Friday, February 26, 2010
The Columbia Journal of Tax Law has published its inaugural issue:
- Karen C. Burke (San Diego), The Sound and Fury of Carried Interest Reform, 1 Colum. J. Tax L. 1 (2010): "Of all the proposals advanced in recent years to reform Subchapter K, the part of the Internal Revenue Code governing partnership tax, perhaps none has generated more acrimony and confusion than the pending carried interest legislation contained in proposed § 710. While reformers have framed the issue of taxing the compensatory portion of a service partner's return as ordinary income in terms of distributive justice, critics have been quick to invoke the rhetoric of class warfare to fend off reform. In the most elementary terms, the carried interest legislation would tax some (but not all) of a service partner's share of partnership profits as ordinary income. Even at this basic level, however, the contours of the proposed legislation are ambiguous. Indeed, the reform is sometimes misdescribed as taxing "distributions" rather than "distributive shares" as ordinary income, a distinction that is fundamental. Moreover, the precise tax advantage of carried interest arrangements depends crucially on whether one adopts a "joint-tax" perspective or focuses more narrowly on the service partner's opportunity for deferral and conversion. Apart from the merits of carried interest legislation, there is also considerable dispute over whether such reform is likely to raise significant amounts of revenue."
- Wei Cui (China University of Political Science and Law, Beijing), "Establishment": A Core Concept in Chinese Inbound Income Taxation, 1 Colum. J. Tax L. 46 (2010): "Analogous with the concept of a U.S. "trade or business" in U.S. federal income tax law, the concept of "establishment" under Chinese tax law determines the boundary between net-income and gross-income taxation of inbound investments. As central as the concept is, it has received surprisingly little interpretation. This Article traces the cause of this under-interpretation to China's traditional regulatory environment for foreign investment that was biased against portfolio investments and non-corporate business forms, and describes recent regulatory and commercial developments that may rekindle interest in elaborating the meaning of "establishment." It then reviews the interpretations that have been given to the concept under existing law, as well as several areas of commercial practice where additional guidance is urgently needed. Finally, the Article examines what policy considerations should guide the further development of the concept. This policy analysis considers the overall tax policy stance toward foreign portfolio investment that may reasonably be attributed to China. The country's large surpluses in current and capital accounts and currency reserves make it doubtful that a dramatically more favorable model for taxing foreign investment is appropriate in the near term. Nonetheless, because tax policy plays a subsidiary role to other regulatory policy in the treatment of foreign investments, cogent arguments can be advanced for adopting an interpretation of "establishment" that allows foreign portfolio investment already identified as beneficial for China to proceed."
- Lawrence Zelenak (Duke), Complex Tax Legislation in the TurboTax Era, 1 Colum. J. Tax L. 91 (2010): "When tax returns were prepared with pencil and paper—in an era now gone forever—Congress did not impose income tax provisions of great computational complexity on large numbers of taxpayers, in the belief that it was unreasonable to require average taxpayers (or their paid preparers) to struggle with computationally complex provisions. As return preparation software gradually replaced the pencil in recent decades, the complexity constraint weakened and eventually disappeared. Congress has responded by imposing unprecedented computational complexity on large numbers of taxpayers—primarily through the expanded scope of the alternative minimum tax and the proliferation of phase outs of credits, deductions, and exclusions. This response would not be problematic, if the only objection to computational complexity were the difficulty of performing the calculations—a difficulty overcome by the widespread adoption of software. Unfortunately, computationally complex provisions generally constitute bad tax policy, even apart from computational concerns. For taxpayers faced with a welter of computationally complex provisions, the income tax is a black box, the inner workings of which are beyond their comprehension. This undermines both the political legitimacy of the tax system and the ability of taxpayers to engage in informed tax planning. In response to the demise of the complexity constraint, argues this Essay, Congress should develop a self-imposed constraint against the enactment (or survival) of computationally complex provisions of widespread applicability."