Transacting business in the “cloud” has quickly gained popularity worldwide as the new method of ... more Transacting business in the “cloud” has quickly gained popularity worldwide as the new method of providing information technology resources. Instead of purchasing or downloading software, we can now use the Internet to access software and other fundamental computing resources located on remote computer networks operated by third parties. These transactions offer companies lower operating costs, increased scalability and improved reliability, but also give rise to a host of international tax issues. Despite the rapid growth and prevalent use of cloud computing, U.S. taxation of international cloud computing transactions has yet to receive significant scholarly attention. This Article seeks to fill that void by analyzing the U.S. tax implications of operating in the cloud from a doctrinal and policy perspective. Such an analysis shows that the technological advances associated with the cloud put pressure on traditional U.S. federal income tax principles, which creates uncertainty, compliance burdens and liability risks for companies and a potential loss of revenue for the government. Applying the current law to cloud computing transactions also results in tax consequences that run counter to sound tax policy and may result in double taxation or complete non-taxation of cloud income. In light of these problems, federal attention is warranted to clarify how U.S. federal income tax principles apply to businesses operating in the cloud. Thus, this Article proposes that Treasury issue guidance that clearly addresses the U.S. tax implications of international cloud computing services and suggests that, ultimately, the United States must collaborate with other countries to achieve international consensus on these issues. Together these changes will ensure that the United States appropriately taxes the cloud and does so in a manner that minimizes double taxation and promotes efficiency, equity and administrative simplicity.
An exciting new way to fund social services has recently emerged. This new financing mechanism, c... more An exciting new way to fund social services has recently emerged. This new financing mechanism, called a social impact bond (SIB), has the potential to help us tackle some of our nation’s most challenging social problems. Broadly speaking, a SIB is a type of “pay-for-success” contract where private investors provide the upfront capital to finance a social program, but only recoup their investment and realize returns if the program is successful. Like any new financing instrument, SIBs create numerous regulatory challenges that have not yet been addressed. One unresolved issue is the tax implications of a SIB investment. This Article argues that the current law allows for multiple possible characterizations of the SIB arrangement for tax purposes. This uncertainty as to the correct characterization of a SIB investment can affect a private investor’s ultimate tax liability and subject the investor to an unnecessary audit risk. A SIB investment can also expose a nonprofit investor to additional taxes or, possibly, even cause it to lose its tax-exempt status. Despite the potentially substantial tax implications of a SIB investment, no guidance exists on this issue. This Article is the first to analyze the federal income tax consequences to investors who participate in a SIB-funded program. It concludes that SIB arrangements should generally be classified as contingent debt instruments under the current tax law but that it may be appropriate to bifurcate the transaction in the case of nonprofit investors. To address the substantial tax uncertainty created by the current law, this Article also argues that Internal Revenue Service guidance is ultimately necessary and suggests ways to structure the SIB arrangement to minimize the risk of any negative tax implications until such guidance is issued. Doing so will hopefully encourage investors to invest in SIBs and thereby unlock an additional source of capital to fund much needed social services.
Each year taxpayers spend billions of their hard-earned dollars on federal taxes. One way to defe... more Each year taxpayers spend billions of their hard-earned dollars on federal taxes. One way to defer taxes is to engage in a like-kind exchange under Section 1031 of the Internal Revenue Code. These exchanges allow taxpayers to defer taxation and have more of those dollars to spend today. A like-kind exchange (commonly referred to as a Section 1031 exchange) is particularly beneficial for oil, gas or other mineral properties. To qualify for tax deferral, the transaction must strictly comply with the statutory like-kind-exchange requirements. The Section 1031 exchange rules first require that both the property transferred and the property received are held for productive use in a trade or business or held for investment purposes. The exchange cannot involve property you hold or intend to acquire for personal use. Structuring the disposition of an interest in mineral property as a like-kind exchange is substantially beneficial from a tax perspective. Through the exchange, the seller of mineral interests defers paying federal income tax on the transaction
Salt Lake County, Utah, like many other counties throughout the nation, has struggled with findin... more Salt Lake County, Utah, like many other counties throughout the nation, has struggled with finding a meaningful and effective way to address persistent homelessness and high rates of recidivism within the county. Current government funding for programs to address these issues is limited and their effectiveness is often unknown. The result is costly: 43% of persistently homeless individuals in Salt Lake County become chronically homeless within two years; 74% of high-risk offenders return to county jail within four years of their release; and the Salt Lake County jail is currently operating at full capacity. These issues also result in numerous other social and financial costs to society. In an attempt to address these issues, in December 2016, Salt Lake County launched a million dollar initiative to provide more than 500 of the county’s most vulnerable and at-risk population with innovative, evidence-based, preventative services never before available to these residents. Unlike othe...
Transacting business in the “cloud” has quickly gained popularity worldwide as the new method of ... more Transacting business in the “cloud” has quickly gained popularity worldwide as the new method of providing information technology resources. Instead of purchasing or downloading software, we can now use the Internet to access software and other fundamental computing resources located on remote computer networks operated by third parties. These transactions offer companies lower operating costs, increased scalability and improved reliability, but also give rise to a host of international tax issues. Despite the rapid growth and prevalent use of cloud computing, U.S. taxation of international cloud computing transactions has yet to receive significant scholarly attention. This Article seeks to fill that void by analyzing the U.S. tax implications of operating in the cloud from a doctrinal and policy perspective. Such an analysis shows that the technological advances associated with the cloud put pressure on traditional U.S. federal income tax principles, which creates uncertainty, compliance burdens and liability risks for companies and a potential loss of revenue for the government. Applying the current law to cloud computing transactions also results in tax consequences that run counter to sound tax policy and may result in double taxation or complete non-taxation of cloud income. In light of these problems, federal attention is warranted to clarify how U.S. federal income tax principles apply to businesses operating in the cloud. Thus, this Article proposes that Treasury issue guidance that clearly addresses the U.S. tax implications of international cloud computing services and suggests that, ultimately, the United States must collaborate with other countries to achieve international consensus on these issues. Together these changes will ensure that the United States appropriately taxes the cloud and does so in a manner that minimizes double taxation and promotes efficiency, equity and administrative simplicity.
An exciting new way to fund social services has recently emerged. This new financing mechanism, c... more An exciting new way to fund social services has recently emerged. This new financing mechanism, called a social impact bond (SIB), has the potential to help us tackle some of our nation’s most challenging social problems. Broadly speaking, a SIB is a type of “pay-for-success” contract where private investors provide the upfront capital to finance a social program, but only recoup their investment and realize returns if the program is successful. Like any new financing instrument, SIBs create numerous regulatory challenges that have not yet been addressed. One unresolved issue is the tax implications of a SIB investment. This Article argues that the current law allows for multiple possible characterizations of the SIB arrangement for tax purposes. This uncertainty as to the correct characterization of a SIB investment can affect a private investor’s ultimate tax liability and subject the investor to an unnecessary audit risk. A SIB investment can also expose a nonprofit investor to additional taxes or, possibly, even cause it to lose its tax-exempt status. Despite the potentially substantial tax implications of a SIB investment, no guidance exists on this issue. This Article is the first to analyze the federal income tax consequences to investors who participate in a SIB-funded program. It concludes that SIB arrangements should generally be classified as contingent debt instruments under the current tax law but that it may be appropriate to bifurcate the transaction in the case of nonprofit investors. To address the substantial tax uncertainty created by the current law, this Article also argues that Internal Revenue Service guidance is ultimately necessary and suggests ways to structure the SIB arrangement to minimize the risk of any negative tax implications until such guidance is issued. Doing so will hopefully encourage investors to invest in SIBs and thereby unlock an additional source of capital to fund much needed social services.
Each year taxpayers spend billions of their hard-earned dollars on federal taxes. One way to defe... more Each year taxpayers spend billions of their hard-earned dollars on federal taxes. One way to defer taxes is to engage in a like-kind exchange under Section 1031 of the Internal Revenue Code. These exchanges allow taxpayers to defer taxation and have more of those dollars to spend today. A like-kind exchange (commonly referred to as a Section 1031 exchange) is particularly beneficial for oil, gas or other mineral properties. To qualify for tax deferral, the transaction must strictly comply with the statutory like-kind-exchange requirements. The Section 1031 exchange rules first require that both the property transferred and the property received are held for productive use in a trade or business or held for investment purposes. The exchange cannot involve property you hold or intend to acquire for personal use. Structuring the disposition of an interest in mineral property as a like-kind exchange is substantially beneficial from a tax perspective. Through the exchange, the seller of mineral interests defers paying federal income tax on the transaction
Salt Lake County, Utah, like many other counties throughout the nation, has struggled with findin... more Salt Lake County, Utah, like many other counties throughout the nation, has struggled with finding a meaningful and effective way to address persistent homelessness and high rates of recidivism within the county. Current government funding for programs to address these issues is limited and their effectiveness is often unknown. The result is costly: 43% of persistently homeless individuals in Salt Lake County become chronically homeless within two years; 74% of high-risk offenders return to county jail within four years of their release; and the Salt Lake County jail is currently operating at full capacity. These issues also result in numerous other social and financial costs to society. In an attempt to address these issues, in December 2016, Salt Lake County launched a million dollar initiative to provide more than 500 of the county’s most vulnerable and at-risk population with innovative, evidence-based, preventative services never before available to these residents. Unlike othe...
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