Thursday, June 30, 2005
In Davis v. Commissioner, T.C. Memo. 2005-160, the Tax Court held yesterday that an Annapolis, Maryland taxpayer could not take a 250k theft loss deduction for substandard construction and overcharges on a custom-built home because he didn't prove when he discovered the loss, the amount of the loss, or that he had no reasonable prospect of recovery in the year he claimed the loss.
Stuart Levine has a devastating critique of the American Family Business Institute's anti-estate tax advertising campaign, calling it "an example of knavery in its purest form." Stuart notes that the AFBI cannot find a single "horror story" to back up its claim that the current estate tax forces forces families to sell their closely-held businesses or farms. (We previouly blogged the non-partisan group FactCheck.org's report calling the ads "estate tax malarky.")
The Joint Committee on Taxation has issued issued Estimated Revenue Effects Of Title XV. Of H.R. 6, The "Energy Policy Tax Incentives Act Of 2005," As Passed By The Senate On June 28, 2005 (JCX-51-05)
Linda M. Beale (Illinois) & Yoram Keinan (Ernst & Young's National Tax Office) have published Point and Counterpoint: Should the Individual AMT Be Repealed?, 107 Tax Notes 1723 (June 27, 2005), also available on the Tax Analysts web site as Doc 2005-12575, 2005 TNT 124-48:
The President's Advisory Panel on Federal Tax Reform has been charged with advising on options to make the Code "simpler, fairer, and more pro-growth." It does so as Congress considers a variety of tax-related topics, including funding for Social Security, making the 2001 and 2003 tax reductions permanent, and using a VAT to replace or supplement the federal income tax. Among the topics that the Panel and Congress may consider is the individual Alternative Minimum Tax (AMT), which was enacted in 1969 in response to reports of high-income taxpayers who paid little or no income tax. Over time, Congress expanded the AMT but failed to index its provisions. As a result, the AMT now affects a significant number of middle-class taxpayers and is often criticized. Although the Joint Committee on Taxation has called for repeal of the AMT, repealing the AMT will soon be more costly than repealing the income tax itself. In this Point/Counterpoint debate Professor Linda Beale of the University of Illinois makes the case for retaining the AMT with modifications, while Yoram Keinan of Ernst & Young argues that the AMT should just be repealed, the sooner the better. In reaching their conclusions each considers topics assigned to the Advisory Panel: simplicity, fairness, and growth.
The Senate Finance Committee holds a public hearing today on Encouraging Savings and Investment: Stay the Course or Change Direction?. Here are the witnesses scheduled to appear:
- G. Scott Harding (President & CEO, F.B. Harding, Inc.)
- Robert A. Weinberger (Vice President, Government Relations, H&R Block)
- David Malpass (Chief Economist, Bear Stearns)
- Eric Toder (Senior Fellow, The Urban Institute)
- Stephen J. Entin (President & Executive Director, Institute for Research on the Economics of Taxation)
- Brian Graff (Executive Director & CEO, American Society of Pension Professionals & Actuaries)
The hearing will be held beginning at 2:00 pm in 215 Dirksen Senate Office Building.
In connection with the hearing, the Joint Committee on Taxation has issued Present Law And Background Information On Certain Expiring Tax Provisions (JCX-50-05) (25 pages):
The Taxation and IRS Oversight Subcommittee of the Senate Committee on Finance has scheduled a hearing for June 30, 2005, on certain expiring tax provisions. Specifically, the hearing will address the following provisions of present law.
- Document 6149 - Calendar Year Return Projections by State
- Document 6186 - Calendar Year Return Projections for the United States and IRS Campuses
- Document 6187 - Calendar Year Projections of Individual Returns by Major Processing Categories, Selected Years and Areas
- Document 6292 - Fiscal Year Return Projections for the United States
- Document 6961 - Calendar Year Projections of Information and Withholding Documents for the United States and IRS Campuses
Wednesday, June 29, 2005
Jacoba Urist, a former tax lawyer at O'Melveny & Myers (and daughter of Cardozo Tax Prof Edward Zelinsky) has obtained a publisher for her novel about life as a tax lawyer, Six Minutes in the City. The New York Post reports:
Former Secretary of State Warren Christopher's high-powered law firm is set to be the subject of a racy roman à clef. Jacoba Urist, a 28-year-old lawyer who resigned from the New York office of O'Melveny & Myers two years ago, is peddling a novel, "Six Minutes in the City," said to be inspired by her eight-month tenure at the white-shoe firm. We're told that senior partner Christopher, 79, who ran the State Department during Bill Clinton's first term, is the basis for the character of Earl Lewis, a doddering Republican power player well past his prime. "He's basically half-comatose," said a publishing insider of the character. "He's very old, and no one takes him very seriously." The book also features the fictitious firm's partners buying cocaine, uppers and pot from mailroom employees and sexually harassing attractive female summer associates. Urist declined comment. An O'Melveny & Myers spokesman said: "We don't comment on works of fiction."
Frances R. Hill (Miami), Tax Program Director of the Campaign Legal Center, sent a letter to IRS Commissioner Mark Everson noting that plans by some § 501(c)(3) tax-exempt organizations to conduct joint interviews of Republican presidential candidates could violate the ban on partisan campaign activity by charities.
See here for a related Roll Call article.
Reportedly (a little birdie told me), some people more in the know than I am are betting that the Tax Reform Commission will endorse neither the X-tax, which I would favor, nor the Graetz model, on which I’ve made my views clear, but rather will propose making various changes to the current income tax system. Some of the main possible features that I have heard about (plus my comments on them) are as follows:
- Exemption for capital income plus elimination of interest deductibility.
- Replace personal exemptions with a single, unified child tax credit.
- Replace various itemized deductions, such as those for charitable contributions and home mortgage interest, with percentage credits.
- A $10,000 cap on the exclusion for employer-provided health insurance.
- Vic Fleischer (UCLA) "share[s] Dan's skepticism that any of this will go anywhere in the near term. But it may set the table for future debates and a move to a consumption tax by 2015 or so."
- Vic Fleischer (UCLA) answers the question: Do tax profs set their research agendas to "fulfill personal meaning"?
Ronald Stein (Deloitte, Chicago) has published Settling With the IRS: The Importance of Procedure, 107 Tax Notes 1675 (June 27, 2005), also available on the Tax Analysts web site as Doc 2005-11412, 2005 TNT 123-33. Here is the abstract:
[The article] explores fundamental procedures and related principles and concepts that contribute significantly to the shaping of the settlement process in federal tax controversies. Stein believes that an understanding of the procedural nuances of settlement practice in tax cases is vital as enforcement reemerges as a top IRS priority.
The hearing will focus on the current laws, policies and procedures to detect and deter tax fraud committed by prison inmates, and will explore further steps that can be taken by the IRS or Congress to eliminate this fraud.
The hearing will take place in the main Committee hearing room, 1100 Longworth House Office Building, beginning at 2:00 pm.
The IRS has renewed a 5-year, $20 million contract with ChoicePoint to provide data processing services to the agency. ChoicePoint is one of the companies caught up in the identity theft crisis, as it allowed thieves to steal confidential information on more than 100,000 of its customers. Senator Patrick Leahy (D-VT) issued a press release yesterday blasting the IRS's move, calling it "especially galling right now to be rewarding firms that have been so careless with the public’s confidential information."
I have been called a lot of things as a result of this blog, but this gem in today's blogosphere is my favorite: "Paul L. Caron appears to be some kind of IRS cheerleader. He's probably the head cheerleader on the IRS pom pom squad."
Update: Joe Kristan offers some photographic proof (I'm the top one.)
Tuesday, June 28, 2005
We previously blogged the case of Montana law prof Robert G. Natelson, a self-described conservative who claimed he had been denied the opportunity to teach con law solely because of his political views (see here and here). News reports today say that he has prevailed in his quest to teach con law:
Law School Dean Ed Eck and UM President George Dennison handed Natelson the decision after considering a recent report by the three-person committee charged with assessing Natelson's suitability to teach the course. One member of the committee, Bozeman attorney James H. Goetz, dissented from the committee's final report. But UM officials agreed with the findings of James Weinstein of Arizona State University and Robert F. Nagel of the University of Colorado, each of whom holds an endowed chair in constitutional law at their respective universities.
Natelson is fully qualified for the job, the two academics concluded. In their final report, they wrote: "We are able to make this judgment with confidence. It is based on an evaluation that in its scope and thoroughness might well be unprecedented for any decision about a teaching assignment in the history of the American legal academy." Goetz argued the Law School should conduct a national search for a constitutional law professor and invite Natelson to apply.
The Nationwide Tax Forums feature a variety of basic and advanced seminars that provide the tax professional community with the latest information on IRS policies and programs. Among the topics on the 2005 agenda are like-kind exchanges, estate and trust planning, identity theft, retirement plans for small businesses, alternative minimum tax and recent tax law changes. The seminars are conducted by IRS experts and tax industry leaders from the American Bar Association, the American Institute of Certified Public Accountants, the National Association of Enrolled Agents, the National Association of Tax Professionals, the National Society of Accountants and the National Society of Tax Professionals. Tax professionals are invited to bring unresolved cases or questions to IRS representatives for on-site resolution. For the full program, see here.
David A. Case has posted Article I Courts, Substantive Rights, and Remedies for Government Misconduct (forthcoming, Northern Illinois University Law Review) on SSRN. Here is the abstract:
So-called Article I courts (namely the Tax Court, Court of Federal Claims, and Court of Appeals for Veterans Claims) can provide petitioners with remedies for illegitimate conduct by government attorneys, in the form of more favorable decisions. While the debate regarding whether Article I Courts possess inherent powers, or can base their decisions on equitable concepts is ongoing, using the history of the doctrine of sovereign immunity, the history of these courts, and Professors Hart and Sacks' analysis of rights and remedies, the paper concludes that, when faced with government attorney misconduct these courts may provide litigants with a remedy. This issue is particularly important in light of Dixon v. CIR, 316 F.3d 1041 (9th Cir. 2003), in which the Ninth Circuit split with other circuits, and determined that the remedy for what resembled a Mary Carter agreement between the IRS and certain cooperating petitioners in a test case was to order the Tax Court to apply the favorable settlement arrangements to the injured petitioners. Thus, the Tax Court, effectively was told that it could and must apply the equitable doctrine of quasi-contract, in a court that other Courts of Appeals have held has no equitable powers.
This paper argues that this view is incorrect. In fact Article I Courts have equitable powers, and although equity cannot be used to vitiate a statutory regime, it can be used to provide litigants with remedies for abusive litigation behavior.
Karen C. Burke (San Diego) & Grayson M.P. McCouch (San Diego) have published a review of Death by a Thousand Cuts: The Fight Over Taxing Inherited Wealth, by Michael J. Graetz (Yale) & Ian Shapiro (Yale) (blogged here and here), 107 Tax Notes 1583 (June 20, 2005), also available on the Tax Analysts web site as Doc 2005-12643, 2005 TNT 118-48:
Graetz and Shapiro have written a remarkable book that deserves a wide audience. Their account of "the fight over taxing inherited wealth" is notable not only for its sophisticated and penetrating analysis, but also for its scrupulous fairness. Despite the highly charged nature of their subject matter, Graetz and Shapiro manage to avoid imposing their own policy preferences and predilections, and different readers will undoubtedly draw different conclusions. No one who reads their book will ever look at the politics of tax reform in quite the same way again.
The conflict between the original report and the Tax Court decision has prompted some to raise ethical questions about Tax Court procedures and to call on Congress to examine them....
[T]he report is "very different" from the 1999 opinion, said tax scholar Leandra Lederman of the Indiana University School of Law-Bloomington. "Most important, the original report did not find that the taxpayers committed fraud; the opinion did," she emphasized. "These differences are disturbing. They raise questions about what the Tax Court means in Rule 183 cases when it says it 'agrees with and adopts' the findings of the trier of fact. This type of question may undermine confidence in the Tax Court's practices in Rule 183 cases."
See also the follow-up story in the Chicago Tribune, Tax Court's Top Judge Quiet on Fraud Case:
The chief judge of U.S. Tax Court declined on Friday to discuss revelations that call into question the decision-making process of judges who oversee tax disputes between citizens and the IRS. In a brief telephone interview, Joel Gerber, a Chicago native who was appointed to the tax court in 1984 and named chief judge in 2004, said, "No judge will be able to discuss this. There is no way."
The Subcommittee on Select Revenue Measures of the House Ways and Means Committee holds a hearing today on Funding Rules for Multiemployer Defined Benefit Plans in H.R. 2830, the Pension Protection Act of 2005:
More than 9.8 million workers participate in multiemployer defined benefit plans, which are collectively bargained pension arrangements involving unrelated employers, usually in a common industry. The Pension Benefits Guaranty Corporation (PBGC) estimates that multiemployer pension programs are underfunded by more than $150 billion; that is, these pension programs have promised $150 billion more in benefits than they have assets to pay according to current funding levels in the plans.
To address the current underfunding in these plans, ... H.R. 2830 ... create[s] a structure for identifying multiemployer pension plans that may be facing funding problems and providing quantifiable benchmarks for measuring efforts to improve the plan’s funding. Plans that are between 65 and 80% funded are classified as “yellow zone” plans that are in intermediate financial problems. Trustees of yellow zone plans would be required to adopt a program that will improve the health of the plan by one-third within 10 years. Trustees would be prohibited from increasing benefits that could cause the plan to fall below the 65% funded status. Plans that are less than 65% funded and face significant funding problems would be classified as “red zone” plans. Trustees would be required to develop a plan to exit the red zone funding status within 10 years, among other requirements. Additionally, H.R. 2830 requires increased reporting and disclosure requirements for all plans.
The hearing will take place in the main Committee hearing room, 1100 Longworth House Office Building, beginning at 10:00 am.
In connection with the hearing, the Joint Committee on Taxation has issued Present Law And Background Relating To Multiemployer Defined Benefit Pension Plans And Related Provisions Of H.R. 2830, The "Pension Protection Act Of 2005" (JCX-49-05) (47 Pages):
This document, prepared by the staff of the Joint Committee on Taxation, provides background and present law on multiemployer defined benefit pension plans, describes the multiemployer plan provisions of H.R. 2830, as introduced, and discusses issues relating to the funding status of multiemployer plans.
Monday, June 27, 2005
The IRS announced today (IR-2005-69) that the model year 2006 Toyota Highlander Hybrid is eligible for the clean-burning fuel deduction. Taxpayers who purchase one of these hybrid vehicles new during calendar year 2005 may claim a tax deduction of up to $2000 on Form 1040. In 2006, the deduction drops to $500.
See here for a list of the vehicles that qualify for the deduction:
- Ford Escape Hybrid — Model Year 2005
- Honda Accord Hybrid — Model Year 2005
- Honda Insight — Model Years 2000 through 2005
- Honda Civic Hybrid — Model Years 2003 and 2005
- Lexus RX 400h — Model Year 2006
- Toyota Highlander Hybrid — Model Year 2006
- Toyota Prius — Model Years 2001 through 2005
Please email me other suggestions for improvements we can make to the site to better serve your tax scholarship and teaching needs.
Desai, Dharmapala & Fung on Taxation and the Evolution of Aggregate Corporate Ownership Concentration
Mihir A. Desai (Harvard Business School), Dhammika Dharmapala (University of Connecticut, Economics) & Winnie Fung (Harvard University, Department of Economics; Harvard Business School) have posted Taxation and the Evolution of Aggregate Corporate Ownership Concentration on SSRN. Here is the abstract:
Legal rules, politics and behavioral factors have all been emphasized as explanatory factors in analyses of the determinants of the concentration of corporate ownership and stock market participation. An extension of standard tax clientele arguments demonstrates that changes in the progressivity of taxes can also significantly influence patterns of equity ownership. A novel index of the concentration of corporate ownership over the twentieth century in the U.S. provides the opportunity to quantitatively test for the role of taxes in shaping ownership concentration. The index of ownership concentration is characterized by considerable time series variation, with significant diffusion of ownership in the post WWII era and reconcentration in the late 1990s. Analysis of this index indicates that the progressivity of taxation significantly influences corporate ownership concentration and equity market participation as predicted by the model. This evidence supports the intuition of Berle and Means (1932) that taxation can significantly influence patterns of equity ownership.
Alan Berube, William G. Gale & Tracy Kornblatt (all of the Brookings Institution) have published Tax Policies to Help Working Families in Cities on the The Brookings Institution web site. Here is the abstract:
This paper examines ways that federal tax policy could improve the economic prospects of low- and middle-income working families in cities. We show how existing federal tax rules affect these families, and that a variety of public policies are available to provide better economic opportunities and incentives for these households. In particular, policies that expand and modify the child care and dependent care tax credit, the saver's credit, and subsidies for health insurance, or that alter the structure of homeownership subsidies away from deductions and toward capped credits for homeownership, have the potential to improve economic prospects for millions of working families who live in urban areas. The significant link between federal tax policies and the welfare of households in cities is an area of growing awareness and increasing importance and should receive the attention of both urban leaders and federal policy makers in the future.
Darryll K. Jones (Pittsburgh) has published It's the Ceiling Rule, Stupid!, 107 Tax Notes 1579 (June 20, 2005), also available on the Tax Analysts web site as Doc 2005-12754, 2005 TNT 118-41. Here is the opening:
In the fourth edition of their useful text, Partnership Income Taxation [Editor's Note: Blogged here], Alan Gunn and James R. Repetti point out an interesting collateral consequence of the recently enacted § 704(c)(1)(C). Without actually saying so, Gunn and Repetti prove that § 704(c)(1)(C) constitutes a partial repeal of the ceiling rule. Their proof also raises the possibility that § 704(c)(1)(C) creates unexpected distortions. Gunn and Repetti suggest that any repeal is probably unintended in light of the legislative history's failure to even mention the rule or any of its ameliorative counterparts. That at least a partial repeal occurs without the drafters' explicit acknowledgment or intent, though, proves only that total repeal is inevitable and even desirable. The ceiling rule, you may agree, is merely a label implementing a cerebral determination that a partnership should be viewed as an entity and not just an aggregation of its partners insofar as partnership allocations are concerned. The determination is ultimately an irrelevant diversion. Prof. Mark Gergen of the University of Texas explained some time ago that the decision to refer to a partnership as an entity or an aggregate is irrelevant to the real questions concerning the proper tax consequence to partners from partnership operations.
Do income taxes levied at a state or regional level affect the after-tax distribution of income? Or do workers merely move between regions, causing pre-tax wages to adjust? This question is relevant both in across states in the United States, and across countries within the European Union. Using the full income tax parameters for all US states from 1977-2002, I create a "simulated tax redistribution index", which captures the mechanical impact of the changes in tax policy on the gini coefficient, but is exogenous to any behavioral response. Analyzing the effect of this redistribution index on inequality, I find that gross wages do not adjust so as to fully offset the effect of more redistributive taxes. Exploring the adjustment process further, I create a new class of tax redistribution measures, based on the S-Gini, which differentially weight effects at the bottom and top of the distribution, and conclude that neither taxes that particularly affect the rich or the poor seem to affect the distribution of wages. Redistributive taxes do not appear to affect interstate migration or total state personal income. From a political economy perspective, I also find some evidence that more inequality leads states to implement more redistributive taxes, which may help explain why earlier studies observed a positive relationship between redistribution and inequality.
- Top 5 Tax Paper Downloads
- The Mother of All Data Security Breaches?
- Sheppard on Draft Senate Finance APA Report Shows Incompetent IRS
- Article on Tax and Accounting Blogs
Sunday, June 26, 2005
1. Jurisdictional Competition for Trust Funds: An Empirical Analysis of Perpetuities and Taxes, by Robert H. Sitkoff (Northwestern) & Max M. Schanzenbach (Northwestern)
2. Travails in Tax: KPMG and the Tax-Shelter Controversy, by Tanina Rostain (New York Law School)
Reuters reports that the IRS is investgating the possibility that hackers may have gained access to sensitive data from their computers. The potential security breach dwarfs those recently announced by ChoicePoint, Bank of America, Reed Elsevier, and others. (Thanks to Kerry Kerstetter for the tip.)
Lee A. Sheppard (Contributing Editor, Tax Analysts) has published Draft Senate Finance APA Report Shows Incompetent IRS, also available on the Tax Analysts web site as Doc 2005-13514, 2005 TNT 119-1. Here is the opening:
"The National Office negotiates as if IRS needs the APA more than the taxpayer does." That is an IRS agent complaining about the generous dealmaking in the IRS Advance Pricing Agreement Program, wherein the IRS cuts transfer pricing deals with large corporate taxpayers. That's the sort of damaging information that is contained in the recently completed draft of the long-awaited report on the Senate Finance Committee investigation of the APA program. The draft is being reviewed on Capitol Hill pending final release and possibly a Senate hearing.
Saturday, June 25, 2005
Last Father's Day weekend, we brought you the first of a two-part profile of the Kahn father-son tax prof tandem. Doug shared his thoughts on the special joys and challenges of raising a tax prof son. This week, Jeff offers us his perspective on what it was like to grow up as the son of one of the true tax legends of our time:
I was born and raised in Ann Arbor, Michigan and it was wonderful growing up in a university town with an academic family. As a child, I decided that I wanted to teach because I was always so proud when people stopped my father on the street and told him how much they enjoyed his class and how much he meant to them. I realized then what kind of positive effect a teacher can have on a student.
Jeffrey H. Kahn (Santa Clara)
- B.A. 1994, Duke
- J.D. 1997, Michigan
After graduating from Duke where I double majored in Latin and Classics, I attended the University of Michigan Law School with the hope of becoming a law professor at some point in my career. At that time, I had no idea what area of law I wanted to specialize in. I did know, however, what area I did not want to enter: tax law. I decided when I entered law school that I would avoid tax as I did not want to be compared to my father. Fate (or my DNA) had other plans for me.
The federal government's campaign against income tax protesters suffered a major setback yesterday when a federal jury in Sacramento acquitted a former Internal Revenue Service investigator on charges of helping to prepare false tax returns....
The jury verdict appeared to reflect the different way criminal tax laws apply to taxpayers and to professional advisers who promote tax cheating, said Jay Adkisson, a tax lawyer in Laguna Nigel, Calif., who tracks tax protesters at the Web site quatloos.com. "It is hard to convict promoters," Mr. Adkisson said. "Promoters make a lot of money off their marks, watch their marks go to jail for not paying taxes and then take advantage of a loophole that lets them prepare bogus returns that they characterize as protest returns" prepared at the direction of the client...
Lee A. Sheppard (Contributing Editor, Tax Analysts) has published Thinking About Domicile and Football, 107 Tax Notes 1494 (June 20, 2005), also available on the Tax Analysts web site as Doc 2005-13052, 2005 TNT 120-8, which explores how European nations deal with the question of domicile and residence for tax purposes.
Cloyd, Robinson & Weaver on Does Ownership Structure Affect Corporations’ Responses to Lower Dividend Tax Rates?
C. Bryan Cloyd (Virginia Tech, Department of Accounting and Information Systems), John R. Robinson (University of Texas at Austin, McCombs School of Business) & Connie D. Weaver (University of Texas at Austin, McCombs School of Business) have posted Does Ownership Structure Affect Corporations’ Responses to Lower Dividend Tax Rates? An Analysis of Public and Private Banks on SSRN. Here is the abstract:
The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) significantly reduces the maximum tax rate imposed on dividend income received in 2003 through 2008 by individual shareholders. Using data from call reports filed with the Federal Reserve Board, we investigate whether federally regulated bank holding companies (BHCs) increased dividend distributions after JGTRRA. By focusing on BHCs, we are able to compare the responses to this important but temporary change in tax policy across publicly-traded and privately-held corporations, while controlling for industry-related factors. Examining private firms’ dividend payouts and reactions to JGTRRA allows us to estimate the effect of differential taxation on dividend policy in a setting that is relatively free of the information asymmetry and agency problems that may dominate the payout decisions of public firms. We find that dividend yield (i.e. dividend distributions deflated by assets) increased after the reduction of the dividend tax rate for both private and public BHCs. However, private BHCs increased dividend payouts to a greater extent than most public BHCs. Our findings have implications for tax policy and for understanding differences between public and private firms.
Friday, June 24, 2005
- Subject: Any topic relating to U.S. taxation of income from international activities, including taxation under U.S. tax treaties
- Open to: All students during the 2004-05 academic year pursuing a graduate degree with a tax specialty.
- Submission Deadline: September 30, 2005
- Prize: $2,000 cash, plus expenses-paid invitation to IFA USA Branch Annual Meeting in San Antonio in February, 2006, where the winner will be presented with an award
The American Tax Policy Institute is sponsoring a roundtable conference on July 7 to discuss a draft paper by Stephen Holt, Making Work Really Pay: Income Support & Marginal Effective Tax Rates Among Low-Income Working Households.
- Janet Holtzblatt (Treasury Department)
- Dan Shaviro (NYU)
- Eugene Steuerle (Urban Institute)
The roundtable will be held from 2:30 to 5:30 p.m. on Thursday, July 7, 2005, in the Ernst & Young Conference Center, 1225 Connecticut Ave. NW, Washington D.C. To attend, please RSVP to Janine Hoke here at by Monday, June 27, to obtain a copy of the paper prior to the conference.
Interesting article in today's Chicago Tribune on the Kanter case, Tax Court Reversal "Incredible"; Judge Alters Secret Finding in Fraud Trial:
Lawyers and law professors familiar with the case are stunned by the disclosure. "How could the tax court judges essentially lie about what was in the report?" said Julie Roin, a law professor at the University of Chicago who has followed the case. "I find it incredible. ... It makes you wonder what's going on," Roin said. The dispute provides a rare look inside the court, located in Washington, D.C., and, according to tax experts, raises questions about the credibility of the court's decision-making process in what often are multimillion-dollar cases....
"The court order--that's a total lie," Roin said. "It strikes me as institutionally destructive to lie. ... I find this all mysterious. I don't understand what they have to gain by lying. It just seems bizarre."...
Leandra Lederman, the William W. Oliver professor of tax law at Indiana University School of Law in Bloomington, said the disclosure of Couvillion's report "does raise questions. Has it happened before? How many times has it happened before?" "I think it leads to questions about what was going on behind closed doors," she said. Lederman, who filed an amicus brief in the case urging release of Couvillion's findings, said the practice of keeping such findings secret is a "lack of transparency. And that leads to a lack of accountability. Transparency not only protects actual fairness, but the appearance of fairness, which is needed for people to have confidence in the system."
Burgess J.W. Raby & William L. Raby have published Golden Parachutes, Change of Control, and Section 83(b), also available on the Tax Analysts web site as Doc 2005-13511, 2005 TNT 120-77. Here is part of the Conclusion:
The golden parachute rules have been in the tax law since 1984. They are complex, and most tax practitioners either have encountered few golden parachute situations or haven't recognized them when they did. It took 20 years for the IRS to put in place the regulations dealing with this complex area. Earlier this year, the Service released an MSSP audit guide covering golden parachute payments. Tax practitioners cannot afford to ignore the potential application of the regulations by revenue agents guided by the MSSP, and practitioners now have tools to work with, complex though the subject may be.
With KPMG's continued existence very much up in the air as the Feds contemplate indicting the entire firm for their tax shelter work in the late 1990s, Taxable Talk asks if folks remember the names of the original Big Eight accounting firms? [Answer below the fold.]
A former Criminal Investigation (CI) Division special agent who left the IRS in 1999 over disagreements about the validity of the federal income tax, Banister was exonerated of conspiring to defraud the IRS and of helping Cencal Aviation Products proprietor Walter A. "Al" Thompson file false returns for tax years 1996-1998. Thompson was found guilty of tax evasion and failure to withhold in January 2005 and was sentenced to six years in prison.
Other big tax protestor cases scheduled for trial this summer include:
- Larken Rose (section 861 shtick) in Philadelphia in July
- Irwin Schiff (pay no income tax shtick) in Las Vegas in August
Thursday, June 23, 2005
Volume 3, Issue 1 of the eJournal of Tax Research, published by Atax (Australian Taxation Studies Program), University of New South Wales, Sydney, Australia, is available (with a free subscription) on its web site with these articles:
- Sandra Eden, Judicial Control of Tax Negotiation (pp 5-27)
- Lin Mei Tan & John Veal, Tax Knowledge for Undergraduate Accounting Majors: Conceptual v. Technical (pp 28-46)
- Ern Chen Loo & Juan Keng Ho, Competency of Malaysian Salaried Individuals in Relation to Tax Compliance under Self Assessment (pp 47-64)
- Jim O'Donnell, Quarantining Interest Deductions for Negatively Geared Rental Property Investments (pp 65-116)
- Neil Warren, Ann Harding and Rachel Lloyd GST and the Changing Incidence of Australian Taxes: 1994-95 to 2001-02 (pp 117-149)
AALU Provides Revenue Estimates and Number of Taxable Estates Under Current Law, Estate Tax Repeal, and Reform Alternatives
The Association for Advanced Life Underwriting (AALU) has prepared Revenue Estimates of Estate Tax Repeal and Revenue Estimates and Number of Taxable Estates Under Current Law, Estate Tax Repeal, and Reform Alternatives ($1m - $3.5m Exemption and 15% - 45% Top Rates). There is a separate page for each state with three tables:
- Table 1 (revenue estimates) and Table 2 (number of taxable estates) on each page contain national data.
- Table 3 contains data on the number of taxable returns for each state under both current law and various reform alternatives
Estimated Number of Estate Tax Returns Under Current Law, 2006-2020
Jonathan G. Blattmachr (Milbank, Tweed, Hadley & McCloy, New York), Mitchell M. Gans (Hofstra), Diana S.C. Zeydel (Greenberg Traurig, Miami) & Tracy L. Bentley (Milbank, Tweed, Hadley & McCloy, New York) have published Circular 230 Redux: The Questions of Validity and Compliance Strategies, 107 Tax Notes 1533 (June 20, 2005), also available on the Tax Analysts web site as Doc 2005-12260, 2005 TNT 119-42. Here is the abstract:
In this article, the authors revisit their prior article on Circular 230 (see Tax Notes, Apr. 4, 2005, p. 61), focusing in particular on the amendments Treasury adopted on May 18. They consider the meaning of an important, new safe harbor under which transactions that are consistent with the Code and its purpose are subject to less rigorous standards. They go on to discuss strategies for making certain that the advice practitioners provide after June 20 will be in compliance with the circular. They also provide a decision tree that will enable practitioners to classify their written advice and thereby determine whether and how the circular applies. Finally, they suggest that because the circular adopts a system of rules that is not parallel to the penalty provisions in the code, it may be invalid as applied in estate planning and other contexts on First Amendment and statutory authority grounds.
- Howard E. Abrams (Emory) and Tanina Rostain (New York Law School) were quoted in Tuesday's New York Times story, KPMG May Dodge One Bullet, Only to Face Another
- Vic Fleischer's post, Criminalizing Tax Shelters
- Joe Kristan's post, Vic Fleischer to KPMG: Die
- Larry's Ribstein's post, KPMG and Limited Liability of Professional Firms
Timothy Schnabel (Yale, Class of 2005) has published Vigilante Nonprofits: The Bob Jones Rule as Applied to the International Promotion of the Rule of Law, 24 Va. Tax Rev. 921 (2005). Here is part of the Introduction:
[M]any ... [nonprofit] organizations based in this country have motives and missions such as distributing Bibles or freeing slaves that Americans would consider laudable and charitable if carried out within the United States but that run afoul of the laws of the governments in whose territories they operate. What are the legal consequences when an American nonprofit operating abroad begins to act like a vigilante, promoting its own allegedly charitable agenda despite the prohibitions of foreign laws? The Supreme Court has held that an organization that violates a fundamental federal public policy is not charitable and is thus not eligible for tax exemption. The fundamental policy addressed by the Court was a domestic one: the elimination of racial discrimination in education. Should the loss of exemption rule also apply to a different fundamental policy -- the goal of promoting the growth of the rule of law -- that operates in the international sphere? An organization that violates another country's laws undermines the rule of law ideal that the law ought to bind everyone equally and effectively; should such an organization still be granted tax-exempt status?
Wednesday, June 22, 2005
The European Association of Tax Law Professors met in Caserta, Italy (near Naples) for a two-day conference which has become an annual event (next year: Budapest, and the year thereafter Helsinki). This group, which is only a few years old, seems to be quite a successful way for tax law teachers all over Europe (a few members with an interest in comparative tax law, such as yours truly, are from outside Europe) to get together to network and discuss issues of common concern.
The Panel on the Nonprofit Sector has released its final report with 120 recommendations for charitable organizations, Congress, and the IRS to strengthen the nonprofit sector’s transparency, governance, and accountability.
In companion rulings issued last week (Priv. Ltr. Rul. 200524016 & Priv. Ltr. Rul. 200524017), the IRS ruled that a county's collectively bargained deferred compensation plan must be interpreted to deny benefits to same-sex donestic partners in order to constitute a qualified plan for § 457 purposes. The Service ruled that the plan could not circumvent the federal Defense of Marriage:
Rev. Rul. 58-66, 1958-1 C.B. 60, provides that the marital status of individuals as determined under state law is recognized in the administration of tax laws. However, Section 3 of the "Defense of Marriage Act", P.L. 104-199 (September 21, 1996), provides that, "in determining the meaning of any Act of Congress, or of any ruling, regulation or interpretation of the various administrative bureaus or agencies of the United States, the word 'marriage' means only a legal union between one man and one woman as husband and wife, and the word 'spouse' refers only to a person of the opposite sex who is a husband or a wife."...
A registered domestic partner, a former registered domestic partner, or a surviving registered domestic partner as defined in state X Act is not a spouse, a former spouse or a surviving spouse for purposes of § 457. Accordingly, in the event that the Spouse Provisions are not interpreted and applied in a manner consistent with the Defense of Marriage Act, the operation of the Plan will not be in compliance with § 457(b).
Theodore Paul Manno has published Federal Income Taxation of Soldiers, Sailors, Airmen and Marines, 50 S.D. L. Rev. 293 (2005). Here is the Conclusion:
[T]he aim of this article [is] to combine in one place . . . the most salient changes made by MFTRA, SCRA, and WFTRA in the context of discussing the overall federal income taxation of military personnel. These changes have increased payments to those who make the ultimate sacrifice for our nation, have created or enhanced income tax exclusions with respect to that death benefit, homeowners assistance payments, dependent care assistance programs, and sales of homes, and have alleviated the financial burden of overnight travel expenses for National Guard and Reserve members. Together, this trilogy of statutes has also expanded relief from filing, and in some cases, even from payment requirements for fighting men and women; has ameliorated technical drawbacks with respect to federal tax credits, and the imposition of state income taxes on spouses; and has aided veterans groups and service academy appointees. These developments, the other changes wrought by these statutes, and other tax topics of key importance to those who answer the call to arms, have been the focus of this article. It is hoped that the specialist and the general practitioner alike will find it both a depository of information and analysis, and a source of references for further research and reading.