TaxProf Blog

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

Tuesday, July 31, 2018

NY Times: Trump Administration Mulls Unilateral $100 Billion Tax Cut For The Rich By Indexing Capital Gains

Following up on my previous post, Can Trump Enact A Second Tax Cut On His Own By Indexing Capital Gains?:  New York Times, Trump Administration Mulls a Unilateral Tax Cut for the Rich, by Alan Rappeport & Jim Tankersley:

The Trump administration is considering bypassing Congress to grant a $100 billion tax cut mainly to the wealthy, a legally tenuous maneuver that would cut capital gains taxation and fulfill a long-held ambition of many investors and conservatives.

Steven Mnuchin, the Treasury secretary, said in an interview on the sidelines of the Group of 20 summit meeting in Argentina this month that his department was studying whether it could use its regulatory powers to allow Americans to account for inflation in determining capital gains tax liabilities. The Treasury Department could change the definition of “cost” for calculating capital gains, allowing taxpayers to adjust the initial value of an asset, such as a home or a share of stock, for inflation when it sells.

“If it can’t get done through a legislation process, we will look at what tools at Treasury we have to do it on our own and we’ll consider that,” Mr. Mnuchin said, emphasizing that he had not concluded whether the Treasury Department had the authority to act alone. “We are studying that internally, and we are also studying the economic costs and the impact on growth.” ...

The move would face a near-certain court challenge. It could also reinforce a liberal critique of Republican tax policy at a time when Republicans are struggling to sell middle-class voters on the benefits of the tax cuts that President Trump signed into law late last year. ...

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July 31, 2018 in Tax | Permalink | Comments (8)

Average Starting Salaries For Graduates Of The 144 Law Schools Ranked By U.S. News

U.S. News & World Report, What Type of Salary You Can Expect With Your Law Degree:

Many high-paying law firms recruit recent J.D. grads from top-ranked law schools. In U.S. News' 2019 Best Law Schools ranking, law school degree grads from the class of 2016 who completed their degree at an institution ranked among the top 15 earned $180,000 on average in the private sector, according to data submitted to U.S. News by 179 ranked law schools in an annual survey. ...

Prospective and current law students can compare salary data in the interactive graphic below for law schools ranked in the top 144 of the 2019 Best Law Schools rankings.

July 31, 2018 in Law School Rankings, Legal Education | Permalink | Comments (8)

Colinvaux: How The IRS’s Stance On Donor Disclosure Corrupts The Nonprofit World

Chronicle of PhilanthropyChronicle of Philanthropy:  How the IRS’s Stance on Donor Disclosure Corrupts the Nonprofit World, by Roger Colinvaux (Catholic):

The Internal Revenue Service made clear last week just how broken federal oversight of nonprofits has become when it announced that nonprofits (other than charities) no longer need to tell the agency the names of people who give $5,000 or more.

Thus the IRS has decided it does not need to know the funding sources of advocacy groups like the American Civil Liberties Union and the National Rifle Association, which have charitable arms but raise a big share of their money through related tax-exempt organizations classified under Section 501(c)(4) of the tax code. Trade associations like the Chamber of Commerce, which are tax-exempt under another part of the tax code, are also affected.

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July 31, 2018 | Permalink | Comments (0)

Burger King's Brilliant Take On The 'Pink Tax': Would You Pay Double For 'Chick Fries'?

CHick FriesInc., Burger King Takes on the Pink Tax and It's Brilliant: Would You Pay Twice As Much For "Chick Fries"?:

Have you heard of the "pink tax"--a term for the routine practice of charging more for products and services targeted to women than those targeted to men? If not, you will soon. Though the term's been around for years, and the practice itself has existed from the earliest days of commerce, both have gained more prominence lately. That's thanks to a study showing just how common it is, and a bill introduced in the House to make gender-based pricing illegal. Now, Burger King has gotten into the act in a very witty way.

To highlight the unfairness of the pink tax (so called because products for women are often colored pink), Burger King recently briefly offered its regular Chicken Fries for $1.69 a box, or "Chick Fries," the same food in the same serving size, but in a pretty pink box where the chicken has a bow and eyelashes, for $3.09. Then they created an ad.

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July 31, 2018 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

Legal Education Gets Its Mojo Back: Fall 2018 Applicants Are Up 8%, June/July LSAT Test-Takers Surge 30%

National Law Journal, Number of Law School Applicants Surges, Especially Among High Scorers:

Does legal education have its mojo back?

The number of people applying to law school for the upcoming academic year shot up 8 percent—the only significant annual increase since 2010. The Law School Admission Council (LSAC) reported that 60,401 people applied for admission this fall, up from 55,580 the previous year.

LSAC

“I’ve heard from a number of schools that this year they are worried about, not under-enrollment, but over-enrollment,” said LSAC president Kellye Testy. “Because the demand was so strong, some schools are finding that they may have had higher yield rates than they had in prior years, and they may have larger classes than they aimed for.” ...

Early indications also suggest that the applicant pool will expand yet again for the 2019 entering class. The number of people taking the Law School Admission Test in June and July was up 30 percent over the previous year. The June and July exams are considered the beginning of the new admission cycle, when early-bird applicants start the process. The June 2017 LSAT clocked a 20 percent increase in takers, foreshadowing the 8 percent applicant increase for the recently completed 2018 cycle.

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July 31, 2018 in Legal Education | Permalink | Comments (4)

NY Times: After Passage Of The Trump Tax Law, Should You Get A Divorce Now Or Later?

Following up on my previous post, For Wealthy Americans, There Will Never Be A Better Time To Get Divorced Due To New GOP Tax Law:  New York Times, Should You Get a Divorce Now or Later?:

Lawyers and accountants often push their clients to plan for unpleasant events. Better to be prepared now than to pay the consequences later. But the Republican tax law that took effect in January has added a new urgency for wealthy Americans contemplating divorce.

Several key changes in the law may determine whether it is better to complete or update a divorce agreement by Dec. 31 or wait until the new year.

One of the biggest changes affects alimony, which will not be a tax break for Americans whose divorce agreements are completed or updated after this year. The new tax law is also causing parting spouses to look more closely at benefits for their children and the values of privately owned businesses and partnerships.

There is a lot of money at stake for wealthy couples. Nearly 600,000 taxpayers claimed alimony deductions totaling more than $10 billion for the 2010 tax year, according to the Internal Revenue Service.

Here are four areas that couples considering a divorce should examine before the end of the year:

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July 31, 2018 in Tax | Permalink | Comments (0)

The Future Of The Nation's 17 Independent Law Schools Is In Peril

Law.com, Future of Independent Law Schools Is in Peril:

It’s hard out there for an independent law school.

The number of law campuses that aren’t attached to larger universities is slowly dwindling amid closures and mergers, and several stand-alone campuses are fighting for survival. The seven-year downturn in legal education, which appears to be coming to an end, hit independent law schools especially hard because they can’t tap into university funds to tide them over in lean times. Many independent law schools also experienced sharper enrollment declines than their university-affiliated counterparts. ...

Eighteen independent law schools are accredited by the American Bar Association, though that number is expected to fall to 17 in 2019, when the John Marshall Law School becomes part of the University of Illinois at Chicago. The school has operated independently since its founding in 1899, but officials said last week that the move will ensure John Marshall’s long-term future, lower tuition, and create opportunities for more interdisciplinary programming and dual degrees. ...

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July 31, 2018 in Legal Education | Permalink | Comments (1)

Prosecutors Investigate Whether Magbanua Sister-In-Law's Alleged $1.2 Million Embezzlement Was Used To Pay Defendant's Attorneys' Fees In Dan Markel Murder Case

Chez-MagbanuaTallahassee Democrat, Embezzlement Arrest of Magbanua's In-Law Being Investigated For Ties to Dan Markel Case:

Tallahassee detectives are investigating whether Dan Markel murder suspect Katherine Magbanua’s legal fees were being paid, at least in part, by her sister-in-law.

Samantha Chez-Magbanua [right], who is married to Katherine Magbanua's brother, was arrested in March in South Florida on charges of embezzling $1.19 million from her employer. She faces charges of grand theft of over $100,000 after her arrest by the Plantation Police Department.

The 46-year-old’s case could be of particular importance to prosecutors in Tallahassee who have long sought to suss out who is paying for Katherine Magbanua’s legal defense on her charges of murder, conspiracy to commit murder and solicitation of murder in connection with the Florida State law professor's July 2014 killing.

But the payment of Katherine Magbanua's legal fees and her sister-in-law's embezzlement case may be tough to link, said Assistant State Attorney Georgia Cappleman. "They’re looking at that," she said. "It’s going to be hard to prove."

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July 31, 2018 in Legal Education | Permalink | Comments (0)

Monday, July 30, 2018

‘Eye-Popping’ Payouts For CEOs Follow Trump’s Tax Cuts

Politico, ‘Eye-Popping’ Payouts for CEOs Follow Trump’s Tax Cuts:

Some of the biggest winners from President Donald Trump’s new tax law are corporate executives who have reaped gains as their companies buy back a record amount of stock, a practice that rewards shareholders by boosting the value of existing shares.

A Politico review of data disclosed in SEC filings shows the executives, who often receive most of their compensation in stock, have been profiting handsomely by selling shares since Trump signed the law on Dec. 22 and slashed corporate tax rates to 21 percent. That trend is likely to increase as Wall Street analysts expect buyback activity to accelerate in the coming weeks. ... That could undercut the political messaging value of the tax cuts in the Republican campaign to maintain control of Congress in the midterm elections.

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July 30, 2018 in Tax | Permalink | Comments (1)

ABA Finds North Carolina Central Law School Back In Compliance With Admissions Accreditation Standards

NCCU LawFollowing up on my previous posts:

ABA Journal, NCCU Has Taken 'Concrete Steps' Toward Admissions Standards Compliance, ABA Says:

North Carolina Central University School of Law, which in January was found to be out of compliance with an ABA accreditation standard regarding admissions, has now demonstrated compliance, according to a decision the ABA’s Section of Legal Education and Admissions to the Bar posted to its website Monday.  ...

According to the June 2018 decision, the accreditation committee has found that the law school has taken “concrete steps” regarding its admissions policy and practices that demonstrate compliance with the standard and the interpretation. The finding does not list what those steps were.

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July 30, 2018 in Legal Education | Permalink | Comments (0)

ABA Seeks To Consolidate Accreditation Lawsuits By Three For-Profit Law Schools

InfilawLaw360, ABA Asks JPML To Centralize For-Profit Law School Suits:

The American Bar Association's accreditation committee told the U.S. Judicial Panel on Multidistrict Litigation Thursday that centralization of a group of lawsuits filed by for-profit law schools challenging the committee's standards is necessary to avoid rulings that could have some schools judged one way and others judged another way.

The American Bar Association, its council of the Section of Legal Education and Admissions to the Bar, and the section's accreditation committee told the JPML at its hearing in Santa Fe, New Mexico, that grouping three lawsuits filed by schools owned by InfiLaw Corp. before one judge is critical to the accreditation process in the future.

Allowing the three suits to move forward before different judges risks having injunctions that would require the ABA to apply different standards to different schools, ABA counsel Steven J. Horowitz of Sidley Austin told the panel.

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July 30, 2018 in Legal Education | Permalink | Comments (0)

Wall Street Fears New International Tax That Was Aimed At Tech

Bloomberg:  Wall Street Fears New International Tax That Was Aimed at Tech, by Lynnley Browning:

A new international tax that was supposed to deter U.S. technology and pharmaceutical companies from shifting their profits offshore could instead catch Wall Street banks in its crosshairs.

The levy on international profits — called Gilti — is only supposed to kick in if a company is paying an especially low tax rate in foreign countries. But quirks in the way the tax is calculated mean it will likely hit big banks with offshore operations, even when they already pay effective foreign tax rates above the threshold.

Bank lobbyists are now urging the Treasury Department to come up with a fix for last year’s tax overhaul that would lessen the pain from Gilti, saying an adjustment is needed to make the tax consistent with the intent of Republican lawmakers who wrote the legislation.

The effect of the Gilti levy on banks is an example of how the biggest U.S. tax rewrite in a generation has lead to unintended consequences. The Republican law slashed the corporate tax rate to 21 percent from 35 percent, and shifted the U.S. to a system of taxing its companies on their domestic profits only. Those changes required guardrails — like the Gilti tax — to ensure that multinationals pay at least something on their overseas profits. But much of the implementation of Gilti is governed by old tax regulations still on the books.

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July 30, 2018 in Tax | Permalink | Comments (0)

Temple’s Ranking Scandal Spreads To Six Additional Programs; University Also Admits To Three Errors In The Data It Submitted For Its Undergraduate College Ranking

Temple LogoFollowing up on my previous posts:

Temple Press Release, Second Update on Rankings:

The university has been carefully scrutinizing rankings data submissions to identify misreporting for other Fox programs. Although the review is ongoing, we have concluded that misreporting similar to that involving the Online MBA also occurred with respect to the Executive MBA, Global MBA, Part-Time MBA, Master of Science in Human Resource Management and Master of Science in Digital Innovation in Marketing. These programs all had issues related to the reporting of one or more metrics, including the number of new entrants providing GRE/GMAT scores, student indebtedness and applicants’ undergraduate GPAs. For the Online Bachelor of Business Administration, misreporting related to student indebtedness was found. As a result, we have reported to U.S. News that we cannot verify data related to these programs, and we are not participating in or submitting business school surveys at this time. ...

In a related update, U.S. News asked Temple to provide a letter verifying the accuracy of our data submissions for the 2018 and 2019 Best Colleges rankings. The university conducted a painstaking review of the voluminous data contained in these submissions. On July 20, Temple provided U.S. News with the requested letter, in which we verified the accuracy of our submissions for both the 2018 and 2019 rankings. We also made three corrections: one inadvertent transposition and two typographical errors. Additionally, we updated originally reported endowment information to ensure consistency in survey responses. U.S. News also had requested information on additional programs, and that review is underway.

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July 30, 2018 in Law School Rankings, Legal Education | Permalink | Comments (3)

Lesson From The Tax Court: The Power Of The Form 872 Waiver

Tax Court (2017)This past week I learned a lesson about partnership tax returns from the case of Inman Partners, RCB Investments, LLC, Tax Matters Partner, v. Commissioner, T.C. Memo. 2018-114 (July 23, 2018).  Partnership taxation is definitely out of my comfort zone, so I am quite grateful for the help of my colleagues on the double-super-secret-tax-profs-rule-the-world listserv that Paul Caron started back in 1995, shortly after the internet got its graphical interface.  They got me straight on some terminology and sent me off reading some cool stuff.  Still, readers may well spot error, and if you do, please give a correction in the comments.  I am especially hesitant when I think I spot an error in a Tax Court opinion as I did here.  I know full well the error could be mine.

Inman is a case where the partners, but not the partnership, had signed a Form 872 waiver for their 2000 tax year.  The IRS issued a FPAA to Inman Partners.  Inman petitioned the Tax Court and it’s argument was a procedural one: the FPAA was too late because it was issued more than three years after the due date of the Partnership Return.  In response the IRS said “Hey, we got these here waivers!”  Inman said: “those were just signed by the individual partners and were not signed by the partnership and so they cannot waive the limitation period for the FPAA against the Partnership.”   

Judge Holmes held that the language in the Form 872 was strong enough to also waive the limitation on assessment for the related partnership for an earlier tax period.  It might be, however, that the language worked only because of the statutory scheme then in place for partnership audits.  Congress nuked that scheme in the December 2017 tax reform legislation.  Does Inman give us any insights on whether the Form 872 language still works?  For a quick swim through the murky waters of partnership procedure, I invite you to dive below the fold. 

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July 30, 2018 in Bryan Camp, New Cases, Tax, Tax Practice And Procedure | Permalink | Comments (0)

Arizona Summit Law School in Talks With Arizona State To Take Students If School Loses Accreditation

Arizona Summit Logo (2015)Arizona Central, Arizona Summit Law School in Talks With ASU to Take Students If School Loses Accreditation:

Arizona Summit Law School officials are in talks with Arizona State University to let their students complete their education at the state university if the private school loses its accreditation.

School officials said they filed an appeal July 18 with the American Bar Association after the national accrediting body for law schools notified Arizona Summit in June of plans to revoke the school's accreditation.

If the appeal fails and the school closes, they said they are laying the groundwork to ensure students finish at an ABA-accredited law school. "We’ve had some very productive meetings" with ASU, said the school's interim dean, Penny Willrich. ...

The school's new president, Peter Goplerud, told the board it's possible Arizona Summit and ASU can reach an agreement, in principle or on paper, within a week to 10 days. ...

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July 30, 2018 in Legal Education | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, July 29, 2018

Two Pepperdine Law Faculty Among Eleven Recommended By LGBT Group For 9th Circuit At Behest Of White House

HelfandPushaw2Two of my Pepperdine Law School colleagues, Michael Helfand and Bob Pushaw, are among the eleven candidates recommended by the Log Cabin Republicans, a conservative LGBT group, for the U.S. Court of Appeals for the Ninth Circuit at the behest of the White House:  Washington Examiner, Trump Welcomes LGBT Group's Help in Court Picks, 11 Recommended For 9th Circuit:

While the White House has been repeatedly attacked by liberal LGBT groups despite President Trump’s campaign pledge for equality and his appointment of an openly gay U.S. ambassador, it has built a strong relationship with a Republican group once banned from party events.

And Log Cabin Republicans, the conservative LGBT lobby, hasn’t just weighed in on issues of sexual orientation and civil rights, it has also been asked to suggest candidates for top jobs, including federal courts, for the first time.

Gregory T. Angelo, in Amsterdam this week to represent his group and U.S. interests at the 22nd International AIDS Conference, told Secrets that his group was asked to recommend candidates for the controversial 9th Circuit Court of Appeals that covers the West Coast, a liberal court that has stalled key administration policies.

Angelo said that his group, which has a strong network in California, provided 11 names, including one of a gay former San Diego prosecutor, to the White House Counsel’s Office.

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July 29, 2018 in Legal Education | Permalink | Comments (0)

NY Times: How The Trump Tax Cut Is Helping To Push The Federal Budget Deficit To $1 Trillion

New York Times:  How the Trump Tax Cut Is Helping to Push the Federal Deficit to $1 Trillion, by Jim Tankersley:

The amount of corporate taxes collected by the federal government has plunged to historically low levels in the first six months of the year, pushing up the federal budget deficit much faster than economists had predicted.

The reason is President Trump’s tax cuts. The law introduced a standard corporate rate of 21 percent, down from a high of 35 percent, and allowed companies to immediately deduct many new investments. As companies operate with lower taxes and a greater ability to reduce what they owe, the federal government is receiving far less than it would have before the overhaul.

NYT

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July 29, 2018 in Tax | Permalink | Comments (3)

Jury Awards Former Columbia B-School Prof $1.25 Million In Damages Due To Retaliation For Sexual Harassment Claims

CBSFollowing up on my previous posts:

New York Law Journal, Jury Awards Former Columbia Business Prof $1.2M in Damages Over Retaliation for Sex Harassment Claims:

A former assistant professor at Columbia Business School was awarded $1.2 million by a Manhattan jury Friday, after finding the university and a top professor liable for retaliation over sexual harassment claims.

The jury awarded professor Enrichetta Ravina $750,000 in compensatory damages against Columbia and professor Geert Bekaert, as well as $500,000 in punitive damages against Bekaert. ... 

[T]he jury found Bekaert and the school liable for retaliation against Ravina, who brought sexual harassment claims against Bekaert to the attention of school officials. She claimed Bekaert had made physical advances and discussed inappropriate sexual topics with her. When she refused to be romantic with him, Ravina claimed Bekaert thwarted her research and publication efforts. The school, she claimed, refused to help. Later, she was denied tenure.

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July 29, 2018 in Legal Education | Permalink | Comments (4)

The Top Five New Tax Papers

SSRN Logo (2018)There is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new paper debuting on the list at #5:

  1. [337 Downloads]  Introduction to Tax Policy Theory, by Allison Christians (McGill) (reviewed here (Sloan Speck (Colorado))
  2. [275 Downloads]  The International Provisions of the TCJA: A Preliminary Summary and Assessment, by Reuven Avi-Yonah (Michigan)
  3. [174 Downloads]  U.S. Tax Reform: Potential Impact on Europe and EU Corporations (Presentation Slides), by Reuven Avi-Yonah (Michigan)
  4. [157 Downloads]  Recent Developments in Federal Income Taxation: The Year 2017, by Bruce McGovern (South Texas) & Cassady Brewer (Georgia State)
  5. [143 Downloads]   Income-Based Effective Tax Rates and Choice-of-Entity Consideratins Under the 2017 Tax Act, by Bradley Borden (Brooklyn) (reviewed here) Mirit Eyal-Cohen (Alabama))

July 29, 2018 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (1)

Saturday, July 28, 2018

This Week's Ten Most Popular TaxProf Blog Posts

Hemel, Nou & Weisbach: Cost-Benefit Analysis Of Tax Regulations — A Case Study

Jennifer Nou (Chicago), David Weisbach (Chicago), and I have been working this summer on a framework for quantitative cost-benefit analysis of tax regulations. At Whatever Source Derived and the Yale Journal on Regulation's Notice and Comment blog, we have posted a preview of our approach with an application to pending regulations regarding the new passthrough deduction. From the post:

The Treasury Department and the Internal Revenue Service (IRS) have submitted a proposed rule regarding the new passthrough deduction to the Office of Information and Regulatory Affairs (OIRA) for review. This appears to be the first tax regulation labeled as “economically significant” that Treasury and IRS have submitted to OIRA since an April 2018 memorandum of agreement set forth a new process for the centralized review of tax regulations. That process requires Treasury and IRS to submit a regulatory impact analysis to OIRA before publishing any “economically significant” rule — one that is “likely” to “have an annual non-revenue effect on the economy of $100 million or more.” That analysis must include, “to the extent feasible,” a quantification of the proposal’s benefits and costs.

The proposed passthrough rule will likely require Treasury, the IRS, and OIRA to confront a question that has vexed tax scholars for some time: How should cost-benefit analysis be conducted for tax regulations? More precisely, how should it account for the revenue effects of tax-related changes? Guidance from the Office of Management and Budget (OMB, of which OIRA is a part) seems to instruct agencies to treat government revenue collections as “transfer payments” rather than as benefits or costs. The rationale is that “benefit and cost estimates should reflect real resource use,” while “transfer payments are monetary payments from one group to another that do not affect total resources available to society.” However, in the tax context, some increases in tax revenue do in fact reflect changes in real resource use. Under OMB’s own guidance, then, these revenue changes should be counted as a social benefit.

In a forthcoming article in Tax Notes, we propose a method for Treasury and IRS to calculate the social costs and benefits of tax regulations that affect revenue collections. This method, which we call the “marginal revenue rule,” builds upon recent work by economists Martin FeldsteinRaj ChettyMichael Keen, and Joel Slemrod. We argue that revenues resulting from behavioral changes should be counted toward the social benefits of a tax regulation, whereas other revenues (what economists refer to as “mechanical transfers”) should not. For non-revenue costs and benefits, cost-benefit analysis of tax rules should proceed along the same lines as that for non-tax regulations.

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July 28, 2018 in Scholarship, Tax | Permalink | Comments (0)

Charles Koch Foundation To Publish All Future University Grant Agreements

Koch FoundationWall Street Journal, Charles Koch Foundation to Publish Future University Grant Agreements:

The Charles Koch Foundation says it will post online all future multiyear grant agreements with universities, aiming to head off some of the controversy surrounding the libertarian philanthropic group’s growing ambitions on college campuses around the country.

The foundation doled out roughly $90 million in gifts in 2017, much of it to colleges and universities and more than double the amount it gave in 2015. The funds have gone to research centers promoting free enterprise as well as to academic projects on free speech, criminal-justice reform and other areas.

Some schools that have accepted Charles Koch Foundation funds, including Wake Forest University, Florida State University and George Mason University, have been criticized for serving as vessels for a conservative political agenda.

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July 28, 2018 in Legal Education | Permalink | Comments (0)

Lipman & Williamson: Social Security Retirement Benefits — A Timing Model For Working Families

Francine J. Lipman (UNLV) & James E. Williamson (San Diego State), Social Security Retirement Benefits: A Timing Model for Working Families:

With more than 61 million individuals receiving Social Security benefits, one out of every four families in America receives monthly cash payments from the Social Security Administration (SSA). These monthly payments directly benefit 48.5 million retired workers, their current and former spouses, 10 million disabled adults, and include more than 3 million children. Several million more children and adults in the increasing number of multi-generational households in America benefit indirectly from Social Security retirement payments.

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July 28, 2018 in Scholarship, Tax | Permalink | Comments (0)

Friday, July 27, 2018

Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Borden's Effective Tax Rates And Choice-Of-Entity Considerations Under The 2017 Tax Act

This week, Mirit Eyal-Cohen (Alabama) reviews Bradley T. Borden (Brooklyn), Income-Based Effective Tax Rates and Choice-of-Entity Considerations Under the 2017 Tax Act (July 2018).

Mirit-Cohen (2018)How does the Tax Cuts and Jobs Act of 2017 (TCJA) affect small business owners? According to Borden, the new corporate tax rate and new deduction for qualified business income in the TCJA greatly complicates the choice-of-entity landscape. Prior to the TCJA, businessmen could choose between corporations and hybrid passthrough entities that combined the benefits of limited liability and one level tax. Marginal corporate income tax rates were close to those of individuals, but the taxation of dividends increased the effective corporate tax rates higher than the individual rate across all income levels. Thus, for the majority of small businesses the ideal choice-of-entity was the passthrough structure. Yet, Borden claims that the TCJA nullifies this general rule by muddling choice-of entity considerations for small businesses and entails more tax planning in order to get the most favorable effective tax rates. Post-TCJA, choice-of-entity decisions will be more nuanced, on a case-by-case basis, and preferences will likely be highly situational. 

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July 27, 2018 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Legal Education Roundup

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July 27, 2018 in Legal Education, Scott Fruehwald, Weekly Legal Education Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

Claremont Closes Philosophy Department, Fires Its Two Tenured Professors

ClaremontPress Release, CGU Board Votes to Close Philosophy Department; Current Students Will Receive Full Support to Complete Their Degrees:

The Board of Trustees of Claremont Graduate University has decided to close the university’s Department of Philosophy as a result of a “combination of market, enrollment, and limited faculty resources,” according to a statement released late last week by Interim President Jacob Adams.

The board, which voted for the closure during its meetings held earlier this month, considered a range of factors, including “the dwindling market for philosophy programs at small privates in our selectivity range,” Adams explained in his message, which was sent out to the university’s staff and faculty. ...

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July 27, 2018 in Legal Education | Permalink | Comments (8)

Hemel: As New York Looks Into Whether Trump Foundation Broke The Law, Criminal Charges Remain Unlikely

Daniel Hemel (Chicago), As New York Looks Into Whether the Trump Foundation Broke the Law, Criminal Charges Remain Unlikely:

New York authorities have opened an investigation into the Donald J. Trump Foundation to determine whether the president or his charity broke state tax laws.

The state tax probe is just the latest example of the legal trouble the president’s foundation faces. In addition, New York Attorney General Barbara Underwood is suing the foundation for allegedly violating state laws governing charities. And she has alerted the IRS and the Federal Election Commission about the foundation’s possible federal tax and campaign law violations.

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July 27, 2018 in Tax | Permalink | Comments (5)

Manhire: Constraints On IRS Control — An Alternative Approach to Tax Gap Analysis

Jack Manhire (Texas A&M), Constraints on IRS Control: An Alternative Approach to Tax Gap Analysis:

A tax authority wants to take actions it knows will foster the greatest degree of voluntary taxpayer compliance to reduce the "tax gap." This paper suggests that even if a tax authority could attain a state of complete knowledge, there are constraints on whether and to what extent such actions would result in reducing the macro-level tax gap. These limits are not merely a consequence of finite agency resources. They are inherent in the system itself.

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July 27, 2018 in Scholarship, Tax | Permalink | Comments (0)

The ABA Is Doomed To 'Wither on the Vine' Without A Dues Reduction

ABA Logo (2016)Law.com, ABA Doomed to 'Wither on the Vine,' Without Dues Overhaul: Memo:

The American Bar Association is planning to significantly reduce its annual dues in hopes of boosting the number of paying members, which has been declining for decades.

Lawyers with fewer than 10 years on the job would pay half as much or even less under the proposal, dubbed OneABA, while most experienced lawyers would see their annual dues whittled down by $100 or more. Membership revenue is the organization’s single largest source of funding, and shrinking membership is imperiling its future, according to internal ABA memos that lay out the reasons for the dues overhaul.

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July 27, 2018 in Legal Education | Permalink | Comments (8)

Do Tax Policies Drive Innovation By Small/Medium Enterprises In China?

Runhua Wang (Illinois) & Jay P. Kesan (Illinois), Do Tax Policies Drive Innovation by SMEs in China?:

There is little empirical evidence showing how innovation by small and medium enterprises (SMEs) is impacted by tax policies, especially SMEs from developing countries. We explore how targeted policies of corporate tax (firm-specific) and value-added tax (product-specific) in China impact their domestic SMEs' R&D investment and R&D output. We find that a stringent corporate tax policy with specified R&D thresholds for qualifying for tax credits is narrowly tailored to positively incentivize R&D and patent applications by firms, including SMEs.

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July 27, 2018 in Scholarship, Tax | Permalink | Comments (0)

Thursday, July 26, 2018

Grewal: The Charitable Contribution Strategy — An Ineffective SALT Substitute

Andy Grewal (Iowa), The Charitable Contribution Strategy: An Ineffective SALT Substitute:

The Tax Cuts and Jobs Act has provoked a large amount of controversy, especially for a revenue bill. Though politicians and experts often spar fiercely over tax policy, the TCJA drew passionate new voices into the debate, with some citizens even taking their concerns to the streets. The close association between the TCJA and the controversial President no doubt added fuel to the fire.

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July 26, 2018 in Scholarship, Tax | Permalink | Comments (1)

A Tax on Free Campus Parking?

Inside Higher Ed, A Tax on Free Campus Parking?:

If you park at no charge in the university lot in front of your campus office, you might be sticking your employer with a tax bill without even knowing it.

Or maybe you ride public transportation to work at an urban college. You purchase your metro pass using money from your paycheck that's routed to a pretax account instead of your taxed paycheck. You also might be unknowingly leaving your employer holding a new tax bill.

Colleges and universities are facing possible new tax bills like these, plus a dizzying number of questions about how and when they should be calculated, in the wake of the Republican tax-reform package signed into law at the end of last year. Even seven months after President Trump etched his signature onto the bill, institutions have little guidance on what, specifically, they will be paying.

The uncertainty was clear Sunday at the National Association of College and University Business Officers annual meeting. A tax update session seemed to raise more questions than answers about a host of issues, including unrelated business income taxes on employee parking, transit benefits and the sections of the new tax code covering them.

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July 26, 2018 in Legal Education, Tax | Permalink | Comments (2)

American Is 23rd Law School To Accept GRE For Admissions

GREAmerican is the 23rd law school to accept the GRE (joining Arizona, Brooklyn, BYU, Cardozo, Chicago Kent, Columbia, Cornell, Florida State, Georgetown, Harvard, Hawaii, John Marshall (Chicago), Northwestern, NYU, Pace, PennSt. John's, Texas A&M, UCLA, USCWake Forest, and Washington University). Two law schools allow the GRE in limited circumstances: Chicago (admissions committee may grant LSAT waiver) and Georgia (students enrolled in a dual degree program at the university). (George Washington has rescinded its use of the GRE because it has not done a school-specific validation study.)

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July 26, 2018 in Legal Education | Permalink | Comments (0)

Do Business Tax Incentives For Economic Development Work?

John Lester (University of Calgary), Business Tax Incentives for Economic Development: Do They Work:

The Canadian federal government has a surprisingly small number of business income tax measures that are intended to promote economic development. Nevertheless, the amount of tax revenue forgone is substantial, likely amounting to about $8 billion in 2016. Provincial governments have implemented more economic development tax incentives than the federal government, at a total cost of about $9 billion. Most of this money is ineffectively deployed.

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July 26, 2018 in Scholarship, Tax | Permalink | Comments (0)

Colleges Can’t — Or Won’t — Track Where Ph.D.s Land Jobs

Chronicle of Higher Education, Colleges Can’t — or Won’t — Track Where Ph.D.s Land Jobs. Should Disciplinary Associations?:

Colleges are bad at collecting data on where Ph.D. recipients end up working. In addition to the logistical challenges of tracking their alums, graduate programs often want to forget about those who didn’t become professors. Attitudes have started to change in recent years, but not landing a tenure-track job is still viewed in some circles as a failure for both student and program.

An ambitious new effort aims to erode that narrative. The American Historical Association last week released a comprehensive snapshot of the entire discipline’s Ph.D. recipients. The project, Where Historians Work, tries to track where all of the 8,500 people who earned a doctorate from 2004 to 2013 landed jobs. About 7 percent of the recipients could not be found.

The data set comes at at time when Ph.D. programs, especially in the humanities, are under withering criticism for strapping doctoral students with record student-loan debt and poor prospects for landing a secure academic job. The programs lack accountability, critics say, operating like fiefdoms not subject to the centralized data-collection requirements common in undergraduate education.

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July 26, 2018 in Legal Education | Permalink | Comments (5)

Hanlon, Verdi & Yost: Insider Tax Effects On Acquisition Structure And Value

Michelle Hanlon (MIT), Rodrigo S. Verdi (MIT) & Benjamin Yost (Boston College),  Insider Tax Effects on Acquisition Structure and Value:

This study investigates the effect of target firm insiders’ capital gain tax liabilities on acquisition structure and value. We construct insider holdings using data from the Thomson Financial Insiders Data Feed for a large sample of acquisitions over the last twenty years. Results indicate that the positive relations between shareholder-level capital gain tax rates and 1) the likelihood of a nontaxable acquisition and 2) acquisition premiums documented in Ayers, Lefanowicz, and Robinson (2004, 2003) are largely driven by insider tax effects. We also show that whether acquisition structure or premium is adjusted in response to insider taxes depends on the alternatives available for the acquirer.

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July 26, 2018 in Scholarship, Tax | Permalink | Comments (0)

A Cracker Jack Story: Finding Love From The UCLA Law Waitlist

Cracker JackLos Angeles Times:  I Kept Telling My Crackerjack Boyfriend I Was Leaving, by Grace Reiner (Vice President for Legal Affairs, A&E Network):

I grew up in New York and had always envisioned myself as a lifelong New Yorker, used to four seasons and talking fast. I was planning on attending law school in Boston and staying on the East Coast, but I was taken off the waiting list at UCLA just a few weeks before the school year was scheduled to begin. It was awfully late to move cross-country, but the opportunity to study entertainment law in the heart of the industry and, just as important, spend three whole years without snow, was just too compelling.

“But you’ll be so far away,” my parents said to me, their only daughter.

“It will only be three years, then I’ll be home,” I promised. “I will come back.”

In the summer before my third year of law school, I took an internship in the legal department at the Writers Guild. I loved the work, I enjoyed the staff, and I got to spend time with fabulous writers I had always admired.

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July 26, 2018 in Legal Education | Permalink | Comments (0)

The Lack Of Policy Uncertainty From Expiring 'Temporary' Taxes

Andrew Chang (Board of Governors of the Federal Reserve System), Nothing is Certain Except Death and Taxes: The Lack of Policy Uncertainty from Expiring 'Temporary' Taxes:

What is the policy uncertainty surrounding expiring taxes? How uncertain are the approvals of routine extensions of temporary tax policies? To answer these questions, I use event studies to measure cumulative abnormal returns (CARs) for firms that claimed the U.S. research and development (R&D) tax credit from 1996-2015. In 1996, the U.S. R&D tax credit was statutorily temporary but was routinely extended ten times until 2015, when it was made permanent. I take the event dates as both when these ten extensions of the R&D tax credit were introduced into committee and when the extensions were signed by the U.S. president into law. On average, I find no statistically significant CARs on these dates, which suggests that the market anticipated these extensions to become law.

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July 26, 2018 in Scholarship, Tax | Permalink | Comments (0)

Wednesday, July 25, 2018

Hemel: Federalism As A Safeguard Of Progressive Taxation

Daniel Hemel (Chicago), Federalism as a Safeguard of Progressive Taxation, 93 N.Y.U. L. Rev. 1 (2018) (workshop) (review):

This Article considers the distributional consequences of the Supreme Court’s federalism jurisprudence over the past quarter century, focusing specifically on the anti-commandeering, anti-coercion, and state sovereign immunity doctrines. The first of these doctrines prevents Congress from compelling the states to administer federal programs; the second prevents Congress from achieving the same result through offers that for practical purposes the states cannot refuse; the third prohibits Congress from abrogating state sovereign immunity outside a limited class of cases. These doctrines vest the states with valuable entitlements and allow the states to sell those entitlements back to Congress for a price. In this respect, the doctrines have an intergovernmental distributional effect, shifting wealth from the federal government to the states.

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July 25, 2018 in Scholarship, Tax | Permalink | Comments (0)

IRS Chief Counsel Nominee Advised Trump On Taxes

DesmondBloomberg, IRS Counsel Nominee Briefly Advised Trump Organization on Taxes:

President Donald Trump’s nominee for chief counsel of the Internal Revenue Service briefly advised the future president’s real estate company on a tax question several years ago.

Michael Desmond counseled the Trump Organization on “a discrete reporting matter for a subsidiary company that was resolved with no tax impact,” James Wilkinson, a spokesman for Desmond, said in a written statement to Bloomberg News. Wilkinson said Desmond didn’t interact with anyone at the Trump Organization, which was a longtime client of two other partners at his law firm.

Democrats on the Senate Finance Committee have given no sign they plan to scrutinize Desmond’s Trump work at his confirmation hearing Thursday. Still, potential conflicts of interest have drawn attention under Trump, who broke with presidential tradition by refusing to release his tax returns and has mused publicly about using government agencies to punish enemies.

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July 25, 2018 in IRS News, Tax | Permalink | Comments (0)

Simkovic: Northwestern's Mark Cohen Can't Defend His Views On Cause Of Vermont Law School's Purge Of Tenured Faculty

Following up on Thursday's post, Vermont Law School's Tenured Faculty Purge And What It Portends For Legal Education:  Michael Simkovic (USC), Northwestern Lecturer Mark A. Cohen’s Angry Outburst on Twitter:

I recently pointed out some factual problems with claims by Northwestern lecturer Mark A. Cohen. Cohen, writing in Forbes, claimed that faculty terminations at Vermont Law School were proof that student debt was unsustainable, not only at Vermont, but at all law schools except for a handful of elite institutions.

Here’s the problem: When student debt levels are unsustainable, student default rates are high. But at Vermont--and at most law schools--default rates are low.

When Professor David Herzig pointed out some of the relevant literature to Mr. Cohen, Cohen responded with the following angry outburst on twitter:

That "evidence" has been panned by every credible source I know. The methodology and premises upon which the conclusions were drawn are laughable and fly in the face of real studies. I was a bet-the-company trial lawyer for many years--the "study" you cite is 3rd rate fiction.

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July 25, 2018 in Legal Education | Permalink | Comments (8)

Netanya Hosts 5th International Roundtable Today On Taxation And Tax Policy

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July 25, 2018 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Who Is Your Faculty's Carlos Beltrán?

AstroballFollowing up on my previous post, Who Is the Shane Battier of Your Faculty?:  Wall Street Journal Book Review:  Paul Dickson, Lone Star Turnaround (reviewing Ben Reiter, Astroball: The New Way to Win It All (2018)):

Mr. Reiter now has written a full account of the remarkable story of how one of the greatest turnarounds in modern baseball history was engineered. ... Houston had looked at the processes that Oakland A’s general manager Billy Beane had used early in the 21st century. That team’s methods—sophisticated statistical analyses and attention to “undervalued” measuring sticks (like on-base percentage)—were detailed in Michael Lewis’s Moneyball (2003), and they changed the way baseball front offices operated. But Mr. Lewis’s book also portrayed a somewhat fraught internal organization, with old-fashioned scouts in one corner and the analytic nerds in the other, often disagreeing about players and prospects and resenting one another as well.

Astros general manager Jeff Luhnow wanted to figure out how to get scouting and analytics to work together and eventually produce an internal metric that would render a decision on a player as simple as the one in blackjack: hit or stay, keep or trade, play or bench. The blackjack analogy is apt, since Mr. Luhnow’s leading partner in all of this was Sig Mejdal, a former blackjack dealer and NASA scientist who became the head of the Astros’ Nerd Cave or, as the Astros named him, “director of decision sciences.”

Under Mr. Luhnow, scouts not only made subjective judgments about a prospect’s talent but also collected unique data that they fed to the folks in the Nerd Cave. And the nerds began listening to the scouts. All of this was easier said than done, but it was done, and the team made a series of sound, even brilliant, choices as it drafted, traded and signed players. ...

[R]oster-creation, all by itself, did not bring home the championship. Building an exceptional team is one thing, but making it work as a team is another. “Fault lines” exist in all complex organizations—including baseball teams. If these lines can be bridged or eradicated, a team is likely to win more ball games. To use another bit of old-fashioned terminology, a team needs chemistry.

Carlos Beltrán, the veteran outfielder signed by the Astros after the 2016 season, immediately took on the role of chief chemist. Among other things, he created a postgame ceremony that awarded prizes for excellence in the field and instituted a postgame “court” for those who failed to attend: The fine was $500. Mr. Beltrán also had a singular ability to study opposing pitchers and determine their “tells”—gestures and small changes in behavior that signaled whether or not the next pitch would be, for example, a breaking ball or a fast ball. Finally, Mr. Beltrán had a strong desire to close the gap between the English and Spanish speakers. ...

Mr. Reiter’s superb narrative of how the team got there provides powerful insights into how organizations—not just baseball clubs—work best.

Sports Illustrated, Why Carlos Beltrán Was the Perfect Addition to Aid the Astros' Journey to the World Series:

Luhnow also felt that Beltrán could imbue a club with something else, a variable that neither Statcast nor any of Sig’s other metrics could begin to track.

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July 25, 2018 in Book Club, Legal Education | Permalink | Comments (1)

9th Circuit Reverses Tax Court In Altera, Revives Cost-Sharing Regs In Major Loss For Intel, Other Tech Companies

AlteraWall Street Journal, IRS Wins Court Case Over Intel Corp.:

The Internal Revenue Service won a court case closely watched by technology companies, as an appeals court upheld a regulation governing how corporations divide expenses between their domestic and foreign operations.

Tuesday’s ruling by a panel of the Ninth Circuit Court of Appeals in San Francisco represents a loss for Intel, whose Altera subsidiary challenged the regulation when it was a separate company [Altera Corp. v. Commissioner, Nos. 16-70496, 16-70497 (9th Cir. July 24, 2018)]. Tech companies had billions of dollars at stake in the case because the rules at issue determine where they report some deductions.

The U.S. Tax Court, which handles disputes between taxpayers and the IRS, ruled in favor of Intel [Altera Corp. v. Commissioner, 145 T.C. No. 3 (2015)]. The IRS appealed the decision.

“We conclude that the regulations withstand scrutiny under general administrative law principles, and we therefore reverse the decision of the Tax Court,” wrote Chief Judge Sidney Thomas.

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July 25, 2018 in New Cases, Tax | Permalink | Comments (0)

Symposium: Law Student Learning Outcomes And Assessment

Journal of Legal Education (2018)Symposium, Law Student Learning Outcomes and Assessment, 67 J. Legal Educ. 373-614 (2018):

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July 25, 2018 in Legal Education, Scholarship | Permalink | Comments (0)

NY Times: Montana Governor Sues IRS, Warning Of ‘Foreign Money’ In Elections:

New York Times, Montana Governor Sues I.R.S., Warning of ‘Foreign Money’ in Elections:

Gov. Steve Bullock of Montana, a Democrat who has crusaded against the loosening of campaign finance rules, is suing the Trump administration to block it from eliminating a mandate that politically active nonprofit groups disclose the identities of their major donors to the government.

The Treasury Department announced last week that the Internal Revenue Service would no longer require a range of nonprofit organizations to identify any contributors giving more than $5,000, in a move it described as bolstering privacy and easing administrative burdens for those groups. Previously, certain nonprofits had to name their large donors to the government even though they were not supposed to be disclosed to the public.

The change in rules stirred immediate political controversy because of its effect on so-called “dark money” groups, which spend money in elections but are not required to reveal the sources of their funding except to the I.R.S. Under the new reporting regime, groups associated with organizations like the National Rifle Association, Planned Parenthood and Americans for Prosperity, the conservative advocacy network backed by the billionaire Koch brothers, would no longer have to list their donors, even to the government.

But in a lawsuit filed on Tuesday in Federal District Court in Montana, Mr. Bullock and his administration alleged that the Trump administration had flouted proper government process in eliminating the disclosure requirements. The suit asked the court to issue a judgment voiding the new I.R.S. policy. ...

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July 25, 2018 in IRS News, New Cases, Tax | Permalink | Comments (0)

Tuesday, July 24, 2018

Viswanathan: Tax Compliance in a Decentralizing Economy

Manoj Viswanathan (UC-Hastings), Tax Compliance in a Decentralizing Economy, 34 Ga. St. U. L. Rev. 283 (2018) (workshop) (review):

Tax compliance in the United States has long relied on information from centralized intermediaries — the financial institutions, employers, and brokers that help ensure income is reported and taxes are paid. Yet while the IRS remains tied to these centralized entities, consumers and businesses are not. New technologies, such as the “sharing” economy (companies such as Airbnb, Uber, and Instacart) and the blockchain (the platform on which Bitcoin is based) are providing new, decentralized options for exchanging goods and services. Without legislative and agency intervention, these technologies pose a critical threat to the reporting system underlying domestic and international tax compliance.

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July 24, 2018 in Scholarship, Tax | Permalink | Comments (0)

Borden: Income-Based Effective Tax Rates And Choice-Of-Entity Consideratins Under The 2017 Tax Act

Bradley T. Borden (Brooklyn), Income-Based Effective Tax Rates and Choice-of-Entity Consideratins Under the 2017 Tax Act:

This Article uses a simple model to graphically present the effective tax rates at various income levels for small businesses under the Tax Cuts and Jobs Act of 2017 (TCJA) and compares them to effective tax rates at various income levels for small business prior to the TCJA. The graphical presentation reveals that the various tax rates under the TCJA complicate choice-of-entity analyses and undermine general rule-of-thumb concepts that drove choice-of-entity decisions prior to the TCJA. Under TCJA, choice-of-entity preferences will likely be highly situational and may feature combinations of various entities. Using a typical business situation, the Article illustrates how different types of entity can cause the effective tax rate on business income at the $1,000,000 level to vary from 21.36% to 34.60%. The most favorable effective rate results from an entity structure that combines a C corporation and passthrough entity. Rate variations based upon entity combinations portend subtle, carefully calculated, shifts in choice-of-entity actions following JCTA.

 

July 24, 2018 in Scholarship, Tax | Permalink | Comments (0)