Supreme Court Overturns 'Physical Presence' Rule in Sales Tax Case: Today, a divided U.S. Supreme Court issued its opinion in South Dakota v. Wayfair, Inc., 585 U.S. ____ (2018), upholding a South Dakota law imposing sales tax collection obligations on retailers treated as having an economic presence in the state. The opinion overturns the decades-old rule enunciated in Quill Corp. v. North Dakota and National Bellas Hess, Inc. v. Dep’t of Revenue of Ill. requiring an in-state physical presence before a state could impose tax collection obligations on a seller.
House Ways and Means Committee Approves Measure on IRS Hiring Practices: Today, the House Ways and Means Committee approved by voice vote a measure that would prohibit the IRS from rehiring employees fired for misconduct or performance problems. A similar measure passed the House last year.
Supreme Court Holds Employee Stock Options Are Not Taxable Compensation Under The Railroad Retirement Tax Act of 1937: Today in Wisconsin Central v. United States, the U.S. Supreme Court was asked to resolve whether the Railroad Retirement Tax Act (Section 3231(e)(1) requires railroads and their employees to pay taxes on stock-based compensation. In a 5-4 opinion written by Justice Gorsuch, the Court reversed the judgment of the Seventh Circuit and held that stock options are not taxable compensation because they are not money remuneration.
Supreme Court Holds SEC Administrative Law Judges, Like Tax Court Judges, Are Subject To The Appointments Clause: Today, the Supreme Court decided Lucia v. SEC, holding that the SEC Commission’s Administrative Law Judges (ALJs) are “Officers of the United States,” and therefore subject to the Appointments clause. The Appointments clause requires that all officers of the United States be appointed by the president, courts of law, or heads of departments. The petitioner in this case challenged his administrative proceeding, arguing that the ALJ had not been constitutionally appointed because he was appointed by civil-service procedures, not the SEC commission itself. The Court used the same framework it applied in its 1991 decision in Freytag v. Commissioner, where it held that the Chief Judge of the United States Tax Court was authorized under section 7443A(b)(4) to assign any Tax Court proceeding to a special trial judge for hearing and preparation of proposed findings and a written opinion. The Court analyzed that, like the Tax Court Special Trial Judges, the SEC ALJs hold a continuing office established by law, exercise the same discretion when carrying out the same important functions, and have all the authority needed to ensure fair and orderly adversarial hearings. In Freytag the Supreme Court had held that the appointment was properly made by a court of law under the Appointments clause. However, unlike Freytag, the Lucia court found that the appointment of the ALJ hearing the case was unconstitutional as the appointment was made under civil-service procedures, not by a department head.
OECD Releases Guidance on Hard-To-Value Intangibles and the Transactional Profit Split Method: Today, the OECD released two pieces of guidance under BEPS Actions 8 and 10. First, the OECD released new guidance for tax administration on the application of the approach to hard-to-value intangibles under BEPS Action 8. The guidance seeks to improve consistency and reduce the risk of economic double taxation. Second, the OECD released revised guidance on the profit split method under BEPS Action 10, which has been incorporated into the Transfer Pricing Guidelines. The guidance states that the profit split method should be used when it is the most appropriate method and expands the guidance regarding when that might be the case.