How Private Equity Firms Avoid Taxes

There were two weeks left in the Trump administration when the Treasury Department handed down a set of rules governing an obscure corner of the tax code.

Overseen by a senior Treasury official whose previous job involved helping the wealthy avoid taxes, the new regulations represented a major victory for private equity firms. They ensured that executives in the $4.5 trillion industry, whose leaders often measure their yearly pay in eight or nine figures, could avoid paying hundreds of millions in taxes.

The rules were approved on Jan. 5, the day before the riot at the U.S. Capitol. Hardly anyone noticed.

The Trump administration’s farewell gift to the buyout industry was part of a pattern that has spanned Republican and Democratic presidencies and Congresses: Private equity has conquered the American tax system.

one recent estimate, the United States loses $75 billion a year from investors in partnerships failing to report their income accurately — at least some of which would probably be recovered if the I.R.S. conducted more audits. That’s enough to roughly double annual federal spending on education.

It is also a dramatic understatement of the true cost. It doesn’t include the ever-changing array of maneuvers — often skating the edge of the law — that private equity firms have devised to help their managers avoid income taxes on the roughly $120 billion the industry pays its executives each year.

Private equity’s ability to vanquish the I.R.S., Treasury and Congress goes a long way toward explaining the deep inequities in the U.S. tax system. When it comes to bankrolling the federal government, the richest of America’s rich — many of them hailing from the private equity industry — play by an entirely different set of rules than everyone else.

The result is that men like Blackstone Group’s chief executive, Stephen A. Schwarzman, who earned more than $610 million last year, can pay federal taxes at rates similar to the average American.

Lawmakers have periodically tried to force private equity to pay more, and the Biden administration has proposed a series of reforms, including enlarging the I.R.S.’s enforcement budget and closing loopholes. The push for reform gained new momentum after ProPublica’s recent revelation that some of America’s richest men paid little or no federal taxes.

nearly $600 million in campaign contributions over the last decade, has repeatedly derailed past efforts to increase its tax burden.

Taylor Swift’s back music catalog.

The industry makes money in two main ways. Firms typically charge their investors a management fee of 2 percent of their assets. And they keep 20 percent of future profits that their investments generate.

That slice of future profits is known as “carried interest.” The term dates at least to the Renaissance. Italian ship captains were compensated in part with an interest in whatever profits were realized on the cargo they carried.

The I.R.S. has long allowed the industry to treat the money it makes from carried interests as capital gains, rather than as ordinary income.

article highlighting the inequity of the tax treatment. It prompted lawmakers from both parties to try to close the so-called carried interest loophole. The on-again, off-again campaign has continued ever since.

Whenever legislation gathers momentum, the private equity industry — joined by real estate, venture capital and other sectors that rely on partnerships — has pumped up campaign contributions and dispatched top executives to Capitol Hill. One bill after another has died, generally without a vote.

One day in 2011, Gregg Polsky, then a professor of tax law at the University of North Carolina, received an out-of-the-blue email. It was from a lawyer for a former private equity executive. The executive had filed a whistle-blower claim with the I.R.S. alleging that their old firm was using illegal tactics to avoid taxes.

The whistle-blower wanted Mr. Polsky’s advice.

Mr. Polsky had previously served as the I.R.S.’s “professor in residence,” and in that role he had developed an expertise in how private equity firms’ vast profits were taxed. Back in academia, he had published a research paper detailing a little-known but pervasive industry tax-dodging technique.

$89 billion in private equity assets — as being “abusive” and a “thinly disguised way of paying the management company its quarterly paycheck.”

Apollo said in a statement that the company stopped using fee waivers in 2012 and is “not aware of any I.R.S. inquiries involving the firm’s use of fee waivers.”

floated the idea of cracking down on carried interest.

Private equity firms mobilized. Blackstone’s lobbying spending increased by nearly a third that year, to $8.5 million. (Matt Anderson, a Blackstone spokesman, said the company’s senior executives “are among the largest individual taxpayers in the country.” He wouldn’t disclose Mr. Schwarzman’s tax rate but said the firm never used fee waivers.)

Lawmakers got cold feet. The initiative fizzled.

In 2015, the Obama administration took a more modest approach. The Treasury Department issued regulations that barred certain types of especially aggressive fee waivers.

But by spelling that out, the new rules codified the legitimacy of fee waivers in general, which until that point many experts had viewed as abusive on their face.

So did his predecessor in the Obama administration, Timothy F. Geithner.

Inside the I.R.S. — which lost about one-third of its agents and officers from 2008 to 2018 — many viewed private equity’s webs of interlocking partnerships as designed to befuddle auditors and dodge taxes.

One I.R.S. agent complained that “income is pushed down so many tiers, you are never able to find out where the real problems or duplication of deductions exist,” according to a U.S. Government Accountability Office investigation of partnerships in 2014. Another agent said the purpose of large partnerships seemed to be making “it difficult to identify income sources and tax shelters.”

The Times reviewed 10 years of annual reports filed by the five largest publicly traded private equity firms. They contained no trace of the firms ever having to pay the I.R.S. extra money, and they referred to only minor audits that they said were unlikely to affect their finances.

Current and former I.R.S. officials said in interviews that such audits generally involved issues like firms’ accounting for travel costs, rather than major reckonings over their taxable profits. The officials said they were unaware of any recent significant audits of private equity firms.

For a while, it looked as if there would be an exception to this general rule: the I.R.S.’s reviews of the fee waivers spurred by the whistle-blower claims. But it soon became clear that the effort lacked teeth.

Kat Gregor, a tax lawyer at the law firm Ropes & Gray, said the I.R.S. had challenged fee waivers used by four of her clients, whom she wouldn’t identify. The auditors struck her as untrained in the thicket of tax laws governing partnerships.

“It’s the equivalent of picking someone who was used to conducting an interview in English and tell them to go do it in Spanish,” Ms. Gregor said.

The audits of her clients wrapped up in late 2019. None owed any money.

As a presidential candidate, Mr. Trump vowed to “eliminate the carried interest deduction, well-known deduction, and other special-interest loopholes that have been so good for Wall Street investors, and for people like me, but unfair to American workers.”

wanted to close the loophole, congressional Republicans resisted. Instead, they embraced a much milder measure: requiring private equity officials to hold their investments for at least three years before reaping preferential tax treatment on their carried interests. Steven Mnuchin, the Treasury secretary, who had previously run an investment partnership, signed off.

McKinsey, typically holds investments for more than five years. The measure, part of a $1.5 trillion package of tax cuts, was projected to generate $1 billion in revenue over a decade.

credited Mr. Mnuchin, hailing him as “an all-star.”

Mr. Fleischer, who a decade earlier had raised alarms about carried interest, said the measure “was structured by industry to appear to do something while affecting as few as possible.”

Months later, Mr. Callas joined the law and lobbying firm Steptoe & Johnson. The private equity giant Carlyle is one of his biggest clients.

It took the Treasury Department more than two years to propose rules spelling out the fine print of the 2017 law. The Treasury’s suggested language was strict. One proposal would have empowered I.R.S. auditors to more closely examine internal transactions that private equity firms might use to get around the law’s three-year holding period.

The industry, so happy with the tepid 2017 law, was up in arms over the tough rules the Treasury’s staff was now proposing. In a letter in October 2020, the American Investment Council, led by Drew Maloney, a former aide to Mr. Mnuchin, noted how private equity had invested in hundreds of companies during the coronavirus pandemic and said the Treasury’s overzealous approach would harm the industry.

The rules were the responsibility of Treasury’s top tax official, David Kautter. He previously was the national tax director at EY, formerly Ernst & Young, when the firm was marketing illegal tax shelters that led to a federal criminal investigation and a $123 million settlement. (Mr. Kautter has denied being involved with selling the shelters but has expressed regret about not speaking up about them.)

On his watch at Treasury, the rules under development began getting softer, including when it came to the three-year holding period.

Monte Jackel, a former I.R.S. attorney who worked on the original version of the proposed regulations.

Mr. Mnuchin, back in the private sector, is starting an investment fund that could benefit from his department’s weaker rules.

Even during the pandemic, the charmed march of private equity continued.

The top five publicly traded firms reported net profits last year of $8.6 billion. They paid their executives $8.3 billion. In addition to Mr. Schwarzman’s $610 million, the co-founders of KKR each made about $90 million, and Apollo’s Leon Black received $211 million, according to Equilar, an executive compensation consulting firm.

now advising clients on techniques to circumvent the three-year holding period.

The most popular is known as a “carry waiver.” It enables private equity managers to hold their carried interests for less than three years without paying higher tax rates. The technique is complicated, but it involves temporarily moving money into other investment vehicles. That provides the industry with greater flexibility to buy and sell things whenever it wants, without triggering a higher tax rate.

Private equity firms don’t broadcast this. But there are clues. In a recent presentation to a Pennsylvania retirement system by Hellman & Friedman, the California private equity giant included a string of disclaimers in small font. The last one flagged the firm’s use of carry waivers.

The Biden administration is negotiating its tax overhaul agenda with Republicans, who have aired advertisements attacking the proposal to increase the I.R.S.’s budget. The White House is already backing down from some of its most ambitious proposals.

Even if the agency’s budget were significantly expanded, veterans of the I.R.S. doubt it would make much difference when it comes to scrutinizing complex partnerships.

“If the I.R.S. started staffing up now, it would take them at least a decade to catch up,” Mr. Jackel said. “They don’t have enough I.R.S. agents with enough knowledge to know what they are looking at. They are so grossly overmatched it’s not funny.”

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The Cost of Being an ‘Interchangeable Asian’

On a recent Tuesday evening, Jully Lee and her boyfriend curled up on the couch and turned on the TV to watch the Ovation Awards, a ceremony honoring stage work in the Los Angeles area that was held virtually this year because of the coronavirus pandemic. Ms. Lee, an actor, had been nominated for her role in the play “Hannah and the Dread Gazebo,” which was in production before the pandemic.

Ms. Lee, 40, had submitted a prerecorded acceptance speech in case she won. During the ceremony, each nominee’s photo was shown as his or her name was announced. When Ms. Lee’s category arrived, her name was called, and a photo appeared on the screen. A photo of the wrong Asian: her colleague Monica Hong. The announcer also mispronounced Ms. Lee’s name.

“I was just stunned,” Ms. Lee said. She added that after a pause, she and her boyfriend started cracking up. “When things are awkward or uncomfortable or painful, it’s much safer to laugh than to express other emotions. It’s like a polite way of responding to things.”

The LA Stage Alliance, which hosted the ceremony, disbanded in the wake of outrage over the blunder.

The irony of a mix-up like this wasn’t lost on Ms. Lee. It was rare to even be performing with other Asian actors, rather than competing for the same part. “It’s so funny because when there’s so many Asians, then you can’t tell them apart, but in media there are so few Asians that you can’t tell us apart,” she said. “What is it?”

The invisibility of Asians in pop culture is part of what, scholars say, contributes to the “wrong Asian” experience: When people aren’t accustomed to seeing Asian faces onstage or onscreen, they may have more trouble telling them apart in real life. To put it another way: If all you really have to work with are John Cho, Steven Yeun, Aziz Ansari and Kal Penn, that’s not going to go a long way in training you to distinguish among men of Asian descent offscreen. In contrast, Hollywood has given everyone plenty of training on distinguishing white faces, Dr. Nadal said.

Out of Hollywood’s top 100 movies of 2018, only two lead roles went to Asian and Asian American actors (one male and one female), according to a study by the University of Southern California’s Annenberg School for Communication and Journalism.

Donatella Galella, a professor of theater history and theory at the University of California, Riverside, said that popular culture has long reflected the Western world’s xenophobic views toward Asians, which resulted in placing them in diminished roles onstage and onscreen — the villain, the sidekick. That entrenched a kind of marginalization feedback loop.

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House Hunters Are Leaving the City, and Builders Can’t Keep Up

River Islands, the development where the Namayans hoped to live, is in Lathrop, Calif., which has a population of 25,000. It sits about a half-hour beyond Altamont Pass, whose rolling hills and windmills mark the border between Alameda and San Joaquin Counties. Though technically outside the Bay Area region, Lathrop’s farms and open fields have been steadily supplanted by warehouses and subdivisions as it and nearby cities have become bedroom communities for priced-out workers who commute to the Silicon Valley and San Francisco.

In Livermore, on the eastern side of Alameda County, the typical home value is nearing $1 million, according to Zillow. That falls to $500,000 to $600,000 over the hill in places like Tracy, Manteca and Lathrop. The catch, of course, is that many residents endure draining, multihour commutes.

The pandemic may have upended that economic order, in California and elsewhere. Thousands of families that could afford to do so fled cities last spring, and while some will return, others will not — particularly if they are able to continue to work remotely at least part of the time. One recent study estimated that after the pandemic, one-fifth of workdays would be “supplied remotely” — down from half during the height of the pandemic but far above the 5 percent before it.

If those trends hold, it will make it easier for many workers to live not just in farther-out towns like Lathrop but to abandon high-cost regions like the Bay Area altogether. Midsize cities that for years have tried — usually in vain — to recruit large employers through tax breaks can now attract workers directly.

“If Google moves to Cleveland, that’s great, but if one Googler moves to Cleveland, that’s also great,” said Adam Ozimek, chief economist of Upwork, a freelancing platform.

To some extent, the pandemic accelerated a shift that was already taking place. When the housing bubble burst, members of the millennial generation were in their teens and 20s. Now the oldest of them are turning 40, and about half are married. They are hitting the milestones when Americans have traditionally moved to the suburbs.

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Why Apple and Google’s Virus Alert Apps Had Limited Success

Sarah Cavey, a real estate agent in Denver, was thrilled last fall when Colorado introduced an app to warn people of possible coronavirus exposures.

Based on software from Apple and Google, the state’s smartphone app uses Bluetooth signals to detect users who come into close contact. If a user later tests positive, the person can anonymously notify other app users whom the person may have crossed paths with in restaurants, on trains or elsewhere.

Ms. Cavey immediately downloaded the app. But after testing positive for the virus in February, she was unable to get the special verification code she needed from the state to warn others, she said, even after calling Colorado’s health department three times.

“They advertise this app to make people feel good,” Ms. Cavey said, adding that she had since deleted the app, called CO Exposure Notifications, in frustration. “But it’s not really doing anything.”

announced last year that they were working together to create a smartphone-based system to help stem the virus, their collaboration seemed like a game changer. Human contact tracers were struggling to keep up with spiking virus caseloads, and the trillion-dollar rival companies — whose systems run 99 percent of the world’s smartphones — had the potential to quickly and automatically alert far more people.

Soon Austria, Switzerland and other nations introduced virus apps based on the Apple-Google software, as did some two dozen American states, including Alabama and Virginia. To date, the apps have been downloaded more than 90 million times, according to an analysis by Sensor Tower, an app research firm.

But some researchers say the companies’ product and policy choices limited the system’s usefulness, raising questions about the power of Big Tech to set global standards for public health tools.

Stephen Farrell and Doug Leith, computer science researchers at Trinity College in Dublin, wrote in a report in April on Ireland’s virus alert app.

CA Notify in December, about 65,000 people have used the system to alert other app users, the state said.

“Exposure notification technology has shown success,” said Dr. Christopher Longhurst, the chief information officer of UC San Diego Health, which manages California’s app. “Whether it’s hundreds of lives saved or dozens or a handful, if we save lives, that’s a big deal.”

In a joint statement, Apple and Google said: “We’re proud to collaborate with public health authorities and provide a resource — which many millions of people around the world have enabled — that has helped protect public health.”

Based in part on ideas developed by Singapore and by academics, Apple and Google’s system incorporated privacy protections that gave health agencies an alternative to more invasive apps. Unlike virus-tracing apps that continuously track users’ whereabouts, the Apple and Google software relies on Bluetooth signals, which can estimate the distance between smartphones without needing to know people’s locations. And it uses rotating ID codes — not real names — to log app users who come into close contact for 15 minutes or more.

said last year in a video promoting the country’s alert system, called Corona-Warn-App.

But the apps never received the large-scale efficacy testing typically done before governments introduce public health interventions like vaccines. And the software’s privacy features — which prevent government agencies from identifying app users — have made it difficult for researchers to determine whether the notifications helped hinder virus transmission, said Michael T. Osterholm, the director of the Center for Infectious Disease Research and Policy at the University of Minnesota.

“The apps played virtually no role at all in our being able to investigate outbreaks that occurred here,” Dr. Osterholm said.

Some limitations emerged even before the apps were released. For one thing, some researchers note, exposure notification software inherently excludes certain vulnerable populations, such as elderly people who cannot afford smartphones. For another thing, they say, the apps may send out false alarms because the system is not set up to incorporate mitigation factors like whether users are vaccinated, wearing masks or sitting outside.

Proximity detection in virus alert apps can also be inconsistent. Last year, a study on Google’s system for Android phones conducted on a light-rail tram in Dublin reported that the metal walls, flooring and ceilings distorted Bluetooth signal strength to such a degree that the chance of accurate proximity detection would be “similar to that of triggering notifications by randomly selecting” passengers.

Kimbley Craig, the mayor of Salinas, Calif. Last December, when virus rates there were spiking, she said, she downloaded the state’s exposure notification app on her Android phone and soon after tested positive for Covid-19. But after she entered the verification code, she said, the system failed to send an alert to her partner, whom she lives with and who had also downloaded the app.

“If it doesn’t pick up a person in the same household, I don’t know what to tell you,” Mayor Craig said.

In a statement, Steph Hannon, Google’s senior director of product management for exposure notifications, said that there were “known challenges with using Bluetooth technology to approximate the precise distance between devices” and that the company was continuously working to improve accuracy.

The companies’ policies have also influenced usage trends. In certain U.S. states, for instance, iPhone users can activate the exposure notifications with one click — by simply turning on a feature on their settings — but Android users must download a separate app. As a result, about 9.6 million iPhone users in California had turned on the notifications as of May 10, the state said, far outstripping the 900,000 app downloads on Android phones.

Google said it had built its system for states to work on the widest range of devices and be deployed as quickly as possible.

Some public health experts acknowledged that the exposure alert system was an experiment in which they, and the tech giants, were learning and incorporating improvements as they went along.

One issue they discovered early on: To hinder false alarms, states verify positive test results before a person can send out exposure notifications. But local labs can sometimes take days to send test results to health agencies, limiting the ability of app users to quickly alert others.

In Alabama, for instance, the state’s GuideSafe virus alert app has been downloaded about 250,000 times, according to Sensor Tower. But state health officials said they had been able to confirm the positive test results of only 1,300 app users. That is a much lower number than health officials would have expected, they said, given that more than 10 percent of Alabamians have tested positive for the coronavirus.

“The app would be a lot more efficient if those processes were less manual and more automated,” said Dr. Scott Harris, who oversees the Alabama Department of Public Health.

Colorado, which automatically issues the verification codes to people who test positive, has reported higher usage rates. And in California, UC San Diego Health has set up a dedicated help line that app users can call if they did not receive their verification codes.

Dr. Longhurst, the medical center’s chief information officer, said the California app had proved useful as part of a larger statewide public health push that also involved mask-wearing and virus testing.

“It’s not a panacea,” he said. But “it can be an effective part of a pandemic response.”

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A Super Blood Moon Dazzles Earthlings

Australians were among those lucky enough to see it on Wednesday evening, a rare astronomical event marked by a dazzling array of sunset colors like red and burnt orange: a “super blood moon.”

From Brazil to Alaska, California to Indonesia, people with the right view of the celestial phenomenon marveled as their moon, usually a predictable, pale, Swiss-cheese-like round in the sky, was transformed into a fierce, red giant. As one Twitter user, words failing, put it: “Man I’m in love with this urghhh.”

The striking display was the result of two simultaneous phenomena: a supermoon (when the moon lines up closer than normal to our planet and appears to be bigger than usual), combined with a total lunar eclipse, or blood moon (when the moon sits directly in the Earth’s shadow and is struck by light filtered through the Earth’s atmosphere).

“A little bit of sunlight skims the Earth’s atmosphere,” said Brad Tucker, an astrophysicist and cosmologist based at the Australian National University in Canberra, the country’s capital. He said this creates the effect of “sunrise and sunset being projected onto the moon.”

on a special flight to see the supermoon. It left Sydney about 7:45 p.m. and was to return later that evening. Vanessa Moss, an astronomer with Australia’s national science agency, CSIRO, and the guest expert on the flight, said this kind of phenomenon was exciting because it was accessible.

“You don’t need a telescope; you don’t need binoculars,” she said, adding that it was a good chance to “look up at the sky and think about our place in the universe.”

studied humanity’s relationship with space, wrote in an email.

“We wonder whether the red moon is a sign of the end of disruption and suffering, or another beginning,” he said, adding that the moon provides one of the constants in our lives. “When that’s disrupted, we temporarily lose our moorings, and for a moment we’re jostled from the world we take for granted.”

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A New C.D.C. Story

This morning, I am going to tell you another story about the C.D.C. and its approach to Covid-19 behavioral guidelines. It’s a story that highlights the costs of extreme caution.

When Dr. Rochelle Walensky, the C.D.C. director, appeared before a Senate committee this month and defended the agency’s description of how often Covid-19 is transmitted outdoors, she cited a single academic study.

She was responding to a question from Senator Susan Collins of Maine, who had asked why some C.D.C. guidelines seemed inconsistent with the available data. Collins quoted from that day’s edition of this newsletter and argued that the C.D.C. was exaggerating the risk of outdoor activities by claiming that “less than 10 percent” of Covid transmission occurred outside.

Anything close to 10 percent would mean that outdoor infections were a huge problem. Yet the true share appears to be closer to 0.1 percent.

a study published in The Journal of Infectious Diseases. The study was “a meta-analysis,” she explained, which means it synthesized data from other studies. “The topline result of all studies that were included in the systematic review said less than 10 percent of cases were transmitted outdoors,” she said.

Her answer made the study sound definitive. Walensky did not mention any other studies or offer any logical argument for why she believed outdoor transmission was a significant risk. She implied that the C.D.C. was simply listening to The Journal of Infectious Diseases, which, as she noted, is a top journal.

Later that day, one of the study’s authors posted several messages on Twitter, and the story got more complicated.

The tweets came from Dr. Nooshin Razani, an epidemiologist at the University of California, San Francisco. In them, she emphasized that the study’s results suggested that the share of Covid occurring outdoors was “much lower than 10 percent.” The central message of the paper, Razani wrote, was the relative safety of the outdoors:

in her testimony, had used the two terms interchangeably.)

Singapore construction workers who probably transmitted it in enclosed spaces.)

The actual share occurring outdoors is “probably substantially less than 1 percent,” Razani told me. “The outdoors is an amazing resource,” she added. “What we really should be focused on is how to transition more activities to be outdoors.”

Yet the C.D.C.’s guidance continues to treat outdoor activities as a major risk — as if the truth were closer to 10 percent than 0.1 percent.

The agency advises unvaccinated people to wear masks outdoors much of the time, and many communities still impose strict guidelines on outdoor activities. The C.D.C. has also directed virtually everyone attending summer camp this year — counselor or camper, vaccinated or not — to wear a mask at almost all times. The camp guidelines use the word “universal.”

It’s true that for many people, masks are a minor nuisance. For others, though, masks bring real costs. Some children find it harder to breathe while wearing one during, say, a game of soccer or tag. Many adults and children find it more difficult to communicate. That’s especially true for people without perfect hearing and for young children, both of whom rely heavily on facial movements to understand others.

has written, is often “like talking on your phone in a zone with weak cell service.”

For unvaccinated adults indoors or in close conversation outdoors, the costs of a mask are vastly lower than the risks from Covid. But the trade-offs are different in most outdoor settings, and they are different for children. The Covid risks for children are similar to those from a normal flu (as these charts show).

There does not appear to be much scientific reason that campers and counselors, or most other people, should wear a mask outdoors all summer. Telling them to do so is an example of extreme caution — like staying out of the ocean to avoid sharks — that seems to have a greater cost than benefit.

The C.D.C., as I’ve written before, is an agency full of dedicated people trying their best to keep Americans healthy. Walensky, a widely admired infectious-diseases expert, is one of them. Yet more than once during this pandemic, C.D.C. officials have acted as if extreme caution has no downsides.

Everything has downsides. And it is the job of scientific experts and public-health officials to help the rest of us think clearly about the benefits and costs of our choices.

They’re on the menu.

Like a boss: Meet Beyoncé’s go-to stylist.

Not who she says: A scholar faked her Cherokee ancestry. Her career has thrived.

A Times classic: See how climate change is weakening the Gulf Stream.

Lives Lived: As a performer, writer and director, Robbie McCauley often put race at the center of her works. “Our nation is starving for the kinds of courageous conversation that Robbie and her work engendered,” a fellow artist said. McCauley died at 78.

baked feta pasta and dalgona coffee — as well as a new generation of cooking stars who are largely self-taught, preparing meals in their home kitchens.

Within 24 hours of posting his first TikTok in 2019, Eitan Bernath, now 19, had tens of thousands of followers. His upbeat and approachable food videos have since earned him over a million more, and he has three full-time employees, as well as a gig as a resident culinary expert on “The Drew Barrymore Show.”

Other up-and-coming food creators are making six figures through the app and sponsorships, often using TikTok fame to launch cookware lines, cookbooks and more.

Read Taylor Lorenz’s full story. — Sanam Yar, a Morning writer

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What Digital Nomads Need to Know About Taxes Abroad

It’s risky. Employers need to know where their employees work in case their presence leads to corporate tax obligations abroad. The risk is higher when employees are bringing in revenue for companies, such as in sales positions, said David McKeegan, who co-founded Greenback Tax Services, an accounting firm for U.S. expatriates.

Still, many companies are operating on a “don’t ask, don’t tell” policy. A science writer in his 50s from California, who was granted anonymity because he did not want senior managers to know he had worked from Costa Rica for a few months, said his human resources department discouraged employees from working outside of California, but did not say anything explicit about working abroad. His setup from an Airbnb by the beach worked perfectly until he lost power because of a hurricane and had to work from a bar a few times. He used his company’s Zoom background, but colleagues started asking about where he was when they heard ocean waves and music. “At a restaurant,” he would tell them, without elaborating.

As more people work from abroad, it may be harder for companies to turn a blind eye. About 10.9 million Americans last year described themselves as digital nomads — people who work remotely and tend to travel from place to place — up from 7.3 million in 2019, according to MBO Partners, which provides services for self-employed workers.

“The tax system globally right now is not prepared for what the work force is going through,” Mr. McKeegan said. “I think at some point we’ll see a system where people are asked on the way in or out if they were working and countries will try and get some more tax revenue from this very mobile work force.”

Potentially. If you qualify for the Foreign Earned Income Exclusion, your first $108,700 is exempt from U.S. income tax. But keep in mind that this applies only if you’re a U.S. citizen who resides in a foreign country for more than 330 days within 12 consecutive months, not including time on planes, or if you are a bona fide resident of a foreign country. (You would still have to pay federal and state taxes on unearned income including interest, dividends and capital gains.)

It is important to track the number of days abroad to be able to prove to U.S. tax authorities that you were there.

Paige Brunton, 30, a Canadian website designer based in Hannover, Germany, learned about how complicated the tax rules are for expats the hard way: One year, she had to file tax returns in three countries. The situation was unavoidable, since she had lived and worked in Germany, Canada and the United States during that tax year, but her biggest advice for others who may have complicated situations is to get an accountant who specializes in international tax right away.

“Don’t congregate in Facebook groups and Google, it’ll really stress you out,” she said.

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A New Crop in Pennsylvania: Warehouses

OREFIELD, Pa. — From his office in an old barn on a turkey farm, David Jaindl watches a towering flat-screen TV with video feeds from the hatchery to the processing room, where the birds are butchered. Mr. Jaindl is a third-generation farmer in Pennsylvania’s Lehigh Valley. His turkeys are sold at Whole Foods and served at the White House on Thanksgiving.

But there is more to Mr. Jaindl’s business than turkeys. For decades, he has been involved in developing land into offices, medical facilities and subdivisions, as the area in and around the Lehigh Valley has evolved from its agricultural and manufacturing roots to also become a health care and higher education hub.

Now Mr. Jaindl is taking part in a new shift. Huge warehouses are sprouting up like mushrooms along local highways, on country roads and in farm fields. The boom is being driven, in large part, by the astonishing growth of Amazon and other e-commerce retailers and the area’s proximity to New York City, the nation’s largest concentration of online shoppers, roughly 80 miles away.

“They are certainly good for our area,” said Mr. Jaindl, who is developing land for several new warehouses. “They add a nice tax base and good employment.”

promotional video posted on the economic development agency’s website, there are images of welders, builders and aerial footage of the former Bethlehem Steel plant, which closed in the 1990s. The narrator touts the Lehigh Valley’s ethos as the home of “makers” and “dreamers.”

“We know the value of an honest day’s work,” the narrator intones. “We practically wrote the book on it.”

Jason Arias found an honest day’s work in the Lehigh Valley’s warehouses, but he also found the physical strain too difficult to bear.

Mr. Arias moved to the area from Puerto Rico 20 years ago to take a job in a manufacturing plant. After being laid off in 2010, Mr. Arias found a job packing and scanning boxes at an Amazon warehouse. The job soon started to take a toll — the constant lifting of boxes, the bending and walking.

“Manufacturing is easy,” he said. “Everything was brought to you on pallets pushed by machines. The heaviest thing you lift is a box of screws.”

One day, walking down stairs in the warehouse, Mr. Arias, 44, missed a step and felt something pop in his hip as he landed awkwardly. It was torn cartilage. At the time, Mr. Arias was making $13 an hour. (Today, Amazon pays an hourly minimum of $15.)

In 2012, Mr. Arias left Amazon and went to a warehouse operated by a food distributor. After a few years, he injured his shoulder on the job and needed surgery.

“Every time I went home I was completely beat up,” said Mr. Arias, who now drives a truck for UPS, a unionized job which he likes.

Dr. Amato, the regional planning official, is a chiropractor whose patients include distribution workers. Manufacturing work is difficult, but the repetitive nature of working in a warehouse is unsustainable, he said.

“If you take a coat hanger and bend it back and forth 50 times, it will break,” he said. “If you are lifting 25-pound boxes multiple times per hour, eventually things start to break down.”

Dennis Hower, the president of the local Teamsters union, which represents drivers for UPS and other companies in the Lehigh Valley, said he was happy that the e-commerce boom was resulting in new jobs. At the same time, he’s reminded by the empty storefronts everywhere that other jobs are being destroyed.

“Every day you open up the newspaper and see another retail store going out of business,” he said.

Not everyone can handle the physicality of warehouse work or has the temperament to drive a truck for 10 hours a day. In fact, many distribution companies are having a hard time finding enough local workers to fill their openings and have had to bus employees in from out of state, Mr. Hower said.

“You can always find someone somewhere who is willing to work for whatever you are going to pay them,” he said.

Two years ago, there were no warehouses near Lara Thomas’s home in Shoemakersville, Pa., a town of 1,400 people west of the Lehigh Valley. Today, five of them are within walking distance.

“It hurts my heart,” said Ms. Thomas. “This is a small community.”

A local history buff, Ms. Thomas is a member of a group of volunteers who regularly clean up old, dilapidated cemeteries in the area, including one in Maxatawny that is about two miles from her church.

The cemetery, under a grove of trees next to a wide-open field, is the final resting place of George L. Kemp, a farmer and a captain in the Revolutionary War. Last summer, the warehouse developer Duke Realty, which is based in Indianapolis, argued in county court that it could find no living relatives of Mr. Kemp and proposed moving the graves to another location. A “logistics park” is planned on the property.

Meredith Goldey, who is a Kemp descendant, was not impressed with Duke’s due diligence. “They didn’t look very hard.”

Ms. Goldey, other descendants and Ms. Thomas pored through old property and probate records and found Mr. Kemp’s will.

The documents stipulated that a woman enslaved by Mr. Kemp, identified only as Hannah, would receive a proper burial. While there is no visible marker for Hannah in the cemetery, the captain’s will strongly suggests she is buried alongside the rest of the family.

“This is not the Deep South,” Ms. Thomas said. “It is almost unheard-of for a family to own a slave in eastern Pennsylvania in the early 19th century and then to have her buried with them.”

Several descendants of Mr. Kemp filed a lawsuit against Duke Realty seeking to protect the cemetery. A judge has ordered the two sides to come up with a solution by next month. A spokesman for Duke Realty said in an email that the company “is optimistic that the parties will reach an amicable settlement in the near future.”

Ms. Thomas worries that if the bodies are exhumed and interred in another location, they will not be able to locate Hannah’s remains and they will be buried under the warehouse.

“She will be lost,” she said.

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The Small Business Administration’s Gaffes Are Now Her Job to Fix

Isabella Casillas Guzman, President Biden’s choice to run the Small Business Administration, inherited a portfolio of nearly $1 trillion in emergency aid and an agency plagued by controversy when she took over in March. She has been sprinting from crisis to crisis ever since.

Some new programs have been mired in delays and glitches, while the S.B.A.’s best-known pandemic relief effort, the Paycheck Protection Program, nearly ran out of money for its loans this month, confusing lenders and stranding millions of borrowers. Angry business owners have deluged the agency with criticism and complaints.

Now, it’s Ms. Guzman’s job to turn the ship around. “It’s the largest S.B.A. portfolio we’ve ever had, and clearly there’s going to need to be some changes in how we do business,” she said in a recent interview.

When the coronavirus crisis struck and the economy went into a free fall last year, Congress and the Trump administration pushed the Small Business Administration to the forefront, putting it in charge of huge sums of relief money and complicated new programs.

confusing, often-revised loan terms and several technical meltdowns — the program enjoyed some success. Millions of business owners credit it with helping them survive the pandemic and keep more workers employed.

Economists are skeptical about whether the program’s results justify its huge cost, but Mr. Trump and Mr. Biden both embraced the effort as a centerpiece of their economic rescue plans. As the pandemic stretched on and the economy plunged into a recession, the Paycheck Protection Program morphed into the largest business bailout in American history. More than eight million companies got forgivable loans, totaling $788 billion — nearly as much money as the government spent on its three rounds of direct payments to taxpayers.

Fraud is a major concern. Thousands of people took advantage of the rushed program’s minimal documentation requirements and sought illicit loans, according to prosecutors, to fund gambling sprees, Lamborghinis, luxury watches, an alpaca farm and a Medicare fraud scheme. The Justice Department has charged hundreds of people with stealing more than $440 million, and scores of federal investigations are active. (During her confirmation hearing, Ms. Guzman promised that she would “prioritize the reduction of fraud, waste and abuse.”)

There were other problems. Female and minority business owners were disproportionately left out of the relief effort. A last-minute attempt by Mr. Biden to make the program more generous for solo business owners came too late to help many of them. This month, a new emergency popped up: The program ran short of money and abruptly closed to most new applicants.

“There was no warning,” Toby Scammell, the chief executive of Womply, a company that helps borrowers get loans, said of the latest debacle. His company alone has more than 1.6 million applicants caught in limbo.

low-interest disaster loans of up to $500,000 and new grant funds, created by Congress, for two of the hardest-hit industries: the Shuttered Venue Operators Grant for live-event businesses and the Restaurant Revitalization Fund. (The hotel industry is pushing for its own version.)

Each required the agency to create policies and technology systems from scratch. The venue program has been especially rocky. On its scheduled start day, in early April, the application system completely failed, leaving desperate applicants hitting refresh and relying on social media posts for information and updates.

“I turned to my associate director and said, ‘I figured something like this would happen,’” said Chris Zacher, the executive director of Levitt Pavilion, a nonprofit performing arts center in Denver. The Small Business Administration revived the system three weeks later and has received 12,200 applications, but it does not anticipate awarding grants until late May.

have turned into primal screams of pain. (“I SERIOUSLY CANNOT TAKE THIS WITH SBA ANY LONGER” is one of the milder replies.) She said she understood the urgency.

“It’s definitely unprecedented — across the board, across the nation — and we are seeing multiple disasters at the same time,” she said. “The agency is highly focused on just still responding to disaster and implementing this relief as quickly as possible.”

This is Ms. Guzman’s second tour at the Small Business Administration. When President Barack Obama picked Maria Contreras-Sweet in 2014 to take over the agency, Ms. Guzman went along as a senior adviser and deputy chief of staff. The women had met in the mid-1990s. Ms. Guzman, a California native with an undergraduate degree from the University of Pennsylvania’s Wharton School of Business, was hired at 7Up/RC Bottling by Ms. Contreras-Sweet, an executive there.

“I was always impressed with her ability to handle jobs with steep learning curves — she has a quick grasp of complex concepts,” Ms. Contreras-Sweet said.

Ms. Guzman spent her first stint at the agency focused on traditional projects like its flagship lending program, which normally facilitates around $28 billion a year in loans. The time, the job is radically different.

community navigators” program, which will fund local organizations, including nonprofits and government groups, to work closely with businesses owned by people with disabilities or in underserved rural, minority and immigrant communities. It’s an expansion of a grass-roots effort by several nonprofits to get vulnerable businesses access to Paycheck Protection Program loans.

Ms. Guzman said she was bullish about that effort and other agency priorities, like expanding Black and other minority entrepreneurs’ access to capital — but first, like the clients it serves, the Small Business Administration has to weather the pandemic.

And to do that, it has to stop shooting itself in the foot.

The much-awaited second attempt at opening the Shuttered Venue Operators Grant fund was preceded by one final debacle: The agency announced — and then, less than a day before the date, abandoned — a plan to open the first-come-first-served fund on a Saturday. For those seeking aid that has not yet arrived, the incident felt like yet another kick in the teeth.

Ms. Guzman said she was aware of the need for her agency to overcome its limitations and rebuild its checkered reputation.

“This is a pivotal moment in time where we can leverage the interest in small business to really deliver a remarkable agency to them,” she said. “I value being the voice for the 30 million small and innovative start-ups around the country. What I always say to my staff is that I want these businesses to feel like the giants that they are in our economy.”

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