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Tuesday, August 31, 2010

Home Values Fell 16% in 2008, But Property Taxes Rose 4.2%

Tax Foundation, Property Tax Revenue Increased As Property Values Fell:

The Case-Shiller index, a popular measure of residential home values, shows a drop of almost 16% in home values across the country between 2007 and 2008. As property values fell, one might expect property tax collections to have fallen commensurately, but in most cases they did not.

Data on state and local taxes from the U.S. Census Bureau show that most states' property owners paid more in FY 2008 (July 1, 2007, through June 30, 2008) than they had the year before (see Table 1). Nationwide, property tax collections increased by more than 4%. In only four states were FY 2008's collections lower than in FY 2007: Michigan, South Carolina, Texas and Vermont. And in three states—Florida, Indiana and New Mexico—property tax collections rose more than 10%.

Rank

State

Increase

Per Capita Tax

1

Florida

11.7%

$1,649

2

Indiana

11.6%

$1,089

3

New Mexico

10.2%

$568

4

Hawaii

9.7%

$977

5

Nevada

9.2%

$1,241

6

Alabama

9.1%

$495

7

West Virginia

8.7%

$683

8

Oklahoma

8.4%

$582

9

Minnesota

7.6%

$1,273

10

California

7.6%

$1,449

 

 

 

 

U.S. Average

4.2%

$1,352

 

 

 

 

41

Alaska

2.4%

$1,559

42

Iowa

2.4%

$1,245

43

New York

2.3%

$2,009

44

Tennessee

2.0%

$752

45

Ohio

1.8%

$1,178

46

Maryland

0.6%

$1,171

47

South Carolina

(1.7%)

$963

48

Michigan

(2.4%)

$1,443

49

Texas

(3.8%)

$1,393

50

Vermont

(4.9%)

$1,896

August 31, 2010 in Tax, Think Tank Reports | Permalink | Comments (10) | TrackBack (0)

The Homebuyer Tax Credit -- What Was It Good For?

The Guardian, Home Truths for Complacent Economists:

What should be clear is that the tax credits helped to pull housing demand forward. People who might have bought in the second half of 2010, or even 2011, instead bought their home before the tax credit expired. Now that the credit has expired, there is less demand than ever, leaving the market open for another plunge in prices. The support the tax credit gave to the housing market was only temporary.
 
It is worth asking what was accomplished by spending tens of billions of dollars to prop up the market for a bit over a year with these tax credits. First, this allowed millions of people to sell their home over this period at a higher price than would have otherwise been the case. The flip side is that more than 5 million people bought homes at prices that were still inflated by the bubble. Many of these buyers will see substantial loses when they resell their house.

The banks also had a stake in this. The homebuyers' tax credit prevented prices from declining as rapidly as would otherwise have been the case. This enabled millions of homeowners to sell their home at a price where they could pay off their mortgage. This made banks who could have been holding underwater mortgages very happy.

Of course, someone had to issue the mortgage to all those people who bought homes at prices that are still inflated by the bubble. The overwhelming majority of the mortgages issued in the last year and a half are insured by the government, either through Fannie Mae and Freddie Mac, or through HUD. So, taxpayers, not banks or private investors, are carrying the risk that further price declines will push these mortgages underwater.

August 31, 2010 in News, Tax | Permalink | Comments (3) | TrackBack (0)

WSJ: Are Law School Faculties Part of the Problem With Legal Education?

Following up on my prior posts:

Wall Street Journal Law Blog, Are Law School Faculties Part of the Problem With Legal Education?:

It’s often struck us as an obvious question: how can law schools provide better real-world training to students when their faculties are made up of article-writing academics?

August 31, 2010 in Legal Education | Permalink | Comments (2) | TrackBack (0)

Fogg: In Whom We Trust

T. Keith Fogg (Villanova) has published In Whom We Trust, 43 Creighton L. Rev. 357 (2010).  Here is the abstract:

The federal government collects the majority of taxes through business entities that are required to withhold taxes from wages or collect excise taxes at the time of providing services. These business entities hold the taxes they collect in trust for the United States. The vast majority of business entities pay over the taxes held in trust in a timely and appropriate manner; however, a sizeable amount, in dollar terms, does not get paid. Aside from passing criminal laws at or near the passage of the 1954 code, Congress has done little to create a structure that provides incentives for business entities acting as trustees to pay over these collected taxes.

This article explores the literature that has primarily developed with respect to the tax gap seeking to find structural answers to the problem. Most of the literature addresses issues concerned with underreporting taxes rather than the underpayment of taxes but certain ideas on how to influence taxpayer behavior are transferable to underpayment. Applying appropriate structural principles to the problem, the article explores some of the solutions adopted by states to see if importing those solutions could assist the federal government in collecting these taxes.

Five specific recommendations follow from the study and these recommendations range from information gathering to monetary incentives for timely compliance to requiring bonds. The range of proposed solutions is intended to address the range of reasons for the non-compliance. Through the implementation of these solutions or similar ideas that create the proper structure for taxpayers serving as trustees, this corner of the tax gap should be reduced.

August 31, 2010 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Fellowships for Aspiring Law Professors (2010-11 Edition)

For practitioners and others contemplating joining the law professor ranks, many law schools offer wonderful opportunities to transition into the legal academy with one- or two-year fellowships which allow you to enter the AALS Faculty Recruitment Conference (the "meat market") with published scholarship (and in many cases teaching experience) under your belt (spreadsheet here):

For more information on becoming a law professor, including a discussion of the advantages of these fellowship programs, see:

August 31, 2010 in Legal Education, Tax Prof Jobs | Permalink | Comments (1) | TrackBack (0)

Tennessee Seeks to Hire Tax Prof

TennesseeThe University of Tennessee College of Law seeks to fill three tenure-track positions with entry level or lateral professors to begin in Fall 2011 in a variety of fields, including tax:

The Faculty Appointments Committee will interview applicants who are registered in the 2010 Faculty Appointments Register of the Association of American Law Schools at the AALS Faculty Recruitment Conference in Washington, D.C. Applicants who are not registered in the AALS Faculty Appointments Register must send a letter of intent, resume, and the names and contact information of three references by October 15, 2010 to: Becky L. Jacobs, Chair, Faculty Appointments Committee.

August 31, 2010 in Tax, Tax Prof Jobs | Permalink | Comments (0) | TrackBack (0)

9th Cir.: Reversible Error to Refuse Continuance to Allow Tax Evasion Defendant to See His Dying Son

A divided (2-1) Ninth Circuit yesterday reversed the tax evasion conviction of Garth Kloehn on the ground that the district court abused its discretion in refusing to continue his trial for two days to allow him to see his dying son.  United States v. Kloehn, No. 06-50456 (9th Cir. Aug. 30, 2010). Judge Trott dissented, arguing that the ditrict court's error was harmless: Mr. Kloehn was charged “with a transparent scam which anyone with an IQ over room temperature would have seen as illegal."

August 31, 2010 in New Cases, Tax | Permalink | Comments (0) | TrackBack (0)

WSJ: Expiration of Bush Tax Cuts Won't Reduce Dividends

Wall Street Journal, Higher Taxes May Not Push Firms To Cut Dividends, by Martin Vaughan:

The expiration of a tax cut on dividend income wouldn't likely spur firms to significantly cut their dividend payouts, say some scholars who study the relationship between tax rates and corporate behavior. One big reason is that a growing share of U.S. equities are held by retirement funds and foreign investors that aren't swayed by U.S. individual income-tax rates. "If there is an effect, it will be modest," University of North Carolina professor Douglas Shackelford said of the pending higher tax rates. "Pension funds, 401(k)'s, foreigners and corporations--all of these don't care" about the individual tax rate, he said. ...

Critics of the 2003 law that slashed the dividend rate to 15% say it played a small role or none at all in corporate decisions to return cash to shareholders. While it is clear that corporate dividend payments increased over the five-year period following the law's enactment, these critics argue the increase merely tracked share value growth in an expanding economy.

"My view is that the tax cut didn't achieve much in terms of encouraging distributions," said Reuven Avi-Yonah, a professor at the University of Michigan law school. Avi-Yonah cites recent data on corporate distributions showing that in the period from 2003-2008, companies heavily favored stock buybacks over dividends as a way to return money to shareholders. That suggests that the views of foreign hedge fund shareholders, which prefer stock buybacks, held greater sway over corporate boards than the tax cut, Avi-Yonah contends.

In a June paper [Dividends, Share Repurchases, and Tax Clienteles: Evidence from the 2003 Reductions in Shareholder Taxes], Shackelford and colleagues Jennifer Blouin and Jana Raedy found that the tax cut did spur some firms to increase dividend payouts. This effect was greatest at firms in which corporate directors and officers held large stakes, raising the question of whether those who acted to increase dividends were motivated by their own potential for gain. That said, Shackelford said the response to the 2003 tax cut "was not nearly as great as had been anticipated before the legislation passed." He said another reason higher tax rates next year won't mean lower dividends is that firms are sensitive to how investors would interpret such a move. "If you cut dividends, the market really pounds you," Shackelford said.

August 31, 2010 in News, Tax | Permalink | Comments (0) | TrackBack (0)

Monday, August 30, 2010

IRS Approves Deduction for Credit Card Cash Rewards Donated to Charity

Discover Card In Priv. Ltr. Rul. 2010-027-015 (Apr. 5, 2010), the IRS ruled that (1) cash rewards on credit card purchases do not constitute income under § 61 to the card holder, and (2) cash rewards paid out to charity at the direction of the holder constitute a charitable contribution on the date the amount is received by the charity. (The IRS also ruled that the written acknowledgment provided to credit card holders did not satisfy the recordkeeping requirement of § 170(f)(17) because it did not include the date the credit card company remitted the contribution amount to the charity.) From the Wall Street Journal:

"This is a win/win for donors," says Melissa Labant, a tax expert with the American Institute of CPAs, since they can take a donation without claiming income. The cash reward qualifies as a rebate, which in tax terms is a reduction in the price of items purchased with the card. ...

The IRS ruling means there may be a sharp difference between cash-reward cards and "affinity cards" that benefit a university or charity. Holders of affinity cards don't get deductions for benefits to the group, whereas those who contribute their cash rewards may qualify for them.

August 30, 2010 in IRS News, Tax | Permalink | Comments (1) | TrackBack (1)

Forman Presents Using Refundable Tax Credits to Help Low-Income Taxpayers Today at Loyola-L.A.

Forman Jonathan Forman (Oklahoma) presents Using Refundable Tax Credits to Help Low-Income Taxpayers: What Do We Know and What Can We Learn From Other Countries? at Loyola-L.A. today as part of its Tax Policy Colloquium Series.   The commentator is Kirk J. Stark (UCLA). Here is the abstract:

One of the central functions of modern governments is to redistribute income from those who are rewarded by free markets to those who are not. Historically, most of that redistribution was achieved through traditional welfare programs. In recent decades, many developed nations have shifted towards using refundable tax credits in their income tax systems to make welfare transfers to low-income families and individuals. In particular, this article focuses on how the United States, Canada, the United Kingdom, and Australia now use their tax systems to provide benefits to low-income families and individuals.

At the outset, Part I of this article provides an overview of income, inequality, and redistribution in various countries. Part II then provides a detailed examination of how the U.S. income tax system uses refundable tax credits to help low-income workers and their families. Next, Part III shows how redistribution is achieved in the income tax systems of Canada, the United Kingdom, Australia, and some other developed nations. Finally, Part IV discusses some of the problems with using tax credits for redistribution and the best approaches for dealing with those problems.

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

Aspiring Law Profs Conference

Aspiring Prof Flyer_Page_1 Arizona State is hosting an Aspiring Law Professors Conference on October 2:

Designed for Visiting Assistant Professors, Fellows and Clerks who plan to go on the academic teaching market, but valuable to anyone considering a move to teaching

  • Learn to succeed in the entry-level law teaching market
  • Obtain an insider’s perspective on the appointments process from faculty who’ve been there
  • Conduct a mock interview or mock job talk and gain feedback from law professors

August 30, 2010 in Conferences, Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0) | TrackBack (0)

Ground Zero Mosque May Get Tax-Exempt Financing

Reuters, Ground Zero Muslim Center May Get Public Financing:

The Muslim center planned near the site of the World Trade Center attack could qualify for tax-free financing. ...  The mosque's backers hope to raise a total of $70 million in tax-exempt debt to build the center, according to the New York Times. Tax laws allow such funding for religiously affiliated non-profits if they can prove the facility will benefit the general public and their religious activities are funded separately. The bonds could be issued through a local development corporation created for this purpose, experts said.

August 30, 2010 in News, Tax | Permalink | Comments (1) | TrackBack (0)

Aprill: Bilski and the Future of Tax Strategy Patents

Ellen Aprill (Loyola-L.A.) has published The Supreme Court's Opinions in Bilski and the Future of Tax Strategy Patents, 113 J. Tax'n 81 (Aug. 2010). Here is the abstract:

The Supreme Court waited until the last day of the 2009-10 Term to issue its pronouncement on business method patents, Bilski v. Kappos. It then came “not with a bang but a whimper.” Those who thought, based on statements in earlier Court opinions or the tenor of oral argument in Bilski, that the Court might find all business methods, including tax strategies, not to be patentable subject matter, were disappointed. All the Justices agreed that patent protection did not extend to Bilksi’s hedging strategy process claims because they 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 they recognized that it was an important and useful test in many, perhaps even most, cases. They also declined to endorse the Federal Circuit’s prior test for patentability, whether the invention produced a “useful, concrete and tangible result.” The five members of the majority, in an opinion by Justice Kennedy, read the patent law as leaving open “the possibility of some business method patents.” At the same time, the opinion was quick to disclaim “broad patentability of such claimed inventions.” But the majority failed to offer guidance on when an idea is an abstract idea or what the limits on business method patents might be.

Continue reading

August 30, 2010 in Scholarship, Tax | Permalink | Comments (1) | TrackBack (0)

State Tax Revenues Rise for Second Consecutive Quarter

The Nelson A. Rockefeller Institute of Government reported today that state tax revenues increased for the second consecutive quarter, up 2.2% for the second quarter of 2010:
  • Corporate income tax:  -18.8%
  • Personal income tax:   +1.6%
  • Sales tax:  +5.9%

The largest increase was in the Northeast (+8.3%); the largest decrease was in the Rocky Mountain (-4.4%). State tax revenues rose in 30 states:

Chart

Here are the states with the ten biggest increases in tax revenues, as well as the states with the largest decreases in tax revenues:

1

Alaska

106.0%

2

Delaware

17.8%

3

North Dakota

16.9%

4

New Hampshire

16.3%

5

Connecticut

10.9%

6

Hawaii

10.7%

7

Massachusetts

10.5%

8

Oregon

10.0%

9

Washington

8.7%

10

Wisconsin

8.7%

United States

2.2%

41

Rhode  Island

-4.1%

42

Alabama

-4.2%

43

Utah

-4.5%

44

Nebraska

-4.7%

45

Idaho

-5.9%

46

Illinois

-7.0%

47

Kansas

-9.5%

48

Montana

-12.3%

49

Louisiana

-22.1%

50

Wyoming

-28.2%

August 30, 2010 in Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Johnston: How Would You Invest $1 Billion Under the Current Tax System?

Tax AnalystsDavid Cay Johnston has published How Would You Invest $1 Billion Under the Current Tax System?, 128 Tax Notes 1001 (Aug. 30, 2010):

In this column, Johnston poses a question about what to do with a windfall, asking readers to ponder how the tax system affects investment decisions and suggest ways to increase demand for goods and services.

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

August 30, 2010 in Scholarship, Tax, Tax Analysts | Permalink | Comments (2) | TrackBack (0)

NYU Graduate Tax Program Seeks to Hire Tax VAPs

NYU Logo The NYU Graduate Tax Program is seeking applicants for its Acting Assistant Professor of Tax Law Program for the 2011-12 academic year, beginning August 1, 2011:

For over fifty years, the NYU Acting Assistant Professor of Tax Law (“Tax AAP”) program has launched the careers of dozens of tax academics. ... Tax AAPs show promise as legal scholars and have a strong interest in teaching. They serve on a full-time, non-tenure track basis at the Law School for two academic years. At the start of their second year, Tax AAPs are expected to seek a tenure-track position on the law school academic job market.

While in residence at the Law School, Tax AAPs devote a substantial amount of time to their scholarship and begin to develop their research agendas. Tax AAPs teach one or two courses in the Graduate Tax Program each semester. Each Tax AAP also either serves an Assistant Editor of the Tax Law Review, the nation’s top tax policy journal, or works with the International Tax Program, the leading graduate tax program for non-U.S. lawyers.

A J.D. degree, a strong record of academic achievement, and an interest in an academic career, are required. Tax AAPs will be selected based on their potential scholarly and teaching abilities. To be considered for the Tax AAP program for the 2011-12 academic year, please submit the following items electronically to Professor Deborah Schenk, chairman of the Acting Assistant Professors of Tax Law Committee:  (1) cover e-mail explaining interest in the Tax AAP Program; (2) curriculum vitae; and (3) copies of law school transcripts (J.D. and, if applicable, LL.M.). Applications for the 2011-12 academic year will be reviewed on a rolling basis starting November 1, 2010.

More information on the NYU Acting Assistant Professor of Tax Law program, including benefits and salary information, is available here.

August 30, 2010 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0) | TrackBack (0)

Ground Zero Mosque Developers Owe $224k in Back Taxes

New York Post, Mosque Big Owes 224G Tax:

The mosque developers are tax deadbeats.

Sharif El-Gamal, the leading organizer behind the mosque and community center near Ground Zero, owes $224,270.77 in back property tax on the site, city records show.

El-Gamal's company, 45 Park Place Partners, failed to pay its half-yearly bills in January and July, according to the city Finance Department.

The delinquency is a possible violation of El-Gamal's lease with Con Edison, which owns half of the proposed building site on Park Place. El-Gamal owns the other half but must pay taxes on the entire parcel.

August 30, 2010 in Celebrity Tax Lore, News, Tax | Permalink | Comments (4) | TrackBack (0)

'TurboTax for Divorce'

Wall Street Journal, Breaking Up Without Breaking the Bank:

Breaking up is always hard to do. In the worst economic downturn most of us have ever lived through, it can be downright excruciating. Plummeting home values, sagging investments, job worries and exploding college and health-care costs have made parting ways and splitting assets more difficult than ever.

Even for couples with fewer assets than, say, Tiger Woods and Elin Nordegren, that is a good recipe for frustration and anger. One St. Louis family lawyer, Marta Papa, has seen such a rise in client hostility that she purchased a Taser, which she places on a nearby end table when couples come in. "The scarier part is that I've had to use it three times" by casting a red laser-beam light as a warning, Ms. Papa says. "I guess the chocolates and classical music weren't enough."...

Mick and Patricia Twomey, now 40 and 39 years old, respectively, have found it difficult to untie the knot. They decided to separate in 2007 after 10 years of marriage, but didn't finalize their divorce until last year. In the interim, they watched helplessly as the value of their business, house and investments tumbled. ...

Litigation can cost tens of thousands of dollars, take several months or even years, and is likely to disclose more personal information than mediated or collaborative divorces would. ... One couple spent two hours in court arguing over a leaf blower, Ms. Papa says. "I could have bought them each a new one for the amount it cost them." ...

The growth in so-called alternative divorce methods has helped trim costs. Only 1% of mediation cases cost couples more than $15,000, compared with 11% of litigated cases, according to the Institute for Divorce Financial Analysts, a group of financial professionals who specialize in divorce.

In mediation, couples meet with lawyers outside of court to hash out a mutually acceptable agreement that is later brought before a judge. In collaborative divorce, couples typically engage a phalanx of experts—including lawyers, mental-health professionals and financial planners—to work out an agreement in a more-structured environment of negotiation. ...

The Twomeys decided to use the collaborative-divorce process, which is encouraged under Texas divorce laws. In a series of five meetings with two attorneys and mental-health and financial professionals, the couple mapped out their post-marriage lives.

"It's almost like Turbo Tax for divorce," Mr. Twomey says. "You just answer the questions and everything gets filled out."

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

TaxProf Blog Weekend Roundup

Sunday, August 29, 2010

Top 5 Tax Paper Downloads

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

1.   [977 Downloads]  Social Security Benefits Formula 101: A Practical Primer, by Francine J. Lipman (Chapman) & James E. Williamson (San Diego State University, College of Business Administration)

2.  [664 Downloads]  Constitutional Decapitation and Health Care, by Steven J. Willis (Florida) & Nakku Chung (J.D. 2010, Florida)

3.  [370 Downloads]  2009 Developments in Connecticut Estate and Probate Law, by John R. Ivimey (Reid and Riege, Hartford) & Jeffrey A. Cooper (Quinnipiac)

4.  [317 Downloads]  Living with (and Dying by) the Codified Economic Substance Doctrine, by Martin J. McMahon, Jr. (Florida)

5.  [243 Downloads]  The Health-Related Tax Provisions of PPACA and HCERA: Contingent, Complex, Incremental and Lacking Cost Controls, by Edward A. Zelinsky (Cardozo)

August 29, 2010 in Tax, Top 5 Downloads | Permalink | Comments (0) | TrackBack (0)

WSJ: The $31 Billion Tax Fantasy

Wall Street Journal editorial, The $31 Billion Revenue Fantasy:
WSJ

Congress's Joint Committee on Taxation recently dropped a study claiming that millionaires will pay $31 billion of the $36 billion in revenue that it expects will be raised next year if tax rates rise as scheduled on January 1. Naturally, Democrats are saying this proves the tax hike is a free lunch for everybody except the rich. Yada, yada, yada.

If you believe that, you probably also believed Joint Tax when it predicted that the rich would gain a huge tax windfall when tax rates were cut in 2003. Let's go to the videotape.

According to the most recent IRS data on actual tax payments, total revenues collected over the period 2003-07 were about $350 billion higher than Joint Tax and the Congressional Budget Office predicted when the 2003 tax cuts were enacted. Moreover, the wealthiest taxpayers paid a larger share of all income taxes from the beginning to the end of this period. The IRS data show that in 2003 those with incomes above $200,000 paid $313 billion in income tax. By 2007 they paid $610 billion.

When the recession hit, the payments fell to $537 billion in 2008. But even accounting for that decline, payments by the rich were still 65% higher five years after the rate cut that was supposedly a giveaway to the rich. The share of federal income taxes paid by the $200,000-a-year club was 42% in 2003 but 52% in 2008. (The IRS doesn't adjust these annual numbers for inflation.)

The IRS data are a useful reminder of how dependent Uncle Sam is on the rich to pay the government's bills. Those who earn more than $200,000 a year in adjustable gross income, the group that Mr. Obama and the Democrats want to tax more, accounted for 3% of all taxpayers in 2008 but paid more than the bottom 97% of all taxpayers....

If Democrats want to raise more revenue and have a better chance to hold the House and Senate in November, they'll extend all of the 2001 and 2003 tax rates.

August 29, 2010 in News, Tax | Permalink | Comments (2) | TrackBack (0)

Aprill: The Americans for Prosperity Tax Controversy

Following President Obama's lead, the Democratic Congressional Campaign Committee has filed a complaint with the IRS regarding Americans for Prosperity Foundation ("APF"), a § 501(c)(3) organization. The complaint alleges that APF is a lobbying or advocacy organization ineligible for exemption under § 501(c)(3) and that it is engaged in prohibited intervention in a political campaign through advertisements run by its sister organization, Americans for Prosperity, a § 501(c)(4) organizations. Ellen Aprill (Loyola-L.A.) has a detailed post on the tax controversy. For more, see:

August 29, 2010 | Permalink | Comments (1) | TrackBack (0)

Building Envy: Marquette

The University of Cincinnati College of Law is in the midst of a capital campaign to construct a new building (as part of the university's $1 billion campaign), so this video of Marquette's new building set my heart racing:

I am looking forward to checking out Marquette's new building at the 2011 CALI Conference on June 23-25, 2011.

August 29, 2010 in Legal Education | Permalink | Comments (2) | TrackBack (0)

Saturday, August 28, 2010

2d Cir. Upholds KPMG BLIPS Tax Shelter Convictions

The Second Circuit on Friday upheld the convictions former KPMG tax partner Robert Pfaff, former KPMG senior tax manager John Larson, and former Sidley Austin partner Raymond Ruble of tax evasion in connection with the sale of BLIPS tax shelters.   The court, however, reduced Mr. Larson's fine by 50% (to $3 million).  United States v. Pfaff, No. 09-1702 (2d Cir. Aug. 27, 2010). (Bloomberg, Reuters)

August 28, 2010 in New Cases, News, Tax | Permalink | Comments (0) | TrackBack (1)

CNN: Barrister Barista -- Law Grad Works in Coffee Shop

Where Do State and Local Governments Get Their Tax Revenue?

Tax Foundation, Where Do State and Local Governments Get Their Tax Revenue?:

 

Property

Sales-Gen

Sales-Spec

Individual

Business

License

U.S.

30.8%

22.9%

10.8%

22.9%

4.3%

8.2%

AL

16.4%

29.5%

17.3%

22.7%

3.7%

10.3%

AK

11.0%

2.2%

3.6%

0.0%

10.1%

73.1%

AZ

29.2%

39.6%

8.7%

14.8%

3.4%

4.3%

AR

15.5%

39.5%

11.9%

24.9%

3.6%

4.4%

CA

28.4%

22.1%

6.7%

30.0%

6.4%

6.5%

CO

31.2%

26.8%

7.8%

25.8%

2.6%

5.8%

CT

36.0%

15.3%

9.8%

32.5%

2.6%

3.8%

DE

16.3%

0.0%

13.2%

28.7%

8.3%

33.5%

FL

41.3%

31.2%

15.8%

0.0%

3.0%

8.7%

GA

30.4%

29.1%

8.6%

26.3%

2.8%

2.9%

HI

18.6%

38.9%

12.6%

22.9%

1.6%

5.4%

ID

23.9%

27.3%

8.6%

29.1%

3.9%

7.2%

IL

36.8%

16.1%

17.2%

17.8%

5.4%

6.6%

IN

30.2%

25.0%

12.0%

23.5%

4.0%

5.3%

IA

32.2%

21.1%

11.2%

25.4%

3.0%

7.1%

KS

31.0%

25.8%

8.7%

24.8%

4.4%

5.3%

KY

19.6%

20.3%

16.8%

32.0%

4.6%

6.6%

LA

15.8%

39.6%

13.3%

17.7%

3.9%

9.7%

ME

36.4%

17.9%

10.9%

26.3%

3.1%

5.4%

MD

23.9%

13.6%

11.1%

40.4%

2.7%

8.4%

MA.

34.3%

12.1%

6.3%

36.8%

6.4%

4.2%

MI

37.5%

21.8%

10.6%

20.3%

4.7%

5.0%

MN

26.8%

18.9%

12.3%

31.5%

4.2%

6.3%

MS

25.0%

34.0%

13.0%

16.8%

4.2%

7.0%

MO

27.6%

25.4%

11.2%

27.5%

1.9%

6.3%

MT

34.1%

0.0%

15.9%

25.2%

4.7%

20.1%

NE

33.1%

25.0%

8.1%

23.0%

3.1%

7.7%

NV

30.4%

31.9%

23.9%

0.0%

0.0%

13.9%

NH

61.6%

0.0%

16.0%

2.4%

12.4%

7.7%

NJ

42.2%

16.6%

6.9%

23.4%

5.2%

5.6%

NM

14.5%

35.7%

10.5%

15.7%

4.6%

19.0%

NY

28.3%

16.7%

7.9%

33.6%

8.2%

5.5%

NC

23.7%

21.8%

11.8%

33.1%

3.6%

6.0%

ND

23.3%

19.6%

11.3%

10.0%

5.1%

30.7%

OH

29.1%

20.4%

11.1%

30.0%

1.9%

7.5%

OK

17.2%

29.3%

9.1%

22.6%

2.9%

18.8%

OR

34.0%

0.0%

8.8%

39.7%

4.3%

13.2%

PA

28.7%

17.0%

12.4%

26.5%

4.1%

11.3%

RI

42.3%

17.4%

11.2%

22.4%

3.0%

3.6%

SC

32.7%

24.1%

10.8%

21.8%

2.4%

8.3%

SD

34.3%

40.1%

14.3%

0.0%

2.8%

8.4%

TN

24.6%

46.3%

11.6%

1.5%

5.3%

10.7%

TX

38.8%

31.3%

15.5%

0.0%

0.0%

14.3%

UT

23.7%

27.9%

10.4%

27.7%

4.2%

6.2%

VT

40.1%

11.7%

17.8%

21.2%

2.9%

6.3%

VA

32.3%

14.5%

11.7%

30.9%

2.4%

8.1%

WA

27.3%

48.0%

14.6%

0.0%

0.0%

10.0%

WV

19.3%

17.3%

19.8%

23.6%

8.4%

11.7%

WI

36.2%

18.7%

8.7%

27.2%

3.5%

5.5%

WY

34.1%

32.9%

4.4%

0.0%

0.0%

28.6%

DC

32.0%

16.6%

9.1%

25.1%

7.8%

9.4%

 

August 28, 2010 in Tax, Think Tank Reports | Permalink | Comments (10) | TrackBack (0)

Obama Tax Policies Threaten Gulf Recovery From Katrina and BP

Washington Examiner, Looming Tax Hikes Threaten Gulf Economic Recovery, by Bill Dickens:

Will we ever see good news for the Gulf of Mexico region? [On the heels of Katrina and the BP oil spill,] new energy taxes recently proposed in Washington are ensuring that [the Gulf's recovery] future remains only a pipe dream.

Specifically, two new energy taxes being pushed by federal lawmakers would make our domestic energy companies less competitive globally and eliminate job promoting tax incentives at a time when we need them most. Both of these tax increases target only our oil and natural gas industry and, therefore, disproportionately undercut the welfare of costal states where energy exploration and production as a major source of jobs and the economy.

Consider first proposed changes to taxation on income earned abroad. Current ‘dual capacity’ rules grant American companies generating income overseas a tax credit to ensure the IRS doesn’t tax them for earnings on which they’ve already paid taxes elsewhere. For the past 25 years, Washington has maintained this sound tax policy to create an even playing field for domestic businesses in the global market. Yet, the proposed changes would penalize American-owned businesses, putting them at a competitive disadvantage against foreign competitors. That means that U.S. lawmakers would give companies like BP, who wouldn’t be subject to this kind of double-taxation, a leg up on domestic employers who will have fewer resources with which to compete. ...

The second major proposal Capitol Hill is considering involves the repeal of a tax credit known as Section 199. Congress enacted the credit six years ago to provide an incentive for job growth among all U.S. manufacturers, from the auto plants in Detroit to film producers in Hollywood. Now, Beltway politicians are calling for a repeal of this credit for only our oil and gas firms. ...

Though targeted at different sections of the tax code, these dubious proposals share a common consequence: more trouble ahead for our already troubled Gulf community. ...

With the anniversary of Katrina, it’s important to remember that the Gulf region has been hit by a natural disaster in Katrina and a manmade disaster with Deepwater Horizon. Now a Washington-made disaster in the form of energy taxes threatens these same businesses and families already struggling as well as our national economic stability.

August 28, 2010 in News, Tax | Permalink | Comments (6) | TrackBack (0)

Friday, August 27, 2010

President's Economic Recovery Advisory Board Releases 126-Page Tax Report

White House Following up on this morning's post, the President’s Economic Recovery Advisory Board (PERAB) today unanimously approved and sent (Chair Paul Volcker's letter; White House blog) to President Obama The Report on Tax Reform Options: Simplification, Compliance, and Corporate Taxation (126 pages).

Press and blogosphere coverage:

Here is the preface:

What follows is a report of the President’s Economic Recovery Advisory Board (PERAB) on options for changes in the current tax system to achieve three broad goals: simplifying the tax system, improving taxpayer compliance with existing tax laws, and reforming the corporate tax system.

Continue reading

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

BNA: Pay to Win -- Campaign Contributions Produce California Taxpayer Victories

BNA Logo BNA Daily Tax Report, Campaign Contributions and the California State Board of Equalization:

Taxpayers with complex tax dispute cases before the California State Board of Equalization were more likely to win their cases if they or their representatives made campaign contributions to the elected board members, either directly or through political action committees, according to a detailed examination by Daily Tax Report, a BNA publication.

In a series of reports, BNA examined the outcomes of 70 complex, high-stakes cases argued before the board between 2002 and 2009, and compared those cases to publicly available campaign finance records.

BNA found more than $1 million in contributions to board members from taxpayers or their representatives who argued those cases before the board. All of the contributions were legal, and contributors who spoke to BNA denied any causality between their contributions and success before the board.

Political Contribution

No. of Cases

TP Success Rate

< $250

20

30%

$250 - $16,000

17

53%

$16,001 - $50,000

16

75%

$50,001 - $137,000

16

88%

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

Do We Need a Tax Bracket for the Super-Rich?

Huffington Post, Do We Need A Tax Bracket For The Super-Rich?:

Should someone who makes $400,000 a year pay the same effective tax rate as someone who makes $40 million a year? In a recent CNBC spot, two analysts took up the debate, which has taken on a new urgency as lawmakers and pundits ponder the Bush tax cuts and the mounting Federal deficit. ...

In the CNBC spot, Michael Linden, an expert at the progressive think-tank the Center for American Progress, argued the U.S. should add income tax brackets for those making $1 million, $5 million and over $10 million a year. While Daniel Mitchell, a fellow at the conservative think tank the Cato Institute, said the super rich should pay the same tax rate as the moderately rich, the middle class, even the poor.


(Hat Tip: Francine Lipman.)

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

Garnett: 'Preaching What They Don't Practice'

Following up on Monday's post, Newton: How Law Profs' Preoccupation with 'Impractical Scholarship' Obstructs Legal Education Reform (Aug. 23, 2010):  Rick Garnett (Notre Dame), "Preaching What They Don't Practice" (PrawfsBlawg):

Critiques like this are nothing new, of course, and (just as "of course") have some bite.  But, they can be (and I worry that Newton's might be) overstated.  Sure, we all remember (or know!) legal scholars and law teachers who seem way-disconnected from the practice of law and who we cannot imagine actually advising a client, putting together a deal, or arguing a case.  But, the suggestion that -- even at those awful, top-tier theoretician-factories that Newton has in his sights -- faculty members who are hired not only to teach skills and doctrine but also to investigate and reflect on the history, animating principles, normative failings, etc., of our craft and tradition (our learned profession) "lack the skill set necessary to teach students how to become competent, ethical practitioners" seems too sweeping.  The suggestion reflects, I suspect, a narrower-than-mine view of what it means to be a "competent, ethical practitioner" -- a real lawyer.

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

Lewis: Charitable Waste -- Consideration of a 'Waste Not, Want Not' Tax

Evelyn Alicia Lewis (UC-Davis) has posted Charitable Waste: Consideration of a 'Waste Not, Want Not' Tax, 30 Va. Tax Rev. ___ (2010), on SSRN. Here is the abstract:<

Lavish expenditures by charities occur regularly, even in today’s depressed economy. Many are unwarranted and foolish while some prove to be extremely beneficial and valuable over time. But even the best of charitable splurges involve government waste since all charities are substantially supported by significant government subsidies. Unfortunately, most taxpayers don’t respond to charitable luxury-type waste with the same degree of outrage they do to other forms of government waste. This article first reveals the probable reasons for this different taxpayer reaction and posits that it’ll be difficult to change taxpayer response given the complexity of the perception problems. As an alternative, this article proposes a tax solution to the problem, after describing how existing laws are currently inadequate to the task of preventing or curbing lavishness by charities. Moreover, the article articulates why flat prohibitions or oppressive sanctions are unwarranted and proposes taxing only the excess amount of charitable expenditures without threat, judgment or blame about a charity’s worthiness for general tax-exemption. A chief difficulty is in defining wastefulness. This article offers criteria for the tax’s design that tackles this issue as well as other considerations.  

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

Tax Court Cites Monty Python to Excuse Taxpayer From Penalty

Monty Shao v. Commissioner, T.C. Memo. 2010-189 (Aug. 26, 2010):

In Shao’s case we don’t find the circumstances that led the Court to penalize Calloway [Calloway v. Commissioner, 135 T.C. ___ (July 8, 2010)] -- there is no evidence of a wink-wink-nudge-nudge-say-no-more arrangement with Derivium. See Monty Python’s Flying Circus: How To Recognise Different Types of Trees From Quite a Long Way Away (BBC television broadcast Oct. 19, 1969). Shao had legitimate, nontax motivations for wanting to structure her deal as a loan instead of a sale -- she wanted to reduce risk and use some of the stocks’ value without selling her nest egg. Her naivete, but not (we expressly find) her negligence, is especially prominent in her renewal of the loan at a steep price after three years. Unlike Calloway, Shao treated her transaction like a loan throughout its existence, proving her good faith.

We therefore find that Shao acted in good faith upon an honest misunderstanding of the law that was reasonable in her circumstances. She has proven her defense to the accuracy related penalty.

August 27, 2010 in New Cases, Tax | Permalink | Comments (3) | TrackBack (0)

President's Economic Recovery Advisory Board to Discuss Tax Options at Today's Meeting

White House The President’s Economic Recovery Advisory Board (PERAB) meets today at 2:00 p.m. EST via conference call (live webcast available here).  From the agenda:

The discussion will include Board review of a report by the Tax Reform subcommittee. The report discusses a spectrum of reform ideas relating to tax simplification, enforcement of existing tax laws, and reform of the corporate tax system, without considering policies that would raise taxes on families making less than $250,000. The PERAB is not tasked with providing its own policy recommendations for the Administration and the final report will be an almanac of options from a broad range of viewpoints. The PERAB will vote on presenting the report as formal advice to the President.

August 27, 2010 in Gov't Reports, News, Tax | Permalink | Comments (1) | TrackBack (0)

"My Wife Knows Everything" Beats "My Wife Doesn't Know"

Check out the hilarious call of the seventh race at Monmouth Park (New Jersey) on August 22, 2010:

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

Hatfield: The Ethics of Tax Lawyering

Michael Hatfield (Texas Tech) has posted The Ethics of Tax Lawyering: An Introduction on SSRN. Here is the abstract:

This draft chapter’s objective is to raise interesting tax ethics issues in practical contexts. There are 43 notes and questions to prompt and guide discussions, and primary source materials to inform classroom discussions (e.g., cases, IRC provisions, and Circular 230 excerpts). The topics considered include: sharing the tax profession with CPAs; regulating tax lawyering through the criminal and civil penalties of the IRC, Circular 230; and malpractice standards, written tax opinions, tax shelters, mistakes by clients, mistakes by the IRS, and working with the IRS.

August 27, 2010 in Scholarship, Tax | Permalink | Comments (4) | TrackBack (0)

Thursday, August 26, 2010

1st Circuit Upholds Check-the-Box Regs

The First Circuit on Tuesday summarily affirmed Medical Practice Solutions, LLC v. Commissioner, 132 T.C. 125 (2009), joining the Second (McNamee v. Dept. of the Treasury, 488 F.3d 100 (2d Cir. 2007)) and Sixth (Littriello v. United States, 484 F.3d 372 (6th Cir. 2007)) Circuits in upholding the validity of the check-the-box regulations. Medical Practice Solutions v. Commissioner, No. 09-1909 (1st Cir. Aug. 24, 2010).

August 26, 2010 in New Cases, Tax | Permalink | Comments (1) | TrackBack (0)

Dean David Van Zandt to Leave Northwestern to Become President of the New School

Van Zandt New School Press Release:

The New School Board of Trustees announced today the appointment of David E. Van Zandt, dean and professor of law at the Northwestern University School of Law, as the eighth president of the university. The New School, which offers some of the nation's most respected degree programs in the humanities and social sciences, design, public administration, and the performing arts, has transformed in recent years into a major urban university that remains faithful to a history of civic engagement and democratic ideals.

Dr. Van Zandt will assume his new position as president of The New School on January 1, 2011. He succeeds the university's current president, Bob Kerrey, who will remain as New School president until the end of 2010 to ensure a seamless transition. Kerrey, who was appointed in 2001, led The New School during a period of unprecedented growth.

Dean Van Zandt:

At today's faculty meeting, I announced that I will be leaving Northwestern University to become the president of The New School in New York City.  My last day will be December 31, 2010.

While Lisa and I are excited about this new opportunity, our feelings are bittersweet. To say that Northwestern has been wonderful to us over the last two decades is an understatement.  We will sorely miss our colleagues and friends here at the law school, the University, and in Chicago.

Northwestern Provost Dan Linzer:

We greatly appreciate David's leadership at the law school during a time of dramatic change in the legal profession. Building upon a strategic plan implemented in 1998, he has led continual efforts to analyze the legal market to maximize our graduates' success. The resulting initiatives for students, along with the faculty focus on discipline-based research that furthers understanding of law and legal institutions, have set the law school apart. Under his leadership, Northwestern Law has innovated and kept up with big shifts in the law and business worlds and has been pathbreaking in the world of academic research in law, paving the way for David's successor.

Press and blogosphere coverage:

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

The Top 10 Highest State Capital Gains Taxes: All Obama Blue States

Forbes, Consider State And Local Taxes Before You Take Capital Gains, by Ashlea Ebeling:

The ten highest state taxes on capital gains:

  1. Oregon:  11% (income > $500,000 (couple), $250,000 (single))
  2. California:  10.55% (income > $1 million)
  3. Rhode Island:  9.9% (income > $373,650)
  4. Iowa:  8.98% (income > $64,261)
  5. New Jersey:  8.97% (income > $500,000)
  6. New York:  8.97% (income > $500,000)
  7. Washington, D.C.:  8.5% (income > $40,000)
  8. Maine:  8.5% (income  > $39,550 (couple), $19,750 (single))
  9. North Carolina:  7.9825% (income > $100,000 (couple), $250,000 (single))
  10. Minnesota:  7.85% (income > $132,220 (couple), $74,780 (single))
See also The Top 10 Highest State Income Taxes: All Obama Blue States (Aug. 20, 2010)

August 26, 2010 in News, Tax | Permalink | Comments (2) | TrackBack (0)

White House Says Alan Simpson to Remain as Co-Chair of Deficit Commission Despite Offensive Comment

The White House today announced that Alan Simpson will remain as co-chair of President Obama’s bipartisan fiscal commission despite writing a letter comparing Social Security to “a milk cow with 310 million tits.”

August 26, 2010 in News, Tax | Permalink | Comments (4) | TrackBack (0)

WSJ: IRS Goes Overboard in Regulating Tax Preparers

Wall Street Journal op-ed: The IRS Targets Incompetent Tax Preparers -- That's Good News. But the Agency Is Going Overboard, by Brad Sherman (D-CA) & Michael Conaway (R-TX):

The IRS is out to do something nice for us by ensuring we get quality help when we hire someone to prepare our tax returns. Unfortunately, parts of this laudable effort may be too much of a good thing. By going too far, too fast with more regulation than necessary, the IRS will add needless burden and expense. The agency's goals could be achieved more cheaply and efficiently without stretching its enforcement resources so thin.

Tax attorneys, certified public accountants (CPAs) and enrolled agents already are subject to extensive oversight and testing at both the state and federal levels. But a vast army of others operate with little federal or state supervision and may have little formal training. No independent cop on the beat protects taxpayers from the unprepared preparer. The proposed registration program would bring unregulated preparers within reach of the IRS, enabling it to identify those with a pattern of shoddy work, and, if necessary, act to protect taxpayers. That's the good news.

But the effort is flawed by plans to apply it too widely—going beyond the "signing preparer" (the person who directs and reviews the work and then signs the return) to basically every person who may touch a return.

This approach could require more than a million registrations nationwide, including legions of "nonsigning preparers" at CPA firms that are already subject to intense scrutiny and penalties by state accountancy boards and the IRS. Requiring a PTIN for nonsigners is regulatory duplication that will create volumes of additional paperwork and expense to be passed onto taxpayers—without providing any added protection.

August 26, 2010 in IRS News, News, Tax | Permalink | Comments (2) | TrackBack (0)

Atax Issues Call for Tax Research Fellows

ATax The Australian Taxation Studies Program (Atax), University of New South Wales, Sydney, Australia, is seeking two research fellows for 2011:

In 2011 Atax will offer two Research Fellowships to international academics and professionals keen to further their research in the field of taxation and related disciplines. Each Fellowship is valued at up to A$7,500.

Research Fellows normally spend four weeks working at Atax on a mutually agreed area of research. During their stay, Fellows are involved in the following activities:

  • producing at least one research paper on taxation, preferably in collaboration with Atax academic(s), to be published in a refereed journal with due acknowledgement of the Fellowship;
  • conducting an Atax research seminar for interested members of the broader tax research community; and
  • participating in Atax collegial activities during the period of the Fellowship.

Atax will provide office space and computer equipment at its campus in Sydney, Australia. Fellows will be responsible for organising their own travel and accommodation arrangements. The preferred timing for successful applicants to undertake the Fellowship is August - October 2011, but other times of the year may also be possible.

Selection is based on the applicant’s research proposal and on their ability to contribute to the Atax research profile. A track record in collaborating with Atax academics will be considered as an advantage.

Applications are invited from overseas academic and professional researchers working in taxation and related disciplines from around the world. To apply, applicants must send a letter of application, indicating the area they wish to research under the Fellowship, a current curriculum vitae and their preferred timing to undertake the Fellowship.

Applications should be sent to Professor Binh Tran-Nam, Research Fellowship Convenor. Applications to undertake the Research Fellowship in 2011 must be received by 19 November 2010. Successful applicants will be notified by 31 December 2010 and undertake the Fellowship in 2011.

August 26, 2010 in Tax, Tax Prof Jobs | Permalink | Comments (1) | TrackBack (0)

ABA Releases Law Student Tax Challenge Problem

Law Student Tax Challenge (2010) The ABA Tax Section has released the problem (J.D.; LL.M.) and updated rules (J.D.;LL.M.) for the 10th Annual Law Student Tax Challenge:

An alternative to traditional moot court competitions, the Law Student Tax Challenge asks two-person teams of students to solve a cutting-edge and complex business problem that might arise in everyday tax practice.

J.D.: This year's J.D. problem focuses on the personal income tax effects of a famous athlete's divorce from his wife, as well as his subsequent attempts to repair his marriage and his professional sports career. The problem asks participants to evaluate alternate property settlement proposals from his wife's lawyer and analyze the deductibility of certain expenses incurred by the client.

LL.M: This year's LL.M problem focuses on a wealthy energy tycoon's attempt to reorganize his existing investments and acquire an interest in the burgeoning electric car business. The problem asks participants to recommend the best structure for: the tycoon's purchase of the oil rig business owned and operated by one of his current investments, the reorganization of his investments into an S corporation, and his new investment in the electric car business.

Teams are initially evaluated on two criteria: a memorandum to a senior partner and a letter to the client explaining the result. Based on this written work product, 6 teams from the J.D. Division and 4 teams from the LL.M. Division will receive a free trip (including airfare and accommodations for two nights) for the Section's 2011 Midyear Meeting, January 20-22 at the Boca Raton Resort & Club in Boca Raton, FL, where they will defend their submissions before a panel of some of the country's top tax lawyers.

The competition is a great way for law students to showcase their knowledge in a real-world setting and gain valuable exposure to the tax law community. On average, more than 40 teams compete in the J.D. Division and more than 20 teams compete in the LL.M. Division.

At several institutions, the competition is used as a learning tool. The competition offers motivated students a tremendous opportunity to learn more about tax law, interact with professionals in the world of tax, and earn credit while doing so.

Upcoming Deadlines:

  • Nov. 5, 2010:  Written Submissions Due
  • Dec. 6, 2010:  Semi-Finalists and Finalists Notified
  • Jan. 21, 2011: Semifinal and Final Oral Rounds at Section of Taxation Midyear Meeting

For the results, problems, winning answers, judges, and entrants for the prior competitions (2001-2009), see here. For TaxProf Blog coverage of prior winners, see 2009, 2008, 2007, 2006, and 2005.

August 26, 2010 in ABA Tax Section, Conferences, Tax, Teaching | Permalink | Comments (0) | TrackBack (0)

Lawsuit: IRS Using Bob Jones University to Deny Tax-Exempt Status to Pro-Israel Charity

Politico, Pro-Israel Group Claims IRS Persecution:

A hawkish pro-Israel group today filed a lawsuit against the Commissioner of the IRS containing the explosive allegation that the IRS is devoting special scrutiny to pro-Israel groups whose policies conflict with that of the administration.

The group Z Street, intended as a conservative Zionist answer to the liberal J Street, says in its complaint that its counsel was informed that its status as a tax-exempt group was delayed, and could be denied, because of that scrutiny.

Agent Diane Gentry told the group's lawyer that the IRS is "carefully scrutinizing organizations that are in any way connected with Israel," the complaint, filed in federal district court in Pennsylvania, says. "Agent Gentry further stated to counsel for Z STREET: 'these cases are being sent to a special unit in the D.C. office to determine whether the organization's activities contradict the Administration's public policies.'"

The Jewish Daily Forward, Lawsuit Accuses IRS of Screening Israel-Related Charities:

As the Forward reported in January, some argue that the 1983 U.S. Supreme Court decision in the case of Bob Jones University v. United States could be interpreted to deny nonprofit status to organizations that oppose established American foreign policy. The Bob Jones decision, which found that “an institution seeking tax-exempt status must… not be contrary to established public policy,” was written to bar tax exempt groups from participating in racial discrimination.

Legal experts were split on the question of longstanding foreign policy, such as America’s opposition to Jewish settlements in the West Bank, could fall within the realm of “public policy” as described in Bob Jones. All agreed, however, that the IRS had never used Bob Jones to deny tax-exempt status to nonprofits that oppose American foreign policy.

The Weekly Standard, Is the IRS Discriminating Against a Pro-Israel Group?:

Z Street was told by an IRS agent that it might not be granted 501(c)(3) status, which would allow the group to be tax exempt, because its position toward Israel differs from the Obama administration's official policies. Z Street alleges that this is unconstitutional:

These statements by an IRS official that the IRS maintains special policies (hereinafter the “Israel Special Policy”) governing applications for tax-exempt status by organizations which deal with Israel, and which requires particularly intense scrutiny of such applications and an enhanced risk of denial if made by organizations which espouse or support positions inconsistent with the Obama administration’s Israel policies, constitute an explicit admission of the crudest form of viewpoint discrimination, and one which is both totally un-American and flatly unconstitutional under the First Amendment.

August 26, 2010 in IRS News, New Cases, Tax | Permalink | Comments (12) | TrackBack (0)

Morse: How Australia Got a VAT

Susan C. Morse (UC-Hastings) has posted How Australia Got a VAT on SSRN. Here is the abstract:

Australia got its goods and services tax – its VAT – in 2000. It enacted GST legislation through ordinary political channels, without external pressure from a multinational organization, without the pressure of an extreme national fiscal crisis and without an unusual exercise of executive authority. And the GST-enacting center-right Liberal National Party government retained control for seven years after the reform.

This paper tells the Australian story in four parts: (1) framing the GST as a relatively efficient tax; (2) building a coalition between business and social welfare interest groups; (3) emphasizing efficiency while addressing regressivity in the political and legislative process; and (4) the federalism solution included in the reform, which provided for the transfer of GST revenue to the Australian states and territories.

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

Wednesday, August 25, 2010

Five Tax-Wise Moves for Today's Down Stock Market, Low Interest Rates

Forbes: Five Ways To Freeze Out Uncle Sam, by Deborah L. Jacobs:

For those who dare to think ahead, today's down market and low interest rates offer great tax saving opportunities.

August 25, 2010 in News, Tax | Permalink | Comments (0) | TrackBack (0)

Virginia Tax Review Publishes New Issue

Sliced Bagel Tax Riles New Yorkers

TIGTA: IRS Fails to Properly Monitor 25% of Section 527 Political Organizations

TIGTA The Treasury Inspector General for Tax Administration today released Improvements Have Been Made, but Additional Actions Could Ensure That Section 527 Political Organizations More Fully Disclose Financial Information (2010-10-018):

This report presents the result of our review of the filing compliance of Section 527 political organizations. ... The IRS has taken significant actions to improve its ability to identify political organizations that do not timely notify the IRS of their existence or timely submit reports of their contributions and expenditures. However, the IRS has not fully addressed noncompliance among political organizations. For example, one out of every four Political Organization Report of Contributions and Expenditures (Form 8872) that we reviewed had incomplete or missing contributor or recipient information. While some of these filings may later be deemed acceptable, we determined the IRS is not reviewing these filings to determine if they are complete or if penalties should be assessed. Also, the IRS is not always issuing notices at the appropriate time that include all information needed by political organizations to become compliant. Lastly, the IRS is not following up on information it has requested from political organizations to verify compliance. ...

Although the EO function has taken action to identify noncompliant political organizations, we believe EO function management should focus on addressing noncompliance through increased enforcement actions. The assessment of taxes and penalties for incomplete filings, when appropriate, could lead to increased accountability and disclosure by political organizations. Improvement in the notice process could also assist political organizations in complying with their responsibilities.

August 25, 2010 in Gov't Reports, IRS News, Tax | Permalink | Comments (0) | TrackBack (0)

McCauliff: Wealth, Lobbying and Distributive Justice in the Wake of the Economic Crisis

C.M.A. McCauliff (Seton Hall) has published Didn't Your Mother Teach You to Share?: Wealth, Lobbying and Distributive Justice in the Wake of the Economic Crisis, 62 Rutgers L. Rev. 383 (2010). Here is the abstract:

Whether legislative or technological, change is always difficult to envision and accomplish. True high-speed rail and the fastest internet, available in parts of Europe and Asia, are variously estimated to be from fifteen to fifty years away for the United States as a consequence of cultural barriers. Similarly, legislative reform should be immanent in both the disclosure and substantive terms of financial investments and consumer credit cards, mortgages and other instruments. Cultural barriers again hinder implementing legislation. This article focuses on one analysis of, and justification for, the needed changes: the jurisprudence of distributive justice. The meaning and understanding provided by a jurisprudential analysis may inform policy and legislation.

The article also examines the obstacles to passing reform legislation. The cultural habits of secrecy and extreme profits on Wall Street are fiercely held and well financed. The continued culture of outsize profits is produced by taking unwarranted investment risks. The desire to mold legislation through lobbying is also designed to keep that culture of wealth in place. Such self-serving behavior raises "deep and unsettling questions" about this numerically very small culture of Wall Street which nevertheless dominates regulation and tax legislation relative to protecting its extraordinary profits. Even if legislative change does not fully come about now, this article addresses the academic's duty "to expose the patterns of risk and denial" after "a bubble of false prosperity and [continued] excessive materialism."

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