TaxProf Blog

Senate to Investigate Whether Transocean 'Exploited' U.S. Tax Law

Following up on my prior post, Transocean: Better at Tax Planning Than Oil Drilling:  Senate Finance Committee Chairman Max Baucus announced today that he has launched an investigation into the tax practices of Transocean Ltd., the owner of the offshore drilling rig that exploded in the Gulf of Mexico and caused the disastrous oil spill.  Sen. Baucus is questioning whether Transocean "exploited" U.S. tax law by moving its headquarters overseas, first to the Cayman Islands and later to Switzerland.

• Associated Press
• The Hill
• Wall Street Journal
• Web CPA

Seto: Keeping Tax-Subsidized Corporate Money Out of Politics

Theodore P. Seto (Loyola-L.A.) has published Keeping Tax-Subsidized Corporate Money Out of Politics, 127 Tax Notes 1476 (June 28, 2010). Here is the abstract: 

Prof. Seto discusses serious problems raised by Citizens United that affect the integrity of the tax system and proposes a possible solution.

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

Studies in the History of Tax Law

John Tiley (Queen's College, Cambridge) has published Volume 4 of Studies in the History of Tax Law (Hart Publishing, 2010):

This work contains the full text of the papers presented at the fourth Tax Law History Conference in July 2008. The Conference was organised by the Cambridge Law Faculty's Centre for Tax Law.

The matters discussed are broad and include the extent to which charges levied by the Court of Wards were seen as taxes, the seventeenth century poll tax, traders, the excise and the in early nineteenth century England and the right of the Crown's right to elect between different heads of charge to income tax. There are also chapters on taxation in the reign of King John and Stamp Duties in the 18th Century.

International tax matters include a history of company residence and a paper on the first UK-Australia Double Tax Agreement. Papers concentrating on other countries include papers on the history of income tax in Malta (1641-1949), the history of land tax in Australia, the history of the legal definition of charity and its application to tax law and a paper on the psychology of taxation as shown by the 1936 US Election.

Hacker: The Gendered Dimensions of Inheritance

Daphna Hacker (Tel Aviv University, Buchman Faculty of Law) has published The Gendered Dimensions of Inheritance: Empirical Food for Legal Thought, 7 J. Empirical Legal Stud. 322 (2010). Here is the abstract:

Inheritance is an extremely significant personal, familial, social, and legal phenomenon. Due to the significance of inheritance in wealth distribution and family relations, it is essential to uncover and discuss its gendered dimensions, which have benefited from surprisingly little empirical or legal attention. This article provides an updated state-of-the-art review of the limited available empirical data on women as legators and on women as heirs in different parts of the world. The review is based on 23 studies, including the original results from a study the author conducted on inheritance in Israel, which illuminates the reach of insights that can be drawn from an inheritance study that focuses on gender. The review shows a sharp dichotomy between the ongoing discrimination women experience in non-Western societies in relation to inheritance and the social reality in the West, in which inheritance is a rare economic space in which women enjoy privilege, power, and control. Although egalitarian inheritance laws have had a dramatic impact on women's representation in intestacy and their participation in will writing in the West, the data demonstrate that even in this part of the world, cultural patriarchal practices persist and limit women's inheritance rights and, accordingly, point to the importance of creating legal mechanisms that can counterbalance these practices. Moreover, the available data indicate the value of freedom of testation for women and the importance of ceasing to regard care as cause for suspicion in inheritance law, and instead viewing it as a practice deserving of reward. Finally, the article identifies the areas in which further research on gender and inheritance is warranted, hopefully spurring greater interest and developments in the field.

Paula Monopoli (Maryland) reviews the piece on Jotwell.

Remembering Marty Ginsburg (1932-2010)

Following up on Sunday's post on the death of renowned tax professor (Georgetown) and tax lawyer (Fried Frank) Martin D. Ginsburg, husband of Supreme Court Justice Ruth Bader Ginsburg:  over two dozen of Marty's tax friends and colleagues offer their remembrances and tributes below the fold.

• Alice Abreu (Temple)
• Ellen Aprill (Loyola-L.A.)
• Reuven Avi-Yonah (Michigan)
• Jordan Barry (San Diego)
• Linda Beale (Wayne State)
• Daniel Berman (Boston University)
• Jack Bogdanski (Lewis & Clark)
• Evelyn Brody (Chicago-Kent)
• Paul Caron (Cincinnati)
• Mark Cochran (St. Mary's)
• Sheldon Cohen (Washington, D.C. tax lawyer and former IRS Commissioner)
• Cliff Fleming (BYU)
• Jonathan Forman (Oklahoma)
• Albert Golbert (Los Angeles tax lawyer and former adjunct professor)
• James Halpern (Judge, U.S. Tax Court)
• Christopher Hanna (SMU)
• Calvin Johnson (Texas)
• Michael Knoll (Pennsylvania)
• Jeffrey Kwall (Loyola-Chicago)
• Louis Lobenhofer (Ohio Northern)
• Roberta Mann (Oregon)
• Elliott Manning (Miami
• James Maule (Villanova)
• Joel Newman (Wake Forest)
• Robert Peroni (Texas)
• Randle Pollard (Widener)
• Toni Robinson (Quinnipiac)
• Adam Rosenzweig (Washington University)
• Deborah Schenk (NYU)
• David Shakow (Pennsylvania)
• Daniel Shaviro (NYU)

Alice Abreu (Temple):

One of my favorite and most revealing Ginsburg stories is one that Marty told himself when he accepted the Tax Section's Distinguished Service Award. I was in the audience when he gave the speech and was then the Editor of the Section's NewsQuarterly. I was so taken with it that I went up to him afterwards and asked if I could have it for publication in the NQ, an invitation which he graciously accepted. Here is the link for the piece, which I think was later published elsewhere. It's quite wonderful, not the least for the admiration and love between him and Ruth that comes through loud and clear. The combination of that and the piece you put on TaxProf blog from her describing him are really quite special and inspirational. Vintage Ginsburg.

Ellen Aprill (Loyola-L.A.):

When I was at the Office of Tax Legislative Counsel in the late 1980's, we staffers would find ourselves wondering whether we had the resources -- meaning brain power and time, to make a rule we were working on "Marty Ginsburg-proof." Trying to imagine what approach he would take meant asking ourselves to do our very best work - and more. In recent years, whenever I would see Marty at a tax meeting or conference, he would always have a kind word and the twinkle in his eye that reflected his zest for life. It is hard to imagine the tax world without him. It will be a professional world that is less challenging, less interesting, and less fun.

Reuven Avi-Yonah (Michigan):

I met Marty several times and once had the pleasure of enjoying his wonderful cooking skills. He was a great mentor- when I was just beginning to teach, he told me that the only way to teach tax law is to understand what the loopholes were that various provisions aimed at closing, and therefore it is essential to teach cases that have been overruled by legislation. I have followed his advice ever since. He will be sorely missed.

Jordan Barry (San Diego):

I met Marty while working as an associate at Fried Frank, before I went into academia. He was in the Washington office and I was in the New York office, so we didn't meet right away, but his reputation preceded him -- partners in our office talked about how much he knew and how good an attorney he was. Still, I remember how impressed I was when I first saw him in action in front of a client. He was phenomenal -- relaxed, supremely knowledgeable, completely in control of the situation. I have worked with many accomplished tax attorneys, and I have never seen any of them perform as well as Marty did that day.

But of course, Marty's personal qualities were so much more important than his skill as a tax attorney. He was vivacious and he had a great sense of humor. He was very kind. He was generous with his time, always happy to help anyone who needed it. He was always happy to talk about his family, which was clearly his greatest source of pride and joy in life. He was a real presence who cast a long shadow, and he will be sorely missed.

Linda Beale (Wayne State):

As an associate at Cleary Gottlieb who had come to tax law later in life than most, I found the Ginsburg & Levin work on mergers & acquisitions indispensable from day one, when I was charged with writing my first acquisition memo. As my years in practice progressed, I realized that Ginsburg’s work provided a solid foundation for transactional tax practice. I never knew him personally but, like every tax lawyer, I owe him a considerable debt of gratitude for helping make a complex system of taxation much more comprehensible, and practice more doable, than they otherwise would have been.

Daniel Berman (Boston University):

One of the lesser-known fringe benefits of working in tax policy positions with the federal government is the opportunity to get to know many leading members of the private tax bar as they contribute to the work of the government. Getting to know Marty Ginsburg was a real treat. He was unfailingly thoughtful, helpful, humble, and gracious. I especially appreciated the effort he made, when I became an adjunct professor of law at Georgetown, to take me around and introduce me to Dean Areen and members of the faculty. When the best tax lawyer in the United States doesn’t take himself too seriously, you know he’s someone special! We will feel Marty’s absence for a long time.

Jack Bogdanski (Lewis & Clark):

Marty Ginsburg, hands down the most gifted tax lawyer on the planet, died yesterday. Not only was he a spectacular advisor, advocate, teacher, thinker, and writer, but also an accomplished chef, and a hilarious comic when he wanted to be, which was often.

Leave it to Marty to depart this world when matters of death and taxes are unsettled. He and his previously departed colleagues are probably laughing it up right now over the fact that nobody knows for sure what the tax "basis" is in the stuff he left behind.

Our condolences to his family and to his many friends. There won't be another like him.

Evelyn Brody (Chicago-Kent):

I took Business Planning from Marty in his first year at Georgetown (and my third) -- he moved to DC from New York, of course, to follow his wife, who was appointed to the D.C. Circuit. At the time Marty sported short-sleeve dress shirts and ties that came down just below his sternum. (In recent years he became quite the snazzy dresser.) The course was team taught by a corporations professor; Marty loved to pop up with, "But what are the TAX implications of that?" I still use my favorite Marty line on my students to get them to relax:  "Basic tax, as everyone knows, is the only genuinely funny subject in law school."

Paul Caron (Cincinnati):

It is safe to say that we will never see the likes of Marty Ginsburg again -- spectacular teacher, co-author of the seminal corporate tax treatise, brilliant practitioner, and joyful man. Georgetown has the opportunity to honor this tax legend when it fills the Martin D. Ginsburg Professor of Tax Law chair endowed by Ross Perot in recognition of Marty's work in structuring GM's acquisition of Electronic Data Systems. I can think of no higher honor in the tax world. 

Mark Cochran (St. Mary's):

About twenty years ago I had the privilege of taking a course on Installment Sales that Marty Ginsburg offered as part of the in-house education program at the IRS Chief Counsel’s Office, where I was serving as Professor In Residence. Marty’s reputation preceded him, and he more than lived up to it. The course materials, which still sit on my bookshelf in a three-ring binder, were elegantly presented and deceptively simple, demonstrating Marty’ knack for putting his finger on the statutory soft spots. In the classroom, Marty was delightful. His technical skill was remarkable, but his gentleness and self-deprecating humor were an unexpected treat.

Sheldon Cohen (Washington, D.C. tax lawyer and former IRS Commissioner):

I first met Marty in 1964 shortly after I became Chief Counsel of the IRS. I had grown up as a tax lawyer in that office and had the idea of sponsoring an educational opportunity for the young lawyers in that office to meet and be taught by some of the best legal minds in the tax field. It would provide an educational opportunity but at the same time would help me develop a cohesive atmosphere and spirit in the office. I searched for the lead prof and was steered on to a young relatively new prof at Columbia, Martin Ginsburg. He gave the first seminar on "collapsible corporations" a new and hot subject in 1964, not talked of at all today. Since that time in 1964 Marty and I have been close friends.

When Marty was in NY, he was only a phone call away and we would call and chat when the occasion was appropriate. When Marty came to town in the 80's after his wife's appointment to the D.C. Circuit Court, he and I discussed the teaching opportunities at the local law schools. One of the great opportunities that this gave me was the chance to see Marty and Ruth on a more regular basis. I was fortunate to be a the White House on the day President Clinton announced Ruth's nomination to the Supreme Court and I stood in the rear to hear the announcement. It was a thrill for me, I can only imagine how Marty felt as he had such pride in Ruth's job to that point. Faye and I would see the Ginsburg's on regular occasions as I have been the Treasurer of the Supreme Court Historical Society and they attend and participate in the programs of the Society regularly. He was a great lawyer, teacher and most of all friend. We and the tax system will miss him dearly but we and the world in which he lived are so much better because he taught us so much.

Cliff Fleming (BYU):

When I was Professor-in-Residence in the IRS Chief Counsel's Office during the 85-86 year, I once found myself in a meeting with senior staff where I was arguing for a taxpayer-favorable result with respect to a particular type of corporate transaction. When I finished, a senior executive said something to this effect: "your argument sounds right but we're not going to adopt it because I know that if we do, a week later Marty Ginsburg will be in here using it as precedent for approval of a transaction that we never imagined. Meeting over."

Jonathan Forman (Oklahoma):

Marty was a real gentleman, and he was always generous with his time and vast knowledge. I will miss him.

Albert Golbert (Los Angeles tax lawyer and former adjunct professor)

Professor Martin Ginsburg, known to all of us as "Marty," was always a favorite speaker at the annual or periodic meetings of the California Tax bars. We even sent him a offer to speak whenever he had the time or felt the need for a bit of California sunshine. I am not aware of any other speaker who had a standing invitation to address our tax bars any time he or she were willing to make the trek. But Marty was different.

There are any number of speakers who can be informative; others who can do so and also be enlightening. Still others exist who are entertaining. None of them could do what Marty did in terms of educational quality coupled with unparalleled humor. Whether he was reinventing the whole notion of corporate reorganization or dissecting a leveraged buy-out, he had the rapt attention of everyone within earshot. His disquisitions were liberally salted with side-splitting irony or satirical musings, that kept us all amused even as we were being amazed by his erudition. The laughter emanating from his programs could be heard at the far ends of the building, and the glow from his presentations lasted throughout the day.

We shall always remember how Marty amazed us by his ability to turn statutes inside out and upside down while opening new ways of thinking about the extent and limitations of the laws we love to hate and hate to love. Marty was always a major attraction and draw at our programs, and all of us who were witness to his presentations were educated by them and touched by him. We will miss him.

James Halpern (Judge, U.S. Tax Court):

For almost 10 years after I joined the Tax Court I lunched regularly with Judge Ted Tannenwald and Marty Ginsburg. I loved those lunches with two giants of the tax bar. At the memorial ceremony to honor Ted, both Marty and I spoke in praise of Ted. I described how, after those lunches, I would recount for my wife over dinner the delightful conversations we had had at lunch that day. After one of the early lunches, knowing both Ted and Marty (and, of course, me), my wife asked: "Who gets to talk first?" I relayed the question to Ted, who answered for both himself and Marty: "We all do!" Marty and I continued those lunches after Ted died, lately with Professor Ron Pearlman. I loved those lunches. Marty was a good man, a fine teacher, and a true friend. I will miss him.

Christopher Hanna (SMU):

I still remember my first contact with Professor Ginsburg (even though he always told me to call him "Marty," I felt more comfortable addressing him as "Professor Ginsburg"). I was a junior, untenured faculty member and had co-authored a draft of an article on installment sales. One part of the article, for which I was responsible, generated some negative comments from reviewers who thought I had made a "big mistake." Not knowing who to turn to, I decided (with some trepidation) to send a fax to Professor Ginsburg and ask for his opinion on the issue. The next day, I received a fax from him, which read: "I agree with you and cannot guess what the big mistake might be." I still have that fax. I always appreciated Professor Ginsburg taking the time to respond to a question from a junior tax law professor. He really was one of the true giants in our field.

Calvin Johnson (Texas):

Martin Ginsburg gave the most enthralling example of the art of teaching tax that I have heard. In a symposium on I believe on tax simplification he described the history of the reasonable basis standard for positions on a tax return. His example was a business cost, I think a prepayment, which generally accepted accounting would clearly have capitalized. The cost had not expired by year end, it was related to future income like an investment, and it was properly matched against the future income. The question was whether the taxpayer could deduct it immediately under ABA ethics and whether a tax adviser could tell the client to expense it. Marty recounted the history of the reasonable basis standard within the ABA. Proponents analogized the tax return to a complaint initiating a law suit, and stuck to the analogy. Opponents, Marty explained, showed that a tax return is different from a complaint. You can go to jail for what you put on tax return, while there is a liberty right of petition to the courts for redress, even on a quite novel theory. Tax returns are sworn to be correct. The defendant joins suit against complaints, but the IRS audits a return in half a percent of the cases. Marty had us all very skeptical about the low ethical stance of the ABA on return position in his case and then he pulled the rabbit out of the hat: The IRS had ruled in 1943, I believe, that the very expense could not be capitalized. The taxpayer had incurred the cost in 1940 when rates were low and wanted to use the expense against the extraordinary tax rates enacted in 1942, and the IRS representing Uncle Sam ruled tactically. Marty did not say it on that occasion, but it was an illustration of his recurring warning to the IRS: Beware of the rod of Aaron, which will turn into a snake and bite you on the backside. On that day, he had his audience in the palm of his hand.

When I started practice at Paul, Weiss in the early 1970s, Ginsburg’s unpublished outlines were passed around the law firms like samizdat. They were a godsend to a young associate trying to figure out the logic of triangular reorganizations or the limits of installment sales. His outlines had the same clarity and thoroughness that made his “Mergers, Acquisitions and Leveraged Buyouts” so great, and of course on top of all the lovely articles he has written, Mergers and Acquisitions” is the masterwork that celebrates him as such an important figure in tax. Or that and building up Weil Gotshall entirely from scratch and serving on the Columbia and Georgetown Law faculty.

One the great pleasures of being Professor in Residence at IRS Chief Counsel was that Marty’s office was across the street and I could have lunch with him over my stay. I never lose an opportunity to talk to Marty about tax issues, or rather now, alas, I must say I never did. I was often on the other side of the issue under discussion. He represented venture capital funds, and I think the funds are nuts to force C corporations on their portfolio ventures and bury their tax deductions. He is mostly responsible for the liberalization of installment sales in the 1980 Act, and I think the liberalization made great tax shelters and that installment sales should be seriously cut back. I think Elkhorn Coal represents the right norm for spinning off unwanted assets, and he believes in Morrison Trust easy spin off rules. He did represent his clients. Still I would walk the distance between us, if I could, for the opportunity to talk some tax, even if just for one more time. He was always charming, always clear and always a delight.

Michael Knoll (Pennsylvania):

Over the years, I learned much from Marty -- reading his writings, hearing him speak, and occasionally talking with him. I particularly remember Marty describing how the tax system in one of the Scandinavian countries for many years discouraged marriage. He described in great detail the back and forth between taxpayers and tax collectors as to how the tax system would try to assess whether previously legally married couples who had divorced in response to the law were in fact married (same address, cohabitation, etc.), but that the authorities were stymied in collecting the marriage penalty from couples that never married. As a result of the tax system, the standard for a committed relationship was to become engaged (to be married) and just never marry. However, when the law changed and the marriage penalty was eliminated, many couples including those with grown kids who had been together for many years, decided to tie the knot. I remember Marty finishing the story by describing attending such friends' wedding. I often use this story in my basic tax class as an example of how tax can affect behavior.

Jeffrey Kwall (Loyola-Chicago):

I don't recall speaking to Marty in person, but I was privileged on several occasions to talk with him over the phone to get his reactions to drafts I had asked him to read. No matter how busy he was, he was always receptive to reading and commenting on the work of a young colleague. And he never did a superficial read; rather, he provided detailed, thoughtful comments and insisted on reviewing his comments over the phone no matter how long that might take. His comments were always helpful and his generosity in time and spirit will always be remembered.

Louis Lobenhofer (Ohio Northern):

I only met Prof. Ginsburg once, at the NYU Graduate Tax Workshop, but I was very impressed by his encyclopedic knowledge and his brilliant analysis of tax issues. In addition, both in his writings and in the talks I heard him give, he had the rare ability not only to teach all of us in the tax world but to do so in a witty, engaging, and delightful manner. I will miss him for both his wit and his wisdom in generously sharing his brilliance with the rest of us. Each of the past several years, and probably every year until I retire, I will quote Marty on the first day of Federal Income Tax to the effect that "Federal Income Tax is the only truly humorous course in law school," in an attempt to get the students to let go of their fears and engage the subject.

Roberta Mann (Oregon):

Marty represented the taxpayer in my first adverse conference at the IRS, as a young docket attorney in Corporate. I wondered if the deferential attitude of my superiors towards Marty was the usual tone set by government attorneys towards taxpayer's counsel (No.) Later, when I was teaching at Georgetown as an adjunct, I attended a reception for faculty, and spied Marty across the room. I charged over to greet him and bask in his wisdom. My husband asked, "aren't you going to say hello to the Justice?" In my tax nerdiness, I had shoved Justice Ruth Bader Ginsburg aside to greet my hero. His speech in accepting the ABA Tax Section Distinguished Service Award is my all-time favorite. As I recall, he started with something like, "Perhaps you are all wondering why I am receiving this award, as my entire practice has consisted of making wealthy people wealthier. Like all good things, it is because of my wife." I'm sure that you can find the precise quote, but I prefer to remember it this way.

Elliott Manning (Miami):

It is hard to figure out how to begin writing about Marty. We met more than fifth years ago at Harvard Law School when he returned from the military stint that interrupted his law school career after the first year. During the next two years, we took the same tax classes, including the Ernie Brown seminar., and studied together for both, including commiserating about our seminar papers. In addition, I officially edited Ruth's contribution to the Supreme Court note on Libson Shops, or, more accurately co-edited. During the two years, I also had more than one opportunity to sample Marty's famous cooking talents, and to meet the three year old Carol. We started practice in New York, at the same time, at different firms, but my practice was interrupted by a six month army reserve stint. During that time Marty started, and dropped out of, the NYU LLM program on the ground that it would take two years to cover what we already had, and that by that time Ted Tannenwald would have taught him the rest. We served together on various NYSBA Tax Section projects, etc. We also visited at Stanford Law School in Spring 1978, on sabbaticals from our respective firms. Indeed, Marty's sabbatical, which enabled him to be with Ruth who had a fellowship at the Hoover Institute, was negotiated in part on the basis of mine. There was some kind of virus in the air, because it inspired both of us to go into academia. Marty made it a year before me, largely because I was delayed by family issues. We also spent ten years together on the CCH, Tax Transactions Library Board, which led to his (and Jack Levin's) Mergers and Acquisitions volume(s). Marty conceived the idea for the tax transactions libary and assembled a great group of tas experts, and served as an extremely effective chair, but his timing was off. The project was essentially killed by the early '90s recession and by changes in the tax publishing business, but, of course, the mergers and acquisitions volumes lived on.

Since I cannot really add anything to what has been and will be said about his magnificent sense of humor, and ability to come up with the right phrase at the right time, I will leave it there. We will all miss him and not see his like again.

P.S. I notice in the item in the Miami Herald and others that Marty is referred to as Ruth's husband. Marty would have relished that. He often referred to himself as an American member of the Dennis Thatcher Society.

James Maule (Villanova):

Most tax law professors’ names – other than those in whose classes I sat -- came into my brain (whether through my eyes or ears) when I began teaching, though some had registered on account of research for articles I wrote before I began to teach. Marty Ginsburg’s name was one of very few whose name was uttered while I was still a student, by someone teaching a tax class. I thought it was remarkable that one tax law professor would refer to another tax law professor in glowing terms, though I’ve since come to understand why. Marty Ginsburg was one of those special tax lawyers turned tax law professor who brought practical insights into his teaching, never lost touch with his client experience roots, and contributed in countless ways to a better tax law education world and a tax practice world. If there were a tax law professor Hall of Fame, he would be in it. He would, I’m sure, laugh at both the idea of a tax law professor Hall of Fame and at the suggestion that he be in it. That’s the way he was, and his departure is our loss.

Joel Newman (Wake Forest):

In the summer of 2008, I team taught a comparative tax course in Venice with Marty Ginsburg, while my colleague, Suzanne Reynolds, team taught with his wife, Justice Ruth Bader Ginsburg.

It was a delight to teach with Marty; the students and I learned a great deal. It was an even greater delight to get to know the Ginsburgs as a couple. Marty teased his wife, constantly. For her part, she would occasionally smirk, and, on at least one occasion, jabbed him with her elbow.

Dean Morant and his wife spent some time in Venice while the Ginsburgs were there. Before he arrived, Dean Morant e-mailed to ask me to invite the Ginsburgs to have dinner with them. I happened to see Marty, sitting alone, and told him, “The Morants would like to have dinner with you on Wednesday.” “That’s fine,” Marty said, “but what about my wife?”

According to Marty, his wife was a world-class shopper. One day, my wife and I were walking toward the Piazza San Marco, and met the Ginsburgs coming the other way. “Don’t bother going to Ferragamos’s,” Marty warned. “Ruth just left, and she cleaned out the place.”

At dinner one evening, Justice Ginsburg complimented my wife, Jane, on her pendant. There was a story behind that pendant, so we told it. Jane and I were in the North Carolina mountains, some 85 miles from our home. She admired the pendant in an antique store, and I urged her to buy it. She wouldn’t. She said that it was enough to admire it in the store. The next time she was out of town, I drove back to the mountains and bought it for her. The Ginsburgs listened in silence. Then, Marty turned to his wife and said, “Ruth, you know that I would never do anything like that for you.” What made it so funny is that that was exactly the sort of thing that Marty would have done for his wife.

It was a privilege to spend time with an amazing tax lawyer and tax teacher. It was even more profound, however, to watch the interaction of a truly amazing couple.

Robert Peroni (Texas):

I have had the great pleasure to spend time with Marty in various settings over the past 20 years, including briefly as his faculty colleague when I was a visitor at Georgetown during the Fall 2009 semester. He was a remarkable human being in all respects and we have truly lost a giant in the tax law field. He will be sorely missed by all who had the chance to spend any time with him whether in a professional or personal setting. I am sure he is now entertaining his fellow occupants in Heaven with his great wit and sense of humor. I extend my deepest condolences to Justice Ginsburg and to the other members of Marty’s family.

Randle Pollard (Widener):

During my attendance at Georgetown University Law Center (GULC) in the late 1980’s, I made every effort to avoid taking Professor Ginsburg’s tax classes. Professor Ginsburg had the reputation of being the “hardest” professor at GULC and I allowed peer pressure to sway me from taking his classes (I took my tax classes from other professors). In my later years, I learned what I missed by not having been taught “tax” by such a fine professor. Rest in peace and God bless Professor Marty Ginsburg.

Toni Robinson (Quinnipiac):

When I was a law student at Columbia, I was a research assistant to Professor George Cooper. George was, at the time, writing a book on how high-income taxpayers passed large amounts of wealth on to subsequent generations without the imposition of tax. I and my fellow research assistant conducted many interviews on our own. But, George joined us for interviews with a few of the top tax lawyers in New York. One of them was Marty. I was amazed at his willingness to share his “secrets,” knowing that they would become public. His demonstration of an interest in good tax policy, even though revealing his techniques might lead to changes in the law, was an important lesson to an aspiring tax lawyer. That meeting with Marty, in part, led me to active membership in the Tax Section of the ABA, where lawyers, like Marty, often put their interests in the law above their financial interests in maintaining strategies for clients.

Adam Rosenzweig (Washington University):

Although I did not know him as well as I wish I had, Marty Ginsburg was a great teacher and inspiration to me, as well a generous supporter of my career. I almost missed out on one of the better experiences of my law school career – taking Marty Ginsburg’s Structuring Venture Capital and Private Equity course – due to the immense reputation which preceded him at Georgetown. Marty was renowned for being one of the most thoughtful, entertaining and funny professors at Georgetown while also being one of the most difficult, intimidating and challenging. Due (in part) to my fear of the latter, I had not taken a course with Marty until my third year, at which time I fortunately decided to take the risk and enroll in his course. It was in this class where I learned the true elegance of structuring a transaction to navigate the shoals of not only the tax law, but also securities law, bankruptcy law, contract law, ERISA, and others, as well as the unique skills and value that a lawyer can bring to a transaction.

To this day, I carry two distinct memories from Marty’s class: first, “there is always a way” … meaning that a good lawyer should always be able to find a way to resolve a legal issue, and second, never try to win a battle of wits with Marty Ginsburg. I am still not sure which was the more valuable lesson. Marty’s humor was legendary, and I remember to this day how it could be supportive and acerbic, sarcastic and inspiring, all at the same time. The stories about his experiences with Ross Perot and the GM/EDS tracking stock and horizontal double dummy transactions, among others, exposed me to a world of the law that I had never before conceived was possible.

Marty was instrumental in helping my career by agreeing to act as a reference for me on multiple occasions, although he may have never appreciated just how much so. It soon became abundantly clear that one word from Marty Ginsburg opened doors that might have otherwise been closed. He advised me on tax practice in New York when I was deciding where to begin my career as an associate out of law school. Later, when I was beginning to consider entering academia, I asked Marty what he thought it took to be a good scholar and teacher; he answered in typical fashion that he didn’t know since he was “just” a tax lawyer. When I began as a Visiting Assistant Professor at Northwestern I sent him an email thanking him for his help obtaining the position and promptly received a response thanking me for writing him such a thoughtful note. When I was asked on the law professor hiring market which teacher of mine I would like to emulate, my answer was Marty Ginsburg. I continue to aspire to this goal.

In my experience Marty Ginsburg was truly a brilliant, witty, and inspiring teacher and lawyer. I am honored to have been a student of his, and the legal community has suffered a great loss with his passing.

Deborah Schenk (NYU):

As everyone will note, Marty was a giant. Among Marty's many contributions to the tax law were his efforts on behalf of tax simplification. Unlike many of us, Marty actually had a major effect. He was the driving force behind the Subchapter S Simplification Act as well as the Installment Sale Simplification Act. Marty visited at NYU the semester that Ruth's appointment to the Court was being considered. Although I had many enjoyable conversations with Marty from which I learned a lot about triangular mergers and the like, I was struck most by his devotion to his family. He worked tirelessly to promote Ruth's appointment and turned us all into cheerleaders for the cause. Whenever the subject of his children came up, perhaps by mentioning an article of Jane's that I had seen, he acknowledged her success, but promptly told me about James' latest recording. And of course I laughed more that semester than perhaps any other. His wit and wisdom will be sorely missed.

David Shakow (Pennsylvania):

Marty had an incredibly encyclopedic knowledge of tax law and authorities, subject to instant recall, which would surely have excited envy if displayed by someone else. But you couldn't feel negatively about Marty for two reasons, at least. First, he was a very nice man, and that became obvious to anyone who spent the briefest time with him. Second, he was very generous. I remember sitting in on a talk Marty was giving to a group at the IRS on tax straddles, an issue I had been working on at Treasury. In the middle of the talk, Marty turned to me to explain some aspect of the tax straddle structure. The memory of Marty needing me to explain something warmed my heart for months, until I woke up one day and realized that Marty undoubtedly could have explained it himself--he was just finding a friendly way to be nice to me.

Marty also had an incredibly practical approach to tax issues. I sat in once on an ALI project's discussion of net operating losses. The issue on the table was allowing refundability of NOLs. Stanley Surrey was there, and he was pained at the prospect but hadn't found a way to convince the advocates of the error of their ways. Marty took a direct approach. He said, basically, "let me at 'em." In other words, he didn't bother to worry through the niceties of the proposal. He basically warned those in favor of the idea that, no matter how well they thought they could draft a provision, the tax bar would find a way to exploit the proposal to achieve unintended consequences.

Marty was the sort of person you were always happy to see, and he made it clear that he was happy to see you too. He was irrepressible and irreplaceable.

Deborah Schenk (NYU):

 

Daniel Shaviro (NYU):

I was very saddened by the news of Marty's death, though I had known he was ill. Truly a wonderful and lovely man (gentle, ironic, appreciative of life), as well as a preeminent and brilliant legal scholar from a different era.

He was a delightful colleague for a semester at Chicago many years ago, although I suspect the students still have nightmares thinking about the final exam he gave. (I thought it was pretty challenging.) Then again, he probably graded it gently.

In Tax I, I always mention his article "The Leaky Tax Shelter," along with his pretended initial tax shelter idea, which was something like: "Give me your money and I'll run off to Mexico, then you can simply claim a loss deduction!" (Leaving aside 165 limits et al -- but the point he was making, of course, was that the key to a tax shelter is NOT actually suffering the losses you deduct.)

Please visit Georgetown web page, In Memory of Professor Martin D. Ginsburg. In lieu of flowers, donations in Marty's memory may be made to:

The Chicago Classical Recording Foundation (CCRF)
1205 West Balmoral Avenue
Chicago, IL 60640

ABA Proposes Changes to Law School Accreditation Standards

The ABA Section of Legal Education & Admission to the Bar seeks comments on these proposed changes to the law school accreditation standards:

• Proposed Chapter 3 -- Student Learning Outcomes
• Proposed Rule 24 -- Complaints Process
• Download Appeals Process Memo
• Proposed Transfer Credit Standard
• Proposed Criteria for Approval of Study Abroad Programs
• Proposed Criteria for the Approval of Summer & Intercession Program

Comments on the proposed student learning outcomes standard must be submitted by July 1.  The remaining proposed changes will be considered at a hearing in Chicago on July 23; comments and requests to speak at the hearing are due by July 22.  All comments and requests should be submitted to Becky Stretch,

Rapper Method Man Pleads Guilty to Tax Evasion

Following up on my prior post, Rapper Method Man (Clifford Smith) Arrested on Tax Charges:  Mr. Smith pleaded guilty on Monday to evading New York state taxes and paid $106,000 in restitution.

• Associated Press
• BBC
• E! Online
• New York Daily News
• TMZ

(Hat Tip: Justin Axelrod.)

Texas Tech Prof Loses Endowed Chair After Surfing for Porn With Video Feed Still on After Teaching Distance Learning Class

KCBD, Students May Have Witnessed TTUHSC Professor Surfing for Sexual Material:

50-year-old Texas Tech Health Sciences Professor Rod Hicks was instructing students this week from Austin via teleconference. We're told that when the class ended, he left the video feed open. This is when students on the other side of the feed saw Hicks surfing for sexual material. ...

We've learned through an open records request that Hicks was removed Thursday from his professorship of the endowed chair.

Georgetown Names Fordham Dean Bill Treanor as VP & Dean

Georgetown today named Fordham Dean William Treanor as its new Executive Vice President and Dean of the Law Center, effective Aug. 16:

Treanor joins the Law Center from Fordham University, where he has served as dean of Fordham Law School since 2002. ... Treanor has served on Fordham Law’s faculty since 1991, first as associate professor and then professor before being named dean. As dean, Treanor worked to enhance the academic reputation of Fordham Law by strengthening the school’s clinical program and its global focus. ... From 1998 to 2001, Treanor served as deputy assistant attorney general in the U.S. Justice Department’s Office of Legal Counsel, where he was responsible for supplying advice to the White House and U.S. attorney general.

CBPP: Proposed Unlimited Estate Tax Exemption for Farms Is Misguided

The Center on Budget and Policy Priorities today released Unlimited Estate Tax Exemption For Farm Estates Is Unnecessary and Likely Harmful, by Gillian Brunet & Chye-Ching Huang:

Proponents of repealing the estate tax have made farmers, along with small business, the face of their cause, driving some policymakers to push for special preferences for farms in estate tax law. One of the most radical of these proposed changes is an unlimited estate tax exemption for farmland, recently introduced by Rep. Mike Thompson (D-CA) in H.R. 5475. This approach is seriously misguided, for three basic reasons.

First, there is overwhelming evidence that the estate tax does not pose a significant problem for farmers. The Urban-Brookings Tax Policy Center estimates that fewer than 110 small-farm estates in the entire nation would likely face the tax in 2011 if Congress reinstated the tax at its 2009 levels, as President Obama has proposed. Moreover, estate tax opponents have not been able to produce a single case in which a family farm had to be sold to pay the tax, even before the 2001 tax law began phasing down the tax significantly.

Second, an unlimited exemption for farmland would promote tax sheltering by giving wealthy individuals whose primary occupation is not farming a strong incentive to sell financial assets and buy up large tracts of farmland in order to avoid paying the tax. In examining an earlier proposal to exempt farmland, the Tax Policy Center concluded that such an exemption “would make the estate tax essentially voluntary for the very wealthy,” because of the large tax shelter that it would create.

Third, an unlimited farmland exemption could hurt ordinary farmers by driving up the price of farmland as wealthy individuals sought to buy farmland for use as a tax shelter. This would make it harder for young aspiring farmers to enter the farming industry and for families to hold on to true family farms.

Alternative Careers for Law Grads

New York Law Journal, Alternative Career Paths for Those With a J.D.., by Katherine Frink-Hamlett:

Faced with a tepid legal marketplace, law students and recent graduates (whether deferred, downsized or simply dismayed) need to rethink their career strategies to adapt to this brave new world. With significantly fewer entry-level associate positions available, now is the time to consider alternative opportunities that may not have initially appeared on your radar screen. ...

[T]here are several careers available to lawyers, including recent law school grads, that go beyond the so-called traditional practice of law. Here, three specific areas will be considered: procurement, compliance and legal administrative opportunities. ...

In addition to procurement, compliance and legal administrative opportunities, there are a host of careers that recent graduates can consider, ranging from contract administration to legal publishing. Even in this challenging market, a law degree can provide meaningful career opportunities for law students and recent grads. Stay flexible in your approach, be willing to look beyond the obvious, and just hang in there. There's a place for you; it's just a matter of time.

Town Wants Princeton to Increase Payments in Lieu of Taxes

Bloomberg, Princeton as ‘Hedge Fund’ Foiling Residents Seeking Tax Share:

Princeton University, the fourth- richest institution of higher education in the U.S., paid more than $10 million last year to its prosperous New Jersey community. Municipal officials and residents say the college should do more.

The university would pay about $28 million in additional property taxes if all of its land were taxed, said Princeton Borough Councilman Kevin Wilkes. The college owns 43% of the borough’s assessed land value and 13% of adjoining Princeton Township’s, Wilkes said. ... 

It’s the latest round in the town-gown faceoff, as U.S. municipalities still reeling from the economic crisis turn to their local universities, whose land holdings are mostly tax-exempt, to close budget shortfalls. Those institutions say they aren’t in a position to help: They are also scrimping to save money through program and job cuts after record endowment declines. Princeton University’s investments lost 24% in the year ended June 30, 2009. The total value of the endowment fell 23% to $12.6 billion, from $16.3 billion the previous year. ...

Just one third of 30 top research universities made regular voluntary payments in lieu of taxes to their cities or towns, according to a Chronicle of Higher Education survey in January.

Tensions in Princeton have been mounting since a standing- room-only meeting in April 2009, called “Why Princeton University Should Pay Its Fair Share of Property Taxes.” About a dozen people booed Kristen Appelget, the university’s director of community and regional affairs, as she spoke about all the college had done for its neighbors, directly or indirectly, said David Goldfarb, a Princeton Borough councilman. ...

“Taxpayers are subsidizing the university,” said Sue Nemeth, a Princeton Township committee member. “The intangible benefits the university offers are lovely but we can’t pave the streets with them.”  Nemeth cites what she calls the generosity of other wealthy Ivy League colleges. Harvard University, which has the largest university endowment in the U.S., made $4.14 million in voluntary payments in lieu of taxes in 2009 to Cambridge and Boston, the two cities where its campuses are located. Yale University, which has the second-largest endowment in higher education in the U.S., increased its annual voluntary payment in lieu of taxes to its hometown, New Haven, Connecticut, to more than $7.5 million in 2009 from $5 million. Princeton University’s financial contributions to the town significantly exceed those of peer institutions when measured as a percentage of the municipal budget. ...

Daughter Sues Father for Failing to Pay for College

College Grad Sues Father to Recoup Tuition Costs (Connecticut Law Tribune):

It's not news that some children, especially as they hit their teenage and college years, don't get along with their parents. But even experienced attorneys say it's rare when the disagreements grow to a point where litigation is required. So consider the odd case of Dana Soderberg, who went to court to force her father to live up to a deal to pay her tuition at Southern Connecticut State University. ...

Her parents, Howard and Deborah Soderberg, of Stratford divorced in 2004. Upon splitting, they agreed that Howard, a property developer, would be responsible for the education costs for their three children, Dana, Amanda and Erik.

Dana's experience had evidently taught her that her father had a tendency not to follow through with paying for things. So she persuaded him the following year to enter into a written contract obligating him to pay her college tuition until she was 25, along with other school expenses such as textbooks, and her car insurance.

As part of the agreement, Dana would make an effort to apply for student loans and Howard Soderberg would pay off those loans. Co-signing the agreement was Howard's sister, Patricia.

Howard delivered on his word through March 24, 2007. But when it came time for Dana to begin her senior year at Southern Connecticut, Howard Soderberg refused to pay the bills. And so Dana got a $20,000 loan to pay for her last year of college, with her mother co-signing.

Dana finished up school and then filed a breach of contract lawsuit in New Haven Superior Court against her father for failing to pay for her senior year of college.

The father represented himself in a two-day trial. He argued that Dana breached their agreement by not making reasonable efforts to apply for student loans, by failing to attend classes full time and by not providing him with receipts for tuition and other school-related expenses.

More iPad Tax Adventures

Following up on last week's post, How to Get Your Dean to Buy You an iPad: Forbes, A Financial Advice Wonk's Further iPad Adventures: A New iPad User Finds Glitches and Gleans Solace and Enlightenment from Unlikely Sources, by Deborah L. Jacobs:

Just a week ago, in "A Financial Advice Wonk Falls For The iPad," I described how I had fallen in love with the gizmo and was laboring to make it into a workhorse I could take with me on a trip to Tibet. (I was delighted to discover three U.S. Tax Code apps available, the cheapest for just 99 cents, and that I could manipulate the size of type on the iPad and ditch my reading glasses.)

Since then, I've run into some additional glitches, but also gotten some comic relief from the comments of other tax and law geeks. Robert W. Wood, of Wood & Porter in San Francisco, who writes frequently for Forbes.com as the Tax Lawyer, wrote in an e-mail that he had enjoyed the column, "Plus, I learned that the Internal Revenue Code is worth 99 cents." Paul L. Caron, [Associate] Dean at the University of Cincinnati College of Law, posted on his popular TaxProf Blog a mention of my column under the priceless headline: "How to Get Your Dean to Buy You an iPad."

Ed Slott, a Rockville Centre, N.Y. CPA and IRA expert, noted that he had just received the Summer 2010 edition of what tax geeks call the IRC and regulations--eight books, each with thousands of pages in microscopic type--and could vicariously enjoy the thought of my "scanning through the Code in large type." But he warned that together the IRC and regulations might be a memory hog for my iPad. "The Code is two volumes, the Regs (explaining the Code) is six volumes. You'll have no room left for fun!" he warned. I appreciated his concern, but it turned out to be unfounded; the Code and Regs together consumed a mere 48.3 megabytes, and my iPad came with 64 gigabytes.

NY Times: Student Evaluations, Part Two

Following up on last week's post, NY Times Debate on Student Evaluations:  New York Times, Student Evaluations, Part Two, by Stanley Fish:

The deleterious effects of student evaluations extend beyond the personal injuries these comments rehearse; they infect the entire system of higher education. Teachers who fear (correctly) that student evaluations will determine their fate become stand-up comedians — wave your arms around, praise students excessively and “dress sharp,” advises Dr. Bob — and alter their grading policy in an effort to be liked. Since “student evaluations are driven almost entirely by the perception of grades” (Troglomorphic), grade inflation — “an insidious weed choking out real education” (vince) — “is inevitable.” Once it gets going, grade inflation feeds on itself and initiates a race to the bottom, for “just as teachers in public schools will lessen their effectiveness by teaching to the test, college teachers can lessen their effectiveness by teaching to the evaluation” (Roger Bullard). ...

There are, of course, dissenters, and they raise two points: (1) that I display a profound lack of respect for students, and (2) that I offer no alternative to student evaluations and thus seem to leave students, parents and society without protection against bad and unprofessional teaching. (This is a concern expressed by fellow columnist Ross Douthat.)

To the first point I would say that I respect students as persons who deserve to be treated with courtesy, which means, minimally, that they should not be harassed or singled out for ridicule or graded up or down on the basis of gender, ethnic, racial or religious affiliation, or sexual orientation. But this courtesy and respect does not extend to their ideas, which may or may not be given a hearing depending on the instructor’s preferred teaching style, and which may be summarily dismissed if they are judged to be beside the pedagogical point. Treat them as human beings with inherent dignity by all means; but don’t treat them as sages before the fact.

And as for ways of monitoring and dealing with irresponsible teaching, here the posters come to my rescue with excellent suggestions. Several propose evaluation forms that determine whether a teacher is doing what he or she is paid to do. “Are grades returned in a timely fashion, does the prof hold office hours, do they show up on time?” (Madison). Questions like that will “detect bad actors” without falling into the error of putting students in charge of their own education.

Another proposal is to base teacher evaluation on student performance in future classes so as “to actually assess whether the learning to be achieved really took place or not” (Thane Doss). John would retainthe present practice of evaluation, but with a twist: “May I suggest that Teacher Evaluations be in the form of Essays,” for that would put the burden “on the students’ expository skills and the evaluators’ analytical skills.” A number of posters call for peer review by senior faculty members who would meet with the instructor, offer guidance and constructive criticism and file formal reports that could be reviewed by a chair or dean. (This was the system in place when I was a baby instructor and is no doubt still being used by many colleges and universities.) Each of these ideas deserves consideration, and together they give the lie to the assumption that it is anonymous student evaluations or nothing.

I cannot leave the topic without remarking on the passion voiced by many who took the time to respond. A Teacher lets it all hang out and speaks for many: “Sorry kids, you are not the authority in the classroom. Me Teacher. You student. Me Teach , you learn. End of discussion . . . Education is not a business. You are not my customer. My classroom is not Burger King. You do not get to ‘have it your way.’”

(Hat Tip: Suja Thomas.)

Raising Taxes Leads to More Economic Growth and Private Investment

Angry Bear, Taxes and Private Sector Investment -- Evidence from the Real World, by Mike Kimel (Analystic Economics:

Last week I had a post (which appeared both here and at Angry Bear). The post included the following graph [click on graph to enlarge]:

The graph looks at every eight year period since 1929 (the first year for which National Accounts data is available from the Bureau of Economic Analysis) that can be thought of as a complete “administration.” It notes that there is a very strong negative correlation between the tax burden in the first two years of an administration and the economic growth that follows in the remaining six years of the administration. In plain English – the more the tax burden was reduced during the first two years of an administration, the slower the economic growth in the following six years. Conversely, the more the tax burden was raised during the first two years of each administration, the faster economic growth was during the following six years. ...

I tried providing an explanation:

Michael Kanell and I advanced several theories in Presimetrics but the one I think makes the most sense is that changes in the tax burden are a sign of the degree to which an administration enforces laws and regulations.

The logic is simple – (1) collectively, Americans cheat on their taxes and (2) whether the tax burden, the percentage of GDP that the government collects in taxes, rises or falls seems to have nothing whatsoever to do with whether marginal income tax rates rise or fall. Thus, one way for tax burdens to go up is increased enforcement, and one way for tax burdens to fall is decreased enforcement. ...

The graph below shows the change in the tax burden in the first two years of each 8 year administration on the horizontal axis, and the annualized change in real private investment per capita in the remaining six years along the vertical axis [click on graph to enlarge].

 
Notice… administrations that cut the tax burden early saw mediocre increases in private investment later. On the other hand, administrations that started out by increasing the tax burden enjoyed big increases in private investment in the remainder of their term. ...

So let me revisit once more the explanation that Michael Kanell and I put forward in Presimetrics and which is consistent with the data presented in both graphs above. Administrations that cut the tax burden tended to do so mostly by reducing enforcement of tax laws and regulations. But people who don’t believe in enforcing tax laws are also not particularly fond of most other forms of rules and regulations, preferring a laissez faire “pro-business” government in all walks of life. Sure, there may well be many private sector winners when the government allows a free-for-all. However, as the costs of exploiting loopholes, breaking laws and creating externalities falls relative to the costs of doing productive things, fewer truly useful productive activities take place, and that kills growth. 

Motro: Preglimony

Shari Motro (Richmond) has posted Preglimony on SSRN. Here is the abstract:

Unmarried lovers who conceive are strangers in the eyes of the law. If the woman terminates the pregnancy, the man owes her nothing. If she takes the pregnancy to term, the man’s obligation to support her is limited. The law reflects this lovers-as-strangers presumption by making a man’s obligation towards a woman with whom he conceives derivative of his paternity-related obligations; his duty is towards his child, not towards the woman in her own right. Thus, a pregnant woman’s lost wages and other personal costs are her private problem, and if there is no child at the end of the pregnancy, there is no one — from a legal perspective — that the man must support.

The law also endorses this lovers-as-strangers default in the way in which it treats men who do support their pregnant lovers. It does this through the tax code. Current tax law regards payments between unmarried lovers as gifts or as child support. This characterization not only misses the mark descriptively, but it also misses an opportunity to reward and encourage a behavior that is critically important in an age when sex and procreation outside of marriage are common.

This Article argues that the law should develop a new framework for addressing the unique relationship between unmarried lovers who conceive and that tax reform offers a practical and relatively modest first step for doing so. To this end, it proposes that Congress create a pregnancy support deduction to benefit taxpayers who already support pregnant women, thereby extending to them the same deduction we now give taxpayers who pay alimony.

ABA Tax Section Accepting Nominations for 2011-2013 Public Service Fellowships

The ABA Tax Section is accepting applications for Public Service Fellowships for 2011-2013:

Applications must be received by October 4, 2010 to be considered. Applicants selected for interviews will be invited to attend the Section’s meeting in Boca Raton on January 20-22, 2011, and asked to participate in interviews on January 22, 2011.

The Public Service Fellowship program, which began in 2008, reflects the Section’s desire to advance public service efforts in tax law, and to foster a more fair and equitable tax system. Pro Bono service has been an integral part of the Section’s activities for many years. The Section actively encourages member participation in various Pro Bono efforts, holds numerous training sessions to that end, and devotes many of its resources to providing legal services to those in need.The Section recognizes the need for funding and fostering recent law school graduates or judicial clerks who wish to dedicate some portion of their professional careers to public service in tax.

The Section will award up to two Fellowships for 2011-2013 to recent law school graduates or judicial clerks. Both LLM and JD candidates are eligible to apply. The proposed employment must involve taxation or administration of tax law and must be with a public-interest, non-profit section 501(c)(3) organization (the “Sponsoring Organization”). Each Fellow is expected to serve a two-year term with the Sponsoring Organization. The applicant must identify and secure a position with a Sponsoring Organization before applying for the Fellowship (although the position may be contingent upon award of the Fellowship). The application must be accompanied by a commitment letter from the Sponsoring Organization that describes the proposed employment with the Sponsoring Organization and explains why the Sponsoring Organization considers the applicant to be qualified to perform the work. The Sponsoring Organization must agree to hire the applicant, if the Fellowship is granted, and to fulfill all tax and other reporting obligations with respect to the amounts paid to the Fellow. The Sponsoring Organization must also describe how the applicant will be supervised. The Section does not expect to select an applicant unless the Sponsoring Organization has identified at least one attorney who will supervise the Fellow throughout the two-year period.

The Section provides an unrestricted grant to each Sponsoring Organization equal to the Fellow’s salary, payroll taxes, and benefits, which are formulated to be commensurate with judicial clerkship salaries. In addition, the Section will provide assistance with educational loans for those Fellows who are not covered by a law school low-income-protection plan. The amount of educational loan assistance a Fellow can expect will depend on the amount of debt, the type of loans, and whether the Fellow is eligible for assistance from any other loan-repayment or loan-assistance program. In general, the Section’s objective will be to provide funding sufficient to cover the interest accrued on the applicant’s educational loans during the two-year Fellowship period. The actual amount of the assistance provided will be determined on a case-by-case basis and may be subject to an overall limitation to be determined by the Section, in its sole discretion.

Resources and Services Provide to the Fellows

The Section will provide each Fellow with access to one or more mentors from the Section’s membership. The Section expects Fellows to join the Section and participate in Section activities during the Fellowship period. The Section will pay for, or waive, the Fellow’s ABA and Section dues for the duration of the Fellowship. Each Fellow will be expected to attend at least two of the three Section meetings per year. The Section will pay travel and meeting expenses associated with each meeting in accordance with ABA and Section reimbursement policies. The Fellows are encouraged strongly to participate in the activities of the Section’s public service oriented committees, such as the Pro Bono Committee and the Low Income Taxpayers Committee.

Aprill: The Impact of Bilski on Tax Strategy Patents

Ellen P. Aprill (Loyola-L.A.) offers her views on the impact of today's Supreme Court decision in Bilski v. Kappos, No. 08-964 (June 28, 2010), on tax strategy patents:

Bilski is at best a mixed bag for those who think tax strategies should be patentable. It gives little help and does allow business method patents, albeit somewhat begrudgingly. It demonstrates that for those who believe that tax strategies should not be patented, legislation is needed.

As expected, all the Justices agreed that patent protection did not extend to Bilksi’s hedging strategy process claims because it involved only an abstract idea. All agreed as well that the Federal Circuit’s machine-or-transformation test was not the sole test for patentability of a process, although it was a useful test in many, even most cases. All rejected the “useful, concrete and tangible result” approach to patentability articulated in the State Street decision. That is, the members of the Court reject all of the Federal Circuit’s attempt to date to give some guidance to this area of patent law.

The majority of the Justices, in an opinion written by Justice Kennedy, however, hold that the term process did not “categorically exclude business methods.” In particular, according to the majority, section 273, a statutory provision permitting a special defense of prior use to a claimed infringement of a business method, acknowledged some business method patents, although “it does not suggest broad patentability of such claimed inventions.”

The Court refuses to offer “categorical rules that might have wide-ranging and unforeseen impacts.” Yet, at the end of its opinion, it pleads with the Federal Circuit to do what it declined to do itself - develop some other test for limiting business method patents. It speculates that the Court of Appeals turned to exclusive use of the machine-or-transformation test “because it case law had not adequately identified less extreme means of restricting business method patents. . . In disapproving an exclusive machine-or-transformation test, we by no means foreclose the Federal Circuit’s development of other limiting criteria that further the purpose of the Patent Act and are not inconsistent with its text.”

Four Justices concur in the result, in an opinion by Justice Stevens. They would have held that business method are not patentable. The concurring opinion bases its conclusion on the history and purpose of American patent law, including the legislative history of section 273.

Yet even the concurring opinion accepted the result in State Street because it addressed whether a piece of software, a machine, could be patented. And tax method patents, like that in State Street, generally do or could involve software.

Thus, Bilski, I believe, leaves us in a greater state of uncertainly than that which existed before it was decided. It asks us to return to the basics of the Supreme Court precedents of Benson, Flook and Diehr. But it gives us no guidance as to how these precedents should apply to business method patents generally. It asks the Federal Circuit to undertake this task instead, even though the Supreme Court has rejected every attempt by the Federal Circuit to do so. The inability or unwillingness of the Supreme Court to address these difficult issues underscores that, for those who believe that tax strategies should not be patentable, legislation is needed.

Update: Linda M. Beale (Wayne State), The Supreme Court's Decision in In re Bilski: Does It Allow Tax Patents or Not?:

The AICPA, which has spearheaded the tax practitioner and accountant community's lobbying against tax strategy patents, issued a release on Monday that noted the continuing uncertainty about patentability of tax strategies.  It called on Congress to enact a clear ban to resolve the issue once and for all.  AICPA Renews Call for Congressional Action to Ban Tax Patents, PRNewswire, June 28, 2010. 

Congress should act, but one suspects that the health and financial battles make enactment of the major Patent Reform Bill practically untenable for now.  That means that the most likely possibility for a ban on tax strategy patents would be through a dedicated bill dealing solely with that issue.  But you can bet that the IP bar will fight such a bill tooth and nail, as a toe in the door towards narrowing of patent law (and their turf), under the banner of "innovation" and "public disclosure."  Innovation is not an inherent good in finance or tax, and there is little merit to the public disclosure of tax strategies for helping people avoid even more taxes than they already do.  Meantime, we will remain in suspense as the Patent Office and Federal Circuit work through the Supreme Court's opinion.

The Costs of Estate Tax Dithering Just Went Up

I previously blogged my Creighton lecture on The Costs of Estate Tax DIthering, in which I speculated that the estate of Texas energy tycoon Dan Duncan (#30 of Forbes 400 Richest Americans), who died on March 28, was well-positioned to challenge any retroactive re-imposition of the estate tax.   Reader Randall K.C. Kau notes that last Thursday's death of California real estate mogul Walter Shorenstein (#371 of Forbes 400 Richest Americans) has raised the stakes.  Mr. Shorenstein's wife predeceased him (unlike Mr. Duncan), and thus the marital deduction is not available to shelter any retroactively re-imposed estate tax.

Supreme Court: UC-Hastings Can Require Christian Legal Society to Admit Gays/Lesbians to Receive School Recognition

The Supreme Court today ruled, 5-4, that the UC-Hastings could constitutionally require the law school's Christian Legal Society to accept as members students who do not share CLS's religious views on sexual orientation. Christian Legal Society v. Martinez, No. 08-1371 (June 28, 2010). From Justice Ginsburg's majority opinion:

In the view of petitioner Christian Legal Society (CLS), an accept-all-comers policy impairs its First Amendmentrights to free speech, expressive association, and free exercise of religion by prompting it, on pain of relinquishing the advantages of recognition, to accept members who do not share the organization’s core beliefs about religion and sexual orientation. From the perspective of respondent Hastings College of the Law (Hastings or the Law School), CLS seeks special dispensation from an acrossthe-board open-access requirement designed to further thereasonable educational purposes underpinning the school’s student-organization program.

In accord with the District Court and the Court of Appeals, we reject CLS’s First Amendment challenge. Compliance with Hastings’ all-comers policy, we conclude, is a reasonable, viewpoint-neutral condition on access to thestudent-organization forum. In requiring CLS—in common with all other student organizations—to choose between welcoming all students and forgoing the benefits ofofficial recognition, we hold, Hastings did not transgress constitutional limitations. CLS, it bears emphasis, seeksnot parity with other organizations, but a preferential exemption from Hastings’ policy. The First Amendment shields CLS against state prohibition of the organization’sexpressive activity, however exclusionary that activitymay be. But CLS enjoys no constitutional right to state subvention of its selectivity.

From Justice Alito's dissent:

The proudest boast of our free speech jurisprudence is that we protect the freedom to express “the thought thatwe hate.” United States v. Schwimmer, 279 U. S. 644, 654–655 (1929) (Holmes, J., dissenting). Today’s decisionrests on a very different principle: no freedom for expres-sion that offends prevailing standards of political correct-ness in our country’s institutions of higher learning.

• Alliance Defense Fund
• Associated Press
• Balkinization
• CNN
• Constitutional Law Prof Blog
• Inside Higher Ed
• Jonathan Turley
• Law, Religion, and Ethics
• Mirror of Justice
• New York Times
• Religion Clause
• Volokh Conspiracy
• Wall Street Journal

Washburn: Elena Kagan and the Miracle at Harvard

Just in time for today's opening of the Elena Kagan confirmation hearings: Kevin Washburn (Dean New Mexico) has posted Elena Kagan and the Miracle at Harvard on SSRN.  Here is the abstract:

For most of the past fifty years, attending Harvard Law School was a miserable experience. Though students were happy to obtain a Harvard degree, they regretted the great personal cost of earning it. Harvard Law School was widely viewed as irreparable because the obstacles to changing the culture of the hide-bound, ivy-covered walls of an elite law school seemed too great. Student anomie at Harvard appeared to be structural, an inevitable by-product of admitting more than 550 law students each year and pitting them in a three-year competition for grades, elite law review membership, and, ultimately, jobs in fancy law firms. While a handful of students reaped vast rewards, others were scarred for life. A person looking for a challenge could scarcely have found a greater one in the Harvard deanship.

During Elena Kagan’s tenure as dean, a miracle occurred. Harvard Law School was transformed. Today, students embrace the institution. The professors engage with one another. And the school’s widely discussed dysfunctions are distant memories. Kagan accomplished this miracle by modeling two important and traditional American values: hard work and community. Kagan was known for walking the halls tirelessly to learn the views of her bright and independent colleagues and to seek consensus. She broke the gridlock between faculty political factions that had atrophied the academic life of the institution. Even more importantly. she transformed the student experience. This essay seeks to describe Kagan’s transformational leadership and provide insight as to the specific changes Kagan made to accomplish the miracle.

Ann Althouse (Wisconsin) responds in If Elena Kagan Worked a 'Miracle at Harvard', What Effect Might She Have on the Supreme Court?:

Let's take this all as true. Kagan has skills that worked brilliantly in the context a dean transforming a deeply dysfunctional, highly elite law school. But how will those skills apply in the context of an individual Justice on the Supreme Court? When a troubled law school brings in a new dean, it is looking for leadership and transformation. But there is no reason to think that the Supreme Court Justices look toward the newcomer for leadership at all, and she arrives to fill the seat that was vacated, not with any problem to be solved and institution to be transformed.

Bloink: Cancellation of Indebtedness Income and Financed Life Insurance

Robert S. Bloink (Thomas Jefferson) has posted Premium Financed Surprises: Cancellation of Indebtedness Income and Financed Life Insurance, 63 Tax Law. ___ (2010), on SSRN. Here is the abstract:

The last decade saw a tremendous expansion in the use of premium financed life insurance for high net worth individuals. Billions of dollars in premium finance loans were sold as low risk options for purchasing high-value life insurance. But the collapse of the secondary market for life insurance policies eliminated the primary exit strategy for insureds who purchased policies utilizing premium finance loans. When the option of selling the policies on the secondary market evaporated, most viewed the best course of action as surrendering the policies in satisfaction of the loan or allowing the policy to lapse.

But while handing back an underwater policy will eliminate all, or at least most, of the debt on the policy, this cancellation of debt (COD) has potentially dire income tax consequences that must be examined by insureds and their advisers. A taxpayer will usually realize income from COD when a premium finance loan is forgiven. But a number of factors may reduce or eliminate the insured's exposure: the identity of the taxpayer, the structure of the trust holding the policy, the structure of the loan, and the applicability of exceptions to the inclusion of COD income in gross income. Each of these factors must be analyzed to determine whether the insured should be prepared for a doomsday tax scenario or whether the insured will walk away from the deal relatively unscathed.

Biden Calls Custard Shop Manager a 'Smartass' for Asking VP to 'Lower Our Taxes'

Biden: What do we owe you?

Manager: Don't worry. It's on us. ... Lower our taxes and we'll call it even.

Biden (a few minutes later): Why don't you say something nice instead of being a smartass all the time? Say something nice.

• FOX News
• L.A. Times
• New York Daily News

Cummings: Making Tax Litigation Complex

Jasper L. Cummings, Jr. (Alston & Bird, Raleigh, NC), has published Making Litigation Complex, 127 Tax Notes 1483 (June 28, 2010). Here is the abstract: 

A primary cause of the length and complexity of recent tax litigation is the government’s assertion of the economic substance doctrine. Although the government’s intent seems to be to frighten people away, once the doctrine is unleashed, the government can’t control what it will do, including possibly upsetting previously settled law.

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

NY Times: Valedictorian Inflation

New York Times, How Many Graduates Does It Take to Be No. 1?:

In top suburban schools across the country, the valedictorian, a beloved tradition, is rapidly losing its singular meaning as administrators dispense the title to every straight-A student rather than try to choose the best among them.

Principals say that recognizing multiple valedictorians reduces pressure and competition among students, and is a more equitable way to honor achievement, particularly when No. 1 and No. 5 may be separated by only the smallest fraction of a grade from sophomore science. But some scholars and parents have criticized the swelling valedictorian ranks as yet another symptom of rampant grade inflation, with teachers reluctant to jeopardize the best and brightest’s chances of admission to top-tier colleges. ...

“It’s honor inflation,” said Chris Healy, an associate professor at Furman University, who said that celebrating so many students as the best could leave them ill prepared for competition in college and beyond. “I think it’s a bad idea if you’re No. 26 and you’re valedictorian. In the real world, you do get ranked.” ...

William R. Fitzsimmons, the dean of admissions at Harvard, said he had heard of schools with more than 100 valedictorians, and had seen home-schooled students praised as No. 1 — out of one — all of which has helped render the distinction meaningless. “I think, honestly, it’s a bit of an anachronism,” he said. “This has been a long tradition, but in the world of college admissions, it makes no real difference.”

Kristan: State Taxes for the Traveling Employee

Joe Kristan has a great post on Franken’s Monster: State Taxes for the Traveling Employee:

[Al] Franken has a lot of company in going from state to state without paying all of his taxes (he also has a lot of company in dumping on his accountant to weasel out of the blame). It’s a lot of work, and a lot of expense, for a traveling worker to pay taxes in every state. Every state has its own tax rules, and preparing all those returns isn’t cheap. Unfortunately, current law can make you taxable in a state with as little as one day of work.

State taxes are a compliance nighmare for glamour professions like sports, entertainment, construction and auditing. That’s why the Multistate Tax Commission is working on model legislation that would exempt workers from state taxes if they work in a state for less than 20 days in a year. That is, unless they work in sports, entertainment or construction (perhaps the only known instance where auditors aren’t abused worse than other professionals). A bill going nowhere in Congress, the Mobile Workforce State Income Tax Fairness and Simplification Act, would would create a 30-day threshold, but similarly screw entertainers and athletes, but not construction workers.

This raises the obvious question: why do they want to screw the athletes and entertainers? Presumably the states all want to pick Taylor Swift’s pocket (understandably), but for every Taylor Swift there are hundreds of struggling young musicians trying to scrape by and make a name for themselves. Yet the tax law, in all its majesty, requires the same level of tax compliance for millionairess Taylor Swift and the wonderful, but surely less prosperous, Carrie Rodriguez.

Small businesses used to be able to blow off states they only visited for a brief time. That’s becoming a bad bet. Better and cheaper data mining software makes it easier each year for state revenuers to sniff out temporary presence. If there is any publicity for your visit, you leave a Google trail. If you don’t file in a state, the statute of limitations never runs there, and you can build up a painful multi-year liability. If they catch you after the statute of limitations for your home state runs out, you lose your credit on the home state return for taxes paid in the other state — meaning you pay tax on the same income in two states.

BP Spills Coffee

(Hat Tip: Greg Mankiw.)

TaxProf Blog Weekend Roundup

Saturday:

• CBPP:  Concentration of Income Among Top 1% Is Greatest Since 1928
• Tax Avoidance and Wal-Mart Stores
• New York's Unconstitutional Amazon Tax

Sunday:

• Death of Marty Ginsburg
• Top 5 Tax Paper Downloads
• Closing the Tax Gap Via 'Understanding'
• Knight and the 2% Floor

Death of Marty Ginsburg

Renowned tax professor (Georgetown) and tax lawyer (Fried Frank) Martin D. Ginsburg, husband of Supreme Court Justice Ruth Bader Ginsburg, died today (June 27, 2010) at his home in Washington, D.C., due to complications of metastatic cancer.  From the Supreme Court's press release:

Martin Ginsburg was born in Brooklyn, New York on June 10, 1932. He was the son of Morris Ginsburg and Evelyn (Bayer) Ginsburg. He earned an A.B. from Cornell University in 1953 and a J.D. magna cum laude from Harvard Law School in 1958. It was at Cornell University that Martin Ginsburg and Ruth Bader Ginsburg met on a blind date in 1951. They were married on June 23, 1954 at his parents’ home on Long Island.

Martin Ginsburg served in the U.S. Army from 1954 until 1956 and was stationed at Fort Sill, Oklahoma where he taught in the Artillery School. He returned to law school in 1956 and joined the firm of Weil, Gotshal & Manges following graduation. He was admitted to the New York bar in 1959 and to the District of Columbia bar in 1980. He taught at New York University Law School in the 1960s and was the Beekman Professor of Law at Columbia Law School. When Ruth Bader Ginsburg was appointed to the United States Court of Appeals for the District of Columbia Circuit in 1980 and the family moved to Washington, D.C., Martin Ginsburg joined the faculty of the Georgetown University Law Center. He was also of counsel to the firm of Fried, Frank, Harris, Shriver & Jacobson. He was a visiting professor at Stanford Law School in the spring of 1978, at Harvard Law School in the spring of 1986, at University of Chicago Law School in the spring of 1990, and at New York University Law School in the spring of 1993.

Professor Ginsburg was co-author, with Jack S. Levin of Chicago, of Mergers, Acquisitions, and Buyouts, a semi-annually updated tax treatise. He held numerous positions as an expert in the tax field including chair of the Committee on Simplification of the American Bar Associations Tax Section, chair of the New York State Bar Association’s Tax Section, and consultant to the American Law Institute’s Federal Income Tax Project. He also served as a member of advisory groups to the Commissioner of the Internal Revenue, the Treasury Department, and the Tax Division of the Department of Justice. In 2006, he was awarded the American Bar Association Tax Section’s Distinguished Service Award.

Mr. Ginsburg is survived by his wife and his two children, Jane Carol Ginsburg, the Morton Janklow Professor of Literary and Artistic Property at Columbia Law School, and James Steven Ginsburg, founder and president of the Chicago Classical Recording Foundation. He is also survived by four grandchildren.

A private interment service will be held at Arlington National Cemetery.

• Above the Law
• Associated Press
• CNN
• National Law Journal
• New York Times
• Wall Street Journal
• Washington Post

For posts that capture Marty's unique personality:

• TaxProf Blog, Marty Ginsburg: "The Funniest [Tax] Law Professor in America" (Dec. 27, 2007)
• Speech by Ruth Bader Ginsburg (Mar. 13, 2009)
• Georgetown Law Center, In His Own Words

(Hat Tip: Calvin Johnson.)

Update: Jack Bogdanski (Lewis & Clark), Heaven Just Got Funnier:

Leave it to Marty to leave this world when matters of death and taxes are unsettled. He and his previously departed colleagues are probably laughing it up right now over the fact that nobody knows for sure what the tax "basis" is in the stuff he left behind.

Top 5 Tax Paper Downloads

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

1.  [604 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.)

2.  [509 Downloads]  The Generation-Skipping Transfer Tax: A Quick Guide, by Mark Powell (Chapman)

3.  [407 Downloads]  Taxation and the Financial Sector, by Douglas A. Shackelford (University of North Carolina, Kenan-Flager Business School), Daniel Shaviro (NYU) & Joel B. Slemrod (University of Michigan, Ross School of Business)

4.  [357 Downloads]  An Overview of Tax Issues for Synagogues (and Other Religious Congregations), by Ellen P. Aprill (Loyola-L.A.)

5.  [237 Downloads]  The Costs of Estate Tax Dithering, by Paul L. Caron (Cincinnati)

Closing the Tax Gap Via 'Understanding'

Susan Striz (J.D. 2010, West Virginia; LL.M. (Tax) 2011, NYU) has published Note, The Key to Closing the Tax Gap: Understanding, 112  W. Va. L. Rev. 1053 (2010). Here is part of the Introduction:

Part II of this Note will explain the tax gap and its effects. Part III of this Note will explain the several causes behind the tax gap. Part IV of this Note will detail specific strategies designed to reduce the tax gap and which strategies are most in line with providing guidance and being effective. Finally, Part V will discuss President Obama’s policies and their potential impact on the tax gap.

Knight and the 2% Floor

Nathan R. O’Tool (J.D. 2011, William Mitchell) has published Comment, Knight and the Two Percent Floor: Still in Search of a Workable Standard to Evaluate the Tax Deductability of Fiduciary Expenses, 36 Wm. Mitchell L. Rev. 1333 (2010). Here is the Conclusion:

The estate planning and wealth management community had high expectations when the Supreme Court granted certiorari in the Knight case. These expectations were rooted in the fact that for more than twenty years, since the adoption of section 67, trustees were unsure as to how the 2% floor applied to certain fiduciary fees and expenses. The Supreme Court took on the case to resolve a longrunning conflict among federal appeals courts. There was hope that the Supreme Court would settle this conflict and establish a brightline rule by which both the IRS and trustees would be able to determine with certainty which fiduciary expenses would be fully deductible and which expenses would be subject to the 2% floor.

The opinion, while logical and well written, did little to clarify the confusion which surrounds section 67(e). Instead, the Supreme Court seemed content in setting the boundaries within which the IRS and Treasury would be allowed to make their own clarification— specifically, what constitutes “common” or “customarily.” This clarification, however, has yet to be made. In issuing the final regulations, the IRS and Treasury should avoid setting forth a rule that would require a case-by-case analysis of each and every fiduciary fee or expense. Instead, they should issue a bright-line rule that is cost-effective and reasonable to administer for both fiduciaries and for the IRS.

Given the language of section 67(e), establishing this bright-line rule is easier said than done. Depending on the success that the IRS and Treasury have with setting forth this rule, the next logical step is for Congress to address the poorly written statute. This process, however, may take longer than the two decades it took courts to address this issue. But until Congress inserts itself into this process, trustees will wait patiently in tax law limbo for the finalized regulations—hoping some reasonable guidance will be provided.
 

CBPP: Concentration of Income Among Top 1% Is Greatest Since 1928

The Center on Budget and Policy Priorities yesterday released Income Gaps Between Very Rich and Everyone Else More Than Tripled In Last Three Decades, New Data Show, by Arloc Sherman & Chad Stone:

The gaps in after-tax income between the richest 1% of Americans and the middle and poorest fifths of the country more than tripled between 1979 and 2007 (the period for which these data are available), according to data the Congressional Budget Office (CBO) issued last week. Taken together with prior research, the new data suggest greater income concentration at the top of the income scale than at any time since 1928.

 

Update: Peter Pappas, A Win for the Tax the Rich Crowd?:

The survey does, indeed, show, as fellow tax bloggers  Jim Maule and  Linda Beale are sure to point out, that the rich have gotten richer. What it does not show, and what is not to be automatically inferred from it, is that the poor and the middle-class have gotten poorer.

Of course, I fully expect the tax-the-rich types to suggest that very thing. But by doing so they only betray one of their many faulty premises: Namely, that wealth, like energy, is finite and an increase in one individual’s wealth is always be matched by a commensurate decrease in another individual’s wealth.

Tax Avoidance and Wal-Mart Stores

Jeremy M. Wilson (J.D. 2010, North Carolina) has published Recent Development, Statutory Interpretation in Wal-Mart Stores East, Inc. v. Hinton and Why North Carolina Courts Should Apply Anti-Tax Avoidance Judicial Doctrines in Future Cases, 88 N.C. L. Rev. 1471 (2010). Here is the abstract:

In its 2009 decision Wal-Mart Stores East, Inc. v. Hinton, the North Carolina Court of Appeals held that the North Carolina Secretary of Revenue had the statutory authority to force combination of Wal-Mart Stores East and its related corporate entities. This action led to Wal-Mart Stores East paying nearly $30 million in back taxes, interest, and penalties resulting from a complex corporate tax avoidance strategy. This Recent Development argues that although the North Carolina Court of Appeals reached the correct result from a public policy standpoint in Wal-Mart Stores East, it did so after conducting an incomplete statutory analysis. Underlying this incomplete analysis was the inability of the state’s tax statutes to respond to new and evolving corporate tax avoidance strategies. In future cases, North Carolina courts should apply anti-tax avoidance judicial doctrines to egregious cases of tax avoidance in which state officials lack clear statutory authority to intervene. Applying these doctrines would help North Carolina achieve important policy benefits, including protecting state revenues, providing for simpler tax law, promoting fairness between individual and corporate taxpayers, and promoting economic efficiency.

New York's Unconstitutional Amazon Tax

Daniel Cowan (J.D. 2010, North Carolina) has published Recent Development, New York’s Unconstitutional Tax on the Internet: Amazon.com v. New York State Department of Taxation & Finance and the Dormant Commerce Clause, 88 N.C. L. Rev. 1423 (2010). Here is the abstract:

As the current economic downturn continues to ripple through every sector of the economy, state governments from North Carolina to California are struggling to develop innovative tax policies to boost their plummeting revenues. Traditional methods of taxation are no longer sufficient to satisfy state expenditures—either government spending must change drastically or legislatures must approve new taxes to bolster falling revenues. The recent “Amazon tax” passed by the New York State Assembly is a prime example of the latter. The tax requires out-of-state retailers—such as Amazon.com, Inc. and Overstock.com, Inc.—to collect a use tax from in-state consumers if the retailers have marketing affiliates in the state which produce at least $10,000 in sales. In Quill Corp. v. North Dakota, however, the United States Supreme Court held that, under the Commerce Clause of the U.S. Constitution, a state cannot require an out-of-state retailer to collect and remit a use tax unless the retailer has a “substantial nexus” with the taxing state. The Court invalidated a sales tax imposed by North Dakota on an out-of-state mail-order retailer, which had no offices or employees in the state. By invalidating this tax, the Court reaffirmed the bright-line rule of National Bellas Hess, Inc. v. Department of Revenue of Illinois that “a vendor whose only contacts with the taxing State are by mail or common carrier lacks the ‘substantial nexus’ required by the Commerce Clause;” in other words, some physical presence is required. Attempts by New York and other states to create statutorily this “substantial nexus” between out-of-state Internet retailers and the taxing state through the retailers’ marketing affiliates run afoul of Quill and its bright-line rule.

This Recent Development analyzes the recent New York County Civil Supreme Court decision, Amazon.com v. New York State Department of Taxation & Finance, which upholds the constitutionality of the tax. The focus is on Amazon’s Dormant Commerce Clause argument and the trial court’s application of the Supreme Court’s decision in Quill. This Recent Development argues that the New York trial court failed to apply Quill’s “substantial nexus” test properly and exaggerated the role of Amazon’s associates. As a result, the trial court incorrectly held that the tax on Amazon did not violate the Commerce Clause. When applied correctly, the Quill decision should invalidate New York’s tax on Amazon and similar out-of-state Internet retailers.

IRS Provides Guidance to Gulf Oil Spill Victims

The IRS today released IRS Provides Tax Help, Guidance to Gulf Oil Spill Victims; Special Assistance Day Planned for July 17 (IR-2010-78):

The IRS today provided guidance [Information Center; Q&A] to individuals and businesses affected by the oil spill in the Gulf of Mexico and announced a number of new efforts to help affected taxpayers, including a special Gulf Coast Assistance Day on July 17. ...

The guidance released today is based on current law, and it explains how recipients of payments from BP should treat the payments for tax purposes. According to the current law, BP payments for lost income are taxable in the same way that the wages or business income these payments are replacing would have been. The law treats compensation for lost wages or income differently for tax purposes than compensation for physical injuries or property loss, which generally are nontaxable. ...

To help people in the Gulf Coast area dealing with tax issues, the IRS also announced a special assistance day on July 17 in seven cities. Taxpayers and tax preparers will be able to work directly with IRS employees to resolve tax issues, including specific topics related to the oil spill. The IRS will hold the Gulf Coast Assistance Day in four states:

• Alabama: Mobile
• Florida: Panama City and Pensacola
• Louisiana: New Orleans, Houma and Baton Rouge
• Mississippi: Gulfport

Wesley Snipes Seeks Dismissal or New Trial in Tax Fraud Case in Light of Kenneth Starr's Arrest

Wesley Snipes' attorneys have filed a motion requesting that the 11th Circuit suspend consideration of his appeal to allow him time to request the district court to either dismiss his conviction on three misdemeanor tax fraud counts or order a new trial in light of the arrest on securities fraud charges of Kenneth Starr, a tax lawyer and financial adviser who was a key government witness in Snipes' trial.

• Associated Press
• San Francisco Chronicle

The Forthcoming U.S. News & World Report Law Firm Rankings

Robert Morse, Director of Data Research at U.S. News, Some News About the New, Upcoming Best Law Firms Rankings:

Here is an update on the highly anticipated U.S. News-Best Lawyers Best Law Firms rankings, which are scheduled to be released in the October 2010 issue of U.S. News and on our website in mid-September.

Some of the highlights of the methodology of the U.S. News-Best Lawyers Best Law Firms: surveys were sent to 52,480 clients of law firms; to 43,900 practicing lawyers in the United States including every American lawyer listed in Best Lawyers; to 2,314 law firm marketing officers; to 2,322 law firm recruiting officers; to 8,597 law firms without marketing- or recruiting-office contacts; and to 2,322 associates at law firms; and 1,775 law firm summer associates.

The response has been very positive: 1,859 firms participated in the marketing-officer and recruiting-officer surveys; 9,514 clients— including every Fortune 100 company and 587 of the Fortune 1000 companies—provided 194,370 firm practice-area evaluations; 6,190 clients provided 11,181 comments about law firm practice areas and individual lawyers; and 8,842 lawyers provided 594,012 firm practice-area evaluations.

The client and lawyer surveys collected mostly reputational ratings on such areas as expertise, cost-effectiveness and responsiveness. Marketing-officer and recruiting-officer surveys provided a wide array of demographic, client and other lawyer profile data about their firms. In addition to information from these surveys, the rankings will incorporate the 3.1 million evaluation. ...

Because firms were often separated by small or insignificant differences in the overall score, the Best Law Firms rankings will be published alphabetically within tiers rather than as a numerical ranking.

NY Times Debate on Student Evaluations

New York Times, Deep in the Heart of Texas, by Stanley Fish:

If a waiter asks me, “Was everything to your taste, sir?”, I am in a position to answer him authoritatively (if I choose to). When I pick up my shirt from the dry cleaner, I immediately know whether the offending spot has been removed. But when, as a student, I exit from a class or even from an entire course, it may be years before I know whether I got my money’s worth, and that goes both ways. A course I absolutely loved may turn out be worthless because the instructor substituted wit and showmanship for an explanation of basic concepts. And a course that left me feeling confused and convinced I had learned very little might turn out to have planted seeds that later grew into mighty trees of understanding.

“Deferred judgment” or “judgment in the fullness of time” seems to be appropriate to the evaluation of teaching. And that is why student evaluations (against which I have inveighed since I first saw them in the ’60s) are all wrong as a way of assessing teaching performance: they measure present satisfaction in relation to a set of expectations that may have little to do with the deep efficacy of learning. Students tend to like everything neatly laid out; they want to know exactly where they are; they don’t welcome the introduction of multiple perspectives, especially when no master perspective reconciles them; they want the answers.

New York Times, In Defense of Student Evaluations, by Ross Douthat:

Allow me to respectfully dissent. Yes, in an ideal world, a student’s impression of his teacher’s abilities would be allowed to ripen, over years and decades, before anyone asked for an assessment of said teacher’s pedagogy. But I still think that more often than not, a good teacher will be recognized as such by his students while he’s teaching them, and a bad one will be accurately-pegged as well. (A decade removed from my own classroom education, I’ve revised my opinions of some of my teachers, but not that radically …) Such evaluations will always be necessarily imperfect measures of a teacher’s real quality. But in the context of a higher education system that has radically undervalued teaching skills in favor of a “publish or perish” model of professorial advancement, I think there’s a strong case for placing more emphasis on how students react to their classroom experience, however provisional those reactions may be.

Law Student Sues North Carolina, Fears She Won't Get a Job if Her Online Purchase of Obama Zombies Is Disclosed in Sales Tax Dispute

National Law Journal, ACLU Intervenes in Privacy Dispute Between Amazon and State Tax Collector, by Karen Sloan:

Two lawyers and a law student were among seven plaintiffs who filed suit on Wednesday to block the North Carolina Department of Revenue from collecting detailed information about purchases state residents made through online retailer Amazon.com Inc. ...

The ACLU's complaint alleges that the sales information the state has requested infringed the privacy of buyers by disclosing their names and detailed information about what they purchased.

Amazon has turned over product codes of purchased items to the state for auditing purposes, but has resisted turning over customer names and addresses.

Among the anonymous plaintiffs is the general counsel of a global company who purchased "books with overt leanings," including Michael Moore's Dude, Where's My Country and Al Franken's Lies and the Lying Liars Who Tell Them: A Fair and Balanced Look at the Right, according to the complaint. Other plaintiffs include a retired lawyer and a law student who hopes to work in the public sector. The student fears her ability to get a job in legislative or public policy will be hindered if her Amazon purchases are made public. She has purchased Jason Materra's Obama Zombies: How The Liberal Machine Brainwashed My Generation and Thomas E. Woods Jr.'s Who Killed The Constitution? The Federal Government vs. American Liberty From World War I to Barack Obama.

"What a person chooses to purchase on Amazon reveals personal, private and profoundly intimate information about that person's life and identity," the complaint reads. "For example, an individual's purchase history can provide details about his or her political or religious beliefs, organizations or groups he or she associates with, who his or her friends or family are, and whether he or she has any medical, psychological or family problems."

Sales tax revenue is at the heart of the larger dispute, with North Carolina expected to lose nearly $162 million in sales tax revenue from online purchases, according to a University of Tennessee estimate. Amazon doesn't collect the state's 5.75% sales tax because the company doesn't have warehouses or offices in North Carolina. The responsibility to pay the tax lies with the buyer.

Worster: The Constitutionality of Taxing the Renunciation of U.S. Citizenship

William Thomas Worster (The Hague University) has published The Constitutionality of the Taxation Consequences for Renouncing U.S. Citizenship, 9 Fla. Tax Rev. 921 (2010). Here is the abstract:

Individuals that renounce their U.S. citizenship are held to a special taxation regime as a consequence for their expatriation that is unique in the world and, this article will argue, unconstitutional. Originally, renunciation of citizenship was seen as the ultimate income tax reduction device, but this option has now lost much of its attractiveness as Congress has passed “exit tax” provisions that impose a tax liability on individuals who have renounced U.S. citizenship similar to that imposed on U.S. citizens.

This article will argue that, as it currently stands, the exit tax is not constitutional because it is not narrowly tailored to achieve a compelling government interest and must be judged at that standard because it infringes on the fundamental right to expatriate and discriminates based on national origin.

Tax Prof Visits, 2010-2011

The Faculty Lounge has updated its list of Law School Visitors 2010-2011.  My annual April post on Tax Prof Moves lists all of the Tax Prof visits for 2010-2011 (as well as tax-related VAP hires, entry-level hires, lateral moves, promotions, tenures, chairs, and professorships, administrative appointments, and retirements and departures):

• Steve Black (Franklin Pierce) to LSU (2010-11)
• Neil Buchanan (George Washington) to Cornell (Visiting Scholar, Fall 2010)
• Paul Caron (Cincinnati) to San Diego (Summer 2010) and Pepperdine (Spring 2011)
• David Elkins (Netanaya College School of Law, Israel) to SMU (Fall 2010) 
• Vic Fleischer (Colorado) to NYU (Fall 2010)
• Cliff Fleming (BYU) to Central European University, Hungary (April 2010) and Murdoch University, Australia (June 2010)
• Terri Lynn Helge (Texas-Wesleyan) to Baylor (Summer 2010)
• Henry Lischer (SMU) to Georgetown (Fall 2010)
• Gary Lucas (Texas-Wesleyan) to Florida State (Spring 2011)
• Ruth Mason (Connecticut) to Yale (2010-11)
• Jack Miller (Idaho) to U. Washington (2010-11)
• Shari Motro (Richmond) to Georgetown (Spring 2011)
• George Mundstock (Miami) to San Diego (Summer and Fall 2010) 
• Adam Rosenzweig (Washington U.) to Texas (2010-11)
• Walter Schwidetzky (Baltimore) to California Western (2009-10)
• Andre Smith (Florida International) to Widener-Wilmington (2010-11)

Sen. Landrieu Seeks IRS Guidance on Tax Treament of BP Payments

Following up on Tuesday's post, $20b Gulf Coast Disaster Payments: Income to Victims, Deductible by BP: Sen. Mary Landrieu (D-LA) on Wednesday sent this letter to the Treasury Department and the IRS seeking public written guidance by July 2 on the tax treatment of BP oil spill claims payments to individuals and businesses:

As of June 22, 2010 -- Day 63 of this tragedy -- your agencies had yet to issue any guidance to advise recipients recipients of BP payments on how they should treat these payments for federal tax purposes. While I share your goal of ensuring that U.S. tax laws are followed and I am aware that this situation has triggered some unprecedented questions of tax policy, this delay in action is unacceptable.

It is my strong belief that every relevant tax question triggered by this disaster cannot nor should not be answered immediately. I also appreciate that your agencies need sufficient time to develop sound tax policies on how these payments should be treated for tax purposes. However, as I write to you today, now is the time for impacted Gulf Coast residents to receive basic guidance on fundamental issues that have been triggered by the disaster such as:

• Whether income replacement payments are taxable;
• Whether property damage payments are taxable; and
• And whether payments for personal injury claims are taxable.

Tax Analysts Hosts Roundtable Discussion Today on Tax Expenditures

Tax Analysts hosts a roundtable discussion today from 9:00 a.m. - 11:00 a.m. at the National Press Club in Washington, D.C. on Tax Expenditures: Are They Worth the Cost?:

Please join us for a roundtable discussion on federal tax expenditures in which we will ask whether all the deductions, credits, and other write-offs are worth the hundreds of billions of dollars in lost federal tax revenues each year.

Speakers:

• Christopher Bergin (President and Publisher, Tax Analysts) (Moderator) 
• Edward D. Kleinbard (Former Staff Director, Joint Tax Committee; Professor, USC Law School)
• Eric Toder (Institute Fellow, Urban Institute; Codirector, Tax Policy Center)
• Andrew Schulz (Vice President, Council on Foundations)
• Brian Flahaven (Director of Government Relations, Council for Advancement and Support of Education)

Shanske: An Agenda for a California Constitutional Convention?

Tax Prof Darien Shanske (UC-Hastings) has published What Would the Delegates Talk About? A Rough Agenda for a Constitutional Convention, 37 Hastings Const. L.Q. 641 (2010).  Here is the abstract:

This short article outlines a possible agenda for a California Constitutional Convention. The goal is not to achieve originality in the substance of each proposal so much as to propose reasonable compromises that might ameliorate California’s chronic fiscal woes. At the moment, the prospects for such a convention have dimmed considerably, but the compromises outlined below could still be reached through legislative action and/or voter referenda. The proposals, in brief, are:

Proposal 1: More Local Control and Likely Greater Resources but Accepting More Disparity in Resources.
Proposal 2: Split the Property Tax Roll and Impose (Gradually) a Statewide Tax on Commercial Property Based on Market Values, but Eliminate (Gradually) the Corporate Income Tax.
Proposal 3: Expand the Current Sales Tax to Services but Lower Its Rate and Allow Deficit Spending.
Proposal 4: Retain the Tax on Capital Gains, but Place A Large Percentage of Resulting Revenues in the Rainy Day Fund.
Proposal 5. Enable More State Borrowing But Require Commitment of New Revenues to All Borrowing.
Proposal 6: Make it Easier to Raise Tax Rates, but Restrain Spending in Some Other Way. Proposal 7: Ease Residential Property Tax Limitations, but Institute Aggressive Circuit Breakers.

How to Get Your Dean to Buy You an iPad

Forbes, A Financial Advice Wonk Falls for the iPad: No Reading Glasses Needed and Three Downloadable Versions of the U.S. Tax Code. That's True Love, by Deborah L. Jacobs:

I had very different ideas about how to fill up my iPad's 64 gigabytes of memory. I envisioned it not as a plaything, but as a portable workhorse. Having never owned a smartphone, I figured the iPad would answer a pressing need to retrieve e-mail on the go and might be a capable reading device. And near term I saw enormous potential for the 1.6-pound iPad to lighten my load on a vacation to Tibet this summer.

The icing on the cake was that the entire Internal Revenue Code was available in a choice of three different iPad apps, one of which cost just 99 cents. Yes, I'm serious. As a financial writer, I need the IRC (as tax geeks call it) for my work. In book form it's heavy and expensive and the free online versions are cumbersome to use. So once Congress passes various tax bills now pending, I'll put the IRC app on my buy list. Because, to put it in teenspeak, "That app is mad cool."

When I mentioned these plans to my editor, she said she'd be intrigued by a column about "how middle-aged boring people (no offense) actually use iPad."

Cauble: DOI Income and Tax-Exempt Organizations

Emily L. Cauble (Illinois) has published Cancellation of Indebtedness Income and Tax-Exempt Entities, 127 Tax Notes 1381 (June 21, 2010). Here is the abstract: 

Significant uncertainty exists under current law regarding the tax treatment of cancellation of indebtedness income realized by tax-exempt entities. This article examines current law and proposes viable solutions for eliminating uncertainty.

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

UBS Tax Whistleblower Asks Obama to Commute His Sentence

Bloomberg, Banker Who Blew Whistle on Secrecy Over Tax Cheats Seeks Pardon:

Bradley Birkenfeld, once a UBS AG banker who handled a $200 million investment for a billionaire client, now makes 12 cents an hour mopping floors at the federal prison in Minersville, Pennsylvania.

Sleeping in a bunk bed in a dormitory-style building with 35 other inmates is far from the reward Birkenfeld says he deserves for exposing a massive tax-evasion scandal at UBS, the biggest Swiss bank. He told U.S. authorities how UBS bankers came to the U.S. to woo rich Americans, managed $20 billion of their assets, and helped them cheat the Internal Revenue Service.

Birkenfeld, 45, has asked President Barack Obama to commute a 40-month term he began in January at Schuylkill Federal Correctional Institution for his part in the conspiracy. He is seeking payment from the IRS whistleblower program and wants the U.S. Department of Justice to punish prosecutors who wouldn’t grant him immunity before his 2008 indictment and guilty plea.

His disclosures preceded UBS’s decision to pay $780 million to avoid prosecution, admit it fostered tax evasion from 2000 to 2007, and turn over data on 250 secret accounts to the IRS. UBS later agreed to reveal data on another 4,450 accounts, a transfer upheld last week by the Swiss Parliament. For lifting the veil on Swiss bank secrecy, Birkenfeld said, he’s a hero, not a criminal.

WSJ: Carried Interest Tax Hike Will Hit Family Partnerships

Wall Street Journal editorial, The Family Business Revenue Act: A Tax on the Wealthy Becomes a Tax on Mom and Pop:

Class-warfare politics has a way of doing damage well beyond its intended targets. Consider how the Democratic plan to raise taxes on "carried interest" will also sock it to a family business near you.

Democrats want to raise carried-interest taxes from the current 15% rate to the top income tax rate, scheduled to hit 39.6% on January 1. The sales pitch is that this will only whack hedge fund managers and other unsympathetic types. Yet Democrats wrote the law so broadly that it may sweep up millions of Americans in family partnerships.

This would be a huge hit to the estimated 6.5 million folks invested in real-estate partnerships, who own assets ranging from a local house to a commercial shopping center. The legislation also potentially hits any partnership invested in certain specified assets, including families who own, say, an auto dealership, fishing boat, construction company or securities.

These partnerships are at risk because of the logic Democrats have used to justify their tax hike. The taxers argue that fund managers receive carried interest as compensation for a service performed—managing other people's money—and so should be taxed at ordinary income rates. Never mind that Congress previously deemed carried interest to be investment income, at-risk capital that deserved to be taxed at a lower rate. ...

Mark this down as one more example of how the Democratic scramble for revenue will hurt millions of Americans who are far from wealthy. Democrats are rewriting a half century of partnership tax law with no hearings, no analysis and little debate. And they wonder why businesses are creating so few jobs.