THE TEXAS May 2009 TAX LAWYER Vol. 36, No.3 * www.texastaxsection.org TO MOVE DIRECTLY TO AN ARTICLE CLICK ON THE TITLE TABLE OF CONTENTS From Our Leader: The Chair’s Message . 1 Daniel J. Micciche Special Attention and Upcoming Events: 2009 Outstanding Texas Tax Lawyer Award – Stanley L. Blend . 4 State Bar of Texas Annual Meeting . 5 June 26, 2009 – Dallas Texas State Bar of Texas State and Local Tax Committee Annual Joint Meeting with the Office of the Texas Comptroller of Public Accounts. 6 July 17, 2009 – Austin, Texas 27th Annual Advanced Tax Law Course August 27-28, 2009 – Houston, Texas. 7 Articles: Where is the “United States” for Federal Tax Purposes? . 9 Andrius R. Kontrimas & Robert C. Morris Paying Other People’s Taxes: Current Issues In Employment Taxes And Transferee Liability . 14 M. Todd Welty, Laura L. Gavioli, and Claire I. Wade Public or Private? How the Distinction May Affect Your Company’s Executive Compensation Practices . 21 Katy B. Zarolia Bonus Returns and Tax Deductions . 26 Robert W. Wood Public Charities, Private Foundations, and Supporting Organizations for the Non-Exempt Organizations Specialist . 31 Albert Lin Pending Legislation to Change the Federal Transfer Taxes . 36 Jim Roberts The New and Improved FBAR: Broader in Scope with Enhanced Enforcement But Not More Clarity. 45 Joseph M. Erwin Should False Imprisonment Damages be Taxed? . 53 Robert W. Wood TO MOVE DIRECTLY TO AN ARTICLE CLICK ON THE TITLE Practitioner’s Corner: Annotated Agreement of Limited Partnership . 57 Thomas C. Baird Annotated Limited Liability Company Agreement . 97 Thomas C. Baird Governmental Submissions: Tax Section of the State Bar of Texas State and Local Tax Committee Comments To House Bill 3 . 133 Joint Letter of Tax Section of the State Bar of Texas State and Local Tax Committee and Texas Society of Certified Public Accountants Concerning Texas Margin Tax and Definition of Net Distributive Income Within the Compensation Deduction and Treatment of Rental Income Under Passive Entity Exception. 150 In Every Issue: 2008-2009 Calendar . 169 Tax Section Leadership Roster . 171 Committee Selection Form . 176 The name and cover design of the Texas Tax Lawyer are the property of the State Bar of Texas, Section of Taxation Texas Tax Lawyer, May 2009 1 RETURN TO TABLE OF CONTENTS CHAIR’S MESSAGE To: Fellow Tax Section Members I have a lot of good news to report: 1. New Website and Free 24/7 Audio Video Library First, as you may already know, we recently launched our NEW State Bar of Texas Tax Section website, along with a FREE, 24/7, audio video, CLE library for Tax Section members. The new website is not password-protected for anything except the free, 24/7, audio video, CLE library. The 24/7 Online CLE Instructions provide step-by-step help for using the library. The free, 24/7, audio video, CLE library for Tax Section members is the first of its kind. No other section of the State Bar of Texas offers such a benefit. No other tax section in the nation offers this benefit. The library currently contains 30 audio and video programs that State Bar of Texas Tax Section members can access at any time, including the State Bar of Texas Tax Section’s highly acclaimed 11th International Tax Symposium. We are positioned to add at least 30 new audio or video programs per year to the library. Visit 24/7 Audio Video CLE to review the list of programs currently available. These programs are top quality CLE programs, pre- sented by some of the best tax lawyers in the country. Most of the programs are basic and practical skills courses. Some of the programs are audio only, and some are video.You can listen to or watch them on a computer, or you can download them as a pod- cast and listen to them on an IPod. We plan to add new programs to the library regularly, and you will be able to get all of your required CLE from this member bene- fit. Tax Section members who are accountants will also be able to obtain CPE credit for these programs. Each year, our twelve State Bar of Texas Tax Section substantive committees will contribute at least one audio or video program to the free, 24/7, audio video, CLE library. We will also add the State Bar of Texas Tax Section’s Property Tax Law seminar, which was held last month in Austin. 2. New Alliances with Local Bar Associations and CPAs In addition, we have entered into alliances with the Dallas Bar Tax Section and the Houston Bar Tax Section to audio record most of their new programs and make them available free to our members. We will also have a place on the website that will store the outlines and articles from these outstanding programs. WE THANK THE DALLAS BAR TAX SECTION AND THE HOUSTON BAR TAX SECTION FOR THEIR COOPERATION AND SUPPORT AND FOR ALLOWING US TO MAKE THEIR EXCELLENT PROGRAMS AVAILABLE TO THE ENTIRE STATE BAR OF TEXAS TAX SECTION MEMBERSHIP. The benefits of the alliance with the Dallas Bar Tax Section and the Houston Bar Tax Section are readily apparent. The State Bar of Texas Tax Section has approximately 1950 members. Texas tax lawyers not in Dallas and Houston will now be able to access high quality CLE that was previously unavailable to them. The speakers will now speak to a much wider audience and will gain greater recognition. Dallas and Houston tax lawyers who can’t make the live meetings in their cities can listen to the recordings on our website. At this point in time, many of the outlines and articles are unavailable after they are presented locally. In addition, we plan to record the seminar that our State and Local Tax Committee presented to the Dallas Chapter of the Texas CPA Society in May and make the programs available to our members in the free, 24/7, audio video, CLE library. For those of you who are technologically challenged, I can assure you that the library is easy to use. Try it. Invest five minutes to see how it works. We have tested it with some of the most technologically-challenged people we could find (i.e., State Bar of Texas Tax Section Officers and Council members – especially me). If you have mastered the process of sending and receiving an email, you can do this. At the same time, let me also stress that we are trying to bring our members unprecedented new benefits on a very limited budg- et. We are new at this. There will inevitably be glitches! Please bear with us. Texas Lawyers who are not members of the Tax Section are encouraged to join – simply download a Membership Application from our website and follow the instructions. RETURN TO TABLE OF CONTENTS 2 Texas Tax Lawyer, May 2009 3. Tax Section Wins State Bar of Texas Pro Bono Award I am very proud to report that the Tax Section won the 2009 State Bar of Texas Pro Bono Award for our new Tax Court Pro Bono Program. This award recognizes the outstanding efforts of our Pro Bono Committee and, in particular, our Pro Bono Committee Chair, Elizabeth Copeland. As Chair of our Pro Bono Committee, Elizabeth established the Nation’s first state-wide Tax Court Pro Bono Program in Texas. The program encourages lawyers to offer pro bono consultation services to unrepresented or pro se tax- payers at calendar calls. Working with the U.S. Tax Court, lawyer volunteers mediate disputes between the IRS and Tax Court peti- tioners and provide advice to those taxpayers on presenting evidence at trial. Congratulations to Elizabeth and all of our Tax Section pro bono volunteers for a well deserved honor. More information on the Tax Court Pro Bono Program can be found on the Tax Section Website. 4. Stanley Blend Wins the 2009 Outstanding Texas Tax Lawyer Award The Tax Section Council voted to award the 2009 Outstanding Texas Tax Lawyer Award to Stanley Blend. This is the highest award that our Section gives, and it has been awarded only five times in the past. This award recognizes Stanley for his outstanding rep- utation, expertise, and professionalism in the practice of tax law; his leadership in the State Bar of Texas and American Bar Association; his significant contributions to the general welfare of the community; his reputation for ethics; and his mentorship of other tax professionals. The award will presented at the Texas Federal Tax Institute in San Antonio which will be held June 11th and 12th. 5. Streamlining Costs Like other organizations, the Tax Section must control costs and get the most out of every dollar we spend. I am pleased to report that with the savings realized by the transitioning of the newsletter to electronic format and the reduction of staff administrative costs, we are well positioned to cover the cost of maintaining the new website and of expanding the free, 24/7, audio video, CLE library as well as to cover the cost of travel and other expenses for the Tax Court Pro Bono Program and our other programs, ini- tiatives, and meetings well into the future. 6. Texas Federal Tax Institute Web-based CLE is an excellent tool, but there is no substitute for live, high quality CLE and the opportunity to network and to exchange ideas with your colleagues. The Texas Federal Institute is one of our best and most prestigious CLE programs. This year we are celebrating our 25th Anniversary. It will be held on June 11th and 12th at the Hyatt Hill country Resort in San Antonio.