TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, August 21, 2004

Sheryl Crow's Tax Problems

Saturday, August 21, 2004

Photo of Sheryl CrowWe previously have blogged the issue of the administrative problems in subjecting athletes and entertainers to multiple state and local income taxes in the locations in which they perform (see here). In this month's "Shop Talk" column in the Journal of Taxation, Sheldon Banoff takes the issue to a new level in discussing the potential tax plight of singer Sheryl Crow. According to press reports, Crow performed a 40-minute concert on a United Airlines flight from Chicago to L.A. to publicize Sony's new on-line music service. Banoff notes Crow's joking reference that she hoped she did not have to pay taxes in any of the states she flew over and asks, why not:

Assuming [states she flew over] would have taxed Ms. Crow had she been performing on a moving train, would they similarly have spatial jurisdiction? Or would Ms. Crow's performance be exempted from state taxation because she is not performing in the state, but rather above the state (i.e., "out of state")? Presumably the rest of the paid crew . . . faces similar tax questions. Is there a multi-state compact that exempts pilots and flight attendants from multiple taxation?

August 21, 2004 in Celebrity Tax Lore | Permalink | Comments (2) | TrackBack (0)

Kopczuk & Saez on Top Wealth Shares in the U.S.

Saturday, August 21, 2004

Wojciech Kopczuk (Columbia University, Dep't of Economics) & Emmanuel Saez (UC-Berkeley, Dep't of Economics) have published Top Wealth Shares in the United States, 1916-2000: Evidence from Estate Tax Returns, 57 Nat'l Tax J. 445 (2004). Here is the abstract:

This paper presents new homogeneous series on top wealth shares from 1916 to 2000 in the United States using estate tax return data. Top wealth shares were very high at the beginning of the period but have been hit sharply by the Great Depression, the New Deal, and World War II shocks. Those shocks have had permanent effects. Following a decline in the 1970s, top wealth shares recovered in the early 1980s, but they are still much lower in 2000 than in the early decades of the century. Most of the changes we document are concentrated among the very top wealth holders withmuch smaller movements for groups below the top 0.1 percent. Consistent with the Survey of Consumer Finances results, top wealth shares estimated from Estate Tax Returns display no significant increase since 1995. Evidence from the Forbes 400 richest Americans suggests that only the super–rich have experienced significant gains relative to the average over the last decade. Our results are consistent with the decreased importance of capital incomes at the top of the income distribution documented by Piketty and Saez (2003), and suggest that the rentier class of the early century is not yet reconstituted. The paper proposes several tentative explanations to account for the facts.

August 21, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Friday, August 20, 2004

More on Keyes' Proposal to Exempt African-Americans from Income Tax

Friday, August 20, 2004

Eugene Volokh (UCLA) responds to today's TaxProf post on Illinois Republican Senate candidate Alan Keyes' defense of his proposal to exempt African-Americans from the income tax:

[I]f you compare (1) raising taxes on whites to pay for the lowering of taxes on blacks and (2) raising taxes on whites and blacks to pay for cash grants to blacks, it's hard to see how either is any more or less "extortion from the fellow citizens of people here in America, based on the idea that somehow or another that would be requital for slavery" than the other.

August 20, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Kovach on Dollar Limitations in the Tax Code

Friday, August 20, 2004

Richard Kovach (Akron) has published A Seldom Considered Aspect of Tax Fairness and Simplification:The Need for a Coherent Policy Perspective on the Many and Varied Dollar Limitations Contained in the Internal Revenue Code, 1 Pittsburgh Tax Rev. 1 (2003). Here is the Introduction:

Dollar limitations abound in the Internal Revenue Code (Code). They fundamentally define the familiar rate brackets of § 1 and control a wide variety of tax obligations and advantages that contribute greatly to the complexity of the Code all the way into its highest-numbered sections. Many dollar limitations refer to a particular level of income, usually adjusted gross income, and determine the extent to which particular tax features operate, as in the case of credits, loss recognitions, special tax statutes, or many kinds of deductions.

As individual provisions containing dollar limitations find their way into the Code, the precise points at which they separate taxpayers who will experience a corresponding benefit or detriment result, in part, from computations relating to direct revenue effects. Consequently, one explanation for the astounding range and variety of dollar limitations in the Code rests on the observation that our collection of federal tax statutes did not evolve within a short time under a uniform political climate and stable set of fiscal circumstances.

The haphazard evolution of the Code into a massive conglomeration of disparate provisions containing designated dollar limitations suggests the need for a policy overhaul directed both toward simplification and other systemic goals to coordinate the incidental implications, social and economic, of predicating important tax benefits and detriments upon fixed dollar attainments. This article will elaborate upon some of the policy implications of many existing dollar limitations in the Code and discuss how a more cohesive perspective on the collective effect of dollar limitations could help strengthen our federal taxation system.

August 20, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Feenberg & Poterba on the AMT and Effective Tax Rates

Friday, August 20, 2004

Daniel Feenberg (NBER) & James Poterba (MIT, Dep't of Economics) have published The Alternative Minimum Tax and Effective Marginal Tax Rates, 57 Nat'l Tax J. 407 (2004). Here is the abstract:

This paper examines how the Alternative Minimum Tax (AMT) affects the weighted average marginal tax rates that apply to various components of taxable income and the subsidy rates on various income tax deductions. It also considers how several AMT reform proposals would affect the number of AMT taxpayers, total AMT liability, and weighted average marginal tax rates. On average, the AMT has only a modest impact on the weighted average marginal tax rates for most sources of income although some taxpayers face substantially higher tax rates, and others substantially lower rates, as a result of the AMT. Our projections show that modest increases in the AMT exclusion level have substantial effects on the number of AMT taxpayers, and that indexing the AMT parameters would reduce the number of AMT payers in 2010 by more than 60 percent.

August 20, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Cooper, Ivimey & Vincenti on State Estate Taxes After EGTRRA

Friday, August 20, 2004

Jeffrey Cooper, John Ivimey & Donna Vincenti have published State Estate Taxes After EGTRRA: A Long Day's Journey Into Night, 17 Quinnipiac Prob. L.J. 317 (2004). Here is the Conclusion:

The passage of EGTRRA completely altered estate taxation in America. Yet, perhaps the most fundamental change, the repeal of the state death tax credit, is far from the most obvious. Rather, amid the tax rate cuts and increasing exemptions of EGTRRA lay a revenue provision designed to eradicate tens of billions of dollars of state tax revenue and redirect those funds to the federal government.

EGTRRA's impact on state taxes did not go unnoticed. State legislature by state legislature saw the issue and enacted new estate tax laws designed to recoup the lost revenue. In these states, budget gaps closed. Revenue was saved, at least for now. But simplicity, uniformity, and clarity were lost. Perhaps forever.

As state after state decouples from the federal tax, state estate taxes revert to their pre-EGTRRA levels. The repeal of the state death tax credit ends up meaning little from a state revenue standpoint; largely the same taxpayers end up paying largely the same state taxes. Yet, the simplified method of calculating and collecting those taxes is replaced by a piecemeal progression of new state tax legislation, new tax forms and procedures, and new estate planning considerations.

In 2001, a veil of fog descended upon the field of estate planning. In 2011, if not before, it will lift, revealing a familiar landscape. Until then, the fifty states are left to navigate their own way down the path of estate taxation, making long, confusing, journeys just to return to where they once were. In the literature of tax legislation, this is no doubt a tragedy.

August 20, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Keyes Proposes to Exempt African-Americans from Tax

Friday, August 20, 2004

Photo of Alan Keyes Illinois Republican Senate candidate Alan Keyes has proposed exempting African Americans from tax (per the Chicago Tribune):

"When a city had been devastated [in the Roman empire], for a certain length of time--a generation or two--they exempted the damaged city from taxation."

Keyes proposed that for a generation or two, African-Americans of slave heritage should be exempted from federal taxes-federal because slavery "was an egregious failure on the part of the federal establishment."... The former ambassador said his plan would give African-Americans "a competitive edge in the labor market," because those exempted would be cheaper to hire than federal tax-paying employees and would "compensate for all those years when your labor was being exploited."

Under Keyes' plan, African-Americans would still have to pay the Social Security tax, because "it's not a tax in the strict sense," said Keyes, calling it instead a payment to support a social insurance program.

Eugene Volokh notes: "No word on whether Americans whose ancestors died fighting in the Civil War would get special treatment as well, or whether having a slaveowner ancestor would double your tax bill." Volokh also points out that Keyes himself dismissed the idea of reparation two years ago in these words:
Those responsible [for reparations lawsuits] propose to settle the accounts of slavery leaving the Civil War out of the equation — complete and utter nonsense. The price for the sin of slavery has already been paid, in blood. . . .

Pettifogging lawyers and dishonest scholars will always be able to carp selectively and ignorantly about the warts upon our body politic.

But the truth of the Civil War is that the terrible price for American slavery has been paid, once for all, by the American people's deliberate acceptance of their duty to pay it when, in God's providence, Southern intransigence brought it due.

Yet Keyes held his ground when interviewed by a sympathetic Tucker Carlson on CNN's Crossfire, claiming that reparations for African-Americans through the Tax Code is "a thoroughly conservative, thoroughly consistent Republican approach":
CARLSON: All right. I want to ask you question then, Ambassador Keyes. I take you serious, I take your ideas seriously and I agree with most of them. So I was shocked the other day to see you give a press conference endorsing the idea of reparations for slavery, for tax breaks for descendants of slavery. You said, pointing out that your opponent Barack Obama is not descended from slaves and you are. This struck me as a kind of essential betrayal of the beliefs you've been espousing in public for the last 20 years.

KEYES: Not at all. I have taken a strong position against schemes of extortion from the fellow citizens of people here in America, based on the idea that somehow or another that would be requital for slavery. And I made clear over the years that I think the blood and treasured sacrifice during the Civil War constituted that requital.

But I have also made clear every time I was asked that there was objective damage done to black Americans by the slave system. And there have been frequent efforts in American history not thus far successful to address the wounds that were left by that legacy.

What I have laid on the table repeatedly is a thoroughly Republican, thoroughly conservative approach that is actually borrowed from ancient history in terms of what the Roman empire used to do to respond to damaged communities. You give them tax relief. You give them a tax break to make up for the fact, for instance in this case, the black folks toiled for generations at what was effectively 100 percent tax rate.

And by doing this, you unleash their enterprise. Give them an incentive to work. Give people an incentive to own businesses without taking pennies out of anybody else's pocket, you're able to create an environment where people are encouraged to work and put a strong foundation under themselves instead of putting money in a democracy to dominate their lives that undermines the moral foundations of their families and destroys their economic incentives.

As a matter of fact, it's a thoroughly conservative, thoroughly consistent Republican approach to a very serious challenge.

For other media and blogosphere commentary on the proposal, see here, here, here, and here.

August 20, 2004 in News | Permalink | Comments (11) | TrackBack (4)

IRS Files $1 Million in Tax Liens Against Pete Rose

Friday, August 20, 2004

The IRS has filed $1 million in tax liens against local legend Pete Rose, likely dooming his chances for reinstatement in major league baseball and keeping him ineligible for the baseball hall of fame.

August 20, 2004 in Celebrity Tax Lore | Permalink | Comments (0) | TrackBack (0)

Tax Charges Surface in McGreevey Mess

Friday, August 20, 2004

Tax charges have surfaced in the seedy mess involving N.J. Gov. McGreevey: millionaire developer Charles Kushner, Gov. McGreevey's top campaign donor, pleaded guilty to 18 federal criminal charges, admitting he hired a prostitute to seduce his brother-in-law and mailed a video of the encounter to his sister to convince them not to assist an ongoing federal probe of his activities. Now for the really bad stuff: Kushner admitted he defrauded the IRS by claiming more than $1 million in charitable donations and three private school tuition payments as business expenses:

For the 16 tax fraud counts, Kushner admitted engaging in two separate schemes: recording over $1 million in charitable contributions as business expenses from four partnerships and diverting nearly $14,000 in company funds for private school tuition and writing the costs off as business expenses.
Of course, Kushner's lawyer says "on balance, Mr. Kushner is an extraordinary man, an extraordinary human being....Even a good person can do something wrong. And in this case, what you have is a good man who has done something wrong." For more details, see here. (Thanks to Ann Murphy (Gonzaga) for the tip.)

August 20, 2004 in Celebrity Tax Lore | Permalink | Comments (0) | TrackBack (0)

Thursday, August 19, 2004

Tax Court Denies Deduction for M.B.A. Expenses

Thursday, August 19, 2004

Interesting Wall Street Journal article on recent Tax Court cases that have made it difficult for M.B.A. students to deduct their costs as education expenses under § 162:

• In McEuen v. Commissioner, T.C. Summary Opinion 2004-107 (8/3/04), the court held that the M.B.A. degree (from Northwestern) qualified the taxpayer for a new trade or business and was a requirement of the job she took after graduation.
• In Zhang v. Commssioner, T.C. Summary Opinion 2003-58 (5/20/03), the court held that the M.B.A. degree (from MIT) merely improved the taxpayer's general understanding and competency rather than specific skills needed in his trade or business.
Robert Willens of Lehman Brothers is quoted in the story as saying that these cases virtually foreclose a deduction for M.B.A. expenses:
"That's the scary part of the [McEuen] decision. An M.B.A. is always going to qualify you to do something beyond what you're doing.... Quite frankly, it's pretty much over. It's going to be virtually impossible to take a deduction for education expenses."

August 19, 2004 in News | Permalink | Comments (3) | TrackBack (0)

Temple on General Powers of Appointment in Oklahoma

Thursday, August 19, 2004

Judson Temple (Oklahoma City) has published The Oklahoma Estate Tax: Powers of Appointment, Contingent Remainders, and the Case of Ernest L. Sieber, 28 Okla. City U. L. Rev. 347 (2003). Here is part of the conclusion:

The Court of Civil Appeals in Sieber found that the decedent's power over trust property, held jointly with his two children, to withdraw amounts needed for the decedent's health, comfort, or welfare was not a general power of appointment. In so holding, the court may have reached an appropriate outcome but almost certainly did so for the wrong reason. The decedent's power should not be deemed to be non-general because it permitted appointment to the decedent's two children as well as to the decedent. Such a holding appears to represent a misconstruction of the term "restricted" as used in section 807(A)(9)--the Oklahoma statute which defines a general power of appointment....

August 19, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Weisbach on Impact of Income Tax on Risk-Taking

Thursday, August 19, 2004

David Weisbach (Chicago) has published Taxation and Risk–Taking with Multiple Tax Rates, 57 Nat'l Tax J. 229 (2004). Here is the abstract:

This paper extends the literature on the effect of an income tax on risk taking to the case where different tax rates apply to different types of assets. It shows that an income tax that nominally imposes different rates on the full return to investments can be recharacterized as a uniform tax on the risk–free rate of return to all investments plus a fixed subsidy or penalty. The subsidy or penalty depends only on the risk–free rate of return and the relative tax rates. Therefore, differential taxation does not affect risk. Moreover, for a reasonable range of parameters, the subsidy or penalty is small. The implication is that measurements of the deadweight loss from differential taxation may be too high by an order of magnitude. In addition, expenditures on reducing differential taxation, such as to make the income tax more accurate, may not be worthwhile.

August 19, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

New Book: Estate Planning for Same-Sex Couples

Thursday, August 19, 2004

Book CoverThe ABA has published Estate Planning for Same-Sex Couples, by Joan M. Burda, Associate Counsel with the Defense Finance and Accounting Service in Cleveland. Here is the publisher's description:

The legal landscape concerning same-sex relationships is changing. It is vital for lawyers to stay on top of these changes. Attorneys who represent lesbian and gay clients must provide creative estate planning that protects both parties to the relationship, their children and their future. This new book provides estate planning lawyers with an introduction to the issues faced by lesbian and gay clients. Also provided are forms and documents on CD-Rom that lesbian and gay clients need to prepare as part of a complete estate plan.

August 19, 2004 in Book Club | Permalink | Comments (0) | TrackBack (0)

Conference on Tax Reform in Transition Economies

Thursday, August 19, 2004

The Austrailian Taxation Studies Program (Atax) of the University of New South Wales, Sydney, Australia held a conference yesterday on Tax Reform in Transition Economies: Sharing the Experience. For the complete program, with a list of speakers and the titles of their papers, see here.

August 19, 2004 in Conferences | Permalink | Comments (1) | TrackBack (0)

Tobin on Application of Campaign Finance Laws to Charities

Thursday, August 19, 2004

Donald Tobin (Ohio State) & Edward Foley (Ohio State) urge (here and here) the Federal Election Commission at today's hearing to adopt its General Counsel's recommendation (here and here) on the application of federal campaign finance law to charities. For the Ohio State press release, see here. For a contrary view, see here. For C-SPAN coverage of the hearing, see here.

August 19, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 18, 2004

Welcome Back, Jack!

Wednesday, August 18, 2004

After a 6-week self-imposed exile (blogged here), Tax Prof Jack Bogdanski (Lews & Clark) has re-started his eclectic Jack Bog's Blog. For a funny video announcing Jack's reappearance in the blogosphere, see here (warning to Tax Prof Jrs: the video carries a well-deserved PG-13 rating). Although his blog is only occasionally about tax law and law schools, we welcome Jack back as only the third tax law professor with a blog (although, as the old country song says, "How can we miss you if you never go away?").

August 18, 2004 in Tax Profs | Permalink | Comments (1) | TrackBack (0)

Joulfaian & McGarry on Tax Incentives for Lifetime Giving

Wednesday, August 18, 2004

David Joulfaian (Office of Tax Analysis, Treasury Department) & Kathleen McGarry (UCLA, Dep't of Economics) have published Estate and Gift Tax Incentives and Inter Vivos Giving, 57 Nat'l Tax J. 429 (2004). Here is the abstract:

The estate tax has received a great deal of attention from policy makers and the public in recent years. Yet we know little about its effect on the transfer of wealth. In this paper we explore the effect of the tax on inter vivos giving. In particular, we look at the degree to which wealthy individuals exploit the potential for tax–free transfers as a means of spending–down their estates, and examine the responsiveness of inter vivos transfers over time to changes in the tax law. To address these questions we employ two data sets, each with important strengths and weaknesses. Using panel data from the Health and Retirement Study (HRS) we find that many of the wealthy fail to take advantage of the gift tax annual exemption to make tax–free transfers in any given year. Even those who do make a transfer in one year, often do not repeat the transfer annually and transfer far less than the tax law would allow. We then use data from linked gift and estate tax returns to examine giving over a much longer period. We find in the aggregate that there are sizable shifts in the timing of giving in response to tax changes, but again, the wealthy appear to transfer very little during theirlifetimes. Overall, we conclude that while taxes are an important consideration in transfer behavior of the rich, their behavior is not universally consistent with a tax minimization strategy.

August 18, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Wall Street Journal Details Role of Tax Lawyers in Tax Shelters

Wednesday, August 18, 2004

A front page story in today's Wall Street Journal details the role of tax lawyer Raymond J. "R.J." Ruble of Brown & Wood in writing over 600 tax opinions used to market tax shelters like "BLIPS," "OPIS" and "FLIPS" sold by KMPG. (Check out the unkind shot at tax lawyers: "Mr. Ruble, 59 years old, doesn't fit the stereotype of a tax lawyer, colleagues say, in part because of his youthful demeanor and affability.")

August 18, 2004 in News | Permalink | Comments (1) | TrackBack (0)

Ten Christian Professors Call on Bush to Stop Enlisting Churches in Campaign

Wednesday, August 18, 2004

Today's Washington Post reports on a letter sent by ten leading Christian academics to President Bush calling on him to stop trying to enlist churches in his re-election effort. (Thanks to reader Steven Sholk for the tip.)

August 18, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Tax Quotes, Biblical Edition

Wednesday, June 18, 2004

More from the TaxProf E-Mail Discussion Group's thread on neat quotations about taxes:

Calvin Johnson (Texas) offered this from Frank & Ernest:

Moses is on top of Mt. Sinai with a tablet talking to a dark cloud in the sky, saying "Now don't take this the wrong way, but I brought my lawyer."

Mark Cochran (St. Mary's) added:

Moses reports back to the masses: "I've negotiated it down from fifteen to ten, but adultery is still in there."

Ellen Aprill (Loyola-L.A.) closed with:

One of the Israelite people asks Moses: "How long will it take to do the regulations?"

August 18, 2004 in Tax Profs | Permalink | Comments (1) | TrackBack (0)

SOI Releases Study of Unrelated Business Income Tax Returns

Wednesday, August 18, 2004

The just-released Statistics of Income Bulletin (Spring 2004) includes Unrelated Business Income Tax Returns, 2000, with a Decade in Review, 1991-2000, by Margaret Riley (SOI). Here is the abstract:

Nonprofit organizations filed an estimated 38,567 Forms 990-T, Exempt Organization Business Income Tax Returns, for Tax Year 2000. Overall, organizations reporting unrelated business income (UBI) filed 8.5 percent fewer returns for 2000, the second consecutive tax year that the number of filings fell. Returns with gross UBI of $10,000 or less, the threshold for being exempted from filing return schedules and reporting detailed information on deductions, decreased by 15.3 percent; those with higher amounts of gross UBI decreased by 3.6 percent.
For related tables of data, see here.

August 18, 2004 in Gov't Reports | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 17, 2004

"Vow of Poverty" No Shield Against Tax Liability

Tuesday, August 17, 2004

In Coomes v. Commissioner, T.C. Memo. 2004-182, Judge Goeke recently held that a taxpayer's "vow of poverty" does not exempt him from Federal income tax.

August 17, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Even & Macpherson on Company Stock in Pension Funds

Tuesday, August 17, 2004

William Even
(Miami University, Dep't of Economics) & David Macpherson (Florida State University, Dep't of Economics) have published Company Stock in Pension Funds, 57 Nat'l Tax J. 299 (2004). Here is the abstract:

This study examines several issues surrounding the tendency for some pension funds to invest in their own company’s stock. After reviewing the existing literature describing the benefits and costs of investing in company stock, the legislative environment surrounding company stock holdings is reviewed. Using data from Internal Revenue Service Form 5500 filings on the pension fund holdings of over 300,000 defined–contribution pension plans in the 1990s, we show that about one out of ten defined–contribution plans invest in their own stock, but about one–third of workers in defined–contribution plans have some company stock in their pension plan. Pension funds are shown to be less likely to invest in company stocks that lead to higher risk that financial markets do not reward. We also find that pensions that hold a larger share of assets in company stock earn a higher average return and a higher variance of returns.

August 17, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Engelhardt & Madrian on Employee Stock Purchase Plans

Tuesday, August 17, 2004

Gary Engelhardt (Syracuse University, Dep't of Economics) & Brigitte Madrian (University of Pennsylvania, Wharton School) have published Employee Stock Purchase Plans, 57 Nat'l Tax J. 385 (2004). Here is the abstract:

Employee stock purchase plans (ESPPs) are designed to promote employee stock ownership broadly within the firm and provide another tax–deferred vehicle for individual capital accumulation in addition to traditional pensions, 401(k)s, and stock options. We outline the individual and corporate tax treatment of ESPPs and the circumstances under which ESPPs will be preferred to cash compensation from a purely tax perspective. We then examine empirically ESPP participation using administrative data from 1997–2001 for a large health services company that employs approximately 30,000 people. The picture that emerges from the analysis of these data suggests that there is substantial non–participation in these plans even though all employees could increase gross compensation through participation. We discuss a number of potential explanations for non–participation.

August 17, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Attorneys Fees in Tax Class Actions Lowest of 10 Areas Studied

Tuesday, August 17, 2004

In Attorney Fees in Class Action Settlements: An Empirical Study, 1 J. of Empirical Legal Studies 27 (2004), Theodore Eisenberg (Cornell) & Geoffrey Miller (NYU) examine the amount of attorney fee awards as a percentage of the recovery in 10 areas of law for 1993-2002. Tax refund class actions had the lowest mean (13.1%) attorney fee awards among the subject areas studied. By way of comparison, the overall mean was 21.9%; the highest attorney fee awards were in civil rights (37.0%); and for securities law -- the area with the most class actions -- the mean was 24.1%.

August 17, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Tax Quotes

Tuesday, August 17, 2004

As many readers of this blog know, Tax Analysts has a wonderful collection of quotations about taxes. Many of the quotations are from Tax Profs (including this one from your truly: "The tax bar is commonly referred to as a 'special priesthood,' and it is only slightly more tolerant than the Catholic Church in ordaining women tax priests.").

The TaxProf E-Mail Discussion Group has had an interesting recent thread about other neat quotations about taxes. Elliott Manning (Miami) offers this gem on interpreting the Tax Code:

We here deal with problems arising under the Korean Excess Profits Tax Statute, as to which others have said, and we have echoed, that this statute "probably represented the most intricate and baffling enactment ever to receive Congressional approval." As we struggle through this intricate web of definitions, exclusions, provisions, exceptions, cross references, limitations, provisos and a general but unavoidable obscurity, it is our conclusion that § 430(e)(2)(B)(i), expressly incorporating § 445(g)(2)(B), impliedly carries with it § 445(g)(3), though not necessarily that portion of § 461 impliedly incorporated by the reference to § 462(g) in § 445(g)(1), so that the attribution rules of § 503(a)(1)(2)(5) makes ownership of the corporate stock by the minor beneficiaries of a trust the ownership of the father, and thus pushes the stock ownership beyond the critical 50 per cent to make thereby a new corporation an old one.
Phinney v. Tuboscope Co., 268 F.2d 233, 234 (5th Cir. 1959) (citation omitted).

August 17, 2004 in News | Permalink | Comments (0) | TrackBack (0)

SOI Releases Study of Individual Income Tax Returns

Tuesday, August 17, 2004

The just-released Statistics of Income Bulletin (Spring 2004) includes Selected Income and Tax Items from Inflation-Indexed Individual Tax Returns, 1990-2001, by Michael Strudler (SOI) & Michael Parisi (SOI). Here is the abstract:

Inflation-adjusted individual income tax data are presented by 11 income classes, including income classes of $10 million or more (which had previously been published for Tax Years 2000 and 2001 only). For Tax Year 2001, about 130.3 million returns were filed, a 14.5 percent increase from the 113.7 million returns filed for 1990. This growth in the number of returns has not been uniform among the various income classes. For example, while the number of returns with real AGI between $1 to under $20,000 increased 9 percent and the number with AGI between $20,000 and $50,000 increased 11.3 percent, the number of returns for all groups above $100,000 increased by at least 69 percent.
For related tables of data, see here.

August 17, 2004 in Gov't Reports | Permalink | Comments (0) | TrackBack (0)

Monday, August 16, 2004

DOL Dismisses Sarbanes-Oxley Complaint v. Swatch for Violating Transfer-Pricing Rules

Monday, August 16, 2004

Swatch Logo The Wall Street Journal reports that the Department of Labor has dismissed on jurisdictional grounds the Sarbanes-Oxley complaint against Swatch (blogged here on Sunday) alleging that the Swiss watchmaker violated transfer-pricing rules in evading U.S. taxes. The DOL lacked jurisdiction because the two complainants were hired and employed outside the U.S.

August 16, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Florida Taxpayers Given 2-Month Extension to File 2003 Returns

Monday, August 16, 2004

Hurricane Charlie Makes Landfall, 2004Following up on this morning's post about the need for taxpayers who received automatic 4-month extensions on April 15 to file their tax returns today or obtain an additional 2-month extension (until October 15) from the IRS by filing Form 2688: the IRS announced today that taxpayers who live in the 25 Florida counties struck by Tropical Storm Bonnie and Hurricane Charley will automatically receive a 2-month extension. The IRS will abate interest and any late filing or late payment penalties that otherwise would apply.

August 16, 2004 in News | Permalink | Comments (0) | TrackBack (0)

SOI Releases Study of S Corporation Returns

Monday, August 16, 2004

The just-released Statistics of Income Bulletin (Spring 2004) includes S Corporation Returns, 2001, by Kelly Bennett (SOI). Here is the abstract:

A total of nearly 3 million S corporation returns were filed for Tax Year 2001, an increase of over 4.4 percent from Tax Year 2000. S corporations continue to be the single most frequent corporate entity choice, representing 58.2 percent of all corporate entities. The number of shareholders for S corporations increased to nearly 5.4 million, up 3.1 percent from the previous year.
For related tables of data, see here.

August 16, 2004 in Gov't Reports | Permalink | Comments (0) | TrackBack (0)

NY Times: Bush Plans To Make Tax Reform "Cornerstone" of Second Term

Monday, August 16, 2004

The New York Times reports that Prsident Bush plans to make tax reform a "cornerstone" of a second term:

Mr. Bush's advisers said the president wants to make tax reform a cornerstone of his second term, and campaign officials see the potential to win over voters by pledging to fix a system that is widely seen as complex and unfair.
The Bush focus continues to be on a consumption tax, and the Times reports that Sen. Kerry was "almost giddy" about the President calling a national sales tax "an interesting idea." (Thanks to reader Steven Sholk for the tip.)

August 16, 2004 in News | Permalink | Comments (0) | TrackBack (0)

4-Month Extension To File 2003 Return Expires Today

Monday, August 16, 2004

IRS Form 2688If you are one of the 8.5 million taxpayers who received an automatic 4-month extensions on April 15 and have not yet filed your 2003 income tax returns, you must do so today or obtain an additional 2-month extension (until October 15) from the IRS by filing Form 2688. Here is advice from the IRS:

The Internal Revenue Service reminds taxpayers with extensions to file their returns by August 16 to avoid the late filing penalty, which is 5 percent per month of the unpaid tax. Help may be available, however, for people who cannot file by August 16. Taxpayers with special circumstances, such as a hardship, that prevent them from preparing and filing their tax forms by August 16 may request an additional two-month extension by completing Form 2688, giving them until October 15 to file their income tax returns. These taxpayers will be granted an extension of time to file even if they cannot send in payment of outstanding 2003 taxes with the extension request.

Taxpayers granted the additional time to file will not be penalized for late payment of tax if they pay the balance of their 2003 tax when they file the tax return by October 15, provided 90 percent of their total tax was paid by April 15. However they will owe interest on any taxes not paid by April 15.

The IRS expects to receive more than 3 million Forms 2688 during 2004.

August 16, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Weekend Roundup

Tax Cartoon on N.J. Gov. McGreevey's Resignation

Monday, August 16, 2004

Funny tax cartoon on the TaxGuru about New Jersey Governor McGreevey's resignation.

August 16, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Sunday, August 15, 2004

Top 5 Tax Paper Downloads

Sunday, August 15, 2004

The same papers comprise this week's list of the Top 5 Tax Paper Downloads on SSRN, but the order (other than #1) is reshuffled from last week:

1. Theories of Distributive Justice and Limitations on Taxation: What Rawls Demands from Tax Systems, by Linda Sugin (Fordham)

2. The Estate Planning Implications of Goodridge v. Department of Public Health for Massachusetts Same-Sex Couples, by Jeremy Marr (Boston College)

3. E-Commerce and International Tax Planning, by Carla Carnaghan (University of Waterloo, School of Accountancy) & Kenneth J. Klassen (University of Waterloo, School of Accountancy)

4. Effective Tax Rate Changes and Earnings Stripping Following Corporate Inversion, by Jim Seida (Notre Dame, Dep't of Accounting) & William Wempe (TCU, Dep't of Accounting)

5. Quantifying the Costs of Intertemporal Taxable Income Shifting: Theory and Evidence from the Property-Casualty Insurance Industry, by Gerald Salamon (Indiana-Bloomington, Dep't of Accounting), Jim Seida (Notre Dame, Dep't of Accounting), & David Randolph (Dayton, Dep't of Accounting)

August 15, 2004 in Top 5 Downloads | Permalink | Comments (0) | TrackBack (0)

Sarbanes-Oxley Lawsuit v. Swatch for Violating Transfer-Pricing Rules

Sunday, August 15, 2004

Swatch Logo The Wall Street Journal reports that two former financial controllers have filed a Sarbanes-Oxley suit against Swatch alleging that the Swiss watchmaker violated transfer-pricing rules in evading U.S. taxes.

August 15, 2004 in News | Permalink | Comments (0) | TrackBack (1)

SOI Releases Study of DISCs

Sunday, August 15, 2004

The just-released Statistics of Income Bulletin (Spring 2004) includes Interest-Charge Domestic International Sales Corporations, 2000, by Cynthia Belmonte (SOI). Here is the abstract:

IC-DISC tax provisions provide limited incentives to small U.S. exporters. IC-DISC’s filed 727 income tax returns for 2000. Export gross receipts were $4.7 billion, tax-deferred IC-DISC income reported to shareholders was $0.7 billion, and actual distributions to shareholders were $0.4 billion.

For related tables of data, see here.

August 15, 2004 in Gov't Reports | Permalink | Comments (1) | TrackBack (0)

Saturday, August 14, 2004

Tax Prof Spotlight: Yariv Brauner

Saturday, August 14, 2004

Photo of Yariv BraunerThis week's Tax Prof Spotlight continues our series of profiles of folks starting their careers this fall as tenure-track tax professors at American law schools. We hope the profiles will help introduce our newest tax colleagues to the academic tax community.

Yariv Brauner joins the Arizona State faculty this fall. He came to the United States in 1997 to take the NYU LL.M. in International Taxation and enjoy New York City’s East Village.

Originally from Israel, Yariv grew up in the Galilee, spent a long time in the Israeli Defense Forces and went to law school at the Hebrew University in Jerusalem. In Hebrew U., he was also a research and teaching assistant for Professor Zohar Goshen (now with Columbia University) in corporate and antitrust law. During law school, Yariv worked for Israel’s State Controller’s legal department, the Jerusalem Court and the Israeli Council for the advancement of Democratic Values, operated in the Supreme Court. He completed a mandatory internship period and practiced corporate and M&A law with one of Israel largest firms, S. Friedmann & Co.

After receiving his LL.M. from NYU, Yariv joined Ernst & Young New York City’s international tax practice at the peak of the high tech boom, where he was involved in tax planning for both large and start-up clients, primarily involving technology transfers and international restructurings.

In 2000, Yariv was called by his mentor, Paul McDaniel, to teach at NYU as an acting assistant professor in the international tax program while continuing to consult with E&Y. He spent a wonderful three years teaching a variety of tax courses at NYU, including Fundamentals of U.S. Individual and Business Taxation, Comparative Tax Policy, Corporate Tax, Advanced Corporate Tax Problems (International), International Tax, International Tax Policy, International Business Transactions, Tax Procedure, and Comparative Jurisprudence: Taxation. At the same time he completed his doctoral work at NYU on cross-border M&A, receiving the J.S.D. May 2003. In 2003 he joined the faculty at Northwestern, where he taught in the Graduate Tax Program.

Yariv has written several tax articles (both in Hebrew and English), including:
A Good Old Habit, or Just an Old One? Preferential Tax Treatment for Reorganizations, 2004 B.Y.U. L. Rev. 1
An International Tax Regime in Crystallization, 56 Tax L. Rev. 259 (2003)

Yariv has participated in several International Tax seminars and lectured in Israel, Austria, Australia, and the United States. He is this year's U.S. national reporter for the EU High Scientific Committee conference on "The WTO and Direct Taxation" and is in the process of writing an article on the difficulties of reconciliation of tax and trade agreements. The conference, held in Rust in July 2004, was hosted by Vienna University and the small tax empire of Michael Lang (Vienna). The U.S. was represented also by keynote speaker Reuven Avi-Yonah (Michigan) and Eran Lempert (NYU). Yariv notes that "the conference was very interesting and the discussion unique in the blend of pure traditional doctrine and normative thought in an area with so little scholarship."

Yariv focuses his scholarship on the merits of international coordination of tax policies, following Professor Avi-Yonah’s lead in the field. His International Tax Regime in Crystallization piece experiments with international rule, rather than rate harmonization, and its efficiency benefits. His current projects include also an article on integration and on international fairness.

Each Saturday, TaxProf Blog shines the spotlight on one of the 700+ tax professors in America's law schools. We hope to help bring the many individual stories of scholarly achievements, teaching innovations, public service, and career moves within the tax professorate to the attention of the broader tax community. Please email me suggestions for future Tax Prof Profiles, particularly for our series on new tax professors. For prior Tax Prof Profiles, see here.

August 14, 2004 in Tax Prof Spotlight | Permalink | Comments (0) | TrackBack (0)

Lustig on the Tax Professoriate

Saturday, August 14, 2004

Eric Lustig (New England) has published Who We Are: An Empirical Study of the Tax Law Professoriate, 1 Pitt. Tax. Rev. 85 (2003). Here is part of the Conclusion:

This article reports the results of an empirical study of the tax law professoriate. The survey was conducted between late October 2001 and March 2002. The findings are based on surveys sent to over 600 tax law professors with a 22.75% response rate. The 137 survey respondents represent a broad range of 85 law schools and there is no indication that they are skewed in any significant way.

As with any profile, the breadth of the responses presents a richer picture than the actual profile. To some extent, a descriptive profile does emergefrom the data. The tax law professor is roughly the same age as the average law professor and is quite experienced in teaching. Like law professors generally, the tax law academy is predominantly white and male (although little bit more so). The tax law professor most likely majored in Accounting, Economics, History, or Political Science. In addition, the tax law professor is roughly twice as likely to have an LL.M. as the average law professor. Like most law professors, the tax law professor will almost always come to the academy with practical experience. And that experience is most likely to come from medium to large law firms, or to a lesser extent, the Internal Revenue Service.

A profile also emerges of the tax curriculum at the law schools where the tax law professor teaches. A basic tax curriculum at the majority of law schools would include Basic Income Tax, Corporate Tax, Partnership Tax (or some combination of Corporate and Partnership), Business Planning, Estate and Gift Taxation, Estate Planning, and International Tax. Most tax law professors devote the substantial majority of their teaching load to tax-indeed a significant number only teach tax courses. Those who do teach nontax courses are most likely to teach Trusts and Estates, Property, Business Associations, or Contracts....

August 14, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Tax Profs as Super Heroes?

Saturday, August 14, 2004

Photo composite of Professor Maule and the Hulk

Riding a wave of publicity after his blog's appearance in Thursday's Wall Street Journal (see here), Jim Maule (Villanova) on Friday was compared to the Incredible Hulk (see here)!

This opens up a new thread: Tax Profs as super-heroes! Any Tax Prof nominees for Spiderman, Catwoman, X-Men, etc?!?

August 14, 2004 in Celebrity Tax Lore | Permalink | Comments (0) | TrackBack (2)

Friday, August 13, 2004

Nominate a Tax Prof for National Law Journal's Board of Editors

Friday, August 13, 2004

The National Law Journal is assembling an editorial board of prominent members of the legal community to provide advice, feedback and occasional opinion pieces. To nominate a Tax Prof for the Board of Editors, email here.

August 13, 2004 in Tax Profs | Permalink | Comments (0) | TrackBack (0)

IRS Hires New Tax Shelter Cop

Friday, August 13, 2004

IRS Chief Counsel Donald Korb today announced (IR-2004-107) the selection of Jonathan Zelnik as acting Senior Counsel to the Chief Counsel. In this role, Zelnik will be the primary adviser to the Chief Counsel on abusive tax transactions:

"Halting the promotion and use of abusive tax schemes is one of my top priorities. We have many talented and dedicated attorneys in Counsel working on shelters, and the Senior Counsel will play a key role as my principal advisor in achieving this goal. Jonathan’s background analyzing complex tax shelters and experience in the Office of Chief Counsel make him a solid choice for this important position."
Zelnik has worked for Chief Counsel since October 1994. A 1994 graduate of Loyola Law School in Los Angeles, he started in the Office of the Assistant Chief Counsel, Financial Institutions and Products. Later he became the Senior Legal Counsel, Corporate Tax Shelters, in the Office of the Division Counsel for Large and Mid-Size Business and most recently was Special Counsel to the Senior Counsel.


August 13, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Release of CBO Tax Study Causes Stir on Presidential Campaign Trail

Friday. August 13, 2004

The Congressional Budget Office's release today of a 27-page report, Effective Federal Tax Rates Under Current Law, 2001 to 2014, has caused a stir on the Presidential campaign trail. Here is the lead from today's Washington Post:

Since 2001, President Bush's tax cuts have shifted federal tax payments from the richest Americans to a wide swath of middle-class families, the Congressional Budget Office has found, a conclusion likely to roil the presidential election campaign.

The CBO study, due to be released today, found that the wealthiest 20 percent, whose incomes averaged $182,700 in 2001, saw their share of federal taxes drop from 64.4 percent of total tax payments in 2001 to 63.5 percent this year. The top 1 percent, earning $1.1 million, saw their share fall to 20.1 percent of the total, from 22.2 percent.

Over that same period, taxpayers with incomes from around $51,500 to around $75,600 saw their share of federal tax payments increase. Households earning around $75,600 saw their tax burden jump the most, from 18.7 percent of all taxes to 19.5 percent.

The Kerry campaign embraced the findings, while the Bush campaign dismissed the study as "the Democrat-requested report."

August 13, 2004 in News | Permalink | Comments (0) | TrackBack (1)

Ranking of States By Tax Burden

Friday, August 13, 2004

CNN/Money have ranked the 50 states by their respective state and local tax burdens (as a percentage of per capita income), based on data from the Tax Foundation.

The 5 highest tax states:

• New York 12.9%
• District of Columbia 12.8%
• Maine 12.3%
• Ohio 11.3%
• Hawaii 11.3%

The 5 lowest tax states:

• Texas 8.7%
• Tennessee 8.5%
• Delaware 8.2%
• New Hampshire 7.5%
• Alaska 6.3%

For the accompanying story, see here. For a ranking of the tax bite in 51 big cities, see here.

August 13, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Commentary on Bush and Kerry Tax Plans

Friday, August 13, 2004

Recent analyses of the tax plans of President Bush and Senator Kerry:

• On President Bush's recent flirtation with a national sales tax:
The Required Tax Rate in a National Retail Sales Tax, by William Gale (Brookings Institution)
A Note on the Required Tax Rate in a National Retail Sales Tax: Preliminary Estimates for 2005-2014, by William Gale (Brookings Institution)
Senator Kerry's Tax Proposals, Updated, by Leonard Burman (Tax Policy Center) & Jeff Rohaly (Tax Policy Center)
Making Sense of the Presidential Tax Plans, by the Tax Foundation

August 13, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Maule's Tax Blog Featured in Wall Street Journal

Friday, August 13, 2004

Jim Maule's blog item comparing teaching tax to teaching the rules of cricket, blogged here three weeks ago on TaxProf Blog, was featured in Tom Herman's Tax Report in Thursday's Wall Street Journal:

TAXING HUMOR: A law professor has an idea for how to interest his students in taxes.

Sure, taxes are complicated, but some subjects are even worse. Try mastering the rules of cricket, says James Edward Maule, a law professor at Villanova University School of Law near Philadelphia. "Whoever invented cricket died, and then [was] reincarnated, as the inventor of income tax," Prof. Maule writes in his blog, "Mauled Again," at www.mauledagain.blogspot.com.

"Perhaps if I begin the basic tax class with a cricket rules lesson, the students will be thrilled to ease up with a study of the Internal Revenue Code, its regulations and all the law associated with it," he writes.

For Jim's cricket update, see here.

August 13, 2004 in Tax Profs | Permalink | Comments (0) | TrackBack (0)

Thursday, August 12, 2004

SOI Releases 2002 Estate Tax Data

Thursday, August 12, 2004

The SOI has released nine pages of data from estate tax returns filed in 2002: Table 1.--Estate Tax Returns Filed in 2002: Gross Estate by Type of Property, Deductions, Taxable Estate, Estate Tax and Tax Credits, by Size of Gross Estate

August 12, 2004 in Gov't Reports | Permalink | Comments (0) | TrackBack (0)

Monks on Impact of College Financial Aid on Family Savings

Thursday, August 12, 2004

James Monks (University of Richmond, Dep't of Economics) has published An Empirical Examination of the Impact of College Financial Aid on Family Savings, 57 Nat'l Tax J. 189 (2004). Here is the abstract:

The system of distributing financial aid dollars using needs analysis formulae implicitly imposes a financial aid tax on assets. Existing studies provide mixed evidence of the influence of this implicit tax on assets on wealth accumulation. This paper attempts to contribute to the literature on this topic by examining the sensitivity of results to various assumptions, specifications, and categories of assets, using more recent data that allows for the incorporation of recent developments in financial aid and college costs. I find much weaker evidence than existing studies that college financial aid has a significant impact on family savings.

August 12, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

SOI Releases Study of Foreign Earned Income and Foreign Tax Credits

Thursday, August 12, 2004

The just-released Statistics of Income Bulletin (Spring 2004) includes Individual Foreign-Earned Income and Foreign Tax Credit, 2001, by Jeff Curry (SOI) & Maureen Keenan Kahr (SOI). Here is the abstract:

U.S. taxpayers living abroad reported $27.4 billion in foreign-earned income for 2001. They filed 294,763 individual income tax returns, an increase in real percentage terms of 15.1 percent from 1996 (the last year for which similar statistics were collected). Along with this, the foreign-earned income exclusion increased by 3.1 percent to $14.1 billion, while the exclusion for certain employer-provided housing expenses fell from over $2.1 billion for 1996 to just over $1.9 billion for 2001, a decrease of 9.8 percent.
For related tables of data, see here.

August 12, 2004 in Gov't Reports | Permalink | Comments (0) | TrackBack (0)

Lederman Files Amicus Brief in Ballard & Kanter

Thursday, August 12, 2004

Leandra Lederman (George Mason) has filed an amicus brief in the Supreme Court in the companion Ballard (No. 03-184) and Kanter (03-1034) cases. Here is the summary of her argument:

One of the questions in this case is whether the Tax Court effectively can shield from appellate review the work of its Special Trial Judges in the largest cases over which those judges preside, cases heard under Tax Court Rule 183. Internal Revenue Code § 7482(a) provides, in relevant part, that "[t]he United States Courts of Appeals . . . shall have exclusive jurisdiction to review the decisions of the Tax Court . . . in the same manner and to the same extent as decisions of the district courts in civil actions tried without a jury . . . ." I.R.C. § 7482(a)(1). The Tax Court’s current practice of keeping the reports of Special Trial Judges in Rule 183 cases out of the record on appeal violates this statute because it renders the United States Courts of Appeals incapable of reviewing Tax Court decisions “to the same extent” as bench trials in the district courts.
Leandra is the co-author of Tax Controversies: Practice and Procedure (LexisNexis, 2d ed. 2002 & 2004 Supp.) (with Stephen Mazza (Kansas)). For Leandra's commentary on TaxProf Blog when the Supreme Court granted certiorari in the cases, see here.

August 12, 2004 in Tax Profs | Permalink | Comments (0) | TrackBack (0)