Minimum Competence - Daily Legal News Podcast
Minimum Competence
Tues 6/20 - Louisiana v. Tesla, Google v. Fake Review Mills, EU has Cum-Ex Solution, and Column Tuesday on New Jersey GILTI Regime

Tues 6/20 - Louisiana v. Tesla, Google v. Fake Review Mills, EU has Cum-Ex Solution, and Column Tuesday on New Jersey GILTI Regime

We have Louisiana putting a damper on Tesla, Google suing fake review mills, EU has a solution for rampant dividend-stripping fraud and Column Tuesday, where I have some thoughts about a tax law.

On this day, June 20th, in legal history, Lizzie Borden was found not guilty of the murders of her stepmother and father.

Lizzie Borden, born in 1860, stood trial for the murders of her stepmother and father in 1892. Although she was acquitted, she remains infamous for the crimes. The murders took place in Fall River, Massachusetts, on August 4, 1892, with Lizzie's father found on the living room couch and her stepmother in an upstairs bedroom. Both victims had been struck in the head with a hatchet. Lizzie claimed to have discovered her father's body shortly after he returned home, while the maid found the stepmother's body.

Lizzie had a strained relationship with her stepmother and had conflicts with her father over property division and the killing of her pigeons. Prior to the murders, the entire family fell ill, leading Mrs. Borden to suspect foul play. However, it was later determined that they had contracted food poisoning. Lizzie was arrested on August 11, 1892, indicted by a grand jury, and her trial began in June 1893. The hatchet used in the murders was found but lacked evidence, and the police mishandled the collection of fingerprint evidence.

During the investigation, no blood-stained clothing was discovered, but it was reported that Lizzie burned a blue dress that had been stained with paint. Due to a lack of evidence and certain testimonies being excluded, Lizzie Borden was acquitted on June 20, 1863. 

After the trial, Lizzie and her sister Emma lived together but eventually grew apart. Lizzie spent her last years unwell and her death went largely unnoticed. Speculation and theories abound regarding Lizzie's guilt, ranging from the maid committing the murders to Lizzie experiencing fugue state seizures. She is probably best remember by folks of a certain age for her prominent place in a rope-skipping rhyme that referenced the murders, which I won’t repeat here. 

A federal court in Louisiana has rejected Tesla's complaint against the state's ban on direct car sales. Tesla had filed a lawsuit arguing that the restriction on selling vehicles directly to consumers was protectionist and anticompetitive. However, the court ruled that the ban applied to all manufacturers equally, and Tesla failed to demonstrate any bias against the company by the Louisiana Legislature. This decision is part of Tesla's broader efforts to challenge direct sales bans in various states as it seeks to sell vehicles online or through its own stores instead of traditional dealerships.

Last week Florida Governor Ron DeSantis signed a similar bill that, there, excepted electric powered vehicles – which amounted to an exception for Tesla. The Florida legislation requires car manufacturers to rely on franchised dealerships for sales, but allows companies that already sell directly to customers, such as Tesla, to continue doing so. DeSantis and Tesla CEO Elon Musk have a friendly relationship, with Musk hosting DeSantis' presidential-campaign launch on Twitter. While traditional automakers still rely on dealerships, electric-car companies have been leading the way in direct-to-consumer sales.

Tesla loses bid to overturn Louisiana’s ban on direct car sales | Reuters

Ron DeSantis signed a bill that banned direct-to-consumer car sales in Florida — but left an exception for Tesla

Google has filed a lawsuit against a Los Angeles man, Ethan QiQi Hu, and his companies, alleging that he created numerous fake business listings on Google's platforms and sold them to real businesses to deceive customers. The lawsuit claims that Hu used props during video calls with Google agents to verify the sham businesses, such as a tool bench for garage repair listings and essential oils for fake aromatherapy businesses. Google accuses Hu of purchasing thousands of fake positive reviews to make the businesses seem legitimate. The company seeks monetary damages and an order to block Hu's alleged misconduct.

Fake reviews and the mills that generate them are an ongoing problem for online retailers. Amazon has filed legal complaints in Italy and Spain as part of its own global efforts to combat fake review brokers. Amazon is targeting individuals and operators involved in selling or facilitating fake reviews on its platform. In Italy, Amazon is pursuing a high-profile broker who allegedly built a network of individuals to post fake five-star reviews in exchange for a full refund, while in Spain, the company filed a civil complaint against AgenciaReviews for reimbursing customers in exchange for fake reviews. Amazon's actions in Europe are in addition to the increasing number of lawsuits filed in the United States.

New Google lawsuit aims to curb fake business reviews | Reuters

Amazon files legal complaints in Italy, Spain against fake review brokers | Reuters

The European Commission has put forward a proposal to simplify tax rules in order to prevent double taxation and address the fraudulent practices that led to the Cum-Ex and Cum-Cum tax scandals. The plan aims to streamline withholding tax procedures for cross-border investors, banks, and tax administrations, focusing on interest and dividend payments. The goal is to combat the complex structures used to avoid dividend taxes and seek multiple tax rebates, which have resulted in an estimated €150 billion in losses over the past two decades. The proposal also aims to simplify and expedite the process for taxpayers to receive refunds for excess taxes paid in other EU member states, with the introduction of a digital tax residence certificate and standardized refund procedures. The implementation of these measures is estimated to save investors approximately €5.2 billion annually. The proposal requires unanimous approval from member states and is expected to take effect on January 1, 2027.

I have written about the cum-ex fraud in Europe in the past. The fraud, a financial scam for a time exceedingly prevalent in the EU, exploits an information-delay problem in tax authorities. The fraud involves selling shares of a company with dividend rights but delivering them without dividend rights, resulting in multiple rebate claims for a single withholding tax payment. The scheme takes advantage of the gap in ownership information during the dividend payout period. Variations of the fraud exist in different countries, such as Germany and Denmark. Potential solutions to prevent such fraud include utilizing blockchain technology or implementing a shared database among all parties involved to provide real-time ownership information and ensure accurate withholding tax rebates. The solution should incorporate measures to synchronize clearing periods and incentivize parties to verify transaction details–we’ll see what the EU has up its sleeve when more details are announced. 

EU Aims to Streamline Tax Rules After Cum-Ex, Cum-Cum Scandals

Cum-Ex Frauds—An Information-Delay Problem

New Jersey is considering a tax bill, S3737, that would expand the permitted exclusion for the global intangible low-taxed income (GILTI) structure from 50% to 95%. The GILTI regime is a tax provision that targets profits earned by US multinational corporations from intangible assets, like patents and other intellectual property, held in low-tax jurisdictions; it is intended to curb the offshoring of highly-mobile intangible assets.This move goes against President Joe Biden's proposed budget, which aims to expand the GILTI regime and reduce exemptions. The justification for the bill is to align New Jersey's tax regime with neighboring states, New York and Connecticut, but this ignores the purpose of GILTI, which is to target assets easily moved to low-tax jurisdictions. 

Instead of gutting the GILTI regime, New Jersey should consider expanding it to include both tangible and intangible assets. By focusing on income from intangible assets, GILTI approximates the percentage of profits derived from them, but including tangible assets would create a more sensible proposal. 

Engaging in tax races to the bottom with neighboring states only benefits multinational corporations, while New Jersey could increase revenue by closing loopholes that allow profit shifting to low-tax jurisdictions. The bill also proposes changes to allocation factors for corporate filers and the adoption of the economic nexus threshold established under South Dakota v. Wayfair. However, these proposals are unrelated to the issues surrounding the GILTI regime. Expanding GILTI to include income from tangible assets would create a more effective and fair system and help onshore assets that would otherwise be lost to low-tax jurisdictions. 

New Jersey Tax Bill a Major Step Backward for Recovery Efforts

Minimum Competence - Daily Legal News Podcast
Minimum Competence
The idea is that this podcast can accompany you on your commute home and will render you minimally competent on the major legal news stories of the day. The transcript is available in the form of a newsletter at