Federal Corporate Research Articles

Who consumes the credit union subsidies?

Credit unions in the United States (US) are exempt (benefit from subsidies) from federal corporate income taxes, which are traditionally justified by their non-profit cooperative status and mission of meeting the financial needs of individuals of modest means. In recent years, the efficacy and fairness of these subsidies has been debated extensively as the traditional demarcation between banks and credit unions and their respective customer bases have blurred. To investigate how credit unions allocate subsidies to various stakeholders, we estimate a structural profit model for matched pairs of credit unions and commercial banks. We find that credit unions use most (approximately 90%) of their tax exemption for the benefit of their membership via above-market deposit interest rates.

The Federal Corporate Transparency Act: More Answers are Proposed

The Federal Corporate Transparency Act: More Answers are Proposed

Director and officer liability and corporate tax avoidance

AbstractWe use the unique nature of the director and officer liability protection law applicable to Nevada incorporated firms to study how liability protection is related to corporate tax avoidance. We find that firms incorporated in Nevada avoid 32% more federal corporate tax as a fraction of total assets than firms incorporated in Delaware, and 40% more than firms incorporated in other states. Nevada‐incorporated firms have a 15% lower cash effective tax rate and an 8% lower GAAP ETR. The results are robust to various specifications including instrumental variable and matching approaches. Greater tax avoidance is also associated with lower payouts to shareholders for Nevada‐incorporated firms. The findings are consistent with theories about the complementarity of managerial diversion and tax avoidance for firms with poor monitoring, and they demonstrate how increases in liability protection lead to the unintended consequence of greater firm tax avoidance.

The Deterrent Effect of Federal Corporate Prosecution Agreements: An Exploratory Analysis

In this paper, we explore the potential deterrent effect of federal pretrial agreements by examining the extent of violations subsequent to an organization signing a pretrial agreement. More specifically, this research examines the subsequent criminal, civil, and regulatory violations of 161 publicly-traded firms that signed federal deferred prosecution agreements and non-prosecution agreements between 2001 and 2020. Our analysis identified 87 recidivist companies with a total of 629 subsequent violations, eight of which were criminal violations. While most companies had only one subsequent violation, one company had 63 noted violations after signing the pretrial agreement. Our exploratory analyses reveal that companies paying larger penalties as part of the pretrial agreement were less likely to have subsequent violations, and, when examining U.S.-based companies only, that larger organizations were more likely to have subsequent violations. These preliminary results are important to understanding both corporate deterrence generally, and the use of pretrial agreements as a corporate deterrent specifically.

The Future of Securities Law in the Supreme Court

Since the enactment of the first federal securities statute in 1933, securities law has illustrated key shifts in the Supreme Court’s jurisprudence. During the New Deal, the Court’s securities law decisions shifted almost overnight from open hostility toward the newly-expanded administrative state to broad deference to agency expertise. In the 1940s, securities cases helped build the legal foundation for a broadly enabling administrative law. The 1960s saw the Warren Court creating new implied rights of action in securities law illustrative of the Court’s approach to statutes generally. The stage seemed set for the rise of “federal corporate law.” The Court swiftly reversed itself, however, with Justice Lewis F. Powell, Jr. leading the effort to confine the reach of the securities laws. Powell succeeded in imposing a strict constructionism in securities law that never quite took hold in criminal or constitutional law. When there was a significant shift for the Court, securities law was prominent—at least until Powell’s retirement. Since then, the Court has meandered in its approach to securities law, its decisions neither expansive nor restrictive. The Court’s docket in this space has become a random walk of indifference.
 What is the future of securities law in the Supreme Court? We doubt that securities law’s bellwether status during its early days is likely to recur. The Securities and Exchange Commission, a groundbreaking agency of the 1930s, now seems like a small cog in a much larger administrative machine. Without prompting from the SEC, it is quite possible that the Court will continue to meander in the field of securities law. The Court— which Franklin Delano Roosevelt populated with appointees having front-line experience writing the securities statutes, running the SEC, or defending the constitutionality of the securities laws—has not had a member with any direct experience with securities law for more than thirty years.
 If the Court’s spotlight were to shine again on securities, we suggest it might well be a Chevron question of the SEC’s authority. Proponents of corporate social responsibility could push the boundaries of the securities laws beyond the SEC’s historical focus on disclosure. Such a move could also be met by a federalism challenge to securities law preempting the field of state corporate law. These possibilities might once again put securities law at the center of the Court’s work to develop the law of the administrative state.

Do credit unions have distinct objectives? Evidence from executive compensation structures

AbstractCredit unions compete directly with commercial banks in markets for consumer financial services yet receive an exemption from federal corporate income tax. Commercial banks claim that credit unions are no different than banks and that the credit union tax exemption represents an unfair competitive advantage. Credit unions counter that while they offer similar products and services, they differ from commercial banks in terms of structure and mission, given their not‐for‐profit, cooperative status. In this paper, we test for substantive differences in the objective functions of commercial banks and nonprofit credit unions by comparing CEO compensation structures. Drawing on the relevant principal–agent literature, we provide several arguments to support the hypotheses that credit union boards of directors establish lower‐powered incentive contracts with their CEOs relative to similarly sized commercial banks, and offer lower total compensation. We find that credit union CEOs receive approximately 250% less performance‐based compensation relative to CEOs of similarly sized community banks. Bank CEOs also earn approximately 15% to 20% more total compensation on average. The results are generally robust to controlling for CEO‐ and board‐level characteristics, local economic conditions, and institution‐level indicators of size, growth, complexity, liquidity and risk. The findings suggest important differences in incentive structures and objectives between banks and credit unions.

The Federal Corporate Transparency Act: The Answers are Here, in Part

The Federal Corporate Transparency Act: The Answers are Here, in Part

The Federal Corporate Transparency Act; Answers Are Coming

The Federal Corporate Transparency Act; Answers Are Coming

Taxes and Firm Size: A 40-Year Perspective

We examine the statutory incidence of the federal corporate tax on firms by asset size over a 40-year period spanning numerous tax changes. In contrast to previous studies, which have been based upon financial statement measures of effective tax rates, we examine the relation between taxes and asset size using published tax return data and a common measure of distribution. The results suggest that the corporate tax burden has become relatively proportional to firm size over the last 40 years, only slightly favoring larger firms.

The Future of Natural Gas in California

California has been known for decades as being one of the most environmentally progressive states in the country. Its fuel efficiency standards for cars ultimately led to tighter federal corporate average fuel economy (CAFE) standards. California's embrace of natural gas to phase out coal power plants started well before such federal efforts. And now, the state has aggressive renewables targets that are making progress toward a low‐carbon energy economy. Of course, in many circles around the US one only need say “California” and the room dissolves in laughter. Budget crises, high taxes, wildfires followed by mudslides and strange election processes all lead to many people scoffing at the state. However, it is the fifth largest economy in the world. On the whole, California's energy practices and policies have yielded many successes that have caught on worldwide.

The Shock Doctrine Comes to Canada: Laurentian University’s Insolvency Claim and the Neoliberal Tide

During the depths of COVID-19, Laurentian University, a small Canadian postsecondary institution located in the mid-sized city of Sudbury Canada, declared that it was insolvent and was legally allowed to terminate one-third of its faculty and cut almost one-half of its academic programmes. This historically unprecedented attack on a Canadian public institution utilized a Federal corporate court process, the Companies’ Creditors Arrangement Act (CCAA), a piece of legislation akin to the US Chapter 11 process. The result of the still-ongoing process saw the university Administration and Board of Governors working against the interests of the community, targeting the arts, Indigenous, Francophone and working-class communities. This article poses the question ‘to whom do universities belong, and at what point does a publicly funded university stop being a collective “social good” – responsible to the society that spawned it – and start being a stand-alone organization that serves private interests?’

¿Son los Estados Unidos un paraíso fiscal?

La reforma fiscal de los Estados Unidos de América, que entró en vigor en 2018, ha traído varios cambios relevantes, dentro de los cuales el más importante consiste en la disminución de la tasa del impuesto sobre la renta corporativo federal del 35% al 21%. Lo anterior trae como consecuencia que, conforme al artículo 176 de la Ley del Impuesto Sobre la Renta de los Estados Unidos Mexicanos, los Estados Unidos puedan ser considerados un régimen fiscal preferente. Asimismo, se analiza la posibilidad de que los Estados Unidos sean clasificados como un paraíso fiscal por su reticencia a entrar en el CRS de la OCDE y por el trato inequitativo que da a los países que colaboran con dicho país en relación con FATCA.

The Federal Corporate Transparency Act - Waiting for Answers

The federal Corporate Transparency Act, adopted on January 1, 2021 over President Trump's veto, is the product of two decades of proposed federal legislation to combat money-laundering and terrorist financing through anonymous business organizations. When rules are finalized, newly-formed and existing business entities will have to file reports with the Department of the Treasury's Financial Crimes Enforcement Network identifying control persons and beneficial owners of more than 25% of the entity. Unfortunately, and despite the very long gestation period for the Corporate Transparency Act, the act itself raises a large number of questions for which we are awaiting answers. Hopefully the answers will come in rulemaking which must be completed by December 31, 2021. This paper describes a number of the questions for which we are awaiting answers.

Why Business and Real Estate Lawyers Need to Worry About the 2021 National Defense Authorization Act

Colorado, specifically, and the United States, generally, allow free formation of for business and non-business purposes, with few and many times no obligation to disclose the underlying beneficial owners. This purportedly allows these to be used for money-laundering and terrorist financing operations. The William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 is another step to change this, following international attention focused from the international Financial Action Task Force, almost twenty years of effort in Congress, and the geographical targeting orders issued by the Department of the Treasury’s Financial Crimes Enforcement Network. This paper discusses the Federal Corporate Transparency Act requiring that the Department of Treasury develop disclosure obligations for existing and newly-formed businesses in the United States. While the Corporate Transparency Act is not effective immediately but must wait for rule-making, it will change the method that business lawyers and real estate lawyers advice their clients when the rules are adopted and involves ethical implications for the lawyers who intentionally or inadvertently assume their client's obligation to make the reports required under the Corporate Transparency Act. While waiting for rulemaking, those who form are waiting for answers. - Do you want to risk being an applicant as defined in the Corporate Transparency Act and therefore possibly responsible for the entity's filing obligations at the potential risk of criminal and civil liability? - What fundamentally will be companies? We know that it includes corporations, LLCs, and similar entities - but what will be defined as a similar entity? - How will the reporting companies gather the necessary information? Should there be language in articles of incorporation, articles of organization, bylaws, operating agreements, partnership agreements, and buy-sell agreements (among others) requiring the control persons and owners provide the necessary information? This paper gives a detailed background on the history that went into the Corporate Transparency Act. This paper does not answer those questions, but raises and discusses those questions and a number of other questions, including the attorney's ethical obligations that arise from the Corporate Transparency Act.

Mindestfallzahlensteuerung und Bedarfsgerechtigkeit in der stationären Versorgung

The mainly medical law and health economics treatise follows the interdisciplinary theoretical approach of health services research. The focus is on managing health care in Germany through minimum numbers of cases. What effects does this concept have on the quality aspect and the needs-based approach to inpatient care. Methodologically, a selective literature search is used. In a comparative analysis between the states of Saxony-Anhalt and Schleswig-Holstein, empirical data are examined. As a result, it can be stated that the actors have experienced a power shift in the health system due to the relevant legislation. In the future, it will be less the hospital planning of the federal states than the intermediary Federal Joint Committee (G-BA) and corporate structural development that will drive the centralization of the care landscape.

The Federal Corporate Transparency Act: Still Waiting for Answers

The Federal Corporate Transparency Act: Still Waiting for Answers

Is It Time to Eliminate Federal Corporate Income Taxes?

As the nation is experiencing the need for ever-increasing government expenditures to address COVID-19 disruptions, rebuild the nation’s infrastructure, and many other worthy causes, conventional thinking calls for restoring at least a portion corporate taxes eliminated by the 2017 Tax Cuts and Jobs Act, especially from progressive circles. In this working paper, Edward Lane and L. Randall Wray examine who really pays the corporate income tax and argue that it does not serve the purposes most people believe.The authors provide an overview of the true purposes and incidence of corporate taxation and argue that it is inefficient and largely borne by consumers and employees, not shareholders. While the authors would prefer the elimination of the corporate profits tax, they understand the conventional thinking that taxes are necessary to help finance government expenditures—even if they disagree. Accordingly, the authors present alternatives to the corporate tax that shift the burden from consumers and employees to those who benefit the most from corporate success.

Mapping geographic patterns in federal corporate agreements

Purpose The purpose of this study is to use crime mapping techniques to examine geographic patterns of signed deferred and non-prosecution agreements across federal districts. The purpose is also to examine the variation in the number of agreements by the district since 1992. Design/methodology/approach This study uses data from the Corporate Prosecution Registry to examine geographic patterns in federal corporate agreements since 1992 (n = 534). Choropleth mapping techniques were used to create national crime maps displaying the geographic locations of signed corporate agreements. Findings The results showed that, overall, prosecutors in the District of Columbia have signed the most federal corporate agreements although there is some variation over time. Research limitations/implications This study is unable to determine the causes of changes in the geographic placement or number of agreements signed. It is also unable to determine the precise geographic locations of crimes, but only the location of the District Court that elected to pursue a federal agreement with the organization. Practical implications The wide discretion prosecutors have in the agreement process has led to an overall lack of transparency concerning prosecutors’ decision-making when signing agreements with organizations. This study helps to make the number and geographic location of agreements more transparent. Originality/value This study uses crime mapping techniques to visually depict the locations of signed agreements allowing for visual comparisons and analyzes for an extended period of time.

Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State (2020 Edition)

Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State (2020 Edition)

The Economic Effects of Special Purpose Entities on Corporate Tax Avoidance

ABSTRACTThis study provides the first large‐sample evidence on the economic tax effects of special purpose entities (SPEs). These increasingly common organizational structures facilitate corporate tax savings by enabling sponsor firms to increase tax‐advantaged activities and/or enhance their tax efficiency (i.e., relative tax savings of a given activity). Using path analysis, we find that SPEs facilitate greater tax avoidance such that an economically large amount of cash tax savings from research and development (R&D), depreciable assets, net operating loss carryforwards, intangible assets, foreign operations, and tax havens occur in conjunction with SPE use. We estimate that SPEs help generate over $330 billion of incremental cash tax savings, or roughly 6 percent of total U.S. federal corporate income tax collections during the sample period. Interaction analyses reveal that SPEs enhance the tax efficiency of intangibles and R&D by 61.5 percent to 87.5 percent. Overall, these findings provide economic insight into complex organizational structures supporting corporate tax avoidance.