TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Saturday, December 15, 2012

Now May be the Best Time to Go to Law School

The Volokh Conspiracy:  Law School Applicant “Capitulation”, by David Bernstein (George Mason):

[T]he best time to buy real estate, or really any investment, is when “everyone” is saying it’s a terrible investment. …

If we’re not as this stage with regard to demand for law school, we are damn close, with applications running about half the level of six years ago. Law school certainly isn’t for everyone, and how worthwhile economically it might be for anyone in particular has to start with that individual’s opportunity cost and where he gets admitted…

But there hasn’t been a better time to apply to law school in a long time, if ever. Worried about going into debt? Go to a law school school somewhat below where your credentials would allow, and they will shower you with aid… Always dreamed of going to a top 10 law school? You may never have less competition than now. Want to keep your current job and go part-time, but got rejected a few years from the only law school in town with a part-time program? This year, they will probably take you.  Counter-Cyclical Law School Application Strategies, by Michael Froomkin (Miami):

Whether law school makes sense for you still depends enormously on what you want to do in the long run, and what your alternatives are. Even if this is the ‘new normal’ for applicant numbers — and I’ll bet that numbers will rebound substantially from this trough within five years even if they don’t go back to old peaks — it’s clear that for now law schools as a class are only making partial adjustments to the new state of things, part of which involves competing aggressively by offering scholarship money and/or lower admissions standards. Thus it’s a buyer’s market from the potential student’s point of view.

December 15, 2012 in Legal Education | Permalink | Comments (0) | TrackBack (0)

AICPA Releases Fiscal Cliff Tax Series

AICPA LogoThe American Institute of CPAs has released a Fiscal Cliff Series that provides a brief, objective and non-partisan fact sheet on each of the following tax topics:

Each fact sheet describes the tax provision in question, explains what will happen if we go off the fiscal cliff, identifies who will be affected by the cliff, discusses whether the provision can be dealt with after January 1, and provides an AICPA comment and additional resources.

December 15, 2012 in Tax | Permalink | Comments (0) | TrackBack (0)

CTJ: Fortune 500 Are Holding $1.6 Trillion of Profits Off-Shore

CTJ LogoCitizens for Tax Justice:  Fortune 500 Corporations Holding $1.6 Trillion in Profits Offshore:

Among the Fortune 500 corporations, 290 have revealed that they, collectively, held nearly $1.6 trillion in profits outside the United States at the end of 2011. This is one indication of how much they might benefit from a so-called “territorial” tax system, which would permanently exempt these offshore profits from U.S. taxes.

Just 20 of the corporations — including household names like GE, Microsoft, Apple, IBM, Coca-Cola and Goldman Sachs — held $794 billion offshore, half of the total. The data are compiled from figures buried deep in the footnotes of the “10-K” financial reports filed by the companies annually with the Securities and Exchange Commission.


December 15, 2012 in Tax, Think Tank Reports | Permalink | Comments (1) | TrackBack (0)

Independent Contractor Status and the IRS's Twenty Factor Test

Alexandre M. Zucco (J.D. 2011, Wayne State), Note, Independent Contractors and the Internal Revenue Service's Twenty Factor Test: Perspective on the Problems of Today and the Solutions for Tomorrow, 57 Wayne L. Rev. 599 (2011):

[T]his Note will sift through the key sources of authority pertaining to worker classification and attempt to establish a clear perspective on where the lines are currently drawn between employees and independent contractors. To accomplish this, the Note will proceed down a somewhat unorthodox path by examining this topic through a business law lens as opposed to the many employment, tax, and tort law dimensions that are intertwined. First, the Note will provide background of the development of the main standard that the IRS uses for worker classification, as well as important derivative standards and factors that often come into play. Second, the Note will analyze the inconsistencies and ambiguities that plague such standards and lead to a continually high level of misclassifications. Third, the Note will offer a variety of national and Michigan-oriented cases that further illustrate the constant state of flux that worker classification is mired in. Fourth, the Note will point out the many different opinions of experts and commentators on how the unpredictability associated with worker classification creates significant issues for businesses. Ultimately, the Note will conclude by arguing in favor of an overhaul of the entire worker classification system by focusing on the goal of significantly reducing the number of misclassifications and making the regulatory standards more business-friendly and less convoluted. 

December 15, 2012 in Scholarship, Tax | Permalink | Comments (2) | TrackBack (0)

Friday, December 14, 2012

Nina Olson: Taxes and the Fiscal Cliff

(Hat Tip: Francine Lipman.)

December 14, 2012 in Tax | Permalink | Comments (0) | TrackBack (0)

The New Republic: How Higher Taxes Could Lift the Economy

RepublicThe New Republic:  Rein in the Rich: How Higher Taxes Could Lift the Economy:

Obama is right that a tax increase on the rich would not cost jobs; and he is certainly right that it would be fairer to tax the wealthy whose incomes have shot up, even during the downturn. And he is also correct that taxing the rich will actually benefit the economy--but not primarily for the reasons he cites. If the government extracts income from the wealthy, and then spends it on a $50 billion infrastructure program, an extension of unemployment insurance, and a Social Security payroll tax cut, as Obama has proposed, that will not only boost the recovery, but will also discourage the wealthy from rerouting their savings into the kind of speculative activity that helped create the Great Recession. A closer approximation of income equality is not only better for our souls—it’s also better for the economy. The question of fairness aside, the rich have been making relatively too much money for the country’s good. ...

Supply-siders were right about one thing: the best way to reduce the government deficit is to create economic growth. Obama’s proposal to raise taxes on the wealthy and to transfer those revenues to workers and the unemployed isn’t just the fair thing to do; it is exactly what’s right for the economy.

December 14, 2012 in Tax | Permalink | Comments (4) | TrackBack (0)

Dick Morris: France Imposes Tax on Americans

States Face $3 Billion Estate Tax Windfall If We Fall Off Fiscal Cliff

Forbes:  States Face $3 Billion Estate Tax Windfall If We Fall Off Fiscal Cliff, by Ashlea Ebeling:

Will estate taxes come back from the dead in 30 states on Jan. 1? Yes, if Congress stalls on fiscal cliff talks, which include the fate of the federal estate tax.

If Congress does nothing, the federal estate tax law reverts to pre-2001 parameters, including an obscure provision known as the state death tax credit that allows states to share in estate tax revenue the Treasury collects. As a result, 30 states would resume collecting estate taxes, boosting their revenue by about $3 billion in 2013, calculates Norton Francis, a senior research associate at the Urban Institute in Back From the Dead: State Estate Taxes After The Fiscal Cliff.

December 14, 2012 in Tax | Permalink | Comments (0) | TrackBack (0)

Zelinsky: State Taxpayer Standing After Cuno and Winn

Edward A. Zelinsky (Cardozo), Putting State Courts in the Constitutional Driver’s Seat: State Taxpayer Standing After Cuno and Winn, 40 Hastings Const. L.Q. 1 (2012):

This article explores the implications of the U.S. Supreme Court’s decisions in DaimlerChrysler Corp. v. Cuno and Arizona Christian School Tuition Organization v. Winn. In Cuno and Winn, the Court held that state taxpayers lacked standing in the federal courts. Because the states have more liberal taxpayer standing rules than do the federal courts, Cuno and Winn will not terminate taxpayers’ constitutional challenges to state taxes and expenditures, but will instead channel such challenges from the federal courts (where taxpayers do not have standing) to the state courts (where they do). Moreover, municipal taxpayer standing in the federal courts, which persists after Cuno and Winn, is an historic anomaly, given what is now a near-absolute bar in the federal courts on state taxpayer standing. As a result of the channeling caused by Cuno and Winn, in the future, state courts will develop a body of law under the U.S. Constitution governing state taxes and outlays. This body of law will be beyond direct Supreme Court review because of that Court’s rejection of state taxpayer standing in the federal courts. At least at the margins, and perhaps more fundamentally, state court judges will be more inclined than their federal counterparts to uphold state tax and expenditure policies against constitutional challenges. Consequently, these state-friendly cases premised on the United States Constitution, as developed by the state courts and unsupervised by the Supreme Court, will be more permissive toward state policies than would a comparable corpus of cases decided by federal judges. This result will be untidy, but potentially manageable.  

December 14, 2012 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

CRS Re-issues Report: Tax Rates on Rich Have 'Negligible' Effect on Economic Growth

NY Attorney General to Demand Disclosure of Donors to 501(c)(4) Groups

New York Times:  Attorney General Seeks to Force Disclosure of More Political Donors:

The New York attorney general announced a a far-reaching draft regulation on Wednesday that would force broad public disclosure of millions of dollars in loosely regulated spending on elections and ballot measures in New York.

The proposal by the attorney general, Eric T. Schneiderman, takes direct aim at tax-exempt organizations that spend heavily on political advertising but have not been required to reveal the donors behind their spending. The new rules are likely to have a major political impact after they are finalized next spring. ...

Mr. Schneiderman’s new regulation would require any tax-exempt group that does business in New York to disclose what proportion of its total spending went to political activities. The regulations would define political spending more broadly than does the IRS, whose own rules have been criticized for allowing tax-exempt groups to spend millions of dollars on thinly veiled campaign ads despite their charitable status.

Any group that spends more than $10,000 in New York on state and local elections — including ballot measures, as well as races for municipal or county posts — would have to go even further, disclosing the name of any donor giving $100 or more. Groups would be required to disclose the new information as part of their annual reports to the attorney general’s office, which is responsible for regulating charitable organizations in New York. They would not be required to name donors who designate their contributions as restricted to nonpolitical purposes. And organizations that fear their donors would face serious threats or harassment would be able to apply for a waiver to the disclosure rules.

December 14, 2012 in Tax | Permalink | Comments (0) | TrackBack (0)

Foster: The Relative Transparency of Tax Rate Reform

Huffington Post op-ed:  The Relative Transparency of Tax Rate Reform, by William E. Foster (Washburn):

Although tax deduction caps are likely to be enacted as part of any political compromise before the end of the year, rate changes are far more transparent and ought to be a significant component of any reform. The White House and Republican congressional leaders clearly are divided on the prospect of raising or lowering tax rates.

With split partisan control of federal political offices, it seems unlikely that any significant modification to the current rate structure is in the cards. However, there appears to be bipartisan support for limitations on deductions for high-income individuals. Although broadening the tax base by making more income subject to tax (by, e.g., limiting deductions) is a sound and effective revenue raising maneuver, the impact on individual taxpayers is obscured compared to rate changes.

It is not surprising, then, that politicians can reach compromises on deduction limitations rather than rates. The simple fact is that rate changes and their concomitant effects are too transparent for partisans to concede. Generally speaking, people understand the significance of their top marginal tax rates, but are less likely to thoroughly analyze the consequences of reduced deductions. ...

Congress's ability to compromise on less transparent tax reform, but not tax rates, suggests that maybe taxpayers aren't intended to understand the consequences of such reform.

(Hat Tip: Francine Lipman.)

December 14, 2012 | Permalink | Comments (0) | TrackBack (0)

Tax Analysts Hosts Conference Today on State 'Fiscal Cliffs' and State Taxes

TAC_FiscalCliff_531x216pxTax Analysts hosts a roundtable discussion on State "Fiscal Cliffs" and State Taxes at the National Press Club in Washington, D.C. today at 9:00 - 11:00 a.m. EST:

  • Christopher E. Bergin (President and Publisher, Tax Analysts) (moderator)
  • Donald J. Boyd (Co-Executive Director, Task Force on the State Budget Crisis)
  • Cara Griffith (Legal Editor, State Tax Notes)
  • Joseph Henchman (Vice President for Legal & State Projects, Tax Foundation)
  • Nicholas Johnson (Vice President for State Fiscal Policy, Center on Budget and Policy Priorities)

December 14, 2012 in Conferences, Tax | Permalink | Comments (0) | TrackBack (0)

NY Times: Most Pakistani Leaders Don’t File Returns, Study Finds

New York Times:  Most Pakistani Leaders Don’t File Returns, Study Finds:

Fewer than a third of Parliament members in Pakistan file annual tax returns, according to a report published on Wednesday, lending new focus to longstanding complaints from foreign donors and ordinary Pakistanis about tax evasion at the highest levels of society.

The report, which was published jointly by two civil society organizations — the Center for Peace and Development Initiatives and the Center for Investigative Reporting in Pakistan — found that just 126 of the country’s 446 federal lawmakers filed income tax returns in 2011. Among the leaders who did not was President Asif Ali Zardari, the report said.

The report does not take into account the tax paid by politicians on their parliamentary salaries, which is automatically deducted by the government. Instead, it focuses on the lawmakers’ declarations of supplemental income from property, professional practices and other sources of revenue.

(Hat Tip: Mike Talbert.)

December 14, 2012 in Tax | Permalink | Comments (2) | TrackBack (0)

Thursday, December 13, 2012

Pew: Creating Fiscally Sound State Tax Incentives

PewThe Pew Charitable Trusts, Avoiding Blank Checks: Creating Fiscally Sound State Tax Incentives:

Reliable cost estimates and annual cost controls for tax incentives have helped states promote job creation and economic growth while avoiding unexpected budget challenges. But Pew’s analysis shows that policy makers often create tax credits, deductions, and exemptions without these tools, raising the risk of budget shortfalls and unplanned spending cuts or tax increases to close them.

December 13, 2012 in Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Law Schools Face 'Calamity' as Applications Are 'Collapsing' -- Down 25% From 2012

LSAC reports that as of December 7 (roughly 30% through the cycle), applications for the law school class entering in 2013 are down 24.6% from 2012 and applicants are down 22.4%:

A line chart titled Fall ABA Applicants by Week. The horizontal axis represents months November through August. Along its vertical axis are numbers 0 through 100,000 indicating number of applicants. The line labeled Fall 2011 steadily rises from 19,728 in November to 71,889 in March, then begins to plateau from March until August ending at 78,769. The line labeled Fall 2012 steadily rises from 16,719 in November to 58,983 in March, then begins to plateau from March until August ending at 67,957. The line labeled Fall 2013 increases from 12,728 to 16,241 from November to early December.

A line chart titled Fall ABA Applications by Week. The horizontal axis represents months November through August. Along its vertical axis are numbers 0 through 800,000 indicating number of applications. The line labeled Fall 2011 rises steadily from 124,716 in November to 494,669 in March, then plateaus gradually from March until August ending at 536,480. The line labeled Fall 2012 curves gently beginning with 107,415 in November, reaching 433,743 in March, then gradually plateauing to end in August at 469,642. The line labeled Fall 2013 increases from 77,985 to 106,608 from November to early December.

Paul Campos (Colorado), Applications to Law School Are Collapsing:

These numbers suggest that law schools will have a total of somewhere between 52,000 and 53,000 applicants to choose from in this cycle, i.e., slightly more than half as many as in 2004, when there were 188 ABA accredited law schools (there are 201 at the moment, with an emphasis on "at the moment").

To put that number in perspective, law schools admitted 60,400 first year JD students two years ago.  Since a significant percentage of applicants are unwilling to consider enrolling at any school below a certain hierarchical level, and/or will decline to enroll at certain other schools without receiving massive discounts on the advertised tuition price, these numbers portend fiscal calamity for more than a few schools. But out of that calamity will come the beginnings of a more rational and just system of legal education for the next generation of lawyers.

Update:  ABA Journal, Fiscal Calamity Ahead for Some Law Schools? Applicants for 2013 Drop 22% in ‘Free Fall’

December 13, 2012 in Legal Education | Permalink | Comments (2) | TrackBack (0)

NALP: Number of Women Associates Drops for Third Straight Year

NALP logoNALP, Representation of Women Among Associates Continues to Fall, Even as Minority Associates Make Gains:

While women and minority partners continue to mark small gains in their representation among law firm partners as a whole, and while the percentage of minority associates has rebounded after falling in the wake of the recession, the percentage of women associates continues to fall compared to their male counterparts.

The latest NALP findings on law firm demographics reveal that law firms have continued to make up most, but not all, of the ground lost when diversity figures fell in 2010. While the overall representation of minorities continued to inch up, the overall representation of women increased by only a very small amount, and all of this gain can be attributed to increases in women among the partnership ranks. Since the overall figure for women fell in 2011 compared to 2010, this small increase means that the overall percentage for women remains virtually flat compared to 2010.

In 2012, the percentage of both women and minority partners in law firms across the nation was up by a small amount compared with 2011. Among associates, however, representation of women declined slightly for the third year in a row and for only the third time since NALP started compiling this information in the 1990s. The net effect was that, for lawyers as a whole, representation of women was almost flat and remains lower than in 2009. Representation of minority women was up by a very small amount. For minorities as a whole, representation was up slightly. Minorities now make up 12.91% of lawyers at these law firms, compared with 12.70% in 2011. Just under one-third of lawyers at these same firms are women — 32.67% in 2012 compared with 32.61% in 2011 and 32.69% in 2010, all lower than the 32.97% mark reached in 2009. Minority women now account for 6.32% of lawyers at these firms, up a bit from 6.23% in 2011, and returning to a level comparable to the 6.33% figure for 2009. Among associates specifically, however, the representation of women has continued its incremental but steady slide from 45.66% in 2009 to 45.05% in 2012. Representation of minority women among associates is now just barely higher than the 11.02% figure for 2009.

During most of the 20 years that NALP has been compiling this information, law firms had made steady, if somewhat slow progress in increasing the presence of women and minorities in both the partner and associate ranks. In 2012 that slow upward trend continued for partners, with minorities accounting for 6.71% of partners in the nation’s major firms, and women accounting for 19.91% of the partners in these firms. In 2011, the figures were 6.56% and 19.54%, respectively. Nonetheless, the total change since 1993, the first year for which NALP has comparable aggregate information, has been only marginal. At that time minorities accounted for 2.55% of partners and women accounted for 12.27% of partners. Among associates, the percentage of women had increased from 38.99% in 1993 to 45.66% in 2009, before falling back each year since. Over the same period, minority percentages have increased from 8.36% to 20.32%, more than recovering from a slight decline from 2009 to 2010. ...

Los Angeles and San Francisco show the highest representation of women, minorities, and minority women among both partners and associates. Minorities account for 12.42% and 10.78% of partners in these two cities, respectively, and women account for 19.96% and 24.85% of partners, respectively. Figures for minority women are 3.98% and 3.96%, respectively. Firms in Seattle and Washington, DC, also at least slightly exceed national averages on most measures.

Among smaller cities, Miami exceeds national averages, and San Jose and Orange County, CA, do so with respect to minority associates. In Miami, women account for 23.65% of partners; minorities, many of whom are Hispanic, account for 27.30% of partners, and 7.83% of partners are minority women. In the San Jose area almost 37% of associates are minorities and almost 17% are minority women. In Orange County, CA, almost one-quarter of associates are minorities, though the percentage of minority women, at just over 10% is somewhat below average.

December 13, 2012 in Legal Education | Permalink | Comments (1) | TrackBack (0)

Galle & Walker: Stakeholder Outrage Constrains University President Pay

Brian D. Galle (Boston College) & David I. Walker (Boston University), Does Stakeholder Outrage Constrain Executive Compensation? Evidence from University President Pay:

We analyze the determinants of the compensation of private college and university presidents from 1999 through 2007. We find that the fraction of institutional revenue derived from current donations is negatively associated with compensation and that presidents of religiously-affiliated institutions receive lower levels of compensation. Looking at the determinants of contributions, we find a negative association between presidential pay and subsequent donations. We interpret these results as consistent with the hypotheses that donors to nonprofits are sensitive to executive pay and that stakeholder outrage plays a role in constraining that pay. We discuss the implications of these findings for the regulation of nonprofits and for our broader understanding of the pay-setting process at for-profit as well as nonprofit organizations.

December 13, 2012 in Legal Education, Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Foreign Music Acts and U.S. Taxation

Aninda Dhar (EisnerAmper, New York), Foreign Music Acts and United States Taxation:

On February 7, 1964, the Beatles landed in New York City, signaling the beginning of the “British Invasion.” Waves of the Invasion produced numerous foreign musical acts, such as The Rolling Stones, Herman’s Hermits, and The Kinks. While some of these acts have faded as music tastes have evolved and diverged dramatically, several foreign musical acts have continued to earn significant income in America. For example, in 2006, veteran British rockers, The Rolling Stones, were the top grossing touring act in America.

In response to the significant portion of United States tour revenues attributed to foreign musical acts, the Internal Revenue Service (“IRS”) recently announced that it would closely scrutinize foreign entertainers. Specifically, the IRS has introduced a compliance initiative targeting foreign entertainers and athletes who earn income in the United States. This effort by the IRS includes the establishment of “an issue management team . . . assembled to improve U.S. income reporting and tax payment compliance by foreign stars.” The new management team’s primary objective will be to determine the nature of guidance and the level of outreach necessary to train IRS personnel in identifying compliance issues.

While the IRS’s new initiative is geared toward “stars” who have achieved a certain level of international success, such as U2, this note will provide an overview of some United States tax issues that concern foreign entertainers of varying levels of fame, including those performing in small venues as well as those performing in major arenas. The note begins by briefly examining the United States statutory framework. It then analyzes United States treaties pertaining to foreign musical acts, and concludes by exploring certain specific tax concerns for foreign performers.

December 13, 2012 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Law Prof Blog Traffic Rankings

Below are the updated quarterly traffic rankings (page views and visitors) of the Top 35 blogs edited by law professors with publicly available SiteMeters for the most recent 12-month period (October 1, 2011 - September 30, 2012), as well as the percentage change in traffic from the prior 12-month period:



Page Views







Legal Insurrection




Hugh Hewitt




Leiter Reports: Philosophy








Jack Bog's Blog




TaxProf Blog








Sentencing Law & Policy




The Faculty Lounge




Concurring Opinions








The Incidental Economist




Harvard Law  Corp Gov








Leiter's Law School Reports




Opinio Juris




Election Law Blog




Professor Bainbridge




Wills, Tr. & Est. Prof Blog




Turtle Talk




Mirror of Justice












Legal History Blog




Religion Clause




ImmigrationProf Blog




Constitutional Law Prof Blog




Sports Law Blog




Truth on the Market




Antitrust & Comp. Pol’y Blog




Workplace Prof Blog




White Collar Crime Prof Blog




Legal Profession Blog




The Right Coast













Legal Insurrection




Hugh Hewitt




Leiter Reports: Philosophy




TaxProf Blog








Jack Bog's Blog








Sentencing Law & Policy




The Faculty Lounge




Leiter's Law School Reports








Concurring Opinions








The Incidental Economist




Harvard Law  Corp Gov




Professor Bainbridge




Opinio Juris




Election Law Blog




Wills, Tr. & Est. Prof Blog




Turtle Talk




Mirror of Justice








Truth on the Market








Constitutional Law Prof Blog




ImmigrationProf Blog




Legal History Blog




Sports Law Blog




Religion Clause




Workplace Prof Blog




Antitrust & Comp. Pol’y’ Blog




White Collar Crime Prof Blog




The Right Coast




Legal Profession Blog



  • These Law Prof Blog Rankings are drawn from Dan Solove's Law Professor Blogger Census, as updated by Colin Miller's Legal Educator Blog Census.  They include all blogs edited by law professors -- both law-related and non law-related.
  • Please email me the names of any Law Prof Blogs with traffic over the past twelve months that would qualify for inclusion on the lists (204,466 page views and/or 143,208 visitors).  If necessary, I will re-publish the list to include all qualifying blogs.
  • Several popular Law Prof Blogs do not have publicly available SiteMeters and thus are not included on the list:  e.g., California Appellate Report, Credit Slips, The Deal Professor, Dorf on Law, Feminist Law Professors, InstaPundit, Legal Theory, Point of Law, Volokh Conspiracy. 
  • These rankings cover only those blogs edited by law professors.  Other law-related blogs edited by practitioners, librarians, non-law school academics, and journalists are not included on this list:  e.g., Above the Law, How Appealing, Law Librarian Blog, Wall Street Journal Law Blog.
  • Members of our Law Professor Blogs Network comprise, by both page views and visitors, two of the Top 10, three of the Top 25, and nine of the Top 35 blogs.

December 13, 2012 in Blog Rankings, Legal Education, Tax | Permalink | Comments (1) | TrackBack (0)

The Day After Calling for Higher Estate Taxes on the Rich, Warren Buffett Helps Billionaire Save Millions in Taxes

Reuters:  Berkshire Buyback Seen Clashing With Estate Tax Push:

Warren Buffett's $1.2 billion share buyback from a single unnamed investor likely helped that person's estate save substantially on taxes, just one day after the Berkshire Hathaway CEO said the rich should actually be paying more, not less, when they die. With the "fiscal cliff" looming and ... taxes set to rise dramatically in less than three weeks, the timing was seen as advantageous -- and, according to Berkshire watchers, also out of place in the context of Buffett's recent tax activism. ... Berkshire said it bought 9,200 Class A shares from "the estate of a long-time shareholder," whom it did not name, at $131,000 per share, a price in line with where Berkshire has traded in recent weeks. ...

Yet given his wealth and his own self-professed low tax rate, Buffett has been called out in some quarters for not practicing what he preaches.

Update:  Wall Street Journal:  Berkshire, in Rarity, to Buy Holder's Stock:

The estate that sold the shares did so at a time when many investors are unloading some of their winning stocks to avoid an increase in the capital- gains tax next year, and the sale should qualify for this year's top tax rate of 15% on long-term capital gains. Next year the top rate will be at least 18.8% for wealthy Americans, because of a new 3.8% tax on net investment income.

In addition, as part of the debate in Washington over taxes and spending, President Barack Obama has called for a five-percentage-point increase in the 15% rate, so the top rate could be 23.8%.

Exactly how much a difference the coming tax increase would make is unclear. One thing is certain: Even though the Berkshire shares were longtime holdings, the estate appears unlikely to pay tax on all of the stock's rise over the decades that Mr. Buffett has run the company. Estates that sell shares pay tax only on increases in the value of shares after the date of death, according to tax experts.

Mr. Buffett has been a vocal advocate for higher taxes on the wealthiest Americans, arguing that the most affluent people in the country should pay a minimum tax of 35% on taxable incomes over $10 million.

December 13, 2012 | Permalink | Comments (13) | TrackBack (0)

Fleischer: Not All Companies Would Welcome a Lower Tax Rate

NY Times DealBookNew York Times DealBook:  Not All Companies Would Welcome a Lower Tax Rate, by Victor Fleischer (Colorado):

Reaching an agreement to cut the corporate tax rate should be easy. Major figures from both political parties have expressed interest in reducing the tax from 35%, which is the highest rate among the country’s main trading partners. Corporations would generally benefit from paying less tax and having more cash to reinvest in new projects or pay in dividends to shareholders.

The 35% rate is more of a “sticker price” than a reflection of the average tax burden. Corporations can pay a lower rate by lobbying for special deductions and credits, employing aggressive transfer pricing strategies to shift profits offshore and structuring operations to minimize how much they pay in taxes in the United States.

The average effective corporate tax rate is around 20%, and even lower in some industries. Cutting the nominal rate to 25% while broadening the base would discourage wasteful tax planning and, some believe, would make United States-based multinationals more competitive. But the politics of changing the rate and eliminating loopholes are thorny. Not everyone benefits. ...

A final tax package is likely to include many things other than a simple reduction in the corporate tax rate. Congress may offer special deductions and credits to soften the blow for companies that take a big charge to earnings or lose a competitive advantage.

The policy argument for these sweeteners is especially weak. Usually, when companies strive for a competitive advantage by offering superior service or building a better mousetrap, we all benefit. But when companies gain an advantage by aggressively managing their tax liability, they benefit only themselves and shift the burden to others.

Changing the tax code is never easy. Cutting the corporate tax rate provides a rare opportunity for bipartisan lawmaking. Congress shouldn’t make it harder on itself by promising to hold harmless every company that has manipulated the status quo to its advantage.

NY Times Chart

December 13, 2012 in Scholarship, Tax | Permalink | Comments (1) | TrackBack (0)

Senator Coburn Releases Ten Tax Expenditure Reforms

CoburnSenator Tom Coburn (R-OK) has released Ten Tax Expenditure Reforms & Eliminations: $315 Billion Over Ten Years:

The tax code is long overdue for comprehensive restructuring. Yet, instead of considering broad reform to simplify the code and lower rates, Washington continues to exacerbate the problem—doling out tax breaks and subsidies in the form of tax credits to well-connected companies and special interests with powerful lobbyists who seem to have more influence than most members of Congress. Even worse, some want to simply raise tax rates without addressing the underlying waste, spending and corporate giveaways embedded in the tax code.

Masquerading as tax cuts, many of these programs are no different from any other federal program that spends taxpayer money. Cleaning up the code by eliminating the most egregious tax giveaways will not only generate revenue, but also pave the way for reducing tax rates for all Americans and small businesses. While Washington delays undertaking true tax reform, the following ten expenditures could be immediately eliminated or reformed to reduce the deficit by more than $315 billion over the next ten years.

Coburn Chart_Page_1

December 13, 2012 in Congressional News, Tax | Permalink | Comments (1) | TrackBack (0)

Adler: The Illegal IRS Rule on Health Insurance Exchanges

Following up on my previous post (links below):  The Volokh Conspiracy, The Illegal IRS Rule on Health Insurance Exchanges -- A Reply to Bagenstos, by Jonathan H. Adler (Case Western):

One component of the PPACA (aka Obamacare) provides for the creation of health insurance exchanges in each state in which consumers may purchase health insurance. The PPACA’s supporters anticipated that every state would create its own exchange, and the law provides for tax credits and subsidies for the purchase of qualifying health insurance plans in state-run exchanges. Yet as Michael Cannon and I pointed out the PPACA does not authorize tax credits and subsidies in exchanges run by the federal government. This is a potential problem because at least twenty states are refusing to create their own exchanges and are defaulting to the federal option. In response, the IRS issued a rule to authorize tax credits and subsidies in federal exchanges. The only problem, as Cannon and I explain at length in a forthcoming article in Health Matrix, the IRS rule is illegal. Now the rule is being challenged in court by Oklahoma in a suit legal analyst Stuart Taylor calls “by far the broadest and potentially most damaging of the legal challenges” to PPACA implementation, and more suits are likely.

The IRS defends its rule, but has had difficulty providing much by way of justification beyond vague references to congressional intent. Now comes my friend Samuel Bagenstos, at his Disability Law blog and Balkinization, arguing that Cannon and my arguments are “nonsensical” and “deeply legally flawed.” Bagenstos is a serious scholar, and his arguments are clever, but they do not sustain the case for the IRS rule.

Bagenstos’ central argument is similar one advanced by Tim Jost on the Health Affairs blog (and to which Cannon and I responded here). Essentially he argues that the PPACA makes federal fallback exchanges the legal equivalent of state-run exchanges and therefore any tax credits or subsidies authorized in the latter must be available in the former as well.

Prior TaxProf Blog coverage:

December 13, 2012 in Scholarship, Tax | Permalink | Comments (1) | TrackBack (0)

Wednesday, December 12, 2012

Arizona Allows Law Students to Take the Bar in February of Their Third Year

Following up on my previous post: the Arizona Supreme Court on Monday approved a three-year experimental program allowing third year law students to take the February bar exam.

December 12, 2012 in Legal Education | Permalink | Comments (1) | TrackBack (0)

Can the Estate Tax Solve the Fiscal Cliff?

Estate Tax LogoTime:  Can the Estate Tax Solve the Fiscal Cliff?:

Now that the fiscal cliff debates are (we hope!) coming to a conclusion, Responsible Wealth — a network of business leaders and other wealthy citizens, including Bill Gates Sr., Warren Buffett and George Soros — is speaking out in favor of returning to an estate-tax structure more reminiscent of that of the pre-Bush years.

The group is arguing for a much lower exemption — $4 million for a couple — than current law dictates. Its members also believe that the tax rate should begin at 45% and rise on a graduated basis in proportion to the size of the inheritance. This is actually a more liberal policy than President Obama is calling for; he has proposed a maximum estate-tax rate of 45%, with a combined exemption for couples up to $7.5 million.

But how much money would this tax actually raise, and could it help avert some of the other painful choices being made in the fiscal-cliff debate? The amount the estate tax could raise, of course, depends on the details of the reform. According to a recent analysis by the Wall Street Journal, current policy, which mandates a maximum estate tax of 35%, would raise $161 billion in revenue over the next 10 years. By contrast, reverting to a pre-2001 estate tax would raise $532 billion in the same time period, while the President’s proposal would raise $276 billion. 

These aren’t the kind of proposals that are going to solve America’s budget issues overnight. The U.S.’s yearly deficits have been topping $1 trillion per year. At the same time, every hundred billion counts, and the past several months (and perhaps the entire election cycle) have been centered on whether the Bush income-tax cuts on top earners should expire — a debate over a swing of just $110 billion (more or less) in taxes over the next decade, according to the Congressional Budget Office. And if an aggressive estate tax would raise almost $400 billion more in the next 10 years than current law allows, that’s $400 billion less we would have to cut from entitlement programs.

December 12, 2012 in Tax | Permalink | Comments (8) | TrackBack (0)

Once a Failed REMIC, Never a REMIC

Bradley T. Borden (Brooklyn) & David J. Reiss (Brooklyn), Once a Failed REMIC, Never a REMIC, 30 Cayman Fin. Rev. ___ (2013):

This article analyses how courts may reach results that undercut arguments that REMICs were the owners of the mortgage notes and mortgages for tax purposes. And even if the majority of states rule in favor of REMICs, the few that do not can destroy the REMIC classification of many mortgage-back securities that were structured to be — and promoted to investors as — REMICs. This is because rating agencies require that REMICs be geographically diversified in order to spread the risk of defaults caused by local economic conditions, REMICs hold notes and mortgages from multiple jurisdictions. Most, if not all, REMICs own mortgages notes and mortgages from states governed by laws that the courts determine do not support REMIC eligibility for the mortgages from those jurisdictions. This diversification requirement makes it very likely that REMICs will have more than a de minimis amount of mortgages notes that do not come within the definition of qualified mortgage under the REMIC regulations. Professionals who helped structure these securitizations may face liability if the IRS were to find that a purported REMIC was just purported and not a REMIC.

December 12, 2012 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Cantley: The Accumulated Earnings Tax and § 831(B) Captive Insurance Companies

Beckett G. Cantley (John Marshall (Atlanta)), The Forgotten Taxation Landmine: Application of the Accumulated Earnings Tax to IRC § 831(B) Captive Insurance Companies, 11 Rich. J. Global L. & Bus. 159 (2013):

The owners of a company often can form an IRC § 831(b) captive insurance company (“CIC”) to insure certain risks of the company while retaining insurance management, eliminating underwriting fees, claiming current income tax deductions for insurance premium expense, and controlling the investment portfolio of the CIC. Furthermore, the use of a CIC may defer the realization of ordinary income or even re-characterize ordinary income as capital gain to the common owners of the company and CIC, due to the current qualified dividend tax rate preference. While these tax benefits are substantial, a CIC cannot defer taxation to the parent corporation shareholder indefinitely. A CIC generally must be a Subchapter C corporation to comply with local jurisdictional requirements and thus may be subject to the Accumulated Earnings Tax (“AET”). The AET is a penalty tax designed to prevent corporations from unreasonably retaining after-tax earnings and profits in lieu of paying current dividends to shareholders, where they would be again taxed as ordinary income at applicable shareholder tax rates. If a C corporation is liable for the AET under IRC § 532(a), there will be imposed a tax for each taxable year of fifteen percent (15%) on the corporation’s accumulated taxable income. Accumulated taxable income is reduced by a credit for an accumulation amount sufficient to satisfy reasonable current and future anticipated business needs.

Reasonable current business needs of a CIC generally include (but are not limited to): the amount needed for employee compensation and benefits for the current business cycle; the amount needed for facilities overhead expenses for the current business cycle; and the amount needed to fund the probable claims payable, as determined by actuarial tables. Reasonably anticipated future business needs of a CIC may include (but may not be limited to) planned for expansions of facilities; expansions of workforce; acquisition of stock or assets for diversification or other business needs; redemption of CIC shares; and retiring bona fide business indebtedness of a non-shareholder creditor. The reasonableness of accumulations may be challenged under several scenarios. First, the IRS may claim the CIC had no specific plan outlining how the earnings accumulations are to be utilized. Second, if a CIC claims that accumulations are made in accordance with a plan, but actually has no intent to carry out the plan (as shown through a lack of substantial steps to further the plan), the accumulations may be deemed unreasonable. Third, if a CIC actually makes expenditures in furtherance of a plan for accumulation in fixed assets but does not use those fixed assets for business purposes, the fixed assets may be deemed liquid assets subject to the AET, since such liquid investments are considered available to satisfy the capital needs of the CIC. Lastly, if accumulated earnings are received in liquid form but converted to non-liquid form, the accumulation may be deemed to be objectively unreasonable, made for tax avoidance purposes, and thus deemed liquid assets subject to the AET.

This article discusses (i) the requirements, benefits, and tax attributes of an IRC § 831(b) CIC; (ii) an overview of the AET and the reasonable needs test which must be met to avoid the AET; and (iii) the potential future application of the AET to an IRC § 831(b) CIC and the negative results that could arise if the IRS chooses to do so. Given that the IRS has yet to announce any policy about applying the AET to combat the growth of this popular tax arrangement, this article seeks to analyze how the IRS may prospectively make use of this tool and how CIC owners and mangers should conduct themselves to not run afoul of the IRS.

December 12, 2012 | Permalink | Comments (0) | TrackBack (0)

Taxing Multinationals in Europe

Wolfgang Schoen (Max Planck Institute for Tax Law and Public Finance), Taxing Multinationals in Europe:

Within the European Union, there exists a fundamental tension between the fiscal sovereignty of its Member States, in particular in the field of direct taxation, and the requirements of the Internal Market, which aim at the abolition of any regulatory or fiscal obstacles to cross border movement of goods, persons, services and capital. While the impact of secondary European legislation and state aid control is still rather limited, the judicature of the European Court of Justice on the fundamental freedoms has established substantial constraints for national legislators which force Member States to provide equal treatment for purely domestic and cross-border situations. This has a major effect with respect to the taxation of corporate groups as the legislator is obliged to extend benefits for domestic groups to multinational enterprises. The article explains how this affects important elements of the international tax order like relief for intercompany dividends (credit or exemption), deductibility of expenditure related to foreign dividends, intra-group loss compensation, CFC legislation, thin capitalization and interest barriers/debt caps, transfer pricing and exit taxation.

December 12, 2012 | Permalink | Comments (0) | TrackBack (0)

IRS Grants 501(c)(4) Tax-Exempt Status to Ohio Tea Party Group

OhioDayton Daily News:  IRS Rules Tea Party Group Is Tax-Exempt:

The IRS has ruled that a Tea Party affiliated organization in Ohio is exempt from federal taxes, concluding that the Ohio Liberty Council  is a non-profit organization. In a statement Tuesday announcing the IRS’s decision, Tom Zawistowski, president of the conservative-leaning Ohio Liberty Council — known as the OLC — predicted “our victory today will pave the way for other liberty groups around the nation to replicate our success’’

Ohio Libery Coalition Press Release:

After nearly two and a half years of fighting for its legal right to “tax exempt” status as a non-profit corporation, the Ohio Liberty Coalition was notified today by the IRS that the organization is indeed exempt from Federal Income Tax under section 501(c)(4) of the Internal Revenue Code.  For years, the IRS had been denying TEA Party and Liberty Groups across the nation a status that many unions and liberal groups had routinely been awarded. The OLC lead a national fight to protect the rights of these groups and was rewarded today with this IRS ruling.

Prior TaxProf Blog coverage:

December 12, 2012 in IRS News, Tax | Permalink | Comments (1) | TrackBack (0)

McEntee: The Problem With Law School

Huffington Post:  The Problem With Law School, by Kyle McEntee (Law School Transparency):

The November 29 New York Times editorial by Case Western law school dean Lawrence E. Mitchell (Law School Is Worth the Money) [criticized here] reminds us why people relentlessly criticize law schools. The piece misleads readers and shamelessly disregards why critics stand up for students. ...

Dean Mitchell wants to take the long view. Forget that when law school started for this May's graduating class, ABA-approved schools enrolled 52,500 students, or that from 2007 through 2011 an average of just 27,200 graduates had full-time legal jobs within nine months of graduation. Overlook that tuition continues to increase, despite years of warnings that tuition hikes at rates far exceeding inflation are unsustainable and unfair.

The Bureau of Labor Statistics shows that the crunch for lawyer jobs continues to worsen. It projects 21,880 new lawyer jobs per year through 2020, in part because the legal profession is undergoing substantial structural change. Globalization, technological improvements, and a growing market for non-lawyer legal services contribute to a weakened entry-level market for fresh graduates. Nevertheless, the law school crisis is not solely a function of oversupply. ...

If a student debt-finances the entire cost of their legal education at Dean Mitchell's school today, she will owe a cool quarter of a million dollars by the time her first payment is due. 46.3% of the school's class of 2011 had full-time professional jobs (legal or not) lasting at least one year; 20% of the class made at least $70,000. Not even 10% of the class made more than the average amount borrowed ($98,900), let alone the actual debt figures after interest accumulates during school and opportunity costs. As these facts seep into the marketplace, it is no wonder Case Western's enrollment is down 35% over the last two years.

December 12, 2012 in Legal Education | Permalink | Comments (7) | TrackBack (0)

Why Will the IRS No Longer Collect Data on Taxpayer Migration From Blue States to Red States?

IRS Logo 2National Review:  An Embarrassing Metric Disappears:  Why Are Government Statistics on Taxpayer Migration Being Discontinued?:

As the din of America’s falling headfirst over the fiscal cliff reverberates across the nation, the Obama administration is quietly killing a key economic metric that tells how, and how many, people are voting with their feet. Since 1991 the IRS has been compiling statistics on filers’ addresses, which the agency’s Statistics of Income division uses to show who is moving into and out of every county and state in the nation. As you’d expect, the IRS also knows the aggregate income levels of those who move. So the movements of the most fundamental productive components of the economy — taxpayers — can be analyzed by journalists and economists, or could until now.

The IRS and the U.S. Census Bureau (which provides technical support in reporting tax migration data) have not made an official announcement as to why the program is being discontinued. So we are left to speculate why such vital economic statistics suddenly got canceled.

Some would be glad if the IRS data simply went away. Blue states with high state and local tax burdens have come out looking bad in recent years. California [, Maryland] and New York have been embarrassed publicly, as a steady exodus is underway from both. ...

While it remains to be seen what the official position of the IRS is, unofficially it is suggesting that the problem lies in coordinating with the Census Bureau. It is asking for comments on how people use the data and how important it is, presumably so that higher-ups at the agencies can reverse their decision if necessary.

The very idea of people voting with their feet is uncomfortable to some politicians. Fortunately, others realize the damage that a declining tax base causes and prefer transparency over attempting to delete statistics that reveal the problem.

December 12, 2012 in IRS News, Tax | Permalink | Comments (6) | TrackBack (0)

Senate Holds Hearing Today on Tax Policy and Energy Efficiency

Senate LogoThe Subcommittee on Energy, Natural Resources, and Infrastructure of the Senate Finance Committee holds a hearing today on Tax Reform and Federal Energy Policy: Incentives to Promote Energy Efficiency:

  • Dan Arvizu (Director, National Renewable Energy Laboratory, Golden, CO)
  • Steve Nadel (Executive Director, American Council for an Energy- Efficient Economy, Washington, D.C.)
  • Mark F. Wagner (Vice President for Government Relations, Johnson Controls, Inc, Washington, D.C.)
  • Matt Golden (Principal, Efficiency. Org, Policy Chair, Efficiency First, San Francisco, CA)

December 12, 2012 in Congressional News, Tax | Permalink | Comments (1) | TrackBack (0)

How Much of Each State's Budget Comes From the Feds: From 24% (Alaska) to 49% (Mississippi)

The Tax Foundation map below looks at "how much of each state's budget comes from the federal government. Mississippi tops the list with 49% of its general revenue coming from Washington; Alaska, by contrast, gets only 24% of its general revenue from the feds."


December 12, 2012 in Tax, Think Tank Reports | Permalink | Comments (6) | TrackBack (0)

Tuesday, December 11, 2012

AALS Places Villanova on Two Years Probation for Submitting False LSAT and GPA Data

Villanova Logo Following up on my prior posts (links below):  the AALS has placed Villanova on two years probation for submitting false LSAT and GPA data for its entering classes for at least eight years to goose its U.S. News ranking.

(Hat Tip: Dan Filler.)  Prior TaxProf Blog coverage:

December 11, 2012 in Law School Rankings, Legal Education | Permalink | Comments (1) | TrackBack (0)

Wealthy Progressives Call for $2 Million Estate Tax Exemption, Graduated Rates Starting at 45%

Estate Tax LogoA group of three dozen wealthy progressives, including Warren Buffett, Jimmy Carter, Bill Gates Sr., and George Soros, today released a Responsible Estate Tax Proposal:

  • We believe a more appropriate exemption is $4 million per couple, indexed to inflation.
  • We believe there should be a graduated rate on the taxable estate over the exemption amount, beginning at 45% and rising on the largest fortunes.
  • We believe that compliance should be simplified to allow for state tax credits, portability and the reunification of federal gift taxes.

Press and blogosphere coverage:

December 11, 2012 in Tax | Permalink | Comments (5) | TrackBack (0)

David Cay Johnston: Why We Need to Raise Taxes on the Rich

Visit for breaking news, world news, and news about the economy

December 11, 2012 in Tax | Permalink | Comments (1) | TrackBack (0)

Gamage & Rana: Taxation and Incentives in the Business Enterprise

David Gamage (UC-Berkeley) & Shruti Rana (Maryland), Taxation and Incentives in the Business Enterprise, in Enterprise Law: Contracts, Markets, and Laws in the U.S. and Japan (Zenichi Shishido, ed.):

This book chapter discusses the tax perspective on business enterprise law with a comparative focus on the U.S. and Japan.

December 11, 2012 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Tax Prof's Advice to President Obama: Take Us Over the Cliff

Hartford Courant op-ed:  Taking Fiscal Cliff Best Route To Recovery, by Jeffrey A. Cooper (Quinnipiac):

As the nation hurtles toward 2013's "fiscal cliff" — a combination of tax increases and spending cuts designed to tackle the nation's ballooning deficit — pundits from across the political spectrum are inciting full-scale panic.

They warn about the tax increases the fiscal cliff could bring while destroying a fragile economy and ravaging a citizenry facing difficult economic times. They call upon the president and congressional Republicans to do whatever is necessary to reach a compromise to avert this coming tax disaster.

My advice to President Barack Obama is different. He should let us go over the precipice.

I have no desire to cause a fiscal calamity, but I do believe that the current tax policy in Washington is so politicized and the rhetoric so detached from reality that no productive compromise can emerge. We need a fresh start before we can reach any meaningful consensus on future tax policy. The path to this fresh start lies just beyond the fiscal cliff.

December 11, 2012 in Tax | Permalink | Comments (9) | TrackBack (0)

Tax Attorneys Are in No Rush to Leave the IRS

Tax AnalystsShamik Trivedi (Tax Analysts), As Economy Recovers, Attorneys Are in No Rush to Leave IRS, 137 Tax Notes 1147 (Dec. 10, 2012):

The chief counsel honors program is the primary way the IRS recruits entry-level attorneys. It accepts applications from third-year law students and graduating LLM students who have less than one year of post-JD legal work experience. According to the IRS, the program receives about 4,000 applications each year for positions available nationwide.

In the chief counsel's office in Washington, 10 to 20 law students and recent graduates are hired each year, the IRS said. ... A newly appointed attorney is expected to remain with the IRS for three years but can resign after the first year, according to the IRS's website. An early departure, however, may not be the best idea for an attorney seeking to one day return to the IRS. ...

Documents obtained by Tax Analysts showed that between 2004 and 2007, 57 attorneys were hired into the honors program in the chief counsel's office in Washington. Their average annual pay was $115,412, markedly less than what they could earn in the private sector but slightly higher than the national median wage for attorneys. ...

The gender of the attorneys was split almost evenly. Twenty-nine were male, and 28 were female. While the IRS did not provide information in the FOIA response about where the attorneys had gone to school, research conducted by Tax Analysts showed that attorneys with LLMs in taxation generally received the advanced degree from Georgetown University Law Center....

In the mid-2000s, the Office of Chief Counsel began trying to increase recruitment of talented law students. It dispatched then-Chief Counsel Donald Korb to dozens of law schools to pitch the benefits of working as an IRS attorney. Korb is credited with changing the office's recruitment procedures to mirror those of large law firms. ...

"When we started out, the theme was that the IRS was a great place to start your career," said Korb. But that changed quickly to "it was also a great place to build your career too," he said. "We wanted to focus not only on starting, but building a career over time. For a lot of people, that's exactly what it was."

The Service's goal was to recruit and retain talented lawyers, but even if they left after their three-year commitment, that wasn't so bad, Korb said. "We were trying to get the best people we could," he said. Even if attorneys left, they were well trained and understood how the government worked, he said, adding, "It would benefit the tax system as a whole."

Korb said he wasn't surprised that most of the honors attorneys were still with the IRS, even with the opportunity to go elsewhere. "The Office of Chief Counsel is a great place to work," said Korb, who began his own legal career as an honors attorney with the Service and is now a partner at Sullivan & Cromwell LLP.

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

December 11, 2012 in IRS News, Tax | Permalink | Comments (5) | TrackBack (0)

New York Law School Rankings by July 2012 Bar Exam Results

New York Law Journal:  Eight Law Schools Post Lower Bar Pass Rates:

In a reversal from last year, eight of New York state's 15 law schools have reported lower pass rates for first-time candidates who took the July bar exam. In 2011, eight schools reported improved pass rates over the prior year. ... With its 70% pass rate for the July exam, New York Law School experienced the most precipitous plunge this year, down 10 percentage points from 2011.


December 11, 2012 in Law School Rankings, Legal Education | Permalink | Comments (1) | TrackBack (0)

39 College Presidents Made > $1 Million in 2010, Half Got Gross-Up to Cover Taxes on Perks

New York Times:  Three Dozen Private-College Presidents Earned Over $1 Million in 2010, Study Finds:

Three dozen private-college presidents earned more than $1 million in total compensation in 2010, the same number as in the previous year, according to The Chronicle of Higher Education’s analysis of federal tax documents. ... The median total compensation among the presidents was $396,588, up 2.8% from the previous year.

Here are the ten highest paid private college presidents:

  1. Bob Kerrey (The New School), $3,047,703
  2. Shirley Ann Jackson (Rensselaer Polytechnic Institute), $2,340,441
  3. David Pollick (Birmingham-Southern College), $2,312,098
  4. Mark Wrighton (Washington University), $2,268,837
  5. Nicholas Zeppos (Vanderbilt University), $2,228,349
  6. Steven Sample (USC), $1,963,710
  7. Lee Bollinger (Columbia University),  $1,932,931
  8. Richard Levin Yale University $1,616,066
  9. Robert Zimmer (University of Chicago) $1,597,918
  10. Jack Varsalona (Wilmington University) $1,550,218

In contrast,only three public university presidents received total 2010 compensation in excess of $1,000,000:

  1. Gordon Gee (Ohio State University), $1,992,221
  2. Michael McKinney (Texas A&M University), $1,966,347
  3. Graham Spanier (Pennsylvania State University), $1,068,763

Chronicle of Higher Education:  Pay and Perks Creep Up for Private-College Presidents; Some of the Highest Paid Get Cash to Cover Taxes, Too:

Private-college presidents often draw scrutiny for their hefty compensation packages, but most of them have a ready comeback: I could make a lot more money in the corporate world.

While this statement is surely sometimes true, it is also true that some of the nation's top-paid presidents continue to receive perks that their corporate counterparts have relinquished under shareholder criticism.

Among the 50 highest-paid private-college presidents in 2010, half led institutions that provided top executives with cash to cover taxes on bonuses and other benefits, a Chronicle analysis has found. This practice, known as "grossing up," has fallen out of fashion at many publicly traded companies, where boards have decided the perk is simply not worth the shareholder outrage it can invite.

(Hat Tip: Greg McNeal.)

December 11, 2012 in Legal Education | Permalink | Comments (1) | TrackBack (0)

Google Avoids $2 Billion in Taxes by Parking Profits in Bermuda

Bloomberg:  Google Revenues Sheltered in No-Tax Bermuda Soar to $10 Billion, by Jesse Drucker:

Google avoided about $2 billion in worldwide income taxes in 2011 by shifting $9.8 billion in revenues into a Bermuda shell company, almost double the total from three years before, filings show.

By legally funneling profits from overseas subsidiaries into Bermuda, which doesn’t have a corporate income tax, Google cut its overall tax rate almost in half. The amount moved to Bermuda is equivalent to about 80% of Google’s total pretax profit in 2011.  

The increase in Google’s revenues routed to Bermuda, disclosed in a Nov. 21 filing by a subsidiary in the Netherlands, could fuel the outrage spreading across Europe and in the U.S. over corporate tax dodging. Governments in France, the U.K., Italy and Australia are probing Google’s tax avoidance as they seek to boost revenue during economic doldrums. ...

“The tax strategy of Google and other multinationals is a deep embarrassment to governments around Europe,” said Richard Murphy, an accountant and director of Tax Research LLP in Norfolk, England. “The political awareness now being created in the U.K., and to a lesser degree elsewhere in Europe, is: It’s us or them. People understand that if Google doesn’t pay, somebody else has to pay or services get cut.”

(Hat Tip: Ann Murphy.)

December 11, 2012 in Tax | Permalink | Comments (0) | TrackBack (0)

Arbitration Clauses in U.S. Tax Treaties

Maya Ganguly (Attorney, Chicago), Tribunals and Taxation: An Investigation of Abitration in Recent U.S. Tax Conventions, 29 Wis. Int'l L.J. 735 (2012):

The United States has entered into three international tax treaties that include a provision for mandatory arbitration in the event of a dispute. Surprisingly, this substantial shift in policy has not grown out of extensive academic research, public policy debate, or empirical study. Little work has been done regarding the historical importance of tax arbitration, and few have published case studies regarding the outcome of disputes handled though tax arbitration. Perhaps this is because these treaties include confidentiality provisions that make such case studies nearly impossible. Therefore, this article aims to show the reader the possible strengths and downfalls of these treaties as well as offer insight regarding the history and strengths of arbitration as a tool for settling tax disputes.

December 11, 2012 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Monday, December 10, 2012

Silver: The Case Against Tamanaha’s Motel 6 Model of Legal Education

Motel 6 LogoJay Sterling Silver (St. Thomas U.), The Case Against Tamanaha’s Motel 6 Model of Legal Education, 60 UCLA L. Rev. Disc. 52 (2012):

The radical overhaul of legal education espoused in Professor Brian Tamanaha’s new, widely read book, Failing Law Schools, would represent a disastrous step backward in legal education. Tamanaha and his supporters argue that the current crisis in legal education—rampant unemployment among debt-laden law graduates and plummeting law-school applications—requires a dramatic reduction in law-school tuition by substituting a yearlong apprenticeship for the final year of law study and replacing tenured, full-time legal scholars in the classroom with low-cost, part-time practitioners at non-elite law schools.

This Essay examines Tamanaha’s model in light of the pedagogical needs of law students, the interests of the clients of fledgling attorneys, and the role law professors have traditionally played in championing legal reform and the rights of the disenfranchised through enlightened scholarship. Who will replace the law professor—protected by tenure, unbound to clients or special interests, and able to reflect on abuses of power from the Archimedean point of the academy—as the critic of injustice? I contend that Tamanaha’s argument for apprenticeships disserves clients and is pedagogically unsound. And that Tamanaha’s “differentiated” legal education, with elite, three-year programs training corporate lawyers and less expensive two year schools for local practitioners, would limit the choices and opportunities of law students from the start.

Update:  Orin Kerr (George Washington) is not Impressed with Silver's argument:

I think legal scholarship can be extremely valuable and worthwhile. Brian Tamanaha thinks so, too. But making the case that the status quo is the best possible world requires more than just patting ourselves on the back about how society is very lucky to have us.

Other reviews of Failing Law Schools (below the fold):

Continue reading

December 10, 2012 in Legal Education | Permalink | Comments (7) | TrackBack (0)

WSJ: The Republican Tax Panic

Wall Street Journal editorial:  The Republican Tax Panic: The GOP Should Negotiate with Obama, Not Each Other:

If any Republicans thought that President Obama would respond with magnanimity in victory, they now know better. He is determined to rout them on taxes, give as a little as possible on spending, and blame them for any economic damage in the bargain. The question for the GOP is how to minimize the harm to the economy, as well as to their chances of a political and policy comeback in 2014 and beyond.

So it's a shame that Republicans are playing into Mr. Obama's hands, negotiating in public among themselves, prematurely giving up on the tax issue and undermining House Speaker John Boehner in the process. Mr. Obama isn't going to blink on the budget if he thinks Republicans are going to blink first, and so far the emerging GOP position seems to be to surrender on taxes first and hope Mr. Obama will have mercy on them later on entitlements.

December 10, 2012 in Tax | Permalink | Comments (0) | TrackBack (0)

Dorothy Brown on Home Ownership by Blacks and Whites, Cutting Tax Deductions

The racial wealth gap has hit an all-time high while Barack Obama has been president. The median net worth of white households is now 20 times that of black households. Why?

Some argue that the gap is a current manifestation of a historical problem. Others say blacks are to blame. While I can’t eliminate the lingering effects of slavery and Jim Crow, or change stereotypes, I can highlight one area where blacks may be inadvertently contributing to the racial wealth gap: When most black people buy homes, we hurt ourselves economically. 

Home ownership has been an important vehicle in creating a solid white middle class, but it has not done the same for most black homeowners, because blacks and whites buy homes in very different neighborhoods. Research shows that homes in majority black neighborhoods do not appreciate as much as homes in overwhelmingly white neighborhoods. This appreciation gap begins whenever a neighborhood is more than 10% black, and it increases right along with the percentage of black homeowners. Yet most blacks decide to live in majority minority neighborhoods, while most whites live in overwhelmingly white neighborhoods. ...

The recent crash and subsequent rebounding of the market—”fiscal cliff” jitters notwithstanding—show how meaningful this is: White median net worth is down by only 16%, while black median net worth is down by 50%. This is because the stock market has significantly rebounded and compensated for whites’ losses in home equity, but blacks, without comparable stock investments, have not benefited.

A new Tell Me More series, 'Why Not?' takes a closer look at what's on the table during the fiscal cliff negotiations. Host Michel Martin talks to NPR's Scott Horsley and Dorothy Brown of Emory University School of Law. They weigh the pros and cons of cutting tax deductions, including mortgage interest and charitable giving adjustments.

December 10, 2012 in Tax | Permalink | Comments (1) | TrackBack (0)

Law Student Wins Krispy Kreme Doughnuts for a Year and Wonders: What Are the Tax Consequences?

Krispy-kreme-logoEast Valley Tribune:  The Early Bird Gets the Krispy Kreme Doughnut in Mesa:

A second-year law student at Arizona State University, Adam Brown arrived at the new Krispy Kreme Doughnuts shop in Mesa about 8 a.m. on Monday to be first in line for the grand opening of the shop, nearly 24 hours before its doors opened for business. ...

Most of them got there early enough to be among the first 100 people in line for the store or the first 24 at the drive-through window to receive a dozen free doughnuts for a year (every week for the first person in line inside and at the drive-through, and every month for everyone else). ...

Brown, an aspiring tax attorney, who said he doesn’t eat doughnuts on a regular basis, said he showed up just for the free doughnuts and will share them with his family and friends. He said he’ll take the first dozen home and share them with his wife, Melanie, and his daughters, Autumn, 2, and Maggie, 8 months.

"It was worth the wait," Brown said as workers were preparing to open the doors for business. "It’s been fun. I’ve been studying and slept a couple of hours. I’m a little cold, but no complaints on my part."

But is there any law that Brown knows of having to pay taxes on the doughnuts? "If it’s a prize, I’ll have to pay taxes, but if it’s a gift, I don’t," said Brown who was eating a plate full of Hawaiian haystacks (rice with cream of chicken salad) and studying for his final in criminal procedure.

(Hat Tip: Bob Kamman.)

December 10, 2012 in Legal Education | Permalink | Comments (6) | TrackBack (0)

What Is the AALS Good For?

AALSDan Rodriguez (Dean, Northwestern), The Present and Future of AALS?:

What are your good ideas for the AALS as an organization going forward, especially in these remarkably difficult times for legal education?  I have the opportunity to play a leadership role in the association for the next little while (being nominated as president-elect at the upcoming annual meeting).  My sense is that we can do much better as a group in furthering the myraid objectives of the law professoriate. Moreover, I would like to use my (small) bully pulpit to advance objectives that are critical to our collective future. 

Check out the interesting comments from Rick Garnett (Notre Dame) and Paul Horwitz (Alabama), among others. Stephen Bainbridge (UCLA) offers a particularly ascerbic take in What Useful Purpose Does the AALS Serve?:

The best thing we could do with the AALS is to disband it. ... I can't think of one useful thing the AALS does except to provide a massive schmooze fest for faculty to network at taxpayer and student expense. And while that's fun, it doesn't justify the organization's existence.

Or as Edwin Starr would say:

December 10, 2012 in Legal Education | Permalink | Comments (3) | TrackBack (0)

Samuelson: The Death of Tax Reform

Washington Post op-ed:  The Death of Tax Reform, by Robert J. Samuelson:

The story behind the story is that “tax reform,” as we know it, is dying. During the 1980s, no major piece of legislation better symbolized bipartisan consensus than the Tax Reform Act of 1986, which was regarded by both liberal and conservative experts as the best tax law since World War II. The basic idea was simple: Reduce tax rates and recover lost revenue by ending (or limiting) tax breaks. The struggle between President Obama and House Speaker John Boehner over the “fiscal cliff” indicates that this beneficial consensus has collapsed.

Just the opposite is occurring. President Obama insists not only that the rich pay more in taxes (a legitimate demand) but also that their tax rates go up (questionable). This turns traditional tax “reform” on its head. Boehner says the added revenues should come through closing loopholes. The two also disagree on the amount of tax increases: Boehner has offered $800 billion over a decade, about half of what Obama wants. But this difference is amendable to negotiation; the rates-versus-loopholes dispute is less so.  

For Obama, the obsession with raising top rates (from today’s 33% and 35% to 36% and 39.6%) seems an exercise in political symbolism. He wants to be seen as vanquishing the rich — and Republicans. Otherwise, why not accept Boehner’s means (loophole closing) to achieve his policy ends (higher taxes on the rich)? ...

The lower rates and broadened tax base of the 1986 law had explicit goals: to increase economic growth; to reduce the use of taxes to promote some activities and discourage others; to minimize lobbying for tax breaks; and to make the system simpler. With time, the appeal of these goals has faded. ...

[M]any politicians support tax breaks for favored groups (the elderly, the poor, small business) and causes (homeownership, attending college, “green” industries). This enhances their power. The man who really pronounced the death sentence for the Tax Reform Act of 1986 was Bill Clinton, who increased the top rate to 39.6% rather than broadening the base. As the top rate rose, so did the value of generating new tax breaks. Ironically, many of the people who complain the loudest about Washington influence-peddling and lobbying are the same people who support higher tax rates, which stimulate more influence-peddling and lobbying.

December 10, 2012 in Tax | Permalink | Comments (6) | TrackBack (0)