved whether I.R.C. Sec. 1341 treatment was available for the restoration of amounts received in prior taxable years when repayment occurred in a subsequent taxable year.

The third issue was whether the I.R.C. Sec. 7525 Accountant Client Privilege or the work product doctrine privileged documents prepared regarding certain tax shelter arrangements the seller in the above transaction had engaged his CPA to prepare.

Finally, this is a sentimental post for me as I was a former competitor in this competition which was also the subject of my one of my first blog posts one year ago (more on that in a later post).

If you have been watching the endless coverage of this Sunday’s Super Bowl match-up, you have probably realized that most of the conversation has been centered around the quarterbacks (as is usually the case). While Trent Dilfer and Steve Young talk about what they like and dislike about Packer’s QB Aaron Rodgers and Steelers’ QB Ben Roethlisberger respective styles, not much is being made of the star’s tax liabilities. Well, the Wall Street Journal has taken the liberty to shed light on this topic. According to the article:

Take the Packers’ fleet-footed quarterback Aaron Rodgers. He made $8.6 million in 2009, according to USA Today’s database of player salaries. Of that, we calculate he paid roughly $680,000 in state and $3.1 million in federal income and payroll taxes. Steeler quarterback Ben Roethlisberger didn’t earn as much, but he got to keep a relatively larger chunk of his haul—$4.6 million of his $7.7 million salary. (This excludes taxes paid to states that tax players visiting on away games.) Unlike Wisconsin, which has a graduated income tax that charges top earners 7.75% on earnings over $220,000, Pennsylvania has a 3% flat rate. Even football players can behold the merit of a flat tax.

Apparently there is life after death and taxes. Well, at least according to the band Relient K.  In any event, the band’s song “Life After Death and Taxes” is this week’s tax track. Enjoy.

According to a Tax Foundation article, on January 26th, a federal judge enjoined enforcement of a Colorado law that essentially places the burden of collecting state and local taxes for purchases made on online, on the online retailer. This legislation, which is often referred to as an “Amazon tax,” has been challenged on Constitutional grounds. The article states that Judge Robert E. Blackburn held that “the plaintiff has shown a substantial likelihood that it will succeed in showing that the act and the regulations are discriminatory because, in practical effect, they impose a burden on interstate commerce that is not imposed on in-state commerce.”

Currently, New York, North Carolina, and Rhode Island, have laws that requires retailers that have contracts with “affiliates”-independent persons within the state who post a link to an out-of-state business on their website and get a share of revenues from the out-of-state business-to collect the state’s sales and use tax. Other states are considering imposing similar Amazon tax laws.

As a Graduate Tax student, I would wait in line to get my hands on “Tributin” (or “Little Tax”), a new video game planned by the Cuban government to teach kids about fiscal policy and the importance of paying taxes. No details have emerged as to what the game play will be like, but with a name like Tributin, it must be good. According to a phone interview with Reuters, the project director of the game, Dagoberto Marino, said that “It is a fun software to help children learn about fiscal policy, because since they were born in a socialist society with some gratuities, they don’t have all the elements needed to understand taxes.”

MSNBC, Cuba Plans children’s video game to promote taxes.