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Thursday, September 30, 2004

Red State, Blue State Update

Thursday, September 30, 2004

A follow up to Monday's post, Red States Feed at Federal Trough, Blue States Supply the Feed, which linked to a new Tax Foundation study showing that of the 32 states (and the District of Columbia) that are "winners" -- receiving more in federal spending than they pay in federal taxes -- 76% are Red States that voted for George Bush in 2000, while of the 16 states that are "losers" -- receiving less in federal spending than they pay in federal taxes -- 69% are Blue States that voted for Al Gore in 2000.

Roth & Company has a helpful map showing the Red States (who receive more in federal spending than they pay in federal taxes) and Blue States (who receive less in federal spending than they pay in federal taxes):

Map of Tax Winner/Loser States

The map looks suspiciously like the Red State (Bush)/Blue State (Gore) breakdown in the 2000 election:

US 50 States Map

Jim Maule (Villanova) has a thoughtful Red State/Blue State discussion on his blog.

Finally, as Miami Prof Michael Froomkin hunkers down for tonight's Presidential debate on his campus, he passed on an interesting map that has been making the rounds in the blogosphere showing the paths of Hurricanes Charley, Frances, and Ivan through the Bush Red Counties in Florida while skirting the Gore Blue Counties:

Map Tracking of 2004 Hurricanes

For a site debunking the Red County hurricane thesis, see here. (Thanks to reader Juan Smith for the tip.)

September 30, 2004 in Political News | Permalink | Comments (0) | TrackBack (0)

BU Graduate Tax Program Hosts Conference on Tax Accounting and Inventories

Thursday, September 30, 2004

The Boston University Graduate Tax Program is co-sponsoring a Tax Accounting and Inventories Conference today from 3:00 - 5:30 pm in conjunction with the ABA Tax Section Fall Meeting in Boston. For a list of the topics to be covered, see here.

September 30, 2004 in Conferences | Permalink | Comments (0) | TrackBack (0)

Slate Blasts Bush Tax Record

Thursday, September 30, 2004

Slate has a withering attack on George Bush's tax record, Catastrophic Success. Here is the opening:

In 1999, George W. Bush said we needed to cut taxes because the economy was doing so well that the U.S. Treasury was taking in too much money, and we could afford to give some back to the people who earned it. In 2001, Bush said we needed the same tax cuts because the economy was doing poorly, and we had to return the money so that people would spend and invest it.

Bush's arguments made the wisdom of cutting taxes unfalsifiable. In good times, tax cuts were affordable. In bad times, they were necessary. Whatever happened proved that tax cuts were good policy. When Congress approved the tax cuts, Bush said they would revive the economy. You'd know that the tax cuts had worked, because more people would be working. Three years later, more people aren't working. But in Bush's view, that, too, proves he was right. If more people aren't working, we just need more tax cuts.

Now Bush is playing the same game in postwar Iraq. When violence there was subsiding, he said it proved he was on the right track. Now violence is increasing, and Bush says this, too, proves he's on the right track.

September 30, 2004 in Political News | Permalink | Comments (0) | TrackBack (0)

Schenk Presents Optimal Deterrence and Corporate Tax Shelters at Florida and Florida State

Thursday, September 30, 2004

Photo of Professor SchenkDeborah Schenk (NYU) presents Optimal Deterrence and Corporate Tax Shelters today at noon at Florida State and tomorrow at noon at Florida. Here is the abstract:

Over the last decade corporations have increasingly used sophisticated tax shelter techniques to sharply reduce corporate income. While Congress has bemoaned this state of affairs, it has adopted very few provisions that might be effective in shutting them down. The IRS has aggressively sought out shelters, but has been stymied by the difficulty in locating the users and the lack of effective enforcement tools. This paper applies optimal deterrence theory to the tax shelter problem. It uses evidence from cases and press reports to show that corporate tax shelters users are utilizing a cost benefit analysis for decisionmaking. That calculus illustrates that the odds of detection are low and the odds of a penalty are even lower. The tax benefits are so low that they swamp the costs. The paper explores what kind of structure optimal deterrence theory would lead to and whether such a structure is feasible.

September 30, 2004 in Colloquia | Permalink | Comments (0) | TrackBack (0)

More Celebrity Tax Fodder: Courtney Love's Tax Lien

Thursday, September 30, 2004

Photo of Courtney LoveFor those teaching tax procedure: The Smoking Gun has copies of a tax lien filed by California against Courtney Love for nonpayment of employment taxes. (The managers of a Manhattan building also have filed liens against Ms. Love for nonpayment of maintenance fees on her Soho condo -- see here and here.)

September 30, 2004 in Celebrity Tax Lore | Permalink | Comments (1) | TrackBack (0)

Hutton & Pennell Present at Southern Federal Tax Institute

Thursday, September 30, 2004

Two Tax Profs are making presentations today at the 39th Annual Southern Federal Tax Institute in Atlanta:


Photo of Professor Hutton

William Hutton (Hastings) presents Conservation Easements in Estate Planning at 2:00 pm EST:
Conservation easements are increasing in popularity. What types of properties are eligible? What types of restrictions can be imposed? What are the valuation and substantiation requirements? This presentation will examine the applicable income, gift and estate tax rules.
Jeffrey Pennell (Emory) presents Understanding and Using QTIP Trusts: A Review of the Basic Rules at
3:00 pm EST:
Making the QTIP, partial QTIP and reverse QTIP elections. Income and unitrust entitlements. Making corpus available, and other sources of flexibility to facilitate gift and estate planning by the surviving spouse. Choosing an appropriate trustee. Pros and cons of QTIP trusts versus other forms of marital dispositions. Effects of lifetime termination or commutation of the spouse's interest, purchase of the remainder interest in a QTIP, and paying gift or estate tax attributable to the QTIP trust. Use of inter vivos QTIP and joint settlor revocable trusts to shelter a less wealthy spouse's unified credit.
For the full 5-day program, which lists all speakers and topics, see here.

September 30, 2004 in Conferences | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 29, 2004

Australia's Tax Office Drops Plans To Sponsor Sex Industry's Award Night

Wednesday, September 29, 2004

From the Where Does He Find This Stuff Department: Check out this story from a leading Australian newspaper, No Sex For Us, Says Tax Office. Here is the lead:

The Australian Taxation Office has dropped plans to sponsor the sex industry's award night. The backflip follows anger at the tax office's plan to put money into the event to encourage strippers and prostitutes to pay more tax. Industry insiders say sex industry workers are notorious for not declaring their mostly cash income.

September 29, 2004 in News | Permalink | Comments (2) | TrackBack (1)

Bagels and Tax Breaks Bring Hollywood to New York City

Wednesday, September 29, 2004

Mel Brooks at signing of Made in NY tax incentive statuteFrom Reuters (via CNN Money):

New York is striking back with better bagels and tax breaks in its fight to keep motion picture production in the Big Apple and stem the flight of the industry to cheaper destinations like Canada. The lure worked for Mel Brooks, who announced Tuesday that the film version of his Broadway hit musical The Producers would become the first major project filmed at Steiner Studios in Brooklyn, a massive complex that has also benefited from subsidies.

Brooks, flanked by politicians and studio executives, said, "without tax breaks, the horrible truth is this movie would have been made in Kabul or wherever the cheapest place in the world was to shoot the movie."

The movie will star Matthew Broderick, Nathan Lane, Nicole Kidman and Will Ferrell.

The New York tax break is a 15% tax credit to film and television companies that complete 75% of a production in New York. Governor Pataki signed the bill, the Empire State Film Production Credit Program, into law at press conference held yesterday in New York City. The legislation authorizes New York City to be able to offer additional tax incentives to help boost the film industry in the five boroughs, and Mayor Bloomberg unveiled the Made in New York Incentive Program, featuring a combination of tax and marketing credits, along with expanded customer services for productions in New York City.

September 29, 2004 in Celebrity Tax Lore | Permalink | Comments (1) | TrackBack (0)

WSJ: KPMG May Be Barred from Representing S.C. Taxpayers as a Result of Firm's Tax Shelter Work

Wednesday, September 29, 2004

Today's Wall Street Journal reports that South Carolina may bar KPMG from representing taxpayers because of "KPMG's conduct in the sale of certain tax shelters, principally FLIP and OPIS, to residents of this state." In particular, South Carolina is investigating whether KPMG violated state prohibitions on charging contingent fees for preparing tax returns.

September 29, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Does Anyone Know a Good Intellectual Property Lawyer?

Wednesday, September 29, 2004

Taxprof license plate


If so, please have them pay a visit to Jay Soled (Rutgers)! [grin] (For those wondering how Jay can afford such a fancy new car, see here.)


September 29, 2004 in Tax Profs | Permalink | Comments (0) | TrackBack (0)

ABA Teleconference and Webcast Today on Criminal Employment Tax Matters

Wednesday, September 29, 2004

The ABA Tax Section's "Last Wednesday of the Month" Teleconference and Webcast will be held today from 1:00 - 2:30 pm EST on Strategies for Avoiding and Handling Criminal Employment Tax Matters. The program will examine fact patterns that may give rise to criminal tax controversies and discuss avoidance and defense strategies.

September 29, 2004 in ABA Tax Section, Conferences | Permalink | Comments (0) | TrackBack (0)

Likhovski Presents Tax Law and Public Opinion Today at Toronto

Wednesday, September 29, 2004

Photo of Professor Likhowski Assaf Likhovski (Tel-Aviv University) presents Tax Law and Public Opinion: Explaining IRC v. Duke of Westminster today at 12:10 pm at the University of Toronto. (Assaf is visiting at Cardozo during the Fall 2004 semester.)


September 29, 2004 | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 28, 2004

TaxProf Blog Crosses 150,000 Threshold

Tuesday, September 28, 2004

150000 miles
Four days after bragging about the 100,000th visitor to TaxProf Blog, we are thrilled to report that we have just crossed the 150,000 visitor mark. We would like to think that the tax papers, colloquia, and conferences noted here in recent days have created this buzz in the blogosphere, but recognize that Britney Spears may have had something to do with it!

September 28, 2004 in About This Blog | Permalink | Comments (0) | TrackBack (0)

Johnson Delivers Wiegand Lecture at UNLV on Administrability-Based Tax Simplification

Tuesday, September 28, 2004

Photo of Professor JohnsonSteve Johnson (UNLV) delivered the inaugural E.L. Wiegand Lecture at UNLV on Administrability-Based Tax Simplification, published at 4 Nev. L.J. 573 (2004). Here is a summary of the lecture:

Our topic is simplification of the federal tax law, particularly the federal income tax. Simplification has been called the "Holy Grail" of tax policy. Like the Grail, simplification is both important and elusive. Quests for both are easy to start but difficult to bring to successful conclusion. We will consider the topic from five perspectives. First, the federal income tax is now our main tax, and it probably will continue to be. So, our attention should be on fixing the income tax to the greatest extent possible. Second, in fixing the income tax, simplification should be a high priority. Third, effective simplification requires putting heavy emphasis -- far more than it receives today -- on administrability. Fourth, we'll consider precedents: examples of administrability-based income tax provisions already in the Code. Finally, I'll offer three administrability-based simplifying income tax reforms that could be effected immediately.

September 28, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Taxes in the News

Tuesday, September 28, 2004

Recent tax stories of interest in the national press:

Hilfiger Shares Tumble on Probe Of Tax Payments (Wall Street Journal, 9/28)
Foreign Tax Havens Costly to U.S., Study Says (New York Times, 9/27)
A New Tax Cut (Washington Post, 9/26)

September 28, 2004 in News | Permalink | Comments (0) | TrackBack (0)

Washington Post Compares Pros and Cons of Different Types of Tax-Exempt Organizations for Engaging in Political Activity

Tuesday, September 28, 2004

Yesterday's Washington Post reports on the pros and cons of § 501(c)(4)-(6) tax-exempt organizations v. § 527 tax-exempt organizations for engaging in political activity:

§ 501(c)(4)-(6) Groups:

Democrat-Backed Groups:

Project Vote
Sierra Club
USAction
Voter Education Fund

Republican-Backed Groups:

Americans for Job Security
Citizens United
I Vote Values
Institute for Legal Reform
National Rifle Association
The Battle for Marriage
60 Plus Association

§ 527 groups

Democrat-Backed Groups:

America Coming Together
America Votes
America's Families United
Sierra Club Voyer Education Fund

Republican-Backed Groups:

Progress for America
Swift Boat Veterans for Truth

(Thanks to reader Steven Sholk for the tip.)

September 28, 2004 in News | Permalink | Comments (0) | TrackBack (0)

IRS Says Taxes Paid to Iraq Now Eligible for Foreign Tax Credit

Tuesday, September 28, 2004

The Treasury Department announced yesterday (in JS-1960) that the special foreign tax credit restrictions of § 901(j) no longer apply to income and taxes attributable to Iraq:

U.S. tax rules allow taxpayers a credit against U.S. income tax for taxes paid to a foreign country. Special rules in §§ 901(j) and 952(a)(5) generally deny foreign tax credits and impose other restrictions in the case of income attributable to countries with which the U.S. does not conduct diplomatic relations or which have been identified as sponsors of international terrorism. Rev. Rul. 95-63 provides a list of countries that have been identified as meeting the specified criteria and that are, therefore, subject to these restrictions. The restrictions of § 901(j) and related provisions cease to apply with respect to a particular country if the Secretary of State certifies to the Secretary of the Treasury that the country no longer meets the criteria in that section.

The State Department has certified that Iraq is no longer a country described in § 901(j)(2)(A), effective June 28, 2004. Accordingly, as of that date, the denial of foreign tax credits and other restrictions of § 901(j) and related provisions do not apply to income and taxes attributable to Iraq.


September 28, 2004 in IRS News | Permalink | Comments (0) | TrackBack (0)

Abrams Presents Tax Issues on Admission of a Partner at Southern Federal Tax Institute

Tuesday, September 27, 2004

Photo of Professor Abrams Howard Abrams (Emory) presents Tax Issues Arising from the Admission of a Partner to a Partnership today at 8:30 am EST at the 39th Annual Southern Federal Tax Institute in Atlanta:

An in-depth examination of the tax consequences to the new partner, to the continuing partners, and to the partnership.
For the full 5-day program, which lists all speakers and topics, see here.

September 28, 2004 in Conferences | Permalink | Comments (0) | TrackBack (0)

Slemrod & Crocker on Corporate Tax Evasion with Agency Costs

Tuesday, September 28, 2004

Joel Slemrod (Michigan Business School) & Keith Crocker (Michigan Business School) have posted Corporate Tax Evasion with Agency Costs on SSRN. Here is the abstract:

This paper examines corporate tax evasion in the context of the contractual relationship between the shareholders of a firm and a tax manager who possesses private information regarding the extent of legally permissible reductions in taxable income, and who may also undertake illegal tax evasion. Using a costly state falsification framework, we characterize formally the optimal incentive compensation contract for the tax manager and, in particular, how the form of that contract changes in response to alternative enforcement policies imposed by the taxing authority. The optimal contract may adjust to offset, at least partially, the effect of sanctions against illegal evasion, and we find a new and policy-relevant non-equivalence result: penalties imposed on the tax manager are more effective in reducing evasion than are those imposed on shareholders.

September 28, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Monday, September 27, 2004

NY Times: Tax Increases Coming, No Matter Who Wins Election

Monday, September 27, 2004

The NY Times article, Whoever Wins, More Taxes May Be the Only Way Out, argues that "the pressure to raise taxes is likely to increase for whoever wins the next election." (Thanks to reader Steven Sholk for the tip.)

September 27, 2004 in Political News | Permalink | Comments (0) | TrackBack (0)

Happy Birthday, Sam Adams

Monday, September 27, 2004

Photo of Sam AdamsToday marks the 282nd anniversary of the birth of Samuel Adams: signer of the Declaration of Independence, second cousin of President John Adams, and incompetent city of Boston tax collector (and namesake of my favorite beer). During Adams 1756-64 stint as tax collector, he accrued over 8,000 pounds in uncollected taxes as he "was a sucker for hard-luck stories from taxpayers."

September 27, 2004 in News | Permalink | Comments (2) | TrackBack (0)

Red States Feed at Federal Trough, Blue States Supply the Feed

Monday, September 27, 2004

The Tax Foundation has released a fascinating report showing which states benefit from federal tax and spending policies, and which states foot the bill.

US 50 States MapThe report shows that of the 32 states (and the District of Columbia) that are "winners" -- receiving more in federal spending than they pay in federal taxes -- 76% are Red States that voted for George Bush in 2000. Indeed, 17 of the 20 (85%) states receiving the most federal spending per dollar of federal taxes paid are Red States. Here are the Top 10 states that feed at the federal trough (with Red States highlighted in bold):


States Receiving Most in Federal Spending Per Dollar of Federal Taxes Paid:

1. D.C. ($6.17)
2. North Dakota ($2.03)
3. New Mexico ($1.89)
4. Mississippi ($1.84)
5. Alaska ($1.82)
6. West Virginia ($1.74)
7. Montana ($1.64)
8. Alabama ($1.61)
9. South Dakota ($1.59)
10. Arkansas ($1.53)

In contrast, of the 16 states that are "losers" -- receiving less in federal spending than they pay in federal taxes -- 69% are Blue States that voted for Al Gore in 2000. Indeed, 11 of the 14 (79%) of the states receiving the least federal spending per dollar of federal taxes paid are Blue States. Here are the Top 10 states that supply feed for the federal trough (with Blue States highlighted in bold):

States Receiving Least in Federal Spending Per Dollar of Federal Taxes Paid:

1. New Jersey ($0.62)
2. Connecticut ($0.64)
3. New Hampshire ($0.68)
4. Nevada ($0.73)
5. Illinois ($0.77)
6. Minnesota ($0.77)
7. Colorado ($0.79)
8. Massachusetts ($0.79)
9. California ($0.81)
10. New York ($0.81)
Two states -- Florida and Oregon (coincidentally, the two closest states in the 2000 Presidential election) -- received $1.00 in federal spending for each $1.00 in federal taxes paid.

September 27, 2004 in Think Tank Reports | Permalink | Comments (86) | TrackBack (101)

McMahon & Shepard Present Recent Tax Developments at Southern Federal Tax Institute

Monday, September 27, 2004

Photo of Professor McMahonPhoto of Professor Shepard
Prof. McMahon (left) Prof. Shepard (right)
Martin McMahon (Florida) & Ira Shepard (Houston) kick off the 5-day 39th Annual Southern Federal Tax Institute in Atlanta today at 9:00 am EST in presenting Recent Federal Income Tax Developments:
Significant court decisions, rulings and statutory and regulatory developments related to federal income taxation occurring during the past twelve months.
For the full 5-day program, which lists all speakers and topics, see here.

September 27, 2004 in Conferences | Permalink | Comments (1) | TrackBack (0)

Bush Says Tax Code Is "A Million Pages Long"; Overshoots By 983,000 Pages

Monday, September 27, 2004

Sunday's Washington Post reports that president Bush recently misspoke about the length of the tax code:

Looks as though President Bush is due for an audit of his tax code facts. "The tax code is a complicated mess," he said in Bangor, Maine, on Thursday. "You realize, it's a million pages long." Most Americans probably did not realize it was that long, because it is not. It is, in fact, 17,000 pages long, according to such experts as the conservative Heritage Foundation and Rep. Jim DeMint (R-S.C.). That's still pretty messy, but only one-fiftieth as messy as Bush asserts.

September 27, 2004 in Political News | Permalink | Comments (6) | TrackBack (0)

Weekend Roundup

Sunday, September 26, 2004

Top 5 Tax Paper Downloads

IRS Revises List of Tax Shelters

Sunday, September 26, 2004

On Friday, the Treasury Department and IRS in JS-1951 issued Notice 2004-67, which updates the list of transactions identified as tax shelters for purposes of the disclosure, list-maintenance, and registration requirements to include 32 transactions.

September 26, 2004 in IRS News | Permalink | Comments (0) | TrackBack (0)

Senate Foreign Relations Committee Holds Tax Treaty Hearing

Sunday, September 26, 2004

The Senate Committee on Foreign Relations held a hearing Friday on tax treaties with Barbados and the Netherlands. Testifying at the hearing were:

Barbara Angus, International Tax Counsel, Office of Tax Counsel, Treasury Department
George Yin, Chief of Staff, Joint Committee on Taxation
William Reinsch, President, National Foreign Trade Counsel
Judith Zelisko, President, Tax Executive Institute.
Here are some of the relevant documents:
Testimony of Barbara Angus (JS-1952)
Testimony of George Yin (JCX-58-04)
Testimony of William Reinsch
Testimony of Judith Zelisko
Technical Explanation of Protocol with Barbados
Technical Explanation of Protocol with the Netherlands
Joint Committee on Taxation Explanation of Potocol with Barbados (JCX-55-04)
Joint Committee on Taxation Explanation of Protocol with the Netherlands (JCX-54-04)

September 26, 2004 in Gov't Reports | Permalink | Comments (0) | TrackBack (0)

Saturday, September 25, 2004

Teachable Moment: Britney Spears' 4-Page "Faux Wedding Agreement"

Saturday. September 25, 2004

Photo of Britney SpearsA follow up on Thursday's post explaining that Britney Spears and Kevin Federline are not married for tax (and other legal) purposes because they have not yet filed a marriage license as they are still in the process of ironing out the prenuptial agreement. The Smoking Gun provides a "teachable moment" for those teaching Estate Planning, Family Law, Legal Drafting, or other such courses with the release of the purported 4-page Agreement Re September 18, 2004 Wedding Ceremony. Here is the opening paragraph:

1. BRITNEY SPEARS (hereinafter referred to as "BRITNEY") and KEVIN FEDERLINE (hereinafter referred to as "KEVIN"), collectively, "the parties," hereby agree that they intend tp participate in a "faux" wedding ceremony with one another on September 18, 2004; however, they do not intend to and shall not validly marry one another on said date. The parties shall not obtain a marriage license on or before September 18, 2004, nor shall they declare a marriage between them on said date pursuant to Family Code Section 425. The parties may apply for a marriage license prior to September 18, 2004 since they may decide to marry one another under the laws of the State of California after September 18, 2004, within 90 days after the issuance of a license.
As The Smokling Gun says, "nothing screams romance more than a notary public." There is no word in the agreement on the physical consummation of the marriage.

September 25, 2004 in Celebrity Tax Lore | Permalink | Comments (3) | TrackBack (0)

Tax Prof Spotlight: Ethan Yale

Saturday, September 25, 2004

This week's Tax Prof Spotlight of Ethan Yale (Georgetown) 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.

Photo of Professor Yale

Ethan Yale comes to Georgetown off a stint as Acting Assistant Professor at NYU Law School. Yale points to the outstanding faculty when asked why he joined Georgetown this fall. "I was impressed by the collegial atmosphere and the strong faculty, particularly in my area--the tax department here at Georgetown is among the strongest in the country."

His fellow faculty members are not the only reason Professor Yale decided to make the move from New York City. "I have a strong interest in tax policy, so coming to Washington, DC was a natural move."
Prior to his teaching at NYU, Yale practiced tax law for the New York firm of Wachtell, Lipton, Rosen & Katz and clerked for Judge Jacques Wiener Jr. of the U.S. Court of Appeals for the Fifth Circuit. He decided to become a law professor because he really liked the classroom atmosphere and enjoyed having the time to read and write in areas of his interest. "I want to concentrate on those areas of tax law I find to be most interesting and important, and for as long as I’m interested. In practice, sometimes that coincided with my clients problems, but usually not."

While he liked practice, Yale explains that he has no regrets in becoming a professor. "I enjoy all aspects of being a professor, aside from grading exams!" It seems obvious why Yale, who earned his undergraduate degree from Cornell, would enjoy law school. He finished first in his Tulane Law School graduating class of 305 students.

At NYU, Yale taught tax policy, corporate tax, advanced corporate tax problems, timing issues and the income tax, and tax procedure. At Georgetown, his current class repertoire includes Corporate Tax and a tax policy seminar focusing on abusive tax shelters.

Yale's teaching approach includes both influences of his private practice as well his research. When asked for any advice he would give students taking his classes, Yale emphasizes that class should be a positive experience. "My approach in teaching is collaborative. I tell students taking my class to be very well prepared and to enjoy themselves. Class should be fun."

While Professor Yale is currently focusing his research efforts on abusive tax shelters as well as capitalization and depreciation issues, he also enjoys spending time with his one month old daughter, Natalie, and when time permits, enjoying a game of pickup hockey.

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.

September 25, 2004 in Tax Prof Spotlight | Permalink | Comments (0) | TrackBack (0)

Thorndike on The Unhappy History of Private Tax Collection

Saturday, September 25, 2004

Joseph Thorndike has published Historical Perspective: The Unhappy History of Private Tax Collection on the Tax Analysts' Tax History Project web site. Here is the opening:

If Congress gets its way, the IRS may soon be hiring private tax collectors to pursue public debts. Pending legislation to repeal the extraterritorial income exclusion would also encourage the IRS to farm out some collection chores. Key House and Senate lawmakers have embraced the idea, and Bush administration leaders have signed on too. But before embarking on this brave new experiment in revenue outsourcing, Congress should consider an unhappy precedent.

September 25, 2004 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Friday, September 24, 2004

TaxProf Blog in Today's Wall Street Journal

Friday, September 24, 2004

Today's Wall Street Journal (The Gift That Never Stops Taking, page 13 of the Weekend Section) quotes TaxProf Blog in connection with the brouhaha over Oprah Winfrey's car giveaway.

September 24, 2004 in About This Blog | Permalink | Comments (0) | TrackBack (0)

Call for Papers: Historical Perspectives on Tax Law and Policy at UCLA

Friday, September 24, 2004

UCLA School of Law, Cambridge University Centre for Tax Law, and Tax Analysts' Tax History Project are soliciting submissions of papers for a conference on Historical Perspectives on Tax Law and Policy. The conference seeks to bring together leading scholars in law, history, political science, economics, and related fields to consider the history of tax law and public finance. The conference will be held July 18-19, 2005, at the UCLA School of Law in Los Angeles, California.

Interested authors may submit either (i) a draft working paper, if available, or (ii) an abstract of the paper along with a brief but detailed description of the project. Submissions should be made by December 1, 2004. The authors of selected papers will be notified by January 31, 2005. The conference sponsors will cover the cost of accommodations for authors selected to present their papers, but authors will be responsible for paying their own travel expenses. For more information, email Joseph Thorndike of Tax Analysts' Tax History Project.

September 24, 2004 in Conferences | Permalink | Comments (0) | TrackBack (0)

Maule's Advice for Law Students

Friday, September 24, 2004

Image of Professor MauleJim Maule (Villanova) offers some thoughtful advice for law students in a series of columns for his law school newspaper:

Doing Puzzles While Learning and Practicing Law
Time Can Be on Your Side. Or At Least By It
Learning to Teach and Teaching to Learn
Crumbling Myths & Dashed Expectations
Money for Nothing and Work for Free?

September 24, 2004 in Tax Profs | Permalink | Comments (0) | TrackBack (0)

Tennessee Looking To Hire Tax Prof

Friday, September 24, 2004

The University of Tennessee College of Law invites applications for two full-time, tenure-track faculty positions to commence in fall 2005. A J.D. or equivalent law degree is required. Successful applicants must have a strong academic background. Substantial professional experience is desirable. Candidates also must have a strong commitment to excellence in teaching, scholarship, and
service.

The teaching areas of the positions are flexible. There is a particular need for Trusts & Estates, Wealth Transfer Tax, and Property. Other areas of presently identified need include Business Associations,
Civil Procedure, Constitutional Law, Immigration Law, Legal Process, and first year courses. However, strong candidates in other areas also will be considered.

In furtherance of the University's and the College's fundamental commitment to a diverse faculty, minority group members and women are strongly encouraged to apply.

Applications, including a letter of intent, resume, and the names and addresses of three references, should be sent to:

Professors Thomas Y. Davies & George W. Kuney
Chairs, Faculty Appointments Committee
c/o Sophia Dardy
The University of Tennessee
College of Law
1505 W. Cumberland Avenue
Knoxville, TN 37996-1810

September 24, 2004 in Tax Profs | Permalink | Comments (0) | TrackBack (0)

Fleischer Presents The Missing Preferred Return at UCLA

Friday, September 24, 2004

Photo of Speedometer with 100,000 milesVictor Fleischer (UCLA) presents The Missing Preferred Return today at UCLA at 12:30 pm PST. Here is part of the abstract:

Managers of leveraged buyout funds, real estate funds, hedge funds, and other private equity funds give their investors an 8% preferred return on their investment before they take a share of any additional profits. Venture capitalists, on the other hand, offer no preferred return. Instead, VCs take their cut from the first dollar of nominal profits. They offer no feature that would account for the time value of the investment, nor do they index their compensation to an industry benchmark. This disparity between venture capital funds and other private equity funds is especially striking because the contracts that determine fund organization and compensation are otherwise very similar. This Article examines the mystery of this missing preferred return.

The missing preferred return is troubling because it suggests that agency costs pose a greater problem in venture capital than previously thought. Are VCs sneakily extracting rents from their investors by failing to offer a preferred return? Conventional explanations for the missing preferred return are unsatisfying. Using option theory, I argue that a preferred return would better align incentives between VCs and their investors. Option theory further reveals even better alternatives to the status quo. For example, one might replace the managers’ profits interest, also known as the "carried interest"or "carry," with a fixed percentage of the fund, thereby giving the manager something to lose on the downside as well as something to gain on the upside. If the goal of the carried interest is to line up the financial incentives of the VCs with the investment goals of their limited partners, venture capital fund agreements miss their target. None of the usual suspects like bargaining power, boardroom culture, camouflaging rent extraction or cognitive bias offers an entirely satisfactory explanation. A more promising explanation may lurk in a dark corner of the tax law: an IRS administrative pronouncement concerning the taxation of a profits interest in a partnership.

September 24, 2004 in Colloquia | Permalink | Comments (0) | TrackBack (0)

TaxProf Blog Crosses 100,000 Threshold

Friday, September 24, 2004

Photo of Speedometer with 100,000 miles

After a little over five months in operation, TaxProf Blog has crossed the 100,000 visitor mark. We have been thrilled by the reaction of the tax community to TaxProf Blog and hope we will be here for many years to come. Thanks for the many words of encouragement and support we have received, as well as the helpful suggestions on how to improve the site. (And feel free to keep both coming!)

We think the success of TaxProf Blog can be replicated in other areas of law and are in the process of putting together a Law Professor Blogs Network patterned after TaxProf Blog. Blogs in these subject areas are either already up and running or in the pipeline:

• Antitrust
• Criminal Law
• Labor Law
• Legal Ethics
• Sentencing Law
• White Collar Crime
• Workplace Law
Please email me if you or a colleague might be interested in starting a blog in other areas of the law school curriculum as part of our Law Professor Blogs Network -- Blogs By Law Professors For Law Professors.

September 24, 2004 in About This Blog | Permalink | Comments (1) | TrackBack (0)

Tax Court Holds That Sale of Right to Future Lottery Winnings Produces Ordinary Income

Friday, September 24, 2004

The Tax Court yesterday, in Lattera v. Commissioner, T.C. Memo. 2004-216 (9/23/04), confirmed that the sale of the right to future lottery winnings produces ordinary income and not capital gain under Davis v. Commissioner, 119 T.C. 1 (2002).

September 24, 2004 in New Cases | Permalink | Comments (0) | TrackBack (0)

Thursday, September 23, 2004

BNA Advisory Board Meeting on Estates, Gifts, and Trusts

Thursday, September 23, 2004

The BNA Tax Management Advisory Board meets today at 5:30 pm EST (followed by a reception at 7:00 pm) at the Waldorf-Astoria Hotel in New York City to discuss three estates, gifts, and trusts papers:

Asset Protection Planning for the Professional Advisor, by Jeffrey A. Zaluda, Horwood, Marcus & Berk, Chicago
Pre-Divorce Estate Planning Strategies: Bed Bash and Beyond, by Richard M. Horwood, Horwood Marcus & Berk, Chicago
Life Insurance Funding of S Corporation Buy-Sell Agreements, by William D. Klein, Gray Plant Mooty, Minneapolis

September 23, 2004 in Conferences | Permalink | Comments (0) | TrackBack (0)

Conference Agreement on Tax Bill

Thursday, September 23, 2004

Here are documents relating to the Conference Agreement on H.R. 1308, the Working Families Tax Relief Act of 2004:

Summary by Democratic staff
Summary by Conference Managers
Statutory Language
Statement of Managers
Revenue Estimates
(Thanks to Donald Tobin (Ohio State) for sharing these documents from his Capitol Hill sources.) For Treasury Secretary Snow's press release (JS-1945) praising the Conference Agreement, see here.

September 23, 2004 in Congressional News | Permalink | Comments (0) | TrackBack (0)

Liberal Think Tanks Publish Report on Corporate Income Taxes in the Bush Years

Thursday, September 23, 2004

Citizens for Tax Justice and Institute on Taxation and Economic Policy have published a 76-page report, Corporate Income Taxes in the Bush Years, noting that roughly one-third of the 275 largest American companies paid zero or less in federal income taxes in at least one year from 2001 to 2003. Here is part of the introduction to the report:

Following the tragic events of September 11, 2001, Americans joined together in grief and solidarity to support each other and our country. Corporate America also rallied to a cause, but it wasn’t in support of our nation. On the contrary, it was tax avoidance....

[C]orporate income taxes in fiscal 2002 and 2003 fell to their lowest sustained share of the economy since World War II....From 2001 to 2003, the Commerce Department reports that pretax corporate profits grew by 26%. But over that same period, corporate income tax payments to the federal government fell by 21%.

This study details which companies have benefitted the most from the decline in corporate taxes over the past three years, and which have been less fortunate. It also measures the effects of loopholes in our corporate tax laws that predated the George W. Bush administration. Specifically, the study looks at the federal income taxes paid or not paid by 275 of America’s largest corporations in 2001, 2002 and 2003. The companies in our report are all from Fortune’s 2004 list of America’s 500 largest corporations, and all of them were profitable in each of the three years analyzed. Over the three years, the 275 companies in our survey reported pretax U.S. profits of $1.1 trillion. Pretax profits for our 275 companies jumped by 26% from 2001 to 2003—just as the Commerce Department reports for corporations overall—even as their average effective income tax rate fell by a fifth. In total, the meager tax payments by our 275 companies represented more than two-fifths of total federal corporate income tax collections over the calendar 2001-03 period.

For some of the many media stories about the report, see the New York Times and the Wall Street Journal

September 23, 2004 in Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Likhovski Visiting at Cardozo

Thursday, September 23, 2004

Photo of Professor Likhowski Assaf Likhovski (Tel-Aviv University) is visiting at Cardozo during the Fall 2004 semester. He recently published The Duke and the Lady: Helvering v. Gregory and the History of Tax Avoidance Adjudication, 25 Cardozo L. Rev. 953 (2004). Here is the abstract from SSRN:

Tax avoidance is one of the major problems that every tax system faces. Courts play an important role in fighting tax avoidance, but the scope of judicial intervention in tax avoidance schemes varies. Certain courts and judges adopt a more passive and formalist attitude to tax avoidance while other courts pursue a more active, substantive approach. What factors influence judicial attitudes to tax avoidance? The article seeks to answer this question by examining the history of one specific landmark case, Helvering v. Gregory, decided by Judge Learned Hand in 1934.

The article examines the legal, cultural and political factors that influenced Hand's decision. It argues that one major factor that led Judge Hand to decide the way he did was the immediate political context in which the case was decided: In the months and weeks prior to the decision, tax avoidance by the rich had become a major political issue and public opinion was captivated by scandalous revelations about the tax avoidance schemes of a group of leading industrialists and bankers, chief among whom was Andrew Mellon, former Secretary of the Treasury. Using the story of Gregory as a case-study, the article shows that only a comprehensive historical approach which takes account of internal doctrinal developments as well as the influence of culture and politics can explain the history of tax avoidance adjudication.

September 23, 2004 in Tax Profs | Permalink | Comments (0) | TrackBack (0)

Oops She Did It Again: Is Britney Spears Married for Tax Purposes?

Thursday, September 23, 2004

Photo of Britney SpearsAccording to press reports (see here and here), Britney Spears has not filed a marriage license with Los Angeles County since her September 18 wedding to Kevin Federline. The reason? Because they moved up the wedding from October 16, their lawyers have not finished ironing out the prenuptial agreement. The New York Daily News reports that Spears originally offered Federline $36,000 per year in the event of divorce, but has since upped the ante to $300,000 per year. Spears is quoted saying "I know we're not completely legal until we file the license, which we'll do next week. But in a real sense, a spiritual sense, we're married." Of course, they also are not married in a tax sense, and any transfers from Spears to Federline in the meantime will not be sheltered by § 1041. (Thanks to Dorothy Brown (Washington & Lee) for the tip.)

September 23, 2004 in Celebrity Tax Lore | Permalink | Comments (2) | TrackBack (1)

McCaffery Presents Shakedown at Gucci Gulch: A Tale of Death, Money & Taxes Today at Florida State

Thursday, September 23, 2004

Photo of Professor McCafferyEdward McCaffery (USC) presents Shakedown at Gucci Gulch: A Tale of Death, Money and Taxes today at noon EST at Florida State. Here is the abstract:

Ever since Mancur Olson's 1965 classic The Logic of Collective Action was published, the dominant view of politics in the academy and the popular understanding has featured the "special interest" model. Small groups with high stakes in legislative outcomes solve their coordination and free-rider problems and then descend on Washington and other bastions of power, seeking rents. In this model, the special interests are the predators, the legislators the prey. In this paper, we argue that in any important set of cases, the process works in reverse. Legislators pro-actively solve the coordination and free riding problems identified by Olson so that they can then "shake down" the groups so formed for campaign contributions. We illustrate this model of a "reverse Mancur Olson phenomenon" with the extended example of estate tax repeal/non repeal, and suggest further extensions. The key properties of the phenomenon are small groups with high stakes that Congress has helped to frame or set up; plausible action; two or more sides; plausible longevity for any legislative action. The key predictions are that, once Congress has found rich territory for the game, it will string matters along, frequently voting, never really acting, and avoiding sensible compromises at every turn.

September 23, 2004 in Colloquia | Permalink | Comments (0) | TrackBack (0)

Brown Presents The Tax Treatment of Children: Separate But Unequal Today at Penn

Thursday, September 23, 2004

Photo of Professor BrownDorothy Brown (Washington & Lee) presents The Tax Treatment of Children: Separate But Unequal today at 4:30 pm EST at Penn as part of their Tax Policy Workshop Series. Here is the abstract:

Tax credits for children are found in two separate tax provisions. The Earned income tax credit (EITC) and the Child Tax Credit (“CTC”) are similar in many ways, yet in crucial respects EITC recipients are disadvantaged when compared with CTC recipients. This piece seeks an explanation for the disparity and ultimately finds that the only plausible explanation is a race based one.
Politicians recently played the “race card” by analogizing the EITC to welfare. Academics argue without empirical support that low-income taxpayers who receive the EITC are Black and disproportionately benefit from the credit. This Article provides the first comprehensive empirical analysis of low-income taxpayers and shows that the majority of EITC-eligible taxpayers are White and that a greater percentage of Blacks are ineligible than are eligible. EITC provisions that disadvantage EITC recipients will disadvantage Whites. By making the earned income tax credit a problem of low-income Blacks, academics and politicians have ignored the larger class issue. This Article, by taking account of race in order to move beyond it, reveals that real EITC reform is possible and argues that CTC benefits currently available only to middle income children should be available to low-income children.

September 23, 2004 in Colloquia | Permalink | Comments (0) | TrackBack (0)

McCaffery Presents Thinking About Tax and Starving the Beast: The Psychology of Budget Deficits Today at Florida

Thursday, September 23, 2004

Photo of Professor McCafferyEdward McCaffery (USC) presents Thinking About Tax and Starving the Beast: The Psychology of Budget Deficits today at 5:00 pm EST at Florida.

Here is the abstract of Thinking About Tax:

Behavioral economics and cognitive psychology have demonstrated that people deviate from ideal precepts of rationality in many settings, showing inconsistent judgment in the face of framing and other formal manipulations of the presentation of problems. This article summarizes the finding of original experiments about subjects' perceptions of aspects of tax-law design and argues for the relevance of behavioral perspectives to the understanding and improvement of real-world fiscal systems. We show that in evaluating tax systems, subjects are vulnerable to a wide range of heuristics and biases, leading to inconsistent judgment and evaluation. The prevalence of these biases suggests that there is room for skillful politicians to manipulate public opinion, and that tax-system design can be volatile on account of the possibility of eliciting preference reversals through purely formal rhetorical means. More troubling, the findings suggest a likely and persistent wedge between observed and optimal public finance systems.
Here is the abstract of Starving the Beast: The Psychology of Budget Deficits:
Many opponents of big government favor a strategy of starving the beast, cutting taxes today with the expectation that spending cuts will follow tomorrow. Why might such a strategy work? Various heuristics and biases help to explain how it can. In two experiments conducted on the World Wide Web, subjects chose general levels of taxation and public spending from various hypothetical starting points. Subjects wanted to reduce both taxes and spending, preferring balanced budgets and even surpluses to deficits. When asked about specific spending cuts, however, subjects showed a marked reluctance to make cuts, leading to deficits. Subjects also showed an anchor and underadjustment bias, changing their responses in light of various baselines, and failing to completely close existing deficits. The starving the beast phenomenon, by pairing specific tax cuts with the general, abstract idea of spending cuts, can thus succeed in a population preferring fiscal balance. Once the deficit is created, it will likely persist, influencing future policy preferences.

September 23, 2004 in Colloquia | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 22, 2004

Joint Committee on Taxation Issues Report on Child Tax Credit Bills

Wednesday, September 22, 2004

The Joint Committee on Taxation has published Comparison of Provisions Contained in H.R. 1308, The "All-American Tax Relief Act Of 2003" (as passed by the House 6/12/03) and The "Relief For Working Families Tax Act Of 2003" (as passed by the Senate 6/5/03) (JCX-57-04)

September 22, 2004 in Congressional News | Permalink | Comments (0) | TrackBack (0)

Stiglitz on Flip-Flops on Deficit Spending

Wednesday, September 22, 2004

Joseph Stiglitz (Columbia) has published The Parties' Flip-Flops on Deficit Spending: Economics or Politics? in The Economists' Voice. Here is the abstract:

Not long ago, Republicans were trying to pass a balanced budget amendment to the constitution. Democrats were skeptical, overwhelmingly Keynesian, and believed that deficit spending had ended the Great Depression. Under Rubinomics the positions began to switch: Democrats became the defenders of fiscal orthodoxy. Now Bush has cut taxes for the rich and caused huge deficits. Is the flip-flop just politics?

September 22, 2004 in Political News | Permalink | Comments (0) | TrackBack (0)

IRS Announces Relief for Victims of Hurricane Ivan

Wednesday, September 22, 2004

Hurricane Charlie Makes Landfall, 2004The IRS today announced (in IR-2004-118) special tax relief for taxpayers in the four Gulf Coast states struck by Hurricane Ivan (Alabama, Florida, Louisiana and Mississippi). Taxpayers in these areas will have until Dec. 30 to file tax returns and submit tax payments. The IRS will abate interest and any late filing or late payment penalties that otherwise would apply. For prior TaxProf Blog hurricane coverage, see here (Frances) and here (Charley). For the full panoply of rules for taxpayer in disaster areas, see here.

September 22, 2004 in IRS News | Permalink | Comments (0) | TrackBack (0)

Catholic Groups Spar with IRS Over Voter's Guide

Wednesday, September 22, 2004

Catholics for a Free Choice have filed a complaint with the IRS alleging that the Voter's Guide for Serious Catholics produced by the § 501(c)(3) organization Catholic Answers violates the ban on partisan electoral activity. Under this theory, any local church that distributes the guide would risk its § 501(c)(3) status. (Thanks to reader Steven Sholk for the tip.)

September 22, 2004 in Political News | Permalink | Comments (1) | TrackBack (0)