With over 3,000 members, the Taxation Section of the California State Bar is one of the largest tax sections in the country. Perceiving that our members can provide valuable insights on various substantive and procedural issues in the tax law of specific concern to California tax practitioners and taxpayers, almost 25 years ago, the Taxation Section of the California State Bar joined with the Los Angeles County Bar Association Taxation Section to sponsor an annual delegation to travel to Washington D.C. to meet with the Internal Revenue Service, the Treasury Department, and members of the House Ways and Means Committee and their staff, the Senate Finance Committee and their staff, the Joint Committee on Taxation and their staff, and the U.S. Tax Court. In the last few years, the trip has been expanded to allow for meetings with the Office of the Taxpayers’ Advocate. The purpose of the delegation is to discuss substantive or procedural issues of specific concern to California tax practitioners and taxpayers.
The delegation received its usual warm welcome in Washington, presenting a total of 11 papers. The State Bar Taxation Section was involved in presenting the following eight papers:
- “Relief from Section 508(a) and (b) Notice Requirement for Charities with Change in Form or Place but No Change in Activities”
Written by: Barbara A. Rosen and Patrick B. Sternal, this paper proposed regulations be revised to provide that Section 501(c)(3) organizations that undergo a mere change in form or place of incorporation not be considered new organizations subject to the Section 508(a) and (b) notice requirements.
- “Partners’ Amounts at Risk for Partnership Debt: the Need for the Treasury to Revisit Section 465 Regulations and the Light Shed by Section 752”
Written by: Jason Fricano, this paper proposed that the Treasury issue regulations under Section 465 to provide that a partner is at risk with respect to partnership debt to the extent that debt is allocated to that partner’s basis in his partnership interest in accordance with Regulations Section 1.752-2.
- “Proposal to Provide Consistent Principal and Income Tracing Rules for Charitable Payments by Noncharitable Trusts”
Written by: Robert Denham, this paper proposed amending the proposed regulations (concerning income ordering rules for charitable payments made by lead trusts) to provide that principal and income tracing provisions in such trusts be disregarded to the extent that charitable payments are disproportionately attributed to trust income unless the provision has independent economic effect.
- “Making Calendar Call a Tool for Pretrial Case Management”
Written by: William E. Taggart, Jr., this paper proposed (i) earlier submission of the Tax Court Pre-Trial Memorandum; (ii) amending that Pre-Trial Memorandum to include additional case management information; and (iii) revision of the Tax Court’s Standing Pretrial Notice and Order to describe in greater detail the trial preparation process and to order applicable preparation for trial or settlement.
- “New Administrative Procedures Affecting Section 6015(f) Innocent Spouse Claimants: a Safety Valve to Protect the Rights of Claimants in the Event the Tax Court’s Holding in Porter v. Commissioner is Overruled”
Written by: Lavar Taylor and Presented by: Robin Klomparens, this paper proposed administrative procedures to (i) place Section 6015(f) claimants on notice that they may not be able to introduce evidence in a court proceeding if that evidence was not first presented to the Commissioner at the administrative level; and (ii) provide a mechanism for Section 6015(f) claimants to request the Commissioner’s assistance in obtaining certain evidence.
- “Qualified Amended Returns Expanding the Safe Harbor”
Written by: Stuart M. Hurwitz and John D. Milikowsky, this paper proposed issuance of a ruling or other guidance clarifying that taxpayers may file a qualified amended return without risk of incurring penalty if there is no ongoing contact regarding their tax liability.
- “Proposal to Adopt a Recurring Standard for the Deduction of Liabilities Owed to Foreign Persons under Section 267(a)(3)(B)”
Written by: William H. Quealy, Jr. and Diana Melnyk, this paper proposed adopting existing regulations under Section 461(h) for use as a test for when a deduction of amounts owed to controlled foreign corporations may be allowed under the matching principle of Section 267(a)(2).
- “Validating the Invalid: Why Internal Revenue Code Section 6226(h) Should Be Amended”
Written by: Wendy Abkin and Travis Logghe, this paper proposed a legislative or regulatory change to clarify IRC section 6226(h) to indicate that a dismissal be not automatically considered as the court’s decision that the FPAA is correct in those instances where the dismissal is for lack of jurisdiction.
The Los Angeles County Bar Association Taxation Section was involved in presenting the following three papers:
- “Proposed Revisions to IRC Section 409A and/or Applicable Treasury Regulations Regarding Issues Impacting the Entertainment Industry”
Written by: Marla J. Aspinwall, Steven C. Gove and John Arao and Presented by: Marla J. Aspinwall, this paper proposed that regulations be interpreted or expanded to provide that contingent participation compensation be exempt from the definition of deferred compensation under Section 409A where (i) the compensated services are related to production of the income, asset or event in which the participation right is granted; and (ii) the proceeds are distributed to the service provider no later than the end of the calendar year following the year in which the receipts from the sale transaction are received by the service recipient.
- “Proposal Guidance under Code Section 7874(c)(2)(B)”
Written by: Bryan Kelly, this paper proposed that Treasury issue regulations or other guidance that would (i) set forth standards for determining when stock is properly treated as sole in a public offering for purposes of Section 7874(c)(2)(B); (ii) set forth factors to guide the determination of when a stock issuance is properly treated as related to an inversion; and (iii) provide limited exceptions to the general rule that stock sold in public offerings is disregarded under Section 7874(c)(2)(B).
- “A Case for Bifurcating Payments to Avoid Taxes in Prohibited Benefits under IRC Section 4967”
Written by: Thomas M. Giordano-Lascari and William C. Choi, this paper proposed the promulgation of regulations under IRC Section 4967 to permit a bifurcation approach with respect to distributions from a donor advised fund, given the application of Section 170 principles in determining what constitutes an incidental benefit in the context of Section 4967.
All of the papers were well received, generating significant interest and comment, and it would not be surprising to see a couple of Revenue Rulings or Revenue Procedures being issued in the next few months as a result of the authors’ efforts.
The delegation started off its two-day whirlwind itinerary the evening of Sunday, May 3, with a rehearsal dinner where each author/presenter gave a short presentation of the paper they would be presenting to the various persons/groups with whom the delegation would be meeting. At that dinner, we were honored by the attendance of Karen Hawkins, new Director of the Office of Professional Responsibility.
“Official” events started with an early morning breakfast meeting Monday (to review the day’s schedule), followed by a trip to the IRS to visit with various IRS personnel and the Office of the Taxpayer Advocate, lunch at Old Ebbitt Grill, a visit to Treasury and our annual cocktail reception in the Dolly Madison House (which is on the premises of the U.S. Federal Court of Appeals for the Federal Circuit). Among the guests who honored us with their attendance at our reception this year were Tax Court Judges Vasquez and Carluzzo; Eric Solomon (former Assistant Secretary of the Treasury for Tax Policy); his “interim replacement” from Treasury, Eric San Juan; Karen Hawkins, Lon Smith, Bill Alexander, Frank Fisher, Frank McCormick and Henry Schneiderman from the IRS; as well as J. Christine Harris and Jeremiah Coder, our friends from Tax Analysts who, for several years, have published the delegation’s papers in TAX NOTES TODAY. Special thanks to John Buckley, Acting Clerk of the U.S. Court of Federal Claims, for arranging for the venue and attending the reception!
After another early breakfast Tuesday morning, the delegation journeyed to the U.S. Capitol for presentation of our Second Annual Capitol Forum, where Marci Jo Mandel, Deputy Controller for the State of California, gave a presentation on California tax and fiscal matters. Following the Capitol Forum, most of the delegation headed to the Tax Court to discuss items of interest to the Judges and members of the Office of Chief Counsel, while a handful met with representatives from House Ways and Means before joining the others for lunch with the Tax Court Judges in the judges’ dining room at the Tax Court.
Following lunch, the delegation broke into small groups for “one-on-one” meetings with Congressional Aides at the offices of Senator Diane Feinstein and Congressional Representatives Pete Stark, Wally Herger, Xavier Becerra, Adam Schiff, Zoë Lofgren and Brad Sherman, before reconvening to meet with various members of the Joint Committee on Taxation and its staff late Tuesday afternoon.
As a result of the efforts of the authors, the persons presenting their papers, and the respective delegation planning committees for the Taxation Sections of both the State Bar and the Los Angeles County Bar, this year’s delegation enjoyed yet another rewarding and memorable trip. In this regard, thanks are due to Eric Swenson, Bill Quealy, Kathy Davidson, LaVonne Lawson, Michelle Ferreira, Jay Ghiya, Felicia Chang, Wayne Johnson, Chair of the Executive Committee of the Taxation Section of the State Bar, and Pam Drucker, Chair of the Taxation Section of the Los Angeles County Bar Association, for all of their hard work which made this trip successful.
For those of you who like to look ahead, next year’s trip is scheduled for May 2-4 (2010), and planning for that trip has already begun. If you are interested in presenting a paper with the 2010 delegation, or if you have suggestions for a paper for that delegation to present, please contact Eric Swenson at Procopio, Cory, Hargreaves & Savitch LLP, 530 B Street, Suite 2100, San Diego, CA 92101; direct dial: (619) 515-3235; direct fax: (619) 744-5415; email@example.com; www.procopio.com.