TaxProf Blog

NTA Annual Tax Conference

The three-day National Tax Association's 102nd Annual Conference on Taxation kicks off today in Denver.  Tax Profs with speaking roles include:

• Value-Added Tax: Fiscal and Practical Potential:  Leonard Burman (Syracuse), Charles McLure (Stanford)
• International Tax Policy:  Douglas A. Shackelford (North Carolina)
• Carbon Taxes and Trade:  David Weisbach (Chicago), Charles McLure (Stanford)
• Tax Incentives for Retirement Savings:  Lily Batchelder (NYU), David Gamage (UC-Berkeley), Louis Kaplow (Harvard), James Poterba (MIT)
• Taxes and Cross-Jurisdictional Income Shifting and Reporting:  Dhammika Dharmapala (Illinois), Douglas Shackelford (North Carolina)
• NBER Reporting Compliance and Compliance Burden:  Jonathan Forman (Oklahoma; IRS Professor in Residence)
• Taxing Firms and Investors in a Global Economy:  Dhammika Dharmapala (Illinois), Kimberly Clausing (Reed College), Mihir Desai (Harvard), Thomas Brennan (Northwestern)
• Stress Tests for State Budgets:  David Gamage (UC-Berkeley)

Kysar Presents Lasting Legislation Today at Columbia

Rebecca M. Kysar (Brooklyn) presents Lasting Legislation at Columbia today as part of its Tax Policy Colloquium Series. Here is the abstract:

This Article argues that, due to certain failings and pathologies of the legislative process, legislation enacted with sunset provisions lacks benefits hailed in recent scholarship, while also harming the political process and its output. Proponents have argued that such “temporary legislation” enhances fiscal responsibility because official cost estimates reflect the full cost of the legislation; the cost estimate, in other words, relays the entirety of expenses to Congress upon each sunset date. In contrast, when enacting non-temporary legislation, the theory goes, Congress is provided with official costs only for the duration of the budget window, or the length of time set forth in the annual budget resolution as the relevant period within which Congress makes spending and revenue decisions.

Continue reading "Kysar Presents Lasting Legislation Today at Columbia"

The Coming 69% Capital Gains Tax Increase May Be Even Higher

Wall Street Journal editorial, A 69% Capital Gains Tax Hike . . . Pelosi's 5.4% Income Surtax Would Hit Capital Gains and Dividends:

House Democrats are funding their new entitlement with a 5.4% surtax on incomes above $500,000 for individuals and above $1 million for joint filers. The surcharge is intended to snag the greatest number of taxpayers to raise some $460.5 billion, and so the House has written it to apply to modified adjusted gross income. That means it includes both capital gains and dividends.

That surtax takes effect on January 1, 2011, or the day the Bush tax rates of 2001 and 2003 expire. Today's capital gains tax rate of 15% would bounce back to 20% because of the Bush repeal and then to 25.4% with the surtax. That's a 69% increase, overnight. ...

Some readers may think that this 5.4% surtax can't possibly make it into a final Congressional bill due to Senate opposition, but we wouldn't be so sure. Mr. Obama hasn't said so much as a discouraging word about the House bill. And we've seen in the past 10 months that when Mr. Obama's campaign promises clash with the priorities of House liberals, the liberals always win.

Bloomberg, Orszag Says Capital Gains Medicare Tax ‘in Play’ on Health Bill, by Ryan J. Donmoyer:

White House Budget Director Peter Orszag said a proposal to apply Medicare taxes to capital gains earned by wealthy Americans as part of health-overhaul legislation is “in play” in order to scale back a proposed levy on high-end insurance plans. ... Aides to Senate Majority Leader Harry Reid have sought input on the idea ....

Reid’s proposal, being advanced by Senator John Kerry, a Massachusetts Democrat, would apply Medicare taxes to non-wage income earned from capital gains, dividends, interest, royalties and partnerships for U.S. couples earning more than $250,000, the aides said. He’s also considering an alternative that would simply increase the 1.45 percent Medicare tax on salaries of couples who earn more than $250,000, one of the aides said.

Conway Presents Debt and Equity and Continuity of Interest Today at BC

Meredith Conway (Suffolk) presents With or Without You: Debt and Equity and Continuity of Interest at Boston College today as part of its Tax Policy Workshop Series. Here is the abstract:

Continuity of interest is a judicially created doctrine designed to ensure that when holders of corporate interests in tax-free reorganizations exchange those interests merely on paper, the exchange is tax-free.

The doctrine was intended to ensure that a holder who “continued” his interest in a corporation would not be taxed. Unfortunately, the continuity of interest doctrine throughout the years became distorted as a result of misinterpretations of both legislative history and judicial decisions. The doctrine was intended to provided that as long as an exchange is purely on paper and takes place in a tax free reorganization the exchange will be tax free. Instead, it has become a mechanical hurdle where a certain percentage of shareholder participation in an exchange (ranging from 40% to 80%) meets the continuity of interest doctrine. The doctrine itself does little to ensure a continuing interest because shareholders are free to sell their interest immediately after the exchange. Furthermore, the doctrine has been interpreted from judicial decisions to apply only to stock and equity and not to debt. Therefore, even when a reorganization meets the tax-free reorganization provisions, if a debt holder exchanges his interest for a similar debt instrument in the new corporation, he is not included within the continuity of interest doctrine.

The doctrine must be revisited and revised.

Continue reading "Conway Presents Debt and Equity and Continuity of Interest Today at BC"

A Homebuyer Tax Credit Primer

Wall Street Journal, The Lowdown on Home-Buyer Tax Credits, by Laura Sanders:

Last week, President Barack Obama signed a law that extends through next spring a temporary tax credit of up to $8,000 for some first-time home buyers, which was due to expire Nov. 30. The law also adds a new tax credit of up to $6,500 for certain repeat home buyers. The package, which the government estimates will cost a total of $11 billion, is intended to help spur housing sales, a critical part of the economy.

Here are answers to [13] questions about the new rules.

Henderson: Outcome Measures and Regulatory Failure in Legal Education

William D. Henderson (Indiana-Bloomington), Outcome Measures and Regulatory Failure in Legal Education (Legal Profession Blog):

Over the last few years, the topic of outcome (or output) measures has been a recurring theme at various association meetings and conferences surrounding legal education. Some of this discussion is motivated by Department of Education initiatives that want to establish a clear linkage between educational cost and economic returns. Some schools, however, believe that their fortunes will rise when they can be judged on three years of education (e.g., bar passage rates, employment, student satisfaction) rather than the input measures that drive the U.S. News Rankings.

It is hard to imagine a more impossible task than faculty from 190+ law schools reaching a "consensus" on outcomes measures. Yet, consensus is not required. The ABA Section on Legal Education and Admission to the Bar, through its authority to accredit law schools, can require law schools to measure, collect, and report information that the Section determines is in the public interest. In 2007, the Section created a "Special Committee on Output Measures" and asked it to "define appropriate output measures and make specific recommendations as to whether the Section should adopt those measures a part of the [Accreditation] Standards."

So what happened? The Special Committee's 76-page single-spaced Final Report, issued in July 2008, made little headway in defining output measures or making specific recommendation regarding accreditation. In a nutshell, the Committee recommended that the Standards be amended so that each law school would be free to define and measure its own outcomes. ...

The Committee shrinks from the task of defining specific, comparable outcomes because it knows (at least implicitly or subconsciously) that the very process of creating meaningful outputs creates a large number of winners and losers among law schools. Yet, by refusing to act as regulator that serves the public interest, the ABA Section on Legal Education and Admission to the Bar makes law schools the winner and law students the losers.

If we evaluate outcome measures from the perspective of law students rather than law schools, there are at least three pieces of information that the Section should collect and publish annually in a format that facilitates school-to-school comparisons:

1. Bar Passage. ...
2. Employment Outcomes. ...
3. Debt Loads. ... 

If the Section focused on the above approach, they will not need to develop the thousand-flowers-bloom approach embodied in the Special Committee's Final Report. In a market will better information, law schools will find and leverage their own competitive advantage in order to survive--and let's be honest, some schools won't. From a societal perspective that is okay. The Section on Legal Education and Admission to the Bar needs to wake up to the fact that is is regulator with a fiduciary responsibility to law students, not law schools.

More on The Tax Treatment of the Sale of Human Body Parts

Following up on last week's post, The Tax Treatment of Transfers of Human Body Parts: the Wall Street Journal covers the story in Tax Code Lags Growing Body-Parts Market, by Arden Dale:

Organs and blood products, eggs, sperm, breast milk and other goods from the human body are bought and sold in a market that has burgeoned over the past two decades. The tax code hasn't kept up.

The Internal Revenue Code has nothing specific to say about how, or even whether, taxpayers should report sales of their own body materials. Is there taxable income when a person sells an egg, a kidney or blood plasma? If so, should it be treated as ordinary income or capital gains?

"The fact that we don't have any settled tax treatment is currently a problem and looks to be a much bigger problem in the future," says Lisa Milot, an assistant professor of law at the University of Georgia School of Law. ...

Bridget Crawford, a professor at Pace University who teaches on tax issues, says lack of specifics in the tax code reflect the "fundamental question of whether the human body is a product, or if it is something so special that it can't be taxed." She believes tax law has looked the other way "to avoid dealing with the ugly reality that bodies are being commercialized."

Death of Walter Giles

I previously blogged about my wonderful undergraduate years at Georgetown, where one man sparked my interest in law and teaching that became my lifelong calling:  Dr. Walter I. Giles.  I took five of Dr. Giles' legendary courses and seminars on constitutional law, and was honored to spend my senior year as his teaching assistant.  I learned much about law, politics, and life from Dr. Giles, including a love for martinis and the Washington Redskins. I cherished the dozens of old Washington Post front pages he gave me chronicling the history of Watergate and other epochal political stories.

The Washington Post reports that Dr. Giles has passed away:

Walter I. "Jack" Giles, 89, a government professor at Georgetown University whose American government and constitutional law classes were considered intellectual proving grounds for future lawyers and legislators, including President Bill Clinton, died of congestive heart failure Oct. 9 at the Emeritus assisted living facility in Arlington County.

Dr. Giles joined the Georgetown faculty in 1947 and retired in 1990. Clinton, of the Georgetown Class of 1968, called Dr. Giles one of his favorite professors, according to David Maraniss's biography of the former president, "First In His Class" (1995).

Dr. Giles altered the trajectory of my life -- I simply would not be where I am today had he not taken an interest in a scared, painfully shy and awkward kid away from home for the first time in his life.  I can only hope that I have had a fraction of an impact on my students that Dr. Giles had on me.

Caron: Tax Court Fumbles Substance-Over-Form Ball in Estate of Brown

With the Cincinnati Bengals in first place in the AFC North Division, I thought it would be an opportune time to post my article, Tax Court Fumbles Substance-Over-Form Ball in Estate of Brown, 75 Tax Notes 1249 (1997), on SSRN.  Here is the abstract:

Tax lawyers are abuzz over Tax Court Judge David Laro’s aggressive application of the substance-over-form doctrine in ACM Partnership v. Commissioner, T.C. Memo. 1997-115. In that case, Judge Laro rejected Colgate-Palmolive’s use of the contingent payment installment sales rules to shelter $100 million of gain. In contrast, Tax Court Judge John O. Colvin recently rejected the Service’s substance-over-form argument in Estate of Brown v. Commissioner, T.C. Memo. 1997-195, thereby permitting control of the Cincinnati Bengals football team to pass to the children of the team’s founder free of over $30 million of estate tax. The decision creates a quasi-business judgment rule in the estate tax -- whatever a closely held company and the estate planning advisers of a major shareholder decide to do to shift control of the company to the shareholder’s children seemingly is automatically imbued with a business purpose as long as an unrelated shareholder receives sufficient cash to go along with the transaction. Although the technique may be difficult for other sports plutocrats to replicate, Estate of Brown gives credence in the estate tax context to matters of form rightfully scorned by ACM Partnership in the income tax context.

How to Fix Charitable Giving

Wall Street Journal op-ed, What's Wrong With Charitable Giving—and How to Fix It, by Pablo Eisenberg (Senior Fellow, Center for Public and Nonprofit Leadership, Georgetown Public Policy Institute):

It's hard to overstate the crisis facing charitable giving today. So let me just say it as plainly as I can: Much of current philanthropic giving, by foundations and individuals, neither meets the needs of our charitable organizations nor addresses some of our most urgent public needs.

What can foundations and others do to make a difference for the nonprofits and the people they are designed to help? Here are nine changes that would go a long way toward making philanthropy do what we all claim we want it to do.

1. Increase the Distribution Percentage
2. Increase General Operating Support
3. Increase Multiyear Funding
4. Adopt Rolling Grant Making
5. Allocate More Funds to the Truly Needy
6. Reach Out to Local Groups And Underserved Regions
7. Simplify Application and Reporting Procedures
8. Improve Public Accountability
9. Fund the Watchdogs

 

Wolff: Congressional Unilateral Tax Treaty Overrides

Mark J. Wolff (St. Thomas University) has published Congressional Unilateral Tax Treaty Overrides: The "Latter in Time Doctrine" Is Out of Time!, 9 Fla. Tax Rev. 699 (2009).  Here is part of the Introduction:

This article examines the questionable jurisprudence allowing the United States to override treaties unilaterally, freely negotiated between two sovereign nations, through the later-in-time doctrine. Through the perspective of tax conventions, this article provides an overview of the historical development and context of unilateral treaty overrides. The following analysis will demonstrate the flawed reasoning behind the enactment of the later-in-time doctrine; the necessity to distinguish between Indian and sovereign nations; the contravention of the executive branch's treaty powers; the flawed interpretations of the Supremacy Clause; and the growing requirement to fulfill international obligations.

The analysis provides a plausible solution by applying a heightened scrutiny to domestic tax statutes attempting to override prior-in-time treaties. The call for heightened scrutiny is to be applied before potential overrides are granted; it is not meant to displace Congress' power to override international tax treaties by way of the tax code. In the case that an override is allowed, the void left from the unfulfilled obligations should spur the United States to make restitution to the parties injured.

California Bar Association Tax Section Annual Meeting

The three-day 2009 Annual Meeting of the California Tax Bar & The California Tax Policy Conference kicks off today in California.  Keynote addresses will be given by Tax Profs Edward Kleinbard (USC) and Richard D. Pomp (UConn).

Tax Angle in David Letterman Extortion Case

The lawyer for Robert Halderman, charged with trying to extort $2 million from David Letterman, filed this 34-page memorandum yesterday seeking dismissal of the indictment. In support of his argument that Halderman was merely trying to sell Letterman a screenplay, Halderman's lawyer notes this tax angle (citation omitted):

[A]t the September 23 meeting, Halderman and [James] Jackoway [Letterman's lawyer] also discussed the manner in which they would memorialize the sale, including the drafting of a "confidentiality agreement" and a "purchase agreement," and how they would handle the tax implications of the sale. At one point, Jackoway told Halderman, "before I issue a check you'll have to tell me, you know, who I am paying. I would need either a social security number if it's you or a federal I.D., if it's not you."  Halderman was willing to sign binding legal documents, and, on the tax issue, told Jackoway that he would even provide his social security number and discuss the issue with his accountant. He even planned to ask for advice on the transaction from his "business manager, [his] tax person." Halderman's course of conduct very clearly indicated that he thought his actions were not unlawful. [p.19]

(Hat Tip: Jim Hart.)

Jacobson: 100+% Implicit Marginal Tax Rates Will Create Permanent Democratic Majority

William A. Jacobson (Cornell), 100% Plus Taxation Key To Permanent Dem Majority:

Is it possible to pay more than 100% of your last dollar of income in taxes? And if it were, would you bother to earn that last dollar?

Herein lies the key to how Democrats will obtain a permanent, economically-enslaved majority if universal income-based health care subsidies are enacted. ... 

The key distinction is between marginal tax rate and implicit marginal tax rate. The marginal tax rate is the rate we all talk about - what absolute percentage of your last dollar earned will be taken by the government.

The implicit marginal tax rate is the absolute percentage of your last dollar taken by the government plus the loss of government benefits resulting from that last dollar. This implicit marginal tax rate can, and does, exceed 100% for the lower-middle and middle classes., and will expand under Democratic health care proposals.

Here's an explanation, plus a chart, from an article titled The Dead Zone: The Implicit Marginal Tax Rate (h/t The Right Coast):

To say that antipoverty programs in the United States are perverted may be an understatement. When you take into account the loss of means-tested benefits (e.g., cash assistance, food stamps, housing subsidies, and health insurance), and the taxes that people pay on earned income, the return to working is essentially zero for those in the lower two quintiles of the income distribution.

For many of the working poor, the implicit marginal tax rate is greater than 100%. The long-run consequence of undermining the positive incentive to work is, of course, the creation of an underclass acclimated to not working; the supplement of cash and noncash benefits with income from crime and the underground economy; and the government resorting to negative incentives such as mandatory work programs....

This situation will only get worse as Obama implements universal income-based health care subsidies and other goodies which will phase out as income rises. ...

In addition to all the other problems with highly subsidized, income-tested health care benefits, will come an even more permanent underclass which, being economically rational, will choose not to earn another dollar rather than lose more than a dollar of benefits.

Conservatives often speak of the Obama-Pelosi-Reid axis as seeking to create a permanent Democratic majority through big government handouts. This implicit marginal tax analysis shows that it is much worse than it seems; the permanent big-government majority will not be there by choice, but by government-created economic necessity.

Lower income voters, who pay no federal taxes and who are very voters facing this government-benefits trap, voted for Obama overwhelmingly, as this chart from the Tax Prof shows:

A permanent, Democratic-voting majority living off government benefits with no way out. It really is that bad, and this really is a once-in-a-lifetime chance for the Democrats to achieve a permanent, economically-enslaved majority.

Mason Presents Tax Expenditures and Federalism at Toronto

Ruth Mason (UConn) presented Tax Expenditures and Federalism at the University of Toronto yesterday as part of the James Hausman Tax Law and Policy Workshop Series.  Here is the abstract:

This Essay provides the first extended comparison of tax expenditures with federal grants to the states as devices for achieving particular federal policies. It examines the classic criticisms of tax expenditures and finds that in some cases grants are susceptible to the same criticisms as tax expenditures. For example, tax expenditures have long been criticized as inequitable because they usually distribute more benefits to higher income taxpayers. However, consideration of alternative grant programs reminds us that affluent suburbanites are likely to capture a disproportionate share of grant money provided to state governments. Likewise, whereas scholars have argued that certain tax expenditures disproportionately benefit whites, researchers have found race bias in the administration of federal grant programs. Thus, although tax expenditures may appear to be inequitable in isolation, comparing tax expenditures with realistic alternative policies provides a more balanced perspective. Analysis of other traditional criticisms of tax expenditures reveals similar insights.

IRS Awards $8 Million in Grants to 147 Organizations for Tax Prep Assistance -- $0 to ACORN

The IRS yesterday released (IR-2009-104) a list of the 147 organizations in all 50 states and the District of Columbia that received $8 million in matching grants to support its Volunteer Income Tax Assistance (VITA) Program in 2009. 360 organizations submitted applications requesting more than $30 million in matching funds in the second year of the VITA grant program.  As I previously noted, the IRS has cut off all funding to ACORN through the VITA program.

Schlunk: Law School Is a Bad Investment

Tax Prof Herwig J. Schlunk (Vanderbilt) has posted Mamas Don't Let Your Babies Grow Up To Be...Lawyers on SSRN.  Here is the abstract:

This essay treats a legal education as an investment, and asks the question of whether, based on known costs and expected benefits, such investment should be undertaken. The inquiry will necessarily differ from one potential law student to another. But for three posited “typical students,” the investment is shown to be a bad one. ...

Based on 2009 tax rates, the following table presents the foregone after-all-tax income of each of my potential law school attendees during his first year of gainful employment.

 

...  The table also presents the salary-level that would have been attained by the start of the fourth year, i.e., the year in which a law graduate enters the workforce.

 

...  [T]he following table presents the initial compensation hurdle that the law degree must overcome to provide any positive value to each of my three potential law school attendees:

I assume that each of my law school graduates has an expected 35-year legal career. I also assume that the incremental earnings from a law degree are earned as an annuity with a 3.5% annual growth factor reflecting increased productivity. The question is: what must be the initial payment of such annuity in order to justify the investment made in the law degree? The answers are surprisingly high, as can be seen in the following table:

What does this mean? Suppose we convince ourselves that 18% is the appropriate discount rate. Then Solid Performer would need to expect to earn, on average, $36,449 more in his first year of legal employment than he would have earned had he not gone to law school. Given that his hurdle compensation is $87,312, it follows that he must expect to earn $123,761 in his first year. Moreover, the $36,449 wage differential would need to be maintained, and indeed increased at a rate of 3% per annum, throughout the remainder of his career. The following table sets forth the result of this same calculation of the required expected first year compensation for each of my three hypothetical individuals:

Update: New York Times, Law School as an Investment.

Simmons: Built-In Gain and Built-In Loss Property on Formation of a Partnership

Daniel L. Simmons (UC-Davis) has published Built-In Gain and Built-In Loss Property on Formation of a Partnership: An Exploration of the Grand Elegance of Partnership Capital Accounts, 9 Fla. Tax Rev. 599 (2009).  Here is the abstract:

This article is a primer on the issues faced by partners in dealing with the consequences of built-in gain or loss property contributed to a partnership. The article explores the tax consequences of almost every aspect of the partnership treatment of built-in gain and loss property.

The use of properly maintained capital accounts to answer tax allocation questions is a principal focus of the article. The first part of the article discusses basic principles of partnership taxation that provide for the formation of partnerships and allocation of partnership book and tax items. A thorough understanding of these fundamental principles is a prerequisite to discussing the problems of built-in gain and loss property. Part II considers the problems raised by contributions of built-in gain property. The analysis demonstrates that recent proposed Treasury regulations regarding contributed built-in gain or loss property and partnership mergers in some circumstances create mischief by failing to fully address deferred recognition. Part III looks at the complexity that is added by the existence of debt in the partnership. Part IV addresses special problems created by built-in loss property, including the issues raised by § 704(c)(1)(C), enacted in 2004. The analysis in this part demonstrates the need for analyzing partnership capital accounts in order to apply the basis limitation of § 704(c)(1)(C)(ii) in the context of its statutory purpose and suggests an interpretation of § 704(c)(1)(C)(ii) in conjunction with optional basis adjustments that produces proper allocations of loss. Part V considers partnership allocations that occur on the admission of a new partner to a partnership with built-in gain and built-in loss property.

5th Circuit Disallows "Midco" Tax Shelter

The Fifth Circuit yesterday affirmed the district court's grant of summary judgment to the IRS, becoming the first appellate court to disallow a "midco" tax shelter.  Enbridge Energy Co. v. United States, No. 08-20261 (5th Cir. Nov. 10, 2009):

The uncontroverted evidence supports the district court’s conclusion that this was a sham conduit transaction, and that Midcoast is not entitled to claim a stepped-up basis for the assets it purchased. Langley sought to sell his stock in Bishop, knowing that a direct asset sale would have negative tax consequences for him. As Midcoast concedes, Bishop’s assets had appreciated considerably and the corporation would have to pay significant taxes on those gains, and Langley in turn would have to pay taxes on distributions he took as a shareholder from Bishop.

Continue reading "5th Circuit Disallows "Midco" Tax Shelter"

Foundation Press Publishes Federal Courts Stories

Foundation Press has published Federal Courts Stories, by Vicki C. Jackson (Georgetown) & Judith Resnik (Yale): 

Touching on history, economics, politics, and law, these stories steal behind the texts of the legal opinions into the larger-than-life personalities and struggles of their antagonists and protagonists. This title is an invaluable supplement to any federal courts casebook.

Other titles in the Law Stories Series (for which I serve as Series Editor) are:

• Administrative Law Stories (2006), edited by Peter L. Strauss (Columbia)
• Antitrust Stories (2007), edited by Eleanor M. Fox (NYU) & Daniel A. Crane (Cardozo)
• Bankruptcy Law Stories (2007), edited by Robert Rasmussen (Dean, USC)
• Business Tax Stories (2005), edited by Steven A. Bank (UCLA) & Kirk J. Stark (UCLA) 
• Civil Procedure Stories (2d ed. 2008), edited by Kevin M. Clermont (Cornell)
• Civil Rights Stories (2008), edited by Myriam Gilles (Cardozo) & Risa Goluboff (Virginia)
• Constitutional Law Stories (2d ed. 2009), edited by Michael C. Dorf (Cornell)
• Contracts Stories (2006), edited by Douglas G. Baird (Chicago)
• Corporate Law Stories (2009), edited by J. Mark Ramseyer (Harvard)
• Criminal Procedure Stories (2006), edited by Carol S. Steiker (Harvard)
• Death Penalty Stories (2009), edited by John H. Blum (Cornell) & Jordan M. Steiker (Texas)
• Education Law Stories (2008), edited by Michael A. Olivas (Houston) & Ronna Greff Schneider (Cincinnati)
• Employment Discrimination Stories (2006), edited by Joel William Friedman (Tulane)
• Employment Law Stories (2007), edited by Samuel Estreicher (NYU) & Gillian Lester (UC-Berkeley)
• Environmental Law Stories (2005), edited by Richard J. Lazarus (Georgetown) & Oliver A. Houck (Tulane)
• Evidence Stories (2006), edited by Richard O. Lempert (Michigan)
• Family Law Stories (2008), edited by Carol Sanger (Columbia)
• Human Rights Advocacy Stories (2008), edited by Deena R. Hurwitz (Virginia) & Margaret L. Satterthwaite (NYU), with Doug Ford (Virginia)
• Immigration Stories (2005), edited by David A. Martin (Virginia) & Peter H. Schuck (Yale)
• Intellectual Property Stories (2005), edited by Jane C. Ginsburg (Columbia) & Rochelle Cooper Dreyfuss (NYU)
• International Law Stories (2007), edited by John Noyes (California Western), Mark Janis (Connecticut) & Laura Dickinson (Connecticut)
• Labor Law Stories (2005), edited by Laura J. Cooper (Minnesota) & Catherine L. Fisk (Duke)
• Legal Ethics Stories (2005), edited by Deborah L. Rhode (Stanford) & David Luban (Georgetown)
• Presidential Power Stories (2008), edited by Christopher H. Schroeder (Duke) & Curtis A. Bradley (Duke)
• Property Stories (2d ed. 2009), edited by Gerald Korngold (New York Law School) & Andrew P. Morriss (Illinois)
• Race Law Stories (2008), edited by by Rachel F. Moran (UC-Irvine) & Devon Carbado (UCLA)
• Tax Stories (2d ed. 2009), edited by Paul L. Caron (Cincinnati)
• Torts Stories (2003), edited by Robert L. Rabin (Stanford) & Stephen D. Sugarman (UC-Berkeley)
• Trial Stories (2008), edited by Michael E. Tigar (American) & Angela J. Davis (American)

Weisbach: Instrument Choice is Instrument Design

David A. Weisbach (Chicago) has posted Instrument Choice is Instrument Design on SSRN.  Here is the abstract:

This paper analyzes the choice between taxes and cap and trade systems (also referred to here as a permit system or a quantity restriction) as methods of controlling greenhouse gas emissions. It argues that in the domestic context, with proper design, the two instruments are essentially the same. Commonly discussed differences in the two instruments are due to unjustified assumptions about design. In the climate change context and within a single country there is sufficient design flexibility that these differences can be substantially eliminated. To the extent that there are remaining differences, there should be a modest preference for taxes, but the benefits of taxes are swamped by the benefits of good design; even though the very best tax might be better than the very best quantity restriction, the first order of business is getting the design right.

In the international context, however, taxes dominate more strongly. The design flexibility available within a single country is reduced in the international context because of the problems of coordinating systems across countries and minimizing holdouts. Moreover, the incentives to cheat and the effects of cheating are not equivalent for the two instruments in the international setting. Because climate change will require a global system for emissions, these considerations mean we should favor taxes for controlling greenhouse gas emissions.

The Tenure Interview

Inside Higher Ed, 30-Minute Chat to Tenure:

Lloyd A. Jacobs announced last week that in his role as president of the University of Toledo, he plans to interview every faculty member who comes up for tenure before making a recommendation to the board on whether to approve the bid.

While many faculty members are angry about the idea that an academic career can be evaluated in a short conversation, Jacobs said he finds it odd that people expect a president to urge trustees to grant tenure to someone without the president having talked to the person and formed an independent judgment. "I think that the concept of university presidents being relegated to a rubber stamp role is one of the downsides of our current higher education," he said. It's time for presidents, he added, "to take more and more responsibility to improve the way we execute our responsibilities."

In his three-plus years as president, Jacobs said, he has reviewed about 20 to 25 tenure bids a year and, to date, never rejected a candidate who had support in the various reviews that traditionally take place before the dossier reaches the president's office. So what insights does he hope to gain? "I am making an independent judgment. I am attempting to exercise the responsibility that the board has delegated to me, in the best possible way," he said. "It's putting a face with a name, including the data gained from observation of body language, facial features, voice tone," he said. He said that the interviews would last about 30 minutes, and would cover teaching, research, service and other issues depending on where the conversation leads. ...

At Toledo, the announcement has drawn harsh reactions from many faculty members. The head of the Faculty Senate said he was reserving judgment until he can talk to Jacobs, but said that the Faculty Senate should have been consulted on such a change and was not.

Harvey Wolff, president of the Toledo chapter of the American Association of University Professors, which is the faculty union at the campus, said that he believed the change violates the union's contract and should have been subject to negotiations. (Jacobs disagrees.) ...

Jacobs isn't deterred by the criticism. He said that the reason he is planning interviews is precisely because he recognizes the importance of tenure decisions. The decision to grant tenure, he noted, could easily be a $1 million or $2 million lifetime investment by the university, extending for decades. "I decided to do this because I take my responsibilities seriously.... I'm responsible to the future and to the organization."

Asked if he knew of other presidents interviewing every tenure candidate, Jacobs said, "I understand many do, but I don't know their names."

Tax Anti-Avoidance v. Abuse of Law

Zoë Prebble (LL.M. 2010, Michigan) & John Prebble (Victoria University of Wellington, Faculty of Law) have posted Comparing the General Anti-Avoidance Rule of Income Tax Law with the Civil Law Doctrine of Abuse of Law on SSRN.  Here is the abstract:

This article compares the general anti-avoidance rule of income tax law with the civil law doctrine of abuse of law (Rechtsmissbrauch, abus de droit) in eight jurisdictions: Germany, Croatia, New Zealand, Australia, France, the United States, the United Kingdom and the European Union. The article deals with the core concept of avoidance and addresses the statutory and judge-made general anti-avoidance rules in these jurisdictions. The article focuses on transactions that most people would recognize as avoidance and on how these eight jurisdictions either frustrate avoidance or allow it.

Writers who contributed to the article and the jurisdictions that they covered include: Séverine Baranger (France, general anti-avoidance rule), Dennis Becher (Germany, abuse of law), Svenja Brandt (Germany, general anti-avoidance rule) David Dunbar (Australia), Matthew Fountain (New Zealand), Franca Frenzel (European Union), David Pickup (United Kingdom), Philip Postlewaite (United States), Rebecca Prebble (Croatia), Viktoria Preusker (Germany, abuse of law), Yves-Louis Sage (France, abuse of law).

The Coming Failure of Obama's Tax Reform Commission

TaxVox Blog, Obama’s Non- Tax Reform Commission, by Howard Gleckman (Tax Policy Center):

In a month, if White House officials are to be believed, the Obama Administration will unveil the tax reform report of the President’s Economic Recovery Advisory Board. Despite once-high expectations, it is likely to be a waste of everyone’s time. ...

Once individual taxes were taken off the table, the panel was charged to look at corporate tax reform, enforcement issues, and simplification. But even on those limited topics, the panel will make no recommendations. A few months ago, we were told it would produce a document that looks something like CBO’s revenue options—listing a narrow range of ideas without actually endorsing any of them.

Now, we learn, the panel may not even do that. Rather, it will merely enumerate possible ways to simplify, improve enforcement, or restructure the corporate tax without even hinting which the Administration favors and which it does not. Other than serving the need to produce something, I can’t imagine why they are even bothering.

It has been abundantly clear since the campaign that Barack Obama has little interest in tax reform. Not to begrudge him, he does have more than enough on his plate without it. And I understand that not everyone shares my fascination with the tax code.

On the other hand, there is that matter of a $1.4 trillion deficit and an income tax that is crumbling under its own weight. Obama is surrounded by economic advisors who understand better than I that reforming the way government collects revenue is both necessary and inevitable. Apparently, their views have been drowned out by his political advisers who, I assume, see the whole issue as a swamp.

So why did the White even bother with a commission such as this? It is not as if anyone was demanding one. And Volcker, Goolsbee et al have better things to do than make lists.

Death of 'Big Law School'?

Erik F. Gerding (New Mexico) has an interesting post on Conglomerate, Death of "Big Law School"?:

[The decline of Big Law firms] would likely mean the end of the law school boom -- with its expanding law faculties and the bumper crop of new law schools. Like it or not, the business model (I hate applying that term to legal education, but can't think of another one) of many law schools is heavily dependent on students getting high paying law firm jobs to pay off high law school tuition. Law firms are also prime benefactors of law school endowments. Without corporate law consuming law school graduates by the dozens, law school will face massive economic pressure.

On the one hand, these pressures will push law schools to improve the training of law graduates so that they are ready on "day one." Helping students in a tougher economic market supports the Carnegie/ABA best practices reforms that have been discussed so much.

But the changing economics of legal education will also cut the other way. The Best Practices model is expensive, and with tighter budgets law schools will also face pressures to move in the direction of the traditional "stack-em and pack-em" model of large classes. ...

Law teaching is likely to become a lot less genteel too. Without law firm largesse, law schools will no longer be insulated from many of the pressures felt by other academic units on campus. Expect greater use of adjunct faculty and graduate students to teach (with VAPs morphing from their original role as professor training to filling curricular holes in a faculty in a cheap, "temporary" way).

Expect a greater push by administrations for faculty to fund part of their salary with grants. This means greater power to the few grant-making organizations that focus on law (like the Kaufman foundation) to shape legal discourse. Industry groups may also fund research to a greater extent with all the attendant potential for intellectual compromise. Will law schools look increasingly hierarchical like labs in the hard sciences or universities in Europe? Ask a junior researcher in a science lab on campus what their professional life is like. ...

A few traps for faculties lurk. First, how do we think about the business model of legal education without completely transforming education into a business? Second, if we all care about consumer protection, how do we make sure that applicants to law schools apply with clear eyes towards the professional prospects that await them rather than over-optimism and romanticism? Like many of you, I have problems with U.S. News rankings, but the solution is not less information (or less competition for students), but better metrics and better disclosure.

Brunson: Tax-Motivated Income-Shifting and the Kiddie Tax

Samuel D. Brunson (Loyola-Chicago) has posted Tax-Motivated Income-Shifting and the Kiddie Tax on SSRN. Here is the abstract:

In 1986, concerned that wealthy parents were sheltering some of their income from taxes by giving some portion of their securities portfolios to their children, Congress enacted the “kiddie tax,” which taxes a child’s passive income at the child’s parents’ tax rate. By doing so, Congress intended to reduce tax-motivated income-shifting. Since its passage, however, there has been little serious consideration of whether the kiddie tax successfully prevents the targeted income-shifting.

This Article reexamines the kiddie tax and concludes that it is both over- and underbroad. The kiddie tax subjects all of a child’s passive income, not just income resulting from tax-motivated income-shifting, to her parents’ higher tax rates. At the same time, the kiddie tax does nothing to prevent large categories of income-shifting, including the transfer of income-producing property to adults and the transfer of appreciated property to children or adults. Moreover, taxing a child’s passive income at her parents’ rate does not reflect economic reality; children and their parents do not necessarily comprise an economic unit. The distortions caused by the kiddie tax are not benign, moreover: as a result of the inefficiency of the kiddie tax, children are discouraged from saving and investing their money.

The Article concludes that the reason for the kiddie tax’s over- and underbreadth is that tax-motivated income-shifting is not primarily the result of the relationship between parents and children. Instead, it is the result of the income tax treatment of gifts. In order to more efficiently prevent tax-motivated income-shifting without discouraging children from investing and saving their money, Congress should repeal the kiddie tax and, instead, treat the giving of a gift as a taxable realization event to the donor and require a donee to include the receipt of a gift in gross income.

(Hat Tip: Francine Lipman.)

IFA International Tax Student Writing Competition

The International Fiscal Association is sponsoring an DInternational Tax Student Writing Competition:

• Subject:  Any topic relating to U.S. taxation of income from international activities, including taxation under U.S. tax treaties.
• Open to:  All students during the 2008-09 academic year pursuing a graduate degree with a tax specialty.
• Submission Deadline:  December 31, 2009.
• Prize:  $2,000 cash, plus expenses-paid invitation to IFA USA Branch Annual Meeting in Philadelphia in February 2010.

Entires may be emailed to Allison Christians (Wisconsin), Brigitte W. Muehlmann (Suffolk), Brainard Patton (Boston University), and William Streng (Houston).

Studies in the History of Tax Law

John Tiley (Queen's College, Cambridge) has published Volume 3 of Studies in the History of Tax Law (Hart Publishing, 2009):

This work on the history of tax law presents the papers delivered at the third Tax Law History Conference in 2006 organised by the Centre for Tax Law in the Law Faculty at Cambridge University. The papers deal with a range of topics, and though the breadth of topics is broad, it is not devoid of pattern. The majority of the papers deal with themes connected with continental Europe, law and empire, international law, and the problems of progression and the tax system. As a whole the papers, by leading tax scholars from all over the world, once again illustrate a wide variety and depth of learning on tax history, and highlight the important issues waiting to be investigated in this rapidly growing field of scholarship.

Herzig: The Taxation of Carried Interests

David Herzig (Valparaiso) has published Carried Interests: Can They Effectively Be Taxed, 4 Entrepren. Bus. L.J. 21 (2009). Here is the abstract:

During the April 2008 Democratic Debate, former Senator Obama with former Senator Clinton almost referred to the subject matter of this article verbatim at page three of the transcript. ... As stated by both candidates, the budget is going to be a major source of contention, and revenue raisers, such as the proposed legislation under § 710, will be a hot button item. It was estimated by a Congressional committee that the fund managers would save $30 billion in taxes over the next ten years if the rules did not change. As promised, on page 122 of President Obama’s 2009 budget is the proposal to tax carried interest as ordinary income. It is suggested that this change will raise $2.7 billion in tax revenue in 2011.

Continue reading "Herzig: The Taxation of Carried Interests"

Seven Reasons Why Congress Should Repeal, Not Fix, the Estate Tax

The Heritage Foundation has published Seven Reasons Why Congress Should Repeal, Not Fix, the Death Tax, by William W. Beach:

The House and Senate may soon begin debate on what to do with the federal estate tax. If Congress fails to act before January 1, 2010, current law calls for death taxes to disappear entirely for one year before returning in 2011 at a top rate of 55% and a $1 million exemption of taxable estate. The 2009 tax rate is 45%, and the exemption stands at $3.5 million per taxpayer.

What should Congress do? Some Members want to permanently "fix" the death tax by reducing the top rate to 35%, which some pro-death tax policymakers suggest is a rate wealthy taxpayers could "afford." However, this would be the wrong move for Congress to make. Instead, policymakers should do what their voters want them to do, as revealed in poll after poll: They should repeal this tax and kill it, once and forever. ...

As Members of Congress consider whether to retain federal death taxes, they should ponder the principal reasons why they should join prior Congresses and repeal this tax.

1. Death taxes discourage savings and investment
2. Death taxes undermine job creation
3. Death taxes suppress productivity and wage growth
4. Death taxes contradict the central promise of American life: wealth creation
5. Death taxes hurt those who have tied their savings up in land
6. Death taxes hurt African-American business owners
7. Death taxes hurt women business owners

Update:  More on the Estate Tax -- The Heritage Foundation Speaks Gobbledygook (ataxingmatter)

Pittsburgh Mayor Proposes 1% Tuition Tax

Pittsburgh's Mayor Says He'll Pursue 1% Higher-Ed Tax (Pittsburgh Post-Gazette, ):

Pittsburgh Mayor Luke Ravenstahl plans to propose a 1% college-education privilege tax to council today, in a move that's likely to set off a fight with the city's schools of higher learning.

College and university representatives met with the mayor on Wednesday and argued against the tax, which would be assessed on a college student's tuition. It technically would not be a levy on the students or their schools, but rather on the privilege of getting a higher education in Pittsburgh. ...

The tuition tax would raise around $16 million a year.

(Hat Tip: Inside Higher Ed.)  Prior TaxProf Blog coverage:

• Providence Proposes Tax on Students at Private Colleges (May 4, 2009)
• Providence Proposes Brown Tax (May 21, 2009)

Tax Provisions of H.R. 3962, The Affordable Health Care for America Act

• Joint Committee on Taxation, Technical Explanation of Manager's Amendment (JCX-52-09)
• Joint Committee on Taxation, Technical Explanation (JCX-47-09)
• Joint Committee on Taxation, Estimated Revenue Effects of Manager's Amendment (JCX-53-09)
• Joint Committee on Taxation, Estimated Revenue Effects (JCX-48-09)
• House Ways & Means Committee, Summary
• House Ways & Means Committee, Paying for Reform
• House Ways & Means Committee, Health Care Surcharge and Households
• House Ways & Means Committee, Health Care Surcharge and Small Business
• CCH, Special Tax Briefing

ABA Tax Section Webcast Today on Impact of the § 509(a)(3) Proposed Regs on the Charitable Sector

The ABA Tax Section offers a teleconference and webcast today on Proposed Regulations on Section 509(a)(3) Supporting Organizations: Implications for the Charitable Sector from 1:00 - 2:30 p.m. EST:

The program will explore recently-released proposed regulations under Section 509(a)(3) that implement changes to the supporting organization provisions enacted by the Pension Protection Act of 2006. Key elements include new annual distribution requirements for certain supporting organizations, standards for qualification as a "functionally integrated Type III" supporting organization, special rules for charitable trusts and transition rules. Our panel of speakers from the IRS and private practice will cut through the complexity of the law in this area and address the practical implications of the proposed new rules for Type III supporting organizations and the organizations that they support.

Speakers:

• LaVerne Woods (Davis Wright Tremaine, Seattle)
• Richard S. Gallagher (Foley & Lardner, Milwaukee)
• Catherine E. Livingston (Deputy Division Counsel/Deputy Associate Chief Counsel (EO/ET/GE), Tax Exempt and Government Entities, IRS)
• David A. Shevlin (Simpson Thacher & Bartlett, New York)

Borden: Section 1031 Qualified Intermediaries in the New Economy

Bradley T. Borden (Washburn) has published Section 1031 Qualified Intermediaries in the New Economy, 27 J. Tax'n Inv. 86 (2009).  Here is the abstract:

Industry estimates indicate that, over the past several years, § 1031 qualified intermediaries have lost as much as $700 million of exchange proceeds. Exchangers and their representatives must take steps to help prevent future losses. This article reviews three recent failures and discusses measures that should help reduce the risk of qualified intermediary failure in the new exchange environment. Lawmakers should also consider measures they can take to help prevent such losses in the future.

Senate Holds Hearing Today on Tax Treaties

The Senate Committee on Foreign Relations holds a hearing today to consider tax treaties with France, Malta, and New Zealand,

Update:  Here links to the testimony of the witnesses at the hearing:

• Kerri-Ann Jones (Assistant Secretary, State Department)
• Manal Corwin (International Tax Counsel, Treasury Department)
• Thomas A. Barthold (Chief of Staff, Joint Committee on Taxation)
• Wesley Scholz (Director, Office of Investment Affairs, State Department)

Cohen Fires Third Shot on Justice Sotomayor's Tax Opinions

Stephen B. Cohen (Georgetown) has posted Whom Do You Trust? A Reply to Prof. Kahn Concerning the Knight Case, Also Known as Rudkin Trust, 125 Tax Notes 711 (Nov. 9, 2009), on SSRN.  Here is the abstract:

In his 2008 opinion in Knight v. Commissioner, Chief Justice John Roberts harshly criticized then Court of Appeals Judge Sonia Sotomayor, writing that her approach to the Internal Revenue Code “flies in the face of the statute.” In the August 3 issue of Tax Notes, I argued that Roberts’ criticism of Sotomayor was “logically flawed and unwarranted.” [Judge Sonia Sotomayor's Tax Opinions, 124 Tax Notes 474 (Aug. 3, 2009).] In the September 21 issue of Tax Notes, Prof. Douglas Kahn [Michigan] defended Robert’s criticism of Sotomayor as “persuasive and accurate” and attacked Sotomayor’s opinion in the case and my defense of what she wrote. [Rudkin Testamentary Trust -- A Response to Prof. Cohen, 124 Tax Notes 1263 (Sept. 21, 2009).]  I believe that Prof. Kahn’s arguments in defense of Chief Justice Roberts are contestable and perhaps even untenable.

Ventry Presents A History of the Mortgage Interest Deduction Today at Loyola-L.A.

Dennis J. Ventry, Jr. (UC-Davis) presents The Accidental Deduction: A History of the Tax Subsidy for Mortgage Interest at Loyola-L.A. today as part of its Tax Policy Colloquium Series.   The commentator is Roberta Mann (Oregon).  Here is the abstract:

This Article traces the mortgage interest deduction (MID) from accident to birthright, from one of many deductible personal interest items to one of the few left standing, and from a negligible tax offset to the second most expensive tax subsidy. It also tells the story of how the MID and other federal housing subsidies fueled the post-World War II surge in rates of homeownership and, more recently, contributed to the collapse of the housing and financial markets. Finally, the Article offers a eulogy to the MID reflecting two generations of tax reformers' criticism of the subsidy that is more applicable today than at any time during its nearly 100-year history.

Off to the Big Dance®

For those of you who asked (or might be interested) following my Saturday post on my freshman son's college soccer team:  for the first time in school history, the team qualified for the NCAA Division III National Tournament following a second thrilling conference tournament victory in a penalty kick shootout after the game remained tied through two overtimes. So it's off to The Big Dance®!

Hanak: State Infrastructure Spending and the Federal Stimulus Package

Ellen Hanak (Public Policy Institute of California, San Francisco) has published State Infrastructure Spending and the Federal Stimulus Package, 62 Nat'l Tax J. 573 (2009).  Here is the abstract:

Nearly one-quarter of the $787 billion in the American Recovery and Reinvestment Act of 2009 is devoted to spending and tax credits for infrastructure investments. The sums available (about six months of public infrastructure spending) and the requirements to spend on “shovel ready” projects mean that this program is a short-term boost, rather than an opportunity to create broad based change in the U.S. infrastructure profile. Some key exceptions are energy, broadband technology, and high speed rail, where federal spending can break new ground. Looking ahead, the availability of stimulus funds should not distract attention from infrastructure finance reform, particularly in transportation.

Benshalom: The Dual Subsidy Theory of Charitable Deductions

Ilan Benshalom (Hebrew University, Faculty of Law) has published The Dual Subsidy Theory of Charitable Deductions, 84 Ind. L.J. 1047 (2009).  Here is the abstract:

Americans contribute billions of dollars to charities on an annual basis. Charitable contributions do not only represent American generosity, however; they also represent a form of giving that provides donors with tax relief. The current literature on charitable contributions suggests that this relief plays an important role in not only decentralizing the provision of public goods, but also in helping the non-profit sector provide public goods more efficiently than government spending. Even if these claims were indisputable, however, they are insufficient to justify the current scheme's anti-democratic function. This Article argues that, at their core, tax-subsidized contributions are part of a non-democratic mechanism that allows individual donors to direct public funds while bypassing majority approval. Despite their non-democratic attributes, this Article recognizes the virtue of charitable spending in voicing preferences not accounted for by the majoritarian process. Therefore, while the current literature suggests that charitable tax-relief represents a substance subsidy - by promoting the allocation of resources towards a confined set of legislatively enumerated public goods - this Article argues that it is also a process-subsidy that supplements the shortcomings of majority decision-making. This dual subsidy approach leads to the inevitable conclusion that current U.S. charitable tax relief scheme undermines the integrity of the majoritarian process, because it disproportionally subsidizes the process component of affluent taxpayers. To better reconcile with democratic theory, many of the scheme's attributes - e.g., tax-subsidies to corporate philanthropy - should be reconsidered and restructured. In raising this point, this Article opens a broader debate about the proper role of majority decision-making and efficiency claims in legitimizing democratic tax and spending decisions.

IRS Office of Chief Counsel Seeks 2010-11 Professor in Residence

IRS Chief Counsel William J. WIlkins seeks applications from full, associate, or assistant law professors at ABA-accredited law schools to serve as the 2010-11 Professor in Residence (September 1, 2010 through June 30, 2011):

The Professor in Residence Program.  The Professor in Residence Program at the IRS Office of Chief Counsel is designed to achieve greater understanding of the academic and governmental perspectives on the development of tax law and policy. The program provides one law school professor per year the opportunity to apply his or her scholarly experience, research and writing in tax law to the full range of technical legal work and litigation handled by the Office of Chief Counsel by serving full-time on the Chief Counsel’s immediate staff for a full academic year. This prestigious position will enhance the professor’s stature within the tax bar and provide him or her the ability to serve the public and the law by meaningfully contributing to the development of tax policy, as well as to attain a comprehensive understanding of the Office of Chief Counsel. The program will also positively reflect upon the sponsoring law school’s reputation for excellence and help stimulate the interest of its students in public service and tax practice. The fresh ideas and perspectives brought to the position by the Professor in Residence will greatly benefit the Office of Chief Counsel and its attorneys as they pursue their mission to provide the best possible legal support to the IRS.

Position Description.  The Professor in Residence will undertake assignments of legal, technical and tax matters. The range of projects the Professor In Residence may be asked to undertake include the development of regulations, rulings, proposed legislation, technical advice, and matters affecting litigation, as directed by the Chief Counsel or his designee. The Professor In Residence will, from time to time, be called upon to perform exhaustive and detailed research on difficult, important, complex and/or complicated legal problems and/or tax matters; consider legal cases or problems that may have broad ramifications that cut across division lines; prepare and/or make recommendations and/or render decisions regarding research and findings; and advise on possible courses of action. In the course of performing these duties, he or she may become involved in interpreting laws, examining procedures, conducting substantive research and preparing technical memoranda. The Professor in Residence will attend meetings, conferences, and other events where invited as a guest speaker before Treasury, IRS, and other professional groups. The Professor in Residence may be engaged in teaching and training assignments as directed by the Chief Counsel to further the exchange of ideas between academia and the attorneys in the Office of Chief Counsel.

We previously have extolled the virtues of the program, reinstituted by Donald Korb with the first four selection:

• 2009-10:  Jon Forman (Oklahoma)
• 2008-09:  David Hasen (Michigan)
• 2007-08:  Gegg Polsky (Florida State)
• 2007:   Calvin Johnson (Texas)

Prior Professors in Residence:

• 1990-91: Laurence B. Wohl (Dayton) & Lawrence A. Zelenak (North Carolina)
• 1988-89: Marilyn E. Brookens (Baylor), Mark W. Cochran (St. Mary’s) & Stanley D. Neeleman (BYU)
• 1987-88: William H. Lyons (Nebraska), Scott A. Taylor (New Mexico)
• 1986-87: Martin J. McMahon, Jr. (Kentucky), Daniel L. Simmons (UC-Davis)
• 1985-86: J. Clifton Fleming, Jr. (BYU) & Robert J. Peroni (Tulane)
• 1984-85: Alan S. Schenk (Wayne State), Henry J. Lischer, Jr. (SMU)
• 1982-83: Daniel Goldberg (Maryland)

Application process:

• Candidates must submit a one page letter of introduction and full CV by December 1, 2009.
• The selection panel will make its decision in early January.

More details:

• The Professor in Residence is detailed by the law school to the IRS Office of Chief Counsel under the Intergovernmental Personnel Act for a full academic year (September – June).
• During the detail period, he or she remains an employee of the university:
  • Salary and benefits continue to be paid by the university;
  • The Office of Chief Counsel provides proportional reimbursement of salary and benefits to the law school under a negotiated cost-sharing agreement.
• The Office of Chief Counsel pays travel to and from Washington and lodging expenses in D.C.

More Fellowships for Aspiring Law Professors

Following up on my August post, Fellowships for Aspiring Law Professors (2009-10 Edition):  Jonathan Gingerich (J.D. 2010, Harvard) of the Harvard Legal Theory Forum has compiled this very helpful spreadsheet with detailed information (including application deadlines, qualifications, salaries, and duration) on 69 teaching and research fellowships.

ABA Tax Section CLE on the Road: Tax Aspects of Debt Workouts and Drafting Partnership Agreements

The ABA Tax Section today hosts ABA Tax CLE on the Road: Tax Aspects of Debt Workouts and Drafting Partnership Agreements in Omaha, Nebraska with these speakers:

• Walter D. Schwidetzky (University of Baltimore School of Law)
• Terence F. Cuff (Loeb & Loeb, Los Angeles)
• Bahar A. Schippel (Snell & Wilmer, Phoenix)

Homeruns and Taxes

Neil M. Mazer (J.D. 2009, Michigan State) has published Homeruns and Taxes: The IRS and Its Treasure Trove Regulation, 16 Sports Law. J. 139 (2009).   Here is part of the Introduction:

The recent events in baseball surrounding several coveted homerun records have given rise to another question of federal regulation not yet addressed: will the person fortunate enough to catch one of these inherently valuable baseballs be responsible for taxes based on the value of the object in the year they catch it? Technically, the value of a ball caught in 2007 (for example, Barry Bonds' 756th homerun) would be assessed as part of the individual's 2007 income. This result is due to the inclusion of “treasure trove” in the Treasury Department's definition of what constitutes gross income.  But a lack of clarity concerning the enforcement of this provision leads to a fear of taxation that forces individuals to sell the baseball immediately, potentially sacrificing a greater realized value, in order to avoid the potential issues that would arise from an unexpected enforcement of the treasure trove regulation.

However, through close study of the Sixteenth Amendment, the definition of both “income” and “treasure trove,” and the history of enforcement of the treasure trove regulation itself, a baseball, among many other items of property, should never have been made subject to income tax. The Sixteenth Amendment and the regulations promulgated under it were intended to tax individuals on economic, or “cash,” income. Furthermore, it can be contested that other tax schemes can apply to a “valuable” homerun baseball, be it deferral of tax liability until the ball is actually reduced to cash or bartered for more easily valued services, or treating the ball as lottery winnings.

Part II of this Article begins with a discussion of the history of “taxes on income” and the Sixteenth Amendment, including the definition of the term “income” by the Treasury Department. Part III addresses the treasure trove regulation itself, with a discussion of what “treasure trove” actually encompasses and the minimal enforcement of the regulation. Part IV explains how a court, if approached with a challenge to taxation of noncash treasure trove, should approach the issue; this includes a discussion of the applicability of judicial deference as established in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. and of the historical interpretive approach to the meaning of “income.” Finally, the Article suggests alternative tax schemes that could apply to the baseball, reassuring the IRS that the individual will not accede to wealth without the item ever being taxed.

(Hat Tip: Ann Murphy.)

TaxProf Blog Weekend Roundup

Saturday:

• President Obama Signs Worker, Homeownership, and Business Act
• WSJ:  27 Million Reasons to Leave New York
• The Good and the Bad in Sports
• Pauly:  Limiting the Tax Exclusion for Employment Based Health Insurance
• Ayers:  The Undertraining of Lawyers and its Effect on the Advancement of Women and Minorities

Sunday:

• Texas Bar Exam Results
• Top 5 Tax Paper Downloads
• Death of Katarina Savino
• 'Girls Gone Wild' Founder Joe Francis Gets Time Served in Tax Case
• U.S. News:  GAO Wrong to Blame Us For Rising Law School Tuition
• Carroll & Swagel:  The Intersection of Tax and Health Care Policy

Texas Bar Exam Results

Here are the results of the July 2009 Texas Bar Exam for first-time test-takers by law school, along with each school's U.S. News ranking:

1. Texas Tech:  94.52% (Tier 3)
2. Baylor:  94.12% (#65)
3. Texas-Wesleyan:  93.29% (Tier 4)
4. Texas:  92.36% (#15)
5. Houston:  91.63% (#59)
6. SMU:  90.99% (#49)
7. South Texas:  89.66% (Tier 4)
8. St. Mary's:  82.80% (Tier 4)
9. Texas Southern:  71.11% (Tier 4)

The pass rate for first-time test takers from the nine Texas law schools was 89.41%; the overall pass rate was 87.63%.

Top 5 Tax Paper Downloads

This week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list.  The #1 paper is now the #34 tax paper in all-time downloads out of 6140 tax papers:

1.  [1040 Downloads]  To Roth or Not to Roth: Analyzing the Conversion Opportunity for 2010 and Beyond, by Richard L. Kaplan (Illinois)

2.  [377 Downloads]  A Field Guide to Cancellation of Debt Income, by Daniel L. Simmons (UC-Davis) & Martin J. McMahon, Jr. (Florida)

3.  [289 Downloads]  A Review of Tax Research, by Michelle Hanlon (MIT) & Shane Heitzman (University of Rochester, Simon Graduate School of Business)

4.  [202 Downloads]  Debt and Equity: What's the Difference? A Comparative View, by Wolfgang Schoen, Tobias Beuchert, Astrid Erker, Andreas Gerten, Maximilian Haag, Sabine Heidenbauer, Carsten Hohmann, Daniel Kornack, Nadia Lagdali, Christine Osterloh-Konrad, Carlo Pohlhausen, Philipp Redeker, Erik Roeder (all of the Max Planck Institute for Intellectual Property, Competition & Tax Law) & Lukas Müller (University of Zurich, School of Law)

5.  [144 Downloads]  Miller: Effective FLP Line Drawing, by Wendy C. Gerzog (Baltimore)

Death of Katarina Savino

Katarina O. Savino, a 35 year-old Washington, D.C. tax lawyer, died of brain cancer on October 10.  From yesterday's Washington Post obituary:

Mrs. Savino worked at Miller and Chevalier from 2002 to 2007. She then worked for McKee Nelson, which became Bingham. She left the firm in August. ... [She] received a bachelor's degree in economics and political science from the Massachusetts Institute of Technology in 1996. She received a law degree from Harvard in 2002.

'Girls Gone Wild' Founder Joe Francis Gets Time Served in Tax Case

Girls Gone Wild founder Joe Francis' guilty plea to two misdemeanor counts of filing false tax returns (and one count of bribing Nevada jail workers in exchange for food) was accepted on Friday by U.S. District Judge S. James Otero in Los Angeles. The judge sentenced Francis to time served and one year's probation and requires him to pay $250,000 in restitution. Francis acknowledged omitting over $500,000 in interest income on his 2003 tax return. Prosecutors had alleged that Francis took more than $20 million in fraudulent deductions in 2002 and 2003.

• Associated Press
• L.A. Times
• New York Daily News
• Tax Girl
• Tax Lawyer's Blog
• Web CPA

Prior TaxProf Blog coverage:

• Taxes Gone Wild: Joe Francis Indicted on Tax Charges (4/12/07)
• Founder of "Girls Gone Wild" Pleads Not Guilty to Tax Evasion Charges, Says "IRS Gone Wild" (7/23/08)
• "Girls Gone Wild" Founder Seeks New Counsel in Tax Evasion Case (1/28/09)
• Tax Lawyer Strikes Back at "Girls Gone Wild" Founder Joe Francis (1/30/09)
• Joe Francis to Use "Deductions Gone Wild" Defense in Tax Evasion Trial (8/27/09)
• 'Girls Gone Wild' Founder Joe Francis Cops Tax Plea (9/24/09)

U.S. News: GAO Wrong to Blame Us For Rising Law School Tuition

Robert Morse, Director of Data Research at U.S. News & World Report, follows up on my prior post, GAO: U.S. News Rankings, Not Accreditation, Key Driver of Law School Tuition, in Who's at Fault for the High Cost of Law School?:

There are weaknesses in the report's methodology. The GAO primarily relied on the views of a very small number of law school academic insiders and the ABA. The law school academic community should have taken more direct responsibility for its own administrative actions that boost tuitions. Many legal educators believe that the ABA's accreditation process, which has numerous standards for faculty and school facilities, plays a far more significant role in adding to the rising cost of legal education than GAO gives it credit for.

The GAO did not mention another factor that is increasing tuitions: Many law schools are viewed as "cash cows" at universities. The central administration of each university gives a portion of a law school's tuition dollars to other parts of campus, and the law school has to run the school on less than the full amount the students paid.

The GAO also did not point out that law is a very popular, high-demand profession with high starting salaries. That has meant that law schools have had little resistance when they raised tuitions.