Thursday, April 10

2:30 PM – 4:30 PM, Monet Ballroom, Tower, Mezzanine Level
Program: LLC Agreements for Mid-Market Businesses -- Balancing Simplicity, Safeguards and Deal Points
Middle Market and Small Business
Cochairs – Randall D. McClanahan and Suzanne L. Saxman
Cosponsored by: Committee on LLCs, Partnerships and Unincorporated Entities and Committee on Taxation

2:30 PM – 4:30 PM, Governors Lecture Hall, Tower, Lobby Level
Program: Tax Issues in Cross-Border Acquisitions
Negotiated Acquisitions
Chair – Peter Haver
Cosponsored by: Committee on International Business Law and Committee on Taxation


Saturday, April 12

8:00 AM – 10:00 AM, Peridot, Atrium I & II, Mezzanine Level
Program: Practice Tips for Successful Inter-Entity Mergers – Texas, Delaware and META Compared
Ad Hoc Committee on Entity Rationalization


2:30 PM – 4:30 PM, Peridot, Atrium I & II, Mezzanine Level
Program: Top 15 Tax Issues Every Corporate Lawyer Should Know
Committee on Taxation
Chair – Ethan D. Millar
Cosponsored by: Committee on Corporate Counsel and Committee on Middle Market and Small Business

back to top ↑

At the end of 2007, Congress passed and President Bush signed several pieces of tax legislation that affect individuals and businesses. This legislation included the Mortgage Forgiveness Debt Relief Act of 2007 ("MFDA"), the Tax Technical Corrections Act of 2007 ("TTCA"), and the Tax Increase Prevention Act of 2007 ("TIPA"). The following discusses some of the important changes to the Internal Revenue Code of 1986, as amended (the "Code") included in these pieces of legislation.

I.  Individual Tax Provisions

AMT Patch. TIPA provides a one year patch for the alternative minimum tax ("AMT") and is expected to save as many as 25 million taxpayers from facing an average tax increase of $2,000 for the 2007 tax year. The AMT patch raises the AMT exemption amounts for 2007 as follows:

1. $44,350 for single taxpayers and heads of households;
2. $66,250 for married couples filing jointly; and
3. $33,125 for married filing separately.

The new law allows taxpayers to apply many nonrefundable personal credits to offset the AMT. These credits include the dependent care credit, the credit for the elderly and disabled, the mortgage interest credit, and the HOPE and Lifetime Learning education credits.


More...

I.  BACKGROUND.

On December 7, 2007, the Treasury Department (the "Treasury") and the Internal Revenue Service (the "IRS") issued Revenue Ruling 2008-1 (the "Revenue Ruling") and Notice 2008-2 (the "Notice"), both of which address certain tax issues related to "prepaid forward contracts." The term "prepaid forward contract" is a term used by tax practitioners to characterize a variety of financial instruments, including: "exchange traded notes," or "ETNs," and other types of structured notes, such as equity-linked and commodity-linked notes, as well as reverse convertibles, variable stock purchase contracts, mandatory exchangeables, mandatory convertibles, and access notes. The Revenue Ruling and the Notice contemplate that such instruments may become subject to taxation on a current accrual basis at ordinary rates (as opposed to capital gains rates), and raise issues as to how such instruments should be treated for purposes of the U.S. withholding tax rules and international tax rules.


More...

Several years ago promoters devised a strategy to help corporations avoid large potential tax bills that would otherwise be due upon a sale of their business. The strategy was a so-called "intermediary transaction." An "intermediary corporation" with unused tax benefits (such as net operating loss carryforwards) would acquire the stock of the corporation with the potential tax bill and then immediately sell off its appreciated assets to the "real" purchaser, using the intermediary's tax benefits to shelter the tax that would otherwise be due.

Not surprisingly, the IRS took a dim view of this loss of tax revenue and in 2001 (in IRS Notice 2001-16) included intermediary transactions among its "listed transactions," meaning that they are subject to penalties for non-disclosure by their promoters and participants. However, it was unclear what degree of knowledge was necessary for a taxpayer to be a participant. Could a seller of corporate stock become an unwitting participant in a "listed transaction" shelter if its buyer happened to resell the assets of the acquired entity in a transaction that was sheltered by the buyer's pre-existing tax benefits?


More...

On December 6, 2007, the Internal Revenue Service (the "Service") issued Revenue Procedure 2007-72 (the "Revenue Procedure") which favorably addresses the tax effects of certain modifications, as described in more detail below, made to subprime mortgage loans held by securitization vehicles after December 6, 2007 and on or before July 31, 2010. Specifically, in the case of a REMIC, the Revenue Procedure states that the Service (i) will not challenge the qualification of a securitization vehicle as a REMIC on the grounds that any specified modification event constitutes a significant modification of the related mortgage loan(s), or results in a deemed reissuance of the REMIC's regular interests, and (ii) will not contend that a specified modification event constitutes a 'prohibited transaction' under the REMIC rules, the net income from which is potentially subject to a 100 percent tax. In addition, the Revenue Procedure provides, in the case of a grantor trust, that the Service will not challenge the classification of the trust as a fixed investment trust on the grounds that any specified modification event manifests a prohibited power to vary the investment of the beneficial interest holders of the trust.


More...

On October 16, 2007, the U.S. Internal Revenue Service ("IRS") released proposed regulations which, if finalized in their current form, would significantly revise the withholding procedures for certain distributions in redemption of publicly traded stock. These proposed regulations could impose significant compliance and reporting burdens on foreign shareholders, U.S. financial institutions acting as withholding agents, and qualified intermediaries.

Transactions Affected. The new regulations are generally targeted at transactions in which a publicly traded corporation offers to purchase stock from its shareholders (a "self-tender"). In this type of transaction, a corporation may purchase stock from some or all of its shareholders, depending on each shareholder's willingness to sell its stock under the terms of the offer.

Because not all shareholders may choose to participate, and may not participate equally if they do, each shareholder's percentage ownership interest in the corporation may increase, decrease, or remain unchanged following the transaction. This can have significant tax implications, because if a shareholder's interest increases, remains unchanged, or has not been sufficiently reduced, the distribution may be taxed as a dividend, rather than as a payment in exchange for stock.


More...

How did a fabulous birthday bash in New York City set off one of the most emotionally charged tax debates the US has seen in years?

On February 13, 2007, Stephen A. Schwarzman -- flamboyant co-founder and chief executive officer of the private equity giant, Blackstone Group -- celebrated his 60th birthday in a big way at the Armory on Park Avenue. Some reports placed the party's cost to Mr. Schwarzman at $5 million, including $1 million for a live performance by aging rock icon Rod Stewart. Even at $5 million, however, the cost would have been trivial to the multi-billionaire merrymaker.

A few weeks after Mr. Schwarzman's highly publicized extravaganza, reports began circulating of a draft paper, by an obscure young law professor at the University of Illinois, which had captured the attention of the staff of the Senate Finance Committee. Professor Victor Fleischer's theoretical analysis drew attention to the favorable tax treatment of so-called "carried interests," which were the source of much of Mr. Schwarzman's wealth and the wealth of other private equity titans. Although there was nothing new or ingenious about the carried interests of the kind Professor Fleischer dissected, reports in the popular press adopted the tone of exposés.


More...

back to top ↑

The National Conference of Commissioners on Uniform State Laws (NCCUSL) recently established a new drafting committee to revise the Uniform Division of Income for Tax Purposes Act (UDITPA). Ethan Millar, Chair of the State and Local Tax Subcommittee of the Committee on Taxation, ABA Section of Business Law, has been appointed as the ABA Advisor to the NCCUSL drafting committee.

The ABA believes that any revisions to UDITPA's sourcing rules may well have significant implications for businesses engaged in multistate operations, and will be working closely with NCCUSL on this project. The ABA would also like to encourage its members and committees to submit comments and ideas regarding this project. You may submit your comments or ideas to Mr. Millar at ethan.millar@alston.com at any time.

UDITPA was created by NCCUSL in 1957 (and was last amended in 1966) to provide uniform state income tax rules for determining how to allocate and apportion the income of taxpayers among the states in which the taxpayers do business. About half the states have adopted UDITPA and most of the other states have statutes that are generally consistent with UDITPA's basic approach.

The drafting committee will initially be focusing on Section 17 of UDITPA, which involves the sourcing rules for transactions other than sales of tangible personal property (e.g., sales of services and intangibles). However, the committee will also engage in a comprehensive review of the act, and therefore any UDITPA provisions are potentially subject to revision. The committee meetings will begin in early 2008 and will continue for at least two years.

back to top ↑

CHAIR:
L. Andrew Immerman
Alston & Bird LLP
One Atlantic Center
1201 W Peachtree St NW
Atlanta, GA 30309-3449
andy.immerman@alston.com



→ Complete Executive Committee Roster...

back to top ↑