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Monday, May 31, 2010

TaxProf Blog Holiday Weekend Roundup

Memorial Day Tax Resources for U.S. Armed Forces (Plus Their Families & Employers)

Memorial_dayContinuing a TaxProf Blog Memorial Day tradition (2009, 2008, 2007, 2006, and 2005), I want to pass along links to the Tax Information for Members of the U.S. Armed Forces material maintained on the IRS web site:

The tax laws provide some special benefits for active members of the U.S. Armed Forces, including those serving in combat zones. For federal tax purposes, the U.S. Armed Forces includes officers and enlisted personnel in all regular and reserve units controlled by the Secretaries of Defense, the Army, Navy and Air Force. The Coast Guard is also included, but not the U.S. Merchant Marine or the American Red Cross. However, these and other support personnel may qualify for certain tax deadline extensions because of their service in a combat zone.

For dozens of links to military tax resources, see below the fold.

Continue reading

May 31, 2010 in IRS News, Tax | Permalink | Comments (0) | TrackBack (2)

Sunday, May 30, 2010

Andrew Beal Appeals Denial of $1.1b DAD Tax Shelter Losses

Following up on my prior post, Court Rejects $1.1b Tax Losses Claimed by Andrew Beal in DAD Tax Shelter (Southgate Masters Fund v. United States, No. 3:06-CV-2335-K (N.D. TX Aug. 18, 2009)): here are the opening briefs filed in the appeal to the Fifth Circuit:

(Hat Tip: Richard Jacobus.)

May 30, 2010 in New Cases, Tax | Permalink | Comments (0) | TrackBack (0)

Top 5 Tax Paper Downloads

SSRNThis week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's:

1.  [1469 Downloads]  Pursuing a Tax LLM Degree: Why and When?, by Paul L. Caron (Cincinnati), Jennifer M. Kowal (Loyola-L.A.) & Katherine Pratt (Loyola-L.A.)

2.  [456 Downloads]  Pursuing a Tax LLM Degree: Where?, by Paul L. Caron (Cincinnati), Jennifer M. Kowal (Loyola-L.A.), Katherine Pratt (Loyola-L.A.) & Theodore P. Seto (Loyola-L.A.)

3.  [361 Downloads]  The Federal Estate Tax: History, Law, and Economics, by David Joulfaian (Office of Tax Analysis, Treasury Department)

4.  [317 Downloads]  A Myth Deconstructed: The 'Emperor’s New Clothes' on the Low Profit Limited Liability Company, by Daniel S. Kleinberger (William Mitchell)

5.  [315 Downloads]  Taxation and the Sabbatical: Doctrine, Planning and Policy, by John A. Miller (Idaho) & Robert Pikowsky (Georgia Institute of Technology)

May 30, 2010 in Tax, Top 5 Downloads | Permalink | Comments (0) | TrackBack (0)

Bartlett: A Pox on Tax Expenditures

Bruce Bartlett (Forbes), Spending Through The Tax Code: It's As Bad As Direct Spending:

Conservatives are united in their belief that government spends much too much and that spending ought to be cut sharply. But they almost universally ignore de facto spending through the Tax Code even though many tax provisions are functionally identical to spending. These "tax expenditures" not only hemorrhage revenue unnecessarily, but they distort private decision-making, create unfairness and reduce economic growth. ...

When the time comes, as it inevitably will, when raising revenues will be part of a big deficit reduction bill mandated by financial markets, Republicans will really have only two choices: raise tax rates or restrict tax expenditures. Since many of the latter are conceptually identical to direct spending, the choice should be an easy one. Those concerned about our nation's fiscal future should be focusing as much attention on tax expenditures as they do on the spending side of the budget.

May 30, 2010 in News, Tax | Permalink | Comments (0) | TrackBack (0)

Today's Law, Society, and Taxation Panel

Law & Society Today's Law, Society, and Taxation panels at the Law & Society Association Annual Meeting in Chicago:

Issues in History and Taxation: Current issues in taxation are uniquely affected by the historical development of our current systems of taxation. Papers on this panel will discuss theoretical issues such as fiscal sociology and political economy; and they will also discuss practical issues such as the use of taxation in policies addressing health care and labor rights.

May 30, 2010 in Conferences, Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Framing the FairTax

Peter R. Matejcak (J.D. 2011, Loyola-Chicago) has published Framing the FairTax for the American Consumer: Tax-inclusive? Tax-exclusive? Why Not Both?, 22 Loy. Consumer L. Rev. 391 (2010). Here is part of the Introduction:

This note examines the confusion and conflicting tax rate presentation the American consumer faces while researching the FairTax rate. Before analyzing the issue of rate presentation, Part II offers a brief overview of the FairTax movement, including its history and current progress and positioning, while Part III details the proposed mechanics of the FairTax itself. Because this note is concerned with the plight of the American consumer attempting to sift through the multitude of material both supporting and criticizing the FairTax, Part IV presents a basic summary of the pros and cons of the FairTax from both sides’ perspectives. This, of course, includes the debate over the presentation of the FairTax rate as either tax-inclusive or taxexclusive, which Part V addresses in greater detail. Recognizing the merits of both presentations, Part VI posits that, perhaps, the most transparent and sincere framing of the FairTax rate is explicit presentation of the rate on both tax-inclusive and taxexclusive bases, minus any additional attempts at posturing and vilification.

May 30, 2010 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Saturday, May 29, 2010

Today's Law, Society, and Taxation Panels

Law & Society Today's Law, Society, and Taxation panels at the Law & Society Association Annual Meeting in Chicago:

Line Drawing in Taxation: Taxation raises fundamental questions of line-drawing that must be addressed in the administration of every tax system. Papers in this panel will address a variety of line-drawing issues, ranging from a theoretical assessment of the concept to various current issues where lines must be drawn: whether to have a standard deduction (and, if so, what to include in it), the taxation of various types of tort recoveries, and the debt/non-debt, foreign/domestic distinctions.

  • Joshua Blank (NYU) (Chair/Discussant)
  • Joshua Blank (NYU), When is Tax Enforcement Publicized?, 30 Va. Tax Rev. __ (2010),
  • Brad Borden (Washburn), Equity Function in Doctrinal Line Drawing
  • Jake Brooks (Harvard), The Zero Bracket Amount: A Critique of the Standard Deduction and a Proposal for Reform
  • Bobby Dexter (Chapman), Dirty Nails, Unclean Hands, and Filthy Paws: A Modest (Tax) Proposal Concerning Reparations for Slavery and Other Forms of Oppression

Challenges in International Tax Law: Papers on this panel address some of the key technical rules of international taxation -- rules that, despite their technical nature, continue to vex scholars and policymakers in international tax law. These issues include sourcing rules, reporting rules, and residency issues. Both design and equity issues will be addressed.

  • Bridget Crawford (Pace) (Chair/Discussant)
  • Fred Brown (Baltimore), A Principled, Unified Approach for Sourcing Income Among Nations
  • Cliff Fleming (BYU), Getting Territoriality Right: Avoiding Unwarranted Exemptions and Negative Taxes
  • Axel Verstraeten (Universidad de Buenos Aires), Double Tax Conventions Between Developed and Developing Countries. Is a DTC Between Argentina and the United States (Im)possible?
  • Kevin Wall (RPI), How the Convergence of GAAP and IFRS Will Impact the International Practice of Law

Legitimacy in Corporate Tax and Compensation Strategies: The aggressive sheltering of corporate income and the size of corporate executives' compensation continue to be a matter of intense concern among policymakers and the press. The papers on this panel will examine various methods to reduce and restrict abuses, from specific anti-abuse rules to changes in the nature of taxation of non-labor income.

May 29, 2010 in Conferences, Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Schnider: Are ISOs Dead Because of the AMT?

Tax AnalystsBruce J. Shnider (Minnesota) has published Are Incentive Stock Options Dead?, 127 Tax Notes 913 (May 24, 2010):
Because gain attributable to incentive stock options (ISOs) is subject to the alternative minimum tax, the apparent tax advantage is lost. As a result, companies may decide to use only non-ISOs.
All Tax Analysts content is available through the LexisNexis® services.

May 29, 2010 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1) | TrackBack (0)

The Promise and Dilemma of Conservation Easements

Zachary Bray (Munger, Tolles & Olson, Los Angeles) has published Reconciling Development and Natural Beauty: The Promise and Dilemma of Conservation Easements, 34 Harv. Envtl. L. Rev. 119 (2010). Here is the abstract:

Local and regional private land trusts are among the most important and most numerous conservation actors in contemporary America, and conservation easements are perhaps the key land conservation tools used by these trusts. In recent decades, privately held conservation easements and local and regional private land trusts have grown at a rapid and increasing rate, and the total acreage protected by privately held conservation easements is now larger than some states. The early growth of privately held conservation easements met widespread approval, but more recently, contemporary conservation easement practice has attracted many critics, based in part on well-publicized national scandals involving fraudulent donations of conservation easements for tax purposes and in part on more general concerns about the potential inefficiency of these easements. To date, however, legal scholars have not adequately tested or examined these concerns against the details of contemporary conservation easement practice. This Article addresses this gap in the current debate by examining various criticisms and proposals for reform of current conservation easement practice in light of a detailed survey of conservation easements held by local and regional land trusts in Massachusetts. More specifically, the Article provides important detail on contemporary conservation easement practice, considers the interaction between contemporary practice and the abstract concerns raised in the academic debate, and offers some suggestions for reform and further study.

May 29, 2010 in Scholarship, Tax | Permalink | Comments (1) | TrackBack (0)

Conservation Easements in Private Practice

Shea B. Airey (J.D. 2009, South Carolina) has published Conservation Easements in Private Practice, 44 Real Prop. Tr. & Est. L.J. 745 (2010) (winning entry in the 2009-10 Real Property/Trust & Estate Law Student Writing Contest). Here is the abstract:

This Article presents an overview of conservation easements that is designed to help practitioners better incorporate the tool into practice in order to reap the myriad benefits that state and federal law authorize. By providing an account of the development of conservation easements, an outline of current available legal benefits, and examples of hypothetical treatment in various states, the Author provides practitioners with that which is necessary to put the conservation easement to use for their clients.

May 29, 2010 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Friday, May 28, 2010

Tax Prof Anne Alstott Leaves Harvard to Return to Yale

Alstott Tax Prof Anne Alstott, who moved from Yale to Harvard in 2008, is returning to Yale, effective July 1, 2011. From her Harvard web page:

After graduating from law school in 1987, Professor Alstott spent three years as an associate at a Wall Street law firm and two years as an attorney-advisor in the Treasury Department's Office of Tax Legislative Counsel. In 1992, she joined the faculty of the Columbia University School of Law as an associate professor. At Columbia, she won the Professor Willis L.M. Reese Award for Excellence in Teaching. In 1997, she became a tenured professor of law at Yale, where she twice won the Yale Law Women teaching award. In 2004, Yale named her the Jacquin D. Bierman Professor of Taxation. She arrived at Harvard in 2008.

This is an important move by Yale to shore up its tax curriculum following the loss of tax legend Michael Graetz to Columbia.  (The departures of Alstott and Gratez likely explain why Yale dropped out of the U.S. News & World Report tax rankings this year for the first time (following a nosedive from #10 to #19 in last year's rankings).

May 28, 2010 in Legal Education, Tax, Tax Prof Moves | Permalink | Comments (0) | TrackBack (0)

What Do Americans Think About Taxes?

Tax AnalystsKarlyn Bowman (American Enterprise Institute) has published What Do Americans Think About Taxes? An Update, 127 Tax Notes 917 (May 24, 2010):

This article ... examines changes in attitudes toward taxes and the deficit since President Obama took office.

127TN0917_Page_2 

All Tax Analysts content is available through the LexisNexis® services.

May 28, 2010 in News, Political News, Tax, Tax Analysts | Permalink | Comments (7) | TrackBack (0)

More on the Glum Employment Prospects for Law Grads

Following up on some recent posts:


Howard B. Miller (President, California Bar), Truth in Lending and in Careers (California Bar Journal):

Those of us in leadership positions in bar organizations need to look closely at the lives of those seeking to begin the practice of law, and where changes in the economy and the profession are leading them.

The economic impact of the great recession has been acute. For graduates in 2008, 2009 and this year, the combination of the number entering practice, the lack of jobs and the levels of debt are devastating personally to those involved and should be to all of us who care about our profession. ...

The average debt of law graduates now approaches or exceeds $100,000, and because of recent increases in tuition, especially at public institutions which historically have been more affordable, debt burdens will be even greater in a couple of years.

At least 10,000 lawyers, probably more, including many, many mid-level associates with no place to go, have been officially laid off during this recession. ...

There is notoriously unreliable self-reporting by law schools and their graduates of employment statistics. They are unreliable in only one direction, since the self-reporting by law schools of “employment” of graduates at graduation and then nine months after graduation are, together, a significant factor in the U.S. News rankings — which are obsessed over, despite denials, by law schools and their constituencies. The anecdotes are as telling as the statistics: prestigious lawyers in the state are hiring their own children to work in their firms because even with their connections they were unable to find employment elsewhere. And if things do pick up, those in the classes of 2008, 2009 and now 2010, whatever they will have been doing, are unlikely to be viewed favorably by firms as first-year entry hires. ...

Finally, we need to be transparent with potential lawyers about the cost and benefits of studying law. All law schools need to gather, verify and report, in consistent and specified ways, the employment record of their graduates, as well report on those who may have started, paid tuition, but never graduated. A good place to start is with our own California-accredited and registered law schools, over which the State Bar and the Committee of Bar Examiners have jurisdiction.

Elie Mystal, Is California Ready to Get Into The Student Debt Fight? (Above the Law): 

Who wouldn’t love to see this? The ABA seems content to let the schools report whatever they want. U.S. News doesn’t seem to do any quality control to make sure that these schools aren’t misleading readers. Why can’t the State bar of California make sure that California schools are accurately reporting employment figures.

I’m sure that the California law schools will claim that reporting accurately will hurt their U.S. News rankings. But at some point, somebody is going to have to put “truth” ahead of “rankings.”

Miller might be onto something here. Let’s hope other state bars start to take a serious look at what is happening to young lawyers these days.

Joe Hodnicki, NALP Takes a Hard Look at Its Class of 2009 Employment Data: Nearly 25% Employed in Temporary Positions, 10% are Part-Timers and Almost 30% are Employed in Positions That Don't Require a JD (Law Librarian Blog):

Temp Jobs for Class of 2009. Nearly 25% of all jobs were reported as temporary. ... NALP also reports that 42% of reporting law schools provided on-campus post-graduate jobs for their students. No word on how many of these appointments were made to game US News employment data for teasing a better ranking.

Job Market Weakness. Some other markers of weakness in the job market for 2009 law school grads reported by NALP include:

  • 10% of all reported jobs are part-time, up from 6% for the class of 2008
  • 70.8% grads reporting that they held a job for which a JD was required, down from 74.7% of the Class of 2008
  • 5% of the law firm job reported are working as solo practitioners, up from 3.3% for the Class of 2008
  • 22% of the Class of 2009 who are employed are actively looking for work, compared to 16% of the previous class

May 28, 2010 in Legal Education | Permalink | Comments (2) | TrackBack (0)

Will the Estate Tax Rise From the Grave in 2011 (or Sooner)?

article1image The Tax Foundation today released Federal Estate Tax: Will It Rise From the Grave in 2011 or Sooner?:

The scheduled but nevertheless unexpected repeal of the federal estate tax in 2010 and the prospect of its reinstatement in 2011 bring debate over the estate tax, or “death tax,” to the fore again.

Some of the arguments are new: Would it be constitutional for Congress to reinstate the estate tax retroactively for 2010? But some of the arguments are a century old or more: Does the estate tax accomplish any worthwhile social purpose? Is it a good way to raise revenue?

Here we condense and update some earlier Tax Foundation studies on this age-old topic, with specific reference to the recent, surprising death and potential new life for the estate tax.

May 28, 2010 in Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Today's Law, Society & Taxation Panels

Law & Society Today's Law, Society, and Taxation panels at the Law & Society Association Annual Meeting in Chicago:

Charities and Tax Exemption: The rules applying to charitable activities have been in great flux over the last decade. The interactions of private benefits with charitable purposes, the increase in corporate charitable behavior, and charities' interventions into the political process have all put a spotlight on the subsidy created by the rules for tax-exempt organizations. Papers on this panel will discuss those issues from both theoretical and practical perspectives.

  • Kristin Hickman (Minnesota) (Chair/Discussant)
  • Roger Colinvaux (Catholic), The Pension Protection Act of 2006: The Beginning or the End of Reform of the Tax Status of Charitable Organizations
  • James Fishman (Pace), Stealth Preemption: The IRS’s Corporate Governance Initiative
  • Terri Helge (Texas-Wesleyan), The Limitless Private Benefit Doctrine
  • Richard Schmalbeck (Duke), Differential Subsidies Among Charities and Their Relation to Worthiness

Tax Policy and Economic Theory: The use of economic theory to inform tax policy debates among legal scholars is hardly new, but it has become more spirited in recent years. In particular, scholars are increasingly questioning the validity of the economic theories that have been imported into legal tax scholarship, and they are casting doubt on the wisdom of applying even logically-consistent theories to the real world. Papers in this panel discuss a number of different angles on the question of whether "efficiency" is a sensible and appropriate measure of a tax system. Specific issues include whether efficiency should trump equity, whether efficiency analysis conclusively pushes us toward a consumption tax, whether corporate behavior meets the assumptions of economic theory, and whether and how to affect behavior through specific types of taxes.

  • Neil Buchanan (George Washington) (Chair/Discussant)
  • Katherine Pratt (Loyola-LA), The Role of Food Taxes in Health Care Reform
  • Chris Sanchirico (Penn), Tax Base Eclecticism and the Taxation of Labor and Capital Income
  • Ted Seto (Loyola-LA), Toward a Just World: Fairness Versus Welfare Revisited

Individual Filers, Preparation Services, and Strategies for Reform: There has been a growing use of paid preparers in income tax preparation by individual filers. This trend has applied to all levels of taxpayers, and it applies with special force to low-income taxpayers. One of the papers on this panel will address the use of paid preparers generally, while a second will address the use of paid preparers by low-income taxpayers. A third paper turns the focus onto the use of broader tax strategies to help the poor. The fourth and final paper looks at examples of states that have done a better job, as well as those that have done a worse job, of achieving progressivity even as they face a global economic crisis and the concomitant need to increase spending and revenues.

  • Brad Borden (Washburn; moving to Brooklyn) (Chair/Discussant)
  • Danshera Cords (Capital; moving to Albany), Increasing the Productivity of Critiques Leveled at Free Tax Preparation Services
  • Reginald Mombrun (North Carolina Central), Shifting the Paradigm by Bringing Tax Arbitrage to the Lower Income Separated Family--Why Should the Middle to Upper Class Family Have All the Fun?
  • Nancy Shurtz (Oregon), State Tax Policy and The Great Recession

Compliance, Interpretation, and Administration: Tax scholars must look beyond the specific tax issues that confront taxpayers and their advisors. In this panel, the participants will discuss the broad issues of statutory interpretation and administrative procedures that create the framework within which we can understand the notion of tax compliance and, ultimately, the legitimacy of the tax system.

  • Francine Lipman (Chapman) (Chair/Discussant)
  • Linda Beale (Wayne State), Statutory Interpretation and Tax
  • Heather Field (UC-Hastings), Taxed by Default
  • Kristin Hickman (Minnesota), Intention versus Reality in U.S. Tax Administration

Deductions, Gender Issues, and Tax Expenditures: Tax expenditure analysis has become a hot topic in legal tax scholarship. This panel combines two papers that discuss tax expenditure analysis from a systemic perspective with two papers that discuss how the tax system does (or could) affect the lives of women in the society. The methods that we use to address those issues inevitably must be scored on the "tax expenditure" budget, making their potential adoption both interesting on their own and important from a broader policy perspective as well.

  • Heather Field (UC-Hastings) (Chair/Discussant)
  • Joseph Cordes (George Wasshington), The Role of Formal Analysis of Tax Expenditures as a Mechanism for Facilitating GreaterTransparency, and Accountability in State Level Fiscal Policy (with Lori Metcalf)
  • Steven Dean (Brooklyn), Compliance Spirals, Fiscal Arbitrage and Tax Deregulation
  • Francine Lipman (Chapman), All the Married Ladies: Married Filing Separately (Or Reasons Not to Put a Ring on It)
  • Claire Young (University of British Columbia), Tax Expenditures for Retirement Savings: Some Inequities in the Canadian Context

May 28, 2010 in Conferences, Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

U.S. News Responds to SALT's Call for a Rankings Boycott

U.S. News Logo Following up on Tuesday's post, SALT Calls for U.S. News Rankings Boycott: Robert Morse, Director of Data Research at U.S. News, responds in Group Tries to Start Boycott of U.S. News Law School Rankings:

Here’s the U.S. News take on this: SALT’s focus on the U.S. News ranking and the use of the LSAT in the rankings is misplaced.  The median LSAT scores of the most recent entering class does count for 12.5% of each law school’s overall score in the ranking.

However, it’s important to remember that U.S. News does not sit in law school admission offices or make admission decisions on specific candidates, it does not set admissions standards for law schools,  it did not decide that LSAT scores are required for law school admission, and it has not published studies like the Law School Admissions Council—the organization that runs the LSAT test—has that state that LSAT scores are linked to law school performance. 

Based on our research, LSAT scores are the most important indicator of whether an applicant will be admitted to a particular school. They also are standardized, making them a key tool to compare schools, unlike undergraduate grade point averages. As long as the ABA requires the LSAT as part of admissions, U.S. News will keep LSAT scores in the ranking formula.  

SALT contends that some law schools manage their LSAT scores because of our ranking, and that the median score inhibits law schools from taking students whose LSAT profile is at a far lower level than their standard.

U.S. News believes that its law school rankings are not hindering diversity at law schools since we use the median (or midpoint)—not the average—LSAT scores and undergraduate grade point averages as ranking factors. The median gives schools considerable flexibility to accept students with very low LSAT and undergraduate grades without lowering the school’s actual median LSAT and grade-point average—and in turn, without negatively affecting their U.S. News rankings.

May 28, 2010 in Law School Rankings, Legal Education | Permalink | Comments (0) | TrackBack (0)

401k and IRA Rollovers Provide Tax-Free Business Start-Up Funding

Bloomberg, Investors Tap Into 401(k) Money Tax-Free for Business Startups, by Amy Feldman:

Hal Mottet, a Lake Oswego, Oregon, businessman bought a family-owned packaging company for $3.5 million in late 2007, and he and a partner financed 40% of the sales price with their retirement money.

Mottet and his partner used a loophole in U.S. tax law to roll over $1.4 million from their existing 401(k) retirement plans to finance the purchase of Carson, California-based Empire Container Corp. The strategy saved them taxes and penalties they would have faced for cashing out the plans. ...

Transactions like Mottet’s let entrepreneurs access their retirement funds without tax consequences. Withdrawals from 401(k)s are generally subject to income taxes on the proceeds, and cashouts done before age 59 1/2 incur a 10% penalty, according to the IRS.

Here’s how it typically works: An investor sets up a corporation, establishes a new 401(k) plan there, rolls over his or her existing 401(k) or IRA, and then uses part or all of the plan’s assets to buy shares of the new company. This funds the new business, while keeping the tax-advantages of the retirement plan.

The transactions have drawn the scrutiny of the IRS, which dubbed them ROBS, for Rollovers as Business Startups, and said in an October 2008 memo that some may run afoul of the law. The IRS is coordinating efforts with the Department of Labor because these rollovers may also raise issues under the rules that govern retirement plans, according to the memo. ...

“Like many other recently marketed tax savings strategies that appear to have been designed to take advantage of the law, ROBS arrangements, designed to fit within existing law and guidance, do not present a ‘home free’ result,” the IRS said in a November 2008 newsletter. “In fact, they may violate the law.”

Among the issues the IRS found were prohibited transactions, questionable valuations of the company stock, and a failure for the rollover retirement plans to be available to employees other than the principal owner. In a few cases the IRS reviewed, retirement funds were used to purchase personal assets, like recreational vehicles, according to the memo.

May 28, 2010 in IRS News, News, Tax | Permalink | Comments (0) | TrackBack (0)

Thursday, May 27, 2010

GLAD Files Amended Complaint in Lawsuit Challenging Application of DOMA to Tax Code

Following up on my prior post, Lawsuit Challenges Application of DOMA to Tax Code: yesterday, Gay & Lesbian Advocates & Defenders issued a press release, GLAD Files Amended Complaint in DOMA Challenge:

GLAD filed an amended complaint this week in our lawsuit challenging Section 3 of the Defense of Marriage Act (DOMA), Gill v. OPM.

The complaint updates the tax overpayments of three of the plaintiff couples due to their inability to file their federal income tax returns under the status “married filing jointly.”  Each couple must instead file as either a single individual or head of household when they have dependent children.

Gill v. OPM was filed in March 2009, and U.S. District Court Judge Joseph L. Tauro heard the case on the merits on May 6, 2010.  A decision is pending.

May 27, 2010 in New Cases, Tax | Permalink | Comments (0) | TrackBack (0)

Gird Your Loins: IRS 'Wealth Squads' Are on the Way

Forbes, IRS 'Wealth Squads' On The Way, by Donald C. Rocen (Miller & Chevalier, Washington, D.C.):
Newly created exam teams will scrub wealthy taxpayers' hedge funds, trusts and foreign accounts.

Those who by anyone’s measure would be considered wealthy, should be on notice: How you acquired and now maintain the wherewithal to be so labeled may soon be called into question by the IRS. That’s not to say that the questions can’t be answered and the matter closed with no further tax due, but the means to that end could get complicated.

Last Fall, IRS Commissioner Doug Shulman unveiled his vision for a Global High Wealth Exam Group--the latest addition to the agency’s arsenal of compliance strategies. Its goal is to ensure that these high-end Form 1040 filers are not shirking their federal tax responsibilities. While the exact amount of “wealth” that will arouse IRS interest was not disclosed, the Commissioner suggested a threshold in the neighborhood of tens of million of dollars. According to the most recently released IRS estimates, in 2004 there were approximately 47,000 individual taxpayers with a net worth of $20,000,000 or more. ...

This will not be a kick-the-tires type of exam. Instead, think in terms of a major overhaul. Global High Wealth taxpayers and their representatives should expect to confront teams of revenue agents, partnership experts, and international examiners prepared to scrub not only the Forms 1040 and the attached schedules but also any and all related returns. In the background will be specialists in such areas as financial instruments; exempt organizations; retirement plans (whether individually maintained or employer sponsored) and insurance and annuity arrangements. And for those who like to play on the edge, do not overlook the possibility of a criminal investigation agent being asked to join the group. The bottom line is that these teams will have access to whatever resources they need.

Going Concern, Memo to Rich People: Gird Your Loins for the IRS ‘Wealth Squads’:

For those of you keeping score, the ballpark figure of “wealth” is “in the neighborhood of tens of million of dollars,” according to IRS Commish Doug Shulman’s best guess. So if this is you, the time is nigh. You peasants whose net worth falls into the seven figure range probably can rest easy but don’t get too comfortable, you’re still at risk.

And don’t think that this will be a friendly visit between you, your CPA and an IRS representative. No, this will likely be a financial strip search that will be topped off with a latex surgical glove moseying around your nether regions.

May 27, 2010 in News, Tax | Permalink | Comments (5) | TrackBack (0)

WSJ: The Double Tax Whammy on Carried Interest

Lead editorial in today's Wall Street Journal, Congress Gets Mean: The Democratic Tax Bill's Double Whammy on Carried Interest:

In the 1999 movie "Payback," Mel Gibson plays a small-time hood who ruthlessly takes on the mob to reclaim $70,000. At one point, he casually shoots holes in the luggage and suits of a high-living mobster played by James Coburn, who says, "Man, that's just mean."

That's the attitude Democrats are taking to American capital markets, as they work to impose the most punitive tax rates on investment income in recent American history. We've already reported that tax writers Sander Levin and Max Baucus plan to raise the tax rate on most "carried interest" income from 15% today to roughly 35% next year, and to about 38% in 2013. But it turns out that, like Mel Gibson, they also want to shoot holes in their victims' suits.

In a little-understood provision, the Levin-Baucus bill would impose a new "enterprise value" tax on the sale of part or all of any investment firm that has ever earned even $1 of carried interest income. So instead of paying the capital gains tax rate on the sale of such shares, the owners would have to pay ordinary income tax on the proceeds of the sale. This means that owners in private equity firms or real-estate trusts would be taxed twice at a rate approaching 40%—first at the time the money is earned and again at the time of the asset sale. The combined tax rate would therefore rise well above 50%.

The Democratic justification for this punitive provision seems to be that firms like the Blackstone Group paid lower tax rates than they should have, so now it's payback time. You'd think these firms have been doing something illegal, as opposed to paying tax rates under the 15% rate that Congress itself passed. But now in their scramble to pay for their runaway spending, Democrats want to punish people who played by Congress's rules even if they earned only token amounts of carried interest. ...

The tax increase on carried interest is destructive enough, but the double whammy of imposing the same higher rate on the sale of a private equity firm or real-estate trust is pure vindictiveness. This crowd on Capitol Hill is just mean.

May 27, 2010 in News, Tax | Permalink | Comments (1) | TrackBack (0)

Navot Presents Taxation of Compensatory Stock Options Under Tax Treaties at Hebrew University

Yuval Navot (Elieser Kaplan Law Offices, Tel Aviv) presents Taxation of Compensatory Stock Options Under Tax Treaties, 126 Tax Notes 325 (Jan. 18, 2010), at Hebrew University Law School as part of its Tax Law & Policy Colloquium. Here is the abstract:

Tax treaties may not provide adequate protection against double taxation and double nontaxation of service providers’ income from compensatory stock options. This report identifies the elements allowing such double taxation and double nontaxation to arise and analyzes the various theoretical approaches to address this problem. It then describes and evaluates the approach adopted under the OECD model treaty, as well as the approach adopted under all three U.S. treaties that contain arrangements regarding compensatory stock options.

May 27, 2010 in Colloquia, Tax | Permalink | Comments (0) | TrackBack (0)

Faculty/Lawyer Dress Codes: No Flip Flops

I have previously blogged the issue of faculty dress codes:

Today's Above the Law reports on the Weil, Gotshal & Manges "New York Office Guidelines on Business Casual Dress":

Weil Dress Code (Women)

Weil Dress Code (Men)

May 27, 2010 in Legal Education, Tax | Permalink | Comments (3) | TrackBack (0)

TIGTA: Has IRS Achieved Goals of 1998 Restructuring and Reform Act?

TIGTA The Treasury Inspector General for Tax Administration today released its evaluation of whether the goals of the IRS Restructuring and Reform Act of 1998 (RRA 98) have been substantially achieved.   The Internal Revenue Service Restructuring and Reform Act of 1998 Was Substantially Implemented but Challenges Remain (2010-IE-R002):

RRA 98 was broadly scoped legislation intended to transform the IRS into a modern financial services organization. It called for reform of virtually every aspect of the IRS, including its reorganization from a geographically based organization to one that was focused primarily on providing taxpayers with customer service similar to that available from many private sector financial institutions, including electronic access to customer accounts.

TIGTA reviewed the IRS’s implementation of the major tax provisions of the law. This review included extensive research of: the law, relevant IRS Internal Revenue Manuals, the IRS Intranet website, prior reports by TIGTA and other relevant organizations including the Government Accountability Office. It further reviewed IRS strategy and policy, processes and procedures, information technology and employee/human capital to gauge IRS’s success at implementing the law.

"While the IRS has made significant strides in transforming into a modern financial services organization, our review found that major challenges remain," said J. Russell George, Treasury Inspector General for Tax Administration. "Much of this reform effort remains a work in progress," he added.

As part of the transformation process, the IRS created a new mission statement focusing on taxpayer service and adopted the new organizational performance measures of business results, customer satisfaction, and employee satisfaction. The IRS further implemented safeguards to ensure that enforcement statistics would no longer be used as a basis for employee evaluations, and engaged in efforts to modernize its computer technology and its business systems. Expanded electronic filing, creation of an extensive Web site (www.IRS.gov), and installation of a state-of-the-art telephone routing system to more effectively and efficiently answer taxpayer calls were all part of this transformation. In addition, 71 taxpayer protections and rights required by the RRA 98 were engineered into operational processes and procedures

TIGTA’s review found that additional work is needed to complete IRS’s Business Systems Modernization effort. In addition, human capital management challenges remain, including replacement of an aging workforce, measurement of training effectiveness, and implementation of a performance-based pay system.

May 27, 2010 in Gov't Reports, IRS News, Tax | Permalink | Comments (0) | TrackBack (0)

DePaul's 'Leona Helmsley Tenure Process'

Inside Higher Ed, 'Leona Helmsley Tenure Process':

The late Leona Helmsley doesn't get quoted that much in faculty deliberations, but she was featured prominently in a memo circulated this spring at DePaul University -- a memo that set off an intense debate about the fairness of the tenure process.

In the memo, Robin Burke, an associate professor of computing and digital media, cited Helmsley's much-derided quote that "only the little people pay taxes," to say that DePaul appears to have a "Leona Helmsley tenure process," in that "only the little people are reviewed for tenure." Burke cited the decision by Provost Helmut Epp to accept a departmental recommendation to award tenure to two faculty members in Burke's college at DePaul.

The two (whose names are not generally featured in the voluminous memos that have been flying at DePaul about their promotions) had been working off the tenure track and were simultaneously put on the tenure track and tenured -- without the standard, lengthy process that would normally be required for someone at the university coming up for tenure.

May 27, 2010 in Legal Education | Permalink | Comments (0) | TrackBack (0)

Today's Law, Society & Taxation Panels

Law & Society Today's Law, Society, and Taxation panels at the Law & Society Association Annual Meeting in Chicago:

The Use of the Tax System to Subsidize and Change Behavior: Designing a tax system necessarily involves describing some activities as core to the system and others as peripheral or even accidental. Descriptions of how the tax system changes behavior take into account the use of deliberate subsidies, exploitation of behavioral regularities, and careful crafting of default rules. Papers on this panel look at various questions in how a tax system can change behavior, and the consequences of arbitrary choices in adopting tax rules.

  • Danshera Cords (Capital; moving to Albany) (Chair/Discussant)
  • Mirit Eyal-Cohen (Pittsburgh), Small Business Tax Regulation -- Revisited
  • David Gamage (UC-Berkeley), Shedding Some Light on Hidden Taxes: An Examination of Tax Salience and Fiscal Illusion (with Darien Shanske (UC-Hastings))
  • David Louk (Yale/Berkeley), Unrelated Operations of Universities and Religious Organizations and Their Favorable Tax Treatment
  • Shannon McCormack (UC-Davis), Deconstructing the Charitable Deduction: Devising a Workable Framework to Analyze Charitable Transfers

Is For-Profit Charity an Oxymoron?This panel brings together scholars in tax, charitable law, and corporate governance to debate the practice and design of philanthropy in the for-profit firm. Panelists will consider whether for-profit firms should be eligible to receive deductible contributions and/or partial tax exemption, and if so whether these benefits should be tied to rules of governance specific to the for-profit-charity form. Some participants may also address corporate-law doctrine, such as whether managers violate their fiduciary duties when donating corporate funds to charitable missions not related to the firm's profit.

  • Brian Galle (Florida State; moving to Boston College) (Chair/Discussant)
  • Brian Galle, Keep Charity Charitable, 88 Tax L. Rev. ___ (2010)
  • Todd Henderson (Chicago), Corporate Philanthropy and the Market for Altruism, 109 Colum. L. Rev. 571 (2009) (with Anup Malani (Chicago))  
  • Benjamin Leff (American), Tax Benefits for For-Profit Do-Gooders
  • Shruti Rana (Maryland), Micro-Innovation

Norms and Global Tax IssuesPapers on this panel will explore issues of culture, gender, and development in international and comparative perspective. In addition, matters of legitimacy and efficacy in international relations will be discussed.

  • Allison Christians (Wisconsin) (Chair/Discussant)
  • Neil Buchanan (George Washington), Social Security Is Fair to Future Generations
  • Lily Kahng (Seattle), Investment Income Withholding in the United States and Germany
  • Diane Ring (Boston College), International Organizations and the Emergence of the New Exchange of Information Agreements
  • Michael Waggoner (Colorado), The House Erred: A Carbon Tax Is Better than Cap and Trade, 124 Tax Notes 1257 (Sept. 21, 2009)

May 27, 2010 in Conferences, Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

IRS Seeks Grant Applications for Low Income Taxpayer Clinics

IRS Logo The IRS announced today (IR-2010-66) that it is accepting grant applications for Low Income Taxpayer Clinics for the 2011 grant cycle (1/1/11 - 12/31/11):

Applications will be accepted June 1, 2010, through July 9, 2010. Previous grant recipients will have the option to apply for up to three years of annual funding, which would reduce the amount of paperwork they must complete over a three-year period. This annual funding will also help recipients with budget planning.

The 2011 application packages and guidelines will be available on the IRS website by June 1, 2010.   ... The IRS in 2010 awarded 24 TCE grantees $6.1 million and 147 VITA grantees $7.44 million.:

May 27, 2010 in IRS News, Legal Education, Tax | Permalink | Comments (0) | TrackBack (0)

A 3-Year College Degree?

New York Times op-ed, A Degree in Three, by Stephen Joel Trachtenberg (President Emeritus, George Washington University) & Gerald Kauver (Professor, George Washington University):

Over the next few weeks more than half a million students will graduate from American colleges, the vast majority with at least four years of campus life behind them. Indeed, the assumption that it takes four years to get an undergraduate education — or three to get a law degree, or four to get a medical degree — lies at the center of the American university system.

That assumption needs to change. The college experience may be idyllic, but it’s also wasteful and expensive, both for students and institutions. There is simply no reason undergraduate degrees can’t be finished in three years, and many reasons they should be.

(Hat Tip: Ann Murphy.)

May 27, 2010 in Legal Education | Permalink | Comments (0) | TrackBack (0)

"I Didn't Know What '$' Means" Fails as Tax Defense

Dollar Sign From Business Day:

Stephen Blackman tried explaining his failure to disclose more than $300,000 in income by claiming he didn't know what the "$" symbol meant.

Sam Ellis, appearing for the Inland Revenue Department, said in a letter dated February 9, 2009, Blackman wrote he had not been paid by his company Plant and Platform Consultants Ltd, of New Plymouth.

"You may have been confused by forms provided to you by my company which contained impressive numbers preceded by a "$" symbol," Blackman wrote. "I am unaware of the meaning of this symbol, but I can assure you I am not aware of anyone at my company who would swear under oath that this represented money paid to me by the company." But when Blackman appeared before Judge Robert Murfitt in the New Plymouth District Court he pleaded guilty to two charges of filing false or incomplete tax returns for the years ending March 31, 2007 and 2008.

May 27, 2010 in News, Tax | Permalink | Comments (0) | TrackBack (0)

Christians: Networks, Norms and National Tax Policy

Allison Christians (Wisconsin) has published Networks, Norms and National Tax Policy, 9 Wash. U. Global Stud. L. Rev. 1 (2010). Here is the abstract:

Global economic crisis demonstrates how critical it is for nations to determine ways to solve problems cooperatively. Tax experts have traditionally facilitated cooperation by participating in transnational networks, where they compare ideas and reach consensus on how nations can tax effectively. But while the merits of the norms developed by these tax networks have prompted much scholarly analysis, little is understood about the nature and function of the networks themselves. This Article argues that participants in networks use “soft law” mechanisms such as shared expertise, voluntary cooperation, and emulation to achieve tax policy convergence while preserving national autonomy. It analyzes how networks facilitate this convergence by drawing upon the institutional structure and processes of norm development and by examining evidence of the functionality of networking in U.S. law-making. It concludes that understanding why and how we use networks to produce tax norms is critical to ensure that law-makers have the tools necessary for developing effective national tax policy in a globalized world.

May 27, 2010 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 26, 2010

Tax Liabilities for Sample Families Under Bush & Obama Tax Law

The Tax Foundation today released Taxpayers Face Uncertainty in 2011 as Bush and Obama Tax Cuts Expire:

Below are tax calculations for a few sample taxpayers. Since it's not clear how Congress and the President will deal with the expiration of all the tax cuts, we calculate them in three ways. The first is what taxes would have been in 2011 if neither the Bush nor Obama tax cuts ever existed (what we call 'Pre-Bush' policy). This is essentially the tax law that was in effect when President Bush was elected and what tax law would be if all the Bush tax cuts were allowed to expire on schedule at the end of 2010. The second scenario is what taxes would be if all Bush-era tax policies were still in effect in 2011. Finally, we look at what taxes would be in 2011 under Obama's proposed tax policies.

Table 1 Summary: Taxes Owed (+ or -) on Typical Tax Returns


Pre-Bush

Bush

Obama

Single Parent, One child, $25,000

- $928

- $1,881

- $2,281

Married couple, two earners, three children, $45,000

$1,020

- $1,510

- $3,183

Married couple, one earner, two children, $50,000

$2,825

$688

$288

Married couple, two earners, two children, $85,000

$7,235

$5,383

$4,583

Single, no children, $60,000

$8,236

$7,484

$7,084

Single, no children, $150,000

$29,962

$26,996

$26,996

Married couple, two earners, two children, $150,000

$22,776

$19,268

$18,468

Married couple, two earners, two children, $300,000

$64,181

$61,292

$61,292

Married couple, two earners, no children, $500,000

$130,210

$123,900

$130,342

Married couple, two earners, no children, $1,000,000

$298,510

$254,167

$307,342

 

Table 2 Summary: Effective Tax Rates (Taxes as a % of Income) of Typical Tax Returns


Pre-Bush

Bush

Obama

Single Parent, One child, $25,000

- 3.7%

- 7.5%

- 9.1%

Married couple, two earners, three children, $45,000

2.3%

- 3.4%

- 7.1%

Married couple, one earner, two children, $50,000

5.7%

1.4%

0.6%

Married couple, two earners, two children, $85,000

8.5%

6.3%

5.4%

Single, no children, $60,000

13.7%

12.5%

11.8%

Single, no children, $150,000

20.0%

18.0%

18.0%

Married couple, two earners, two children, $150,000

15.2%

12.8%

12.3%

Married couple, two earners, two children, $300,000

21.4%

20.4%

20.4%

Married couple, two earners, no children, $500,000

26.0%

24.8%

26.1%

Married couple, two earners, no children, $1,000,000

29.9%

25.4%

30.7%

 

May 26, 2010 in Tax, Think Tank Reports | Permalink | Comments (32) | TrackBack (0)

Aprill: Tax Issues for Synagogues and Other Religious Congregations

Ellen P. Aprill (Loyola-L.A.) has posted An Overview of Tax Issues for Synagogues (and Other Religious Congregations) on SSRN. Here is the abstract:

This 9 page document discusses the issues that most often have (or should have) been asked in the many years that I have been giving pro bono advice to synagogues locally and nationally: (a) requirements for setting compensation; (b) lobbying and political activities; (c) substantiation of charitable contributions, (d) charitable fundraising, (e) payroll taxes and withholding for clergy, (f) parsonage and housing allowances, and (g) discretionary funds. The summary of the applicable rules is designed to help guide lay leaders and congregational staff, whether volunteer or professional. Each topic appears on a single page, so that a page or pages can easily be distributed to those who have need of or interest in a particular topic; congregations have my permission to do so. With a very few exceptions, such as treatment of cantors and cantorial soloists, the issues discussed and rules summarized apply to many religious congregations and not just to synagogues.

May 26, 2010 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

The $100,000+ Law Review Article

As Law Profs nationwide gear up to write law review articles over the summer,Larry Cunningham (George Washington) calculates the economic value of the articles:

What’s the economic value of that scholarly article many law professors will write this summer? For the many schools that award scholars summer research grants, it is at least the value of that allocated to the piece—usually $12,500 to $20,000 at most US law schools.

But an excellent article well-placed also often translates into annual salary increments above a school’s merit pay raise pool. That can bump a raise up anywhere from 1% to 3%, or more, depending on the article and how one’s home-school peers do.

For a mid-career scholar earning a base salary of $200,000, say, that means as much as $6,000 or more. For that person, adding $6,000 a year for life, the article’s economic value gets well into the six figures (even discounting to present value).

For others, true, the payoff is less—but still considerable. Take a more senior professor earning $250,000 with only 10 years of teaching left. The increment adds some $60,000 in present economic value.  Even an entry-level professor at the other end of the earnings spectrum, making $100,000, say, and getting even only a 2% bump, enjoys lifetime payoff about half that.

And that’s not all on the economic front. Add to that the value that may arise from influential articles that lead to lateral recruiting offers at higher pay or that induce one’s home school to outbid competing schools seeking to move them. Incremental annual differences in those settings can be tens of thousands of dollars, translating into many multiples of that, lifetime.

May 26, 2010 in Legal Education | Permalink | Comments (3) | TrackBack (0)

Berg: Tax-Exempt Hospitals and the 'Community Benefit' Standard

Jessica Berg (Case Western) has published Putting the Community Back into the "Community Benefit" Standard, 44 Ga. L. Rev. 375 (2010). Here is the abstract:

Disputes about tax-exemption are occurring all over the country. The IRS and CBO are engaged in national studies of non-profit hospitals and community benefits. State governments are considering whether to legislate minimum amounts of charity care in exchange for tax-exemption. Congress is debating whether hospitals should remain a part of the non-profit sector at all. At the same time, uninsured individuals are suing hospitals for unfair billing and collection practices. Creative accounting and expansive definitions of "free" care have led to a variety of non-ideal practices by hospitals in order to balance their bottom line, while at the same time maintain tax-exempt status. This article argues that the longstanding focus on providing individual charity care to meet the community benefit standard for tax-exemption is misguided. Instead, I determine that there are conceptual and practical arguments for requiring hospitals to provide population or public health benefits. I offer a detailed analysis for implementing a new standard, and a framework for quantifying community benefit under that standard. The suggestions set forth should result in better, more expansive benefits for communities; clearer guidance for health care institutions and tax authorities; and fewer problematic incentives for tax-exempt hospitals attempting to meet their community benefit obligations.

May 26, 2010 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Staffer Steals $400k From American University Law Review

American University Law Review National Law Journal, Employee Stole Law Review Receipts:

A former administrative assistant at American University Washington College of Law pleaded guilty on Thursday to stealing nearly $400,000 from the school over six years.

Martine Tavakoli, 49, will be sentenced in September for interstate transportation of stolen property. She faces a maximum term of 10 years in prison, although she is more likely to receive between 18 to 24 months, the U.S attorney's office for the District of Columbia said in a written statement. Tavakoli has agreed to pay $399,529 in restitution.

Tavakoli, who had worked for the law school since 1981, was a coordinator for its law journals between 1998 and 2009. She was responsible for receiving payments but began funneling some of the money into a secret bank account around January 2003. She opened the account in the name of American University Law Review with the university's tax identification number. She used the stolen money to pay her credit card bills, rent and other expenses, according to prosecutors.

May 26, 2010 in Legal Education | Permalink | Comments (0) | TrackBack (0)

BET Founder Says Carried Interest Tax Increase Would Hurt Minorities

In my lecture, The Costs of Estate Tax Dithering, 43 Creighton L. Rev. ___ (2010), I talked about the curious politics behind the estate tax repeal movement, including the important role played by the African-American and LGBT communities in supporting estate tax repeal (as reflected in a West Wing clip). Robert L. Johnson, founder of Black Entertainment Television (BET), played a leading role in the African-American community's push for estate tax repeal.  Mr. Johnson on Tuesday issued this statement arguing that the proposed carried interest tax increase in the financial regulation bill would hurt minority businesses, entrepreneurs, and jobs:

“In my opinion, this legislation would cause a rapid decline in minority private equity firms and possibly eliminate minority participation in this important financial sector of the American economy.

Minority firms have difficult challenges in attracting fund investors and an even more difficult time attracting top managerial talent. If this legislation is approved, it will become even more daunting for minority firms. Historically, minority firms generate less investment capital than major firms, require more time to raise funds compared to larger firms, and, as a consequence, if taxes are raised on minority companies the same as it exists for large firms, talented minority men and women would likely choose to stay at their existing firms.



May 26, 2010 in News, Tax | Permalink | Comments (3) | TrackBack (0)

Burke: Fuzzy Math and Carried Interests

Karen C. Burke (San Diego) has posted Fuzzy Math and Carried Interests: Making Two and Twenty Equal 710, 127 Tax Notes 885 (May 24, 2010), on SSRN. Here is the abstract:

This report explores proposed § 710 (as modified and reintroduced by H.R. 4213), which would treat the compensatory portion of a service partner's return as ordinary income. The report suggests an alternative distribution-based approach, modeled on  § 707(a)(2)(A), which would accomplish § 710's goal of preventing conversion of ordinary income into capital gain and also address the issue of tax deferral. The report starts from the premise that the carried interest problem should be understood as a specialized form of joint tax arbitrage that exploits differences in the partners' tax profiles. It then applies an approach to tax deferral that is already well established in the area of deferred compensation. Within this analytical framework, the report argues that abusive carried interest arrangements can best be addressed by modest revisions to § 707, without enacting complex new provisions of uncertain scope. The report builds on Professor Burke's previous work, Back to the Future: Revisiting the ALIs Carried Interest Proposals, 125 Tax Notes 242 (Oct. 12, 2009); and The Sound and Fury of Carried Interest Reform,1 Colum. J. Tax L. 1 (2010).

May 26, 2010 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Recidivist Deans

Following up on my post, Tax Prof Richard Gershon Named Dean at Mississippi: the Faculty Lounge blogs the appointment and asks how many folks like Richard (Texas-Wesleyan, Charleston, Mississippi) have been dean at three or more law schools:
  • Rogr Abrams (Nova, Rutgers-Newark, Northeastern)
  • Gail Agrawal (North Carolina (Interim Dean), Kansas, Iowa)
  • Marty Belsky (Albany, Tulsa, Akron)
  • Allen Easley (Washburn, William Mitchell, LaVerne)
  • Peter Goplerud (Southern Illinois (Interim Dean), Oklahoma, Drake, Florida Coastal)
  • Rudy Hasl (St. Louis, St. John's, Seattle, Thomas Jefferson)
  • Dennis Honabach (Western State, Washburn, Northern Kentucky)
  • Rick Matasar (Chicago-Kent, Florida, New York Law School)
  • Dick Morgan (Arizona State, Wyoming, UNLV)
  • Nell Newton (Denver, Connecticut, UC-Hastings, Notre Dame)
  • Tom Read (Tulsa, Indiana-Indianapolis, Florida, Hastings, South Texas)
  • David Shipley (Mississippi, Kentucky, Georgia)
  • Rodney Smith (Capital, Montana, Arkansas-Little Rock)
  • Rennard Strickland (Southern Illinois, Oklahoma City, Oregon)
  • Leonard Strickman (Northern Illinois, Arkansas, Florida International)
  • Cliff Thompson (Hawaii, Wisconsin, Michigan State)
  • Paul Verkuil (Tulane, Cardozo, Miami)
  • Parham Williams (Mississippi, Samford, Chapman)

May 26, 2010 in Legal Education | Permalink | Comments (0) | TrackBack (0)

Sugin: Should Art Collections be Treated as Part of University Endowment?

Linda Sugin (Fordham) has posted Lifting the Museum’s Burden from the Backs of the University: Should the Art Collection Be Treated as Part of the Endowment?, 44 New Eng. L. Rev. ___ (2010), on SSRN. Here is the abstract:

A few universities in economic straits have recently attempted to sell artwork to address their financial woes, causing much consternation in the museum community. This article relates the stories of some institutions’ attempts to deaccession artworks, and explains why universities may suddenly perceive their art collections as important assets to monetize. It contends that the universities and their critics have fundamentally divergent conceptions of the role of the art collection in the university, which explains why they cannot agree on the legal responsibilities of universities vis-à-vis their art. The critics have a strong cultural-property conception that privileges art, while these universities see their collections as similar to other property they use in carrying out their programs. This article advocates a contextual approach for choosing among these conceptions.

The legal regime that governs the responsibilities of university fiduciaries in managing and selling property generally depends on categorization as endowment or program-related property. Unfortunately, there is no clear law determining whether university art collections should be treated as endowment property subject to the statutory rules of investment responsibility, program-related property governed by fiduciary duties, or cultural property subject to its own unique standards. The article concludes that university art collections are hybrid cultural-instrumental property, and that universities should be subject to a more flexible standard than museums in making deaccessioning decisions. It argues that university trustees would be faced with too great a fiduciary-duty conflict if subject to the stricter museum standard. To accommodate the cultural-property concerns, it proposes that trustees exercise a heightened level of attention when selling art, but retain their discretion to act in the best interests of the university.

May 26, 2010 in Scholarship, Tax | Permalink | Comments (2) | TrackBack (0)

Open CRS Releases Tax Reports

Tuesday, May 25, 2010

50-State Ranking: Mortgage Interest Deduction

Tax Foundation, Tax Savings from Mortgage Interest Deduction Vary Significantly from State to State:

Mortgage Interest Deduction by State, Tax Year 2008

State

Percentage of Returns Claiming Deduction

Rank

Average Deduction
(all returns)

Rank

Average Deduction
(for returns claiming one)

Rank

United States

26.83%


$ 3,279


$ 12,221


Alabama

24.02%

32

$ 2,226

36

$ 9,267

38

Alaska

22.42%

38

$ 2,689

24

$ 11,994

16

Arizona

31.53%

11

$ 4,293

9

$ 13,616

7

Arkansas

19.24%

45

$ 1,610

46

$ 8,365

45

California

29.24%

19

$ 5,520

1

$ 18,876

1

Colorado

34.54%

3

$ 4,594

4

$ 13,300

9

Connecticut

35.15%

2

$ 4,396

8

$ 12,509

12

Delaware

31.80%

9

$ 3,817

14

$ 12,006

15

Florida

24.92%

28

$ 3,333

20

$ 13,375

8

Georgia

31.13%

12

$ 3,375

17

$ 10,844

24

Hawaii

24.20%

31

$ 4,048

11

$ 16,730

2

Idaho

29.11%

20

$ 3,081

21

$ 10,587

25

Illinois

28.78%

21

$ 3,337

19

$ 11,593

19

Indiana

23.97%

33

$ 2,070

38

$ 8,637

42

Iowa

20.35%

43

$ 1,649

45

$ 8,104

49

Kansas

23.82%

34

$ 2,060

39

$ 8,647

41

Kentucky

24.57%

30

$ 2,050

40

$ 8,345

46

Louisiana

18.68%

46

$ 1,780

43

$ 9,526

33

Maine

25.81%

25

$ 2,529

28

$ 9,798

31

Maryland

37.94%

1

$ 5,372

2

$ 14,162

5

Massachusetts

31.74%

10

$ 4,064

10

$ 12,805

11

Michigan

27.97%

22

$ 2,659

25

$ 9,505

34

Minnesota

33.71%

4

$ 3,714

16

$ 11,016

21

Mississippi

18.39%

47

$ 1,526

47

$ 8,301

47

Missouri

25.50%

26

$ 2,372

30

$ 9,303

36

Montana

23.42%

36

$ 2,316

32

$ 9,890

30

Nebraska

23.10%

37

$ 1,901

42

$ 8,233

48

Nevada

29.55%

17

$ 4,580

5

$ 15,502

3

New Hampshire

30.68%

15

$ 3,726

15

$ 12,142

14

New Jersey

33.34%

6

$ 4,406

7

$ 13,215

10

New Mexico

21.48%

39

$ 2,356

31

$ 10,969

22

New York

23.73%

35

$ 2,897

23

$ 12,206

13

North Carolina

29.43%

18

$ 2,979

22

$ 10,122

27

North Dakota

14.60%

50

$ 1,222

50

$ 8,372

44

Ohio

26.74%

23

$ 2,266

35

$ 8,475

43

Oklahoma

21.27%

40

$ 1,700

44

$ 7,992

50

Oregon

32.46%

8

$ 3,858

13

$ 11,885

17

Pennsylvania

25.07%

27

$ 2,439

29

$ 9,728

32

Rhode Island

30.74%

14

$ 3,367

18

$ 10,951

23

South Carolina

26.17%

24

$ 2,607

27

$ 9,959

28

South Dakota

14.84%

49

$ 1,396

48

$ 9,404

35

Tennessee

20.70%

41

$ 2,143

37

$ 10,349

26

Texas

20.36%

42

$ 2,027

41

$ 9,955

29

Utah

33.17%

7

$ 3,875

12

$ 11,683

18

Vermont

24.87%

29

$ 2,313

33

$ 9,299

37

Virginia

33.61%

5

$ 4,737

3

$ 14,094

6

Washington

31.04%

13

$ 4,426

6

$ 14,262

4

West Virginia

15.20%

48

$ 1,348

49

$ 8,870

39

Wisconsin

29.92%

16

$ 2,615

26

$ 8,739

40

Wyoming

20.14%

44

$ 2,285

34

$ 11,350

20

Dist. of Columbia

26.93%


$ 4,502


$ 16,720



May 25, 2010 in Tax, Think Tank Reports | Permalink | Comments (3) | TrackBack (0)

SALT Calls for U.S. News Rankings Boycott

SALT The Society of American Law Teachers has called on law schools to boycott the U.S. News rankings

Each spring U.S. News & World Report issues its rankings of American law schools, exerting enormous pressure on deans and faculties to reshape admissions practices and divert scarce resources. One Dean, Alfredo Garcia from St. Thomas University School of Law, Miami Gardens, FL, refused to submit statistical data this year, becoming the first to boycott the rankings.

The Society of American Law Teachers—SALT—issued a statement today urging law school deans and faculty members to work with the American Bar Association—ABA—to reduce the influence of the U.S. News & World Report rankings. Download a pdf of the full Statement. Briefly, SALT states:

  1. Chief among the rankings’ ill effects is their impact on admissions decisions in general, and on diversity in admissions in particular. Because LSAT scores figure so prominently into the computation of a school’s rank, few schools are willing to compromise their ranking by accepting “nontraditional” students whose merit is measured in ways other than a single test score. ...
  2. The U.S. News rankings’ emphasis on LSAT scores directly undercuts a school’s ability to admit a diverse class. Given the well documented but little understood performance gap on standardized tests, the emphasis on LSAT scores necessarily impacts members of groups who under-perform on such tests. ...
  3. The U.S. News rankings’ emphasis on the LSAT also affects how law schools conceptualize merit in determining which of their applicants will be successful and proficient lawyers. Although the LSAT correlates to some small degree with first year performance in law school, neither the LSAT nor undergraduate GPA are indicators of ultimate success in the profession. Recent research reveals that there are alternate ways of assessing who is likely to be a successful attorney.

May 25, 2010 in Law School Rankings, Legal Education | Permalink | Comments (17) | TrackBack (0)

Kagan Got an "A" in Tax

Kagan Transcript

May 25, 2010 in Tax | Permalink | Comments (2) | TrackBack (0)

Prebble: An American GAAR

Prebble John Prebble (Victoria University of Wellington, Faculty of Law) has written An American GAAR for TaxProf Blog.  Here is the abstract:

The President signed § 7701(o) of the Internal Revenue Code, the first U.S. statutory general anti-avoidance rule, or “GAAR”, into effect on 30 March 2010. The birth of the American GAAR was buried in § 1409 (a) of the Health Care and Education Reconciliation Act of 2010 (H.R. 4872). With § 7701(o) the muster of common law jurisdictions without GAARs is dwindling. India and the UK remain prominent hold-outs.

Section 7701(o) applies to “any transaction to which the economic substance doctrine is relevant”. A standard GAAR says that an avoidance transaction is void for tax purposes and authorizes the Commissioner to reconstruct the transaction and to tax that notional reconstruction. The economic substance doctrine operates similarly. It tells the Commissioner to disregard legal transactions and instead to tax the economic substance beneath.

The Obama GAAR has extra bite. It strikes down a transaction where the economic profit is not “substantial” in relation to its net tax benefits.

This relative benefits rule was presumably intended to reverse the result in cases like Compaq Computer Corp v. Commissioner, but the drafting of § 7701(o) betrays all sorts of compromises. Paragraph (5)(C) says: “The determination of whether the economic substance doctrine is relevant to a transaction shall be made in the same manner as if this subsection had never been enacted.” Congress seems to be saying, “We may appear to have armed the Commissioner with a GAAR. But we don’t really mean it. Everyone carry on as before”. But that interpretation is too bizarre to be tenable. On the contrary, § 7701(o) is a true GAAR that will prove a powerful weapon in the hands of the Commissioner. Notwithstanding its novel drafting, it will operate much as GAARs do in other common law jurisdictions. Like GAARs elsewhere it will become a focus of scholarly writing.

May 25, 2010 in Scholarship, Tax | Permalink | Comments (1) | TrackBack (0)

Do Property Tax Caps Work?

Wall Street Journal, The Tax Caps Cometh: Massachusetts Shows How to Put a Lid on Education Spending Increases, by William McGurn:

In Indiana, Republican Gov. Mitch Daniels has succeeded in lowering property taxes on homes to 1% of assessed value. In New Jersey, another Republican, Gov. Chris Christie, has introduced a reform package that would cap property tax increases to 2.5% each year. And in New York, Democrat Andrew Cuomo has just announced his candidacy for governor with a call for a 2% cap on property tax increases—lower than the caps proposed by two of the state's leading candidates for the GOP nomination.

How you think of property caps depends largely on how you think of government. If you see shortfalls in town and state budgets as a revenue problem, you probably think property tax caps are a very bad idea. The best examples here are all those California pols who blame all their state's budget woes on the father of all tax caps, Proposition 13—instead of on their spending like there's no tomorrow.

If, by contrast, you think of budget shortfalls as primarily a spending problem, you see a property-tax cap as a tool to control that spending.

Into this debate now comes a timely study that asks a simple question: Do Property-Tax Caps Work?  Released jointly by the Manhattan Institute and the Common Sense Institute of New Jersey, the study takes for its model Proposition 2.5. This was the measure Massachusetts voters approved in 1980, limiting annual property tax increases to just 2.5% of a home's assessed value.

While California gets the most attention, the Bay State cap helped the state shed its hated Taxachusetts label—going from the second most taxed state in the union when the proposition was passed to 23rd today, according to the Tax Foundation. In the study's executive summary, author Josh Barro puts it this way: "Proposition 2.5 has succeeded in restraining growth of property-tax collections, total tax collections, and per-pupil education spending in Massachusetts."

This study pays particular attention to the effect of the Massachusetts cap on public education. As it turns out, Massachusetts does not bear out the scare stories. Despite spending far less per pupil than New Jersey ($12,857 versus $16,163 in 2007), Massachusetts students in almost all demographics achieved better results than their Jersey counterparts.

May 25, 2010 in News, Tax, Think Tank Reports | Permalink | Comments (3) | TrackBack (0)

Ventry Presents What to Make of the Supreme Court's Denial of Cert in Textron? Today in D.C.

Ventry Following up on yesterday's post, Supreme Court Denies Cert in Textron Tax Work Papers Case:  UC-Davis Tax Prof Dennis J. Ventry, Jr. presents U.S. v. Textron: What to Make of Attorney Work Product for Regulatory Lawyers After the Supreme Court's Cert. Denial? today as part of a panel discussion on Textron v. United States: Are Tax Accrual Workpapers Protected Work Prooduct? hosted by the Section on Taxation of the Federal Bar Association in Washington, D.C.:

I want to thank the FBA for the opportunity to speak to its members on what I still think is the most important federal tax case in recent memory, even if the Supreme Court doesn’t share my enthusiasm. In fact, I’m optimistic that the cert. denial will actually prompt an ongoing discussion over the implications of attorney work product not only in the tax context but also in the larger regulatory context.

So with that in mind, I want accomplish three things today:

  1. I want to offer a few comments on the discussion that’s already transpired; 
  2. I want to talk about how the government has responded so far to its en banc victory in Textron, including its “uncertain tax position” proposal; and lastly
  3. I want to generate a discussion on improving the work product doctrine in the context of modern regulatory practices such as tax.

May 25, 2010 in Conferences, Tax | Permalink | Comments (1) | TrackBack (0)

Virginia Tax Review Publishes New Issue

Virginia Tax Review The Virginia Tax Review has published Vol. 29, No. 1 (Summer 2009):

May 25, 2010 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Judge Dismisses Sexual Harassment Case Against George Mason

Following up on my prior posts:

The Blog of Legal Times, Judge Dismisses Most of Sex Harassment Case Against George Mason Law (May 24, 2010):

A federal judge on Friday dismissed most of law professor Kyndra Rotunda's sexual harassment lawsuit against George Mason University School of Law professor Joseph Zengerle, the school's dean and the school itself. Judge Leonie Brinkema of the U.S. District Court for the Eastern District of Virginia ruled from the bench after a hearing on motions to dismiss the case. ...

The judge dismissed all claims against Polsby and the university and all but one claim against Zengerle. The remaining claim against Zengerle involves the common law tort of assault and battery under state law. A trial set for June 7 in federal court, which originally would have covered all the claims, will now be limited to the assault and battery claim.

May 25, 2010 in Legal Education | Permalink | Comments (0) | TrackBack (0)

Shell Oil Law School Rankings

Shell From Above the Law:

Shell Oil is currently advertising for an in-house position. Shell is willing to accept applications for graduates from all four tiers ... but the lower down your school is on the U.S. News rankings, the closer to the top of your class you have to be.

To be considered for this position, a candidate graduating from: a tier I law school (rated as being in the top 50 law schools nationally), must have graduated in the top 40%; tier II law schools (51-100) must have graduated in the top 25%; tier III school must have graduated in the top 10%; and a tier IV school must have graduated in the top 5%.

May 25, 2010 in Law School Rankings, Legal Education | Permalink | Comments (0) | TrackBack (0)

Monday, May 24, 2010

Bainbridge: Ranking Faculty Quality

Stephen Bainbridge (UCLA), Ranking Faculty Quality:

The core problem is to separate out three levels of metrics: those that measure the quality of an individual article (an article level metric), those that measure the quality of an individual scholar (individual level metrics), and those that measure the quality of a law school as a whole (an institutional level metric). It's not self-evident to me that metrics useful at one level tell us anything about the other levels. ...

I'm not sure what the right solution would be. We could try adapting a multi-factor index, such as a variant of the faculty scholarly productivity index, but it would have to be highly refined to be useful for law. The FPSI relies on factors that simply don't apply to law, such as peer-reviewed journals (we all know that issue), research awards (few in law), and federal grant awards (ditto).

Or we could let a thousand flowers bloom. Folks who want to measure faculty quality should use a bunch of different metrics, report them all, and let users make of the results what they will.

May 24, 2010 in Law School Rankings, Legal Education | Permalink | Comments (0) | TrackBack (0)