September 30, 2006
For over 30 years, the University of Florida Graduate Tax Program has been one of the nation's leading programs for the advanced study of tax law. Among the country's 30 graduate tax programs, Florida has by far the largest number of full-time faculty and is the only school to offer three advanced tax degrees:
Graduate tax students assist in the publication of the Florida Tax Review, one of the most prestigious peer-reviewed tax journals in the country. In this 12-part series, TaxProf Blog will profile the Florida Graduate Tax Faculty.
Paul R. McDaniel is the James J. Freeland Eminent Scholar in Taxation and Professor of Law at the University of Florida Levin College of Law. He is entering his fortieth year as a full-time tax professor, tax practitioner, and government tax official.
It wasn’t supposed to turn out this way. After graduating from Harvard in 1961 (a member of what came to be known as the “tax class”), Paul returned to his home in Oklahoma City and joined the Crowe, Dunleavy firm. He was firmly on a track designed to make him a tough litigator. However, after a few extremely difficult and unpleasant trials, he decided that tax law offered the prospect of a less stressful and more interesting way to practice law.
Bruce Johnson was Paul’s tax mentor at the firm. He customarily traveled to D.C. to meet with IRS and Treasury officials. He returned from one such trip in early 1967 and, uncharacteristically, did not talk to Paul about it for about three days. Bruce called him into his office then and told him that Stanley Surrey, the Assistant Secretary of the Treasury for Tax Policy, had inquired whether he had any tax associates who might be interested in a position in the Tax Legislative Counsel’s office in the Treasury. Sheepishly, Bruce admitted that he told Surrey that did not know of anyone. However, plagued by his conscience he told Paul that he would recommend him to Surrey if he wanted that experience. Paul did, and joined the Treasury TLC staff in April 1967.
With the change of Administrations, Surrey left the Treasury to return to teach at Harvard and appointed Paul and Dan Halperin as Acting Associate Tax Legislative Counsel, pending appointments to be made by the new Treasury officials. Ed Cohen and Jack Nolan were appointed to the top Treasury tax positions. They proposed to make permanent the appointments of Dan and Paul, but following the new Administration’s policy, they were required to get the approval of the Senators from Oklahoma (for Paul) and New York (for Dan). Senator Bellman, from Oklahoma, objected to Paul’s appointment as co-head of the TLC office on the ground that he was an ardent Democrat. Ed and Jack unsuccessfully argued the case with Bellman and passed the matter up to the Secretary’s office. He, too, made no headway and sent the matter over to the White House. Finally, in the summer of 1969, Jack Nolan asked Paul to go to lunch. He advised him that Senator Bellman had told the White House that if Paul was not out of the Treasury by September 1, he would vote against the ABM Treaty, a vote which would have defeated ratification. Needless to say, Paul felt a little outmatched on receiving this information and submitted his resignation. The New York Times, however, picked up the story and gave Paul his fifteen minutes of fame with a front-page exposé of the events.
Paul then joined the staff of Senator Albert Gore of Tennessee, who was the third-ranking member of the Senate Finance Committee and wanted to take an active role in the Senate consideration of what was to become the Tax Reform Act of 1969. It was a valuable experience and led to a decade of frequent consulting with different Senators, particularly Senator Edward Kennedy.
In 1970 Paul left Washington to join the faculty of the Boston College Law School where he remained for 17 years. In 1987 he left teaching to become a partner at the Boston firm of Hill and Barlow and served as chair of the firm’s tax department.
Then, in 1993, Noel Cunningham, at NYU, called with the news that the faculty had voted to institute a new degree program, the LL.M. in International Taxation, and invited Paul to come to New York to design that program. After three years of planning the first class entered for the 1996-1997 academic year. Paul was the Director of the ITP and subsequently assumed the directorship of the Graduate Tax Program itself.
During his nine years at NYU, Paul maintained his principal home in Massachusetts, commuting each week between Boston and New York. As he has told friends, he became more tired of the commute earlier each year and by the beginning of his ninth year, he was tired of it in August.
Paul returned to BC for two years as an Adjunct Professor. But in December, 2003, Marty McMahon called from Florida to see if he would be interested in discussing the Freeland Chair with the Florida faculty. In late December Paul and his wife, Ginny, were looking out the window on a very, very cold night, with snow up to the windowsills, and asked themselves why they were living there. The decision was made to follow up on Marty’s invitation and Paul accepted Florida’s offer for his present position.
Paul has co-authored eight books and is the author or co-author of nearly sixty articles on taxation. He teaches primarily courses in the new LL.M. in International Taxation program instituted by Florida in 2005. He strongly advises his international students, before taking a position with a firm, to get a commitment that the firm will finance annual trips to the Congresses of the International Fiscal Association, which are held in highly desirable locations around the world. Happily, at the 2006 IFA Congress in Amsterdam, he met several former NYU and Florida students who had taken his advice.
For prior Florida Graduate Tax Faculty Profiles, see:
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. For prior Tax Prof Profiles, see here.
NTA Conference on 5 Key Perspectives You Can Learn from Other Professions and Disciplines about Tax Policy
The National Tax Association, in partnership with ithe Office of Tax Policy Research at the University of Michigan and Tax Analysts, held a conference yesterday in Washington, D.C. on 5 Key Perspectives You Can Learn from Other Professions and Disciplines about Tax Policy:
Five Key Things Non-Lawyers Should Know about Tax Law and Its Policy Implications (and What Non-Lawyers Could Do Differently as a Result):
- Pam Olson, Skadden Arps
- Wally Hellerstein, University of Georgia
- George Yin, University of Virginia
- Len Burman, Urban Institute (moderator)
Five Key Things Non-Economists Should Know about Tax Economics and Its Policy Implications (and What Non-Economists Could Do Differently as a Result):
- Jim Hines, University of Michigan
- Bill Fox, University of Tennessee
- Tom Barthold, Joint Committee on Taxation
- Ken Gideon, Skadden Arps (moderator)
Five Key Things Non-Accountants Should Know about Tax Accounting and Its Policy Implications (and What Non-Accountants Could Do Differently as a Result):
- Doug Shackelford, University of North Carolina
- Lillian Mills, University of Texas
- Chris Ohmes, Ernst & Young
- Laura Kalambakidis, University of Minnesota (moderator)
Five Key Things Non-Tax-Administrators Should Know about Tax Administration and Its Policy Implications (and What Non-Tax-Administrators Could Do Differently as a Result):
- Don Korb, Chief Counsel, IRS
- Mary Jane Egrs, Tax Commissioner, State of Nebraska
- Michael Keen, International Monetary Fund
- Matthew Murray, University of Tennessee (moderator)
Five Key Things That U.S. Tax Policy Analysts Should Know about Business Perspectives on Tax Issues and Its Policy Implications (and What Non-Business Tax Policy Analysts Could Do Differently as a Result):
- Timothy McCormally, Tax Executive Institute
- Annabelle Canning, Verizon Wireless
- Dan Kostenbauder, Hewlett-Packard
- Howard Gleckman, Business Week (moderator)
Five Key Things Non-Journalists Should Know about Media and Its Policy Implications (and What Non-Journalists Could Do Differently as a Result):
- David Wessel, Wall Street Journal
- Zanny Minton Beddoes, The Economist
- Doug Sheppard, State Tax Notes
- Joel Slemrod, University of Michigan (moderator)
Galle on Designing Interstate Institutions: The Example of the SSUTA
Brian D. Galle (Florida State) has posted Designing Interstate Institutions: The Example of the SSUTA, 40 U.C. Davis L. Rev. ___ (2007), on SSRN. Here is the abstract:
This Article presents a case study in designing cooperative interstate institutions. It takes as its subject the Streamlined Sales and Use Tax Agreement (“SSUTA”), a recently-developed compact among the States now awaiting congressional ratification. The SSUTA's primary goal is to bring uniformity to the field of state and local sales taxation, a regime in which multi-jurisdictional sellers now confront literally thousands of different sets of rules. I predict here that the SSUTA as currently designed is unlikely to accomplish that goal, and attempt to suggest possible amendments that could improve its expected performance. From these efforts I extract larger lessons about the workings of many similar cooperative ventures.
My prognosis for the SSUTA turns largely on the political economy of state taxation. Extending Daniel Shaviro's seminal work on state incentives for tax-law disuniformity, I examine how the institutional arrangements set out by the SSUTA respond to the pressures identified by Shaviro. I additionally weigh a number of factors omitted in his analysis. For example, I consider the possible public-regarding tendencies of bureaucratic ideology or sense of mission among either state-level tax administrators, state courts, or the governing body of the SSUTA. I also examine the possibility that ongoing intervention by Congress or a reviewing federal court might help either to check rent-seeking by, or instill a stronger sense of public regard in, the SSUTA Governing Board and state-level actors.
I find none of these alternatives especially promising. For example, federal judicial review is often offered as a panacea by present critics of the SSUTA. However, it was precisely the relative incompetence of federal judges in balancing the goods of uniformity against the possible autonomy and experimental benefits of diversity that lead the Supreme Court to, in essence, punt the problem back to Congress. And the failure of local businesses to internalize the costs of national disuniformity likely distorts the decisions not only of state politicians and bureaucrats but also of state courts and Congress.
Having made a more precise diagnosis of the problems that confront the SSUTA, I am able to suggest more precisely targeted solutions. Somewhat radically, I propose tying the deductibility of businesses' federal deduction for state and local tax paid to federal administrative approval of the taxing state's compliance with SSUTA, with approval subject in turn to federal judicial review. In this way, the businesses are made to internalize the costs they impose on others. And the most politically remote actors, federal judges, would have a reliable interpretive partner to supplement their own, ordinarily rather weak, fact finding and policy analysis.
Finally, I claim that this analysis is generalizable. First, it helps to evidence the weakness of nationwide policy making that is dependent purely either on unmitigated “market” federalism, or on relatively rigid and uninformed judicial mandates. For example, rather than granting carte blanche authority to states to offer local development tax incentives, as Congress now contemplates, or barring such incentives under the Dormant Commerce Clause, as the Cuno plaintiffs sought, we might instead design a mediating institution to more rationally weigh the costs of competing local incentives. In addition, the analysis here opens the possibility that conditional taxes, like conditional spending, can be a significant tool in coordinating our national policy goals.
TIGTA Releases Two Tax Reports
The Treasury Inspector General for Tax Administration has released two tax reports:
- Many Taxpayers That Could Benefit From the Income Averaging Provision for Fishermen Are Not Using It (2006-30-158)
- Improvements Are Needed to Better Identify and Prevent Erroneous Refunds (2006-40-137)
September 29, 2006
Johnson Introduces International Tax Simplification Act of 2006
Rep. Sam Johnson (R-TX), a senior member of the House Ways & Means Committee, today introduced the International Tax Simplification Act of 2006, which would make a number changes to various international tax rules:
- Permanent Subpart F exemption for active financing income
- Permanent look-thru rule for related controlled foreign corporations
- Repeal of foreign base company sales and services income rules
- Repeal of foreign base company oil related income rules
- Repeal of special rules for applying foreign tax credit in case of foreign oil and gas income
- Extension of carryforward period for excess foreign taxes
- Subpart F earnings and profits determined under generally accepted accounting principles
- Acceleration of election to allocate interest on a worldwide basis
- Expansion of de minimis rule under subpart F
Former Cravath Tax Associate Denied Bail in Teenage Rape and Prostitution Case
New York Supreme Court Justice Daniel FitzGerald yesterday denied bail to former Cravath tax lawyer James Colliton. age 43. Colliton, who is married with five children, has pleaded not guilty to a 43-count indictment charging him with third-degree rape, third-degree sodomy and patronizing a prostitute. He is accused of having sex with two underage sisters with their mother's approval and of having sex with a third minor girl, not related to the other two. Prosecutors say all of the girls were younger than 17, New York's age of consent.
- New York Lawyer: Former Cravath Associate Charged With Sex With Underaged Sisters Denied Bail
- New York Post: "Perv" Plays Mother Card
- Newsday: Judge Denies Bail for NYC Lawyer Charged with Underaged Sex
Prior TaxProf Blog coverage:
- National Law Journal: Cravath Tax Associate's Trouble Brings Spotlight (3/17/06)
- NY Post: "Pervert" Tax Lawyer Is Broke (3/9/06)
- Police Apprehend Former Cravath Tax Lawyer Wanted on Teenage Rape and Prostitution Charges (3/5/06)
- Former Cravath Tax Lawyer Indicted on Teenage Rape and Prostitution Charges (3/2/06)
WSJ: Turlington Helps Merck Save $1.5 Billion in Taxes
Interesting front-page article in the Wall Street Journal: Bermuda Triangle: How Merck Saved $1.5 Billion Paying Itself for Drug Patents; Partnership With British Bank Moved Liabilities Offshore; Alarmed U.S. Cracks Down; "The Art of Tax Avoidance," by Jesse Drucker:
Merck & Co.'s medications Zocor and Mevacor have been used by millions of people to help lower their cholesterol. But Merck also used the drugs to lower something else: its U.S. tax bill.
Thirteen years ago, Merck set up a subsidiary with an address in tax-friendly Bermuda, in partnership with a British bank. Merck quietly transferred patents underlying the blockbuster drugs to the new subsidiary, according to documents and people familiar with the transaction. Merck then paid the subsidiary for use of the patents. The arrangement in effect allowed some of the profits to disappear into a kind of Bermuda triangle between different tax jurisdictions. The setup helped Merck slash $1.5 billion off its federal tax bills over roughly the next 10 years.
Now, the complicated transaction -- never publicly disclosed -- has sparked one of the largest tax disputes ever involving a U.S. corporation. The IRS is challenging the tax benefits from the arrangement, which the company code-named "Project Ryland," after a fancy restaurant near the company's New Jersey headquarters. Merck anticipates it will be ordered to hand over a total of $2.3 billion in back taxes, interest and penalties, according to its filings with the SEC, which give the amounts in dispute but virtually no other details....
The cases are part of an attempt by U.S. authorities to crack down on what is often called "tax arbitrage." The usual strategy: lower a company's tax bills by structuring transactions so certain types of income or expenses are classified as one thing by the IRS, but something very different by another country's tax regulators....
Many of the strategies like the ones used by Merck, Dow and GE were inspired by one man. In 1988, longtime tax attorney and New York University law school professor R. Donald Turlington published an influential article in the proceedings of a tax conference. Subtitled "The Art of Tax Avoidance," the article began with a 1931 quote from the late Chicago Mafia boss Al Capone: "A good lawyer with a briefcase can steal more than ten men with machine guns." In the article, Mr. Turlington laid out ways companies could lower their taxes by exploiting a loophole in the way income was allocated within partnerships for tax purposes.
He focused on the concept of depreciation, a key tool to lowering taxes. For example, in the U.S. a factory is considered to have a finite life of 39 1/2 years and loses its value gradually during that life. An owner is allowed to deduct a portion of its cost each year, so if the factory cost $39.5 million, the company can deduct $1 million a year from the plant's taxable income. But after that, a company can end up with considerable income from the asset and no offsetting deductions. In the case of pharmaceutical patents, tax write-offs generally are used up during research and development.
Mr. Turlington pointed to a way around such problems by putting the already-depreciated asset into a partnership, and allocating some of its taxable income to a member of the partnership that for one reason or another wouldn't mind shouldering it. That could reduce the tax bill for the company contributing the assets.
Mr. Turlington called on the government to close this loophole, and in December 1992, the U.S. Treasury Department decided to do just that, proposing an "anti-abuse" regulation. But before the government finalized the new regulations a year later, several companies moved to shift assets and establish partnerships to exploit the loophole. Mr. Turlington himself helped structure the Merck deal, counseling Goldman Sachs on the transaction, despite his call for the law to be changed.Merck, GE and Dow Chemical also were aided by some of the country's most prominent partnership tax lawyers, who also once served in high government tax posts. William Nelson, a former IRS chief counsel, advised Merck and GE on their deals, according to people with knowledge of his involvement. The firm he founded with William McKee, a former University of Virginia law professor and U.S. Treasury Department tax legislative counsel, litigated the GE dispute with the government at trial. The firm also is representing Dow in the litigation over its disputed partnership. Mr. Nelson and Mr. McKee declined to comment on the Merck deal....
Mr. Turlington, now retired, says the Merck deal with Abbey was a tax-advantaged way to raise significant capital, and not simply a tax-saving measure. "In my mind the question with a deal like Merck was, and still should be, 'Can a taxpayer who decides to do something for a legitimate business reason, like raising [money], do it in a way that's tax efficient by taking advantage of a rule that the government wrote?'" He added: "Merck's obligation is to do the best it can for its shareholders. If you were going to write that Merck is under some higher social obligation to maximize its taxes, that would probably catch Merck by surprise."
Univ. of Florida Suspends Biz School Prof After Video Captures Him Teaching While Impaired and Shooting Bird to Class
Sad story in today's Chronicle of Higher Education: Baked Professor Is Burned on Blog, Canned by College:
Until earlier today, viewers of BoingBoing, a popular blog, could watch a video clip of a giggling business-school lecturer acting goofy in class, under the heading “apparently-baked biz school prof who was soon fired.” The professor, Howard J. Hall, a lecturer at the University of Florida’s Warrington College of Business, appears in a video still on the site brandishing his middle finger. The video was available through links to the college’s Web site. Next to the photo, the poster wrote: “It appears from the content of this video that this University of Florida professor—whom everyone has to take in the business school—got REALLY REALLY REALLY HIGH before one of his classes.”
You Tube has the video here:
Tax and Twitty Burgers
As someone with an extensive collection of tax bric-a-brac, I was crestfallen to hear that I had missed out on the ebay sale of a menu from the defunct Twitty Burger fast-food restaurant chain. Celebrity tax aficionados will recognize the restaurant from the famous case of Harold L. Jenkins (a/k/a Howard Twitty) v. Commissioner, T.C. Memo. 1983-667.
Twitty convinced 75 of his friends in the country western music business to invest in the restaurant chain with him. When the business failed, Twitty reimbursed his friends for their losses even though he was under no legal compulsion to do so. The Tax Court upheld the claimed business deduction and closed with an "Ode to Howard Twitty," which the Service matched in its nonacquiesence in an "Ode to Howard Twitty: A Reprise" (A.O.D. 1984-022 (March 23, 1984)). (Both tax poems are reprinted in full below the fold.)
Joel Newman has an in-depth discussion of the Twitty case in our Tax Stories book in his chapter on Welch v. Helvering, 290 U.S. 111 (1933): The Use (and Misuse) of the "Ordinary and Necessary" Test for Deducting Business Expenses.
The menu was a steal for $102.50! (Hat Tip: Ann Murphy.)
Tax Court's "Ode to Conway Twitty":
Twitty Burger went belly up
But Conway remained true
He repaid his investors, one and all
It was the moral thing to do.
'His fans would not have liked it
It could have hurt his fame
Had any investors sued him
Like Merle Haggard or Sonny James.
'When it was time to file taxes
Conway thought what he would do
Was deduct those payments as a business expense
Under section one-sixty-two.
'In order to allow these deductions
Goes the argument of the Commissioner
The payments must be ordinary and necessary
To a business of the petitioner.
'Had Conway not repaid the investors
His career would have been under cloud,
Under the unique facts of this case
Held: The deductions are allowed.
IRS's: "Ode to Conway Twitty: A Reprise":
Harold Jenkins and Conway Twitty
They are both the same
But one was born
The other achieved fame.
The man is talented
And has many a friend
They opened a restaurant
His name he did lend.
They are two different things
Making burgers and song
The business went sour
It didn't take long.
He repaid his friends
Why did he act
Was it business or friendship
Which is fact?
Business the court held
It's deductible they feel
We disagree with the answer
But let's not appeal.
OECD Releases Tax Reports
The Organisation for Economic Co-operation and Development has released the following tax reports:
- OECD Tax Administrators to Join Forces in Fighting Tax Non-Compliance
- French Edition of OECD Model Tax Convention on Income and Capital
- OECD Bribery Awareness Handbook for Tax Examiners
- OECD Receives Comments regarding Transactional Profit Methods as they relate to Transfer Pricing
- Tax Policy Development in Denmark, Italy, the Slovak Republic and Turkey
- OECD Invites India to Participate in its Committee on Fiscal Affairs
Hockett on What Kinds of Stock Ownership Plans Should There be? Of ESOPs, Other SOPs and Ownership Societies
Robert C. Hockett (Cornell) has posted What Kinds of Stock Ownership Plans Should there be? Of ESOPs, Other SOPs and Ownership Societies, 92 Cornell L. Rev. ___ (2007), on SSRN. Here is the abstract:
Present-day advocates of an "ownership society" ("OS") do not seem to have noticed the means we have already employed to become an OS where homes and "human capital" (higher education) are concerned. Nor do they appear to have considered whether these same means - which amount to publicly enhanced private credit markets - might be employed to spread shares in business firms, with a view to completing our OS. This article, the third in a series, seeks tentatively to fill that gap. It does so first by demonstrating how the Employee Stock Ownership Plan, or "ESOP," in effect replicates our home and education spreading programs in piecemeal fashion. But piecemeal replication, the article shows, is not sufficient; a completed OS requires complete replication. So the article, second, generalizes from the ESOP along two salient dimensions - what it labels the "patronage" and "credit" dimensions - in order both to complete SOP-financing's replication of our federal home - and higher education-finance programs, and with that our OS itself. Our OS is, in effect, a "three-legged stool" that awaits its third leg.
September 28, 2006
Tax Policy Center Publishes Summary of Major Tax Legislation (1981 - 2006)
The Tax Policy Center has posted Summary of Major Enacted Tax Legislation from 1981 - 2006 on its web site. Here is the Introduction:
In the past 25 years, there has been a major tax bill about every 2-3 years, and since 2001, there has been at least one every year. This legislation has substantially altered our tax laws. In 1980, the top individual income tax rate was 70 percent and the top rate on corporations was 46 percent. Today, the top rates on both are 35 percent. In 1980, individual income taxes were 8.9 percent of GDP; today they comprise 8.1 percent. Payroll taxes have increased as a share of Federal revenues and corporate income taxes and excise taxes have declined. In addition, over the past quarter century, the Congress has enacted numerous new and expanded exemptions, tax credits, and special deductions for favored activities, while limiting and reducing others. The tax law is a major component of Federal policy towards health care, housing, retirement security, education, energy, support for low-income families, states and localities, and non-profit organizations and many other areas. In this way, the tax law affects virtually every aspect of American citizens’ lives.
This page lists selected provisions of major tax legislation enacted between 1981 and 2006. Links to related Tax Policy Center publications and tables for legislation since 2001, as well as revenue tables and summaries from the Joint Committee on Taxation, can be found at the bottom of the page. This document and summary tables of legislation by act and by date are available in PDF.
Application of Moneyball Principles in Faculty Hiring
There has been a lot of blogosphere discussion recently on the application of Moneyball principles to law faculty hiring (a subject I discuss in What Law Schools Can Learn from Billy Beane and the Oakland Athletics, 82 Tex. L. Rev. 1483 (2004)). Jim Chen (Minnesota) weighs in today with Breaking the Elitist Stranglehold: Three Modest Proposals:
I offer three modest proposals, all tempered by my recognition of their implausibility, that might begin to chip away at the elitist stranglehold on law faculty hiring:
- Use prior publication as a threshold qualification and stick to it.
- Develop more rigorous quantitive measures of academic performance.
- Develop a short-form way of allowing candidates to describe themselves to their recruiters.
Duff on The Abolition of Wealth Transfer Taxes: Lessons from Canada, Australia and New Zealand
David G. Duff (Toronto) has published The Abolition of Wealth Transfer Taxes: Lessons from Canada, Australia and New Zealand, 3 Pitt. Tax Rev. 71 (2005). Here is the abstract:
When the United States acted to phase-out its estate tax by 2010, it joined a small but growing group of countries which have also repealed their wealth transfer taxes. In Canada, federal gift and estate taxes were repealed in 1972 and provincial wealth transfer taxes were abolished in the 1970s and 1980s. In Australia, State and Commonwealth wealth transfer taxes were repealed in the late 1970s and early 1980s. New Zealand followed suit in the 1990s, reducing estate tax rates to zero in 1992 and repealing the tax in 1999. This paper reviews the abolition of wealth transfer taxes in Canada, Australia and New Zealand, relying on public choice theories of politically efficient revenue structures to help explain the repeal of these taxes in each country. Part II outlines the essential elements of public choice theory and its implications for tax policy. Part III surveys the history of wealth transfer taxes in Canada, Australia and New Zealand, examining in detail the events leading up to the repeal of these taxes, and illustrating the relevance of public choice theory to their abolition in each country. Part IV offers brief conclusions on the significance of this experience for the future of wealth transfer taxation in these and other countries.
Buckles on The Regulation of Political Campaign Activity by Charities through Federal Tax Law
Johnny Rex Buckles (Houston) has posted Not Even a Peep? The Regulation of Political Campaign Activity by Charities through Federal Tax Law, 75 U. Cin. L. Rev. ___ (2007), on SSRN. Here is the abstract:
Under current law, charitable organizations qualify for exemption from federal income taxation only if they do not participate to any degree in political campaigns on behalf of (or in opposition to) candidates for public office. The Internal Revenue Service has begun to examine the political activities of charitable and religious organizations (including churches) with heightened scrutiny. This Article first surveys the statutory, administrative and case law governing the political campaign activities of charities. Next, this Article identifies and critically analyzes the major rationales for prohibiting tax-exempt charitable entities from participating in electoral politics. These rationales are evaluated, for the first time in the academic literature, through the perspective of a recently advanced theory of the taxation of charitable entities and their donors. After concluding that none of the rationales necessarily justify the absolute prohibition of participation in political campaigns by charities, this Article explains why some charities should be permitted to participate in political campaign activity without adverse tax consequences. Finally, this article proposes several statutory modifications that both relax the current ban on engaging in electoral politics and guard against the private exploitation of charities through political activity.
Colbert 2006 Tax Cruise
(Hat Tip: Kay Bell.)
Tobin on The IRS and All Saints Church
Donald B. Tobin (Ohio State) has posted The IRS and All Saints Church: Tax Procedure in a Case about the Mixing of Religion and Politics on Election Law @ Moritz:
In my view, the IRS's summons clearly meets the 4-part test. The IRS has a legitimate interest in ensuring that 501(c)(3) organizations comply with the statutory requirements. Its request is relevant for that purpose. The Commissioner does not have the relevant information, and the Commissioner appears to have complied with the statutory requirements. (I concede that All Saints Church could try to raise its First Amendment claim at the summons stage. As discussed later, I think the First Amendment argument is the weaker of All Saints Church's two arguments).
Nguyen & Maine on Giving Intellectual Property
The interdisciplinarity of intellectual property and taxation poses many challenges to the disparate existing norms in each respective field of law. This Article identifies and critiques the current tax regime governing the giving of intellectual property as a manifestation of the failure to understand the principles and policies underlying intellectual property and the firm. It proposes an economic, incentives-based system that would encourage firms to extricate part of their repository of residual rights by surrendering their monopolistic ownership of intellectual property for the benefit of charitable organizations and, in turn, the development and growth of society.
Saltzburg on The Fourth Amendment as Internal Revenue Code
Stephan A. Saltzburg (George Washington) has posted The Fourth Amendment: Internal Revenue Code or a Body of Principles, 74 Geo. Wash. L. Rev. ___ (2006), on SSRN. Here is the part of the abstract of interest to readers of this blog:
[T]he total body of Fourth Amendment law has begun to take on the shape of an Internal Revenue Code (a hodgepodge of rules enacted by ever-shifting coalitions of decision makers) rather than a body of coherent principles (of the type often associated with judicial decisions and reasoning).
More on the ABA-LSAC Relationship
Yesterday, we blogged Tom Chapman's excellent post on the ABA's adoption of the LSAC's recommended change to the law school accreditation standards requiring law schools in computing the 75th percentile, median, and 25th percentile LSAT scores of their entering classes to report the highest (rather than the average) score of matriculants who took the test more than once. Tom noted:
Curious about the details of that organizational relationship [between the ABA and LSAC], I've requested the LSAC's federal tax returns for the past three years. Perhaps the details in those dry documents will stimulate my imagination, making it easier for me to understand the reasons for the ABA's policy change.
As Ellen Aprill pointed out, Tom need not request LSAC's Form 990s from the IRS; they are available on GuideStar (registration required). Although Tom did not mention it, the ABA's 2004 Form 990 also is available on Guidestar.
September 27, 2006
Ginsburg Tax Talk at Florida
Georgetown Law Professor Marty Ginsburg (pictured left with Marty McMahon) presented a talk to the Graduate Tax Students at the University of Florida Fredric G. Levin College of Law on September 21, 2006 on The Controversy Side of Tax Practice and Tax Law. He was accompanied on his trip to Gainesville, by his wife, Supreme Court Associate Justice, Ruth Bader Ginsburg, who used the trip as an opportunity to address the remainder of the student body on the operation of the Supreme Court.
Among the vintage Ginsburg anecdotes was a story Marty told about an occasion shortly after Bush v. Gore came down. He and Justice Ginsburg went to a play in New York. As they walked down the aisle to their seats, the audience burst out in sustained applause. Marty leaned over to Ruth, and in the loudest stage whisper he could muster, said “I bet you didn’t know there was a big tax conference in New York right now.”
Marty’s talk had two major themes, discussed below the fold.
First, tax planners need to get into the courtroom from time to time to see how their tax planning plays out in the real world of judges and juries, and to see how their tax planning will be described and characterized in that world. The firm’s litigators need people in the firm’s tax department with a feel for what happens in tax litigation. Second, tax planners, should keep an eye out for the chance to do good, and perhaps do well, in the seemingly insignificant little case that you may take on a pro bono or reduced fee basis.
Cases in point: in his early days in tax practice, Marty was assigned a little case involving repair costs — or were they improvement costs? — on the client’s water pipeline. The fix was so good and so long-lasting that the government said it had to be capitalized. But Marty persuaded the Tax Court that the fix simply cleaned up the operational problems and did not increase the pipeline’s strength and capacity. The influence of the insignificant little case, Plainfield-Union Water Co., can be seen writ large in recent years in the environmental remediation provisions of the Code.
Second case in point: Moritz v. Commissioner, a little case that the taxpayer handled and lost on a pro se basis before the Tax Court, where he objected to the denial of a dependent care deduction that the statute allowed to a woman, a widower, or to a divorced man, but which was not allowed to him as a single man. Joined on the brief on appeal by his wife, Ruth Bader Ginsburg, in her pre-Judge Ginsburg days, in their only appearance together on a brief, they succeeded in having the restricted deduction held unconstitutional by the Tenth Circuit, and succeeded in having the remedy be the expansion of the deduction to Moritz rather than the loss of the deduction for everyone else. In response to a question asking for his comment on the recent Murphy case, Marty expressed his regret that Moritz has to share with Murphy — at least for now — the rarity of a tax decision holding in favor of the taxpayer on constitutional grounds.
McGee & Cohn on Jewish Perspecitves on the Ethics of Tax Evasion
Robert W. McGee (Barry University, Andreas School of Business) & Gordon Cohn (City University of New York, Stan Ross Department of Accountancy) have posted Jewish Perspecitves on the Ethics of Tax Evasion on SSRN. Here is the abstract:
The ethics of tax evasion has been discussed sporadically in the theological and philosophical literature for at least 500 years. Martin Crowe wrote a doctoral thesis that reviewed much of that literature in 1944. The debate revolved around about 15 issues. Over the centuries, three main views evolved on the topic.
This paper begins with a review of the literature and identifies the main issues and summarizes the three main viewpoints that have emerged over the centuries. It then reports on the results of two surveys of members of the Jewish faith who were asked their opinions on the ethics of tax evasion. The results of the two surveys were then compared. Male scores were also compared to female scores to determine if the responses differed by gender.
Crawford on The Profits and Perils of Kinship: Conflicting Meanings of Family in Estate Tax Law
Bridget J. Crawford (Pace) has published The Profits and Perils of Kinship: Conflicting Meanings of Family in Estate Tax Law, 3 Pitt. Tax Rev. 1 (2005). Here is the abstract:
This article critically examines the conflicting estate tax definitions of family in I.R.C. Sections 2036, 2032A and 6166. The sections use terms such as "family" and "related" in ways that conflict with each other and with lay understanding of the terms. From an historical perspective, the multiple estate tax definitions reflect the Code sections' distinct purposes. From a theoretical perspective, they acknowledge the personal and economic interconnectedness within families as well as diversity in the structure of family arrangements. The existing definitions of family fall short, however, in that they fail to recognize the full range of associational arrangements that function as families and the non-market contributions that women, in particular, make to families.
The author evaluates four proposed solutions to the complexity created by the multiple estate tax definitions of family: adopting a uniform definition of family, eliminating all wealth transfer tax rules that penalize or prefer the family, eliminating only the preferential rules for families and increasing the estate tax exemption. The author rejects these proposals as individually and collectively incomplete, though, and embraces instead a fifth proposal that uses unique terms to bring the estate tax definitions in line with the rules' underlying policies. Adopting the unique terms will make the law less complex and will help achieve statutory integrity.
Tax Foundation Podcast with Laurence Kotlikoff
This week's Tax Foundation podcast features Laurence J. Kotlikoff on Long-Term Fiscal Problems in the U.S.:
With dramatic increases in Medicare, Medicaid and Social Security looming on the budget horizon, is the solvency of the United States at risk? And what can be done to avoid a fiscal crisis? In this podcast, Prof. Laurence J. Kotlikoff, Professor of Economics at Boston University and Research Associate at the National Bureau of Economic Research, discusses the threat of growing U.S. entitlement spending, options for spending reform, and the economics of the "FairTax" tax reform plan (14 minutes, 52 seconds).
ABA Tax Section Offers Teleconference & Webcast Today on Building Blocks of Hedge Fund Taxation
Tax issues for hedge funds and their investors can be extremely complex.This teleconference and live audio webcast will provide tax professionals who work with hedge funds and their investors the building blocks of hedge fund taxation. The faculty will cover how hedge funds are structured and current issues that impact hedge fund investors. The course will highlight different types of hedge fund strategies and related tax issues. The panel will address the latest regulations affecting the hedge fund industry; critical tax and accounting issues for fund of funds; how to develop tax-efficient solutions for investment partnership allocations and the tax treatment of various types of financial instruments and strategies used by hedge funds.
Faculty: Kevin Kaiser (KPMG)
Grade Distributions as Public Records
The Pick--a-Prof web site provides grade distributions for thousands of courses at more than 170 colleges and universities. The Chronicle of Higher Education reports that the company has been able to obtain the records from public schools under state public records laws. Jeffrey R. Young, Web Site Fights to Obtain Professors' Grading Histories From Universities.
What's Behind ABA's Decision to Accept Highest, Rather than Average, of Multiple LSAT Scores?
Over the summer, we blogged the decision by the ABA to change its accreditation standards by approving a recommendation from the Section of Legal Education and Admission to the Bar to require law schools in computing the 75th percentile, median, and 25th percentile LSAT scores of their entering classes to report the highest score of matriculants who took the test more than once. The ABA's prior rules had required schools to report the average LSAT score of students who took multiple tests. The rule change follows similar action taken by the Law School Admission Council. Although the change will encourage students to take the LSAT more than once, current LSAC rules limits applicants to three tests in any two-year period.
Tom Bell questions the ABA's motivation for this policy change:
[P]erhaps you can tell me why that body decided to start ignoring repeat test-takers' average LSAT scores in favor of their high LSAT scores. I'm having trouble with that mental exercise. My natural skepticism keeps getting in the way. It causes me to dwell on the likelihood that LSAC stands to make a lot of money thanks to the policy change, which will lead many more students to retake the LSAT, and on the fact that the ABA's member law schools own and operate LSAC. Curious about the details of that organizational relationship, I've requested the LSAC's federal tax returns for the past three years. Perhaps the details in those dry documents will stimulate my imagination, making it easier for me to understand the reasons for the ABA's policy change.
House Holds Markup of Health Opportunity Patient Empowerment Act of 2006
The House Ways & Means Committee today holds a markup of H.R. 6134, the Health Opportunity Patient Empowerment Act of 2006:
The markup takes place at 10:30 a.m. at 1100 Longworth House Office Building.
September 26, 2006
Le Gall Delivers Tillinghast International Tax Lecture Tonight at NYU
Jean-Pierre Le Gall (Of Counsel, Sullivan & Cromwell; Chairman, Permanent Scientific Committee, International Fiscal Association) presents the Eleventh Annual David R. Tillinghast Lecture on International Taxation tonight on Can a Subsidiary be the Permanent Establishment of its Foreign Parent. The lecture takes place at 6:00 p.m. at NYU, Vanderbilt Hall, 40 Washington Square South.
What Matters to Faculty?
A press release issued today by the Harvard Graduate School of Education reports that New Study Indicates Faculty Treatment Matters More Than Compensation; Survey of 4,500 Tenure-Track Faculty Reveals Surprising Findings:
A new study by the Collaborative on Academic Careers in Higher Education (COACHE), a research project based at the Harvard Graduate School of Education, has revealed that climate, culture, and collegiality are more important to the satisfaction of early career faculty than compensation, tenure clarity, workload, and policy effectiveness.
The survey of 4,500 tenure-track faculty at 51 colleges and universities discovered that there are key climate variables for junior faculty, such as: interest senior faculty take in their work, fairness with which they are evaluated, opportunities to collaborate with senior faculty, how well they seem to fit in their departments, sufficient professional and personal interaction with colleagues, and a sense of community in the department. The survey revealed that collegiality matters much to the success and satisfaction of new scholars, in stark relief to studies of an earlier generation that showed autonomy was one of the most important attractions to academic life.
The study is Collaborative on Academic Careers in Higher Education Highlights (Sept. 25, 2006).
Today's Insider Higher Ed reports on the gender differences found by the study in the differing perceptions of the clarity of tenure standards among men and women (on a scale of 1 (very unclear) to 5 (very clear)).
The Clarity Gap, by Scott Jaschik.
Tax Blogger in Tax Court
Joe Kristan passed along the news that tax blogger Stuart Levine (of the Tax & Business Law Commentary Blog) was the counsel of record on behalf of the taxpayers in yesterday's Tax Court decision, Hartsock v. Commissioner, T.C. Memo. 2006-205. The Tax Court upheld the assessment of over $225,000 in taxes and interest on the ground that the taxpayers did not adequately document their losses from slot machines at various Atlantic City casinos. (It should be noted that Stuart entered his appearance in the case after the trial.)
Senate Holds Hearing Today on The Tax Gap
The Federal Financial Management, Government Information, and International Security Subcommittee of the Senate Homeland Security and Governmental Affairs Committee holds a hearing today on Deconstructing the Tax Code: Uncollected Taxes and Issues of Transparency:
This hearing will highlight the 2006 updated estimate of the tax gap by the IRS; examine IRS efforts to close the tax gap as well as legislative solutions to increase taxpayer compliance; and explore the transparency of the tax code.
These are the witnesses scheduled to testify:
- Mark Everson, Commissioner , Internal Revenue Service
- Russell George, Treasury Inspector General, Tax Administration (TIGTA)
- Nina Olsen, National Taxpayer Advocate, Internal Revenue Service
- Jay Soled, Professor, Rutgers University
- Stephen Entin, President and Executive Director, IRET
- Jason Furman, Visiting Scholar, New York University
The hearing takes place at 2:30 p.m. in 342 Dirksen Senate Office Building.
In fiscal year 2005, Federal receipts totaled over $2.2 trillion. More than 95% of net receipts were collected by the IRS through its administration of the income, transfer and excise tax provisions of the Internal Revenue Code. The vast majority of these receipts is collected through our voluntary compliance system, under which taxpayers report and pay their taxes with no direct enforcement and minimal interaction with the government. The overall compliance rate achieved under this system is quite high. In 2001, the compliance rate was over 86%, after including late payments and recoveries from IRS enforcement activities. Nevertheless, an unacceptably large amount of the tax that should be paid every year is not, requiring compliant taxpayers to make up for the shortfall and giving rise to the “tax gap.”
The Administration is committed to working with Congress to reduce the tax gap. This document outlines the Administration’s aggressive strategy for addressing the tax gap. The strategy builds upon the current efforts of the Treasury Department and the IRS to improve compliance. As part of the deliberations in preparing the Administration’s fiscal year 2008 budget request to Congress, the Treasury Department and the IRS are working with the Office of Management and Budget to further develop this strategy to reduce the tax gap. This document is intended to provide a broad base on which to build. The more detailed elements of the tax gap strategy are, in part, contingent upon the budget process for fiscal year 2008 and beyond. Accordingly, the Treasury Department and the IRS will provide a more detailed outline of steps they will take to address the tax gap following release of the Administration’s fiscal year 2008 budget request early next year.
House Holds Hearing Today on Tax Issues Introduced in the 109th Congress
The Select Revenue Measures Subcommittee of the House Ways & Means Committee holds a hearing today on Member Proposals on Tax Issues Introduced in the 109th Congress:
The hearing provides Members the opportunity to speak on behalf of bills they have introduced containing tax provisions important to their constituents.
The hearing will take place at 10:00 a.m. in B-318 Rayburn House Office Building (Panels #1 & #2) and 1100 Longworth House Office Building (Panels #3 & #4). See below the fold for the members scheduled to testify.
- E. Clay Shaw Jr.(FL)
- Benjamin Cardin (MD)
- Ron Lewis (KY)
- Stephanie Tubbs Jones (OH)
- Melissa Hart (PA)
- Rahm Emanuel (IL)
- Devin Nunes (CA)
- Donna Christensen (Virgin Islands)
- Vito Fossella (NY)
- Heather Wilson (NM)
- Gary Miller (CA)
- Trent Franks (AZ)
- Steve Chabot (OH)
- Tom Udall (NM)
- Tim Murphy (PA)
- Mike Turner (OH)
- Jeff Fortenberry (NE)
- Earl Blumenauer (OR)
- Steve King (IA)
- Michael K. Conaway (TX)
Law Schools Embrace Early Admissions Programs
The news media has been all over the decision by Harvard, Princeton, and Virginia to eliminate their early undergraduate admissions programs. The National Law Journal reports that law schools, in contrast, are ramping up their early admissions programs:
In the last three years, several prominent law schools have introduced early decision programs for students who have picked a school as their top choice and are required to go there once they've been accepted. This year at least five law schools-New York University School of Law, University of Virginia School of Law, University of Pennsylvania Law School, Chicago-Kent College of Law and University of Missouri School of Law-introduced binding early decision programs. More than a dozen law schools also have introduced early decision programs in recent years, including the University of Michigan (U.M.) Law School and Northwestern University School of Law.
Law school officials say what's driving the early acceptance trend is fiercer competition among law schools. They say that with students applying to more law schools than ever before-the national average is six-schools have to fight that much harder to win top students over.
Senate Holds Hearing Today on Health Savings Accounts
- Robert Carroll, Deputy Assistant Secretary for Tax Analysis, U.S. Treasury Department
- John Dicken, Director, Health Care Issues, U.S. Government Accountability Office
- Joseph V. Knight, Chief Financial Officer, Setpoint Systems, Ogden, UT
- Sara R. Collins, Assistant VP, Program for the Future of Health Insurance, The Commonwealth Fund, New York, NY
- John C. Goodman, President and CEO, National Center for Policy Analysis, Washington, D.C.
- Eric C. Beittel, Enders Insurance Associates, Harrisburg, PA
In connection with the hearing, the Joint Committee on Taxation has released Present Law and Analysis Relating to the Tax Treatment of Health Savings Accounts and Other Health Expenses (JCX-45-06):
This document, prepared by the staff of the Joint Committee on Taxation, provides a description of the present-law provisions relating to health care expense and health savings accounts and a discussion of issues.
The hearing takes place at 2:30 p.m. in 215 Dirksen Senate Office Building.
JEC Releases Top Half of Taxpayers Pay Highest Tax Share in Decades
The share of income taxes paid by the top half of taxpayers reached its highest level in decades, according to new IRS data released today [blogged here]. According to the new data, the top half of taxpayers ranked by income paid 96.70 percent of the individual income taxes paid in 2004, compared to 86.05 percent in 1949, 89.35 percent in 1959, and 90.27 percent in 1969.
House Democrats Release The Middle-Class Squeeze
The Democratic Staff of the Committee on Special Investigations of the House Committee on Government Reform has released The Middle-Class Squeeze, prepared for Democratic Leader Nancy Pelosi & Rep. Henry A. Waxman. Here is part of the Executive Summary:
President Bush took office with the nation prospering under excellent economic conditions: the budget was in surplus, jobs were being created at record levels, and the inflation and unemployment rates were low. Over the last six years, however, these economic fundamentals have eroded, with the deficit rising, job growth slowing, and inflation now reaching its highest levels in fifteen years. This report analyzes the impact of these economic trends on middle-class families.
Academic Leaders Oppose Open-Access Bill
S. 2695, sponsored by John Cornyn (R-TX) & Joseph Lieberman (D-CT) would require journal articles reporting taxpayer-financed research to be made freely available within six months of publication. Washington, D.C. Principles for Free Access to Science has written a letter opposing the legislation:
The cost of peer review, copy editing, formatting, printing, online publication, search engine development, and permanent archiving ranges from $2,500 - $10,000 per article. At present, publishers cover these publication costs through the sale of subscriptions. A Federal policy mandating public access after six months would threaten the financial viability of many of these journals through the loss of subscription revenues, forcing them to identify other means to cover costs. One such means is to shift the costs to the scientists/authors. This is the business model currently used by the Public Library of Science, for example, which recently increased fees to $2,500 per manuscript....[S]ome studies have already shown that research intensive universities would have to pay considerably more to gain access to the same amount of research under an author- pays model than a subscription model.
September 25, 2006
Death of Frank Slagle
Professor Frank Slagle passed away on September 24 after a lengthy battle with cancer. Frank joined the Law School faculty in 1984. He was a great teacher, a passionate public servant, and a joy to know personally and professionally. He is survived by his wife Ruth Ann, who is a school principal, and daughters Jennifer, who is in her final year of law school, and Elizabeth, whose future plans include medical school.
Funeral arrangements are not yet final and will be posted here as soon as available. Contributions to a scholarship endowment in Frank's memory may be made to the USD Foundation.
Although I never met Frank, I was delighted to profile here his receipt of the 2006 Professor of the Year Award at South Dakota.
Potter Named Deputy Chief Counsel (Technical)
The Deputy Chief Counsel (Technical) serves as alter ego to the Chief Counsel in the overall executive direction of the Office’s technical tax operations. The Deputy is responsible for planning and coordinating all non-litigation work related to the development, interpretation and application of Federal tax regulations, and serves as the Chief Counsel’s personal advisor on most national and international tax matters under his jurisdiction.
Since December 2005, Potter has been Senior Counsel to the Chief Counsel (Legislation), serving as program manager and senior advisor to the Chief Counsel and IRS executives on a broad array of issues related to legislation; fulfilling Counsel’s responsibilities to develop, review, and assist in shaping proposed legislation; and providing legal support to the IRS in fulfilling its legislative responsibilities. She joined Office of Chief Counsel in July 2005 from the faculty of Georgetown University Law Center, where she had been an Associate Professor teaching tax law since 1998. While there she served as director of the Georgetown University Law Center Tax Policy Workshop and as Director of Projects for the American Tax Policy Institute.
2006 Tax Competitiveness Report
The C.D. Howe Institute has published The 2006 Tax Competitiveness Report, by Jack M. Mintz (Rotman School of Management, University of Toronto). The report ranks 81 developed and devleoping countries by their tax treatment of business investment. Here are the developed counties with the highest effective tax rates on capital:
- United States
(Hat Tip: Bruce Bartlett.)
Dexter on An Intratextualist Critique of Tax Refund Seizures
Bobby L. Dexter (Chapman) has posted Transfiguration of the Deadbeat Dad and the Greedy Octogenarian: An Intratextualist Critique of Tax Refund Seizures, 54 U. Kan. L. Rev. 643 (2006), on SSRN. Here is the abstract:
In light of the federal government's plenary collection powers, the states have, for several years, sought and, with the help of Congress, managed to secure the assistance of the United States in obtaining various forms of revenue. As early as 1975, Congress authorized the Department of the Treasury to collect past-due, child-support payments in the same manner in which it assessed and collected certain federal taxes under emergency or exigent circumstances (i.e., jeopardy assessment/collection). Because such collection procedures were often considered cumbersome and costly, however, Congress soon authorized the direct seizure of pending income tax refunds as a more efficient means of reaching the assets of deadbeat dads (or the occasional deadbeat mom). The result has been a smashing success. Child-support-related refund seizures have resulted in the collection of billions of dollars of revenue. In fiscal year 2004 alone, child-support offsets totaled $1.49 billion, and in 2003, the Treasury offset almost 24 million advance child-tax-credit payments, resulting in the collection of $14.2 billion. Given the success of this approach to revenue collection, its rapid deployment to other areas should come as no surprise. In the Deficit Reduction Act of 1984 (DEFRA), Congress authorized the seizure of amounts due to federal agencies (e.g., student loan default amounts or overpayments of Old Age, Survivors, and Disability Insurance (OASDI or Social Security)). And more recently, in 1998, Congress authorized federal refund seizures to pay outstanding state income tax liabilities.
In this Article, I argue that despite various protective measures, procedural improvements are needed to minimize or eradicate erroneous refund-based property deprivations as an initial matter, especially with respect to nonobligated spouses. I proceed to argue, based largely on an intratextualist reading of the Constitution's major tax provisions, that regardless of whatever procedural safeguards exist or happen to be put in place, refund seizures, as a class, are unjustified as a matter of substantive due process because both the Sixteenth Amendment and Article I, section 8 of the Constitution expressly limit Congress's income taxing powers. Federal courts have had no recent opportunity to address substantive due process issues because the governing statute itself serves as a bar to jurisdiction.
Taxation, Economic Prosperity, and Distributive Justice
Ellen Frankel Paul, Fred D. Miller, Jr. & Paul Jeffrey (all of Bowling Green State University) have published Taxation, Economic Prosperity, and Distributive Justice (Cambridge University Press, 2006):
What constitutes a just tax system, and what are its moral foundations? Should a society's tax regime be designed to achieve a just distribution of wealth among its citizens, or should such a regime be designed to promote economic growth, rising standards of living, and increasing levels of employment? Are these two goals compatible or incompatible? Why should justice not require, or at least lead to, an increase in general prosperity? The essays in this volume examine the history of tax policies and the normative principles that have informed the selection of various types of taxes and tax regimes; economic data to discover which tax policies lead to economic growth; particular theories of justice or property rights regarding the design of tax systems; and other essays propose specific tax reforms. Still others challenge traditional theories of taxation, offering new ways of understanding the fiscal relationship between governments and their citizens.
- Social Philosophy and Tax Regimes in the United States, 1763 to the Present, by W. Elliot Brownlee
- The Impact of Tax Policy on Economic Growth, Income Distribution and Allocation of Taxes, by James D. Gwartney & Robert A. Lawson
- Taxes, Growth, Equity and Welfare, by Richard Vedder
- The Consequences of Taxation, by Joel Slemrod
- Justice: A Conservative View, by John Kekes
- Non-absolute Rights and Libertarian Taxation, by Eric Mack
- Taxation, the Private Law and Distributive Justice, by Kevin A. Kordana & David H. Tabachnick
- Taxation, the Private Law and Distributive Justice, by David H. Tabachnick
- The Uneasy Case for Capital Taxation, by Edward J. McCaffery
- Households and the Fiscal System, by Daniel N. Shaviro
- Taxation, the State and the Community, by Jeffrey Schoenblum
- Choice, Catallaxy and Just Taxation: Contrasting Architectonics for Fiscal Theorizing, by Richard E. Wagner
- Government as Investor: Tax Policy and the State, by Jonathan R. Macey
(Hat Tip: Kevin Kordana.)
Boise on Breaking Open Offshore Piggybanks: Deferral and the Utility of Amnesty
Craig M. Boise (Case Western) has posted Breaking Open Offshore Piggybanks: Deferral and the Utility of Amnesty, 14 Geo. Mason L. Rev. ___ (2007), on SSRN. Here is the abstract:
Most U.S. multinationals avoid current U.S. taxation of their foreign business income by accumulating such income in controlled foreign subsidiaries; in essence, their offshore piggybanks. It is estimated that nearly $650 billion in foreign earnings is held offshore by foreign subsidiaries of U.S. corporations and out of reach of U.S. taxation. This represents $68 billion in lost tax revenue between 2007 and 2011.
Deferral could be quite simply addressed by requiring immediate taxation of all foreign business income. But completely eliminating deferral has never been a politically feasible option. The American Jobs Creation Act of 2004 took a different approach to the problem. The Act contained a provision that gave U.S. corporations a one-year window during which to repatriate earnings from their foreign subsidiaries at a fraction of normal tax rates. The provision, new Code section 965, was intended to encourage U.S. multinationals to voluntarily end their deferral of taxation on foreign business income. Certain characteristics of section 965 make it remarkably similar to another well-known tax collection device, the tax amnesty, that typically offers a temporary reprieve from some sanction associated with tax evasion in order to encourage persons who have evaded taxes to come forward voluntarily and pay what they owe.
This Article explores the underlying structure of corporate and tax law that permits deferral, assesses the cost of the deferral problem, and reviews the development of current limitations on deferral. The article then surveys the substantial literature on tax amnesties to develop a theory of the optimal tax amnesty against which to evaluate section 965. The article concludes that, on balance, a provision like section 965 is not likely to be effective in ending deferral.
Call for Tax Papers: Athens Institute for Education and Research
The Athens Institute for Education and Research has issued a call for papers in a variety of areas (including tax) for its International Conference on Industrial Organization, Law & Economics to be held July 16-19, 2007. 300-word abstracts of proposed papers are due via email by December 21, 2006. For more information, email here.
- Tax Prof Profile: Larry Lokken
- SSRN Journal on Nonprofit and Philanthropy Law Publishes First Issue
- Vann on Tax Treaties: The Secret Agent's Secrets
- SOI Releases Individual Income Tax Returns, Percentile Tables, 1986-2004
- Top 5 Tax Paper Downloads
- NY Times: Astor Painting Had Basis of $172k, Not $7.4m Reported on Return
- Kirsch on Taxing Citizens in a Global Economy
- TIGTA Releases Two Tax Reports
September 24, 2006
Top 5 Tax Paper Downloads
1. [319 Downloads] Family Limited Partnership Formation: Dueling Dicta, by Mitchell Gans (Hofstra) & Jonathan G. Blattmachr (Milbank, Tweed, Hadley & McCloy, New York) [blogged here]
4. [95 Downloads] The Federal Income Tax Consequences of the Bobble Supreme Phenomenon, by Leandra Lederman (Indiana) [blogged here]
5. [80 Downloads] The Competence of Nations and International Tax Law, by Eric T. Laity (Oklahoma City) [blogged here]
NY Times: Astor Painting Had Basis of $172k, Not $7.4m Reported on Return
Interesting article in the Sunday New York Times: Major Error Is Reported in Tax Paid by Mrs. Astor on Sale of Painting, by Serge F. Kovaleski:
Legal papers filed by J. P. Morgan Chase, the temporary guardian of Brooke Astor’s assets, state that her son recently told the bank that he now realizes he made an error in his mother’s 2002 tax return by overstating the original price of a Childe Hassam painting she had sold, resulting in a large underpayment of taxes three years ago....
The so-called cost basis for the work of art, “Flags, Fifth Avenue,” was listed in Mrs. Astor’s federal income tax filing as $7.425 million, a copy of the document shows. But she paid $172,010 for the painting when she bought it in March 1970, according to the bill of sale. Because of the inflated figure, Mrs. Astor apparently ended up paying far less in taxes than required on the capital gains she realized from the February 2002 sale of the painting by Hassam, a renowned American Impressionist. Mrs. Astor’s son, Anthony D. Marshall, 82, who managed her finances at the time, sold the painting to an art gallery for $10 million and collected a $2 million fee from his mother for handling the transaction.
Kirsch on Taxing Citizens in a Global Economy
This Article addresses a fundamental issue underlying the U.S. tax system in the international context: the use of citizenship as a jurisdictional basis for imposing income tax. As a general matter, the United States is the only economically developed country that taxes its citizens abroad on their foreign income. Despite this broad general assertion of taxing jurisdiction, Congress allows citizens abroad to exclude a limited amount of their income earned from working outside the United States. Influential lobbying groups, including businesses that employ significant numbers of U.S. citizens abroad, argue that this exclusion is necessary in order to keep American business competitive overseas. Recently, these groups have argued that modern developments, including lowered barriers to trade and the increased mobility of workers, strengthen this argument, and that the United States must allow an unlimited foreign earned income exclusion, or perhaps abandon citizenship-based taxation altogether, in order to remain competitive.
This article analyzes how modern developments in the global economy affect the case for citizenship-based taxation. The article concludes that recent globalization trends strengthen, rather than weaken, the general case for taxing U.S. citizens living abroad. Moreover, it concludes that these modern developments weaken the case for giving preferential treatment to income earned by citizens working abroad.
TIGTA Releases Two Tax Reports
The Treasury Inspector General for Tax Administration has released two tax reports:
- Confirmation of Tax Noncompliance Issues Among Low Income Taxpayer Clinics (2006-10-093)
- Efforts to Identify and Process Potential Joint Committee on Taxation Cases Can Be Improved (2006-30-161)