Valrie Chambers

SOX as Safeguard and Signal: The Impact of The Sarbanes‐Oxley Act of 2002 on US Corporations’ Choice to List Abroad

Corporate scandals at Enron, Tyco, and MCI highlight the issue of opportunistic management behavior. The US Congress responded to these scandals by passing the Sarbanes‐Oxley Act of 2002 (SOX). SOX imposes additional management responsibilities and corporate operating costs on companies trading under SEC regulations. This paper examines three options for US corporations responding to SOX: compliance with SOX, taking a company private, or moving to a non‐ SEC‐regulated exchange, such as an international exchange. The paper then examines potential corporate governance options using Transaction Cost Economics (TCE; Williamson 1985) to develop propositions regarding which options firms may select.

Could Increasing the Frequency of Estimated Tax Payments Decrease Delinquency Rates Among the Self-Employed?

Self-employed business owners are far less compliant in reporting and paying their taxes than wage earners (employees). Discounted utility theory suggests that people act rationally and would not be willing to prepay an upcoming obligation. Mental accounting and behavioral economics theory take a different view, asserting that taxpayers will prefer a pay-as-you-go pattern (i.e., regularity). In response to these opposing theories, we conducted a behavioral experiment to see if a taxpayer who is given the opportunity to pay estimated federal income taxes monthly (instead of quarterly) will do so, and also whether they are less delinquent than those in the control group, who paid estimated federal income taxes quarterly. Our results indicate that when respondents were explicitly offered the opportunity to make monthly rather than only quarterly payments, the majority of the respondents opted to make monthly prepayments at least once. Additionally, those with an explicit option to pay as often as monthly rather than quarterly had significantly fewer dollars of delinquency. Paying more frequently could alleviate some budgeting pressures for the self-employed and result in fewer delinquencies to be collected at the federal level.

The Impact of Recent Court Decisions on the Tax Treatment of Prepaid Variable Forward Contracts

ABSTRACT: For several years, certain wealthy taxpayers have taken advantage of a growing arsenal of Wall Street techniques to delay or entirely avoid taxes on their investment gains. The tax law has been struggling to keep up, as the sophistication and spread of the use of financial products to produce as many benefits of a stock sale, while still delaying taxes on the proceeds, has increased. One such instrument that was sold for years to sophisticated investors, but is only now getting its day in court, is a Prepaid Variable Forward Contract (PVFC). Debate among tax professionals hinged on whether PVFCs would be taxable at execution, either as an outright sale or as a constructive sale, under Internal Revenue Code Sections 1001 and 1259, respectively, or at the final settlement of the underlying contracts, consistent with Revenue Ruling 2003‐7. A brief review of how PVFCs work is followed by authoritative positions on their tax treatment; these are followed by a discussion of recent court decisions and ...