Charles Rettig listens during a Senate Finance Committee hearing on his nomination for Internal Revenue Service Commissioner, Thursday, June 28, 2018, on Capitol Hill in Washington. The Senate is assessing President Donald Trump's choice to head the IRS, Charles Rettig, a Beverly Hills tax lawyer who would face the colossal challenge of overseeing the most sweeping overhaul of the U.S. tax code in three decades. (AP Photo/Jacquelyn Martin)

Charles Rettig listens during a Senate Finance Committee hearing on his nomination for Internal Revenue Service Commissioner, Thursday, June 28, 2018, on Capitol Hill in Washington. The Senate is assessing President Donald Trump's choice to head the IRS, Charles Rettig, a Beverly Hills tax lawyer who would face the colossal challenge of overseeing the most sweeping overhaul of the U.S. tax code in three decades. (AP Photo/Jacquelyn Martin)


Charles Rettig testifies at a Senate Finance Committee hearing on his nomination for Internal Revenue Service Commissioner, Thursday, June 28, 2018, on Capitol Hill in Washington. The Senate is assessing President Donald Trump's choice to head the IRS. Rettig is a Beverly Hills tax lawyer who would face the colossal challenge of overseeing the most sweeping overhaul of the U.S. tax code in three decades. (AP Photo/Jacquelyn Martin)


Sen. Orrin Hatch, R-Utah, chair of the Senate Finance Committee, arrives for hearing on the nomination of Charles Rettig for Internal Revenue Service Commissioner, Thursday, June 28, 2018, on Capitol Hill in Washington. The Senate is assessing President Donald Trump's choice to head the IRS, Charles Rettig, a Beverly Hills tax lawyer who would face the colossal challenge of overseeing the most sweeping overhaul of the U.S. tax code in three decades. (AP Photo/Jacquelyn Martin)


NEWS

Trump choice to head IRS says he’ll work for all taxpayers

By MARCY GORDON

AP Business Writer

Thursday, June 28

WASHINGTON (AP) — Under sharp questioning from some Democratic senators, President Donald Trump’s choice to head the IRS promised on Thursday to work for the benefit of ordinary taxpayers in administering the massive new tax law.

Charles Rettig is a Beverly Hills tax lawyer who has represented thousands of individuals and companies in civil and criminal tax matters before the agency and against it in court. He also defended Trump’s decision to break with tradition by refusing to release his personal tax filings during the 2016 presidential campaign.

At his confirmation hearing by the tax-writing Senate Finance Committee, Rettig was asked whether, given his experience representing wealthy individuals in tax-avoidance cases, he would work for ordinary taxpayers.

“I have seen the difficulties faced by taxpayers of all kinds,” Rettig said. “I will work … to take on challenges with the impact on taxpayers in mind.”

Retting, if confirmed by the Senate as Internal Revenue Service commissioner, will face a colossal challenge in administering and enforcing the new law, the most sweeping overhaul of the U.S. tax code in 30 years. The complex, $1.5 trillion package was muscled through Congress by the majority Republicans late last year with Democrats unanimously voting against it.

The new law, Trump’s signature legislative achievement, provides generous tax cuts for corporations and the wealthiest Americans, and more modest reductions for middle- and low-income individuals and families. Starting early this year, millions of working Americans saw increases in their paychecks with less tax withheld.

Rettig, 61, has worked at his Beverly Hills, California, law firm, Hochman, Salkin, Rettig, Toscher & Perez, for more than 35 years.

His clients have included affluent taxpayers seeking to strike deals with the IRS to turn over information on offshore bank accounts in exchange for reduced penalties. He has sued the IRS on behalf of clients seeking to reduce their tax penalties, and chaired the IRS advisory council, which acts as a public forum for discussing tax issues with agency officials.

Rettig also pledged at the hearing to uphold the political independence of the IRS. He had defended Trump’s refusal to release his tax returns, writing that Trump was facing the IRS “Wealth Squad.” Trump has accused the IRS of unfairly harassing him with audits and cited the IRS’ ongoing audit of his returns as the reason for his refusal.

“Mr. Rettig … needs to demonstrate that he will maintain independence from the Trump White House,” said Sen. Ron Wyden of Oregon, the committee’s senior Democrat.

Rettig said he expects that taxpayers “will see me as staunchly independent or more so.”

The quality of service provided by the agency for taxpayers is a primary issue. Rettig would take over an agency that has been pummeled for years by Republican lawmakers and has seen its funding slashed by 20 percent since 2010. His vetting comes as the independent IRS watchdog warned Congress in a report that funding cuts have eroded the agency’s ability to provide high-quality service to taxpayers and to upgrade its aging technology.

“Some of the IRS’ information technology dates back to the Kennedy administration,” said the Finance Committee chairman, Sen. Orrin Hatch, R-Utah. “I expect Mr. Rettig to work with Congress to modernize the IRS’ infrastructure and technology to bring the agency into the 21st century.”

Rettig acknowledged that long waits on the phone for taxpayers seeking information from the agency and outdated technology “are significant sources of frustration.”

“The American taxpayers deserve the most up-to-date IT system on the planet,” he said, and upgrading the system would be one of his top goals.

The tax-filing season earlier this year for 2017, the last one under the “old” tax regime, went well, officials said.

But on April 17, the filing deadline, the bottom fell out. Key elements of the IRS computer system crashed, bringing an unwelcome surprise for taxpayers who had waited until the final day to file online. The website for making payments and gaining access to other key services was down due to what officials later described as a “high-volume technical issue.” It came back online late that day, and affected taxpayers got an extra day to file.

VIEWS

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Trump’s pick to run the IRS owns properties at the Trump International Hotel Waikiki and Tower in Hawaii.

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Opinion: Offshore Energy Supports Conservation, Outdoor Recreation

By Mark Green

InsideSources.com

Offshore energy development works for the states — all of them. The U.S. Interior Department announced recently that $61.6 million in revenues from offshore oil and natural gas will be distributed to all 50 states, U.S. territories and the District of Columbia for grants that support conservation and outdoor recreation projects.

You don’t have to be a coastal state, you don’t have to be a producing state. Under the Gulf of Mexico Energy Security Act (GOMESA), everyone benefits from offshore natural gas and oil revenues earmarked for Land and Water Conservation Fund (LWCF) grants.

“Using zero taxpayer dollars, the LWCF also invests earnings from offshore oil and gas leasing to conserve outdoor recreation areas for public use and enjoyment,” Interior said in its LWCF announcement. “The funds enable state and local governments to improve park and other recreation areas in their communities by rehabilitating and upgrading existing parks, creating brand-new parks in places that have none, and developing and expanding trail systems that link communities to each other and to additional outdoor recreation opportunities.”

Federal offshore revenues going into LWCF grants is just a part of the economic/revenue benefits afforded by offshore oil and natural gas development.

Earlier this year API released studies showing that increasing access on the Atlantic, Pacific, Eastern Gulf and Alaska outer continental shelf (OCS) could generate billions in industry spending and federal revenue streams that could be shared with the states — as already is happening under GOMESA through offshore-supported LWCF grants and general revenue-sharing agreements the federal government already has with four Gulf Coast states.

Through GOMESA, 12.5 percent of offshore oil and natural gas revenues are allocated to LWCF, while 37.5 percent of all qualified OCS revenues — including bonus bids, rentals and production royalty — is shared with Alabama, Louisiana, Mississippi and Texas. Similar general revenue-sharing agreements could be legislated for other coastal states that host offshore development. These revenues and economic benefits could extend beyond coastal areas to boost entire states. The Georgia Petroleum Council’s Hunter Hopkins earlier this year said: “The Interior’s five-year offshore leasing plan will be the cornerstone for Georgia’s energy and economic future. Many of our communities could benefit greatly from offshore energy exploration and production, which can lead to jobs that pay well-above the state average and millions of dollars in state revenue that can help advance and update our public school systems and infrastructure.”

The key is access. Currently, 94 percent of the OCS under federal control is off limits to safe energy development. Encouragingly, the administration is putting together a new five-year leasing program that promises to open more areas to exploration and development. This is fundamental to our nation’s energy and economic prosperity and its security.

This month API announced the launch of “Explore Offshore,” a coalition of more than 100 local leaders, community organizations, businesses and associationsfrom five Atlantic and Gulf Coast states that supports increased offshore access.

“It is … undeniable that for the foreseeable future, oil and natural gas will be the greatest drivers of the world’s economies,” Explore Offshore national co-chairs Jim Webb and Jim Nicholson wrote recently. “Here at home, oil and gas are expected to generate more than 60 percent of America’s energy for at least the next 30 years, even with the welcome use of renewables continuing to be on the rise. That said, it is time to correct an oversight in America’s move toward an ‘all-of-the-above’ energy policy: the unnecessarily restrictive approach to the exploration and safe development of oil and natural gas resources that lie offshore.”

Webb, a former U.S. senator from Virginia and former U.S. Navy secretary, and Nicholson, the former Veterans Affairs secretary, write that the United States is one of the only countries along the Atlantic that’s not actively exploring for energy in those waters. They point out that Mexico has leased more than 20 million new acres on its side of the Gulf of Mexico in the last four years, bringing its total to more than 30 million acres — more than double that of the United States’ 14.7 million.

Given the time it takes to develop offshore reserves, Webb and Nicholson argue that steps must be taken now to ensure future energy production. The United States — with its strict environmental regulations and safety policies and industry’s advanced technologies — is better positioned than other nations to develop safely and responsibly its offshore energy — energy that would strengthen America’s security.

“As our demand for reliable and affordable energy continues to grow, the long-term question is, whether we will have the national foresight and courage to attain our energy independence,” Webb and Nicholson wrote. “We both have military backgrounds. One of us was Secretary of the Navy, the other Secretary of Veterans Affairs. We both saw extensive combat in Vietnam. And we both strongly agree that a nation must first be energy secure in order to be truly secure.”

As federal officials develop the new offshore leasing program, they should consider the great opportunity at hand to support energy and economic opportunity with a robust offshore blueprint for the future.

ABOUT THE WRITER

Mark Green is editor of American Petroleum Institute’s Energy Tomorrow. He wrote this for InsideSources.com.

Point: Bitcoin Needs ‘Goldilocks’ Regulation

February 28, 2018 by Paul Kupiec

Bitcoin, a new form of private money, is designed to remove the government’s ability to create inflation by printing money. Bitcoin was designed to nurture a new unregulated monetary system without the involvement of governments, banks or other regulated financial institutions.

Ironically, bitcoin and other cryptocurrencies are unlikely to gain mainstream status without the right mix of government regulation and oversight. Too much regulation and cryptocurrencies will succumb to compliance costs. Too little regulation and the cryptocurrency market will fail to achieve the integrity it needs to attract mainstream institutions and investors.

The supply of bitcoin is tightly controlled by open source software to ensure that the cryptocurrency’s value can never be debased. The blockchain distributed ledger technology, which makes bitcoin and other cryptocurrencies possible, underpins a transnational payment system that needs neither banks nor governments to operate.

The integrity of the blockchain payment system depends on the actions of independent “miners” who compete to solve the next blockchain cryptologic puzzle. The solution to the puzzle creates a permanent record of bitcoin transactions, and the winning “miner” earns bitcoin as a reward.

Unfortunately, the blockchain is not tamper proof. A single “miner” with too much computing power can manipulate the timing of transactions on the blockchain and potentially counterfeit the cryptocurrency. This risk is greater than initially believed, and no government monitors the computing power of individual mining firms to ensure the integrity of the blockchain payment mechanism.

While the blockchain records payments of cryptocurrency between two virtual wallets, bitcoin and other cryptocurrencies must have additional functionality to be viable substitutes for national currencies. For example, cryptocurrencies must be easily and safely exchanged for national currencies.

At present, more than 50 cryptocurrency exchanges around the globe facilitate the exchange of cryptocurrency for national currency. These exchanges are private, unregulated intermediaries that match customer purchase and sales orders for cryptocurrency-national currency pairs.

Cryptocurrencies exchanges provide a critical service. But even though the integrity of these exchanges are critical for the long-term viability of cryptocurrencies, the bitcoin blockchain technology does not protect investors against theft or fraud when their cryptocurrency balances and transactions are entrusted with these intermediaries.

To use a cryptocurrency exchange, a currency owner must transfer virtual currency to the exchange, or provide the exchange with national currency to purchase cryptocurrency. Either way, the customer’s cryptocurrency is held in the exchange’s virtual wallet. Unlike regulated exchanges, there is no law or regulation requiring that the balances of customers be segregated from exchange balances. If the exchange goes bankrupt from fraud or mismanagement, or the exchange’s virtual wallet gets hacked, customer cryptocurrency balances can be lost. Unlike U.S.-regulated securities firms, there is no Securities Investor Protection Corp. insurance to protect customers.

In the short time cryptocurrency exchanges have existed, they have been hacked repeatedly and several have experienced bankruptcy. Other risks include “flash crashes,” the potential for front running (where insiders enrich themselves through their knowledge of a pending transaction), the unknown impacts of algorithmic trading, and other information asymmetries that may disadvantage mainstream investors trading on cryptocurrency exchanges.

The anonymity of cryptocurrency transactions also creates risk. Cryptocurrencies are traded between virtual wallets that contain no identifying information about their human owner. The anonymity of cryptocurrency transactions attracts those who profit from illegal activities including criminals, terrorists and tax evaders.

One recent study estimates that nearly 24 million bitcoin market participants and nearly half of all bitcoin transactions can be linked to illegal activities.

The link between cryptocurrency and criminal activity is a major problem for regulated financial institutions. These institutions are subject to anti-money-laundering laws that expose the institutions to fines and other sanctions should they accept funds linked to illegal activity. Currently, the risk of processing funds related to illicit activities limits the participation of mainstream financial institutions in cryptocurrency markets.

This list of issues meriting regulatory oversight is surely incomplete, but the overriding message is that cryptocurrency markets are subject to the same market manipulation, fraud and criminal activities that impeded the development of mainstream financial markets.

Regulations to protect investors were a necessary part of the evolutionary process that allowed traditional financial markets to gain investor confidence and grow. Consumers, investors and regulated financial institutions will be deterred from embracing cryptocurrencies as long as the integrity of their trades are a concern, the security of their legitimate investment balances are at risk, and cryptocurrency transactions are dominated by those who value anonymity above all else.

About the Author

Paul Kupiec is a resident scholar at the American Enterprise Institute. He has also been director of the Center for Financial Research at the Federal Deposit Insurance Corporation and chairman of the Research Task Force of the Basel Committee on Banking Supervision.

Inside Sources

Counterpoint: No Good Reason for Special New Cryptocurrency Regulations

February 28, 2018 by William J. Luther

Bitcoin has risen to prominence in the last few years — and calls to regulate bitcoin have risen right along with it. Three justifications are common: protecting consumers, preventing illegal transactions and transfers, and promoting macroeconomic stability.

But those using or facilitating transactions with are already subject to a fair amount of regulation. So it is difficult to justify additional, special regulations for bitcoin on those three grounds.

Consider the consumer protection case. Some note that bitcoin users can be harmed by excessive price volatility or fly-by-night exchanges that abscond with or fail to secure deposits. They are right on both counts. But it does not follow that additional, special regulations are in order.

For starters, the Financial Crimes Enforcement Network already requires bitcoin exchanges operating in the United States to register as a money services business. And, more generally, existing laws and regulations already deal with fraud and theft. Just this month a Chicago trader appeared in U.S. District Court charged with stealing bitcoin from his employer to cover trading losses. No new laws or regulations are required to prosecute such cases.

What about volatility? I routinely advise my friends and family to buy and hold a diversified portfolio of low-fee index funds; not to attempt picking winners and losers; and never to spend more on financial assets than they are prepared to lose. I tell them they have little business placing big bets on bitcoin. But I also recognize that they are free, responsible adults and should be treated as such. Regulators should recognize this as well.

It is similarly misguided to adopt additional, special regulations for bitcoin on the grounds of preventing illegal transactions and transfers. Some will use bitcoin for nefarious ends — just as they have used dollars, euros and other national currencies in the past. But there is no more reason to think bitcoin will encourage criminal activity than there is to think a slightly faster car will result in more bank robberies.

Drug cartels and terrorist organizations have already developed elaborate schemes for moving wealth around the world with little risk of detection. They do not stand to gain much from bitcoin. Imposing additional, special regulations would do little to reduce the underlying criminal activity, while preventing much more benign uses of bitcoin as a consequence.

Finally, consider the case for regulating bitcoin to promote macroeconomic stability. Should bitcoin use pick up, the argument goes, the Federal Reserve will be unable to conduct effective monetary policy. It will not be able to smooth out undesirable macroeconomic fluctuation. As such, regulation should be adopted to discourage bitcoin use — if not banning it entirely.

I will not mince words here. This is perhaps the worst justification for regulating bitcoin. For starters, it presupposes that the Fed is any good at smoothing out macroeconomic fluctuation. It isn’t. Recent experiences (and, indeed, its entire history) suggest the Fed probably makes matters worse. Loose monetary policy in the early- to mid-2000s resulted in an unsustainable housing boom. Tight monetary policy in the time since produced the greatest economic downturn since the Great Depression and an unnecessarily slow recovery thereafter. If promoting macroeconomic stability is the goal, one should think twice before looking to the Fed.

But, facts of monetary history aside, there is still good reason to reject the macroeconomic stability justification. Note that bitcoin only undermines the Fed’s ability to conduct monetary policy to the extent that users chose bitcoin over dollars. If individuals prefer bitcoin to dollars, regulations and outright bans would merely prop up the dollar by preventing users from switching to an alternative they deem superior.

Alternatively, the Fed could commit to managing the dollar in such a way that would discourage users from switching to bitcoin in the first place. Both strategies would preserve the Fed-managed dollar. But the latter leaves users with a money that more closely resembles their ideal.

Common justifications to regulate bitcoin fall short. There is some scope for regulatory reform, though. Forty states have regulations pertaining to bitcoin that are either too broad or unclear. Clarifying and narrowly tailoring existing regulations would go a long way toward reducing regulatory ambiguity in the market for bitcoin. Calls for additional, special regulations push in the wrong direction.

About the Author

William J. Luther is an adjunct scholar with the Cato Institute’s Center for Monetary and Financial Alternatives, director of the American Institute for Economic Research’s Sound Money Project, and an assistant professor of economics at Kenyon College.

Charles Rettig listens during a Senate Finance Committee hearing on his nomination for Internal Revenue Service Commissioner, Thursday, June 28, 2018, on Capitol Hill in Washington. The Senate is assessing President Donald Trump’s choice to head the IRS, Charles Rettig, a Beverly Hills tax lawyer who would face the colossal challenge of overseeing the most sweeping overhaul of the U.S. tax code in three decades. (AP Photo/Jacquelyn Martin)
https://www.sunburynews.com/wp-content/uploads/sites/48/2018/07/web1_120845672-49b490a60e0648889d51e67644817ffe.jpgCharles Rettig listens during a Senate Finance Committee hearing on his nomination for Internal Revenue Service Commissioner, Thursday, June 28, 2018, on Capitol Hill in Washington. The Senate is assessing President Donald Trump’s choice to head the IRS, Charles Rettig, a Beverly Hills tax lawyer who would face the colossal challenge of overseeing the most sweeping overhaul of the U.S. tax code in three decades. (AP Photo/Jacquelyn Martin)

Charles Rettig testifies at a Senate Finance Committee hearing on his nomination for Internal Revenue Service Commissioner, Thursday, June 28, 2018, on Capitol Hill in Washington. The Senate is assessing President Donald Trump’s choice to head the IRS. Rettig is a Beverly Hills tax lawyer who would face the colossal challenge of overseeing the most sweeping overhaul of the U.S. tax code in three decades. (AP Photo/Jacquelyn Martin)
https://www.sunburynews.com/wp-content/uploads/sites/48/2018/07/web1_120845672-aed7a592941649e1bf28794ebadedde9.jpgCharles Rettig testifies at a Senate Finance Committee hearing on his nomination for Internal Revenue Service Commissioner, Thursday, June 28, 2018, on Capitol Hill in Washington. The Senate is assessing President Donald Trump’s choice to head the IRS. Rettig is a Beverly Hills tax lawyer who would face the colossal challenge of overseeing the most sweeping overhaul of the U.S. tax code in three decades. (AP Photo/Jacquelyn Martin)

Sen. Orrin Hatch, R-Utah, chair of the Senate Finance Committee, arrives for hearing on the nomination of Charles Rettig for Internal Revenue Service Commissioner, Thursday, June 28, 2018, on Capitol Hill in Washington. The Senate is assessing President Donald Trump’s choice to head the IRS, Charles Rettig, a Beverly Hills tax lawyer who would face the colossal challenge of overseeing the most sweeping overhaul of the U.S. tax code in three decades. (AP Photo/Jacquelyn Martin)
https://www.sunburynews.com/wp-content/uploads/sites/48/2018/07/web1_120845672-81fae0f065b0458fa16bb44b812bf9d7.jpgSen. Orrin Hatch, R-Utah, chair of the Senate Finance Committee, arrives for hearing on the nomination of Charles Rettig for Internal Revenue Service Commissioner, Thursday, June 28, 2018, on Capitol Hill in Washington. The Senate is assessing President Donald Trump’s choice to head the IRS, Charles Rettig, a Beverly Hills tax lawyer who would face the colossal challenge of overseeing the most sweeping overhaul of the U.S. tax code in three decades. (AP Photo/Jacquelyn Martin)