NLNG Retirees Form Association


Retired members of staff of the Nigeria LNG Limited have united themselves under an association known as ‘NLNG Alumni Association,’ which has been registered with the Corporate Affairs Commission (CAC) as a legally recognised organisation.

According to a statement issued yesterday by the body, the association was formed with the sole aim of connecting with one another through strong relationship development between members of the association and the Nigeria LNG Limited, its subsidiaries and communities, among others.

It also instituted a five-man board of trustees (BOT) headed by Dr. Grant Akata, who retired as the Managing Director of NLNG Ship Management Limited (NSML).

Other members of the BoT are Mrs. Gloria Ita Ipkeme, Mrs Adesua Atanda, Alhaji Iliyasu Ibrahim Gadu and Captain Charles Ohanwe.

The group also said it has elected its leaders to run the affairs of the association on a three-year single term which is renewable for another term.

The names of the officials and their portfolios are: Charles Okon, Chairman; Yejide Wyse, Vice Chairman; Edith Unuigbe, Legal Adviser; Bako Nanzing, Secretary; Ismail Damisa, PRO; Tola Oluufemi, Welfare Officer; Patience Olojo, Financial Secretary/Treasurer; Tajudeen Lemboye, Internal Auditor; and Kayode Atanda, Ex-Officio Member.

Nigeria: Is A Lien Placed By FIRS On A Taxpayer’s Bank Account A Valid Encumbrance Against Garnishee Order?


The propriety of an administrative notice issued by the Federal Inland Revenue Service (“FIRS”), directing a bank to freeze an account of a customer allegedly in default of a tax obligation, seems to have been judicially settled [1]. Whether or not such an administrative notice constitutes a lien, which can operate to impede the attachment of an ‘encumbered’ bank account in a garnishee proceeding, however remains an open issue which we seek to analyze and answer in this article.

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The National Industrial Court of Nigeria (“NICN” or “the Court”), in Olusegun Omotosho vs. Japaul Oil & Maritime Services Plc (“Omotosho”) [2], recently held that an administrative notice issued by FIRS to a bank, ostensibly freezing the account of a party in a garnishee proceeding alleged to be in default of a tax obligation, cannot operate as aid or be elevated to the status of an order of court, and cannot therefore operate to frustrate an order of court or impede its efficacy.

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In this article, we examine the issues raised in the Omotosho case, and the ruling of the NICN vis-à-vis relevant statutory provisions and judicial precedents.

The Omotosho Case

In the Omotosho matter, the judgment creditor brought an application to attach funds in certain bank accounts maintained by the judgement debtor, in satisfaction of a judgment debt. The court issued a garnishee order nisi and ordered each relevant bank to file an affidavit to show cause, why the order nisi should not be made absolute. One of the banks disclosed in its affidavit that, although it held funds in the judgment debtor’s account, that the funds were not available for the purpose of the garnishee proceedings; due to lien placed on the account by the FIRS.

On his part, the judgement creditor argued that the FIRS’ directive, being an administrative notice, could not impede or frustrate the order nisi being made absolute. The judgment creditor further contended that the administrative notice of the FIRS could not oust the jurisdiction of the court to decide the case before it.

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The court agreed with the judgement creditor and proceeded to make the order nisi absolute. The NICN noted that an order of court is superior to an administrative notice or other communication issued to a party in a proceeding before the court.


Whilst the NICN decision in Omotosho may raise concerns as to whether a garnishee order nisi should constitute a carte blanche for a judgment creditor to take funds that are otherwise encumbered; we believe that the proper issue for consideration should be whether an administrative directive of the FIRS, which directs a bank to freeze a taxpayer’s bank account (without the backing of a court order) could create a legally enforceable and or defensible lien, recognizable by a court of law.

Ordinarily, a lien (whether statutory or equitable) created over a bank account that is subject of a garnishee proceeding, should constitute constructive notice of the interest of a third party and therefore should be taken into consideration by a court of law. However, the legal weight to be attached to such lien would be determined by the validity of the process by which the lien was created.

Section 8(1)(g) of the FIRS (Establishment) Act, 2007 (the “Act”) empowers the FIRS to adopt any measure to identify, trace, freeze, confiscate or seize proceeds derived from tax fraud or evasion. Further, under section 31 of the Act, the FIRS has power of substitution, whereby it may, by a written notice, appoint a person having custody of a taxpayer’s property (such as a bank) as an agent for recovering “any tax payable” to the FIRS.

There may be a presumption that emanates from a combined reading of sections 8(1)(g) and 31 of the Act, that FIRS has a statutory right of lien over a bank account which belongs to a defaulting taxpayer. Such presumption would however be rebuttable or may be flawed, if due attention is paid to the fact that the operative words in both sections are “tax fraud or evasion” and “any tax payable”.

In other words, FIRS’ right of lien does not, in all cases, cover the entire fund in an encumbered taxpayer’s bank account; except such amount equivalent to the sum of tax that has become final and conclusive. This clearly suggests that a court of competent jurisdiction must have first tried and found the taxpayer guilty of either tax fraud or evasion and the taxpayer’s right of appeal must have been fully exhausted.

Thus, we believe that the powers of the FIRS to freeze or restrict a defaulting taxpayer’s bank account, is exercisable only in relation to an amount equivalent to a tax assessment, which has been determined to be final and conclusive, and such power must be exercised pursuant to a valid and subsisting order of court. This was the substance of the decision in Ama Etuwewe, Esq. (Carrying on legal practice under the name and style of Ama Etuwewe & Co.) v Federal Inland Revenue Service & Guaranty Trust Bank Plc [3], considered in our Tax Alert 09 on the proper exercise of the powers of the FIRS to freeze defaulting taxpayers’ accounts and appoint banks as tax collecting agents.

We opine that the powers vested in the FIRS under sections 8 and 31 of its enabling Act is exercisable subject to restrictions. Thus, the creation of a lien pursuant to the powers conferred on the FIRS by virtue of the relevant provisions of its enabling statute, without more, is defective and of no moment, as pronounced in the Ama Etuwewe matter and held in the Omotosho case.

Further, an administrative notice of the FIRS, issued pursuant to the sections of its enabling statute, is subordinate to a court order, and only applicable in distraining funds held in a bank account in satisfaction of a tax obligation.

Excess Dividend Tax is illegal –Expert

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The Finance Act and oversight functions of tax authorities came under heavy hammer Thursday in Lagos  as the pioneer president of Chartered Institute of Taxation  of Nigeria (CITN), Chief Ajibola Olorunleke, adjudged the Excess Dividend  Tax provision as illegal, just as Dame Gladys Simplice, the current helmsman,  urged tax regulatory activities to be centralised.

According to Olorunleke, there is nothing like excess dividend tax in the tax laws.” I don’t know who coined it to be excess dividend tax”! He queried.

The ex-CITN boss, who stated this during  2020 Business Luncheon organised by the institute, explained what is misconstrued in the tax law.

His words: “I have no doubt that many of us have been having issues with our taxes, particularly the tax laws and some interpretations of some of the provisions. Of recent, for example, I was in Abuja recently, I heard people talk about Excess Dividend Tax. And  I said there is nothing like excess dividend tax in our tax laws. I don’t know who coined it to be Excess Dividend Tax. There is no tax on excess dividend.

“The tax, actually, is for- if instead of paying taxes, you are given reliefs, capital allowances. And instead of taking the relief, that is, paying no dividend, you go ahead and pay dividend. Then the government says, ‘if you can afford to pay dividend, you can also afford to pay tax on that dividend because the government is giving you relief on capital allowances.’ And so, if you are healthy enough to now pay dividend, you should be healthy enough to also pay taxation. lt is, therefore, not Excess Dividend Tax! It is your sacrificing what the government has given you as relief and, therefore, we believe that you have the capacity to pay dividend, you should have capacity to pay government tax as well. These are some of the things that many of the people in the tax world take advantage of without regard to what you need to do to help the  government  improve its resources.”

Under the Companies Income Tax – The Finance Act amends the Third and Seventh Schedules of the Companies Income Tax Act (CITA) to –

Exempt from Excess Dividend Tax (EDT)

(a) dividends paid out of exempted profits or retained earnings previously subjected to tax,

(b) distributions made by real estate investment companies to their shareholders and dividend incomes received on behalf of those shareholders.

KPMG, in its impact analysis of the Finance Act explains that “the Excess Dividend Tax (EDT) provision contained in the CITA is intended as  an anti-tax avoidance rule that creates a minimum level of protection against corporate tax avoidance using aggressive tax planning schemes.  “According to the rule, dividends paid by a company in any year should be deemed to be that company’s taxable profit for the year, if the actual taxable profits is less than the dividend paid in the same year.

A strict interpretation of this , according to KPMG,  is that “the provision has sometimes resulted in further taxation of profits that have already suffered tax, i.e., after-taxprofits transferred to retained  earnings account. In some other instances, this provision has been applied to dividends paid out of tax-exempt profits, thereby, effectively rescinding the tax-exemption on those profits.

“The unintended consequences of a strict interpretation of the rule has caused several disputes between taxpayers and the Federal InlandRevenue Service (FIRS), some of which have been adjudicated on by the courts in favour of the FIRS.

“The Finance Act seeks to mitigate the above incidence of (double) taxation by excluding certain profits from the rule. These profits includefranked investment income, after-tax profits, tax-exempt income and distributions made by Real Estate Investment Companies etc.

“That said, companies are encouraged to properly track  the sources of the dividends they declare (and possibly disclose these sources on their financial statements) in order to enjoy the exemptions. It may also be useful for some companies to update their current dividend policy to ensure alignment between the dividend paid to shareholders and the tax payable to government, requirement to pay income tax on interim dividend distributions.”

Simplice, on her part, condemned the duplicity of the tax regulation in the country, wondering  why these  activities could not be centralised.

Her words: “Are we not having too many operators; people would come to your factory, NAFDAC, will come; NDLEA will come; NESRA will come. All sorts of people will come. Are they not too many? Cant such regulatory activities be curtailed so that companies can concentrate on their core activity. We are having too many syndications from over the tax authorities. They are doing audit,  consultants are coming g,  monitors are coming; they are monitoring Withholding Tax. they will come back to say they are monitoring VAT. Almost at the same time sending you desk audit bill. Is this not cumbersome for companies to deal with? These are the things we need to look at.”

Fowler, FIRS chairman, elected president of African tax body

Fowler, FIRS chairman, elected president of African tax body

Babatunde Fowler, executive chairman of the Federal Inland Revenue Service (FIRS), has been elected president of the African Tax Administration Forum (ATAF).

At the election, which held in Pretoria, South Africa, on Wednesday, Fowler polled 13 votes ahead of the four secured by his Togolese opponent.

In his acceptance speech on behalf of Nigeria, Fowler pledged to expand the membership of the Forum for  the continent’s development.

“Our goal shall be to aid the generation of revenue efficiently and sufficiently for the growth of all members,” Fowler said.

An official of Mauritius was voted vice-president.

Also elected into the 10-country council were South Africa, Ghana, Burundi, Uganda and Liberia.The 36 member-forum is made up of tax collecting agencies across Africa

FIRS Solicits Lagos Support For Revenue Target

The Federal Inland Revenue Service (FIRS) on Tuesday solicited the support of Lagos Inland Revenue Service (LIRS) to meet the N8.5trillion target given to it by President Muhammadu Buhari to fund the 2020 budget.

It also said some multinational companies refused to declare their profits, thereby defaulting in tax payment since 2011. It called for collaboration with the Lagos State government to tackle the problem.

FIRS Executive Chairman, Muhammed Nami, stated these during a visit to Governor Babajide Sanwo-Olu at Lagos House, Alausa, Ikeja.

Nami called for strategies on how to increase the Internally Generated Revenue (IGR) of the administration to accelerate the growth and development of the country.

He said: ” The last time some of the multinational companies in Nigeria declared their profit and debt taxes goes as far back as 2011. We are of the view that with you being their host, we should be able to map out strategy on how to tackle these issues.’’

“These are companies that most of their products are consumed daily in our houses, they will come here, do business, go back to their country and leave us with huge responsibility of providing security for their businesses and other infrastructure to enhance an atmosphere to operate optimally.

“We are all aware that the president has given us an unusual target of N8.5trillion to collect to fund the budget, we feel this is a huge task in view of the fact that the tax average to GDP in Africa is as huge as 17 per cent.

“In Nigeria which is the first economy, we have just 6 per cent tax ratio to GDP. It’s becomes a challenge also that the second largest economy in Africa has a tax ratio to GDP in the region of 27 to 28 per cent. This becomes an issue because most of the companies that get tax spectrum are all based in Nigeria.

“We want to request that the internal revenue in Lagos state share certain information with us so that we can collaborate in not only generating income for the country but also building capacity for the staff of FIRS and IRS, we feel without this collaboration we hardly can generate N8.5trillion that we have been instructed to collect by the president.”

In his remarks, Sanwo-Olu pledged continued collaboration with the FIRS to move tax administration forward in the country.

The governor commended President Muhammadu Buhari for approving tax exemptions on some category of businesses, goods and services.

He promised that the state will judiciously utilize its Federal Allocation, and appealed to citizens, corporate bodies to pay their taxes promptly for government to be able to deliver on its responsibilities.

Here’s a way to beat the tax burden for IRA heirs

  • The Secure Act of 2019 eliminated many of the advantages the so-called stretch IRA offered heirs.
  • A Roth IRA conversion can ease what amounts to a “tax-aggedon” but has its own drawbacks.
  • There are several ways to ease a Roth tax bite, including converting in a year when high-deductible health expenses reduce taxable income.
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New federal rules for individual retirement accounts greatly increase the tax burden for some heirs by telescoping the allowable period for withdrawals. Yet this pain can be greatly reduced by converting regular IRAs to Roth IRAs before bequeathing them.

Previously, all heirs had their entire life expectancy to take withdrawals from inherited IRAs, so they were able to stretch out these accounts, and the tax on withdrawals, over decades. Hence, the nickname for inherited accounts: stretch IRAs.

This changed in December, when Congress passed the Secure Act of 2019. The act preserves the lifelong stretch period for surviving spouses, minor children, the chronically ill and other individuals who aren’t more than 10 years younger than their benefactors; the latter category would include most siblings.

But for other heirs, including adult children, the new rules limit the stretch period to a single decade. Starting with the IRA bequests from benefactors who die this year, heirs are now required to withdraw all money from these accounts within 10 years and pay ordinary income tax on each withdrawal in the year that they take it.

The new law means that, along with their accumulated wealth, those who bequeath substantial IRAs to their adult children now may be leaving them a huge tax burden. This greatly increases the need for estate-planning strategies to lighten this load.

Even before the new legislation, leaving heirs an IRA meant passing along some of your own lifetime income tax liability, as contributions to these accounts are tax-deferred. Yet the stretch rules, which allowed heirs virtually the rest of their lives to pay these taxes while continuing to get investment gains, minimized this tax burden by spreading it out for so long.

Here’s why that tax refund might not be a good thing

Now, this inherited wealth can come with significantly more baggage, and affected heirs will typically feel its weight almost immediately. Most will likely withdraw one-tenth of the IRA’s assets every year for 10 years to spread out the tax impact.

For example, let’s say an individual has a household income of $100,000, and inherits an IRA with $500,000 in assets (and that the account retains this value for 10 years). If this heir withdraws 10% per year, these withdrawals would increase his or her gross income by 50% each year — likely pushing them into a much higher bracket. Before the new rules, heirs could stretch withdrawals until they stop working and enter a lower tax bracket.

A good solution for many is to convert their regular IRA into a Roth IRA. Unlike regular IRAs, which are funded with pretax income, contributions to Roth IRAs are made solely with post-tax money. Though unlike regular IRAs, Roth IRAs carry no income tax on withdrawals, the Secure Act means they, too, will now have to be depleted within 10 years of inheritance.

A Roth conversion might be a good option, not only to minimize heirs’ tax burden but also to sustain the growth of your retirement nest egg.
David Robinson

Roth conversions have long been the choice of considerate benefactors mindful that, in leaving heirs an IRA, they were passing along the annoyance of paying tax on the income they invested. Now that the rules have shrunk the stretch option, this inherited liability is far more than a mere annoyance. It’s a “tax-ageddon.”

The institution that holds your IRA can set up a Roth conversion. As these conversions are a form of withdrawal, they can incur significant tax liability in the year that assets are converted. However, unbeknownst to many account holders, you can spread out this tax impact by moving IRA assets into a Roth gradually over multiple years.

Other strategies to ease the tax bite of Roth conversions include:

  • Converting after you retire into a lower income-tax bracket.
  • Taking advantage of a year when you have low taxable income by converting all or most the assets in that year, when your effective tax rate is lower than usual. If you own a small business, a year of low profits is probably a good year to convert.
  • Converting in a year when extremely high-deductible health-care expenses reduce your taxable income significantly. If you’ve had the misfortune of serious illness or injury and high uncovered medical expenses, you might as well use the resulting deductions to offset the tax impact of a Roth conversion.
  • For the charitably inclined, creating a donor-advised fund. Rules for these funds don’t require charitable contributions right away, but you can get a substantial deduction from just putting money into one; this deduction can offset tax liability from a Roth conversion the same year. You can decide later which charities you want to the fund to benefit.

Stakeholders berate CBN over $17 billion illicit financial flows

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Over one million illegal operators still active, says ABCON

Illicit Financial Flows (IFFs) out of Nigeria may not subside unless the Central Bank of Nigeria (CBN), takes a bold step in designing preventive measures and enforcing regulations that would curb commercial banks and individuals arbitrariness engaged in the crime.

The stakeholders, who gathered in Abuja, yesterday, to explore new frontiers in Nigeria’s anti money-laundering regime through effective use of data, alleged that the apex bank has not done enough in combating money laundering.

The Executive Director, Civil Society Legislative Advocacy Centre, Auwal Musa, insisted that money laundering and illicit financial outflows from Nigeria, which now hovers around $17 billion requires urgent action from CBN.

“Given its role as the regulator, it has the responsibility to regulate all the banks and monitor them, as well as ensuring that there is compliance. We have not seen much of that happening, because if it is happening, we will not see huge sums of money leaving the country. Someone is not doing what should be done.

“There is a need for CBN to tightening up. There is a need for CBN to bring in policies and legal framework that will deter looters from siphoning government’s money,” he said. Musa said growth in volume of financial transactions across borders, greater integration of world economies, frequently expanding or changing rules to manage new realities have greatly increased the spate and sophistication of money laundering worldwide and also in Nigeria.He pointed out that the number of prosecutions for financial crimes hit an all-time high in Nigeria in 2019.

According to him, though the Financial Intelligence Unit, having been made autonomous, has been positioned to deliver on its mandate and convictions arising from suspicious transactions reports, their record in this area is still abysmally low.

Acting President, Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, said over one million operators of Bureaux De Change in the country are not registered, and as such, short-change government in terms of taxes and illicit operations.

“There are over million unlicensed operators in the country. This excludes online operators that don’t even have location. Every licensed Bureaux de Change has an office, registered with the Corporate Affairs Commission, renders returns to CBN, and prepares audited account, pay taxes and others.

“This is what makes us different. We are under an umbrella body that protects our investment, empower compliance and enhance capacity,” he said.Gwadabe said the Association has recorded a sustained exchange rate devoid of volatility, speculation and fraud, adding that the group is seeking partnership that would address some of its inadequacies.

“In terms of office operations, we have automated our processes and can file returns online and in real time. As at last week, 2,288 licensed operators were able to file their returns live to the CBN portal.

“This is a big improvement. We have about 2,000 Bureaux de Change on the NFIU reporting portal, which is good in terms of compliance. That is also a big achievement. We are working on establishing an institute to address the issue of capacity gap.”Since our transactions are cash-based, we have a lot of vulnerability, but there is one thing the stakeholders always don’t look at and that is the knowledge that we are distinct from the unlicensed operators. This is a financial market that is bedevilled by a lot of people that are out to break the rules,” he added.

Noting that terrorism financing is eminent across some African countries, ECOWAS Information Officer, Timothy Malaye, said the regional body is working to address the menace.He also noted that addressing the issues of illicit financial flows remained a critical step to crippling terrorism, as the move would cut insurgents from funding sources.
Melaye said there was a need to prevent money laundering and take away the proceeds of such crimes from the perpetrators.

Why the government is planning a tax raising Budget


Tory activists are in uproar this morning over varying reports of tax raising measures Boris Johnson and Sajid Javid are considering for next month’s Budget. Plans currently being mooted include cuts to pension tax relief and the introduction of a recurring property tax  that could replace stamp duty. Critics have been quick to say that neither proposal fits with what the Tory party traditionally claims to want to do – rather than new taxes and limits Johnson ought to be pushing for tax cuts.

However, the view in both No. 10 and No. 11 is that this is the year for tough – and potentially unpopular – decisions. Given the Conservative party won’t be heading to the polls for another four years, there’s a sense in the upper echelons of government that now is the best time to do something radical. As I reported earlier this month, the Treasury is looking at tax-raising measures that will allow Javid to stick to his fiscal rules and deliver Johnson’s agenda. The first year of a government is seen as the best time to bring in measures that will upset some voters. If they can bring in extra revenue, it will give the chancellor more flexibility on day-to-day spending.

Yet what’s intriguing about many of the ideas being discussed is that they don’t fit with a Thatcherite approach to stimulating the economy – if anything they could be mistaken for Labour policies. Tories had argue, for example, that the top-paid were contributing record amounts: Boris Johnson started his leadership campaign by talking about cutting taxes for the best-paid by lifting  the 40 per cent (higher rate tax) threshold to £80,000.

But times change (fast) – and so does the demographic of Tory voters. As Johnson frequently likes to remind colleagues, in the 2019 election the party won many seats in the Midlands and North that have been traditionally Labour. This is where his team see their opportunity in the future – by keeping these voters on side they could make history and win a fifth term in office.

But with a new type of voter comes a new approach. In the manifesto, the Tories promised an increase in public spending. No. 10 believes that higher spend is necessary, but the argument runs deeper: there’s also a sense that the Tory ideal of Thatcherism is of the past and another way forward has to be found to keep the party’s new voters on side. A lot of Tory MPs are already reluctantly resigned to the idea that low taxes and rolled back state interference will not be a hallmark of this government. Philip Hammond’s last budget, for example, envisioned the tax take (as a share of GDP) rising to a 35-year high.

That doesn’t mean all the measures being discussed will definitely make it into the Budget. The idea of a recurring property tax is divisive and could even test Johnson’s large majority. It has been raised privately in government as part of discussions on axing stamp duty – which ministers believe paralyses the market and leads to fewer transactions. But a recurring property tax would quickly be dubbed a mansion tax and lead to a backlash from voters in the south with high value properties that would cost the most.

Johnson’s government has suggested already that it is willing to put a few noses out of joint in the south in order to pursue its level up agenda in the so-called red wall. How radical this government chooses to be in the first Budget since winning a majority of 80 will tell us how serious Johnson really is about prioritising his new voters

Tax Court Denies Millions In Easement Deductions


Federal Tax Court

Both cases illustrate two of Reilly’s Laws of Tax Planning. The Fourth Law – Execution isn’t everything, but it’s a lot. And the Eleventh Law – Pigs get fed. Hogs get slaughtered. And in the Carter case the IRS runs into the Fourth Law saving the Carters and their partner from hefty penalties. We’ll tackle the Carter case in this post and save Railroad Holdings for another day.

The Plantation

The Carters owned 50% of Dover Hill Plantation LLC with Ralph Evans who was also a petitioner in the case. With only two partners, TEFRA does not apply. The Carters faced deficiencies for the years 2011, 2012 and 2013 totaling $1,975,450 and almost $800,000 in penalties. Evans was looking at $2,668,247 in additional tax for 2011 and 2012 and over a million in penalties.

Today In: Money

In 2005, DHPLLC had purchased a 5,245-acre tract of land in Glynn County, Georgia, known as Dover Hall. For the life of me, I don’t understand why contemporary Americans naming property in the Southeast are attracted to the word “plantation” which for me has the connotation of “forced labor camp”. With respect to Dover Hall, that is rather explicit as we can see from this 1845 inventory of the estate of Thomas Dover which includes 74 enslaved people to whom a dollar value was assigned.

More colorful aspects of the history of Dover Hall include being shelled by those damn yankees on the USS Saratoga in 1864. There is also a long story about its association with baseball great Ty Cobb. All that is inherently more interesting than the tax story, but unfortunately out of my lane.

DHPLLC donated a conservation easement to the North American Land Trust. It covered 500 acres on the western edge of Dover Hill. The purposes of the easement are:

“(1) the preservation of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem and (2) preservation of the covered property as an open space that will provide a significant public benefit by (a) providing scenic enjoyment to the general public and (b) advancing a clearly delineated governmental conservation policy”.

Among the things that can’t be done is the building of residences. There is this little exception though. Subject to NALT’s approval 11 two-acre house lots can be carved out for residences – location to be determined later. This is where the Eleventh Law comes into play. There were millions of dollars in tax deductions at stake. Why not just make up your mind now and have the easement apply to 478 acres?

The Holes In The Cheese

The discussion of the case law that governs whether reserving that sort of option kills the deduction is pretty engaging. My favorite part was the Swiss cheese analogy:

As relevant here, the developer could consider two techniques for putting new holes in the cheese. First, he could put new holes in the cheese and make up for it by adding an equal amount of previously unprotected land to the conservation area. That was the pattern in Belk. Alternatively, he could put new holes in the cheese and make up for it by plugging the same number of holes elsewhere in the conservation area. That was the pattern in Bosque Canyon and in the instant case. In each instance the acreage subject to the easement remains exactly the same. But in both instances the developer has achieved the impermissible objective of putting new holes in the cheese, i.e., subjecting to commercial or residential development land that was supposed to be protected in perpetuity from such development.

To be fair to the planners, the case law discussed all came down after the donation was made. So who knew that the holes couldn’t be moved around?

Nonetheless I think the Fourth Law is also relevant here. The whole deduction was killed by that relatively small tweak, which smacks of poor execution.

The Penalty

Poor execution by the IRS saved the taxpayers from the penalty. The IRS agent working the case sent Letters 5153 and revenue agent reports to the taxpayer asserting the penalty before getting written approval from the supervisor. Code Section 6751 requires that the supervisory approval precede the “initial determination” of the penalty.

The argument was about what constitutes the “initial determination”. The IRS argued that it is when a thirty day letter is issued. Given that the committee report indicates that one of the purposes of the requirement is to prevent penalty assessment from being used as a bargaining chip, it seems like it is a pretty fair result.

To be fair to the agent, the case law on 6751 is all recent, although the section has been around since 1998.

Other Coverage

Bloomberg Tax has something behind its paywall as does Law 360.

Lew Taishoff has Swiss Cheese noting the same thing I did. He discusses the penalty issue in his usual colorful style.

“A Letter 5153 is a transmittal for the RAR, telling the addressee to pay up, talk about payment plans, or extend IRS’ time to assess tax to let Appeals have a whack; but if the addressee does nothing by a date certain, IRS will give them a SNOD at no extra charge.

That’s enough for Judge Big Jim. That the Boss Hoss signed off eleven (count ‘em, eleven) days later doesn’t help. So substantial valuation misstatement chops go by the board.”

Nigeria earned N1.17tn from VAT in 2019 – CBN

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Between January and December 2019, the Federal Government generated the sum of N1.17tn from Value Added Tax.

When compared to the target of N1.7tn set by the Federal Government in the 2019 budget, the amount represents a shortfall of about N530bn.

A breakdown of the N1.17tn VAT revenue, as contained in the Central Bank of Nigeria economic report, showed that the sum of N301.62bn was generated by the Federal Inland Revenue Service in the first quarter of 2019.

However, during the second quarter, the VAT revenue dropped by N6.13bn from the first quarter figure of N301.62bn to N295.49bn.

In the third quarter of the year, VAT revenue also witnessed a decline of N4.62bn from N295.49bn in the second quarter to N290.87bn in the third quarter.

The trend also continued in the fourth quarter of 2019 as VAT revenue dropped by N2.92bn from N290.87bn in the third quarter to N287.93bn.

The inability of the government to raise the much needed revenue to finance its operation was one of the reasons for the increase in the Value Added Tax from five per cent to 7.5 per cent.

The 7.5 per cent VAT rate, which the government started implementing on February 1 is being planned to generate about N2.08tn revenue in the 2020 fiscal period.

Out of this N2.08tn, the Federal Government alone will receive about N315.47bn representing 15 per cent, states N1.04tn representing 50 per cent while the Local Government Councils will get N751.43bn or 35 per cent.

The VAT increase, which is meant to help government achieve its revenue projections for the 2020 budget is a part of the tax reforms included in the 2019 Finance Act.

With the Act, it is expected that there will be more revenue to finance key government projects, especially in the areas of health, education and critical infrastructure.

Among the strategic objectives of the Finance Act is the supporting of Micro, Small and Medium Enterprises in line with the ease of doing business reforms such as VAT threshold.

Speaking during a breakfast programme on the Nigerian Television Authority monitored by our correspondent, the Executive Chairman of the FIRS, Mohammed Nami, urged all businesses to ensure that they registered with the FIRS for VAT purpose.

He said any business that failed to obey the tax law would have to face the wrath of the tax authorities.

He said, “It’s your statutory responsibility whether you just register today with Corporate Affairs Commission, to come over to the Federal Inland Revenue to register as VAT agent. That is the first responsibility.

“The second responsibility is that you should keep a good record of your transactions because if you don’t keep good records and eventually during the compliance process and monitoring process it is discovered that you have traded well above N25m, the taxes will be paid in arrears.”

He said the VAT Act already exempted pharmaceuticals, educational items, and basic commodities.

Some of the basic food commodities, according to section 46, are brown and white bread, cereals including maize, rice, wheat, millet, barley and sorghum, and fish of all kinds.

Others are flour and starch meals, fruits, nuts, pulses and vegetables of various kinds, roots such as yam, cocoyam, sweet and Irish potatoes, meat and poultry products including eggs, milk, salt and herbs of various kinds, and natural water and table water.