Tax & Finance

 

FDIC's Framework for Analyzing the Effects of Regulatory Actions

January 29, 2020

By: Jerry Ellig
The FDIC is wise to use Circular A-4 as a template for economic analysis. The analytical approaches in Circular A-4 are critical for determining whether a regulation under consideration is likely to produce more good than harm. The principles in Circular A-4 are also general enough that they can be applied to banking and financial regulation. The Securities and Exchange Commission’s (SEC’s) experience with an analytical framework based on Circular A-4 demonstrates that the framework is practicable and can produce a noticeable improvement in the quality of economic analysis.


IRS's Safe Harbor Notice on State and Local Tax Credits

July 10, 2019

By: Jerry Ellig
The IRS seeks comment on a guidance notice that allows taxpayers to count contributions for which they received a state or local tax credit as a payment of state or local taxes, subject to the $10,000 SALT cap. This notice corrects a problem created by a regulation issued on June 11, 2019, which prohibits taxpayers from taking a charitable deduction if they received a state or local tax credit in exchange for the contribution. Without this notice, the regulation is overly broad, because it takes away the deduction for taxpayers below the SALT cap even though they are not a cause of the tax avoidance problem the regulation seeks to solve.


IRS's Qualified Business Income Deduction

April 08, 2019

By Jerry Ellig & Jeffery Kaufman
The 2017 tax reform allowed investors in real estate investment trusts (REITS) and publicly-traded partnerships (PTPs) to take a tax deduction equal to 20 percent of qualifying distributions from REITs and PTPs. The Internal Revenue Service seeks comment on whether investors should also be allowed to take this deduction if they own REITs or PTPs through a regulated investment company, such as a mutual fund. Unfortunately, the IRS did not conduct an economic analysis sufficient to determine which choice is economically efficient. A complete analysis would first assess whether the deduction is economically efficient; building on that analysis, the IRS could then determine whether extending the deduction is efficient. We provide some illustrative calculations that point the way toward a more complete analysis.


IRS's Proposed Rule on SALT Credits

October 12, 2018

By Jerry Ellig
The Internal Revenue Service (IRS) has proposed a regulation that would prevent all individual taxpayers from claiming a federal charitable deduction if the taxpayer received a state tax credit equivalent to more than 15 percent of the donation. This comment explains why the proposed regulation is much broader than necessary to address the real problem the IRS seeks to solve: state tax credit programs designed explicitly to aid taxpayers in avoiding the cap on deductibility of state and local taxes.