TaxProf Blog

Death of Charles Galvin

Tax Prof Charles O. Galvin, Distinguished Professor Emeritus and former Dean of SMU, died on Jan. 27 at the age of 91. From the SMU press release:

“Dean Galvin was one of the greatest deans in the history of the law school and one of the foremost tax professors of his time,” said John B. Attanasio, Dean of SMU’s Dedman School of Law.” ...

Dean Galvin began his impressive academic career at SMU, where he received his B.S.C. degree with highest honors in 1940.  Subsequently, he earned an M.B.A. degree with distinction from Northwestern University before serving in the United States Navy in World War II with the rank of Lieutenant Commander. Dean Galvin returned to Northwestern after the war and received his Juris Doctor degree in 1947 and later, his S.J.D. from Harvard. ...

In 1952, Dean Robert G. Storey invited Dean Galvin to join the SMU Law School faculty, where he remained for more than 30 years.  From 1963-1978, he served as Dean.  Dean Galvin was the Centennial Professor of Law at Vanderbilt University from 1983-1990.  He also taught at Harvard, Michigan, Northwestern, Duke, Pepperdine, UT-Austin and the University of Kansas. 

He wrote numerous important works on federal tax law and other subjects in collaboration with Boris Bittker. 

• Obituary (Austin American-Statesman)
• Wills, Trusts & Estates Prof Blog

PBS: Tax Justice

Watch the full episode. See more Religion & Ethics NewsWeekly.

NPR: Why Does GE Pay 3.6% Tax Rate, and Wal-Mart Pay 33.6%?

NPR, For Many Companies, Low Taxes Are Key To Profits:

During his State of the Union address, President Obama said the current tax system is broken. "Those with accountants or lawyers to work the system can end up paying no taxes at all," he said. "But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, and it has to change."

Just how broken is the corporate tax system? Consider the tax rate paid by two of America's biggest companies — Wal-Mart and General Electric. Wal-Mart paid 34 cents in taxes for every dollar of profit it made in the past three years. General Electric paid just 3.6 cents on the dollar.

Welcome to the mysterious world of the corporate income tax, says tax expert Len Burman at Syracuse University. "There are big companies that consider their tax departments to be profit centers," he says.

That's right; instead of concentrating on making light bulbs, power plants or whatnot, companies use the tax system to boost their profits.

The source of the data in the chart to the right is the January 20 testimony of Martin A. Sullivan (Tax Analysts) before the House Ways and Means Committee.

(Hat Tip: Francine Lipman.)

'You've Got a Buddy in the Tax Fraud Business'

The former Cincinnati-based in-house counsel for the former 30-store retail chain Buddy's Carpet -- which carpet-bombed local media with advertising with the tag line "You've Got a Buddy in the Carpet Business," a play on the late former owner Burton B. “Buddy” Kallick's name -- was sentenced to 18 months in federal prison for his role in a tax fraud scheme.  From Friday's DOJ press release:

The evidence showed that, prior to selling the business in 2000, the defendants caused the firm to spend a total of $3.6 million on eight “Loss of Income” insurance policies, the purpose of which was to provide substantial tax deductions to the company and to the owners. ... The evidence also demonstrated that these insurance policies were a sham.   The evidence further showed that [the defendants] attempted to conceal their participation in these sham arrangements by establishing offshore nominee entities in foreign countries, such as Nevis.

• National Law Journal, Former In-House Counsel of Buddy's Carpet Gets Prison for Tax Fraud

NLJ: Law Schools Imagine Life Without the LSAT

National Law Journal, Who Needs the LSAT Anyway? Law Schools Are Beginning to Imagine Life Without the Test:

Is the LSAT the best way to gauge who will succeed in law school, or is it a barrier to diversity in the legal profession and a far too influential ­component of the rankings game?

That long-simmering debate has been reignited with news that the ABA is contemplating making the LSAT voluntary rather than mandatory for accreditation. Dumping the test would be a major departure — the test has been required for nearly 40 years — but the ABA's accreditation arm is developing new standards that give law schools more autonomy. ...

Perhaps the strongest argument in favor of the LSAT is that it has been proven time and again to be the best predictor of success during the first year of law school. Council research shows that LSAT scores do a better job of predicting first-year law school performance than undergraduate grade-point average alone, although a combination of both is best. ... Admissions officials rely heavily on the LSAT in part because undergraduate grade-point averages can't offer a head-to-head comparison between applicants. ...

[S]ome say the root of the problem is law school administrators, not the rankings. "I don't think U.S. News is the problem. They're the messenger," said John Nussbaumer, an associate dean at the Thomas M. Cooley Law School and a frequent LSAT critic. "Schools set LSAT cutoffs higher than they need to be, and that's a business decision made by the school."

A 2009 study by two sociologists from the University of Iowa and Northwestern University concluded that the rankings play a significant part in admissions decisions and have prompted some schools to put more money toward merit-based scholarships to attract students with high LSAT scores — often at the expense of need-based scholarships. [The Effects of U.S. News & World Report Rankings on U.S. Law Schools,]

The obsession with LSAT scores and rankings is demoralizing for schools that take a broader view of applicants and admit students who will make good lawyers but don't necessarily score highly on the test, said Suffolk University Law School Dean of Admissions Gail Ellis. "There is so much pressure. Everybody wants to be in the top tier," ...

Of all the criticism aimed at the LSAT, the most persistent is that the test — and the way scores are used — undermines diversity efforts.

Nussbaumer has been studying the effects of the LSAT on minorities since 2005. For a forthcoming law review article [The Door to Law School], he and fellow Cooley professor and ABA Standards Review Committee member Christopher Johnson Jr. analyzed 10 years of law school application data and concluded that blacks had a "shutout" rate of 60% — meaning that the majority of applicants received no admission offer. Hispanics had a shutout rate of 45%; whites had a shutout rate of 31%. Those results closely correlated with the average LSAT score for each group, with whites having the highest average LSAT at 153 and blacks the second lowest, 142.

Some members of Standards Review Committee aren't sure the ABA should be telling law schools how to admit students, and note that the accrediting agencies for medical and business schools do not require any specific admission test. Additionally, the ABA's LSAT requirement financially benefits the council, said David Yellen, a member of the committee and the dean of Loyola University Chicago School of Law. ... [T]he test has helped the council build up wealth and influence. It reported nearly $140 million in net assets to the IRS in 2008, the latest figure available. ...

Would law schools actually stop using the LSAT if the ABA made it ­optional? Probably not, most legal educators agreed. The test has become such a big part of the admissions process that it would be difficult to move away from it. How­ever, schools are already --experimenting, admitting small numbers of students who haven't taken the test. Since 2009, the ABA has granted waivers allowing seven law schools to use tests such as the Scholastic Aptitude Test in lieu of the LSAT. Both the University of Michigan Law School and the University of Illinois College of Law have launched such programs, limited to juniors from their respective undergraduate schools. Both programs show early promise, administrators said.

• ABA May Make LSAT Optional (Jan. 13, 2011)
• 'Hasta la Vista, LSAT?' (Jan. 14, 2011)
• US News to Continue to Use LSAT in Rankings, Even if ABA Makes LSAT Optional (Jan. 24, 2011)

Russell Osgood, Jim Repetti Named Dean Finalists at Boston College

Russell K. Osgood (Visiting Professor, Washington University; former President, Grinnell College; former Dean (and Tax Prof), Cornell) and Tax Prof Jim Repetti (Associate Dean for Academic Affairs and William J. Kenealy, S.J. Professor of Law, Boston College) are among the five finalists for the Boston College deanship. (The other finalists are Michele Goodwin (Minnesota), Vincent Rougeau (Notre Dame), and Robert Schapiro (Emory).) (Hat Tip: EagleiOnline, Faculty Lounge.)

Johnston: Tax Refunds Via Debit Cards -- A Victory for Taxpayers Over Bankers

David Cay Johnston has published Tax Refunds: More for Taxpayers, Less for Bankers,130 Tax Notes 591 (Jan. 31, 2011):

This article examines the seeming benefits, and possible costs of issuing income tax refunds via debit cards and the cards' place in the history of government aid to big business.

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

Samford, Northwestern Win 2010 ABA Law Student Tax Challenge

The ABA Tax Section has released the list of winners of the 2010 Law Student Tax Challenge:

The contest features J.D. and LL.M. divisions, both of which compete in two person teams that research the tax issues involved, and then submit technical memoranda and client letters with their solutions. The teams’ written submissions are judged by tax practitioners from across the country; the teams with the best written submissions are chosen to present their tax planning strategies before the competition judges at the section’s Midyear Meeting in Boca Raton, Florida.

“We were pleased this year to have a record number of entries,” said Charles H. Egerton, chair, ABA Section of Taxation. “Ninety-five J.D. teams and 31 LL.M. teams, from 55 law schools, submitted their solutions to a challenging, complex tax planning problem that involved individual and business entity issues.”  

J.D. Division:

• 1st Place:  Samford -- Wes Hill & Sims Rhyne III (Brannon Denning, faculty coach)
• 2nd Place:  Cleveland State -- Caryn Gross & Michael Tangry (Deborah Geier, faculty coach)
• 3rd Place:  William & Mary -- Peter Farrell & Jonathan Puvak (William Richardson, faculty coach)
• Best Written Submission:  William & Mary -- Peter Farrell & Jonathan Puvak (William Richardson, faculty coach)
• Runner-Up Best Written Submission:  Cleveland State -- Caryn Gross & Michael Tangry (Deborah Geier, faculty coach)
• Semi-finalist #1: Kentucky -- Leah Chalkley & Patrick Kern (Jennifer Bird-Pollan, faculty coach)
• Semi-finalist #2:  Florida -- Ben Friedman & Christopher Mikes (Charlene Luke, faculty coach)
• Semi-finalist #3:  Liberty -- Tim Todd & Melissa Ogden (Philip Manns, faculty coach)

LL.M. Division:

• 1st Place:  Northwestern -- Judson Bryant & John Goodell (Robert Wootton, faculty coach)
• 2nd Place:  Temple -- Travis Wheeler & Jeanmarie Dunn-Kane (Andrea Monroe, faculty coach) 
• Best Written Submission:  Missouri-K.C. -- Nicholas Bracco & Samuel Burnett (Judith Wiseman, faculty coach)
• Finalist #1:  Missouri-K.C. -- Nicholas Bracco & Samuel Burnett (Judith Wiseman, faculty coach)
• Finalist #2:  Denver -- Jennifer Jewkes & Matthew Wiseman (Alicia Buckingham, faculty coach)

Chris Christie v. Pat Quinn

Following up on my recent posts (links below) on the gigantic individual (67%) and business (45%) income tax hikes recently approved in Illinois: New Jersey Governor Chris Christie is running this ad soliciting Illinois businesses to move to his state:

Illinois Governor Pat Quinn is not pleased:

 

• Indiana and Wisconsin Court Illinois Businesses Fleeing 66% Individual and 46% Business Tax Hikes (Jan. 13, 2011)
• Illinois Corporate Tax Hike Inches U.S. Closer to #1 Global Tax Ranking (Jan. 16, 2011)
• Illinois Tax Hikes Claim First Victim: Jimmy John's to Leave State (Jan. 21, 2011)

TaxProf Blog Weekend Roundup

Saturday:

• Clint Eastwood on the Flat Tax
• Bartlett:  Obama Walked Into Tax Reform Neutrality Trap
• The IRS Ban on Political Activity by Tax-Exempt Religious Organizations
• The Mortgage Forgiveness Debt Relief Act of 2007

Sunday:

• Dilbert Creator Scott Adams: How to Tax the Rich
• Top 5 Tax Paper Downloads
• Thorndike: The American Tax Tradition of 'Soaking the Rich'
• 'Hard-Ass' Larry Summers v. 'Tiger Mom' Amy Chua on Developing Children (and Faculty)

Dilbert Creator Scott Adams: How to Tax the Rich

Weekend Wall Street Journal, How to Tax the Rich:

Try giving them perks and privileges (an extra vote?) in return, says 'Dilbert' creator Scott Adams.

The president was too polite to mention it during his State of the Union speech on Tuesday, but here's a quick summary of the problem: The U.S. is broke. The hole is too big to plug with cost cutting or economic growth alone. Rich people have money. No one else does. Rich people have enough clout to block higher taxes on themselves, and they will.

Likely outcome: Your next home will be the box that your laser printer came in. I hope that you kept it. ...

If we accept that the rich can be taxed at a different rate than everyone else, we can also imagine that there could be other differences in how the rich are taxed. ... I can think of five benefits that the country could offer to the rich in return for higher taxes: time, gratitude, incentives, shared pain and power.

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.  [743 Downloads]  2010 Federal Tax Update, by Samuel A. Donaldson (U. Washington)

2.  [332 Downloads]  High Volatility, Negative Correlation, Roth IRA Conversions, and the Codified Economic Substance Doctrine, by Gregg D. Polsky (North Carolina)

3.  [203 Downloads]  Important Developments in Federal Income Taxation, by Edward A. Morse (Creighton)

4.  [145 Downloads]  Regulating the Political Speech of Noncharitable Exempt Organizations after Citizens United, by Ellen P. Aprill (Loyola-L.A.)

5.  [144 Downloads]  Taxing Founders’ Stock, by Victor Fleischer (Colorado)

Thorndike: The American Tax Tradition of 'Soaking the Rich'

Weekend Wall Street Journal, Soaking the Wealthy: An American Tradition, by Joseph J. Thorndike (Tax Analysts):

Americans like to tax the rich. As a nation, we rely more on progressive taxes—and less on regressive ones—than any other developed country. We impose no broad-based consumption tax, standing firm against the global popularity of value-added levies. But we make ample use of corporate and individual income taxes—touchstones of progressive politics for more than a century. Our national penchant for progressive taxation has deep roots in American history. ...

It's one thing to say that American politicians have been taxing the rich for more than 200 years, but what were they trying to achieve? Were they seeking to redistribute wealth, to recast society along more egalitarian lines? Or were they simply trying to ensure that rich people paid their "fair share"? The answer, predictably, is both.

 

American political leaders have defended progressive taxation on narrower grounds, using it to remake the tax system, not society. No one made the case more succinctly than Rep. Cordell Hull, legislative father of the 1913 income tax. "I have no disposition to tax wealth unnecessarily or unjustly," he explained in his memoirs. "But I do believe that the wealth of the country should bear its just share of the burden of taxation and that it should not be permitted to shirk that duty."

'Hard-Ass' Larry Summers v. 'Tiger Mom' Amy Chua on Developing Children (and Faculty)

Weekend Wall Street Journal, Larry Summers vs. the Tiger Mom:

In one of the most entertaining of the sessions at the World Economic Forum in Davos, Switzerland, this week, the organizers pitted Larry Summers, the former Treasury secretary, Harvard president and recently departed Obama administration chief economic adviser, against Prof. Chua. Harvard vs. Yale, West vs. East, Economist vs. Lawyer, Permissive Postmodern Parent vs. Dictatorial Disciplinarian of Daughters.

Prof. Summers, for a start, is evidently no pushover parent himself. At the meeting, organized by the Global Agenda Councils, he instantly acknowledged that he bears no resemblance to the indulgent, indolent Western stereotype Ms. Chua excoriates in her book "Battle Hymn of the Tiger Mother," first excerpted in The Wall Street Journal earlier this month. In fact, he noted ... that his own reputation—at home as much as in his professional life—was as something of a "hard-ass." ...

[Summers] recalled anyway some of his more turbulent exchanges [at Harvard], like the time he once told puzzled faculty members: "I think you have to decide whether achievement is the route to self-esteem or whether self-esteem is the route to achievement. I think you guys think self-esteem is the route to achievement, and I think you're wrong."

And yet even the stern intendant of traditional academic values couldn't quite bring himself to endorse the hard-ass Asian mothering style. Surprisingly for an academic who has won almost all the glittering prizes, he challenged the idea—cherished by Ms. Chua and her admirers—that academic success as a route to a rewarding career should be the sum of a child's ambitions.

"Which two freshmen at Harvard have arguably been most transformative of the world in the last 25 years?" he asked. "You can make a reasonable case for Bill Gates and Mark Zuckerberg, neither of whom graduated." If they had been the product of a Tiger Mom upbringing, he added, their mothers would probably have been none too pleased with their performance.

The A, B and C alums at Harvard in fact could be broadly characterized thus, he said: The A students became academics, B students spent their time trying to get their children into the university as legacies, and the C students—the ones who had made the money—sat on the fund-raising committee.

Clint Eastwood on the Flat Tax

Wall Street Journal Weekend Interview, A Hollywood Icon Lays Down the Law:

As he takes on the story of J. Edgar Hoover, the filmmaker talks about movie lawmen, his Korean War days and the flat tax. ...

"But I'll tell you when I liked [California Governor Jerry Brown]—and I wasn't a registered Democrat—but I liked him when he was running for president [in 1992] on the flat tax. . . . A ton of economists, both liberal and conservative, have argued for a flat tax, but nobody's ever had the nerve to do it. . . . It would simplify things, but simplification doesn't seem to be in the human psyche."

Bartlett: Obama Walked Into Tax Reform Neutrality Trap

Bruce Bartlett (The Fiscal Times), Tax Reform: Obama is Walking into the Neutrality Trap:

In his State of the Union address, President Obama called on Congress to enact tax reform.  Republicans all applauded because to them tax reform is just another excuse to cut taxes. However, their response was muted when he said that any tax reform legislation must be paid for by getting rid of loopholes and cutting spending through the tax code.

No one denies that there are many aspects of the tax code desperately in need of reform. The problem is that Republicans refuse to talk about anything except further cutting tax rates. But the idea of tax reform has always meant much more than that. It also means getting rid of tax preferences that bias individual and business behavior in ways that may not be optimal for them or the economy. In other cases, tax preferences simply waste money subsidizing people and businesses for no reason except that they belong to some politically favored group.

A key goal of tax reform must be to rid the tax code of unjustified tax preferences. The goal, which Republicans used to believe in, should be to achieve tax neutrality. This basically means that people and businesses should make economic decisions based solely on the economics and not because the tax system in effect subsidizes them to do one thing rather than another. ...

Republicans claim they are for it, but they steadfastly refuse to name a single existing tax provision that is worth getting rid of; they are only for tax rate cuts and that is the sum total of their contribution to the tax reform debate. Their rationale, apparently, is that eliminating any tax loophole, no matter how egregious or unjustified, would constitute a tax increase; and they are against all tax increases, period.

The other factor in Republicans’ thinking is just cynical politics – they are for the sugar of rate cuts, but it is the sole responsibility of Democrats to come up with the medicine of actually reforming the tax code by proposing revenue offsets to pay for the rate cuts. Grover Norquist, president of Americans for Tax Reform and the man who, more than anyone else, lays down the Republican line on all tax issues, told me this when I asked him about coming up with offsets to pay for tax reform: “I recommend taking the corporate rate to 25%. The Dems can suggest tax hikes if they believe they need to ‘make up’ revenue. That is a bipartisan division of labor.”

The political trap is obvious. Any actual reform that would increase revenue will be relentlessly attacked by Republicans as a tax increase and they will quickly send out fundraising letters to whatever group or industry is affected, requesting campaign donations to prevent the Democrats from raising their taxes. No mention will be made by Republicans of the idea that the reforms would be coupled with tax rate reductions in a revenue-neutral manner that neither raises nor lowers net tax revenue in the aggregate. Unfortunately, this strategy will doom any hope of tax reform. No Democrat is going to put forward any revenue-raisers under these circumstances. ...

I am not holding my breath waiting for the first responsible Republican to do what Reagan, Kemp, Kasten and others did in the 1980s and put together a tax package that includes specific revenue raisers to pay for further rate cuts. And pie-in-the-sky reforms that would abolish every tax preference in exchange for a flat rate don’t count because there is not the slightest chance such a radical change will ever be enacted. The best we can hope for is incremental improvement along the lines of the Tax Reform Act of 1986, which was a truly bipartisan effort. But that’s not going to happen if Republicans insist on playing by Norquist’s rules.

• Bruce Bartlett, The Roots of Tax Reform, Part I (1960-1979), 129 Tax Notes (Dec. 20, 2010)
• Bruce Bartlett, The Roots of Tax Reform, Part I (1980-2011), 130 Tax Notes (Jan. 24, 2011)

The IRS Ban on Political Activity by Tax-Exempt Religious Organizations

H. Chandler Combest (J.D. 2010, Alabama) has published Note, Symbolism as Savior: A Look at the Impact of the IRS Ban on Political Activity by Tax-Exempt Religious Organizations, 61 Ala, L. Rev. 1121 (2010).  Here is part of the Introduction:

This Note argues that the religious organization political activity prohibition in the Internal Revenue Code is largely symbolic and does not prevent a meaningful number of religious organizations from expressing their political views. Although symbolism is an integral part of the prohibition, it is nonetheless constitutional, and it is a needed part of tax law in order to maintain the federal government's stance of neutrality, as well as the doctrine of separation of church and state. In order to demonstrate the symbolic nature of the prohibition, I focus principally on several ways in which the IRS's proscription is circumvented, both through other tax provisions and the workings of the legal system in general. In Part II, I focus on the constitutional framework of the political activity prohibition, specifically the Establishment Clause, the Free Exercise Clause, and their engagement with tax-exemption principles. In Part III, I turn to the prohibition itself, including the history of the provision and the current state of the law. In Part IV, I consider the somewhat varied interpretation of the prohibition by both the judicial branch and the IRS. Part V focuses on several factors that undercut the political activity prohibition, including methods through which religious organizations can voice their specific political messages while remaining tax-exempt under federal income tax law. In conclusion, I argue that although it is largely undercut by different factors and mechanisms, the political prohibition is both justified and constitutional and it ultimately serves a needed role in the intersection of federal tax and constitutional jurisprudence.

The Mortgage Forgiveness Debt Relief Act of 2007

Curt Hochbein (J.D. 2010, Capital) has published Comment, Mortgage Forgiveness Debt Relief Act of 2007, 38 Cap. U. L. Rev. 889 (2010). Here is part of the Conclusion:

Taxpayers who purchase homes are taking the risk that one day they may not be able to afford their mortgage, that the value of their home may decrease (however unlikely this may be), and that if both occur, the taxpayer may get less back on the sale of the house while remaining personally liable to the bank for the outstanding debt. However, where the bank releases the taxpayer from liability, the taxpayer realizes a gain in assets that otherwise would be used to secure the debt. If the taxpayer is not bankrupt nor insolvent, then he or she should have to pay the resulting tax liability immediately because, by definition, he or she can afford to do so. Simply because “so many homeowners are losing their homes” does not mean that the government should provide “temporary relief” by excusing the homeowners from their tax liabilities. Such a provision does not comport with a “common sense” reading of § 108.

College and University Endowment Rankings

Here are the Top 10 National University and Liberal Arts College endowment rankings (as of June 30, 2010) from the Chronicle of Higher Education:

Rank	National University	Endowment	1-Year Change	US News Rank
1	Harvard	$27.6b	+5.4%	1
2	Yale	$16.7b	+2.0%	3
3	Princeton	$14.4b	+14.1%	2
4	Texas	$14.1b	+15.5%	45
5	Stanford	$13.9b	+9.8%	5
6	MIT	$8.3b	+5.5%	7
7	Michigan	$6.6b	+9.4%	29
8	Columbia	$6.6b	+10.6%	4
9	Northwestern	$6.0b	+9.2%	12
10	Texas A&M	$5.7b	+12.9%	63

Rank	Liberal Arts College	Endowment	1-Year Change	US News Rank
1	Williams	$1.5b	+8.3%	1
2	Pomona	$1.5b	+8.5%	6
3	Amherst	$1.4b	+6.1%	2
4	Wellesley	$1.3b	+3.2%	4
5	Grinnell	$1.3b	+17.5%	18
6	Swarthmore	$1.2b	+10.7%	3
7	Smith	$1.1b	+13.4%	14
8	Wash. & Lee	$1.0b	+12.4%	14
9	Middlebury	$880m	+11.9%	4
10	Bowdoin	$750m	+9.5%	6

No Clawback on 2011-12 Gifts

Accounting Today, No Clawback on Estate Taxes, Say Experts:

The recent extension of the estate tax at a 35% rate will not result in a "claw back" tax obligation for people who make gifts in 2011 and 2012 that exceed their post 2012 estate tax exemption allowance, according to a trio of tax experts.

In a new BNA Tax & Accounting webinar that will be held on Feb. 10, 2011, Estate Tax Changes, noted tax authors and commentators Jerry Hesch [Adjunct Professor, University of Miami School of Law], Alan Gassman [Gassman, Bates & Associates, Clearwater, FL], and Christopher Denicolo [Gassman, Bates & Associates, Clearwater, FL] will present analysis concluding that the passage of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 does not cause this type of "claw back" tax obligation. “Their analysis comes at a time when many commentators have speculated that a reduction in the estate tax allowance for 2013 could cause "retroactive gift tax liability for deaths after 2012,” said BNA Tax & Accounting managing editor Harry Pskowski.

Galle Presents ObamaCare's Insurance Mandate and the Taxing Power at Charleston

Brian Galle (Boston College) presents The Taxing Power, the Affordable Care Act, and the Limits of Constitutional Compromise, 121 Yale L.J. Online __ (2011), today at Charleston School of Law as part of the Federal Courts Law Review Symposium on Healthcare Law in the Federal Courts. Here is the abstract:

This brief essay responds to recent court decisions and scholarly commentary questioning the constitutionality of the Affordable Care Act. Criticism has focused in particular on the provision imposing a $695 penalty on those who fail to purchase qualifying health insurance.

I argue that, contrary to the courts and the commentators, this provision is valid as an exercise of Congress' power to lay and collect taxes. Although much has been made of Congress' use of the word "penalty" rather than tax, the Supreme Court has held since 1866 that Congress can invoke the tax power in litigation without using that term in the challenged statute. I also reject any normative arguments for rejecting that venerable rule as unpersuasive. In any event, the relevant section refers to the penalty it imposes as a "tax" 48 times.

More substantively, I argue that efforts to claim that the section would fall afoul of constitutional limits on "direct" taxes over-read those sections of the Constitution. Limits on direct taxes were the product of a compromise over slavery, and have no other obvious deep meaning. While we must honor the bargain that resulted in their inclusion in the Constitution, honor can be paid with a narrow reading that allows Congress, not courts, to make tax policy.

Buchanan: Tax Cuts for the Poor Stimulate the Economy More Than Tax Cuts for the Rich

Neil H. Buchanan (George Washington), What Are They Teaching in Our Schools?!:

A friend of mine is enrolled in a certificate program at a top-10 U.S. business school. ... The instructor [in the "Investments" course] ... made some passing comment about how tax cuts for the rich stimulated the economy more than tax cuts for the poor. ...

Professor Privilege made three points, each of which I consider presently:

1. "He said rich people are always spending. They go on vacation even when times are tough." ...
2. "He also said that poor people have so much credit card debt anything extra they get just gets plowed into debt payments and doesn't really stimulate any new purchases." ...
3. "And finally, that rich people just have so much more money than poor people, that anything affecting rich people has a much bigger total effect on the economy." ...

I wish that I could say that I am surprised by my friend's story. One would hope that professors of business would know better than to spout such nonsense. It is possible, of course, that the professor in question actually knows that he is lying, but chooses to do so for ideological reasons. There really is no reason, however, to think that he has ever learned the basic economics necessary to understand this. Being good at, say, describing the relative advantages of debt and equity in a client's portfolio does not require any knowledge of macroeconomics. And every other incentive in such a person's life pushes him in the direction of believing that which is reassuring: helping poor people is neither necessary nor useful. Nothing that penetrates such a person's consciousness will ever allow him to believe otherwise.

Law Prof Donates $6 Million to Law School

The University of Oklahoma College of Law yesterday announced the largest gift in its history -- a $6 million gift from Frank Elkouri, George Lynn Cross Research Professor Emeritus.

Professor Elkouri, a nationally noted authority on labor arbitration, joined the OU law faculty in 1952, teaching labor law, property, trade regulation, torts and workers’ compensation. He was honored with a distinguished George Lynn Cross Research Professorship in 1975. Though he retired in 1985, he continued his leadership at the law school through 2010 as an inspirational mentor and accomplished scholar, said OU College of Law Dean Joseph Harroz. In 2002, the Elkouris made a major gift to endow the Frank Elkouri and Edna Asper Elkouri Professorship of Law, which is held by Professor Randall Coyne.

• National Law Journal, Retired Professor, Wife, Give $6 million to Oklahoma Law School

Andy Grewal From Arizona State to Iowa

Amandeep (Andy) Grewal (Visiting Associate Professor of Law, Arizona State) has accepted a tenure track position at Iowa, beginning in July 2011. From the Iowa press release:

Professor Grewal received his BA in Economics from Williams College, his JD from The University of Michigan Law School, and his LLM in Taxation from Georgetown University Law Center.  He is presently a Visiting Associate Professor at the Sandra Day O’Connor College of Law at Arizona State University where his courses include Individual Taxation, Partnership Taxation, Corporate Taxation, International Taxation, and Tax Procedure and Admin. Practice. He formerly was a tax associate at Skadden, Arps, Slate, Meagher & Flom, LLP in Washington, D.C.

Journal of Universal Rejection

A journal to consider for your next article: the Journal of Universal Rejection:

About the Journal:  The founding principle of the Journal of Universal Rejection (JofUR) is rejection. Universal rejection. That is to say, all submissions, regardless of quality, will be rejected. Despite that apparent drawback, here are a number of reasons you may choose to submit to the JofUR:

• You can send your manuscript here without suffering waves of anxiety regarding the eventual fate of your submission. You know with 100% certainty that it will not be accepted for publication. ...
• You may claim to have submitted to the most prestigious journal (judged by acceptance rate). ... 
• Decisions are often (though not always) rendered within hours of submission.

Instructions for Authors:  The JofUR solicits any and all types of manuscript: poetry, prose, visual art, and research articles. You name it, we take it, and reject it. Your manuscript may be formatted however you wish. Frankly, we don't care.

After submitting your work, the decision process varies. Often the Editor-in-Chief will reject your work out-of-hand, without even reading it! However, he might read it. Probably he'll skim. At other times your manuscript may be sent to anonymous referees. Unless they are the Editor-in-Chief's wife or graduate school buddies, it is unlikely that the referees will even understand what is going on. Rejection will follow as swiftly as a bird dropping from a great height after being struck by a stone. At other times, rejection may languish like your email buried in the Editor-in-Chief's inbox. But it will come, swift or slow, as surely as death. Rejection.

Submissions should be emailed to J.Universal.Rejection@gmail.com. Small files only, please. Why not just send the first couple pages if it is long?

UNC Tax Symposium Kicks Off Today

The two-day 14th Annual UNC Tax Symposium kicks off today at the University of North Carolina Kenan-Flagler Business School.  Here are the papers to be presented at the symposium:

• Bo Becker (Harvard), Marcus Jacob (European Business School) & Martin Jacob (WHU-Beisham School of Management), Payout Taxes and the Allocation of Investment
• David A. Guenther (Oregon), What Do We Learn From Large Book-Tax Differences?
• Jonathan B. Cohn (Texas), Lillian Mills (Texas) & Austin Erin Towery (Texas), The Evolution of Capital Structure and Operating Performance after Leveraged Buyouts: Evidence from U.S. Corporate Tax Returns
• Leslie A. Robonson (Dartmouth), Corporate "Non-Income Tax" Avoidance
• Mihir Desai (Harvard), C. Fritz Foley (Harvard) & James R. Hines, Jr. (Michigan), Trade Credit and Taxes
• Scott Dyreng (Duke), Bradley Lindsey (William & Mary) & Jacob Thornock (Washington), Exploring the Role Delaware Plays as a Domestic Tax Haven
• Makoto Hasegawa (Michigan), Jeffrey Hoopes (Michigan) & Ryo Ishida (Michigan) & Joel Slemrod (Michigan), The Effect of Public Disclosure on Reported Taxable Income: Evidence from Individuals and Corporations in Japan

Bogdanski: Charitable Donations of Facade Easements

Jack Bogdanski (Lewis & Clark) has published Keeping Up the Facade: Whitehouse Hotel  and Evans, 38 Est. Plan. 40 (Jan. 2011).

Prof Pees on Colleague's Office Door

One of the benefits of spending a semester in California is being able to read the Los Angeles Times every morning: Cal State Northridge Professor Charged With Allegedly Urinating on Colleague's Office Door:

A Cal State Northridge math professor has been charged with urinating on a colleague's office door during a dispute between the two men.

Tihomir Petrov, 43, is facing two misdemeanor counts of urinating in a public place, according to a copy of a complaint filed in Superior Court.

Petrov is expected to be arraigned Thursday in San Fernando, authorities said. The case stems from a dispute that Petrov allegedly had with another professor in the school's math department, authorities said.

Petrov was allegedly captured in early December on videotape urinating on the door of another professor's office in Santa Susana Hall, according to authorities. School officials had concealed a camera nearby after discovering puddles of what they thought was urine at the professor's door.

• Associated Press, Professor Charged with Peeing on Colleague's Door
• Chronicle of Higher Education, Urine Trouble Now ...
• Huffington Post, Tihomir Petrov, Northridge Professor, Charged With Peeing on Colleague's Door
• LesboProf, It Never Rains in California
• Jonthan Turnley, Vox Veritas Excreta: Professor Charged With Urinating on Door of Colleague
• LA Snark, Stay Classy, Cal State Northridge
• NBC LA, Professor Accused of Urinating on Colleague's Door
• Pajamas Media, Math Professors Gone Wild
• Volokh Conspiracy, Math Disputes Are a Serious Matter

Update: The Smoking Gun has more.

Listokin Presents Taxation and Liquidity Today at NYU

Yair Listokin (Yale) presents Taxation and Liquidity at NYU today as part of its Colloquium Series on Tax Policy and Public Finance. Here is the abstract:

One of the principal determinants of an asset’s return is its liquidity—the ease with which the asset can be bought and sold. Liquid assets yield a lower return than do otherwise comparable illiquid assets. This Article demonstrates that an income tax alters the tradeoff between asset liquidity and yield because: high yields from illiquid assets are taxed; imputed transaction services income from liquidity are untaxed; and illiquidity costs are only partially deductible. As a result, assets have more liquidity and the price of liquidity in terms of yield is higher than it would be in the absence of an income tax. These distortions foster an excessively large financial sector, which exists in large part to create (tax-favored) liquidity. The tax wedge between liquidity and yield also creates clientele effects, in which low-rate taxpayers, such as nonprofit institutions, hold illiquid assets regardless of their liquidity needs. The liquidity/yield tax distortion also offers a new perspective on fundamental questions in federal income tax, such as the desirability of the realization requirement, preferential capital gains tax rates, and corporate taxation.. These elements of of the income tax mitigate or even negate the pro-liquidity tax bias identified in this Article.

The co-convenors of the colloquium are Daniel Shaviro (NYU) and Mihir Desai (Harvard Business School).

Fleischer Presents Equality of Opportunity & Charitable Tax Subsidies at Indiana

Miranda Perry Fleischer (Colorado) presents Equality of Opportunity and the Charitable Tax Subsidies, 91 B.U. L. Rev. ___ (2011), at Indiana-Bloomington today as part of its Tax Policy Colloquium Series. Here is the abstract:

Americans cherish the notion of equality of opportunity, believing that it protects a commitment to liberty and neutrality. Despite the importance of equal opportunity principles in our society, most legal scholarship invoking the concept often fails to address complexities raised by the political philosophy literature, such as the “equality of what” debate. Moreover, current scholarship on the charitable tax subsidies overemphasizes the benefits of efficiency and pluralism to the detriment of distributive justice, resulting in substantial normative gaps. For example, which organizations should be subsidized? Should charities be required to assist the poor? Is a deduction or a credit preferable?

This Article carefully mines the equal opportunity philosophy literature for insights into those questions. Often, these nuances lend rigorous philosophical support for commonly held intuitions. The basic version of ex ante equality of material resources, for example, confirms the intuition that the charitable sector does not do enough to help the financially poor participate fully in our society. Other insights seem counter-intuitive: A broader version of resource equality that addresses talent-pooling and expensive tastes suggests that we continue to subsidize elite cultural institutions such as the opera without requiring them to offer free or discounted services to the poor.

Tax Court Rejects Doctor's Attempt to Avoid 15.3% Employment Tax

Joe Kristan has a great post on Monday's Tax Court decision rejecting a doctor's attempt to structure his practice to limit the 15.3% self-employment tax (and upholding an accuracy-related penalty). Robucci v. Commissioner, T.C. Memo 2011-19 (Jan. 24, 2011).

ABA Journal: Disgruntled Law Grad Bloggers Say 'Bag Law School'

ABA Journal, Law School? Bag It, Bloggers Say; More Disgruntled Grads Are 'Scamblogging' Their Job Frustrations:

If you peruse the Internet, you can practically hear their cries -- the plaintive voices of unemployed law school graduates. The Jobless Juris Doctor gripes, "Keep my diploma in the bathroom in case I run out of toilet paper." And in a post: "In case anyone was wondering, the job market still sucks."

And Scammed Hard oozes bitterly, beyond sarcasm: "So here's to all of the lies, nonsense and hogwash that will delude and mislead the next crop of 45,000 law students who will be matriculating this fall."

It's becoming a mini-epidemic: Disgruntled recent law school graduates or current students complaining, sometimes with venom, on so-called scamblogs.

ABA Journal Podcast, Are Scambloggers Right About Law School?:

• Kyle P. McEntee (Vanderbilt 3L; Executive Director, Law School Transparency)
• Anna Stolley Persky (lawyer and journalist)
• Kimber A. Russell (J.D. 2008, DePaul; Founder, Shilling Me Softly and downbylaw.org; Co-host, The Down by Lawcast)
• David N. Yellen (Chair, ABA Standards Review Committee's Subcommittee on Standard 509; Dean, Loyola-Chicago)

Barton: The Lawyer-Judge Bias in the American Legal System

Benjamin H. Barton (Tennessee) has published The Lawyer-Judge Bias in the American Legal System (Cambridge University Press, Dec. 31, 2010):

Virtually all American judges are former lawyers. This book argues that these lawyer-judges instinctively favor the legal profession in their decisions and that this bias has far-reaching and deleterious effects on American law. There are many reasons for this bias, some obvious and some subtle. Fundamentally, it occurs because - regardless of political affiliation, race, or gender - every American judge shares a single characteristic: a career as a lawyer. This shared background results in the lawyer-judge bias. The book begins with a theoretical explanation of why judges naturally favor the interests of the legal profession and follows with case law examples from diverse areas, including legal ethics, criminal procedure, constitutional law, torts, evidence, and the business of law. The book closes with a case study of the Enron fiasco, an argument that the lawyer-judge bias has contributed to the overweening complexity of American law, and suggests some possible solutions.

Glenn Reynolds (Tennessee) interviews Ben about the book:

Crowdsourced Law School Rankings v. U.S. News Peer Rankings

I previously blogged the Conglomerate's new crowdsourced law school rankings of 188 law schools, compiled with over 300,000 votes by over 6,100 unique users in head-to-head match-ups.  (The full 1-188 crowdsourced rankings are below the fold.)

Below are the 25 schools whose crowdsourced ranking most overperform and underperform their U.S. News peer-reputation ranking:

School	US News Peer	Crowdsourced	Difference
Michigan State	108	63	+45
Baylor	96	61	+35
Syracuse	85	55	+30
South Carolina	96	67	+29
Duquesne	152	128	+24
Gonzaga	108	87	+21
Penn State	71	53	+18
Whittier	176	158	+18
Pepperdine	71	54	+17
DePaul	96	80	+16
UNH (Franklin Pierce)	128	112	+16
Regent	184	168	+16
Texas Southern	171	157	+14
Loyola-New Orleans	114	101	+13
Northern Illinois	158	145	+13
Texas Tech	128	116	+12
Loyola-Chicago	71	60	+11
Richmond	85	76	+9
Boston College	27	19	+8
Maryland	44	36	+8
George Mason	52	44	+8
San Francisco	114	106	+8
George Washington	23	16	+7
Boston University	27	20	+7
U. Washington (Seattle)	39	32	+7
Oklahoma	71	90	-19
Southwestern	128	147	-19
Arkansas-Fayetteville	96	117	-21
Minnesota	20	42	-22
Widener	128	150	-22
Capital	152	174	-22
Houston	66	89	-23
Santa Clara	71	94	-23
Hawaii	85	108	-23
Cleveland State	128	151	-23
Touro	158	181	-23
St. Louis	71	95	-24
Hamline	139	163	-24
Catholic	71	97	-26
Mercer	108	135	-27
Willamette	114	141	-27
New Mexico	71	99	-28
Seattle	85	114	-29
Samford	139	170	-31
Wayne State	108	140	-32
Washburn	128	161	-33
Stetson	114	148	-34
Nova Southeastern	152	187	-35
Alabama	44	83	-39
Chicago-Kent	59	98	-39
Utah	48	91	-43

Crowdsource Rankings:

1	Yale
2	Stanford
3	Harvard
4	Chicago
5	Michigan
6	Penn
7	UC-Berkeley
8	Columbia
9	Virginia
10	NYU
11	Georgetown
12	Cornell
13	UCLA
14	Texas
15	Vanderbilt
16	George Washington
17	Duke
18	Northwestern
19	Boston College
20	Boston University
21	North Carolina
22	Washington U.  (St. Louis)
23	Notre Dame
24	USC
25	Fordham
26	Wisconsin
27	Emory
28	William & Mary
29	Washington & Lee
30	UC-Hastings
31	UC-Davis
32	U. Washington (Seattle)
33	Illinois
34	Iowa
35	Wake Forest
36	Maryland
37	Indiana-Bloomington
38	American
39	Colorado
40	Georgia
41	Ohio State
42	Minnesota
43	Tulane
44	George Mason
45	California-Irvine
46	Florida
47	Arizona
48	Connecticut
49	Oregon
50	Cardozo
51	Arizona State
52	BYU
53	Penn State
54	Pepperdine
55	Syracuse
56	Case Western
57	Miami
58	Pittsburgh
59	Villanova
60	Loyola-Chicago
61	Baylor
62	Brooklyn
63	Michigan State
64	Rutgers-Newark
65	Temple
66	San Diego
67	South Carolina
68	Florida State
69	Seton Hall
70	Kansas
71	Loyola-L.A.
72	Rutgers-Camden
73	Kentucky
74	SMU
75	Missouri-Columbia
76	Richmond
77	Tennessee
78	Indiana-Indianapolis
79	Marquette
80	DePaul
81	Northeastern
82	St. John's
83	Alabama
84	Cincinnati
85	Denver
86	Nebraska
87	Gonzaga
88	Lewis & Clark
89	Houston
90	Oklahoma
91	Utah
92	Vermont
93	Hofstra
94	Santa Clara
95	St. Louis
96	UNLV
97	Catholic
98	Chicago-Kent
99	New Mexico
100	Georgia State
101	Loyola-New Orleans
102	New York Law School
103	SUNY-Buffalo
104	Louisville
105	Maine
106	San Francisco
107	LSU
108	Hawaii
109	U. Mississippi
110	Missouri-Kansas City
111	Howard
112	UNH (Franklin Pierce)
113	Drexel
114	Seattle
115	West Virginia
116	Texas Tech
117	Arkansas-Fayetteville
118	Arkansas-Little Rock
119	Montana
120	Idaho
121	Valparaiso
122	Creighton
123	Pace
124	Suffolk
125	Wyoming
126	Baltimore
127	McGeorge (Pacific)
128	Duquesne
129	Albany
130	Drake
131	Tulsa
132	John Marshall
133	CUNY
135	Mercer
136	Akron
137	Dayton
138	North Dakota
139	Toledo
140	Wayne State
141	Willamette
142	South Dakota
143	William Mitchell
144	Chapman
145	Northern Illinois
146	Quinnipiac
147	Southwestern
148	Stetson
149	Memphis
150	Widener
151	Cleveland State
152	Southern Illinois
153	St. Mary's
154	Texas Wesleyan
155	U. St. Thomas (MN)
156	California Western
157	Texas Southern
158	Whittier
159	New England
160	South Texas
161	Washburn
162	Golden Gate
163	Hamline
164	North Carolina Central
165	Oklahoma City
166	Mississippi College
167	Ohio Northern
168	Regent
169	Roger Williams
170	Samford
171	Florida International
172	Detroit Mercy
173	District of Columbia
174	Capital
175	Northern Kentucky
176	St. Thomas U. (FL)
177	Thomas Jefferson
178	Southern
179	Western New England
180	Campbell
181	Touro
182	Western State
183	Appalachian
184	Ave Maria
185	Florida Coastal
186	Thomas Cooley
187	Nova Southeastern
188	Barry

Dan Filler and Brian Leiter comment on the crowdsourced rankings here.

Dean: Neither Rules nor Standards

Steven Dean (Brooklyn) presented Neither Rules nor Standards at the New York State Bar Association Tax Section Annual Meeting. Here is the abstract:

Sometimes the choice between a rule (a 55 mph speed limit) and a standard (drivers must maintain reasonable speeds) merely obscures a more fundamental problem. Rather than focusing on the task of laying a foundation equal to the challenges of cross-border evasion and avoidance, international tax experts seem determined to compensate for the inadequacies of the century-old benefits principle by swapping rules for standards. That effort is misguided. Only if enforcement is woven deep into the fabric of the international tax regime will it meet today’s challenges as successfully as it once met the test of double taxation.

Law Review Circulation Continues to Plummet

Ross E. Davies (George Mason) has published The Dipping Point: Law Review Circulation 2010, 14 Green Bag 2d 547 (2011). Here is the abstract:

For the past couple of years we have needled the Harvard Law Review (HLR) about its tendency to err on the side of inflation when describing the size of its subscriber base. So, it seems only fair now to salute the HLR’s recent correction, and to note that the extravagant circulation claims made these days by the Virginia Law Review make the HLR’s old claims seem downright modest. This year we are offering two new perspectives on the law review business. The first is really just a bigger version of an old one. We have added several law schools’ flagship law reviews to our little tables of journal circulation rates. The newcomers are: Boston University Law Review, Emory Law Journal, Minnesota Law Review, Indiana Law Journal, Illinois Law Review, Notre Dame Law Review, Boston College Law Review, Iowa Law Review, William and Mary Law Review, George Washington Law Review, Fordham Law Review, Alabama Law Review, North Carolina Law Review, Washington Law Review, Washington and Lee Law Review, Ohio State Law Journal, UC Davis Law Review, Georgia Law Review, Wisconsin Law Review. We also corrected a few errors in earlier versions of the tables and filled in a few blanks, an exercise that will doubtless be repeated in the future. The second new perspective is a look at the distant past, when only a few law reviews published any circulation numbers. A casual review of some of those early numbers, in tandem with an equally casual glance at the advertising pages of those early law reviews, provides an ironic reminder of a plausible piece of conventional wisdom about the decline in sales of print editions of law reviews: that the decline has been and is being caused by the rise of searchable electronic databases and of an Internet via which to conveniently tap into those databases.

[T]ake a look at the graph on page 550. It shows the trends in paid subscriptions at three leading law reviews — the HLR, the Yale Law Journal, and the Columbia Law Review — for which we have at least some data from the 1960s to the present. (The graph is prettier than it ought to be because we have filled in the blanks and smoothed the curves for each journal by assuming that its circulation rates in years for which we lack data are the same as the rates in the immediately preceding years.) The gray bar cutting across all three circulation trend lines marks the period during which Westlaw advertisements began appearing in the law reviews. Correlation does not indicate causation, of course, but it is hard to resist the thought that the appearance of that ink-on-paper Westlaw advertisement in the November 1979 ink-on-paper HLR marked what might eventually turn out to be the beginning of the end for the ink-on-paper HLR, and for ink-on-paper law reviews more generally.

 

CBO on Tax Expenditures

Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2011 to 2021 96-97 (Jan. 26, 2011):

 

A variety of exclusions, deductions, and exemptions in both the federal individual and corporate income taxes cause the individual and corporate income tax bases— the amount of income subject to taxation—to be significantly smaller than the income reported on tax returns. For example, the most comprehensive measure of income reported on individual income tax returns is gross income—and even that measure omits certain types of personal income that taxpayers are allowed to exclude from reporting. Gross income totaled $8.4 trillion in 2008, but once the allowable deductions and exemptions were subtracted, total income subject to tax (taxable income) was $5.7 trillion—or 67 percent of gross income. In addition to the exclusions, deductions, and exemptions, both the individual and the corporate income tax allow for tax credits that reduce the final tax paid by families and businesses. All else being equal, those provisions of tax law reduce tax receipts by hundreds of billions of dollars each year; as a result, tax rates must be higher to collect the same amount of revenues that would be collected in the absence of those provisions.

Income tax exclusions, deductions, exemptions, and credits generally fall into three broad categories: those that modify taxable income to exclude the costs of earning that income, such as an employee’s deduction for work-related expenses; those that subsidize or promote certain uses of income that are deemed worthy, such as the deduction for charitable contributions; and those that provide tax relief on the basis of certain income or demographic characteristics, such as the earned income tax credit for lower-income working families and the child tax credit for families with children.

Some of those tax provisions are termed “tax expenditures” because they are similar in some ways to government spending. Like spending programs, tax expenditures provide financial assistance to particular activities, entities, or groups of people. They are more similar to entitlement programs than to discretionary spending because they are not subject to annual appropriations and any person or entity that meets the requirements can receive the benefits.

The Congressional Budget and Impoundment Control Act of 1974 defines tax expenditures as “those revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability.” The Congressional Budget Act requires that a list of tax expenditures be included in the budget, and each year the Administration publishes estimates of those expenditures (prepared by the Treasury’s Office of Tax Analysis) for provisions that affect federal individual and corporate income taxes. The Joint Committee on Taxation (JCT) also publishes estimates of individual and corporate income tax expenditures each year. Neither the Treasury nor JCT publishes estimates of tax expenditures for social insurance (payroll) taxes or other federal taxes.

According to estimates by the JCT staff, the largest tax expenditure is the exclusion of employers’ contributions for health care, health insurance premiums, and longterm care insurance premiums (see the figure to the right). Although such contributions are part of employees’ total compensation (and are deductible by firms as an expense in calculating their corporate income tax liability), they are exempt from individual income and payroll taxes and are thus excluded from employees’ taxable income. The forgone income tax revenues from this tax expenditure are projected to total $659 billion in 2010 through 2014; forgone revenues from payroll taxes will be significant during that period as well. (Health care also receives favorable tax treatment in other ways: Medicare benefits are excluded from taxable income, and taxpayers’ medical and longterm care expenses that exceed a threshold amount may be deducted.)

The second largest tax expenditure is the net exclusion of pension contributions and earnings, which are estimated to total about $597 billion from 2010 through 2014. Most contributions to pension and retirement plans are not included in employees’ taxable income, nor is the return on the assets accumulated in those plans. Rather, most pension benefits and withdrawals from retirement accounts are taxable when the benefits are paid or the money is withdrawn.

Although typically considered a tax expenditure, the net exclusion of pension contributions and earnings raises the issue of the appropriate base against which to measure the exclusion. A comprehensive income tax base would include income when it was earned; thus, it would comprise income contributed to a pension or retirement plan as well as income from returns on assets in the plan or retirement account. However, an alternative base might not depend on income but instead depend on income minus savings, or consumption. Measured against that kind of base, the exclusion for pension contributions and earnings, a form of saving, would not be considered a tax expenditure.

The largest tax expenditures in the housing area come from the most widely used deductions: those for mortgage interest and property taxes on owner-occupied homes. Homeowners may deduct interest on their mortgages (up to $1.1 million in total) and property taxes from their income when they compute their tax liability. Over the five years from 2010 through 2014, the forgone revenues from the mortgage interest and property tax deductions are projected to total about $484 billion and $121 billion, respectively.

Homeowners may also exclude from taxation as much as $250,000 (or $500,000 for a joint return) of any capital gain they realize when they sell their primary residence. The revenues forgone are estimated to be about $86 billion from 2010 through 2014.

Corporate tax expenditures reduce revenues by much less than do individual tax expenditures. The largest corporate tax expenditure—estimated to total about $71 billion over the 2010–2014 period—is for the deferral of taxes on the active income of controlled foreign corporations (that is, income earned by a foreign subsidiary of a U.S. multinational corporation). Although the federal government taxes the worldwide income of U.S. businesses, that active foreign income is not subject to tax until it is remitted to the parent corporation as dividends.

The second largest corporate tax expenditure is the deduction for domestic production activities, which is projected to result in $43 billion in forgone corporate tax revenues from 2010 through 2014 (and an additional $19 billion in individual income tax revenues). U.S. businesses that are engaged in certain types of domestic production, such as manufacturing and other specified activities, may deduct from their taxable income a percentage of the income they earn from those activities.

ABA Tax Section Hosts Webcast Today on Recent Tax Developments

The ABA Tax Section offers a teleconference and webcast today on Current Developments in Individual, Corporate, and Partnership Taxation from 1:00 - 2:30 p.m. EST:

Please join Professors Martin J. McMahon, Jr. and Ira B. Shepard as they review the most significant statutory enactments, judicial decisions, IRS rulings, and Treasury regulations promulgated during the last twelve months that affect general income taxation, transfer taxation, and tax procedure.

• Martin J. McMahon Jr. (Florida)
• Ira B. Shepard (Houston)

7th Circuit: Overstatement of Basis Is Omission of Income, Triggering 6-Year SOL

The Seventh Circuit handed the IRS a big victory today in a Son-of-BOSS tax shelter case, reversing the Tax Court (Beard v. Commissioner, T.C. Memo. 2009-184 (Aug. 11, 2009)) and treating a taxpayer's overstatement of basis as an omission of income under § 6501(e), triggering the six-year (not three-year) statute of limitations.  Beard v. Commissioner, No. 09-3741 (7th Cir. Jan. 26, 2011). Other cases rasiing this issu are pending in the Fourth, Fifth, Tenth, and Federal Circuits. For a detailed discussion of the case, see Miller & Chevalie's Tax Appellate Blog, Seventh Circuit Sets Up Likely Supreme Court Showdown By Reversing Tax Court on Intermountain Issue. (Hat Tip: Kristin Hickman.)

Update: State Bar of Wisconsin, Seventh Circuit Court of Appeals Distinguishes 1958 Tax Case to Reject Taxpayer's Defense.

Zelenak Presents The Return-Based Mass Income Tax Today at Penn

Lawrence Zelenak (Duke) presents Learning to Love the Form 1040: Two Cheers for the Return-Based Mass Income Tax at Pennsylvania today as part of its Center for Tax Law and Policy Seminar Series hosted by Chris William Sanchirico and Reed Shuldiner.  Here is the abstract:

Since its introduction during World War II, the return-based mass income tax has played a central role in defining the average American's relationship with the federal government. In recent years a number of tax reform proposals have featured the elimination of the tax return filing requirement for many or all Americans. Such proposals would save Americans billions of dollars in fees paid to tax return preparers and to providers of return-preparation software, as well as billions of dollars worth of their own time. On the other hand, something valuable would be lost if tax returns were eliminated. The tax return filing requirement has a number of under-appreciated benefits. For example, return-based mass taxation (coupled with inexact withholding) has served as an enduring compromise between small-government proponents and big-government proponents on the important question of how visible and painful taxation should be. For another example, filing a tax return is – or at least has the potential to be – a ceremony of fiscal citizenship, analogous to voting as a ceremony of political citizenship. This presentation will explore some of the pros and cons of the filing requirement.

Donor Demands Return of $3 Million Gift After UConn Does Not Consult Him Before Hiring Football Coach

Robert G. Burton has demanded that the University of Connecticut return his $3 million gift and remove his name from the Burton Family Football Complex because UConn did not consult with him before hiring new head coach Paul Pasqualoni. From Mr. Burton's January 19 letter to UConn Athletic Director Jeff Hathaway:

When I called you on Monday, January I made two things very clear to you, as the largest donor in the UConn football program. I told you that I wanted to be involved in the hiring process for the new coach. I also gave you my insight about who would be a good fit for the head coaching position as well as who would not. For someone who has given over $7,000,000 to the football program/university, I do not feel as though these requests were asking for too much. ... I was not looking for veto power over the next hire; ljust wanted to be kept in the loop and add value and comments on any prospective candidates. ...

I believe that you are not qualified to be a Division 1 AD and I would have fired you a long time ago. You do not have the skills to manage and cultivate new donors or the ability to work with coaches. ...

[D]on't underestimate me or what I have outlined and requested in this document. I have already secured legal counsel from several law firms. ... We want our money and respect back.

• Associated Press
• Bloomberg
• ESPN
• Hartford Courant
• New York Times

63rd Annual USC Law Tax Institute

The 63rd Annual USC Law Tax Institute concludes today in Los Angeles. Tax Prof speakers include:

• Jennifer M. Kowal (Loyola-L.A.),  New Legislation, Higher Tax Rates and Other Recent Developments Affecting Individual Taxpayers
• Edward J. McCaffery (USC), Recovering (and Learning) From the Train Wreck of 2010
• Jeffrey N. Pennell (Emory), Current Developments in Estate Planning

For a complete list of speakers and their topics, see the brochure.

Grewal: Legislative Entrenchment Rules in the Tax Law

Andy Grewal (Arizona State; moving to Iowa) has published Legislative Entrenchment Rules in the Tax Law, 62  Admin. L. Rev. 1011 (2010). Here is the abstract:

Can one Congress tie the hands of a future Congress? At its heart, that’s the issue posed by legislative entrenchment rules.

Generally, a statute creates a legislative entrenchment rule whenever it says that a subsequent statute will be effective only if it is enacted or phrased in a specific way. For example, a special rule regarding wealth transfer taxes says that no future statute can exempt the transfer of property from those taxes unless that statute specifically refers to the wealth transfer tax provisions. Even if a type of property enjoys an explicit statutory exemption from "any and all taxation," that won't be enough. The exempting statute must specifically refer to the wealth transfer tax provisions to be effective.

Legislative entrenchment rules may protect existing statutes in other ways. Some say that a given statute cannot be overridden unless the future statute is part of the Internal Revenue Code, disregarding any statute contained elsewhere. Other legislative entrenchment rules require a future Congress to issue a mea culpa when enacting legislation, stating that a future statute will have no effect unless it specifically announces that the polices behind the existing statute have been contravened. Legislative entrenchment rules may also be less restrictive, merely requiring that a future law "expressly" modify a pre-existing provision.

Whether legislative entrenchment rules may validly disregard future statutes that do not comply with their requirements remains an open question. Some commentators have argued that legislative entrenchment rules raise serious constitutional questions because they, in a sense, allow one Congress to bind future Congress. Other commentators have challenged that position, arguing that there is nothing objectionable about strictly applying legislative entrenchment rules.

In the tax area, the difficult statutory interpretation issues raised by legislative entrenchment rules have not received close attention from the IRS, the Tax Court, or taxpayers. Instead, these rules have been either strictly applied or cursorily dismissed, without regard to the broader issues at stake. For example, in a recent case involving over $1,000,000,000 of income, Capital One v. Commissioner, the Tax Court with little discussion nullified a statute because it was not codified in the manner prescribed by a legislative entrenchment rule. But in other circumstances, legislative entrenchment rules have been largely ignored. The IRS and the Tax Court have repeatedly concluded that § 7805(e) creates an exception from the APA’s requirements for temporary regulations, even though the APA’s legislative entrenchment rule seemingly prohibits this interpretation.

This Article analyzes whether legislative entrenchment rules may categorically control the interpretation of subsequently enacted tax statutes. The Article considers and rejects arguments made by the commentators who favor strict application of legislative entrenchment rules, and also considers some of the political motivations and costs/benefits of these rules.

Crawford: The Top 10 Estate & Gift Tax Articles of 2010

Bridget Crawford (Pace) has published 2010’s Popular Reading for Estate and Gift Tax Professionals, 130 Tax Notes 469 (Jan. 24, 2011):

[T]his article identifies and summarizes the principal arguments of the 10 most downloaded articles, working papers, and other publications posted to SSRN during 2010 that relate in some way to estate and gift taxation.

1. [2598 Downloads]  Paul L. Caron (Cincinnati), Jennifer M. Kowal (Loyola-L.A.) & Katherine Pratt (Loyola-L.A.), Pursuing a Tax LLM Degree: Why and When?:  "The article's title aptly summarizes its contents. The authors -- three experienced tax professors -- provide frank and complete advice to J.D. graduates of U.S. law schools who may be considering a graduate degree in taxation. Topics include the cost of a tax LLM degree, the reasons candidates apply to tax LLM programs, and employment opportunities for LLM graduates in the private and public sectors. The article's conclusion will surprise no one: 'Successful completion of a Tax LLM program can help prospective Tax LLM students obtain the new employment opportunities they are seeking.' (Remember, however, that can and will are not synonyms, either.) Anyone considering a tax LLM should read this article."
2. [1271 Downloads]  Paul L. Caron (Cincinnati), Jennifer M. Kowal (Loyola-L.A.), Katherine Pratt (Loyola-L.A.) & Theodore P. Seto (Loyola-L.A.), Pursuing a Tax LLM Degree: Where?:  "Prof. Seto joins Profs. Caron, Jennifer Kowal, and Pratt for a companion piece to the 'Why and When' article. The four authors of 'Pursuing a Tax LLM Degree: Where?' provide in-depth information about tax LLM programs at 13 U.S. law schools. Three of the authors are faculty members at one of the schools, but the discussion remains fact-oriented and evenhanded. Topics covered include tuition, scholarships, enrollments, course offerings, faculty members, degree requirements, extracurricular activities, and career services."
3. [1194 Downloads]  Francine J. Lipman (Chapman) &  James E. Williamson (San Diego State), Social Security Benefits Formula 101: A Practical Primer:  "Those unfamiliar with the initials PIA, FRA, and AIME should read this three-page article. It is a short and digestible overview of Social Security benefits. Estate planners and advisers for clients of all wealth levels should have a basic understanding of the financial consequences of work and retirement. The monthly benefits available under the Social Security system have real financial consequences for workers and their surviving spouses, as well as many disabled individuals. As the authors explain, the 'broad distribution of meaningful monthly benefits lifts and keeps millions out of poverty.' Profs. Lipman and Williamson have written a quick reference piece that will be helpful for all tax advisers."
4. [684 Downloads]  Andrew B. Delaney (J.D. 2010, Vermont), Taking a Sack: The NFL and Its Undeserved Tax-Exempt Status:  "Delaney is a recent law school graduate now practicing law in Vermont. This irreverent seminar-paper-turned-publication argues that antitrust and income tax exemptions for the National Football League are improper. With his tongue planted firmly in his cheek -- no, make that with his tongue figuratively wagging -- Delaney touches on the history of the league's lobbying efforts, its current salary payouts, and revenue from advertisements. He argues that the NFL should follow baseball's lead and change its status to a for-profit corporation. Taking the article on its own terms, Delaney raises interesting questions about the nature of tax exemption and the importance of periodic review of nonprofit status."
5. [616 Downloads]  David Joulfaian (Office of Tax Analysis, Treasury Department), The Federal Estate Tax: History, Law, and Economics:  "Joulfaian of Treasury's Office of Tax Analysis has compiled a wonderful resource about the history and evolution of the estate tax. This article has several informative charts that present information on historic tax rates, credit schedules, number of returns filed, and the relative size of taxable estates. This is a must-read, foundational document for anyone -- practitioner, policymaker, or scholar -- starting a career in the field of estate and gift taxation."
6. [527 Downloads]  Ellen P. Aprill (Loyola-L.A.), An Overview of Tax Issues for Synagogues (and Other Religious Congregations):  "Prof. Aprill has distilled into nine pages a discussion of important tax-related issues that are relevant to any religious congregation. Particularly noteworthy are compensation, fundraising, and lobbying issues. Aprill is one of those people who write with equal ease for academic, professional, and legal audiences. She generously grants permission to religious congregations to reproduce this practical work. The guide will be helpful for those who advise (and volunteer for) religious organizations."
7. [513 Downloads]  Samuel A. Donaldson (U. Washington), 2010 Federal Tax Update:  "In the coming months, Prof. Donaldson will undoubtedly be updating his update. This version was last updated on November 15, 2010, before anyone could have predicted the flurry of legislation at year-end. Donaldson has published reliable annual update monographs every year since 2000. His analysis is comprehensive and includes many illustrative examples."
8. [424 Downloads]   Michael Hatfield (Texas Tech), The Ethics of Tax Lawyering: An Introduction:  "This piece is a chapter-length discussion of professional responsibilities that tax lawyers face. Prof. Hatfield brings to the subject a rich practice background. He is a former associate at Debevoise & Plimpton LLP and Simpson Thacher & Bartlett LLP, as well as a former shareholder of a San Antonio firm. Hatfield weaves together a discussion of the ABA Model Rules, guidelines of the ABA tax section's Committee on the Standards of Tax Practice, the U.S. Tax Court Rules of Practice, and state law. Law students are the target audience, but anyone interested in a refresher on ethics rules will be engaged by Hatfield's notes, questions, and hypotheticals. The chapter also could be a discussion-starter in some professional situations at law firms, accounting firms, and nonprofit organizations."
9. [409 Downloads]  Paul L. Caron (Cincinnati), The Costs of Estate Tax Dithering:  "Caron's article is a published version of his TePoel Lecture and keynote address at the Creighton University School of Law symposium on Estate Planning: Moral, Ethical, and Religious Perspectives. Speaking on April 16, 2010, Caron bemoaned the failure of lawmakers to enact new estate tax laws by the end of 2009. Caron argued that legislative inaction, or 'dithering,' meant lost opportunities to raise revenue, increase tax progressivity, and decrease wealth concentration -- historic policy goals of the federal estate tax."
10. [407 Downloads]  Laura E. Cunningham (Cardozo), The FLP, the Transfer Taxes, and the Income Tax:  "Prof. Cunningham argues for limitations on estate tax valuation discounts for family limited partnership interests. She criticizes the ability of taxpayers to take inconsistent positions regarding income tax basis and estate tax valuation of the same assets. Cunningham cites Miller10 and Pierre11 as evidence of the courts' inability to 'back away from the established practice of allowing significant discounts to partnerships holding even the most liquid of assets, as long as the transferor dots all of her i's and crosses all of her t's, in other words, when she is represented by skilled counsel.' Cunningham makes a succinct and blunt analysis."

For Prof. Crawford's list of the Top 10 Estate & Gift Tax Articles of 2009, see here. 

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Texas Tech Seeks Tax Visitor

From Bryan Camp (Texas Tech):

Texas Tech is looking for a visitor to teach upper level tax courses in the 2011-12 academic year. It will most likely be a one-semester appointment (probably for fall) and the key needs are in partnership and corporate tax. The visitor will be eligble to be considered for a permanent position. Interested applicants should contact Associate Dean Wes Cochran.  

Sen Presents Having Daughters Makes Judges More Conservative at Harvard

Maya Sen (Ph.D. Candidate, Harvard University, Department of Government) presents Female Socialization: How Having Daughters Affect Judges’ Voting on Women’s Issues (with Adam Glynn) today at Harvard as part of the Institute for Quantitative Social Science Applied Statistics Workshop Series. Here is the abstract:

Social scientists have long maintained that women judges might behave different than their male colleagues (e.g., Boyd et al. (2010)). This is particularly true when it comes to highly charged social issues such as gender discrimination, sexual harassment, and the status of gender as a suspect classification under federal law. Less studied has been the role that a judge’s family might have on judicial decision making. For example, we may think that a male judge with daughters might have different views of gender discrimination and sexual harassment than a male judge without any daughters. This paper takes a look at the question causally by leveraging the hypothesis that, conditional on the number of total number of children, the probability of a judge having a boy or a girl is independent of any covariates (Washington 2008). Looking at data from the U.S. Courts of Appeals, we find that conditional on the number of children, judges with daughters consistently vote in a more conservative fashion on gender issues than judges without daughters. This effect is particularly strong among Republican appointed judges and is robust and persists even once we control for a wide variety of factors. Our results more broadly suggest that personal experiences — as distinct from partisanship — may influence how elite actors make decisions, but only in the context of substantively salient issues.

(Hat Tip: David Zaring.)

Update:  From Harvard:  "Correct a typo in the abstract. Judges become more liberal on gender issues with daughters, not more conservative."

Tax Portions of President Obama's State of the Union Address

We need to get behind this innovation. And to help pay for it, I'm asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies. I don't know if you've noticed, but they're doing just fine on their own. So instead of subsidizing yesterday's energy, let's invest in tomorrow's. ...

Of course, the education race doesn't end with a high school diploma. To compete, higher education must be within reach of every American. That's why we've ended the unwarranted taxpayer subsidies that went to banks, and used the savings to make college affordable for millions of students. And this year, I ask Congress to go further, and make permanent our tuition tax credit — worth $10,000 for four years of college.

Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries. Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, and it has to change.

So tonight, I'm asking Democrats and Republicans to simplify the system. Get rid of the loopholes. Level the playing field. And use the savings to lower the corporate tax rate for the first time in 25 years — without adding to our deficit. ...

Now, I’ve heard rumors that a few of you have some concerns about the new health care law. So let me be the first to say that anything can be improved. If you have ideas about how to improve this law by making care better or more affordable, I am eager to work with you. We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses.

And if we truly care about our deficit, we simply cannot afford a permanent extension of the tax cuts for the wealthiest 2% of Americans. Before we take money away from our schools, or scholarships away from our students, we should ask millionaires to give up their tax break. ...

In fact, the best thing we could do on taxes for all Americans is to simplify the individual tax code. This will be a tough job, but members of both parties have expressed interest in doing this, and I am prepared to join them.

• Accounting Today, Obama Calls for Tax Reform
• Associated Press, Obama Calls for Overhaul of Corporate Taxes
• Bloomberg, Obama Backs Corporate Rate Cut Only If It Won't Affect Deficit
• Citizens for Tax Justice, Close Corporate Tax Loopholes — But Don’t Give the Revenue Back to Corporations as a Rate Cut
• Fornes, Obama’s Tax Reform: Corporate, Individual, Or Both?
• Huffington Post, Will Business Kill Tax Reform?
• PolitiFact, Obama Says U.S. Corporate Tax Rate Is Among World's Highest
• Start Making Sense (Dan Shaviro (NYU)), Corporate Tax Reform
• Start Making Sense (Dan Shaviro (NYU)), Tax Discussion in the State of the Union Address
• U.S. News & World Report, Both Parties Want to Take on Tax Reform
• Wall Street Journal, A Call to Overhaul Corporate Taxes

The 10 Best (and 10 Worst) Law School Websites

Jason Eiseman (Librarian for Emerging Technologies, Yale) & Roger V. Skalbeck (Associate Law Librarian for Electronic Resources & Services, Georgetown) have published Top 10 Law School Home Pages of 2010, 14 Green Bag 2d 339 (2011).  Here is the abstract:

This ranking report attempts to identify the best law school home pages based exclusively on objective criteria. The goal is to assess elements that make websites easier to use for sighted as well as visually-impaired users. Most elements require no special design skills, sophisticated technology or significant expenses.

Ranking results in this report represent reasonably relevant elements. In this report, 200 ABA-accredited law school home pages are analyzed and ranked for twenty elements in three broad categories: Design Patterns & Metadata; Accessibility & Validation; and Marketing & Communications. As was the case in 2009, there is still no objective way to account for good taste. For interpreting these results, we don't try to decide if any whole is greater or less than the sum of its parts.

The ten best and ten worst law school home pages of 2010 are:

1	Illinois
2	Wayne State
3	Chicago
	Michigan State
	Nebraska
6	Florida Coastal
	George Washington
	Maine
	USC
10	New Mexico
	Pepperdine
	Roger Williams
	Tennessee
	Washington & Lee
190	District of Columbia
	Charleston
192	Missouri-Kansas City
193	Suffolk
	UNLV
195	Montana
196	Dickinson
	Puerto Rico
	Southern
199	California-Western
	Catholic U. Puerto Rico

For the 2009 law school home page rankings, see here.

Update: National Law Journal, Law School Web Sites Judged; Some Found Wanting

NY Times: Does College Make You Smarter?

New York Times, Room for Debate -- Does College Make You Smarter?:

First there was the news that students in American universities study a lot less than they used to. Now we hear, in a recent book titled Academically Adrift, that 45% of the nation's undergraduates learn very little in their first two years of college. ... Have colleges, in their efforts to keep graduation rates high and students happy, dumbed down their curriculums? If they have, who is to blame? What should parents and federal taxpayers do?

• Philip Babcock (UC-Santa Barbara, Department of Economics), An F for Effort
• Leon Botstein (President, Bard College), Products of Rote Learning
• Sean Decatur (Dean of Arts & Science, Oberlin College), The Winner: A Liberal Education
• George Leef (John William Pope Center for Higher Education Policy), No Work, All Play, No Job
• C. Kent McGuire (President, Southern Education Foundation), A Different Type of Student
• Mark C. Taylor (Chair, Department of Religion, Columbia University.), The Student as Profit Center
• Gaye Tuchman (University of Connecticut, Department of Sociology), Will I Be Able to Get a Job?

Dilbert on Tax Policy

(Hat Tip: Andy Morriss.)