TaxProf Blog

Goodbye, Class of 2008

The University of Cincinnati College of Law sent off the Class of 2008 into the world today at our graduation ceremony.  They are our 175th graduating class, making us the fourth-oldest conitnuously operating law school in the country.

It is always a reflective day for the faculty, as we watch with pride as each of the graduates march confidently across the stage to collect his or her diploma from the dean.  It is hard to believe that almost three years have passed since I welcomed 1/3 of them to law school in my week-long Introduction to Law course.  Highlights of the ceremony were:

• The address by William R. (Billy) Martin, head of Sutherland's White Colar Criminal Defense Practice and University of Cincinnati College of Law Class of 1976.  Billy regaled us with lessons he has learned from his many high profile cases, including his representation of Larry Craig, Allen Iverson, Monica Lewinsky's mother, Michael Vick, and Jayson Williams.  (For more on his career, see profiles in the Cleveland Examiner, Law Crossing, Wall Street Journal and Wikipedia.)
• The Class of 2008's selection of Max Huffman as the receipient of the Nicolas Longworth, III Alumni Achievement Award.  I got to know Max as a student (Class of 1998) and as a colleague while he served as our Visiting Assistant Professor of Law during 2005-2007.  He will be starting this fall as tenure-track visiting professor at Indiana University-Indianapolis School of Law.  It is great to see a former student (especially one as talented as Max) enter the legal academy (with the added bonus that Indianapolis is only 110 miles from Cincinnati).
• The recognition of two institutional pillars at the College who are retiring this year:
  • Bill Rands, a tax professor here for 30 years.  Bill was a wonderful mentor when I began my teaching career at Cincinnati, and is a dear friend.
  • Barb Watts, our Associate Dean of Academic Affairs, who is retiring after 27 years.  Barb has an incredibly broad portfolio -- she serves as both our Associate Dean for Acadenic Affairs and our de facto Dean of Students, and handles both jobs with enormous skill and good cheer.

NTA Spring Symposium

The National Tax Symposium has concluded its two-day Annual Spring Symposium and State-Local Tax Program in Washington, D.C.  Tax Prof speakers included:

• James R. Hines Jr. (Michigan), Reconsidering the Taxation of Foreign Income
• Daniel Shaviro (NYU), The Optimal Relationship Between Taxable Income and Financial Accounting Income: Analysis and a Proposal (blogged here)

For a list of all of the speakers and their topics, see the program.

Blogging as a Feminist Legal Method

From a University of Pennsylvania Law School press release:

Alison I. Stein, a student at the University of Pennsylvania Law School, ... will present her paper – Women Lawyers Blog for Workplace Equality: Blogging as a Feminist Legal Method – at the Joint Annual Meetings of Law and Society Association and Canadian Law and Society Association, May 30 in Montreal. ...

"From cattle ranchers to diamond merchants to third-wave feminists … groups of people opt out of the legal system – and instead use personalized and informal methods of rights assertion – as a means of ‘overcoming the ineffectiveness’ of state-sponsored laws,” writes Stein. ... 

[W]hile nearly one half of all law school graduates since 1992 have been women, only about 15% of law firm partners are female and women comprise only 25% of tenured law school professors, the career goal that Stein has set for herself. ...  Female lawyers turn to blogging because the law’s ability to vindicate their rights is limited, their grievances are born out of institutional biases or mindsets, and because the anonymity of blogging lets them give voice to their complaints without risking their reputations.

(Hat Tip:  Above the Law.)  The abstract of the paper is below the fold:

Continue reading "Blogging as a Feminist Legal Method"

The Great Tax Cut Delusion and the Decline of Good Government in America

Bryan D. Jones (University of Washington, Center for American Politics and Public Policy) & Walter Williams (George Mason University, Department of Economics) have published The Politics of Bad Ideas: The Great Tax Cut Delusion and the Decline of Good Government in America (Longman, 2008).  From the publisher's description:

According to political scientist Bryan D. Jones and policy analyst Walter Williams, tax cuts are bad for the American people. In their new book, ... they draw on in-depth research and insightful analysis to argue that tax cuts without spending limits have harmed the government’s long-term fiscal stability, and explain why, despite evidence to the contrary, people keep believing that reducing taxes will create economic growth.

Jones and Williams zero in on two tax-cut theories: supply-side economics – which postulates that tax cuts stimulate the economy by putting more money in people’s pockets, which they in turn spend on goods and services; and starve-the-beast policies – which claim that government programs will shrink if there is less revenue from taxes to spend.

Walking readers through the numbers and factual evidence – from the post-World War II golden years through George W. Bush’s presidency – they argue that tax cuts don’t “pay for themselves” or cause “government to get smaller”, as proponents have claimed. Instead, they prove that tax cuts have consistently resulted in bigger government and increased deficits. “As government has grown, taxes have been cut, and revenue has declined,” say the authors. “The result has been massive borrowing and a basic deterioration in the fiscal balance sheet.”

The authors note that despite overwhelming evidence to the contrary, politicians and the American public continue to put faith in the power of tax cuts to stimulate economic growth. Jones and Williams believe that the usual suspects – including self-centered voters, partisan advantage, interest groups and lobbyists, and right-wing activists – are partly responsible, but they argue that institutional failure is the root cause. “These bad ideas were once kept in check by a firm commitment to factual analysis and the construction of an institutional framework that made it costly to ignore the evidence,” they say. “Today, all this has collapsed.”

Pressure Builds on Cindy McCain to Release Her Tax Returns

Last week, I blogged Cindy McCain's refusal to release her separate tax returns, even if her husband is elected President.  Media and blogosphere pressure is building on Mrs. McCain to release her returns:

• Huffington Post
• L.A. Times
• New York Observer
• Reuters
• Washington Post
• Washington Times #1
• Washington Times #2
• DNC Press Release

Ayers Applauds Chicago's Ban on Laptops in the Classroom

I previously blogged Dean Saul Levmore's decision to pull Internet access out of the University of Chicago's law school classrooms (as well as Doonesbury's great take on the issue).  Ian Ayres (Yale), who launched the anti-laptops in the classroom movement in 2001 with his New York Times op-ed, applauds Chicago's laptop ban on Freakonomics:

In praising Levmore, I should be clear that there is no good a priori argument against multitasking. The case is at best an empirically-informed hunch about what is the best way to teach. I see some power to a parentalism argument that teachers should ban surfing because it impedes students’ ability to learn.

Law students are adults who generally can decide for themselves what is in their best interest — but I still don’t think it would be a good idea to have beer or magazines available in class. As someone who has played way too much Minesweeper in my day, I think some activities are just a bit too tempting.

Still, I’m worried that my own weakness is leading me to take away the rights of others. My sainted father brought me up short when, after reading my original oped, he said, “I thought you were a liberal?”

The “negative externalities” of surfing provide a stronger basis for switching the default:

The laptop screen is a billboard that is very visible to other students sitting behind the gamer. Surfing and game playing in particular can be very distracting — both visually and in the signal they send to others that you don’t care about class. Multitasking also makes students less present as participants in class discussion. Surfing doesn’t stop students from taking notes, but it degrades the quality of their attention. ...

In recent years, I’ve tried to balance student liberty with my negative externality concern by allowing surfing, but only in the back row of class. In the back row, at least, it isn’t a visual distraction. And I view these back-benchers as virtually a step away from non-attendance.

But what’s still missing is basic information on how much surfing is going on. (Levmore claims, “Every teacher underestimates the amount of Internet surfing going on,” in his or her classroom.) The content of the laptop screen is visible to the class, but remains a mystery to the professoriate. I still hear colleagues tell me that surfing is not a problem in their class because they walk around the room.

In a world where alt -tab quickly shifts between windows, it is a fantasy to think that walking around is a sufficient deterrent. ...

But even here, students push back that the implicit contract was also that professors would not teach badly. Some students see surfing as a medication to reduce the annoyance of poor pedagogy. Indeed, some clever students have even argued that surfing has a positive externality — Ayres and Levitt and Wolfers will have better incentives to teach well if they have to compete for students’ attention.

(Hat Tip: Brian Leiter.)

Brunner & Pech: Optimum Taxation of Inheritances

Johann K. Brunner & Susanne Pech (both of University of Linz, Department of Economics) have posted Optimum Taxation of Inheritances on SSRN.  Here is the abstract:

We incorporate the fact that inheritances create a second distinguishing characteristic of individuals, in addition to earning abilities, into an optimum income taxation model with bequests motivated by joy of giving. We show that a tax on inheritances and a uniform tax on all expenditures including bequests are equivalent and that either is desirable, according to an intertemporal social objective, if on average high-able individuals have larger inherited endowments than low-able. We demonstrate that such a situation results as the outcome of a process with stochastic transition of abilities over generations, if all descendants are more probable to have their parent's ability rank than any other.

Tax Court Refuses to Reconsider § 6015(f) Ruling in Ewing

A fractured Tax Court yesterday refused to reconsider its holding in Ewing v. Commissioner, 122 T.C. 32 (2004), holding that the determination of whether a taxpayer is entitled to innocent spouse relief under § 6015(f) is made in a trial de novo that may include evidence introduced at trial that was not included in the administrative record.  Porter v. Commissioner, 130 T.C. No. 10 (5/15/08).

• The majority opinion was written by Judge Haines and joined by Judges Colvin, Cohen, Swift, Wells, Foley, Vasquez, Gale, Thornton, Marvel, Goeke, and Wherry
• Judge Vasquez concurred in an opinion joined by Judges Swift and Wells
• Judge Thornton concurred in an opinion joined by Judges Colvin, Swift, Wells, Gale, and Marvel
• Judge Goeke concurred in an opinion joined by Judges Colvin, Swift, Foley, Marvel, Wherry, and Kroupa
• Judge Wherry concurred in an opinion joined by Judges Colvin, Swift, Foley, Gale, Marvel, Goeke, and Kroupa
• Judges Halpern and Holmes dissented

For those of you scoring at home, the number of opinions joined by the Judges were:

1. Cohen, Haines, Halpern, Holmes, Thornton
2. Vasquez, Wherry
3. Foley, Gale, Wells
4. Colvin, Goeke, Marvel
5. Swift

Dexter: Shock, Awe, & Expropriation: The Act of State Doctrine and Loss Deductions Under § 165

Bobby L. Dexter (Chapman) has published Shock, Awe, & Expropriation: The Act of State Doctrine and Loss Deductions Under Section 165 of the Internal Revenue Code, 82 Tul. L. Rev. 849 (2008).  Here is the abstract:

The Act of State doctrine generally dictates that American courts not sit in judgment with respect to the acts of a foreign sovereign on its own soil. Courts commonly reason that although nothing in our Constitution requires recognition of the doctrine, adherence to its mandate effectively allows the Judicial Branch to steer clear of any actual or perceived interference with the Executive Branch's conduct of foreign policy. Wholly aside from established notions of the proper separation of powers, appeal to the doctrine is also a generous display of international comity, allowing domestic courts to defer to the sovereign authority of a foreign power. Courts hearing domestic tax disputes involving foreign expropriation losses routinely appeal to the Act of State doctrine in refusing to characterize the loss as a "theft." In this Article, I question whether a court appealing to the Act of State doctrine to reach one conclusion is obligated (even if only for the sake of analytical consistency) to defer to or recognize the executive, legislative, and judicial acts of that state (or the acts of other branches) in reaching related conclusions, consistent with established tripartite articulations of the Act of State doctrine. In arguing against a deconstructionist paradigm, I reason that a monolithic mindset enhances administrability, effectively polices judicial whim, and minimizes the potential for taxpayer whipsawing.

Gupta: Who's at Risk? Abbot and Costello Take on Section 465

Ajay Gupta has posted Who's at Risk? Abbot and Costello Take on Section 465 on SSRN.  Here is the abstract:

Hello again, everybody. It's a "bee-yooo-tiful" day for baseball. The setting is the unlikely state of Wyoming. Taking the field is a local outfit - Leasing Co. LLC (LCL). LCL's corporate sponsor, Hubert Enterprises, has not been overly generous - contributing a mere $10,000. Regardless, in a display of loyalty, the sponsor's distinctive logo - "Hu"- is emblazoned on the caps and jerseys of every member of the LCL team. The stands are filling in, the peanut vendors are doing brisk business and there is excitement in the air. But what is this? The manager of LCL in a heated exchange with a newspaper reporter. The reporter wants to find out from the manager which members of LCL are at risk for section 465 purposes. Except, he keeps looking up the section 752 liability sharing rules to frame his questions. The manager wishes to help but the reporter's questions do not give him much leeway with his answers.

Denver Post & Sen. Salazar Don't Understand AGI

Denver Post: Plowing Into the Farm Bill, by Anne C. Mulkern:

Sen. Ken Salazar, a Denver Democrat who supports the bill, disputed the idea that it pays rich farmers. The bill allows payments to farmers with adjusted gross incomes of $750,000 or less.

That number doesn't take into account deductions for the cost of running a farm, Salazar said. "A farmer with an adjusted gross income of $750,000 might be losing his shirt" after paying for fuel, a new tractor and other expenses, Salazar said.

As Wash Park Prophet notes:

The trouble is that Ken Salazar is wrong. Adjusted gross income is income after business expenses (and student loan interest and self-employed health insurance deductions), not before. Indeed, even gross income for tax purposes is after business expenses.

The amount of crop subsidies received are based upon gross cash crop sales, but the limitation on farm subsidies to prevent rich corporate farmers from unduly benefitting from them, are based upon adjusted gross income (see Section 1601 of the Farm Bill), which, for a farmer with no other form of income, is simply taxable profits from farming. The notion that our government needs to be spending $43 billion a year, more or less, subsidizing farmers making $750,000 a year net is absurd.

Ways & Means Committee Approves Energy and Tax Extenders Act

The House Ways & Means Committee voted 25-12 today to approve The Energy and Tax Extenders Act of 2008 (H.R. 6049) and send the bill to the House floor.

• Press Release
• Legislative Documents
• Associated Press

Brokeback Will: Heath Ledger's 2-Year Old Daughter, Omitted From Will, Should Inherit 100% of Estate

FindLaw:  Heath Ledger's Estate: Why Daughter Matilda, Who Was Left Nothing in Her Father's Will, Might Have a Claim to Everything (Part 1, Part 2), by Joanna Grossman (Hofstra) & Mitchell Gans (Hofstra):

[Heath Ledger and Brokeback Mountain] co-star Michelle Williams hooked up and became parents of a daughter, Matilda, in 2005. (Ledger and Williams never married and had broken off their relationship before Ledger died.) Ledger thus left behind a young daughter and an estate with potential complications worthy of a law school exam question. In this two-part series, we will examine the proper disposition of Ledger's estate, focusing primarily on one ultimate question: Could Matilda, who was left nothing in Ledger's will, actually inherit everything in the end?

Ledger's entire estate could pass to his daughter even though she was omitted from his Will (probably inadvertently, as it was written prior to her birth). Her right to inherit, if any, will turn on where Ledger was domiciled at his death, which jurisdiction's laws govern his estate, and even whether tabloid reports that Ledger fathered another child many years earlier are true.

Former Senate Chief Tax Counsel Heck Joins K&L Gates

Patrick G. Heck, former Chief Tax Counsel to the Senate Finance Committee, has become a partner in the public policy and law practice of Kirkpatrick & Lockhart Preston Gates Ellis in the firm's Washington, D.C. office.  From the press release:

As the senior tax policy advisor to Chairman Max Baucus and other Democratic members of the Senate Finance Committee from 2000 through 2007, Heck was responsible for developing and promoting tax law changes related to the Internal Revenue Code, including in the areas of corporate and international tax reforms, tax law simplification, Federal excise taxes, and compliance issues. Among the major legislative accomplishments to which Heck contributed were the transportation and energy tax incentives acts, the Gulf Opportunity Zone Act, the Tax Increase Prevention and Reconciliation Act, the Pension Protection Act, the American Jobs Creation Act of 2004, and the Economic Growth and Tax Relief Act of 2001, as well as tax relief programs aimed at populations such as working families and victims of terrorism and natural disasters. He also has worked extensively on oversight of the Internal Revenue Service and on Congressional investigations.

Greenhouse Gas Auctions and Taxes

Robert W. Hahn (AEI Reg-Markets Center) has posted Greenhouse Gas Auctions and Taxes: Some Practical Considerations on SSRN.  Here is the abstract:

Many scholars assert that "cap and trade" is an appropriate strategy for addressing climate change. Some economists have argued that auctions of greenhouse gases should be an integral part of any cap-and-trade mechanism. These economists suggest that auctions can efficiently distribute emissions allowances among firms, and potentially offset some of the deadweight costs with raising government revenues. Many environmentalists argue that revenue from auctions should be used by the government to promote reductions in greenhouse gas emissions. Similar arguments are made for greenhouse gas taxes.

This paper evaluates various arguments for auctions and taxes in light of political realities. I argue that economists are likely to be overly optimistic in their support for auctions and taxes, and that many potential uses of these revenues are unlikely to result in economic benefits. I then offer some general guidance for governments on the role of auctions in a cap-and-trade mechanism and offer recommendations for participating firms. Specifically, I urge the government to compare a realistic set of policy options, while recognizing that the feasibility of different types of mechanisms can change over time. To illustrate one such comparison, I examine auctions and taxes as ways of raising revenue, and find that neither is likely to do particularly well in terms of efficiency based on history. Furthermore, I suggest that the introduction of political economy considerations may lead to an optimal level of pollution control that is lower than that suggested by conventional economic analysis.

Say It Ain't So, Jim

Jim Maule noted on his blog yesterday that "retirement is around the corner if I have my way."  That took me by surprise, since Jim is one of the most active Tax Profs I know, and he's only 57!  I hope Villanova students are lining up to take Jim's tax courses while they still have the chance.  He noted that he has taught 4,000 - 5,000 students in his 25 years at Villanova.  Most remarkably, Jim has taught Partnership Tax 60 times -- that has to be a record!   

 

Law School Student Evaluations Work Well

Arthur Best (Denver) has posted Student Evaluations of Law Teaching Work Well: Strongly Agree, Agree, Neutral, Disagree, Strongly Disagree, 38 Sw. U. L. Rev. ___ (2008).  Here is the abstract:

Academics in the fields of psychology and education generally describe student evaluations of teaching as reliable and useful. On the other hand, law professors often criticize them as unreliable and impaired by students' biases. This Article considers resolving these discrepant views by paying close attention to the various purposes for which student evaluations of teaching are used. For some uses, such as guidance for students in course selection, shortcomings of the evaluations would be of slight consequence. For promotion or tenure decisions, despite law professors' skepticism, schools should use the data to identify outlier instructors. Basing conclusions only on large numerical differences among faculty should protect faculty members from unfair consequences caused by students' biases, since the effects of biases (if present) are likely to be relatively small. It is also consistent with the modern consensus among educational researchers.

The Article also reports findings from analysis of a large number of law school evaluation of teaching forms. Virtually all of them use phraseology that ignores the collaborative nature of teaching and learning. They focus attention on the professor, with the unintended consequence of portraying students as passive participants in their education. The Article recommends revising questionnaires to have a balance between terminology that ignores students' roles and terminology that reflects them. With regard to other attributes, there are large variations among different law schools questionnaires. The Article documents those differences and identifies some that may be problematic.

Non-partisan Group Chides McCain for Tax "Exaggerations and Distortions"

The non-partisan FactCheck.org chides Republican presidential candidate John McCain's for "exaggerations and distortions" on taxes:

• McCain says that eliminating the AMT will save "more than 25 million middle-class families more than $2,000 every year." But McCain's "middle class" includes families making up to $200,000 per year, and the $2,000 figure is an average. Those earning more money will see the lion's share of the savings. McCain also leaves out the fact that the proposal could cost as much as $1.6 trillion over 10 years.
• By the measure most economists prefer, McCain is wrong in his claim that Sens. Clinton and Obama want to implement "the single largest tax increase since the Second World War;" it would be the fifth largest. At a more basic level, it's misleading to tag Clinton and Obama for something that was scheduled during the Bush administration – the expiration of the 2001 and 2003 Bush tax cuts, which by law will occur at the end of 2010.
• McCain also repeats the mantra that cutting the capital gains tax rate will increase government receipts. In fact, rate cuts produce a spike in revenue, but it's only temporary. McCain also falsely claims that higher capital gains tax rates will affect 401(k) plans.
• McCain was the first to announce the now widely discredited proposal to suspend federal gas taxes. The proposal wouldn't lower prices at the pump and would result in (effectively) an $8.5 billion windfall to oil companies.

House to Mark Up Energy and Tax Extenders Act

The House Ways & Means Committee will mark up The Energy and Tax Extenders Act of 2008 today:

• Press Release
• Summary of Bill
• Legislative Text
• Joint Committee on Taxation Explanation
• Joint Committee on Taxation Revenue Estimate

Update: 

• Updated Joint Committee on Taxation Explanation
• Updated Joint Committee on Taxation Revenue Estimate

Repetti: Corporate Governance and Stockholder Abdication: Missing Factors in Tax Policy Analysis

James R. Repetti (Boston College) has posted Corporate Governance and Stockholder Abdication: Missing Factors in Tax Policy Analysis, 67 Nore Dame L. Rev. 971 (1992), on SSRN.  Here is the abstract:

Policymakers recognize that management's ability to control publicly held corporations can negatively affect corporate productivity because management objectives may differ significantly from the wealth maximization objective of stockholders. Commentators have generally viewed the ability of management to control public corporations as resulting from stockholder abdication. Congress has used the tax system to respond to this problem. At various times, Congress has enacted the capital gains preference, golden parachute tax, greenmail tax, and incentive stock option preference with three goals in mind: (1) to encourage management to adopt objectives consistent with stockholders' objectives, (2) to encourage stockholders to adopt a long-term perspective with respect to their stock ownership, and (3) to discourage management from insulating itself from the discipline of market forces.

This article argues that these provisions have been ineffective and in some cases harmful because Congress did not consider that the evil it sought to remedy, stockholder abdication, impairs the effectiveness of these provisions. Preferential rates for long-term capital gains are unproductive because they subsidize inefficient retention of earnings, particularly when the tax rate on capital gains is less than the tax rate on dividends. In addition, the holding period requirement of the capital gains preference does not encourage stockholders to adopt a long-term investment perspective and may create market distortions. Moreover, golden parachute and greenmail taxes harm efficient companies. The golden parachute tax prevents well-managed public companies from discouraging unwanted bids by inefficient companies because the stockholder approval exception is not available to public companies. The greenmail tax discourages profit-maximizing bidders from making hostile bids for inefficient companies and, at the same time, prevents efficient firms from thwarting takeover attempts by inefficient firms. Lastly, evidence about the impact of incentive stock options on corporate performance is mixed.

ABA Threatens to Withhold Accreditation for Florida A&M Law School

The St. Petersburg Times has obtained a copy of the report issued by the ABA team after its October 28-31, 2007 site visit to Florida A&M University College of Law questioning whether the school will be able to obtain accreditation.

• ABA Site Team Report
• Law School's Response
• ABA Journal:  ‘Steep Mountain’ for FAMU to Climb to Full Accreditation, ABA Report Says
• National Law Journal:  ABA Report on Florida Law School May Endanger Accreditation
• St. Petersburg Times:
  • ABA: Legis Mandate Partly to Blame for FAMU Law Woes
  • "A Very Steep Mountain to Climb"
  • FAMU Law School Running Against Clock, Internal Problem

EU to Crack Down on Tax Havens

International Herald Tribune:  EU Considers Toughening Offensive on Tax Havens, by Stephen Castle:

Under pressure from Germany, the European Union on Wednesday agreed to consider a new clampdown on tax havens, despite the opposition of one country, Luxembourg, which said it saw no reason to change the existing law.

In what is likely to become a lengthy negotiation, the European Commission will propose the expansion of a directive that aims to ensure that EU citizens do not evade taxes on the interest from savings by opening accounts abroad.

(Hat Tip:  Ann Murphy.)

"The Moral Heart of Higher Education: Motivating Senior Faculty to Write"

Following up on Monday's post, Why Don't Some Faculty Write? It's the Law Reviews' Fault:  Louisville Dean Jim Chen offers four possible alternative ways of dealing with law faculty that do not write:

1. Do nothing. At the very least, do nothing drastic. Ask nonwriters to focus on teaching, advising, outreach, and university-wide committees.
2. Issue nonwriters a free pass, to the extent they were hired without scholarly expectations.
3. Increase symbolic rewards for writing.
4. Work harder to avoid hiring (future) nonwriters in the first place.

It should be clear by now that I endorse, with wildly variable levels of enthusiasm and significant misgivings, all four of the strategies I have outlined. I've expended great thought and effort on this whole exercise because I realized ... that the task of motivating senior faculty members to write goes to the moral heart of higher education.

Scholarship is a core responsibility held, even cherished, by most members of the academy. Indeed, the best among us do not view it as a duty, but as a privilege. If higher education were to identify its gravest sins, the complete failure to produce scholarship surely would rank among the top seven.

Here at MoneyLaw and elsewhere, I have enthusiastically endorsed Hanlon's razor, the folk aphorism that reminds us: Never attribute to malice that which can be adequately explained by stupidity. I am now prepared to embrace an even more expansive version of Hanlon's razor. Never attribute to active sin that which can be adequately explained by inertia.

Continue reading ""The Moral Heart of Higher Education: Motivating Senior Faculty to Write""

WSJ: What Congress Is Likely to Do to Your Taxes

Today's Wall Street Journal Tax Report:  What Congress Is Likely To Do to Your Tax Bill, by Tom Herman:

It's going to be a tricky year to do your tax planning. Look for Congress to revive several popular tax breaks this year that expired at the end of 2007 and to shield more than 20 million people from being caught in the tangled web of the AMT. ... Here is a summary of several major proposed tax changes that would affect individuals this year:

• Alternative minimum tax. ...  Approval of a temporary AMT patch this year is "all but certain" ...  The most likely outcome: Congress will increase the AMT's income-exemption levels and take other action to keep the number of AMT victims about the same as in 2007.
• Sales-tax deduction. ... Outlook for passage: excellent.
• Tuition and fees deduction. ...  Outlook for passage: excellent.
• IRAs. Another law that expired at the end of last year allowed taxpayers who were 70½ or older to transfer as much as $100,000 a year, tax-free, directly from their individual retirement accounts to qualified charities. That transfer also counted toward the taxpayer's required minimum distribution for the year. ...  Outlook for passage: very good.
• "Cost basis" reporting. President Bush has called for requiring many brokerage firms and other institutions to report to the government what investors paid for stocks and other securities. Advocates say this cost-basis reporting would make many taxpayers more honest in reporting capital gains and also make it easier for law-abiding taxpayers to calculate taxes. ... Outlook for passage: possible.
• Penalties for nonfilers. President Bush wants to increase criminal penalties for "willful" failure to file federal income-tax returns for several years. His budget includes making it a felony, instead of a misdemeanor, and imposing stiffer financial penalties. This proposal received more attention earlier this year when Wesley Snipes, the actor, was convicted of misdemeanor charges for failing to file returns but was found not guilty of more serious felony charges. ... Outlook for passage: possible.
• Estate taxes. Expect lots of heated rhetoric in coming months about the need for major changes in the federal estate tax. ... Outlook for this year: Forget about it.
• Educator deduction. This expired deduction allowed elementary and secondary-school teachers and other educators to deduct up to $250 a year for buying classroom supplies out-of-pocket. ... Outlook for passage: excellent.

Leviner Presents A New Era of Tax Enforcement -- From "Big Stick" to Responsive Regulation Today at Tel Aviv Law School

Sagit Leviner (Bar-Ilan University, Israel) presents A New Era of Tax Enforcement -- From "Big Stick" to Responsive Regulation at Tel Aviv University, Buchanan Faculty of Law, as part of its Tax Policy Colloquium.  Here is the abstract:

Recent developments in regulation and tax administration in Australia inspired this article on tax compliance and responsive regulation, a concept Ian Ayres and John Braithwaite developed and the Australian tax administration implemented, as an alternative approach to enforcement. The Article begins with a discussion on what has become the dominant approach to tax enforcement of the past three and a half decades: the economics of crime and compliance. It evaluates the key advantages and disadvantages of the economic approach as well as its application to tax. Next, the Article explores responsive regulation as a method that draws on the economic paradigm but that also supplements this approach with other theories, particularly those involving identity, conflict escalation, and procedural justice. The Article suggests that this broader, more balanced, and closely tailored method of regulating responsively may enable regulators to draw on the advantages of the economic model while alleviating some of its drawbacks and that it may therefore constitute a superior method for regulating compliance.

Stephen Gey: A Dying Law Professor's Last Class

I previously have blogged (here and here) the tragic news that one of the true giants and nicest people in our business, Steven G. Gey, David and Deborah Fonvielle and Donald and Janet Hinkle Professor of Law at Florida State, is dying of amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig's disease.

Please take the time to read the incredible story in the St. Petersburg Times, ALS Saps Professor's Strength, Not His Ideals: A Dying Professor Believes in the Law. His Students Believe in God. The Only Faith They Share Is In Each Other, by John Barry.  (Hat Tip:  Brian Leiter.)

Two Professors Urge Students to Lie on Survey to Increase School's Ranking

See the details, including this audio of Fiona Barlow-Brown, at Times On Line:

“If Kingston comes down the bottom, no one’s going to want to employ you because they’re going to think your degree is shit,” she added. “Although this is going to sound incredibly biased, if you think something’s a four, my encouragement would be to give it a five. Because that’s what everyone else is doing.”

(Hat Tip:  Inside Higher Ed.)

SSRN Tax Professor Rankings

SSRN has updated its new monthly rankings of 457 American and international law school faculties and 1,500 law professors by (among other things) the number of paper downloads from the SSRN data base.  Here is the new list (through May 9, 2008) of the Top 25 Tax Professors in two of the SSRN categories: all-time downloads and new downloads (within the past 12 months) [click on chart to enlarge]:

Here are the biggest upward moves in each category from the April 2008 ranking [click on chart to enlarge]:

Note that this ranking includes full-time tax professors with at least one tax paper on SSRN, and all papers (including non-tax papers) by these tax professors are included in the SSRN data.

Continue reading "SSRN Tax Professor Rankings"

Government Wins 5th Circuit Son of BOSS Tax Shelter Case

The Fifth Circuit on Monday handed the government another victory in a Son of BOSS tax shelter case.Kornman & Assoc., Inc. v. United States, No. 06-11422 (5th Cir. 5/12/08):

In these consolidated TEFRA partnership proceedings, the Government argues that the Appellants attempted to create an enormous, artificial tax loss that is devoid of any economic content by using the short sale variant of the "Son of BOSS" tax shelter. Through a pre-arranged series of transactions involving the short sale of Treasury Notes (T-Notes) and subsequent transfers between a trust, two limited partnerships (LPs), and an individual, the Ettman Family Trust (the Trust) reported a short-term capital loss of approximately $102.6 Million on its 1999 tax return despite the fact that it only suffered an economic loss of approximately $200,000 in connection with those transactions.3 Because non-corporate taxpayers can carry an unused capital loss forward to succeeding taxable years until it is exhausted, the trust used this artificial capital loss in 1999 to offset its legitimate income and capital gains in 2000 and 2001. ...  [W]e conclude that the obligation to close a short sale is a liability for purposes of § 752.

Before we begin our excursion into Subchapter K, we would be remiss if we did not comment on the elephant in the room. The Trust acknowledges that it only suffered a $200,000 economic loss in connection with these transactions, yet it claimed a $102.6 Million tax loss on its return. The Trust used this fake loss in 1999 to offset over $2 Million in legitimate income and capital gains in 2000 and 2001. The Appellants' premeditated attempt to transform this wash transaction (for economic purposes) into a windfall (for tax purposes) is reminiscent of an alchemist's attempt to transmute lead into gold.

Judge King issued a one-paragraph concurring opinion:

I concur in the judgment of the panel and in the panel's opinion. I write separately to express my unease with what we have been asked to do here. The basic problem with this case is that the underlying transactions have absolutely no economic substance. The IRS seeks a rule of law from a circuit court to dispose of this case, and others, without being put to the expense and delay of litigating the fact-bound question whether these transactions should be recharacterized for tax purposes under the no-economic substance and step-transactions doctrines. The result is a rule of law addressing what is here a pretense, an unsettling undertaking.

For TaxProf Blog coverage of the Government's victory in the district court, see here.

Update:  DOJ Press Release