TaxProf Blog

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

Thursday, March 2, 2017

Journal of Legal Tax Research Publishes New Issue

AAAThe American Accounting Association has published the Fall 2016 issue of the Journal of Legal Tax Research (Vol. 14, No. 2):

  • Nancy B. Nichols (James Madison University) & Blaise M. Sonnier (University of Colorado (Colorado Springs)), The Consequences of Wynne and a Proposed Congressional Response,  ATA Journal of Legal Tax Research: Fall 2016, Vol. 14, No. 2, pp. 1-25. Abstract: The U.S. Supreme Court's decision in Comptroller of the Treasury of Maryland v. Wynne held that Maryland's individual income tax law violates the Dormant Commerce Clause of the U.S. Constitution because it failed to grant a full credit against both the state and county income tax for income taxes paid to other states. The extension of the Dormant Commerce Clause and the application of the internal consistency test to individual income taxes may lead to taxpayer challenges in other states with individual income taxes. We identify four possible tax regimes that meet the internal consistency test under Wynne and provide an example of the impact of each regime on state and local government revenue in both the resident and nonresident state. We then review current state and local tax regimes, focusing on the 14 states with local income taxes and those that do not grant a tax credit for out-of-state local taxes paid by residents. We evaluate whether those tax regimes may be subject to challenge based on the Wynne decision. Finally, we suggest three policy options that Congress should consider to lessen the budgetary impact of Wynne on county and municipal governments and to allocate the cost of government based on income.

  • Darcie M. Costello (Weber State University) & Debra L. Sanders (Washington State University), What is Economic Income for Corporate Taxation?, The ATA Journal of Legal Tax Research: Fall 2016, Vol. 14, No. 2, pp. 26-45. Abstract: The economic income concept is relevant to numerous corporate tax issues, yet it is not clearly defined. It does not equate to taxable income or financial accounting retained earnings. The concept is required for earnings and profits, accumulated earnings and personal holding company penalty taxes, alternative minimum tax, and adjusted current earnings adjustment. However, it is defined differently under each provision. This complexity is inefficient. This article offers suggestions to improve tax law as it relates to economic income. A uniformly defined measure of economic income, earnings and profits, would be the starting point for all related tax measures, with appropriate adjustments that are consistent with the intent of tax measures. The resulting computation should be codified and provide comprehensive guidance for analysis in one source. Thus, earnings and profits becomes the platform for other provisions that require an economic income proxy, with necessary adjustments to meet specific policy objectives.

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