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Sunday, June 30, 2013

68% of Same-Sex Couples Face $2,495 Average Tax Penalty by Not Filing Joint Return

James Glynn (Webster University), Federal Discrimination of Married Same-Sex Couples:

As the discussion and debate in the political arena intensifies concerning the social aspects of same-sex marriage, there are also adverse economic and legal effects on same-sex couples due to the Defense of Marriage Act (DOMA). In order to sample the effect of DOMA, we examined the tax consequences of the inability of such couples to file a tax return based on "married filing jointly" status by surveying same-sex couples who were married in Massachusetts. After comparing their current tax liability versus their theoretical tax liability using the "married filing jointly" status, we found that sixty-eight percent of those couples suffered an average tax penalty in 2008 of $2,495. Based on this actual adverse impact, we examined a legal remedy based on the failure to accord deference to the States with respect to matters specifically involving marriage in violation of the 10th amendment to the United States Constitution.

June 30, 2013 in Scholarship, Tax | Permalink | Comments (1) | TrackBack (0)

Broadway Pushes to Extend § 181 Deduction for Film and Television Production Costs to Theatre

BroadwayVariety:  Broadway May Be Closer to Earning an IRS Write-Off: Bill Would Help Backers Defer Taxes Until a Show Recoups, but Passage Needs a Strong Supporting Player:

Why should film and TV get all the breaks? The tax breaks, that is.

Broadway producers have been asking that question for years now — and with the recent announcement by U.S. Sen. Charles E. Schumer (D-N.Y.) of his intention to introduce the Stage Act of 2013, the legit industry may be one step closer to earning an IRS write-off.

The goal is to include investors in theatrical productions among those who benefit from Section 181 of the federal tax code, which allows film and TV producers to expense up to $15 million of the costs of a U.S.-based project — meaning that a studio or production company won’t start paying taxes on income from a project until that $15 million is recouped. Earlier this year, Section 181 was extended through 2013.

The Broadway League, the trade association of legit producers and presenters, stepped up its advocacy for legit’s inclusion in the section when Rialto producer Tom Viertel became the chair of the league’s government relations committee a few years back. About a year ago, the League got Schumer interested in the proposal, but the idea couldn’t progress without bipartisan support, which recently came from Sen. Roy Blunt (R-Mo).

The benefits of Section 181 seem pretty obvious to legiters. The capitalization costs of most Broadway productions, except for a rare mega-budget endeavor such as Spider-Man: Turn Off the Dark” fall under that $15 million mark, meaning that investors wouldn’t have to start paying taxes on income from a production until the show has actually recouped and they’ve started to make a profit.

That’s a big change from the current state of things, where investors pay taxes on income from a show that hasn’t made it into the black yet. “In a producer’s offering papers to investors, you have to disclose that investors could pay taxes before they’ve made a dollar of profit from the project,” says Tom Ferrugia, the League’s director of government relations. “That’s a big disincentive to invest.”

June 30, 2013 in Tax | Permalink | Comments (0) | TrackBack (0)

Top 5 Tax Paper Downloads

The IRS Scandal, Day 52

Saturday, June 29, 2013

Silver Linings Law School Playbook: Competition Over Full-Time, Professional Law-Related Job Placement

The Legal Whiteboard:  The Competition is for Full-Time, Professional Law-Related Jobs, Part I, by William D. Henderson (Indiana):

NALP recently released the employment outcome data for the class of 2012. The good news is that the absolute number of JD Bar Passage Required jobs went up from the prior year. The bad news is that a significantly larger class of entry-level lawyers were competing for those jobs. The class of 2011 totaled 41,623, versus 44,339 in 2012 (+2,716, or +6.5%). And note, the class of 2013 is likely to be even bigger -- roughly +1.6% based on the size of the entering 1L classes in the fall of 2010 (see ABA enrollment data). Setting aside the year-over-year flucuations, the trendlines suggest a relatively large and persistent shortfall in the number of full-time, professional law-related jobs.

Henderson

... [A] market correction is clearly underway. ... [C]an we conclude that the market correction will be complete when the relatively small class of 2017 enters the job market four years from now?  I certainly think the smaller number of graduates will help.  But I would argue that two things have fundamentally changed:

  1. Revenues versus credentials. Law schools are struggling with the need to balance their desire to hang onto respectable LSAT/UGPA medians with a need to generate sufficient revenue to cover their operating costs. ...
  2. Competition over full-time, professional law-related jobs. If there is one silver lining that has emerged from this troubled period of U.S. legal education, it is the willingness of the ABA to collect and publish more granular employment outcome data at the law school level.  In turn, U.S. News has incorporated this data into its rankings formula.  Instead of propping up our rankings by hiring our own students or benefiting when they got jobs nine months out working as a retail manager or a cab driver, under the new 2013 U.S. News rankings formula, only full-time, long-term jobs that are JD Bar Passage Required or JD Advantaged are given "full weight."

It is this second point that is going to push change in how law schools do business -- we now have an employment outcome in which the ranking payoff is now fully in allignment with what law students want -- full-time, professional law-related jobs.

June 29, 2013 in Legal Education | Permalink | Comments (1) | TrackBack (0)

The IRS Scandal, Day 51

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June 29, 2013 in IRS News, Tax | Permalink | Comments (1) | TrackBack (0)

Brookings Program on Evaluating the Homebuyer Tax Credit

BrookingsThe Brookings Institution hoasted a program yesterday on Tools for Supporting the Housing Market: Evaluating the Homebuyer Tax Credit and Other Policies:

After the bursting of the home price bubble in the mid-2000s sent the housing market into a downward spiral, the government introduced a variety of new measures aimed at sustaining the flow of mortgage credit and boosting housing demand. One such measure was a program that provided a tax credit to homebuyers of up to $8,000. Although advocates of the program argued that it was a critical tool for absorbing excess inventories, critics complained that it simply accelerated sales that would have occurred anyway. Other measures aimed at stabilizing the housing market included various foreclosure prevention and mitigation initiatives, programs that facilitated refinancing, and the Federal Reserve’s considerable efforts to reduce interest rates.

With several years of experience of these policies now behind us, it is time to take stock of their effects. Establishing a better understanding of how they worked will help us learn what tools to use to combat future episodes of housing market distress and what measures the government should have in place now to encourage the nascent housing market recovery that has emerged over the past year.

Co-Directors of Economic Studies Karen Dynan and Ted Gayer presented a new paper on the impact of the federal and state homebuyer tax credits [An Evaluation of Federal and State Homebuyer Tax Incentives (Presentation]. A panel discussion followed to discuss how it compared to other government efforts to help the housing market:

  • William G. Gale (Co-Director, Urban-Brookings Tax Policy Center) (moderator)
  • Ed Brady (National Association of Home Builders)
  • Jonathan Hanks (Sr. Vice President and COO, Utah Housing Corporation)
  • Jed Kolko (Chief Economist and Vice President of Analytics, Trulia)
  • Christopher J. Mayer (Professor, Columbia Business School)

June 29, 2013 in Conferences, Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Percentage of Each State's Federal Tax Returns Filed Jointly

Friday, June 28, 2013

Vermont Law School Eliminates 25% of its Full-Time Faculty Positions

VermontVermont Digger reports that in the wake of an expected 30% reduction in its entering class (from 200 to 140) in the past two years, Vermont Law School has eliminated 25% of its full-time faculty positions:

Vermont Law School has made [a number of cost-cutting moves] in the past six months. The school is grappling with a trend that’s afflicting law schools almost across the board -- fewer applicants are applying due to dwindling job prospects and the specter of student debt.

Vermont Law School is particularly vulnerable to financial backlash of that trend because it lacks the shield of a “mothership.” Most law schools are housed within universities, which have been able to absorb their losses.

Class size at VLS dropped from 200 to 170 in 2012, and VLS President Marc Mihaly expects it to take another 30-student plunge this year. The school is still accepting applications, and school officials say they won’t have a final count until the students show up in September.

Mihaly says he is also worried that they’ll see a decline in the average GPA and LSAT scores of the incoming class.

Starting last September, VLS enacted a plan to shrink the school in response to a tuition dollar drought that left it with a $3.3 million budget gap. The school attracted national attention last winter when it cut 12 staff positions — 10 were through voluntary buyouts and two were involuntary.

This past spring, in a quieter move, VLS whittled down its faculty. Eight professors, of the 40 who were eligible, voluntarily moved from full-time to part-time positions. Mihaly estimated that two or three other positions were eliminated when professors departed for personal reasons.

VLS has been pruning expenses elsewhere, too. It has cut down on cleaning services and changed the hours and offerings of its food service, among other changes. At one point, there were conversations about whether coffee would continue to be available in offices, according to one staff member.

An analysis by Bloomberg Business Week shows VLS had the third-highest acceptance rate in 2012, with 83 percent of applicants being admitted. [In past years, the rate has typically fallen between 60 percent and 75 percent.] That prompted The Careerist, a law job blog, to place it in the unflattering category of “law schools where your pet poodle can probably get in.”

But VLS’s acceptance rate isn’t as munificent as it may seem, according to Mihaly. The school attracts a certain type of student, Mihaly says — people more concerned with changing the world than making money — and those who don’t fit that mold generally don’t apply.

Update:  After some correspondence with Peter Glenshaw, Director of Communications at Vermont Law School, I’ve learned that the precise numbers involved are:

(1) Four tenure/tenure-track faculty have gone from full to part-time. Two tenured/tenure track faculty left the school, and their positions were eliminated. Together this represents a 21.4% reduction in the number of full-time tenure track faculty.

(2) Four contract faculty have gone from full to part-time. This represents 13% of the contract faculty. Thus the number of full-time positions on the teaching faculty (TT and contract) has been reduced by 17.2%.

Mr. Glenshaw wishes to emphasize that the eight faculty members who have gone from full-time to part-time status will, in his words, “continue to teach or work at VLS in the coming years. We are thrilled that every faculty member who participated in this voluntary program will remain involved in our community as teachers and educators, and we look forward to their contributions in the coming years.”

June 28, 2013 in Legal Education | Permalink | Comments (4) | TrackBack (0)

More on the Tax Implications of the Supreme Court's Gay Marriage Decision

Alabama Dean Ken Randall Is Retiring This Week, Will Join Private Equity Firm

RandallAll Alabama, Dean of University of Alabama Law School Retiring:

Kenneth Randall, who has served as dean of UA's School of Law for two decades, will retire at the end of June.

UA President Judy Bonner confirmed the news Thursday night, stating an interim dean will be named within the next few weeks while the university conducts a national search for Randall's replacement.

Randall will enter the private sector upon his retirement, Bonner said.

Update:

June 28, 2013 in Legal Education | Permalink | Comments (1) | TrackBack (0)

Google Sues IRS Over Disallowed $238.6 Million Deduction in AOL Transaction

GoogleBloomberg:  Google Sues IRS for $83.5 Million Tax Refund:

Google ... sued the IRS for an $83.5 million refund, claiming it was improperly denied a deduction for a 2004 stock transaction with AOL.The IRS erred in disallowing a $238.6 million deduction claimed for the difference between the price AOL paid to exercise a warrant for Google stock and the value of the shares, according to the complaint in U.S. Tax Court. [Google v. Commissioner, No. 014061-13 (Filed June 21, 2013)]

“Google’s actual cost for issuing the AOL warrant was $238,667,835, which equaled the spread between the $21,642,985 it received from AOL to exercise the AOL warrant and $260 million in value” of the stock, Google said in the complaint. ...

AOL’s parent, Time Warner Inc., filed a tax court petition on May 6 over the same transaction, challenging an IRS ruling that it owed $4.6 million, according to Bloomberg BNA. The IRS contends that Time Warner owed tax on the difference between what AOL paid for the Google shares, and their fair market value in May 2004. That difference is $234 million, according to the Time Warner complaint cited by BNA.

June 28, 2013 in IRS News, Tax | Permalink | Comments (0) | TrackBack (0)

Rapoport: Rethinking U.S. Legal Education

Nancy B. Rapoport (Interim Dean, UNLV), Rethinking U.S. Legal Education: No More 'Same Old, Same Old', 45 Conn. L. Rev. 1409 (2013):

In this Essay, I suggest that we should think about how to create a curriculum that encourages students to develop a variety of skill sets. Law students simply don’t need three years of Socratic questioning regarding the fine details of court opinions. They need a wide range of experiences, preferably building on skill sets (like the twenty-six Berkeley factors) that effective lawyers have developed. A law school’s curriculum should have courses that focus on different factors in each year of law school. Ultimately, what we should be teaching law students is how to develop the judgment to advise clients. Teaching students how to think about the law is no longer – and probably never was – enough.

June 28, 2013 in Legal Education | Permalink | Comments (1) | TrackBack (0)

Leveling the International Playing Field with the Marketplace Fairness Act

Richard Thompson Ainsworth (Boston University) & Boryana Madzharova (University of Erlangen-Nuremberg, Department of Economics), Leveling the International Playing Field with the Marketplace Fairness Act;

Quill v. North Dakota unbalanced the American retail market with its preference for out-of-state over in-state sellers. The preference under Quill is that sellers without physical presence in a state cannot be compelled to collect the sales tax. If the buyer does not voluntarily remit the complementary use tax, the purchase is effectively tax-free. As a result, Quill is seen as facilitating tax avoidance and driving business to sellers who have no in-state nexus, notably e-businesses. Revenue losses are estimated in excess of $10 billion per year. The reach of the Quill decision is international.

Preferred sellers can reside just as easily in another country as they can in another State. The international dimension of the Quill decision means that legislative efforts to correct Quill’s preference for out-of-state sellers, like the Marketplace Fairness Act (MFA), also have international implications. This paper provides a rough analytical and quantitative measure of the impact of the MFA on the largest block of foreign businesses selling into the US, businesses selling from the EU.

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June 28, 2013 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Cain: The Less Obvious Tax Consequences from the Fall of DOMA

CainPatricia Cain (Santa Clara), The Less Obvious Tax Consequences that Arise from the Fall of DOMA:

We are all familiar with the concept that if you are married you get to file joint returns. And many of us realize that doing so does not always produce a benefit. That is because for two earner couples at the high end, as well as for low income couples who enjoy the benefit of the Earned Income Tax Credit, taxes will increase. But there are more subtle consequences as well. I think of these consequences as the “transition issues” that arise because of past transactions, entered into while DOMA was in effect, but creating current tax issues now that DOMA is gone.

Consider a same-sex couple who has divorced and entered into a property settlement and support agreement. The tax rules that apply to spouses have not applied to these couples in the past because of DOMA. Now they will. Section 71 of the Internal Revenue Code defines alimony as taxable to the recipient and deductible by the payor under Section 215, but only if the payment qualifies as “alimony” under Section 71. If the divorcing spouses do not want the payment to be taxable to the recipient, they can include a provision in the agreement that states that the payment is not taxable. But failure to include such a provision automatically makes the payment taxable. Many such agreements are silent on this point and, in such cases, the default rule (presuming taxable alimony unless the parties explicitly agree otherwise) ought to apply. This would make the payments taxable under Section 71 and deductible under Section 215. I fear that too many family lawyers in the LGBT community have ignored the tax impact of divorce under Sections 71 and 215, because they assumed the rules did not apply to them. But now they do. That should mean that, going forward, those payments are taxable income to the recipient and deductible by the payor. If that is not what the taxpayers intended, will the IRS provide relief?

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June 28, 2013 in Tax | Permalink | Comments (2) | TrackBack (0)

California State Bar Hosts 2013 Annual Income Tax Seminar Today

StateThe California State Bar's 2013 Annual Income Tax Seminar takes place today at Golden Gate, San Diego, Whittier Law Schools. Tax Prof speakers incluce:

  • Jordan M. Barry (San Diego), Income Tax Update 2013
  • Michael B. Lang (Chapman), Recent Developments in Ethics for Tax Practitioners, Including Actual and Existing Conflicts of Interest
  • John A. Swain (Arizona), State Taxation of Cloud and E-Commerce

June 28, 2013 in Conferences, Tax | Permalink | Comments (0) | TrackBack (0)

Kahn & Kahn: In Defense of the Current Tax Treatment of Carried Interest

Tax Analysts Jeffrey H. Kahn (Florida State) & Douglas A. Kahn (Michigan), In Defense of the Current Treatment of Carried Interest, 139 Tax Notes 1203 (June 3, 2013):

The Obama administration and several commentators have asserted that the current taxation of so-called ‘‘carried interest’’ at capital gains rates is wrong and unjustified. Their case for this change is based on their characterization of the distributions to the partners in question as payments for their services. If that characterization were correct, there would be a very strong case for ordinary income treatment. This letter to the editor explains that, to the contrary, that characterization is erroneous. When the nature of the transaction is examined, it is clear that capital gain treatment is entirely consistent with tax policy and is appropriate.

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June 28, 2013 in Scholarship, Tax | Permalink | Comments (2) | TrackBack (0)

The IRS Scandal, Day 50

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June 28, 2013 in IRS News, Tax | Permalink | Comments (0) | TrackBack (0)

Thursday, June 27, 2013

Senate Finance Committee Proposes 'Blank Slate' Tax Reform

Update:

June 27, 2013 in Congressional News, Tax | Permalink | Comments (0) | TrackBack (0)

Nate Silver on College Majors and Careers

New York Times:  As More Attend College, Majors Become More Career-Focused, by Nate Silver:

A popular article by Verlyn Klinkenborg last week in The New York Times Sunday Review lamented the decline of English majors at top colleges and universities. Mr. Klinkenborg is worried about the “technical narrowness” of some college programs and the “rush to make education pay off”– which, he writes, “presupposes that only the most immediately applicable skills are worth acquiring.”

I am sympathetic to certain parts of Mr. Klinkenborg’s hypothesis: for instance, the potential value of writing skills even for students who major in scientific or technical fields, and the risks that specialization can pose to young minds that are still in their formative stages.

But Mr. Klinkenborg also neglects an important fact: more American students are attending college than ever before. He is correct to say that the distribution of majors has become more career-focused, but these degrees may be going to students who would not have gone to college at all in prior generations.

In 2011, according to the federal government’s Digest of Education Statistics, about 1.7 million bachelor’s degrees were awarded by American colleges, roughly double the 840,000 degrees in 1971. The number of Americans of college age has not increased nearly so rapidly. We can approximate the number of Americans who would be at the typical age to receive a bachelor’s degree by evaluating the number of 21-year-olds in the United States population. In 2011, there were about 4.6 million 21-year-olds in the United States, compared with 3.7 million in 1971 — only about a 25 percent increase instead of double.

A related calculation is the number of bachelor’s degrees awarded per 21-year-old in the United States. In 1971, there were 26.7 bachelor’s degrees awarded for every 100 21-year-olds in the United States. By 2011, that figure had increased to 43.4 degrees, about a 60 percent increase.

The relative decline of majors like English is modest when accounting for the increased propensity of Americans to go to college. In fact, the number of new degrees in English is fairly similar to what it has been for most of the last 20 years as a share of the college-age population. ...

Something of the same story holds for other traditional college majors, including many fields that are grouped under the heading of STEM, or science, technology, engineering and math. ...

[P]erhaps there can be a balance between recognizing two concepts: on the one hand, that college has become more of a necessity for more careers and a wider array of Americans; on the other hand, Americans are now more likely than before to change professions throughout their working lives. Perhaps we should at once encourage or require college students to take coursework in English – and tell them to be wary about majoring in it.

June 27, 2013 in Legal Education | Permalink | Comments (0) | TrackBack (0)

Book Symposium on Dan Shaviro's Fixing U.S. International Taxation at Hebrew University Law School

ShaviroDaniel N. Shaviro (NYU) participated in a symposium at Hebrew University Law School last week on his forthcoming book, Fixing U.S. International Taxation (Oxford University Press, 2014).  The commentators were Steve Shay (Harvard), Yariv Brauner (Florida), and Fadi Shaheen (Rutgers-Newark).  Here is a dscription of the book:

In today’s global economy, the U.S. international tax rules, which govern how we tax cross-border investment, are increasingly important. Nearly everyone agrees that the existing rules are terrible. Their defects largely reflect the difficulty that both U.S. policymakers and analysts have experienced in choosing between two sharply etched approaches, known in the literature as (1) worldwide or residence-based taxation of U.S. taxpayers, including resident companies, and (2) source-based or territorial taxation, also known as exemption as it involves exempting U.S. companies’ foreign source income (FSI).

Unfortunately, evaluation of these and other choices in international tax policy is impeded by the fact that the underlying literature, despite a more than fifty year history of frequently intensive academic study by exceptionally talented and knowledgeable economists and lawyers, at some point went badly off the rails. Its main terms of debate reflect crucial misunderstandings of key issues and distinctions, along with a misguided focus on concepts that verge on being completely unhelpful. A major rethinking is therefore needed, taking advantage of tools that are routinely used elsewhere in the public economics and tax policy literatures.

Among the common errors in existing literature that the book addresses are the following:

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June 27, 2013 in Book Club, Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Cincinnati Cuts Tuition for Out-of-State Students by 30%

UC LogoABA Journal:  University of Cincinnati Law School Listens to World’s Message: Tuition Has Gotten Too High:

The University of Cincinnati law school will cut tuition for out-of-state residents by 30 percent, following the lead of another cost-cutting Ohio law school. Tuition and fees for out-of-state residents will drop from $40,044 to $28,536 at the Cincinnati law school next year, the National Law Journal reports. Ohio residents will continue to pay $23,536.

University of Cincinnati law dean Louis Bilionis explained the move to the National Law Journal. “We thought tuition and expenses for out-of-state students had become out of equilibrium with the market,” he said. “The world is telling us that tuition has gotten too high."

Like many other law schools around the country, Cincinnati faces a difficult recruiting climate. A report prepared by Bilionis for the trustees found that the number of new students enrolling at Ohio law schools has dropped by 28 percent since 2008.

June 27, 2013 in Legal Education | Permalink | Comments (4) | TrackBack (0)

Nonprofit Guarantees in LIHTC Joint Ventures

Eric Mittereder (Applegate & Thorne-Thomsen, Chicago), Pushing the Limits: Nonprofit Guarantees in LIHTC Joint Ventures, 22 J. Affordable Housing & Commun. Dev. L. 79 (2013):

The first section of this article provides an overview of nonprofit participation in LIHTC partnerships and the need for certain guarantees, followed by the legal background for imposing limits on those nonprofit guarantees. After introducing the Urban Memo and other IRS guidance providing specific limitations on nonprofit guarantees, the first section analyzes this guidance’s impact on nonprofit organizations negotiating transactions in a shifting financial market. The discussion draws from industry perspectives comparing the standards in the IRS guidance to current industry practices, based on both publications and interviews with legal practitioners, who represent a variety of geographic markets and interests in their roles as counsel for developers, investors, and syndicators.

The second section of the article applies this discussion to the three most contested guarantees that nonprofits provide to for-profit investors in LIHTC partnerships: (1) tax credit guarantees, (2) operating deficit guarantees, and (3) interest repurchase guarantees. The section identifies the issues raised by each particular guarantee and gauges the extent to which current industry practices overlap and diverge from the limitations proposed in the IRS guidance. These three pressure points in negotiations have produced several nuances in the terms of these guarantees, which vary in the degree to which they adhere to the standards set forth in the informal IRS guidance, but may nonetheless provide alternative mechanisms to minimize the risk to charitable assets. Some of these examples may be valuable improvements in developing formal guidance, in order to alleviate IRS concerns while enhancing flexibility to make business arrangements that provide investors with necessary security.

June 27, 2013 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Herzig: The Tax Implications of Windsor

HerzigDavid J. Herzig (Valparaiso), The Tax Implications of Windsor:

Yesterday was a historic day for advocates of marriage equality. Section 3 of the Defense of Marriage Act (“DOMA”) that provided the definition of marriage for federal purposes being a man and a woman was struck down as unconstitutional in United States v. Windsor. Section 3 of DOMA had prospectively invalidated marriages of same-sex couples for purposes of federal laws regardless if those laws were enacted prior to or subsequent of DOMA. More specifically, it provided:

In determining the meaning of any Act of Congress, or any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word “marriage” means only a legal union between one man and one woman as husband and wife, and the term “spouse” refers only to a person of the opposite sex who is a husband or a wife.

In Windsor, the Court, in an opinion by Justice Kennedy, rendered a 5-4 decision that opined: (1) that the Petitioner had standing to bring the case and (2) most importantly, for our purposes, that Section 3 of DOMA was unconstitutional because it denied same-sex couple “equal liberty” guaranteed by the Fifth Amendment. ...

The question that I was asked to discuss here is the impact that these cases have regarding the federal tax code (the “Code”). Unfortunately, I have more questions than answers at this point. Regardless, I will focus on the federal income tax implications to the ruling and endeavor to frame the issues that result from the decision. Essentially, DOMA was intended to avoid the questions that we are going to be faced with now regarding, among other things, the full-faith and credit issues between states. First, I will discuss the proper definition of marriage that should apply for the Code. Second, I will discuss how the Code might need to be modified. Finally, I will discuss some of the implications of the decision for taxpayers.

June 27, 2013 in Tax | Permalink | Comments (3) | TrackBack (0)

Ex-Director Accuses Berkeley Social Justice Center of Bias

National Law Journal:  Ex-Director Accuses Berkeley Social Justice Center of Bias:

WhiteThe former director of a social justice center at the University of California, Berkeley School of Law has sued her ex-boss, claiming that she was unjustly fired amid an undercurrent of racial tension at the center and the law school.

Wilda White [right], who is black, had served as the executive director of the law school’s Thelton E. Henderson Center for Social Justice from 2008 until April, when she was told that her $123,000 contract would not be renewed because of her poor working relationship with her supervisor Mary Louis Frampton [left], who is white.

White, who was not tenured, sued Frampton on June 13 in California state court, claiming intentional infliction of emotional distress and deceit.

White’s complaint includes numerous allegations of deception by Frampton plus claims regarding racial conflict among the law school’s student body and within the center, founded to foster research into race, sex and poverty.

FramptonAccording to the complaint, “defendant Frampton did not find [White] sufficiently appreciative of Frampton’s self-perception as a ‘White Savior’ of ‘people of color,’ in general and ‘men of color’ in particular.”

Frampton did not respond to calls for comment. Law school spokeswoman Susan Gluss said the lawsuit concerned a confidential personnel matter that she could not discuss publicly.

Dean Christopher Edley Jr., however, called White a “disgruntled employee” who has misrepresented the climate on campus. “Any suggestion that Berkeley Law is not welcoming to minority students is preposterous at best, as students and alumni will readily confirm,” he said. ...

White also said that Frampton falsely declared in her 2011 performance review that many faculty members found White unapproachable and brusque. She began speaking openly about her disagreements with Frampton, including during public remarks during a gala hosted by Berkeley Law’s Students of African Descent in April, openly discouraging prospective minority students from attending Berkeley, according to the complaint. She later conceded to an administrator that her remarks were a mistake and that she needed to take some time off, the complaint says.

June 27, 2013 in Legal Education | Permalink | Comments (4) | TrackBack (0)

Kleinbard: Starbucks' Stateless Income Tax Planning

Tax Analysts

Edward D. Kleinbard (USC), Through a Latte, Darkly: Starbucks' Stateless Income Planning, 139 Tax Notes 1515 (June 24, 2013) :

This paper uses Starbucks Corporation, the premier roaster, marketer and retailer of specialty coffee in the world, as an example of stateless income tax planning in action. “Stateless income” comprises income derived for tax purposes by a multinational group from business activities in a country other than the domicile of the group’s ultimate parent company, but which is subject to tax only in a jurisdiction that is neither the source of the factors of production through which the income was derived, nor the domicile of the group’s parent company.

The paper reviews both Starbucks’ recent U.K. tax controversy (including a parliamentary inquiry), which revolved around the intersection of its consistent unprofitability in the United Kingdom with large deductible intragroup payments to Dutch, Swiss and U.S. affiliates, and its more recent submission to the U.S. House Ways and Means Committee. The paper draws from this review two lessons.

First, if Starbucks can organize itself as a successful stateless income generator, any multinational firm can. Starbucks follows a classic bricks and mortar retail business model, with direct customer interactions in thousands of “high street” locations in high-tax countries around the world. Moreover, Starbucks is not a firm driven by hugely valuable identifiable intangibles that are separate from its business model, which it employs whenever it deals with those retail customers. Nonetheless, it appears that Starbucks enjoys a much lower effective tax rate on its non-U.S. income than would be predicted by looking at a weighted average of the tax rates in the countries in which it does business.

Second, The Starbucks story – in particular, its U.K. experience – demonstrates the fundamental opacity of international tax planning, in which neither investors in a public firm nor the tax authorities in any particular jurisdiction have a clear picture of what the firm is up to. It is not appropriate to expect source country tax authorities to engage in elaborate games of Twenty Tax Questions, in turn requiring detailed knowledge of the tax laws and financial accounting rules of many other jurisdictions, in order simply to evaluate the probative value of a taxpayer’s claim that its intragroup dealings necessarily are at arm’s-length by virtue of alleged symmetries in tax treatment for expense and income across the group’s affiliates. U.S.-based multinational firms owe a similar duty of candor and transparency when dealing with the Congress of the United States.

The remedy begins with transparency towards tax authorities and policymakers, through which those institutions have a clear and complete picture of the global tax planning structures of multinational firms, and the implications of those structures for generating stateless income. National governments should recognize their common interest in this regard and promptly require their tax and securities agencies to promulgate rules providing a uniform world-wide disclosure matrix for actual tax burdens by jurisdiction. As a first step the United States should enforce the current rule requiring U.S. firms to quantify the U.S. tax cost of repatriating their offshore “permanently reinvested earnings."

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June 27, 2013 in Scholarship, Tax | Permalink | Comments (1) | TrackBack (0)

The IRS Scandal, Day 49

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Prior TaxProf Blog posts;

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June 27, 2013 in IRS News, Tax | Permalink | Comments (3) | TrackBack (0)

Do Racial Preferences Affect Minority Learning in Law Schools?

Doug Williams (University of the South, Dpartment of Economics), Do Racial Preferences Affect Minority Learning in Law Schools?, 10 J. Empirical Legal Stud. 171 (2013):

An analysis of the The Bar Passage Study (BPS) reveals that minorities are both less likely to graduate from law school and less likely to pass the bar compared to whites even after adjustments are made for group differences in academic credentials. To account for these adjusted racial gaps in performance, some researchers put forward the “mismatch hypothesis,” which proposes that students learn less when placed in learning environments where their academic skills are much lower than the typical student. This article presents new results from the BPS that account for both measurement‐error bias and selection‐on‐unobservables bias that makes it more difficult to find a mismatch effect if in fact one exists. I find much more evidence for mismatch effects than previous research and report magnitudes from mismatch effects more than sufficient to explain racial gaps in performance.

June 27, 2013 in Legal Education, Scholarship | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 26, 2013

5-4 Supreme Court: Denial of Estate Tax Marital Deduction to Same-Sex Couple Violates Fifth Amendment

The Supreme Court today in a 5-4 decision written by Justice Kennedy held that the denial of an estate tax marital deduction to the surviving spouse of a lesbian couple under the Defense of Marriage Act violates the Fifth Amendment.  Windsor v. United States, No. 12-307 (U.S. June 26, 2013).

June 26, 2013 in Tax | Permalink | Comments (6) | TrackBack (0)

ABA Proposal to Tighten Bar Passage Requirement Alarms Law School Diversity Advocates

ABA Logo 2National Law Journal, ABA Proposal Alarms Law School Diversity Advocates:

A proposal to tighten the ABA's bar passage requirement for law schools hasn't gone over well with some advocates for diversity in the legal profession. The committee updating the ABA's accreditation standards has received letters from numerous faculty and diversity organizations expressing concern since the plan appeared to enjoy widespread support among committee members in late April. The proposal would raise the minimum bar-pass rate from 75 to 80 percent, among other changes.

The National Bar Association — the largest association of black lawyers and judges — on June 20 passed a resolution opposing the proposal. The Society of American Law Teachers (SALT) and the Clinical Legal Education Association (CLEA) sent a joint letter to the committee warning the changes would have "dire consequences on law schools with racially diverse student populations." Additionally, several diversity-focused groups within the ABA have written in opposition. ...

The proposal's opponents essentially argue that a tougher bar passage requirement would dissuade law schools for accepting students with lower undergraduate grades and Law School Admission Test scores — shutting out a larger percentage of minority students, who on average score lower on standardized tests. Those concerns have not fallen on deaf ears, said Jeffrey Lewis, chairman of the ABA committee and a professor at Saint Louis University School of Law. ...

The committee hopes to make its position paper available to the public before its July 12 meeting, when it is scheduled to discuss the bar passage proposal. The idea is to make the existing standard more straightforward and encourage law schools to offer robust academic support to students likely to struggle with the bar exam.

Under the new rule, at least 80 percent of a law school's graduates would have to pass the bar exam within two years of graduation. The existing rule requires that a minimum of 75 percent of graduates pass within five years.

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June 26, 2013 in Legal Education | Permalink | Comments (10) | TrackBack (0)

Former Texas Law School Dean Threatens Lawsuit Against Member of Board of Regents

Barry Presents The U.S. Tax System Made Interesting Today at San Diego

BarryJordan M. Barry (San Diego) presents The U.S. Tax System Made Interesting today at a luncheon meeting sponsored by the Stanford Law School Alumni Association at the University of San Diego School of Law:

Join Jordan Barry, JD '05, Associate Professor of Law at the University of San Diego, for lunch and a discussion about the U.S. tax system. Professor Barry will talk about how the current U.S. tax system fits historically, how our system compares to other countries', the federal budget outlook, and how our taxes might change in the near future, complete with colorful anecdotes that are great for cocktail parties. Attendees will also receive MCLE credit.Registration is free and includes lunch.

June 26, 2013 in Colloquia, Tax | Permalink | Comments (0) | TrackBack (0)

National Taxpayer Advocate Releases Reports to Congress, Calls for $1,000 'Apology Payments' to Taxpayers Abused by the IRS

National Taxpayer Advocate Nina Olson today released (IR-2013-63) her semi-annual report to Congress on Fiscal Year 2014 Objectives as well as a special report to Congress on Political Activity and the Rights of Applicants for Tax-Exempt Status:

National Taxpayer Advocate Nina E. Olson today released her statutorily mandated mid-year report to Congress that identifies the priority issues the Taxpayer Advocate Service (TAS) will address during the upcoming fiscal year.  The report expresses particular concern about the impact of budget cuts on the IRS’s ability to meet taxpayer needs, the IRS’s unwillingness to issue full refunds to victims of tax return preparer fraud and shortcomings in IRS procedures for assisting victims of tax-related identity theft.

In addition, Olson released a special report examining the IRS’s use of questionable criteria to screen applicants for tax-exempt status.  The special report analyzes the sources of the problem and makes preliminary recommendations to address them.

“Today, the IRS is an institution in crisis,” Olson wrote.  “In my view, however, the real crisis is not the one generating headlines.  The real crisis facing the IRS – and therefore taxpayers – is a radically transformed mission coupled with inadequate funding to accomplish that mission.  As a consequence of this crisis, the IRS gives limited consideration to taxpayer rights or fundamental tax administration principles as it struggles to get its job done.”

Cover 1National Taxpayer Advocate Report to Congress: Fiscal Year 2014 Objectives:

Table of Contents

Preface

Areas of Focus

Filing Season Review

TAS Research Initiatives

Case Advocacy

Systemic Advocacy

Integrated TAS Technology

Advancing a Climate of Advocacy Through New Approaches to Education

Appendices

Cover 2National Taxpayer Advocate Special Report to Congress: Political Activity and the Rights of Applicants for Tax-Exempt Status:

The IRS must administer the requirements for tax-exempt status in a nonpartisan and even-handed manner. When an organization seeks exempt status, it is essentially asking all other taxpayers for a contribution to its activities. Thus, the IRS has an obligation to review these applications closely.

According to a report by the Treasury Inspector General for Tax Administration (TIGTA), IRS Tax Exempt Organization (EO) function employees inappropriately selected for further review applications for tax-exempt status under Internal Revenue Code (IRC) § 501(c)(4) from organizations with “Tea Party” or similar terms in their names. These terms were on a “Be on the Lookout” or BOLO list, which flagged 298 applicants for further review. According to TIGTA, the IRS also asked the applicants unnecessary questions, including questions about donors, and delayed processing their applications while awaiting guidance about how to handle them. TIGTA found that IRS employees used inappropriate selection criteria because they did not understand the law or believed it was unworkable, and they created inappropriate job aids and information requests that were not vetted.

TAS has reviewed the TIGTA report, researched the applicable legal standards and IRS procedures, searched for TAS cases involving these issues, and reviewed known systemic issues in EO. Although TAS agrees with TIGTA’s recommendations, we reviewed these materials to further analyze the causes of the problem, and determine why it was not identified or corrected sooner. Our goal was to develop additional recommendations to help prevent the problem from recurring and restore trust with the taxpaying public. A summary of TAS’s findings and recommendations, which fall into four broad categories, follows:

  1. Lack of Guidance and Transparency
  2. Absence of Adequate Checks and Balances
  3. Management and Administrative Failures
  4. EO’s Cultural Difficulty with TAS

The National Taxpayer Advocate plans to make recommendations on this subject in her year-end report.8 At a minimum, she recommends that Congress enact a Taxpayer Bill of Rights that sets forth ten broad rights, modeled on the U.S. Constitution’s Bill of Rights, to help make existing rights clearer and help taxpayers better understand them. The National Taxpayer Advocate has made this recommendation in prior annual reports, and the treatment of § 501(c)(4) applicants violated most of the ten proposed taxpayer rights.

We further recommend that Congress authorize the National Taxpayer Advocate to make symbolic “apology payments” of up to $1,000 to taxpayers where the IRS has caused excessive expense or undue burden to the taxpayer, and the taxpayer has experienced a significant hardship. This is something that tax administrations in a number of other countries already provide for. For present purposes, we offer the following preliminary proposals for consideration and discussion by Congress and the IRS, which merit additional study, but are likely to evolve after further analysis.

June 26, 2013 in IRS News, Tax | Permalink | Comments (8) | TrackBack (0)

Diamond: Washington & Lee, Experiential Learning, and Global Warming

W&L LogoFollowing up on last week's post, W&L's Dismal Placement Results Question Experiential Learning Push for 'Practice-Ready' LawyersStephen F. Diamond (Santa Clara), Washington & Lee Law Prof. Replies to Prof. Merritt: Too Soon to Tell:

I think many aspects of the W&L program sound exciting. There may be great arguments about implementing these kinds of curriculum reform as part of the general modernization of higher education.

But one gets into much shadier territory to suggest any relationship between these kinds of changes and employment outcomes. That is a function largely of the changes in the macroeconomy. If law firms and corporations need lawyers they will take on board all sorts of JDs and train them as needed, which I witnessed first hand during the dot com boom. When they don’t need them anymore they will get rid of them, as some folks at Weil Gotshal discovered this week.

Suggestions that what academics do with law school curriculum can impact overall employment remind me of those who argue that global warming is man made. It seems reasonable until you realize the same people making that case were advocates of global cooling thirty years ago. ...

On the one hand [critics of legal education] all seem to agree that law schools should add more experiential/clinical programming. And they also all definitely agree that law school is too expensive. Yet they never seem to address the fact that clinical and experiential programming is labor intensive and therefore inherently expensive. There is, then, a contradiction at the heart of the reformers’ cause.

If you look at the staffing of law schools over the last few decades the single largest shift and likely contributor to increased costs has been the expansion of clinical and experiential programs as well as the expansion of adjunct teaching. ... Now there is some merit to this turn of events, undoubtedly. And if there is one thing that is true, it is that it is responsive to student demand. ...

But the university is not just a training ground – it is a distinct kind of institution whose autonomy from society, and from the market and state, must be protected. What those new law students do not know is what law practice is really like. Once they graduate they will quickly find that the time and space that a university setting provides for independent thoughtful consideration of issues, concepts and theories will all too easily and quickly dissipate under the pressures of the “real world.” They should be encouraged to take full advantage of the opportunity to push off confrontation with that world while in school. Over the long run the lessons learned during a period of contemplation will create real value for them and for their clients.

If that is something we can agree on then I think it is much easier to examine potential alternatives to the current law school curriculum.

June 26, 2013 in Legal Education | Permalink | Comments (3) | TrackBack (0)

Burke & Barry: Notable Corporate Tax Articles of 2012

Tax AnalystsKaren C. Burke (San Diego; moving to Florida) & Jordan Barry (San Diego), Notable Corporate Tax Articles of 2012, 139 Tax Notes 650 (May 6, 2013):

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June 26, 2013 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

TIGTA: IRS Credit Cards Used for Wine, Porn, $100 Lunches, $140 Dinners

TIGTA The Treasury Inspector General for Tax Administration yesterday released The Purchase Card Program Lacks Consistent Oversight to Identify and Address Inappropriate Use (2013-10-056):

For the two fiscal years ending September 30, 2011, the IRS made more than 273,000 micro-purchases totaling nearly $108 million using purchase cards and convenience checks. The IRS does not have the controls in place to provide assurance that improper purchases do not occur and appropriate corrective action is taken. Enhanced internal controls would provide greater assurance that IRS resources are being used more effectively and efficiently. ...

While some controls are working as intended, the IRS purchase card program lacks consistent oversight to identify and address inappropriate use. TIGTA determined that the IRS does not have a policy in place to timely cancel purchase cards prior to employee separation. Of the 387 cards associated with employees who separated during our audit period, 98 percent were not closed prior to employee departure. TIGTA believes this could leave the IRS vulnerable to misuse. In addition, the IRS did not have sufficient guidance to define what qualifies as a split purchase for office supplies, which contributed to cardholders splitting purchases. Further, the controls the IRS currently has in place do not include a review specifically designed to detect personal use.

The majority of IRS cardholders appear to use their purchase cards properly. However, TIGTA identified some instances of inappropriate use that include improper decorative and give-away items for managers’ meetings and Combined Federal Campaign fundraising events. In addition, IRS representatives, who were entertaining foreign officials, used purchase cards to pay for multiple lunches, dinners, and related alcohol purchases. For example, one dinner had an approximate cost of $140 per guest and another lunch cost $100 per guest. TIGTA did not find any Department of the Treasury or IRS criteria to assess the reasonableness of these charges, but TIGTA considers the costs related to this entertainment to be high. Finally, the Credit Card Services Branch did not report for consideration of potential disciplinary action all instances of inappropriate purchase card use that it identified.

TIGTA Chart

We identified one purchase cardholder who made 38 transactions totaling $2,655 for what appeared to be personal purchases and provided potentially falsified (or fraudulent) receipts to justify the purchases made. Information that the vendor provided to the credit card company indicates that this cardholder purchased diet pills, romance novels, steaks, a smart phone, and baby-related items such as bottles, games, and clothing with her purchase card; however, the cardholder claims that the same transactions were for reference books and office supplies. The IRS does not currently perform an oversight review to evaluate merchant names or item descriptions for potentially inappropriate transactions; however, such a review could have identified the unnecessary items previously discussed as well as these purchases of potentially personal items. We referred this matter to TIGTA’s Office of Investigations for further review.

Further, we identified two purchase cardholders with charges on their purchase cards from merchants affiliated with online pornography. Each of these cardholders reported their card stolen or compromised, one on multiple occasions, and had the charge for pornography credited to the purchase card account. While we have not determined as part of this audit whether or not the employees actually purchased the pornography and falsely reported the cards stolen or compromised, we did discover that both of these former cardholders had multiple purchase card accounts during the time that they were cardholders, and one of these cardholders had a total of seven purchase card accounts, five of which were closed and reported by the employee as being lost, stolen, or counterfeit. Currently, the IRS does not track the number of purchase card account closures due to a lost, stolen, or compromised card, and it does not track whether a cardholder reported a stolen or compromised card to the credit card company (Citibank) and TIGTA’s Office of Investigations as required. Cardholders claiming numerous cards as lost or stolen, particularly those with potentially fraudulent charges incurred, is a red flag that should trigger further review by the IRS. In the case of both of the pornography charges, the cardholders did not inform TIGTA of the fraudulent purchases on their accounts as required. We referred the matter regarding the cardholder who is still employed by the IRS to TIGTA’s Office of Investigations for further review.

June 26, 2013 in IRS News, Tax | Permalink | Comments (1) | TrackBack (0)

The IRS Scandal, Day 48

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June 26, 2013 in IRS News, Tax | Permalink | Comments (0) | TrackBack (0)

House Report: IRS Deputy IT Director Steered $500 Million in Contracts to Pal

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The House Committee on Oversight and Government Reform yesterday released  Questionable Acquisitions: Problematic IT Contracting at the IRS (157 pages):

The IRS spends approximately $2 billion every year on information technology (IT) alone. The agency has over 400 dedicated employees who work on IT acquisition. Many vendors compete to do business with the IRS. Considering the large annual IRS investment in IT, any advantage in the contracting process gained by a particular vendor could prove very lucrative. The Committee found that one company—Strong Castle, Inc.—gained precisely such an advantage based on the relationship between the company’s CEO and an IRS contracting official. Strong Castle, Inc. was formerly known as Signet Computers. In January 2012 Braulio Castillo purchased Signet Computers and subsequently renamed the company Strong Castle, Inc. Except for specific references in documents, testimony, and discussion surrounding the purchase of the company, this report will refer to the company as Strong Castle.

The Committee learned of allegations concerning a series of contracts, potentially worth more than $500 million, awarded by the IRS to Strong Castle. Witnesses who contacted the Committee alleged that Strong Castle engaged in fraud to win those IRS contracts. Documents and testimony obtained by the Committee showed that a cozy relationship between Strong Castle President and Chief Executive Officer Braulio Castillo and IRS Deputy Director for IT Acquisition Greg Roseman may have influenced the selection process.

June 26, 2013 in Congressional News, IRS News | Permalink | Comments (1) | TrackBack (0)

Tuesday, June 25, 2013

Will Taxes Drive Dwight Howard to Sign With Rockets Rather Than Lakers?

Howard 2Seven-time NBA all star Dwight Howard is a free agent and, under the NBA's "Larry Bird Rule," can re-sign with the L.A. Lakers for a maximum of $118.0 million over five years (7.5% annual increases over his existing contract) or with any other team for a maximum of $87.6 million over four years (4.5% annual increases).  The Houston Rockets has emerged as a likely bidder for Howard's services, and several tax folks have run the numbers and concluded that Howard would receive more after-tax income by signing with the Rockets rather than the Lakers, based on California's 13.3% top marginal income tax rate and the absence of a state income tax in Texas, after taking into account the application of various state and local "jock taxes."  

June 25, 2013 in Celebrity Tax Lore, Tax | Permalink | Comments (2) | TrackBack (0)

Demand for Accounting Grads Reaches All-Time High

Journal of Accountancy:  Demand for Accounting Grads Reaches All-Time High:

A new study examining supply and demand trends in accounting found that the profession is thriving—with college enrollments, degrees awarded, and demand for new accounting graduates all reaching all-time highs. [AICPA, 2013 Trends in the Supply of Accounting Graduates and the Demand for Public Accounting Recruits] ...

June 25, 2013 in Legal Education, Tax | Permalink | Comments (1) | TrackBack (0)

Mirkay: Globalism, Public Policy, and Tax-Exempt Status

Nicholas A. Mirkay III (Creighton), Globalism, Public Policy, and Tax-Exempt Status: Are U.S. Charities Adrift at Sea?, 91 N.C. L. Rev. 851 (2013):

This article wrestles with whether charitable organizations’ international activities can or should impact such organizations’ domestic tax exemption. It addresses the issues raised by such international activities — if those activities contravene current U.S. foreign policy or international law is a charity’s tax-exempt status adversely affected? Does such contravention implicate the public policy doctrine? On one hand, this article agrees with other legal scholars that the public policy doctrine needs congressional attention, including some codification of the doctrine to provide legislative boundaries and ensure against arbitrary and capricious application by the Internal Revenue Service (“IRS”). On the other hand, this article contends that the automatic inclusion of U.S. foreign policy and international law as components of “established public policy” would be administratively impracticable and onerous and would result in significant compliance difficulties for charitable organizations. Considering all these challenges, this article nevertheless proposes that some codification of the public policy doctrine accompanied by a listed transaction scheme, similar to those employed in other areas of the Internal Revenue Code (“Code”), could provide Congress and ultimately the IRS with the ability to target certain international activities as inherently in conflict with tax-exempt status. In addition, this article proposes that the codification of the public policy doctrine should include an excise tax regime, as an alternative to revocation, to address isolated or small violations of the public policy doctrine in relation to a charitable organization’s overall tax-exempt activities. Although these proposals are not without pitfalls and criticisms, they will nevertheless provide practical guidance to charitable organizations, thereby aiding compliance and ensuring uniform treatment of charitable organizations with international activities or operations.  

June 25, 2013 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

A National Sales Tax to Incentivize the Collection of Remote Sales Tax

Timothy Q. Li (George Washington), Proposal for a National Sales Tax to Incentivize the Collection of Remote Sales Tax:

This Essay proposes that Congress adopt a national sales tax at one national rate for interstate sales, but with a credit for each transaction in which an out-of-state vendor remits state sales tax. For states without sales taxes, remote vendors can still choose the state rate of zero percent. For states with sales taxes, the national rate should be set to exceed every state’s sales tax rate. Vendors would no longer be able to avoid sales tax by moving overseas. The proposal further provides numerous incentives for Congress to act now rather than delay, including a new source of national revenue, increased market efficiency, and more equal treatment of final sales in the United States of foreign-made goods that currently escape any consumption tax. Finally, to avoid duplicate enforcement, state authorities should take primary enforcement responsibility because they have the largest financial stake and the most expertise in sales tax issues.

June 25, 2013 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Taxes and Mistakes

Daniel H. Reck (University of Michigan, Department of Economics), Taxes and Mistakes: What's in a Sufficient Statistic?:

This paper develops a model of mistakes in tax perception to understand how different behavioral assumptions about the nature of mistakes have different welfare implications; using an approach developed by Chetty, Looney, and Kroft (2009). Specifically, it examines the importance of assumptions about bounded rationality, cognitive costs, budget adjustment rules, and the origin of mis-perceptions. Bounded rationality -- defined here as a tendency to "de-bias" when the stakes are sufficiently high -- will cause the statistics of the CLK Model to depend on the fraction of optimizing agents and the gain to de-biasing. Attempts to exploit mis-perception to reduce excess burden, say by shifting from high to low salience taxes, can actually increase excess burden on the margin, due to the "curse of de-biasing." When de-biasing incurs cognitive costs, this problem is exacerbated. Budget adjustment rules matter as much as mis-perception of marginal prices, so studies which only detect that individuals ignore taxes or mis-perceive tax rates tell us little about welfare, unless they also assume or estimate a budget adjustment rule. The paper also shows how this model applies to mis-perceptions other than inattention using the example of what Liebman and Zeckhauser (2004) call "ironing" -- the confusion of average and marginal tax rates -- and provides a comment on the welfare analysis of Liebman and Zeckhauser.

June 25, 2013 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Herzig: Examining the Gas Tax

Tax AnalystsDavid J. Herzig (Valparaiso), Examining the Gasoline Tax, 139 Tax Notes 1291 (June 10, 2013):

David Herzig discusses the scope of the infrastructure problem, the history of the gasoline tax, and the various proposed alternative taxes to preserve the tax base, while addressing some of the intertwined issues. 

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June 25, 2013 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

The American Legal Profession in Crisis: Resistance and Responses to Change

MoliternoJames E. Moliterno (Washington & Lee), The American Legal Profession in Crisis: Resistance and Responses to Change (Oxford University Press, 2013):

  • Helps the reader understand the full range of the broad history of the legal profession
  • Focuses on and explains discrete historical periods and important crisis points in American legal history
  • Makes provocative recommendations and prescriptions for reform for the entire legal profession
  • Identifies the underlying causes of the legal profession's anachronism in response to change

For more, see:

June 25, 2013 in Book Club, Legal Education | Permalink | Comments (3) | TrackBack (0)

Weil, Gotshal & Manges Lays Off 60 Associates, 110 Staff

Mendola: Why Should You Choose a Career in Tax?

Mark-mendolaMark Mendola (Vice Chairman & U.S. Tax Leader, PriceWaterhouseCoopers), A Career in Tax: Surprisingly On-Trend:

I’ve been advising some of the world’s top companies on tax strategy for more than a quarter of a century, and I've always been proud of the tax profession. But these days, tax is becoming downright trendy.

Taxes are now at the top of our national agenda. In his opening minutes of the State of the Union speech in February, the President addressed tax reform before he turned to other urgent topics. Tax reform is now a regular topic in almost every policy and business conversation.

But this uncertainty about if and when there will be changes to our tax laws breeds caution in businesses and their leaders. Our most recent CEO survey found that this lack of certainty hurts business confidence and impedes economic activity. Almost three-quarters of US CEOs told us they are concerned about an increasing tax burden. Their responses reflect worries that tax law changes could slow activity, turn profits into higher tax bills and make them less globally competitive. The companies these CEOs oversee constantly require strategic advice from tax professionals on compliance and tax planning. As a tax professional, I've been excited and challenged to always be at the top of my game when I advise companies. I can assure you it's becoming more and more challenging -- and exciting -- every day.

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June 25, 2013 in Tax | Permalink | Comments (2) | TrackBack (0)

The IRS Scandal, Day 47

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June 25, 2013 in IRS News, Tax | Permalink | Comments (2) | TrackBack (0)

Monday, June 24, 2013

Pittsburgh Tax Review Publishes New Issue

Pittsburgh Tax Review The Pittsburgh Tax Review has published Vol. 10, No. 1 (Spring 2012):

June 24, 2013 in Scholarship, Tax | Permalink | Comments (0) | TrackBack (0)

Shades of Mitt Romney: Starbucks Forgoes Deductions, Pays $15 Million U.K. Corporate Tax

Starbucks LogoFollowing up on recent posts (links below):  Bowing to public pressure over not paying any U.K. corporate tax for the past five yars, Starbucks announced yesterday that it is foregoing various deductions to which it is entitled in order to pay £10 million ($15 million) in U.K. corporate taxes:  "Our customers should not have to wait for us to become profitable before we started paying U.K. Corporation Tax."

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June 24, 2013 in Tax | Permalink | Comments (2) | TrackBack (0)