Tax Clinic Amicus Brief Argument Supported

The United States Court of Appeals for the Federal Circuit just issued an opinion in BASR Partnership, William F. Pettinati, Sr., Tax Matters Partner v. United States, in which the court determined whether a partnership was entitled to recover its reasonable litigation costs from the government when it submitted a nominal $1 qualified offer to the government in tax controversy litigation and subsequently prevailed at summary judgment.   On the surface, this does not seem like the type of case about which low-income taxpayer clinics would normally have a strong opinion.  However, during the litigation the government asserted an argument that, if successful, could have severely hindered a common litigation strategy that low-income taxpayers employ in frozen refund litigation.  Specifically, the government asserted that, in order to constitute a reasonable offer, a qualified offer must be of a minimal amount that would potentially depend on the amount of tax liability at issue.  In other words, the government took the position that nominal offers were potentially unreasonable solely because they were nominal offers, even if a taxpayer believed he or she was likely to prevail and subsequently did prevail.

Accordingly, the Philip C. Cook Low-Income Taxpayer Clinic of Georgia State University College of Law and the Harvard Federal Tax Clinic filed a joint amicus brief in this case solely on the issue of whether taxpayers should be denied reasonable litigation and administrative costs based on the dollar value of a qualified offer.  The clinics argued that none of the requirements of I.R.C. § 7430, which governs qualified offers, state that an offer must be of a minimum amount or of a minimum percentage of the taxpayer’s possible liability in order to be valid.  The clinics were particularly concerned with the potential impact that a rule requiring a minimum qualified offer amount would have on low-income taxpayers, which motivated them to submit the brief. Low income taxpayers who have had their refunds frozen often submit $1 qualified offers when they believe that they will prevail in a tax court case in order to shorten the time it takes for them to resolve their case and receive their frozen refund.  Obtaining these frozen refunds is of critical importance to these vulnerable taxpayers because they often need the tax refunds generated by the earned income tax credit to meet their basic living expenses.  Filing a qualified offer puts pressure on the government to consider the low-income taxpayer’s case more quickly than it otherwise would because of the risk that the government would have to pay fees and costs if the taxpayer prevails.

In looking at this issue, the Federal Circuit agreed that a nominal $1 qualified offer can be reasonable.  The court based its holding on the standard of review that it applied, which it determined should be abuse of discretion.  Under an abuse of discretion standard, the court determined that the trial court did not abuse its discretion when it determined that an offer does not have to be of a minimal amount to be reasonable.  While the court did not discuss the impacts to low-income taxpayers directly in its opinion, the clinics are pleased that the court reached this result and that nominal qualified offers will remain a viable litigation too to low-income taxpayers who rely on them to obtain improperly frozen refunds as quickly as possible.

The clinics are incredibly grateful for the hard work of Georgia State University College of Law student (now graduate) Reena Patel and Harvard Law School student (now graduate) Amy Feinberg, who did excellent work assisting in the preparation of this brief.

How Could the SunTrust and BB&T Merger Affect my Retirement Plan?

By Caleb L. Swiney, Spring 2019 IAC Student Intern

Mere minutes after SunTrust and BB&T announced their merger, the internet was flooded with articles discussing everything from how big the resulting bank will be to what the name of the Atlanta Braves home stadium might be changed to. At least one article has even considered the impact that the merger could have on retirement accounts.

So, how could this merger affect your retirement plan? If you don’t have any investment accounts with SunTrust or BB&T, that answer is simple; it won’t have any major impacts on your investments. If you do have a retirement or other investment account at either bank, however, there are some factors that you should consider moving forward. Continue reading

This is the Song that Never Ends… The More the Securities Industry Changes the More It Remains the Same

By G. Kevin Mathis, IAC Student Intern

A loveable little sock puppet sang this annoying song that replays in my head from time to time, This is The Song that Never Ends. The seems to be an appropriate refrain when it comes to FINRA and financial technological advances known as FinTech.  I mean we have been here before, in my original post about the meaning and origins of FinTech I spoke about how the financial securities industry adapted to earlier changes in financial technology and how FINRA adjusted accordingly. The same is true now FINRA is recognizing that rapid changes are occurring that are forcing FINRA, investors, and firms to adjust to the changing world of securities.  FINRA has launched a website and issued alerts on a range of FinTech issues.  FINRA also recently asked for comments on FinTech Innovation.

With FinTech, investors should remember that though things may change (and at this time the change seems to be going at breakneck speed.), it roughly stays the same. Investors must continue to educate themselves, as FINRA continues to be more vigilant in its protective regulations over the industry.

The Force of Financial Securities Industry

By G. Kevin Mathis, IAC Student Intern

In the Star Wars Galaxy, the Force binds everyone and everything together.  Some characters are highly sensitive to this Force and those characters can train themselves to wield the Force’s power.  Some force sensitive characters utilize their Force powers for the betterment of the Galaxy while others use Force powers to further their personal goals.  The key is that this Force must remain balanced or chaos may ensue.  A group of Force users, the Jedi, protect that balance through disciplined study, wise counsel, and if necessary regulatory action with the use of a light saber.

Communication binds the “galaxy” of financial securities.  Investing firms recognize the power of communication so they use social media sentiment to harness the power of investor communications to their benefit.  Investors use communication (warning about bad actors, sending information on promising investments, and contacting others with inquiries on leads) to protect themselves and others. FINRA uses communications to protect the balance between the two.

FINRA identified four models that these firms use to wield the power of communications to accomplish their goals. The four models identified are: Continue reading

Enterprise Value or Market Capitalization: What’s your worth?

By: Esmat Hanano, Spring 2019 Student Intern

As economic markets continue to fluctuate, many companies are seeing their stock price move with market changes. Companies, however, are not the only ones watching—retail investors are also noting the changes. Shifting economic markets lead to some important questions about how to value a company given the current state of the economy, chief among them being which valuation metric should retail investors look to when making their investment decisions. To that end, there are two terms retail investors should be familiar with: enterprise value and market capitalization. Continue reading

Artificial Intelligence Going Where No Man Has Gone Before…

By G. Kevin Mathis, IAC Student Intern

Star Trek’s opening line states that the USS Enterprise’s mission is to boldly go where no man has gone before.  Captain Kirk, Mr. Spock, and Dr. McCoy led a crew that boldly pushed the realms of imagination.  Accomplishing their stated goal and solving challenges that they encountered in every episode required the crew of the Enterprise to challenge social norms, work together, and create novel technologies.

Artificial Intelligence (AI), “intelligence of machines,” promises to push the securities industry to boldly go where it has not gone before.  AI is being incorporated into the financial services industry at warp speed.  Thanks to AI computers are performing tasks that humans would traditionally perform using human intelligence.  Personalized automated advice and chatbots provide investors with customer service.  FINRA implements sophisticated algorithms (the language of AI) to conduct highly sophisticated fraud surveillance.  Securities traders use AI to gauge social media sentiment, to highly sophisticated fraud surveillance. AI, like Star Trek, pushes the realms of our imagination in terms of what we can do with technology.  This can be both exciting and frightening.  FINRA’s IOI has decided to step in to ensure that investors and firms experience more of the exciting and helpful aspects associated with AI and less of the unknown and troubling problems that can result from AI.  FINRA is indicating that they will still require either human supervision or intervention to ensure that everyone, and not just the machines, boldly influence the future of the financial services industry.

RegTech: The Tools of Real-Life Heroes

By G. Kevin Mathis, IAC Student Intern

My favorite superheroes have certain tools that help them in their in their fight for justice. Black Panther wears a catsuit, Spiderman uses spider silk-like polymer that he shoots from his wrist enhancements, and Dr. Stranger has a magical cape and the time stone.   FINRA also has tools that help it keep balance in the world of securities.   FINRA calls its tools RegTech.  RegTech is a subset of FinTech that covers new and emerging technologies assisting FINRA quickly and efficiently meeting its regulatory compliance obligations.    Continue reading