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Saturday, April 30, 2011

NY Times: Gift of Non-Voting Bose Stock to MIT Raises Tax Questions

New York Times, Gift to MIT from Bose Founder Raises Tax Questions, by Stephanie Strom:

The founder of the Bose Corporation, a privately held company that makes high-end audio products, has donated the majority of the company to the Massachusetts Institute of Technology, the university said Friday. But Amar G. Bose ... placed some unusual restrictions on the Bose shares he donated to the university. While the shares give the university majority ownership, they are nonvoting and thus confer no control over the company and its operations. Nor can MIT sell the shares. It will receive dividends from Bose. ...

[S]ome tax experts said the gift and the lack of detail about it raised questions. “We don’t know much about the terms of this gift, but it seems like it clearly falls into a gray area that has been of concern to Congress,” said Dean Zerbe, national managing director of the tax consulting firm Alliantgroup. ... Roger Colinvaux, an associate law professor at Catholic University and previously a staff member of the Congressional Joint Committee on Taxation, also said the gift raised questions for him. “If the shares truly can’t be sold so that there is some restriction on the university’s ability to transfer stock, then it would suggest it is a contribution of partial interest only, which would not be deductible as a charitable contribution,” said Mr. Colinvaux, who recently published an article in The Florida Tax Review that argues that the laws governing charity are outdated and inadequate. But Erik Dryburgh, a nonprofit lawyer, said he did not see a problem with the gift. “On its face, I don’t see the abuse or potential abuses that were present in some of the more abusive gift transactions we saw in the past,” Mr. Dryburgh said.

Mr. Zerbe and Mr. Colinvaux, though, said the gift brought to mind various tax shelters involving charities that came under scrutiny during the time they worked in Congress. [MIT] denied that Dr. Bose’s gift was similar to those tax strategies. ... Most of the tax shelters cited by Mr. Zerbe and Mr. Colinvaux involved an elaborate strategy where privately held companies gave nonvoting shares to a charity and then, after a period of time, bought them back. The transactions attracted the attention of regulators puzzled by why donors would give nonprofit groups nonvoting shares, whose value — and thus potential for tax deduction — is limited by their nonvoting nature.

In 2003, the Senate Permanent Subcommittee on Investigations looked into such transactions and found that in some cases, they were an elaborate way of using a charity’s tax-exempt status to erase tax liabilities for the other shareholders of the company involved.

A charity involved in such a tax strategy would receive income from the company in proportion to the size of its holdings of nonvoting stock. But while that income was taxable, it was not distributed to the charity and stayed at the company to be reinvested. The charity did not owe taxes on the income, anyway, because it was tax-exempt. Later, the charity would sell the nonvoting shares back to the company at fair market value, and the company would distribute the income, tax-free, that had been associated with those shares among its other shareholders.

In other, similar cases, charities that received nonvoting stakes in privately held companies through gifts of stock used large losses they had incurred on unrelated businesses to offset taxes for other shareholders. Mr. Dryburgh wrote a paper on that type of tax shelter. In 2004, the IRS listed as “restricted” such transactions and denied deductions associated with them.

(Hat Tip: Bob Kamman.) BNA reported yesterday that the IRS is increasing audit scrutiny of unrelated business income loss deductions by colleges and universities.

April 30, 2011 in News, Tax | Permalink | Comments (0) | TrackBack (0)

Emory Dean Resigns; Is Drop in U.S. News Rankings the Reason?

Emory Logo Emory Dean David F. Partlett is stepping down after five years on the job. Above the Law attributes the resignation to Emory's fall from 22 to 30 in the latest U.S. News & World Report law school rankings, and the resultant fury among Emory students.

April 30, 2011 in Law School Rankings, Legal Education | Permalink | Comments (2) | TrackBack (0)

The Crusade Against 'Charitable' Hospitals' Pursuit of Patients for Unpaid Bills

Amanda W. Thai (J.D. 2011, Iowa) has published Note, Is Senator Grassley Our Savior?: The Crusade Against “Charitable” Hospitals Attacking Patients for Unpaid Bills, 96 Iowa L. Rev. 761 (2011). Here is the abstract:

This Note addresses 501(c)(3) tax-exempt hospitals’ practice of aggressively pursuing uninsured patients for outstanding medical bills. Specifically, this Note will examine whether Senator Chuck Grassley’s additions to President Obama’s Patient Protection and Affordable Care Act, which imposes stricter requirements on hospitals for keeping their taxexemption status, is a viable way of approaching the situation. This Note requires a look at historical context, current circumstances, and a possible model for reform. This Note argues that Senator Grassley’s additions are a step in the right direction. However, the additions must orient themselves to local communities, demand clearer tax-exemption requirements, and also develop public discourse around the matter to effect long-term change, in accordance with the changing perspective of healthcare in the United States from within the industry and from society at large.

April 30, 2011 in Scholarship, Tax | Permalink | Comments (1) | TrackBack (0)

FATCA and the Shift From Tax Enforcement to Tax Compliance

Melissa Dizdarevic (J.D. 2012, Fordham) has posted The FATCA Provisions of the Hire Act: Boldly Going Where No Withholding Has Gone Before, 79 Fordham L. Rev. ___ (2011), on SSRN. Here is the abstract:

In an effort to crack down on offshore tax evasion, the U.S. is implementing a new set of information reporting and withholding requirements on foreign banks and other foreign entities. These provisions, known as the FATCA provisions of the HIRE Act, require thirty percent withholding of the entity’s U.S.-source income, unless they disclose specific information regarding their customers’ identities and account balances. While this may be an effective way to force foreign institutions into compliance, it also raises questions about how it will function within existing tax reporting systems, where the function of withholding serves a materially different purpose.

The FATCA reporting and withholding provisions depart from the norm of using withholding as a tax enforcement mechanism, and instead use it as a coercive compliance measure. This Comment looks to current domestic and international withholding systems as a point of comparison for this new regime. By examining the objectives and operation of these existing systems as compared those of FATCA, it becomes clear that withholding income serves a drastically different purpose. Existing systems utilize withholding as a means of ensuring that taxes will be paid, while FATCA implements it as a way to force foreign banks to comply with a set of reporting requirements. Considering this is the first time withholding appears to be used in this way, it is prudent to ask whether this is a desirable use of withholding in our current international taxation system. This Comment posits that, without significant revision to account for conflicts arising with pre-existing obligations, converting the accepted concept of withholding into a drastically different punitive measure is both undesirable and unacceptable.

April 30, 2011 in Scholarship, Tax | Permalink | Comments (6) | TrackBack (0)

Friday, April 29, 2011

U.S. News Law School Rankings: Judicial Clerkships

U.S. News Logo U.S. News & World Report yesterday published its third  ranking of law schools by the percentage of the 2009 J.D. graduating class with clerkships with Article III federal judges.  Here are the Top 50 law schools by this measure, along with the percentage of all federal and state judicial clerkships and their overall U.S. News ranking, as well as Brian Leiter's ranking by the percentage of U.S. Supreme Court clerkships for the 2000-2010 Terms (determined by the size of the most recent 1L class):

US News Federal Court Clerkship Ranking

US News Overall Ranking

Leiter’s Supreme Court Clerkship Ranking

Law School

% Federal Court Clerkship

% All Courts Clerkship

% Supreme Court Clerkship

1

1

2

Yale

27.0%

30.6%

0.415%

2

3

4

Stanford

24.0%

26.0%

0.160%

3

2

1

Harvard

18.1%

20.6%

0.184%

4

30

 

U. Washington

18.0%

22.8%

 

5

42

 

Arizona

12.3%

21.0%

 

6

11

13

Duke

12.0%

17.0%

0.025%

7

35

7

Georgia

11.0%

14.0%

0.020%

7

7

8

Michigan

11.0%

13.6%

0.035%

7

9

5

Virginia

11.0%

13.0%

0.053%

10

7

17

Pennsylvania

10.4%

15.0%

0.012%

11

 

 

Charleston

10.0%

27.0%

 

11

16

20

Vanderbilt

10.0%

13.0%

0.010%

13

47

 

Colorado

9.5%

16.0%

 

14

9

9

UC-Berkeley

9.0%

11.0%

0.040%

14

5

3

Chicago

9.0%

9.0%

0.165%

16

12

10

Northwestern

8.1%

9.0%

0.028%

17

4

5

Columbia

8.0%

8.0%

0.053%

17

6

7

NYU

8.0%

11.0%

0.038%

17

14

12

Texas

8.0%

12.0%

0.013%

20

23

13

Notre Dame

7.6%

15.1%

0.029%

21

14

18

Alabama

7.5%

12.0%

0.008%

22

71

 

UNLV

6.8%

20.5%

 

23

13

20

Cornell

6.0%

6.0%

0.010%

23

140

 

Memphis

6.0%

11.0%

 

25

16

 

UCLA

5.9%

9.1%

 

25

30

 

Wash. & Lee

5.9%

19.3%

 

27

30

 

Emory

5.7%

8.3%

 

28

14

10

Georgetown

5.3%

9.7%

0.012%

28

27

 

Iowa

5.3%

7.4%

 

30

61

 

Seton Hall

5.0%

40.0%

 

30

Tier 2

 

Dayton

5.0%

5.0%

 

30

100

 

Louisville

5.0%

8.0%

 

30

30

 

North Carolina

5.0%

9.0%

 

30

67

 

Richmond

5.0%

21.0%

 

35

Tier 2

 

Liberty

4.8%

4.8%

 

36

23

 

Indiana-Bloom.

4.7%

7.5%

 

37

61

 

Temple

4.4%

15.3%

 

38

27

 

Boston College

4.3%

8.2%

 

39

23

 20

Illinois

4.2%

6.7%

0.010%

40

Tier 2

 

Ave Maria

4.0%

14.0%

 

40

20

 

George Wash.

4.0%

6.0%

 

40

143

 

Loyola-NO

4.0%

14.0%

 

40

Tier 2

 

Mississippi Col.

4.0%

12.0%

 

40

50

 

SMU

4.0%

4.0%

 

40

47

 

Tulane

4.0%

8.0%

 

40

71

 

Kentucky

4.0%

17.0%

 

40

20

 

Minnesota

4.0%

11.0%

 

40

18

 

USC

4.0%

4.0%

 

40

56

 

Tennessee

4.0%

12.0%

 

40

117

 

Vermont

4.0%

16.9%

 

Schools ranking higher than expected include University of Washington (4), Arizona (5), and Charleston (11). And the total clerkship figures appear unusually high at Seton Hall (40%), Charleston (27%), University of Washington (23%), Arizona (21%), Richmond (21%), and UNLV (21%).

Schools ranking lower than expected include Boston University (52), Fordham (54), BYU (56), Ohio State (56), UC-Davis (56), Washington University (56), William & Mary (56), and Wake Forest (78).

For more, see Robert Morse (Director of Data Research, U.S. News & World Report), Which Law School Grads Get the Most Judicial Clerkships?

Clerkship rankings for prior years:

April 29, 2011 in Law School Rankings, Legal Education | Permalink | Comments (0) | TrackBack (0)

Tax Relief for Homeowners With Defective Drywall

DrywallFollowing up on my prior posts (links below), Tax Relief for Homeowners With Corrosive Drywall (Journal of Accountancy):

This article is intended to help CPAs guide their clients who have or think they may have a problem with corrosive drywall to take advantage of guidance and a safe harbor method of deducting a casualty loss outlined in Revenue Procedure 2010-36, which the IRS issued in September 2010 after numerous inquiries from taxpayers and their congressional representatives. Acknowledging the “unique circumstances” involved, the IRS provided the safe harbor and a formula for determining its amount. The revenue procedure is available to individuals who pay to repair damage to their personal residence or household appliances from the effects of corrosive drywall.

April 29, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

NYLS Hosts Annual Tax Lawyering Workshop Today

NYLS Logo The New York Law School Graduate Tax Program hosts its annual Tax Lawyering Workshop today with these panels:
  • What Is Substantial Authority in Light of Mayo and Current Trends in Treasury Guidance? (Presenter: Linda Galler (Hofstra))
  • Best Practices in Estate Planning after Estate of Schneider (Panelists: Marilyn G. Ordover (Cullen & Dykman); Gerald I. Carp (Mazur Carp & Rubin); Moderator: William P. LaPiana (NYLS))
  • Ethical Issues in Billing and Collecting (Panelists: Joshua Brinen (Brinen & Associates); Scott Jacobs (S.H. Jacobs & Associates); Moderator: Ann F. Thomas (NYLS))
  • Uncertain Tax Position Reporting – What Have We Learned So Far About UTP? (Presenters: Mark L. Lynch & Justin M. Benesch (PricewaterhouseCoopers); Moderator: Ann F. Thomas (NYLS)

April 29, 2011 in Conferences, Tax | Permalink | Comments (0) | TrackBack (0)

Fahey: Is the Tax Court Exempt From the APA?

Diane L. Fahey (New York Law School) has published Is the United States Tax Court Exempt From Administrative Law Jurisprudence When Acting as a Reviewing Court?, 58 Clev. St. L. Rev. 603 (2010). Here is part of the abstract:

The Tax Court is an Article I court created by Congress to provide taxpayers with a forum to protest some tax deficiencies prior to their payment. The Tax Court is not comfortable with its new appellate role and has tried to create a judicial review process by analogizing collection due process appeals to the Tax Court’s deficiency procedures. However, when the Tax Court hears deficiency cases it acts as a trial court and hears the matter de novo. When the Tax Court hears collection due process appeals it acts as an appellate court reviewing agency action to determine its propriety, a different role and process from deficiency cases.

Commentators have urged the Tax Court to fill in the gaps in its statutory authority by turning to traditional administrative law jurisprudence, including the Administrative Procedure Act. In the absence of legislation specifying how a court is to review agency action, these bodies of law step into the breach and provide structure for the court’s review process. As a result, participants in the process are assured of consistency and predictability regarding the review process, thus rendering the process fairer. However, the Tax Court insists that it has never been subject to administrative law jurisprudence or the APA, nor could it be. The Tax Court thwarts participants’ legitimate expectations when it creates its own rules of procedure and evidence when acting as a reviewing court. An exploration of both the Tax Court’s and the Administrative Procedures Act’s history reveals that, in fact, the Tax Court is not exempt from traditional administrative law jurisprudence.

April 29, 2011 in Tax | Permalink | Comments (1) | TrackBack (0)

Regarding the Disregarded Entity

Thomas E. Rutledge (Stoll Keenon Ogden, Louisville, KY) has posted Regarding the Disregarded Entity, 12 J. Passthrough Entities 55 (Mar.-Apr. 2011). Here is the abstract:

The “disregarded entity” is often described as a “tax nothing,” an entity not only transparent to, but actually outside the contemplation of, the tax code. Problems arise, however, when the hybrid nature of the tax nothing LLC is not fully considered – while the structure may be ignored for purposes of federal taxation it can and often does impact upon matters governed by state law.

April 29, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Thursday, April 28, 2011

Common Control and the Delineation of the Taxable Entity

Michael Aikins (J.D. 2012, Yale) has posted Note, Common Control and the Delineation of the Taxable Entity, 121 Yale L.J. ___ (2011), on SSRN. Here is the abstract:

This Paper proposes a solution to what has been one of the most vexing problems in state corporate taxation and in multijurisdictional taxation generally: the delineation of the scope of the entity that an individual jurisdiction is entitled to tax. Starting from the observation that the federal government already aggregates the income of commonly controlled groups of corporations to prevent them from taking multiple advantage of the lowest tax brackets, this Paper proposes that states "piggyback" on these efforts and allow the federal government thereby to shoulder the burden of delineating the taxable entity. A number of benefits follow from this simple move, including the elimination of double taxation of certain corporate profits, greater simplicity and predictability, cost savings through piggybacking, and uniformity among the practices of the states.

April 28, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Hellerstein & Sedon: Legal Issues Confronting VAT Regimes

Tax Analysts Walter Hellerstein (Georgia) & Jon Sedon (KPMG, Washington, D.C.) have published Challenging Legal Issues Confronting VAT Regimes, 131 Tax Notes 409 (Apr. 25, 2011):

The article discusses areas of controversy that raise fundamental issues in contemporary VAT regimes: the treatment of single-entity or branch-to-branch transactions, judicial restraints on VAT structure planning, and the treatment of customer loyalty rewards programs.

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

April 28, 2011 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Call for Papers: North Carolina Tax Symposium

UNC The University of North Carolina Kenan-Flagler School of Business has issued a call for papers for its Fifteenth Annual Tax Symposium to be held January 27-28, 2012. The symposium "is designed to bring together leading tax scholars from economics, accounting, finance, law, political science, and related fields." The deadline for the call for papers is November 11, 2011:

Papers should be well developed, but at a stage where they can still benefit from the group's discussion. The symposium will include no more than six papers. Travel and lodging expenses for presenters will be reimbursed up to $500.

You can submit a paper here. Paper selection will be finalized by December 9, 2011.

April 28, 2011 in Conferences, Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

A Child Tax Benefit Reference Manual

Elaine Maag, Stephanie Rennane & C. Eugene Steuerle (all of the Tax Policy Center) have published A Reference Manual for Child Tax Benefits. Here is the abstract:

The individual income tax contains multiple provisions that favor families with children. They range from credits targeted towards low-income families to deductions that favor higher income families. Some provisions benefit a family by virtue of the family having children, others try to incentivize behavior such as work and going to school. This paper describes the various child-related provisions and shows the distribution of who benefits from the provisions. Benefits can be substantial. For example, a single parent with two children could receive a tax subsidy worth almost $9,000. The rules governing the provisions are complex and ripe for reform.

April 28, 2011 in Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Eyal-Cohen: Why is Small Business the Chief Business of Congress?

Mirit Eyal-Cohen (Pittsburgh) has posted Why is Small Business the Chief Business of Congress?, 43 Rutgers L.J. ___ (2011), on SSRN. Here is the abstract:

Small business is a sacred cow in America. In 1958, Congress created the Small Business Investment Company ("SBIC"), a unique public-private program that provides long-term capital to small entrepreneurs. From its inception, however, the SBIC has been plagued by inefficiency and failure. Yet, Congress continues to pour millions of dollars into the SBIC program, with no end in sight. What explains this failed policy course?

This article argues that the SBIC program exemplifies the pitfalls of legal and political institutional path dependency and should be replaced by private institutional lending systems. Pursuant to this account, past decisions can influence future legal developments even in the face of material social change.

Political institutions can entrench ineffective paths by sustaining dynamics of "increasing returns" through processes of "positive feedbacks" and "self-reinforcement." Increasing returns occur when the benefits of a choice augment simply because over time more people opt for that choice.

Our romantic ideal of small business as an economic and social catalyst has sprouted positive cultural feedbacks. Thereafter, the establishment of the House and Senate Small Business Committees and the Small Business Administration sustained this culture, self-reinforcing the SBIC program inefficient path where we remain invested to this day.

April 28, 2011 in Scholarship, Tax | Permalink | Comments (1) | TrackBack (0)

Block Presents Tax Justice and the Equitable Distribution of Bailout Costs at NYU

Block Cheryl Block (Washington University) presents Tax Justice and the Equitable Distribution of Bailout Costs presents at NYU today as part of its Colloquium Series on Tax Policy and Public Finance convened by Daniel Shaviro (NYU) and Mihir Desai (Harvard Business School). Here is part of the Introduction:

[P]ublic expenditures for bailout-type assistance are funded with coerced contributions from one group, which are then used to support another. In other words, publicly-supported bailouts involve redistribution through government use of its taxing authority. Mindful that bailout-type assistance may someday again be necessary, and assuming that public anger is unlikely to dissipate, this paper uses tax policy approaches to explore alternative answers to the public's question: "Why should we pay?"  Part II begins with a brief discussion of general conceptions of tax justice, and suggests that different standards of tax fairness should be applicable to different tax circumstances. It closes by developing some background principles and assumptions about taxes, makets, and tax policy that will be useful for subsequent discussion. Part III explores the arguments that might be offered to justify the use of general taxpayer revenues for bailout-type expenditures, and Part IV considers some alternative approaches.

April 28, 2011 in Colloquia, Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

ABA: Law School Is Not Just for the White and Wealthy

Bucky Following up on my previous post, Law School for the White and Wealthy: Bucky Askew, Consultant on Legal Education, ABA Section of Legal Education and Admissions to the Bar, has published a letter to the editor in response:

The opinion piece Law School for the White and Wealthy contains inaccuracies and misrepresentations that should not go unchallenged.

Contrary to Michael Coyne's assertion that ABA-accredited law schools charge exorbitant tuitions, 25 of the 200 ABA-approved schools charge less than his school, the Massachusetts School of Law ($15,000). ...With the average public law school tuition for in-state students at $20,489, law school tuition remains affordable for many students. ...

The op-ed in NLJ erroneously suggests that minority students are not encouraged to attend ABA-accredited law schools. In fact, since the late 1990s, minority enrollment at ABA-approved law schools has held steady at 20% to 22%; 7% of the total law school enrollment is African-American. And although the number of African-American applicants dropped during that time, admission of African-American students has actually increased by 7% (and matriculation by 11%).

Another important measure of diversity is in a law school's administration and professoriate. Minority representation in law school deanships in ABA-accredited law schools during the period 2000 to 2009 increased from 11 to 40 (24 of whom are African-American). At the same time, minorities in the professoriate increased from 14% to 16% of the total faculty. ...

It is important to note that Coyne is associate dean of the Massachusetts School of Law, which applied for ABA accreditation in 1993 but was denied it because it did not meet accreditation standards. Since 1993, the ABA has accredited 23 new law schools, all of which were able to demonstrate compliance with the standards. Those 23 new schools are found in a dozen different states and include both public and private institutions; university-affiliated and, like the Massachusetts School of Law, independent institutions; religiously affiliated and secular, and for-profit and not-for-profit law schools. In 2010, these 23 new law schools admitted more than 1,600 students of color into their first year classes.

April 28, 2011 in Legal Education | Permalink | Comments (0) | TrackBack (0)

Walker: Evolving Executive Equity Compensation and Optimal Contracting

David I. Walker (Boston University) has published Evolving Executive Equity Compensation and the Limits of Optimal Contracting, 64 Vand. L. Rev. 611 (2011).  Here is the abstract:

Executive equity compensation in the United States is evolving. At the turn of the millennium, stock options dominated the equity pay landscape, accounting for over half of the aggregate ex ante value of senior executive pay at large public companies, while restricted stock and similar compensation accounted for only about ten percent. Beginning in 2006, stock grants have displaced options as the single largest component of senior executive compensation at these firms. Accompanying this shift has been increased variation among companies in their relative emphasis on stock and options in equity pay packages. Both phenomena provide an opportunity for a rich exploration of executive pay contracting focusing specifically on equity pay design. Such an exploration is timely given the current focus in Washington on the relationship between equity compensation and corporate risk taking. This Article begins that exploration and has two primary aims. First, it describes the evolution in executive equity pay practices and the current equity compensation landscape. Second, it considers the extent to which this evolution and the current use of stock and option pay can be explained as a function of efficient contracting (and what “efficient contracting” means in this context). The analysis reveals several features of the executive equity pay landscape that suggest limitations on efficient compensation contracting. First, although directionally consistent with changes in the conventional economic determinants of equity pay design, the dramatic shift over the last decade from very heavy reliance on options to a more balanced emphasis on stock and options suggests that option expensing, option taint, and/or increased perceptions of option risk played leading roles. Second, the trimodal distribution of the mix of stock and options being granted in recent years suggests that optimizing incentives is not the sole consideration of issuing firms. Third, the extent to which the same mix of stock and options is granted to the various member of the executive suite suggests that individual optimization is quite limited.

April 28, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Herzig: Optimal Tax Compliance Regarding Unknown Basis

David Herzig (Valparaiso) has posted Fixing Behavioral Distortions in Taxpayer Behavior: Optimal Tax Compliance Regarding Unknown Basis, 2011 Mich. St. L. Rev. ___, on SSRN. Here is the abstract:

In order to have optimal tax compliance in the field of tax reporting, under our current paradigm, we need clearly articulated but salient standards for record keeping. The popular belief that taxpayers do not need to keep adequate records creates a behavior distortion of noncompliance. This belief is justified by claims that the obligation is either too complicated or just impossible to understand. The resulting behavior by the taxpayer comports with both norms-based theories and deterrence-based theories of compliance. Because taxpayer keep inadequate records courts are left to determine what value to assign to the assets. For 120 years courts have struggled with assigning this value. The uneven application of the record keeping rules causes friction in the most critical area of the tax code, accounting for a large portion of the $285 billion tax gap associated with underreporting. In order to increase compliance and avoid higher tax rates, this Article suggests that the court should adopt a new preliminary determination to decouple innocent taxpayers from culpable taxpayers. This determination would be based on a similar test under Federal Rule of Evidence 104(a) dealing with assertion of privilege. Regardless of whether the court adopts the new rule, the Article concludes with the theory that, rather than a court using its “best guess” to calculate basis, it should adopt one of the following clear tests: (1) mark-to-market approach; (2) modified Auerbach approach; or (3) modified original issue discount (OID) approach.

April 28, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Monahan: A Regulatory Critique of ObamaCare

Amy B. Monahan (Minnesota) has posted On Subsidies and Mandates: A Regulatory Critique of ACA, 36 J. Corp. L. ___ (2011), on SSRN. Here is the abstract:

This symposium essay examines the two interrelated provisions in the Affordable Care Act that are designed to encourage individuals to purchase health insurance: the individual mandate and premium tax credits. It sets aside the constitutional issues raised by the mandate, and instead examines the regulatory structure and likely effect of the subsidies and individual mandate on health insurance purchasing decisions following full implementation of ACA. It compares subsidies and mandates under ACA to those passed as part of Massachusetts’ 2006 health care reform legislation, examining the differing policy choices that the two structures reflect. In particular, the essay analyzes the structures of the subsidies provided to low income individuals and how they differ with respect to the nature of the financial security they provide and the choices they allow individuals to make, and also analyzes the nature of the individual mandate penalties and the extent to which they function to encourage health insurance purchase among taxpayers of differing income levels.

April 28, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Tax Foundation v. Ed Kleinbard: U.S. Multinationals' Foreign Tax Rate

Tax Foundation logo The Tax Foundation has released U.S. Multinationals Paid $100 Billion in Foreign Income Taxes According to Most Recent IRS Data:

In recent months, a number of press accounts have mentioned the amount of taxes paid by U.S. multinational firms on their foreign income. Some of the more sensational articles would have readers believe that U.S. companies pay little or no tax on their foreign earnings. Unfortunately, such stories are either based upon a misunderstanding of how U.S. international tax rules work, or are simply careless when portraying the way U.S. companies pay taxes on foreign profits.

The U.S. has a complicated "worldwide" system of taxation that requires American businesses to pay the 35% federal corporate tax rate on their income no matter where it is earned—domestically or abroad. When it comes to foreign profits, companies do pay income taxes—not once, but twice.

First, companies pay income taxes to the country in which their profits were earned, and then they pay additional U.S. taxes on any profits they return to this country. For example, if a subsidiary of a U.S. firm earns $100 in profits in England, it pays the British income tax rate of 26%, or $26. Since our system gives companies a credit for the taxes they pay to other countries, the additional U.S. tax the firm is required to pay is equal to the difference between the U.S. rate of 35% and the 26% British rate -- or $9. Between the two nations, the U.S. firm will pay a total of 35% in taxes on those foreign profits.

However, American firms can delay paying the additional U.S. tax on their foreign profits as long as the earnings are reinvested in the ongoing activities of their foreign subsidiaries.  The additional U.S. tax is due when the profits are eventually repatriated.

In order to take advantage of the foreign tax credits allowed under our tax system, U.S. companies are required to report on their annual tax returns, on form 1118, the amount they earn in each country where they operate and how much they pay each country in taxes. According to the most recent IRS data for 2007, American companies paid nearly $100 billion in income taxes to foreign governments on foreign taxable income of $392 billion. As Table 1 indicates, U.S. companies paid an average effective tax rate of 25% on that income.

As the global economy has grown, so too have the foreign earnings and tax bills of U.S. companies. Figure 1 shows the foreign taxable earnings of and foreign taxes paid by U.S. companies between 1992 and 2007, every year for which data is available. Over those 16 years, taxable income grew in real terms by 225% while foreign taxes paid grew by 505%.

 

Much of this growth occurred after the last recession ended in 2002. Indeed, between 2002 and 2007, the taxable income of U.S. subsidiaries abroad more than doubled, after adjusting for inflation, while taxes paid increased by 134%.

Table 1 summarizes the amount of taxable income reported by U.S. firms for each global region along with the total amount of foreign taxes paid and the average effective tax rate.


Taxable Income (Less Loss) before Adjustments

Foreign Taxes Paid, Accrued, and Deemed Paid

Average Effective Tax Rate

All geographic areas

 $392,530,203

$99,103,064

25%

Canada

 $30,410,081

 $8,328,243

27%

Latin America

 $45,916,095

$12,434,434

27%

      Central America

 $1,163,935

     $243,794

21%

      Caribbean countries

 $13,583,315

  $2,382,094

18%

      South America

 $19,949,686

  $6,944,025

35%

Other W. Hemisphere

 $18,931,070

  $2,862,082

15%

Europe

 $167,801,844

 $40,835,721

24%

      European Union

 $127,774,665

 $27,010,882

21%

      Other European

 $40,027,179

 $13,824,839

35%

Africa

 $16,330,147

   $6,172,839

38%

Asia

 $75,200,776

  $22,246,738

30%

      Middle East

 $11,290,681

   $3,396,246

30%

      S & SE Asia

 $21,945,996

   $5,383,752

25%

      Eastern Asia

 $41,240,365

 $13,466,023

33%

Oceania

 $10,887,098

  $2,816,584

26%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kleinbard Edward Kleinbard (USC) critiques the Tax Foundation report:

The paper is designed to create the impression that US firms in fact bear a substantial tax burden in respect of their foreign earnings. Its conclusion is that US firms on average paid a 25% effective foreign tax rate on their foreign income, which demonstrates that US firms are not "avoiding" taxes on their foreign earnings. In keeping with standard DC interest group expository style on all sides of the political spectrum, the paper urges others to dial back their anti-US multinational rhetoric, and avers that this presentation summarizes just the facts, ma'am.

If only life were that simple.

As the report states, its data are drawn from the IRS Statistics of Information Divisions's aggregation of all the Form 1118s that companies file. Form 1118 is the form on which a firm reports its foreign tax credits and foreign taxable income..

If the issue is, are US multinational firms bearing an appropriate level of foreign taxes, relative to their incomes — which I take the Tax Foundation's paper to agree is the relevant question — then here are several reasons why this aggregation of the Form 1118 is the wrong place to look. In particular, the Form 1118 data are not at all helpful for the debate currently under way, which is how should the United States tax the foreign unrepatriated income of US multinationals.

First and foremost, the Form 1118 looks only to repatriated income. It tells us nothing about the effective foreign tax rate imposed on the unrepatriated incomes of foreign subsidiaries, and, as described below, it reflects the application of tax planning, including the deliberate creation of pools of high-tax income that are repatriated to shelter other income, through cross crediting. But the actual debate is whether income that under current law is  unrepatriated should now be allowed to be brought home without further US tax? The Form 1118 simply asks and answers the wrong question.

Second, the Form 1118 looks to taxable income, measured under US norms, that is repatriated to the United States. Other countries with more comprehensive tax bases thus appear to impose higher effective tax rates. The right approach is to use a broader measure of income, like earnings and profits, to see what the economic effective tax rate on that income actually is.

Third, the Form 1118 of course includes income from foreign branch activity. Indeed, roughly 20 percent of the gross income included in the SOI chart comes from branch activity, as do more than 25% of the foreign tax credits paid or accrued (I.e., ignoring deemed paid credits, which are irrelevant to branches). (The data don't show the taxable income of this branch activity on a standalone basis.) The same point applies to the even larger amounts of interest and royalty income received in the United States. (That income of course typically bears a very low rate of foreign tax, and is the principal raw feedstock for the tax director to use in his role as the master distiller, blending high tax and low tax foreign income).

Fourth, aggregated Form 1118 data don't translate into effective total tax burdens, because the aggregate data don't show the effect of the "tax distillery" in operation — the artful blending of zero taxed foreign income (dividends and royalties) with deliberately high-tax pools of foreign earnings that are repatriated to shelter the zero taxed income. In other words, the Form 1118 data by themselves, which look only to what has been repatriated, show some of the consequences of tax planning, including in particular the deliberate creation of high-tax pools of foreign income that a tax director dips into as needed to shelter other income. What the Form 1118 doesn't show is the ever-decreasing effective tax rate on unrepatriated income of foreign subsidiaries, whose modest aggregate tax burdens are in turn stripped out and concentrated into high-tax pools to use in the tax distillery's operations.

Fifth, the Form 1118 data include significant amounts of withholding taxes (about 15% of the foreign taxes paid or accrued). But if the question is, what tax rate is imposed on the foreign unrepatriated earnings of a US subsidiary today, those withholding taxes are irrelevant.

The bottom line is that the Form 1118 data really say nothing about the arguments now waging in DC.

But as it happens, another SOI chart does. That's the chart that aggregates data from all the Form 5471's that are filed. (The Form 5471 is the form on which firms record the results of the operation of their controlled foreign corporations.) . 

That form is easy to read. Column 9 tells you the earnings and profits of all CFCs with positive E&P for the year. Column 10 tells you what they paid in foreign taxes. Divide the second into the first, and you discover that the effective foreign tax rate paid by foreign subsidiaries of US MNEs in 2006 is in the neighborhood of 16.4%, not the 25% figure reported by the Tax Foundation.

April 28, 2011 in Tax, Think Tank Reports | Permalink | Comments (5) | TrackBack (0)

Fleischer: Equality of Opportunity & Charitable Tax Subsidies

Miranda Perry Fleischer (Colorado) has published Equality of Opportunity and the Charitable Tax Subsidies, 91 B.U. L. Rev. 601 (2011). 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 provide opportunities for the financially poor to 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.

April 28, 2011 in Scholarship, Tax | Permalink | Comments (1) | TrackBack (0)

Crawford: Palumbo and the Estate Tax Charitable Deduction

Tax Analysts Bridget J. Crawford (Pace) has published Palumbo and the Estate Tax Charitable Deduction, 131 Tax Notes 423 (Apr. 25, 2011):

Crawford analyzes the arguments in Estate of Palumbo v. United States, (Mar. 8, 2011), a case involving a claimed estate tax charitable deduction for amounts passing to charity under the settlement of a will contest.

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

April 28, 2011 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 27, 2011

Garoupa & Sanchirico: Decoupling as Transactions Tax

Nuno Garoupa (Illinois) & Chris William Sanchirico (Pennsylvania) have published Decoupling as Transactions Tax, 39 J. Legal Stud. 469 (2010). Here is the abstract:

In an influential paper, Polinsky and Che propose that litigation can be made a more cost-effective tool for setting primary activity incentives (such as for product safety or promissory performance) by reducing plaintiffs’ recovery while simultaneously raising defendants’ damages. Decoupling recovery and damages in this manner reduces the number of filed suits but increases the deterrent impact of each. Litigation costs fall, but if damages are raised sufficiently, the level of deterrence is maintained. Yet this story does not account for the fact that when the state takes from liable defendants more than it gives to victorious plaintiffs, it effectively taxes the transaction that led to the litigation. This tax drives a wedge between the private and social benefits of entering the transaction. The result is that socially beneficial transactions may fail to take place. In this paper we explore how this transaction-discouraging aspect of decoupling affects its propriety.

April 27, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Smith: Mannella, State Farm, and the Arbitrary and Capricious Standard

Patrick J. Smith (Ivins, Phillips & Barker, Washington, D.C.) has posted Mannella, State Farm, and the Arbitrary and Capricious Standard, 131 Tax Notes 387 (Apr. 25, 2011), on SSRN. Here is the abstract:

In Mannella, the Third Circuit agreed with the Seventh Circuit's Lantz decision ruling against taxpayer challenge to the rule in the regulations imposing a two-year time limit on claims for equitable innocent spouse relief under § 6015(f). In a dissent in Mannella, Judge Ambro would have held that the IRS violated step two of Chevron because the IRS provided no explanation of its reasons for imposing this two-year time limit at the time the rule was adopted.

Judge Ambro concluded that in the absence of such a contemporaneous explanation of the agency's reasoning, it was impossible for a reviewing court to exercise its role under Chevron in evaluating whether the agency's action represented reasonable decision-making. Judge Ambro's conclusion has substantial support in the area of administrative law relating to the administrative pocedure act's arbitrary and capricious standard, as that standard was interpreted in the Supreme Court's landmark 1983 State Farm decision.

State Farm requires that agencies engage in reasoned decision-making and that agencies provide contemporaneous explanations of their reasoning to make it possible for reviewing courts to evaluate whether the agency has satisfied the reasoned decision-making requirement. The requirements imposed by State Farm are commonly viewed as substantially similar to the requirements of Chevron step two. Although assertions that agencies have violated State Farm are commonplace for agencies other than the IRS, violations of State Farm have almost never been asserted against the Service, even though preambles to regulations are vulnerable to challenge under this standard because they often do not provide the type of explanation State Farm requires.

April 27, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Call for Papers: Critical Perspectives on Tax Policy Workshop

Emory Logo From Dorothy Brown (Emory):

This is a call for individual paper presentations or incubator ideas that look at tax policy from a critical perspective.  Critical perspectives on tax policy for this workshop will be limited to a focus on at least one of the following topics: race or ethnicity, socio-economic status, gender or gender identity/expression, sexual orientation, or disability.  Those examining tax policy in a critical way from a legal, social science, humanities, or comparative/international perspective are encouraged to participate.  Abstracts no greater in length than 500 words including name, affiliation, and contact information should be submitted no later than June 30, 2011 via e-mail to Dorothy Brown.  The conference will take place at Emory Law School in Atlanta, GA on September 16-17, 2011. 

There will be no registration fee. The cost of all meals will be provided by Emory Law School; however, each participant will be responsible for their own transportation costs and hotel expenses.  The conference hotel will be the Emory Conference Center, and the group rate is $99 per night.  The block of rooms will be available at the group rate until August 15, 2011.  To reserve a room please contact my administrative assistant Mr. Daniel Kim by email or by phone (404-727-9434).

April 27, 2011 in Conferences, Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Public Opinions on Taxes: 1937 to Today

American Enterprise Institute, Public Opinions on Taxes: 1937 to Today:
With talk of fundamental tax reform in the air, AEI  updates the Public Opinion Study on Taxes, which takes a comprehensive look at polling on taxes from 1937 to the present.  
  • 48% say the federal income taxes they pay are too high.  45% say they are about right.  Only 3% say they are too low
  • Late Fall 2010 polls showed the public split on which party could better handle taxes. A new late March-early April 2011 NBC/Wall Street Journal poll shows the Republicans with a 2-point advantage on the issue.  
  • 68% in a new AP-GfK Roper poll said "taxes" are an extremely or very important issue to them, ranking far behind such issues as the economy and gas prices.  47% approve of the way President Obama is handling the tax issue, 52% disapprove.
  • Although Americans' preference was to not extend the Bush tax cut for those making $250,000 or more, the public supported the December tax cut compromise that extended that tax break.
  • In other areas, public opinion has been stable. Many Americans think the tax system needs major reforms. Polls support a top 25% total tax rate. The estate tax is unpopular. In a December 2010 ABC/Washington Post poll, 52% supported increasing the exemption on inheritance taxes so that only estates worth $5 million are taxed. 41% were opposed.

April 27, 2011 in Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Southern Federal Tax Institute Offers to Comp Tax Profs

Southern_federal_tax_institute The Board of Trustees of the Southern Federal Tax Institute invites all full-time tax professors to attend the Forty-Sixth Annual Institute in Atlanta on September 19–23, 2011, as guests of the Trustees (the $945 registration fee will be waived). If you would like to attend, email here. If you would like a CD-Rom containing the outlines of this and prior Institutes, e-mail here. If you have any other questions, please contact Brant Hellwig (South Carolina), who serves as Special Advisor to the Institute.

April 27, 2011 | Permalink | Comments (0) | TrackBack (0)

Green Taxation in China

Xu Yan (University of Hong Kong, Faculty of Law) has published Green Taxation in China: A Possible Consolidated Fuel Tax to Promote Clean Air?, 21 Fordham Envtl. L. Rev. 295 (2010). Here is part of the Introduction:

This paper is focused on issues of green taxation in China. Section 2 provides an overview of the concept of green taxes, the current tax law system regarding the environment and resources, and environmental problems in China. Section 3 examines the possibility of applying a consolidated fuel tax in China, beginning with a discussion of the existing tax and charge system on the consumption of petroleum-based products and usage of vehicles. Section 4 goes further to discuss how to impose a consolidated fuel tax in China. By drawing on the experience of some developed countries and regions like the UK and Hong Kong, the paper proposes that in order to introduce such a tax to China, basic issues like the tax base, tax rate, imposition principles and tax administration need to be carefully examined. Section 5 provides the conclusion.

April 27, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Lessons from the 1986 Tax Reform Act

Jason J. Fichtner & Jacob M. Feldman (both of the George Mason University, Mercatus Center), Lessons from the 1986 Tax Reform Act: What Policy Makers Need to Learn to Avoid the Mistakes of the Past:

The 1986 Tax Reform Act (TRA86) was designed to improve three aspects of the tax code: efficiency, equity, and simplicity. TRA86 accomplished all three goals in some measure by reducing the standard rates, increasing the standard deduction, and ending various tax expenditures that distributed resources to less efficient production purposes that sometimes served as the proverbial "tax haven." ...

At the time, TRA86‘s passage seemed like a great success for tax reform. However, looking at the 2011 tax code, taxpayers would be hard pressed to find the aspects of efficiency, equity, and simplicity that were improved with passage of TRA86. The principles embodied in the tax reform of 1986 did not last. ... Michael Graetz analyzed the tax code in 2007 and exclaimed the failure of TRA86, noting "The Tax Reform Act of 1986 has not proved a stable outcome: Congress has since narrowed the tax base and raised income tax rates." Additionally, stability can be judged by the number of temporary provisions in the tax code. In contrast to the 25 expiring expenditures in the 1985 tax code, 2010 had over 141 provisions that would expire within the next two years. ...

What happened over the past quarter of a century? How quickly did the reforms of TRA86 unravel and why? This paper examines the act‘s goals of efficiency, equity, and simplicity, to find the lasting successes and failures of TRA86. Now, 25 years later, the federal tax code is again in dire need of reform. The old saying that those who ignore history are doomed to repeat it also applies to tax reform. Those wishing to reform the tax system today would be wise to learn from the past.

April 27, 2011 in Tax, Think Tank Reports | Permalink | Comments (3) | TrackBack (0)

Death of Jim Eustice

Eustice Legendary Tax Prof James S. Eustice, Gerald L. Wallace Professor of Taxation Emeritus at NYU, died yesterday at the age of 77. From NYU Dean Richard Revesz:

Jim was a legendary figure in the field of tax law and a beloved member of the Law School community since he joined our faculty in 1960.  After graduating from the Law School with his LL.M. in taxation in 1958, he went on to work for White & Case for two years before returning to NYU to become a full professor at age 32. A distinguished scholar, Jim’s treatise on corporate tax law has long been viewed as the authoritative work on the subject, widely cited by the Supreme Court and regularly used by academics and practitioners.  He was deeply committed to the Law School during his more than five decades here, teaching thousands of students in almost every tax course available.  After retirement, he remained dedicated to his work as of counsel at the firm of Cooley LLP, where he founded the tax department in 1970, and continued to teach at the Law School. He was co-teaching Taxation of Affiliated Corporations this Spring, and remained active and engaged to the very end. 

Jim was a wonderful mentor, a generous colleague, and a dear friend.  A familiar presence around the institution, Jim will be deeply missed. Our thoughts and prayers are with his wife Carol Fonda Eustice, daughter Cynthia Lapier, son James M. Eustice, and their families during this incredibly difficult time.

I will share further details about funeral arrangements as soon as I have more information.

From Jim's NYU faculty web page:

Eustice's main philosophy is to teach the Internal Revenue Code itself, rather than the policy implications of that document. "I've always viewed my main mission as getting people up to snuff on what the law is, rather than what it ought to be. This is the only area of the law where you really do close-in-cape-work with a detailed and complicated statute. There are some statutory courses, but there's nothing really like the Code and its six volumes of regulations."

April 27, 2011 in Legal Education, Obituaries, Tax, Tax Profs | Permalink | Comments (7) | TrackBack (1)

Income Tax Education at the Undergraduate Level

Janis C. Weber (University of Louisiana, Monroe) has posted Raising the Bar: Income Tax Education at the Undergraduate Level on SSRN. Here is the abstract:

Taxation is an important component of the knowledge base that certified public accountants (CPAs) are assumed to understand, by mere association. Whether or not CPAs, in general, actually possess enough taxation education and /or experience to warrant this reputation of prowess is a debatable matter. This paper will explore those presuppositions, restate selected previous research involving accounting education in taxation, and evaluate various educational delivery methods that might be utilized to prepare accountants to face tax issues in the real world, from the view of a veteran accounting practitioner turned enthusiastic accounting educator.

April 27, 2011 in Legal Education, Scholarship, Tax | Permalink | Comments (1) | TrackBack (0)

IRS Cancels 2011 Research Conference Due to Budget Cuts

IRS Logo Due to budget cuts, the IRS has cancelled the 2011 Research Conference scheduled to be held in June at Washington, D.C. But the papers will be published online. From Rosemary Marcuss, IRS Director of Research, Analysis, and Statistics:

Thank you for your interest in the Research Conference. We recognize that this event is a valuable way to share information and current research efforts, and will continue working to increase collaboration with tax research professionals. We will consider opportunities for future research conferences.

April 27, 2011 in IRS News, Tax | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 26, 2011

Rate My Professor College Rankings

Rate Rate My Professors has released a ranking of the Top 25 national universities, based on this methodology using more than 10 million student ratings of over 1 million professors:
  1. BYU-Utah
  2. Florida State
  3. Wisconsin
  4. Michigan
  5. Georgia
  6. UC-Berkeley
  7. Iowa State
  8. James Madison
  9. Ohio State
  10. BYU-Idaho
  11. Northeastern
  12. Florida
  13. Georgetown
  14. North Carolina-Wilmington
  15. Auburn
  16. College of Charleston
  17. Northern Iowa
  18. San Diego
  19. East Carolina
  20. UC-Santa Barbara
  21. William & Mary
  22. South Carolina
  23. Penn State
  24. Texas Christian
  25. Clemson

(Hat Tip: Francine Lipman.)

April 26, 2011 in Legal Education | Permalink | Comments (12) | TrackBack (0)

Vann Posts Tax Papers on SSRN

Richard J. Vann (Sydney Law School) has posted two tax papers on SSRN:

April 26, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Christians: How Nations Share

Allison Christians (Wisconsin) has posted How Nations Share, 87 Ind. L.J. ___ (2011), on SSRN. Here is the abstract:

Every nation has an interest in sharing the gains they help create by participating in globalization. If governments fail to claim an adequate share of these gains, they will be forced to look ever more intensely to personal taxes on their own already-burdened citizens. Yet because of the structure of law and the mechanisms of legal decision-making in this area, it is all but impossible to observe how, and how much, governments are in fact claiming. This article shows that to date, excessive protection of taxpayer confidentiality has led to obscurity and minimization of hard law and a network of abstraction through soft law as its faulty and inadequate replacement. It argues that this paradigm serves the political goals of special interest groups at a high social cost. It concludes that at a time when national economic and political fortunes are experiencing high stress, uncertainty and volatility, we need much better information about how international tax law develops and works in practice.

April 26, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Santa Clara Seeks to Hire Supervising Attorney for Tax Clinic

Santa Clara Santa Clara is launching a Low-Income Taxpayer Clinic and is seeking to hire a Supervising Attorney. The position is an eleven-month appointment with the opportunity for annual renewal. Requirements:
  1. J.D. degree and bar membership in good standing. California bar membership preferred.
  2. At least three years of experience representing clients in tax law controversy practice, including experience before the IRS Office of Appeals and the U.S. Tax Court.
  3. Experience teaching students and/or lawyers, particularly in a seminar, clinical or skills development setting. Experience in mentoring students and lawyers.

 For more details, see here or contact Tax Prof David Hasen.

April 26, 2011 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0) | TrackBack (0)

Redding: Spirituality and Performance in Law School

Richard E. Redding (Chapman) has posted Without a Prayer?: Spirituality and Performance in Law School – A Reply to Professor Taylor, 48 Cal. W. L. Rev. ___ (2011), on SSRN. Here is the abstract:

[Tax] Professsor Scott Taylor’s Spirituality and Academic Performance at a Catholic Law School: An Empirical Study [45 Cal. W. L. Rev. 89 (2008)] was disheartening to Catholics and fellow travelers because it reported finding no relationship between the spirituality of law students and their academic performance at a prominent Catholic law school committed to its religious identity. In this essay, I explain how Professor Taylor’s study -- the first and only one of its kind -- is so methodologically flawed it leaves us unable to conclude anything about whether spirituality is related to academic performance. After a review of the few prior research studies on spirituality and performance, I explain the methodological problems with the Taylor study that make its results unreliable. The Taylor study serves as a cautionary tale about the pitfalls of empirical research conducted by law school professors, and my explication of the flaws in the study will point the way for how such studies should be conducted in the future. I conclude with observations on the value of empiricism in the legal academy and advice on how law professors could best undertake empirical studies in ways that will ensure their scientific validity and reliability.

April 26, 2011 in Legal Education | Permalink | Comments (0) | TrackBack (0)

Tax Poison Pills, NOLs, and ObamaCare

Michael R. Patrone (J.D. 2011, Harvard) has published Is the Tax Poison Pill the Last Stand for Protecting NOLs after Health Care Reform?, 1 Harv. Bus. L. Rev. Online No. 10 (2010). Here is the abstract:

Outline of the changes to the economic substance doctrine under the Health Care and Education Reconciliation Act of 2010 and the doctrine’s relationship to the Delaware Selectica case and shareholder rights plans.

April 26, 2011 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Tax Consequences May Determine Outcome of NYSE Bidding War

NYSE Logo Wall Street Journal, Taxing Thoughts for NYSE Shareholders:

The latest dust-up in the battle for NYSE Euronext has centered on potential cost savings from a deal. Investors, though, may want to focus on the tax implications of the competing proposals. ... Neither side, though, has talked much about tax implications. On that score, the NYSE-Deutsche Börse tie-up is to shareholders' advantage. Because NYSE shareholders would receive stock in a reorganization and wouldn't acquire a majority of the new company, the deal won't be taxable to them.

But the Nasdaq plan, which would give NYSE shareholders cash, Nasdaq shares and ICE stock, would be. That may be why, in a proposal to NYSE's board, Nasdaq noted it may be possible to work out a deal structure that results in a partially tax-free share exchange.

Tax accountant Robert Willens reckons there are structures that could result in part of a share-based payment being tax-free in a Nasdaq deal. But no structure is ever certain, and this could be complicated by the regulatory and political attention focused on the battle.

The tax difference isn't likely to completely close the gap between the value of the proposals. Still, it may be something more concrete for NYSE investors to consider than often-ephemeral synergy talk.

April 26, 2011 in Tax | Permalink | Comments (0) | TrackBack (0)

Donald Trump's Heir Problem

Trump Hair Forbes, Trump’s Real Heir Concerns, by Hani Sarji:

In a recent interview with Steve Forbes, Trump revealed his real heir concerns. These are very serious concerns over who will succeed his business:

Forbes: So, what do you do about succession? You have three up-and-comers.

Trump: Well, I do. And maybe five. I really have good children. . . . It’s a very tough decision, because you say, do you leave a bigger chunk to one? Do you break it up evenly? Do you do this? Do you do that? . . .

But it’s very complex. In a way, it’s the most complex thing. And you understand that through your family, and your children, and you know, what’s going to happen here and there. . . .

And I would say — and we could mention a couple of them — but I would say the most vicious fights I’ve ever seen, whether it’s Koch or Milstein or this or that, the most vicious fights are those inter-family fights, when it doesn’t work. So, it really is a very important decision, as to what happens when we’re gone.

Trump highlights a classic difficulty in dividing an estate among children: “do you leave a bigger chunk to one? Do you break it up evenly?” As he makes clear, there are no easy answers.

April 26, 2011 in Celebrity Tax Lore, Tax | Permalink | Comments (4) | TrackBack (0)

The New Republic: Law Prof Investigates Placement Data Used in Rankings

The New Repblic The New Republic, How Law Schools Completely Misrepresent Their Job Numbers: A Law School Professor Investigates, by Paul Campos (Colorado):

This month, thousands of ambitious young people are asking themselves the same question: Does it make sense to invest $100,000 to $250,000, and the next three years of my life, to become officially qualified to work as a lawyer? For most people considering law school, this question is hardly an easy one. Law schools, however, make it much harder than it needs to be by publishing misleading data about their employment statistics. Many law schools all but explicitly promise that, within a few months of graduation, practically all their graduates will obtain jobs as lawyers, by trumpeting employment figures of 95%, 97%, and even 99.8%. The truth is that less than half will. ...

I used employment data drawn from 183 individual NALP forms, in which graduates of one top 50 school self-reported their employment status nine months after graduation. This data suggests that fully one-third of those graduates who report they are working in full-time jobs that require a law degree are in temporary, rather than permanent, positions. ...

When we take temporary employment into account, it appears that approximately 45 percent of 2010 graduates of this particular top-50 law school had real legal jobs nine months after graduation. And the overall number is likely lower, since it seems probable that the temporary employment figures for the graduates of almost any top 50 school would be better than the average outcome for the graduates of the 198 ABA-accredited law schools as a whole.

Even this grim figure, however, may be unduly optimistic. All these statistics are based on self-reporting, and neither law schools nor NALP audit the data they publish. In the course of my research, I audited a representative sample of individual graduate responses and found several instances of people describing themselves as employed permanently or full-time, when in fact they had temporary or part-time jobs. ...

All of this suggests the extent to which prospective law students need more and better information. Of course, such information will make law school look like a far worse investment than it does at present. Still, if we assume that the point of academic work is to reveal the truth, rather than to engage in the defense of a professional cartel from which law professors benefit more than almost anyone else, then this work needs to be done.

April 26, 2011 in Legal Education | Permalink | Comments (6) | TrackBack (0)

TIGTA: IRS Fails to Match Tax Payments to Taxpayer

TIGTA The Treasury Inspector General for Tax Administration yesterday released  Taxpayer Payments Were Improperly Transferred to the Excess Collection File (2011-30-020):

Taxpayer payments that cannot be applied to the proper taxpayer account are transferred to the Excess Collection File (XSF). ... When research is required on a request for transfer to the XSF, the Excess Collections File Addition (Form 8758) should be fully completed to ensure credits are correctly added to the XSF.  TIGTA reviewed a statistically valid random sample of 86 small-dollar cases with transfers between $50,000 and $100,000 and another random sample of 66 large-dollar cases in which the transfer to the XSF was more than $1 million.  TIGTA determined that the documentation was not sufficient in 135 (96%) of 140 requests (12 cases were not reviewable).  TIGTA estimates that requests were not properly documented for 729 taxpayers with credits totaling more than $604 million transferred from their accounts into the XSF.

April 26, 2011 in IRS News, Tax | Permalink | Comments (0) | TrackBack (0)

Michigan Extends Tenure Clock to Ten Years

Michigan Logo Inside Higher Ed, 10 Years to Tenure at Michigan:

Professors at the University of Michigan could face a possible wait of up to 10 years for tenure thanks to a new policy adopted Thursday by its Board of Regents -- over the objections of faculty.

The change to a university bylaw, as Michigan administrators are quick to point out, is not mandated. It gives schools and colleges at Michigan's campuses the option to extend the maximum allowable pre-tenure probationary period (including the terminal year) by two years, from the current maximum of 8 years to 10. In practice, each college and school sets its own policy through its governing faculty body, and this would not change. For example, in Ann Arbor, while the law school currently has a five-year probationary period, 13 other schools and colleges set a six-year period; five maintain a seven-year period.

The regents’ vote Thursday came as a blow to many faculty members in Ann Arbor, whose governing body, the Senate Assembly, in January voted nearly unanimously, 54-1, against the plan. ...

Another reason for the change ... relates to the changing demographics of the professoriate. The growth in two-career and single-parent households -- coupled with longer postgraduate training periods -- has strained junior faculty who are trying to juggle personal and professional obligations. For many, the tenure clock and the biological clock tend to sound their alarms at the same time, forcing some to feel they have to choose between advancing in a career and starting a family.

April 26, 2011 in Legal Education | Permalink | Comments (3) | TrackBack (0)

State & Local Taxes Paid by Households Headed by Unauthorized Immigrants

Immigration Policy Center, Estimates of the State and Local Taxes Paid by Unauthorized Immigrant Households:

The Institute for Taxation and Economic Policy has estimated the state and local taxes paid in 2010 by households that are headed by unauthorized immigrants. These households may include members who are U.S. citizens or legal immigrants. Collectively, these households paid $11.2 billion in state and local taxes. That included $1.2 billion in personal income taxes, $1.6 billion in property taxes, and $8.4 billion in sales taxes.

 

(Hat Tip: Francine Lipman.)

April 26, 2011 in Tax, Think Tank Reports | Permalink | Comments (3) | TrackBack (0)

Monday, April 25, 2011

Maryland Law School Sells Naming Rights for $30 Million

Maryland University of Maryland School of Law press release:

Today the W.P. Carey Foundation announced a gift of $30 million to the University of Maryland School of Law. The gift is the largest in the School's history, one of the top 10 largest gifts to any law school, public or private, and one of the largest in the history of the University System of Maryland.

The gift will enable the School of Law to strengthen its programs, with a special emphasis on faculty support, and increase the School’s endowment. In addition to the gift, the University of Maryland has committed to raise $15 million to support the School of Law. ...

The School of Law will be named the University of Maryland Francis King Carey School of Law after W. P. Carey's grandfather who is a graduate of the law school (Class of 1880) and co-founder of what is now the largest law firm in the world: DLA Piper (previously Carey, Piper and Hall).

See also Law School Naming Rights: $25 Million (July 13, 2007): "[T]he current market rate for a law school's name has been set (in round figures) at about $25 million."

April 25, 2011 in Legal Education | Permalink | Comments (2) | TrackBack (0)

Things You Shouldn’t Say to a College Grad: 'Go to Law School'

5 Things You Shouldn’t Say to a Recent College Graduate:

To avoid a post-commencement faux pas, consider these expert-tested do’s and don’ts when speaking with a recent grad.

You Should Go to Law School,” by Larry Kramer (Dean, Stanford Law School):  "Many college graduates jump into law school because they don’t know what they actually want to do. Parents and friends suggest it because they think it’s a safe default. But a grad should choose his life’s path only once he knows himself well enough to be sure of what he wants. I think people should first spend a few years exploring to figure out what engages their passions. I ended up in law school because my mother pressured me to “do something already.” She wanted me to go to medical school but settled for law. I got lucky and stumbled into a field I love. Unfortunately, it doesn’t end up that way for everyone.
(Hat Tip: Jim Maule.)

April 25, 2011 in Law School Rankings | Permalink | Comments (1) | TrackBack (0)

Boston Asks Nonprofits to Triple 'Payments in Lieu of Taxes'

Boston Globe, City Sends ‘Tax’ Bills to Major Nonprofits: Aims to Triple Voluntary Payments Within 5 Years:

For the first time, Boston’s major tax-exempt institutions — its premier hospitals, universities, and cultural centers — are being asked to make regular voluntary payments to the city based on the value of their property to help offset the rising cost of city services and cuts in state financial aid.

Although many of the city’s nonprofit organizations have been making so-called Payments In Lieu of Taxes for decades, this marks a major change to a system that feels to some organizations uncomfortably close to tax bills. Boston officials recently mailed letters to leaders at 40 major nonprofits asking them to pay up to 25% of what they would owe if their property were not tax-exempt. ...

The new revenue-raising plan — the first of its kind in the nation — is based on the estimated cost of providing basic city services, such as police and fire protection, snow removal, and emergency medical treatment, which account for roughly 25 percent of the city’s budget. And it is designed to gradually increase annual financial payments to the city by the major tax-exempt organizations from the $15 million they paid this year to $48 million over a five-year ramp-up period.

What Boston Wants its Nonprofits to Pay:

Boston  

(Hat Tip: Inside Higher Ed.)

April 25, 2011 in Legal Education | Permalink | Comments (0) | TrackBack (0)

Affirmative Action for Law School Deans

Kenneth Oldfield (University of Illinois-Springfield) has published Social Class-Based Affirmative Action in High Places: Democratizing Dean Selection at America's Elite Law Schools, 34 J. Legal Prof. 307 (2010). Here is the abstract:

Education reformers have argued for some time that America's law schools should seek greater demographic diversity among their students, faculty, and administrators. These reformers say this increased diversity will enhance the learning environment by exposing those involved to more perspectives on important questions and issues. Diversity advocates argue that recruitment and placement policies should be redesigned so the major demographic characteristics of law students, faculty, and administrators more closely resemble those of the public. This project examines diversity in relation to the socioeconomic origins of deans at America's top fifty law programs. The survey results show that notwithstanding gains on other demographic fronts, deans at these elite programs disproportionately come from higher socioeconomic backgrounds. The discussion closes by offering specific steps that schools can take to ensure greater socioeconomic integration among their deans.

April 25, 2011 in Legal Education | Permalink | Comments (4) | TrackBack (0)

NLJ 250 Shed 2900 Lawyers in 2010

NLJ 250 National Law Journal, The NLJ 250:

The NLJ 250, The National Law Journal's annual survey of the nation’s largest law firms, shows that Big Law continued to shed lawyers at a brisk clip in 2010. Nearly 2,900 fewer lawyers worked for the 250 top firms last year. That's in addition to the approximately 6,600 attorneys who departed in 2009. In the 34 years the NLJ has been surveying large firms to gather headcount numbers, there have never been multiyear declines of this magnitude.

Rank

Law Firm              

Principal Office

Attorneys

1

Baker McKenzie

Chicago

3738

2

DLA Piper

Chicago

3348

3

Jones Day

D.C.

2502

4

Hogan Lovells

D.C.

2363

5

Latham&Watkins

New York

1931

6

Skadden

New York

1858

7

White & Case

New York

1814

8

K&L Gates

Pittsburgh

1763

9

Greenberg Tr.

New York

1761

10

Mayer Brown

Chicago   

1645

11

Sidley Austin

Chicago

1538

12

Reed Smith

Pittsburgh

1449

13

Kirkland & Ellis

Chicago

1379

14

Morgan Lewis

Philadelphia

1239

15

Weil Gotshal

New York

1152

16

Cleary Gottlieb

New York

1127

17

Dewey LeBouef

New York

1045

18

Morrison & Foer.

San Francisco

1029

19

Gibson Dunn

Los Angeles

1029

20

Orrick Herrington

San Francisco

1022

21

McDermott

Chicago

970

April 25, 2011 in Legal Education | Permalink | Comments (1) | TrackBack (0)

SoCal Tax Prof Dinner

As we prepare to leave Pepperdine, my wife and I hosted Southern California Tax Profs for a wonderful dinner last night, filled with great food, drink, and conversation.

SoCal 2

Chapman
Bobby Dexter
Mike Lang
Francine Lipman

LaVerne
Victoria Haneman

Loyola-L.A.
Ellen Aprill
Katie Pratt
Ted Seto

Pepperdine
Tom Bost
Khrista McCarden

San Diego
Jordan Barry
Karen Burke
Grayson McCouch
Dick Pugh

Thomas Jefferson
Richard Winchester

UCLA
Steve Bank
Kirk Stark
Eric Zolt

USC
Ed Kleinbard
Ed McCaffery

April 25, 2011 in Legal Education, Tax, Tax Profs | Permalink | Comments (3) | TrackBack (0)