Reports From My Nanocosm

The House passed an economic stimulus bill today. It includes the slap-down of Treasury Notice 2008-83 that the House Ways and Means Committee had previously included. I hope the conference with the Senate disallows all reliance on the notice.

H.R.1

American Recovery and Reinvestment Act of 2009 (Introduced in House)

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PART 4–CLARIFICATION OF REGULATIONS RELATED TO LIMITATIONS ON CERTAIN BUILT-IN LOSSES FOLLOWING AN OWNERSHIP CHANGE

SEC. 1431. CLARIFICATION OF REGULATIONS RELATED TO LIMITATIONS ON CERTAIN BUILT-IN LOSSES FOLLOWING AN OWNERSHIP CHANGE.

(a) Findings- Congress finds as follows:

• (1) The delegation of authority to the Secretary of the Treasury under section 382(m) of the Internal Revenue Code of 1986 does not authorize the Secretary to provide exemptions or special rules that are restricted to particular industries or classes of taxpayers.

• (2) Internal Revenue Service Notice 2008-83 is inconsistent with the congressional intent in enacting such section 382(m).

• (3) The legal authority to prescribe Internal Revenue Service Notice 2008-83 is doubtful.

• (4) However, as taxpayers should generally be able to rely on guidance issued by the Secretary of the Treasury legislation is necessary to clarify the force and effect of Internal Revenue Service Notice 2008-83 and restore the proper application under the Internal Revenue Code of 1986 of the limitation on built-in losses following an ownership change of a bank.

(b) Determination of Force and Effect of Internal Revenue Service Notice 2008-83 Exempting Banks From Limitation on Certain Built-in Losses Following Ownership Change-

• (1) IN GENERAL- Internal Revenue Service Notice 2008-83–

• • (A) shall be deemed to have the force and effect of law with respect to any ownership change (as defined in section 382(g) of the Internal Revenue Code of 1986) occurring on or before January 16, 2009, and

• • (B) shall have no force or effect with respect to any ownership change after such date.

• (2) BINDING CONTRACTS- Notwithstanding paragraph (1), Internal Revenue Service Notice 2008-83 shall have the force and effect of law with respect to any ownership change (as so defined) which occurs after January 16, 2009 if such change–

• • (A) is pursuant to a written binding contract entered into on or before such date, or

• • (B) is pursuant to a written agreement entered into on or before such date and such agreement was described on or before such date in a public announcement or in a filing with the Securities and Exchange Commission required by reason of such ownership change.

Update: This made it through the Senate and conference session, and was signed into law by President Obama.

Tags: 2008-83, economy, policy, politics

California is getting some much needed rain in the lowlands and snow in the mountains. We need it badly. In fact, it would be very nice of mother nature to drop some snow onto the mountain snowpack everyday from now until May. That might help make up for our drought and fill our nearly empty reservoirs. Last I read, this has been one of the driest Januaries on record in California.  Most troubling is that the snowpack, our biggest reservoir, is below normal. An inadequate snowpack means less water for consumers come summer and fall.

In addition to a thin snowpack, California is entwined in a series of ecological and legal battles affecting our water supply. The most contentious are the battles over water from the Sacramento and San Joaquin Rivers Delta, affectionately and simply called “The Delta” by Central Californians. The Delta supplies water to irrigate more than 3 million acres of farmland and two-thirds of California residents. The Delta ecosystem is in distress due to a number of causes including from the pumps that extract huge volumes of water for use elsewhere in the state. Those pumps have been turned down in recent months after a recent string of legal wins for Delta environmental interests and, as a result, less water is now sent West to the San Francisco Bay Area and South to farmers in the San Joaquin Valley and cities in Southern California.

Needless to say, water agencies are now scrambling to find alternative supplies and convince water consumers to use less. Come summer we are all likely to see large scale water rationing. That might include limits on what water can be used for (such as landscaping) and even no deliveries to some water users.

I expect (or should I say hope) that the State Water Resources Control Board (SWRCB) also gives a serious look at what it considers a reasonable use of water. The California Constitution requires that water be used for beneficial and reasonable purposes. If not reasonable, a person’s water rights can be voided.

Consider, for example, the case of alfalfa a perrenial crop used as feed for cows and other grazing animals. Each acre of alfalfa requires 5 acre feet of water per year. An acre foot is the measurement used for large volumes of water. Each acre foot per year can support about 4 people in an urban setting.  Agriculture consumes 80% of water in California and alfalfa farming constitutes 15% of that amount. In other words, 12% of water consumed in California is used to grow alfalfa. The SWRCB should ask whether alfalfa farming during a drought is a reasonable use of water. I won’t make a decision without more information but think a formal review should at least be undertaken. Farmers who grow alfalfa argue that alfalfa is actually more efficient than other crops with comparisons such as: “303 pounds [of alfalfa], vs. 109 pounds for rice and 31 pounds for almonds, per inch of applied water.” The problem I have with that argument is they compare an item humans cannot consume to two other items we do. Scientific studies should determine the amount of human consumable food stuff, such as beef or milk, attributable to each pound of alfalfa and through that per inch of water. Without reliable scientific studies it sounds like growing alfalfa wastes water. To be fair, SWRCB also needs to look at urban landscaping (lawns mostly) which also consumes about 12% of water in California.

I wrote a paper last semester** on the precarious nature of one water agency’s water supply – Westlands Irrigation District. Westlands is the largest and one of the richest agricultural districts in the country but has a dirty little secret. Its soil drains poorly and contains high levels of salts and trace elements such as selenium and arsenic. If not drained properly (farmers want to drain their land into the Delta) then the land eventually becomes unusable and ground water too contaminated to use. In addition, the trace elements and salts are toxic to wildlife in high concentrations such as what is found in drainage water. Westlands is hardly alone in the Central Valley when it comes to poor drainage and salty soil. So the question is whether it is reasonable for the Central Valley Project (Federal reclamation project) to provide water to irrigate land with bad soil that drains poorly.
My conclusion:

“California is reaching the limit of its water supplies and will collectively need to readjust who gets water and for what purpose. By exploring the precarious nature of water availability to the largest water customer, Westlands Water District, of the largest federal reclamation project, I demonstrated just a few of the many ways access to water by a water user might be threatened by our changing times. In truth, Westlands is a proxy for any other water user, big or small.

In short, Westlands is likely to come out on the short end of the battle over Delta water. It has low priority and is subordinate to the established water rights of riparians, appropriators senior to the CVP, and exchange contractors. In times of shortage, which sound more likely with global warming, it will share the lesser amounts of water available on a pro-rata basis with other water service contractors. Furthermore, there is a chance the SWRCB finds the irrigation of salty soil with poor drainage to be an unreasonable use. Westlands can force the Bureau to create a drainage solution but any plan to complete the San Luis drain is likely to run into obstacles. And, if the Bureau has too hard a time building a drainage solution, it may back out of the contract through section 11(a) which spares it liability for decreasing water allocations. Regardless of whether the drain is ever built, environmental interest groups and government agencies tasked with protecting wildlife and keeping water clean will be watching for potential violations of laws such as FESA.”

** I should note that, although I did hand it in, I consider this paper a rough draft. It is not my best paper. I only have myself to blame as I wrote it in less than two days using the ream of research I compiled after finishing my tax paper.

BTW: Are you feeling smug because you’re in a Great Lake state where there is plenty of water? Don’t be. Not taking care of the resources you have might give parched Western states a way to void the recently signed Great Lakes compact. The compact can be improved and your water resources even more protected than they are. In fact, consider the damage you’re doing to your waterways by using salt on your roads during winter. The argument that you are likely to hear again in your lifetime is that “Look at those Great Lakes folks with too much water. They just want to hoard the water and keep it to themselves. But look at them, they don’t manage or use the water properly and let it go to waste. We can do better.”

Tags: california, environment, law school

Don’t forget your slippahs and to take better ones when you leave

Dang, they’re quick. I guess this is what happens when a Hawaiian moves into the White House.

Tags: funny, obama, politics

Joseph Campbell once said that if you want to change the world you must change the metaphor. Campbell spoke of religion but that wisdom seems to transfer to politics as well.

Barack Obama, 44th President of the United States, is above all a metaphor. He is a metaphor for everything and anything you or I want him to be. He is a metaphor for, among other things, hope, dreams no longer deferred, a melting pot, America, the unknown, and the anti-christ. As a metaphor, like Santa Claus, he has huge expectations placed on him, a nation who believes in him, and the world watching. Regardless of who Obama really is, through the power of metaphor we have projected upon him what we want and need him to be.

Good luck Mr. Obama. We have changed the metaphor; here’s to changing the world for the better as the result.

Tags: metaphor, obama, politics

It looks like Congress is about to squelch Treasury Notice 2008-83 but will provide a gift to banks that already relied on it. I think of it as much a parting gift to outgoing Treasury Secretary Paulson.

The draft economic recovery/stimulus package that is starting to wind its way through Congress essentially says that the Treasury Department went beyond its powers by issuing Notice 2008-83 but that banks that already relied on the tax guidance provided by the notice may still take advantage of the huge tax breaks it provides them.

Relevant text from the bill:

PART 4 â?? CLARIFICATION OF REGULATIONS RE-LATED TO LIMITATIONS ON CERTAIN BUILT-IN LOSSES FOLLOWING AN OWNERSHIP CHANGE

SEC. 1431. CLARIFICATION OF REGULATIONS RELATED TO LIMITATIONS ON CERTAIN BUILT-IN LOSSES FOLLOWING AN OWNERSHIP CHANGE.
(a) FINDINGS.â??Congress finds as follows:
(1) The delegation of authority to the Secretary of the Treasury under section 382(m) of the Internal Revenue Code of 1986 does not authorize the Secretary to provide exemptions or special rules that are restricted to particular industries or classes of taxpayers.
(2) Internal Revenue Service Notice 2008â??83 is inconsistent with the congressional intent in enacting such section 382(m).
(3) The legal authority to prescribe Internal Revenue Service Notice 2008â??83 is doubtful.
(4) However, as taxpayers should generally be able to rely on guidance issued by the Secretary of the Treasury legislation is necessary to clarify the force and effect of Internal Revenue Service Notice 2008â??83 and restore the proper application under the Internal Revenue Code of 1986 of the limitation on built-in losses following an ownership change of a bank.
(b) DETERMINATION FORCE EFFECT OF INTERNAL REVENUE SERVICE NOTICE 2008â??83 EXEMPTING BANKS FROM LIMITATION CERTAIN BUILTâ??IN
LOSSES FOLLOWING OWNERSHIP CHANGE.â??
(1) IN GENERAL.â??Internal Revenue Service Notice 2008â??83â??
(A) shall be deemed to have the force and effect of law with respect to any ownership change (as defined in section 382(g) of the Internal Revenue Code of 1986) occurring on or before January 16, 2009, and
(B) shall have no force or effect with respect to any ownership change after such date.
(2) BINDING CONTRACTS.â??Notwithstanding paragraph (1), Internal Revenue Service Notice 2008â??83 shall have the force and effect of law with respect to any ownership change (as so defined) which occurs after January 16, 2009 if such changeâ??
(A) is pursuant to a written binding contract entered into on or before such date, or
(B) was described on or before such date in a public announcement or in a filing with the Securities and Exchange Commision required by reason of such ownership change.

Full Text of The American Economic Recovery and Reinvestment Plan

The bill was posted today and will be officially introduced by Rep. Rangel to the House Ways and Means Committee over the coming days. Apparently, this is hot off the presses. A Committee press release about the bill is dated Saturday, Jan. 17, 2009 although it does mention the bill blocking Notice 2008-83.

The AP provides more commentary on the stimulus package and the repeal of Notice 2008-83.

via Stimulus plan repeals big tax break for banks – washingtonpost.com.

House leaders moved this week to repeal the tax break for banks even as the Senate voted to help many of those same institutions by releasing the second $350 billion of the widely unpopular Wall Street bailout. Many lawmakers are unhappy with the results after the Bush administration spent the first $350 billion, making them wary of helping banks in the stimulus package.

…

Repealing the tax break would negate those savings in future bank mergers. It would not, however, affect mergers already under way, according to a summary of the stimulus package released by the tax-writing House Ways and Means Committee.

I personally think Congress should prevent any party from taking advantage of the guidance from Notice 2008-83. The banks that did knew or should have known that it was likely not legal, outside the powers of the Treasury Department, and would be slapped down by Congress. I wrote more about that in my last post about Notice 2008-83.

Related posts:

• Revenue Code Section 382: in the face of a financial crisis (presentation/outline of the tax policy issues)

• Revenue Code Section 382: in the face of a financial crisis (pt. 2) (paper)

Tags: 2008-83, policy, politics, taxes

Do you pay for text messages? If so, you are being scammed.

via Digital Domain – What Carriers Arenâ??t Eager to Tell You About Texting – NYTimes.com.

Perhaps the costs for the wireless portion at either end are high â?? spectrum is finite, after all, and carriers pay dearly for the rights to use it. But text messages are not just tiny; they are also free riders, tucked into whatâ??s called a control channel, space reserved for operation of the wireless network.

Thatâ??s why a message is so limited in length: it must not exceed the length of the message used for internal communication between tower and handset to set up a call. The channel uses space whether or not a text message is inserted.

Professor Keshav said that once a carrier invests in the centralized storage equipment â?? storing a terabyte now costs only $100 and is dropping â?? and the staff to maintain it, its costs are basically covered. â??Operating costs are relatively insensitive to volume,â? he said. â??It doesnâ??t cost the carrier much more to transmit a hundred million messages than a million.â?

Tags: internet

The University of Utah football team is the national champion of the NCAA Football Bowl Subdivision, the top level in college football, regardless of the outcome of tonight’s football game between the University of Florida and the University of Oklahoma. As the only undefeated team in the major conferences it is clear that Utah is the only team that can rightfully call themselves national champions.

No. 7 Utah beats No. 4 Alabama 31-17 in Sugar Bowl – College Football – Rivals.com
Brian Johnson and seventh-ranked Utah came down from the mountains to SEC country and established themselves as the best of the BCS busters, finishing 13-0 with a convincing 31-17 win over No. 4 Alabama in the Sugar Bowl on Friday night.

…

Yet, after winning the Mountain West Conference, the Utes were left out of the BCS national championship game in favor of perennial powers Florida and Oklahoma, even though both have one loss.

There is no reason to watch tonight’s game, except to take in another meaningless football game. So like many others across the nation, I’ll not bother to turn on the television because there is nothing at stake and my team (USC Trojans) is not playing. Oh, that and I really am boycotting college football as I said I would last year.

Time for a playoff. What other sport in the World crowns a champion with an arbitrary selection by people and computers without a head-to-head matchup? It doesnâ??t happen. Even boxing, fixed as it is, has head-to-head matchups.

Unfortunately, there are no financial incentives to change how things are. That is, until fans provide them. So I’m calling for a fan boycott. Yes, a fan boycott (again).

Boycott: How it will work

• Refuse to purchase any memorabilia or merchandise that has a logo of any college that participates in the NCAA Football Bowl Subdivision (list here). Also refuse to purchase any tickets to football games, including bowl games. I will not buy any more Trojan Gear until a playoff is installed. The ultimate decision is up to the school presidents of the big six leagues.
• Contact companies that sponsor your football team, the league they compete in, and the bowl games to declare your opposition to the bowl system and
• Target one specific company: FedEx
  • Contact its Customer Care (1-800-GoFedEx | 1-800-463-3339) and lodge your dissatisfaction with its sponsoring the Title Game and request it pressure the NCAA to form a football playoff it sponsors instead.
  • Companies are very concerned about image and a few thousand calls regarding its sponsorship will make it take notice.
  • As a last resort, if you want to go this far, is to switch your business.
• Refuse to watch the games. If anyone has power to convince schools, it is the TV networks that paid beaucoup bucks to broadcast the games. They depend on advertising revenue based on the number of “eyeballs” watching the broadcast. If those “eyeballs” were to not show up …

Until a playoff is installed, I’ll just divert more attention to studying and soccer (a.k.a. futbol).

Tags: random, usc trojans

it seemed like a good idea, originally uploaded by dfb.

I bought this wardrobe the day before my mom arrived for a two week visit. The hope was, and still is, to help organize our small apartment by helping to find a home for all the loose items hanging about such as the stroller and vacuum cleaner. It isn’t as unsightly as you see here (it has doors and a couple of shelves, not pictured) but is dwarfs the door.

It did not seem so big when we measured it all out. Unfortunately, it overwhelmed the entrance and clearly was a mistake next to the door.

My mistake forced us to rearrange the whole apartment while my mom was here. Sorry Mom. At least she got to spend time with the baby, albeit couped up indoors.

Tags: family