• European Court Sets Limits on Countries’ Taxing Power, by Dan Bilefsky:

Europe’s highest court ruled Tuesday that countries could not go after profits earned by subsidiaries in other European countries as long as the businesses were not “artificial” arrangements to avoid paying taxes. While potentially painful for high-tax countries like Germany, France and Italy, lawyers said the landmark decision could help promote European integration by making cross-border expansion more attractive.

• Justice Department Is Reviewing Corporate Prosecution Guidelines, by Lynnley Browning:

A top Justice Department official on Tuesday defended the tactics used by federal prosecutors after Enron to combat corporate wrongdoing, but he also indicated that the agency might consider changes to the guidelines. The comments by the deputy attorney general, Paul J. McNulty, before the Senate Judiciary Committee, were the first public response by a senior Justice Department official to mounting criticism from companies and lawyers that the tactics are being used as a bludgeon to force companies to cooperate with investigations.

• Museums Fear Tax Law Changes on Some Donations, by Jeremy Kahn:

Directors and trustees of the nation’s top art museums are preparing a major lobbying effort to reverse a federal tax provision approved last month that they say will significantly harm their ability to acquire new artworks.

The tax law change, included in a little-noticed section of the Pension Protection Act that President Bush signed into law on Aug. 17, affects a practice known as fractional or partial giving, which has become an increasingly popular method for collectors to donate to museums. Proponents of the change say that fractional gifts — under which an artwork is “donated” but can remain largely in the owner’s possession — have been abused by wealthy donors, some of whom received upfront tax deductions for works that will not appear in museum collections for decades, if ever. The changes apply only to fractional gifts made after Aug. 17.

Among the thousands of works that have come to American museums through fractional giving in the past 15 years are Cézanne’s “Boy With a Red Vest” at the Museum of Modern Art, Magritte’s “Kiss” at the Houston Museum of Art, assemblages by Joseph Cornell in the Bergman Collection at the Art Institute of Chicago, and all 53 Impressionist and Post-Impressionist works that make up the Metropolitan Museum’s Annenberg Collection.

(Hat Tip: Nickolas Kyser & Benjamin Orenstein.)