Samuel C. Thompson

The Curry/Trump Split in Tax Reform

This is a follow-up to my SSRN post on December 6, 2017 of my Tax Notes article: Tax Reform: Taxing Trump and Curry Under the Republican Plan, Tax Notes, Vol 157, November 2017. The article discusses the House Republican version of the Tax Cut and Jobs Act (TCAJA), which adopted a maximum 25% rate on certain business income of pass-through entities. In an effort to sell the provision, the House Republicans compared the tax treatment of Stephen Curry, a star professional basketball player, who would not qualify for the 25% rate, to Steve of “Steve’s Bike Shop,�? who would be entitled to the 25% rate. Apparently, the House Republicans used Curry because he got into a fight with President Trump over Curry’s decision not to visit the White House in connection with a celebration of his team’s NBA championship. The article argued that (1) the comparison of Curry to Steve is bogus, and (2) the real comparison is of Curry to President Trump. The article (1) showed that under the 25% provision President Trump would receive a “huge�? tax break compared to Curry, and (2) argued that this 25% rate is bad tax policy and should be stricken from the TCAJA, thus taxing both Curry and President Trump at the same maximum rate. The title to the attached Letter to the Editor of Tax Notes is The Curry/Trump Split in Tax Reform, Tax Notes, page 151, Jan.1, 2018, and it compares the treatment of President Trump and Curry under Section 11011 of the Final TCAJA. This provision adds Section 199A to the Code, which provides, as a substitute for the 25% maximum tax in the House bill, a deduction of 20% of certain pass-through income. The Letter (1) demonstrates how the Final TCAJA continues to provide President Trump a “huge�? tax break compared to Curry, and (2) asserts that a future Congress will repeal it because the disparate treatment is patently unsound from a tax policy perspective.

Legislative and Administrative Proposals Re Inversions - Letter to the Honorable Jacob J. Lew, Mark Mazur, Danielle Rolfes, William Wilkins and Robert Stack

In this letter I set out several proposals the Treasury should undertake in dealing with inversion transactions.

The Missing Link in Sarbanes-Oxley: Enactment of the 'Change of Control Board' Concept, or Extension of the Audit Committee Provisions to Mergers and Acquisitions

This paper builds upon on my 2000 article, Change of Control Board: Federal Preemption of the Law Governing a Targets Directors (2000 COCB Article). In that article I propose that Congress address the conflicts of interest that can arise in the acquisition of a publicly held target corporation in various types of hostile and consensual merger and acquisition (M&A) transactions by requiring the independent appointment of a disinterested Change of Control Board. Under this proposal, unless the shareholders elect-out, once a public corporation becomes a target of a bona fide M&A offer, a federal Change of Control Official would appoint for the target a three-person Change of Control Board, which would have complete authority over the acquisition process. This concept would override all state takeover laws, and because of the obvious independence of the Change of Control Board, a Federal uniform standard of review, the business judgment rule, would apply in determining if the board acted properly. Thus, this concept would eliminate the several confusing standards of review applicable to the actions of a targets directors in M&A transactions under Delaware law. Many features of the Change of Control Board concept are similar to those provided for audit committees in the Sarbanes-Oxley Act of 2002 (SOX). The audit committee is directly responsible for dealing with the firms CPA, each member of the audit committee must be independent, and the audit committee has the authority to hire its own advisors. Also, the U.S. stock exchanges have promulgated rules requiring that the boards of directors of each listed company consist of a majority of independent directors. Although these independence requirements move in the right direction, they do not properly address issues that can arise when a publicly held corporation engages in a M&A transaction. The continuing problem with the acquisition of publicly held targets is illustrated most recently in two 2007 cases in the Delaware Chancery Court: Caremark and Netsmart, and the problem with acquirors is illustrated in the 2006 decision of this Court in J.P. Morgan Chase. This article first explains how the audit committee provisions of SOX and the independent director requirement of the exchanges build upon a previous proposal for federalization of certain aspects of corporate law. The article then discusses (1) the manner in which current state law deals inadequately with various types of conflicts of interest that can arise in mergers and acquisitions, and (2) the bizarre structure of state anti-takeover law under which some states provide boards with virtually unlimited power to block a hostile acquisition. After explaining why the Change of Control Board concept should also apply to major acquisitions made by acquiring corporations, the article then elaborates on the essential features of the concept. Finally, the article discusses how many of the principles could be implemented by the SEC through its rulemaking authority under the audit committee provisions of SOX.