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Thursday, March 13, 2014

Morse Presents The Development of Tax Anti-Avoidance Law in Australia and the United States Today at Indiana

Morse (2013)Susan C. Morse (Texas) presents The Development of Tax Anti-Avoidance Law in Australia and the United States (with Robert Deutsch (University of New South Wales)) at Indiana-Bloomington today as part of its Tax Policy Colloquium Series hosted by Leandra Lederman

The different approaches to the development of tax anti-abuse law in Australia and the United States share the same basic building blocks: administrative leadership, legislative change, and the development of judicial case law. For reasons including path dependence and the degree of difficulty of the path to enacting a legislative change favored by the administration, statutory change is favored in Australia relative to the United States. In the U.S., administrators faced with a tough tax avoidance problem favor a strategy that combines strong elements of litigation strategy and regulatory and other guidance, as well as proposals for statutory amendment. But the differences are differences of degree, since tax administrators in both countries use all of these elements and operate in a way that acknowledges all branches of government when seeking to develop and change applicable tax anti-abuse law. In addition, based on this case study evidence, the substantive differences in Australian and U.S. anti-abuse law cannot be directly traced to institutional choice issues.

March 13, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Phillips Presents Endogenous Detection and Audit Intensity Today at UCLA

PhillipsMark Phillips (USC) presents Endogenous Detection and Audit Intensity in the Tax Evasion Game at UCLA today as part of its Tax Policy and Public Finance Colloquium Series hosted by Jason Oh, Kirk Stark, and Alexander Wu:

In this paper I introduce an imperfect and endogenous detection technology into the sequential tax evasion game. During a tax agency's examination of a taxpayer, the fraction of evasion detected depends upon three factors: the taxpayer's true income; the taxpayer's unreported income; and the tax agency's exam-speci c resources (i.e. intensity of examination). I solve for an equilibrium in which the tax agency chooses both whom to audit and at what intensity subject to an enforcement budget constraint. In contrast to simpler games, the tax agency cannot infer any given taxpayer's true income, even after an audit occurs. Instead, the tax agency need know only two more limited but realistic pieces of information for a given taxpayer: the expected amount of detected (not true) evasion, and how that amount changes with marginal increases in audit intensity.

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March 13, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Wednesday, March 12, 2014

Dharmapala Presents Interest Deductions in a Multijurisdictional World Today at Toronto

DharmapalaDhammika Dharmapala (Illinois) presents Interest Deductions in a Multijurisdictional World (with Mihir A. Desai (Harvard)) at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

The tax treatment of interest expenses in a multijurisdictional setting raises numerous complexities. This paper catalogs these difficulties and highlights the particular problems associated with efforts to achieve ownership neutrality among multinational corporations (MNCs) when debt financing is available. We argue that the differential deductibility of debt entailed by various current tax law provisions leads in general to potential distortions in the patterns of asset ownership across MNCs, and that various proposed solutions have significant limitations. We suggest several alternative regimes to address both the ownership distortions that we highlight, as well as other well-established problems of income-shifting through debt. These alternative regimes are extensions to a multinational setting of two general approaches to the neutral treatment of interest expenses - the CBIT (comprehensive business income tax) and ACC (allowance for corporate capital). These regimes – a worldwide debt cap (WDC) and a net financing deduction (NFD) – provide solutions to income-shifting and ownership distortions. However, they have the potential disadvantage of restricting other policy parameters.

March 12, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, March 11, 2014

Sikes Presents Cross-Country Evidence on Capital Gains Taxes, Risk, and Expected Rates of Return Today at NYU

SikesStephanie Sikes (University of Pennsylvania, Wharton School) presents Cross-Country Evidence on the Relation between Capital Gains Taxes, Risk, and Expected Rates of Return (with Luzi Hail (University of Pennsylvania, Wharton School) & Clare Wang (Northwestern University, Kellogg School)) at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Auerbach:

This study empirically examines the prediction in Sikes and Verrecchia (2012) that the relation between capital gains tax rates and expected rates of return varies in the cross-section and over time with firm risk and market risk. Specifically, we test whether the general positive relation between expected returns and the capital gains tax rate becomes weaker or even reverses when (i) a firm’s systematic risk is high, (ii) the aggregate market risk premium is high, or (iii) the risk-free rate is low. Using an international panel from 25 countries over the 1990 to 2004 period, we find evidence supporting these predictions. The results are particularly pronounced in countries with substantive changes in tax rates, a tradition of low tax evasion, less integrated capital markets, and less institutional ownership as well as around substantive changes in the three risk proxies. We corroborate our findings in a single country setting, using the 1978, 1997, and 2003 changes to the capital gains tax rate in the United States as events. Our results underscore the importance of macroeconomic and firm-specific factors in the determination of the effect of capital gains taxes on expected returns and show that the valuation effects can sometimes be in the opposite direction of what is generally expected.

March 11, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Thursday, March 6, 2014

Shay Presents Formulary Apportionment in the U.S. Today at Temple

ShayStephen E. Shay (Harvard) presents Formulary Apportionment in the U.S. International Income Tax System: Putting Lipstick on a Pig? (with J. Clifton Fleming (BYU) & Robert J. Peroni (Texas)) at Temple today as part of its Tax Policy & Administration Colloquium Series hosted by Alice Abreu & Andrea Monroe:

[T]he authors argue that formulary apportionment and the current standard, arm's length transfer pricing, are just two shades of lipstick on the pig that is the US international tax system, with its twin features of deferral and cross-crediting. They conclude that formulary apportionment might be the less offensive shade, but in effect the whole discussion is a diversion from a broad reform that is sorely needed on the pig itself

March 6, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Wednesday, March 5, 2014

Cain Presents Taxation of Same-Sex Couples After Windsor Today at Duke

CainPatricia Cain (Santa Clara) presents Taxation of Same-Sex Couples After United States v. Windsor: Did the IRS get it right in Revenue Ruling 2013-17? at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

The Windsor decision created a huge shift in tax treatment of same-sex spouses. But there are still many unresolved issues. Revenue Ruling 2013-17 is a step in the right direction as it resolves some of the issues that arose after Windsor, but there is still work to be done. As with sports, “it ain’t over until the fat lady sings.”

March 5, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Auten Presents New Perspectives on Income Mobility and Inequality Today at Penn

Penn 2014Gerald E. Auten (Office of Tax Analysis, U.S. Treasury Department) presents New Perspectives on Income Mobility and Inequality at Pennsylvania today as part of its Center for Tax Law & Policy Seminar Series hosted by Michael Knoll, Chris Sanchirico, and Reed Shuldiner:

This study examines several dimensions of income mobility and inequality — mobility of individuals through their peak earnings years, intergenerational mobility, and persistence in the top 1 percent. Its main fi ndings can be summarized as follows. Half of those age 35–40 in the bottom quintile of their cohort moved to higher quintiles 20 years later; over 60 percent moved up relative to the full population. About 70 percent of dependents from low-income households were themselves in higher quintiles 20 years later. Younger generations gradually replaced those that dominated the top percentile in 1987. The results show the importance of life cycle effects and the changing composition of top income groups.

Figure 1

March 5, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, March 4, 2014

Hines & Logue Present Delegating Tax Today at NYU

PixJames R. Hines, Jr. (Michigan) & Kyle D. Logue (Michigan) present Delegating Tax at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Auerbach:

Congress delegates extensive and growing lawmaking authority to federal administrative agencies in areas other than taxation, but tightly limits the scope of IRS and Treasury regulatory discretion in the tax area, specifically not permitting these agencies to select or adjust tax rates. This Article questions why tax policy does and should differ from other policy areas in this respect, noting some of the potential policy benefits of delegation. Greater delegation of tax lawmaking authority would permit policies to benefit from the expertise of administrative agencies, and afford timely adjustment to changing economic circumstances. Furthermore, delegation of the tax reform process to an independent commission or agency offers the prospect of Congress commiting itself to rational reform and long-run budget sustainability in a way that is more apt to succeed than are piecemeal legislative efforts. The Article concludes with an analysis of the constitutionality of tax delegation, noting the applicability of recent Supreme Court interpretations that Congress has broad discretion to delegate rulemaking authority to federal agencies, and that tax policy is of a kind with other federal policies.

March 4, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Monday, March 3, 2014

Galle Presents Nonprofit Executive Pay as an Agency Problem Today at Pepperdine

GalleBrian D. Galle (Boston College) presents Nonprofit Executive Pay as an Agency Problem: Evidence from U.S. Colleges and Universities (with David I. Walker (Boston University)) at Pepperdine today as part of its Tax Policy Colloquium Series hosted by Paul Caron:

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

Brian D. Galle (Boston College) & David I. Walker (Boston University), Sunshine, Stakeholders, and Executive Pay: A Regression-Discontinuity Approach:

We evaluate the effect of highly salient disclosure of private college and university president compensation on subsequent donations using a quasi-experimental research design. Using a differences-in-discontinuities approach to compare institutions that are highlighted in the Chronicle of Higher Education’s annual "top 10" list of most highly-compensated presidents against similar others, we find that appearing on a top 10 list is associated with reduced average donations of approximately 4.5 million dollars in the first full fiscal year following disclosure, despite greater fundraising efforts at "top 10" schools. We also find some evidence that top 10 appearances slow the growth of compensation, while increasing fundraising and enrollment, in subsequent years. We interpret these results as consistent with the hypothesis that donors care about compensation and react negatively to high levels of pay, on average; but (absent highly-salient disclosures) are not fully informed about pay levels. Thus, while donors represent a potential source of monitoring and discipline with respect to executive pay in the nonprofit sector, significant agency problems remain. We discuss the implications of these findings for the regulation of nonprofits and for our broader understanding of the pay-setting process at for-profit as well as nonprofit organizations.

Salaries

Update:  Post-presentation lunch:

Photo

 

March 3, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Friday, February 28, 2014

Caron Presents The Role of Faculty Scholarship at Faith-Based Law Schools Today at Regent

Caron 2012 PhotoPaul L. Caron (Pepperdine) presents Faculty Scholarship at Faith-Based Law Schools: Long Tails, Moneyball and Rankings in a Time of Crisis at Regent today:

I have written extensively on legal scholarship and teaching in a variety of contexts, particularly the impact of technology in transforming faculty roles in research and in the classroom.  In What Law Schools Can Learn From Billy Beane and the Oakland Athletics, 82 Tex. L. Rev. 1483 (2004), Rafael Gely and I argued that legal education must use technology to develop more sophisticated measures of law school success and faculty contributions to law school success.  In Ranking Law Schools: Using SSRN to Measure Scholarly Performance, 81 Ind. L.J. 83 (2006), Bernie Black and I contended that SSRN downloads can play a role in measuring faculty scholarly performance along with the existing measures of reputations surveys, publication counts, and citation counts.  In The Long Tail of Legal Scholarship, 116 Yale L.J. Pocket Part 38 (2006), I showed that legal scholarship is shifting from a hit-driven model represented by citation counts to a niche-driven model represented by download counts.  In Are Scholars Better Bloggers? Bloggership: How Blogs Are Transforming Legal Scholarship, 84 Wash U. L. Rev. 1025 (2006), I argued that blogs illustrated the shift away from traditional scholarship and traditional methods of disseminating scholarly ideas.

Two things have changed since the publication of those articles.  First, legal education is confronted with an existential crisis,  In The Law School Crisis: What Would Jimmy McMillan Do?, 31 Pepperdine Law 14 (2012), I argued that the law school crisis results from the confluence of four factors:  skyrocketing costs and student loan debt, and plummeting job placement and enrollments.  Second, after over twenty years at the University of Cincinnati College of Law (a public, secular law school), this past fall I joined the tenured faculty at Pepperdine University School of Law (a private, Christian law school).

I argue that religious law schools are uniquely positioned to thrive in the midst of the law school crisis because our faith-fueled commitment to our students and to each other empowers us to better define the pathways to success for our schools, our students, and our faculties and equips us to make that journey together.

February 28, 2014 in Colloquia, Legal Education, Scholarship, Tax | Permalink | Comments (0)

Thursday, February 27, 2014

Polsky Presents Private Equity Monitoring Fees Are Actually Disguised Dividends Today at UCLA

Polsky 2014Gregg D. Polsky (North Carolina) presents The Untold Story of Sun Capital: Private Equity Monitoring Fees Are Actually Disguised Dividends, 142 Tax Notes 556 (Feb. 3, 2014) (blogged here) at UCLA today as part of its Tax Policy and Public Finance Colloquium Series hosted by Jason Oh, Kirk Stark, and Alexander Wu:

Polsky addresses the tax implications of monitoring fees paid to private equity firms and argues that they typically are improperly deducted by the portfolio companies that pay them.

February 27, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Zelenak Presents Mitt Romney, the 47%, and the Future of the Mass Income Tax Today at Indiana

Zelenak (2014)Lawrence A. Zelenak (Duke) presents Mitt Romney, the 47 Percent, and the Future of the Mass Income Tax at Indiana-Bloomington today as part of its Tax Policy Colloquium Series hosted by Leandra Lederman:

This essay puts Romney’s remarks in the context of their causes and consequences–first by describing the 2010 origins and subsequent development of the 47 percent critique in conservative circles, and then by describing the reactions to the remarks (of both opinion leaders and the public, and across the political spectrum). The essay also situates the 47 percent critique in the context of related conservative critiques of federal tax-and-transfer policies–in particular, criticism of the fact that about half the population receives direct government benefits in any given year, and studies concluding that 60 to 70 percent of Americans are “net takers” who receive more value from the government than they pay in taxes.6 Although the goals of the essay are primarily descriptive (of the several critiques and of the reactions to them) and predictive (of the unpromising political future of the critiques), the author’s own normative views may intrude from time to time.

February 27, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Viard Presents State Taxes, Trade Neutrality, and Nondiscrimination Today at Northwestern

ViardAlan D. Viard (American Enterprise Institute) presents Putting the Commerce Back in the Dormant Commerce Clause:  State Taxes, Trade Neutrality, and Nondiscrimination at Northwestern today as part of its Tax Colloquium Series hosted by by Herbert Beller, Charlotte CraneDavid Cameron, Philip Postlewaite, Jeffrey Sheffield, and Robert Wootton:

The Supreme Court’s Dormant Commerce Clause jurisprudence has been intensely criticized as incoherent, with many questioning whether coherence is even possible. We explain that a coherent DCC jurisprudence arises if state taxes and subsidies are evaluated based on their relative treatment of interstate and intrastate trade. Under this “trade neutrality” standard, state taxes and subsides are invalid if they create an economic incentive to engage in intrastate trade rather than interstate trade. Economic analysis reveals that such an incentive arises when the combined tax on imports and exports exceeds the tax on intrastate transactions or when the subsidy to intrastate transactions exceeds the combined subsidy to imports and exports.

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February 27, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Blanchard Presents Individual Income Tax Reform: Back to the Base Today at Temple

BlanchardKimberly S. Blanchard (Weil, Gotshal & Manges, New York) presents Individual Income Tax Reform: Back to the Base, 138 Tax Notes 307 (Jan. 21, 2013), at Temple today as part of its Tax Policy & Administration Colloquium Series hosted by Alice Abreu & Andrea Monroe:

Nearly all the individual income tax reform proposals under discussion in Washington follow the approach of broadening the tax base by eliminating tax expenditures or imposing dollar caps on deductions. This report argues that these types of proposals are regressive and would increase taxes disproportionately on middle-income earners, who are already paying aggregate taxes much higher than is generally understood or acknowledged. It also argues that the proposals are distortive because they fail to account for the differences in the cost of living in different parts of the United States. A better approach would be to restore progressivity and transparency to the individual income tax by significantly expanding the exempted base of the tax and imposing steeply graduated rates over that exempted base. Arbitrary caps, thresholds, and phaseouts would be eliminated because they distort measurement of the tax base, exacerbate horizontal inequity, and mask true effective tax rates, making it difficult to compare tax burdens among similarly situated individual taxpayers.

February 27, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Wednesday, February 26, 2014

Shaviro Presents Fixing U.S. International Taxation Today at Duke

FixingDaniel N. Shaviro (NYU) presents Fixing U.S. International Taxation (Oxford University Press, 2014) at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

Part 1, consisting of chapters 2 and 3, first reviews the basic U.S. international tax rules, and then addresses in greater detail the design challenges that they raise, along with their main incentive effects and planning implications. Part 1 could be skimmed or even skipped by readers who either are already well-versed in the operational details, or else do not wish to delve too deeply into the U.S. international tax system’s plumbing. However, it does (chapter 3 in particular) develop some points that are important to the subsequent analysis. Part 2 then shifts to a broader policy focus. To this end, chapter 4 addresses the global welfare perspective on U.S. international tax policy. Chapter 5 addresses the unilateral national welfare perspective. Finally, chapter 6 addresses the question of what practical steps might be taken to improve U.S. international tax policy.

February 26, 2014 in Book Club, Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, February 25, 2014

Sanchirico Presents International Tax and Ownership Nationality Today at NYU

SanchiricoChris William Sanchirico (Pennsylvania) presents As American as Apple Inc.: International Tax and Ownership Nationality at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Auerbach:

The ownership nationality of large US multinational companies plays an implicit but important role in the current debate over how such companies should be taxed. This paper identifies that role and investigates what is actually known about where these companies’ shareholders reside.

February 25, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Thursday, February 20, 2014

Osofsky Presents Beyond Worst-First Tax Enforcement Today at UCLA

Osofsky 4Leigh Osofsky (Miami) presents Beyond Worst-First Tax Enforcement at UCLA today as part of its Tax Policy and Public Finance Colloquium Series hosted by Jason Oh, Kirk Stark, and Alexander Wu:

When enforcement resources are limited, how should the scarce enforcement resources be allocated to maximize compliance with the law? The answer to this question can determine to what extent the law on the books translates to the law in practice. A dominant school of thought in the tax literature suggests that they should be allocated based on a “worst-first” method, whereby the individuals likely to be most noncompliant are targeted. However, “worst-first” methods suffer some underappreciated weaknesses. While “worst-first” methods can encourage all individuals to increase compliance so as not to be deemed the “worst,” they can also provide cover to engage in noncompliance that is perceived moderate for the relevant population. This dynamic can become most problematic in highly noncompliant populations. In such populations, existing, high levels of noncompliance, and underlying, structural causes of the high noncompliance can serve as coordinating mechanisms, providing mutual assurance of low compliance. Moreover, “worst-first” theories do not provide a comprehensive explanation for the group and project-based enforcement practices that are found in a number of actual enforcement settings. In response to these deficits in existing theory, I draw on work from across different disciplines to develop a new layer of analysis regarding the allocation of scarce tax enforcement resources. I suggest that, under certain conditions, deterrence can be enhanced by allocating scarce enforcement resources among a low-compliance population of taxpayers through a process I call microdeterrence. After setting forth the theoretical case for microdeterrence, I examine how it might apply in the cash business tax sector, a setting that presents particular challenges for “worst-first” methods. I conclude that microdeterrence may increase compliance, meriting its application and empirical evaluation. More fundamentally, this Article underscores the importance of the allocation of scarce enforcement resources, some of the deficits in existing theory, and the potential benefits of integrating additional layers of analysis.

February 20, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Fleming Presents Formulary Apportionment in the U.S. Today at San Diego

Fleming J. Clifton Fleming (BYU) presents Formulary Apportionment in the U.S. International Income Tax System: Putting Lipstick on a Pig? (with Robert J. Peroni (Texas)) at San Diego today as part of its Tax Law Speaker Series:

[T]he authors argue that formulary apportionment and the current standard, arm's length transfer pricing, are just two shades of lipstick on the pig that is the US international tax system, with its twin features of deferral and cross-crediting. They conclude that formulary apportionment might be the less offensive shade, but in effect the whole discussion is a diversion from a broad reform that is sorely needed on the pig itself.

February 20, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Wednesday, February 19, 2014

Osofsky Presents Beyond Worst-First Tax Enforcement Today at Pepperdine

Osofsky 4Leigh Osofsky (Miami) presents Beyond Worst-First Tax Enforcement at Pepperdine today as part of its Tax Policy Colloquium Series hosted by Paul Caron:

When enforcement resources are limited, how should the scarce enforcement resources be allocated to maximize compliance with the law? The answer to this question can determine to what extent the law on the books translates to the law in practice. A dominant school of thought in the tax literature suggests that they should be allocated based on a “worst-first” method, whereby the individuals likely to be most noncompliant are targeted. However, “worst-first” methods suffer some underappreciated weaknesses. While “worst-first” methods can encourage all individuals to increase compliance so as not to be deemed the “worst,” they can also provide cover to engage in noncompliance that is perceived moderate for the relevant population. This dynamic can become most problematic in highly noncompliant populations. In such populations, existing, high levels of noncompliance, and underlying, structural causes of the high noncompliance can serve as coordinating mechanisms, providing mutual assurance of low compliance. Moreover, “worst-first” theories do not provide a comprehensive explanation for the group and project-based enforcement practices that are found in a number of actual enforcement settings. In response to these deficits in existing theory, I draw on work from across different disciplines to develop a new layer of analysis regarding the allocation of scarce tax enforcement resources. I suggest that, under certain conditions, deterrence can be enhanced by allocating scarce enforcement resources among a low-compliance population of taxpayers through a process I call microdeterrence. After setting forth the theoretical case for microdeterrence, I examine how it might apply in the cash business tax sector, a setting that presents particular challenges for “worst-first” methods. I conclude that microdeterrence may increase compliance, meriting its application and empirical evaluation. More fundamentally, this Article underscores the importance of the allocation of scarce enforcement resources, some of the deficits in existing theory, and the potential benefits of integrating additional layers of analysis.

Update:  Post-presentation lunch:

Photo

February 19, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Graetz Presents Technological Innovation, International Competition, and International Taxation Today at Penn

GraetzMichael J. Graetz (Columbia) presents Technological Innovation, International Competition, and the Challenges of International Income Taxation, 113 Colum. L. Rev. 347 (2013) (with Rachael Doud (J.D. 2012, Yale)) at Pennsylvania today as part of its Center for Tax Law & Policy Seminar Series hosted by Michael Knoll, Chris Sanchirico, and Reed Shuldiner:

Because of the importance of technological innovation to economic growth, nations strive to stimulate and attract the research and development (“R&D”) that leads to that inn ovation and to make themselves hospitable environments for the holding of intellectual property (“IP”). Tax policies have taken center stage in their efforts to accomplish these goals and to capture a share of the income from technological innovations.

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February 19, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Lederman Presents (Un)Appealing Deference to the Tax Court Today at Duke

LedermanLeandra Lederman (Indiana-Bloomington) presents (Un)Appealing Deference to the Tax Court, 63 Duke L.J. ___ (2014), at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

The U.S. Tax Court hears the vast majority of litigated federal tax cases. It occupies an unusual place in the federal government in that it is a federal court located outside the judicial branch but whose decisions are appealable to the U.S. Courts of Appeals. This unusual situation coupled with its history as an independent agency in the executive branch can give rise to important questions, such as the standard of review that should apply to its decisions. In particular, should the Courts of Appeals treat Tax Court decisions the same as those of district courts in tax cases, or should they apply a more deferential standard analogous to review of an agency decision, as the Supreme Court held in 1943 in Dobson v. Commissioner?

Answering the standard of review question implicates issues of both law and policy. The article argues, contrary to some scholarship, that, as a doctrinal matter, no vestige of the Dobson rule remains and that Courts of Appeals must apply the same standard of judicial review they apply to district courts in non-jury cases. The article further argues that appellate review theory supports that result, as well. As the article explains, the Dobson rule was a largely instrumental one designed by Justice Jackson to reduce the volume of tax litigation. Although tax litigation has the unique characteristics of decentralization and the expertise of the Tax Court, the article demonstrates that those differences do not support departing from the policies supporting appellate review. Appellate courts therefore should not defer to the interpretations of the Tax Court any more than they do to those of the district courts.

February 19, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Thursday, February 13, 2014

Sanchirico Presents International Tax and Ownership Nationality Today at Indiana

SanchiricoChris William Sanchirico (Pennsylvania) presents As American as Apple Inc.: International Tax and Ownership Nationality at Indiana-Bloomington today as part of its Tax Policy Colloquium Series hosted by Leandra Lederman:

The ownership nationality of large US multinational companies plays an implicit but important role in the current debate over how such companies should be taxed. This paper identifies that role and investigates what is actually known about where these companies’ shareholders reside.

February 13, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Peroni Presents Formulary Apportionment in the U.S. Today at Northwestern

PeroniRobert J. Peroni (Texas) presents Formulary Apportionment in the U.S. International Income Tax System: Putting Lipstick on a Pig? (with J. Clifton Fleming (BYU)) at Northwestern today as part of its Tax Colloquium Series hosted by by Herbert Beller, Charlotte CraneDavid Cameron, Philip Postlewaite, Jeffrey Sheffield, and Robert Wootton:

[T]he authors argue that formulary apportionment and the current standard, arm's length transfer pricing, are just two shades of lipstick on the pig that is the US international tax system, with its twin features of deferral and cross-crediting. They conclude that formulary apportionment might be the less offensive shade, but in effect the whole discussion is a diversion from a broad reform that is sorely needed on the pig itself.

February 13, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Wednesday, February 12, 2014

Mehrotra Presents Corporate Taxation and the Regulation of Early 20th Century American Business Today at Duke

MehrotraAjay K. Mehrotra (Indiana) presents Corporate Taxation and the Regulation of Early Twentieth-Century American Business (with Steven A. Bank (UCLA)) at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

In the early twentieth century, the taxation of modern business corporations became increasingly important to the development of American democracy. During that time, governments at all levels began to view business corporations not only as sources of badly needed public revenue, but also as potentially dangerous wielders of concentrated economic power. To combat the growing dominance of corporations, many fiscal reformers sought to use corporate taxation as a mode of regulatory governance. This paper explores the motives and intentions of fiscal reformers during critical junctures in the development of early twentieth-century U.S. corporate taxation. It seeks to explain how changing historical conditions shaped corporate tax law and policy. More specifically, this paper investigates why activists in the first half of the twentieth century turned to taxation in particular as a technique of corporate regulation. By focusing on the pivotal ideas and actions of key political economists, social commentators, and lawmakers, this paper attempts to answer the question: why did reformers see taxation as a viable form of public control over corporate power?

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February 12, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Oh Presents The Pivotal Politics of Temporary Tax Legislation Today at Toronto

OhJason Oh (UCLA) presents The Pivotal Politics of Temporary Tax Legislation at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

Crucial to the debates surrounding temporary tax legislation are two types of uncertainty. Will the temporary provision be renewed when it is scheduled to expire? If it is renewed, will the temporary provision change? This article explicitly models the renewal of temporary legislation by extending a political science model of the legislative process. This allows a specification of the conditions under which such uncertainties are likely to be significant. Thus, we can begin to sort temporary provisions that are functionally permanent from those that are truly temporary. This has important consequences for several debates including how temporary legislation is scored for budgetary purposes.

February 12, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, February 11, 2014

Caron Presents Revitalizing the Estate Tax: Five Easy Pieces Today at Pepperdine

Caron 2012 PhotoPaul L. Caron (Pepperdine) presents Revitalizing the Estate Tax: Five Easy Pieces, 142 Tax Notes ___ (2014) (with James R. Repetti (Boston College)) at Pepperdine today as part of its Faculty Workshop Series:

In The Estate Tax Non-Gap, Why Repeal a Voluntary Tax?, 20 Stan. L. & Pol'y Rev. 153 (2009), we argued that, contrary to the state of the law over thirty-five years ago when George Cooper wrote his seminal article,  A Voluntary Tax? New Perspectives on Sophisticated Estate Tax Avoidance, 77 Colum. L. Rev. 161 (1977), taxpayers today generally “can reduce the value of assets subject to transfer tax in many instances only if they are willing to assume the risk that the reduction may be economically real and reduce the actual value of assets transferred to heirs or, alternatively, in narrow situations if they are willing to incur some tax risk.”  In Occupy the Tax Code: Using the Estate Tax to Reduce Inequality and Spur Economic Growth, 40 Pepp. L. Rev. 1255 (2013), we documented the dramatic increase in income and wealth inequality over the past thirty years and the accompanying adverse social consequences and long-term negative impact on economic growth.  We argued that tax policy historically has played an important role in reducing inequality and that the estate tax is a particularly apt reform vehicle in light of the role of inherited assets among the very rich and the adverse economic effects of such inherited wealth.  In this article, we advance five estate and gift tax reform proposals that will generate needed revenue, reduce inequality, and contribute to economic growth: (1) disallow minority discounts where the transferred asset or business is controlled by family before and after the transfer; (2) maintain parity between the unified credit exemption amount for the estate tax and gift tax; (3) reduce the wealth transfer tax exemptions to $3.5 million, increase the maximum tax rate to 45 percent, and limit the GST exemption period to 50 years; (4) restrict the ability of gifts made in trust to qualify for the gift tax annual exclusion; and (5) impose a lifetime cap on the amount that can be contributed to a Grantor-Retained Annuity Trust (“GRAT”).

February 11, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Brennan Presents Smooth Retirement Accounts Today at NYU

BrennanThomas J. Brennan (Northwestern) presents Smooth Retirement Accounts at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Auerbach:

I introduce the concept of "smooth retirement accounts" (SRAs) to provide a method for taxing retirement savings evenly over time. I contrast this with the back-loaded taxation of traditional accounts, and I use lifetime utility maximization models to demonstrate that future non-linear and uncertain tax brackets can distort savings incentives and portfolio allocations for for traditional account holders. I also contrast SRAs with the front-loaded taxation of Roth accounts, and I argue that SRAs would bring a reasonable portion of retirement account taxes into the current budget window without leading to the extreme result of Roth accounts that leave no tax receipts beyond the year of contribution. Because SRAs can eliminate investment and savings distortions for taxpayers, as well as help set government budgetary incentives correctly, I recommend that they be created by Congress as a replacement for the current choices of Roth and traditional accounts.

February 11, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Monday, February 10, 2014

Schmalbeck Presents A New Tax-Exempt Category for Churches at San Diego

SchmalbeckRichard Schmalbeck (Duke) presented Churches and Political Speech: Considering a New Exempt Category for Churches at San Diego on Friday as part of its Tax Law Speaker Series:

The U.S. tax law defining organizations that are eligible for treatment as charitable determines both the tax exemption of the organization and the deductibility for tax purposes of donations to the organization. Among the definitional conditions is an absolute ban on participation in political campaigns. While there are sound policy considerations supporting this ban on campaigning, it may operate to restrict inappropriately the expressive functions of some organizations. In particular, churches are organizations with unique interests in expression of their views. This paper offers and defends a simple solution to this situation by suggesting that churches be allowed to participate in campaigns, while denying deductions for contributions to churches. The author predicts with great confidence that this proposal will not be enacted anytime soon, but hopes that discussion of why this might be a promising idea will illuminate aspects of this problem that may lead to any of several part-way solutions suggested in the paper.

February 10, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Friday, February 7, 2014

Fleischer Presents The Inferiority of Pigouvian Taxes at UCLA

Fleischer Vic (2013)Victor Fleischer (San Diego) presented The Inferiority of Pigouvian Taxes at UCLA yesterday as part of its Tax Policy and Public Finance Colloquium hosted by Jason Oh, Kirk Stark, and Alexander Wu:

Pigouvian (or "corrective") taxes have become the favored policy instrument to address activities that cause negative externalities. There is considerable academic support for Pigouvian taxes on a wide range of products and activities, including carbon, gasoline, fat, high fructose corn syrup, financial transactions, executive pay, excessive zoning, and SUVs. Economists of all political stripes are therefore mystified by our politicians’ collective inability to see the merits of using Pigouvian taxes more frequently to address serious social harms.

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February 7, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Wednesday, February 5, 2014

Avi-Yonah Presents Taxation, Inequality, and a Federal VAT Today at Penn

Avi-YonahReuven Avi-Yonah (Michigan) presents Taxation and Inequality and Designing a Federal VAT: Summary and Recommendations at Pennsylvania today as part of its Center for Tax Law & Policy Seminar Series hosted by Michael Knoll, Chris Sanchirico, and Reed Shuldiner:

Taxation and Inequality:
The United States currently has one of the highest levels of inequality in the OECD, as measured by the Gini coefficient before taxes and transfers. In addition, numerous scholars have shown that social mobility in the United States is significantly lower than it was in the period between 1945 and 1970, when inequality was also declining. The combination of these trends is dangerous because it risks transforming the US into a society where small elites capture most of the gains, a pattern in which growth cannot be sustained over time (Acemoglu and Robinson 2012, Zingales 2013). The level of inequality in the US after taxes and transfers are taken into account is much lower, but it is still higher than in most OECD countries and the trend is still for inequality to increase. This paper explores how the US tax system can be used to counter these trends and concludes that the key is not to increase taxes on the rich (although some reforms in this direction can be adopted), but instead to adequately fund and even strengthen the social safety net. The only way to do this in the medium to longer term is to adopt a VAT.

Designing a Federal VAT:
Part I of the article explains why the US needs a federal VAT. Part II summarizes the articles dealing with design features of the federal VAT, and Part III addresses coordination issues. Part IV concludes by offering specific recommendations.

February 5, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Hines Presents Delegating Tax Today at Duke

Hines 3James R. Hines, Jr. (Michigan) presents Delegating Tax (with Kyle D. Logue (Michigan) at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

Congress delegates extensive and growing lawmaking authority to federal administrative agencies in areas other than taxation, but tightly limits the scope of IRS and Treasury regulatory discretion in the tax area, specifically not permitting these agencies to select or adjust tax rates. This Article questions why tax policy does and should differ from other policy areas in this respect, noting some of the potential policy benefits of delegation. Greater delegation of tax lawmaking authority would permit policies to benefit from the expertise of administrative agencies, and afford timely adjustment to changing economic circumstances. Furthermore, delegation of the tax reform process to an independent commission or agency offers the prospect of Congress commiting itself to rational reform and long-run budget sustainability in a way that is more apt to succeed than are piecemeal legislative efforts. The Article concludes with an analysis of the constitutionality of tax delegation, noting the applicability of recent Supreme Court interpretations that Congress has broad discretion to delegate rulemaking authority to federal agencies, and that tax policy is of a kind with other federal policies.

February 5, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (2)

Tuesday, February 4, 2014

Staudt Presents The Supercharged IPO Today at NYU

StaudtNancy Staudt (USC) presents The Supercharged IPO (with Victor Fleischer (San Diego)) at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Auerbach:

A new innovation on the IPO landscape has emerged in the last two decades, allowing owner-founders to extract billions of dollars from newly-public companies. These IPOs--labeled supercharged IPOs--have been the subject of widespread debate and controversy: lawyers, financial experts, journalists, and Members of Congress have all weighed in on the topic. Some have argued that supercharged IPOs are "brilliant, just brilliant," while others have argued they are "underhanded" and "bizarre. "

In this article, we explore the supercharged IPO and explain how and why this new deal structure differs from the more traditional IPO. We then outline various theories of financial innovation and note that the extant literature provides useful explanations for why supercharged IPOs emerged and spread so quickly across industries and geographic areas. Theory provides support for both legitimate and opportunistic uses of the supercharged IPO.

With the help of a large-N quantitative study--the first of its kind--we investigate the adoption and diffusion of this new innovation. We find that the reason parties have begun to supercharge their IPO is not linked to a desire to steal from naive investors, but rather for tax planning purposes. Supercharged IPOs enable both owner-founders and public investors to save substantial amounts of money in federal and state taxes. We conclude our study by demonstrating how our empirical findings can be used to 1) advance the literature on innovation, 2) assist firms going public in the future, and 3) shape legal reform.

Update:  Dan Shaviro blogs the workshop here.

February 4, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Monday, February 3, 2014

Winchester Presents Carried Interest for the Common Man Today at Pepperdine

WinchesterRichard Winchester (Thomas Jefferson) presents Carried Interest for the Common Man at Pepperdine today as part of our Tax Policy Colloquium Series:

In recent years, the public has become increasingly aware of the compensation arrangement known as carried interest, which permits private equity fund managers to pay tax at obscenely low rates on obscenely high earnings for their work. The publicity has led Congress to consider no fewer than eight separate pieces of legislation since 2007 to increase the tax on carried interest. Much of the energy behind this movement seems to be grounded in a concern that the tax system currently allows certain rich individuals to gain an advantage that is not available to anyone else. However, that is not entirely accurate. For years, huge numbers of ordinary self-employed people have been able to limit the tax on their earnings when they conduct their business through a formal business entity instead of as a sole proprietor. These business structures produce the same objectionable results as a carried interest arrangement. They just happen to be utilized by the common man. It is long past time for Congress to address this inequity in a comprehensive way with the same energy that it is devoting to addressing the taxation of carried interest.

Update:  Post-presentation lunch:

Photo

 

February 3, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Hickman Presents Administering the Tax System We Have Today at St. Thomas


Hickman 2014 2Kristin E. Hickman (Minnesota) presents Administering the Tax System We Have, 63 Duke L.J. ___ (2014), at the University of St. Thomas School of Law today as part of its Faculty Workshop Series:

In Mayo Foundation for Medical Education and Research v. United States, the Supreme Court rejected tax exceptionalism from administrative law doctrines and requirements as a general rule. Yet, many tax administrative practices do not comport precisely with general administrative law norms. Courts and commentators often invoke the importance of revenue raising in explaining or defending tax exceptionalism from administrative law norms. But the government’s reliance on tax collections notwithstanding, it does not necessarily follow that revenue raising is the only or even the primary focus of the contemporary U.S. tax system and those charged with administering it. Congress may perceive the non-revenue raising aspects of the tax code to be minor and peripheral to the IRC’s revenue raising function. But what if that perception is no longer accurate? The IRC now contains hundreds of tax expenditure items representing more than a trillion dollars annually of indirect government spending aimed at a variety of social welfare and regulatory goals. Treasury and the IRS share responsibility for administering the Affordable Care Act and ERISA. The IRS dedicates an entire division (out of four) to monitoring the activities of 1.6 million tax exempt organizations. If the efforts of tax administrators are increasingly focused on programs, purposes, and functions other than revenue raising, then what ought to be the implications for instances of tax exceptionalism in administration that are premised on the revenue raising function?

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February 3, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Friday, January 31, 2014

Morrow Presents Tax Valuation in Light of Uncertainty Today at Kentucky

MorrowRebecca Morrow (Wake Forest) presents Valuation in Light of Uncertainty at Kentucky today as part of its Faculty Brown Bag Workshop Series hosted by Jennifer Bird-Pollan:

Buyers and sellers of business interests, IRS officials, and courts have long faced a serious problem: they must frequently determine the present value of a future tax liability without knowing when that liability will be incurred. For example, when a corporation exists primarily to hold assets for the benefit of its owners, its value depends on the net value of the assets it holds. Such corporations are extremely common and often hold highly appreciated assets. The tax liability on the appreciation is not incurred upon the transfer of stock in the corporation; rather, it is incurred when the corporation sells its appreciated assets. Since the appreciation experienced prior to the stock transfer (referred to as “built-in gain”) will cause a future tax liability, it reduces the value of the company and therefore the value of the stock. Unfortunately, at the time when the stock is transferred, it is generally unknown when the appreciated assets will be sold. Thus, buyers and sellers attempting to arrive at appropriate stock prices and taxpayers, IRS officials, and courts attempting to calculate the estate or gift taxes due on gratuitous stock transfers must calculate the present values of future tax liabilities without knowing when those liabilities will be incurred. Courts and scholars have struggled with this problem, alternately assuming away uncertainty regarding timing or denying its importance. The result has been doctrinal inconsistency, taxpayer uncertainty, and opportunistic behavior.

This Article proposes a new valuation methodology to calculate the present value of a future tax liability when it is uncertain when that future tax liability will be incurred. Instead of ignoring uncertainties regarding timing, market participants, IRS officials, and courts can and should value future tax liabilities in a way that accounts for them by using weighted probabilities of multiple likely outcomes. This Article’s key insight is to adapt stock option valuation techniques, which account for similar uncertainties, to this problem. The resulting approach is both theoretically satisfying and eminently workable by parties, the IRS, and courts.

January 31, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Thursday, January 30, 2014

Marian Presents Rethinking Tax Disclosure in Registered Offerings Today at Northwestern

MarianOmri Marian (Florida) presents Consult Your Own Tax Advisor: Rethinking Tax Disclosure in Registered Offerings at Northwestern today as part of its Tax Colloquium Series hosted by by Herbert Beller, Charlotte CraneDavid Cameron, Philip Postlewaite, Jeffrey Sheffield, and Robert Wootton:

Issuers in registered securities offerings are required to disclose, among other tax matters, the expected tax consequences to investors that result from investing in the offered securities (“nonfinancial tax disclosure”). I advance three arguments in this regard. First, current nonfinancial tax disclosure practice, as sanctioned by the SEC, performs little regulatory function. Nonfinancial tax disclosures provide irrelevant information, sometimes fail to provide material information, create unnecessary transactions costs, and divert valuable regulatory resources to the enforcement of largely-meaningless requirements. Second, I suggest the practical reason behind this regulatory failure is a failed attempt by tax practitioners and the SEC to address investors’ heterogeneous tax preferences. Nonfinancial tax disclosure practice assumes the existence of a “reasonable investor” that is also an “average taxpayer”, and tax disclosures are drafted for the benefit of such average taxpayer. I demonstrate, however, that the concept of the “average taxpayer” is not conceptually or empirically defensible. Third, the theoretical reason for the dysfunctionality of the regulatory regime is a misguided reliance on mandatory disclosure theory in the tax context. I argue that given the special nature of tax laws, mandatory disclosure theory—even if accepted at face value—does not support the current regulatory framework of nonfinancial tax disclosure. To remedy this failure, I describe the types of tax-related disclosures that would be supported by mandatory disclosure theory. Under my suggested regulatory reform, nonfinancial tax disclosure will only include issuer-level tax items, (namely, items at the company level not otherwise disclosed in the financial statements), that affect how “reasonable investors” calculate their own individual tax liabilities. Under such a regime, there is no need to rely on the “average taxpayer” construct.

January 30, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Osofsky Presents Beyond Worst-First Tax Enforcement Today at Indiana

Osofsky 3Leigh Osofsky (Miami) presents Beyond Worst-First Tax Enforcement at Indiana-Bloomington today as part of its Tax Policy Colloquium Series hosted by Leandra Lederman:

When enforcement resources are limited, how should the scarce enforcement resources be allocated to maximize compliance with the law? The answer to this question can determine to what extent the law on the books translates to the law in practice. A dominant school of thought in the tax literature suggests that they should be allocated based on a “worst-first” method, whereby the individuals likely to be most noncompliant are targeted. However, “worst-first” methods suffer some underappreciated weaknesses. While “worst-first” methods can encourage all individuals to increase compliance so as not to be deemed the “worst,” they can also provide cover to engage in noncompliance that is perceived moderate for the relevant population. This dynamic can become most problematic in highly noncompliant populations. In such populations, existing, high levels of noncompliance, and underlying, structural causes of the high noncompliance can serve as coordinating mechanisms, providing mutual assurance of low compliance. Moreover, “worst-first” theories do not provide a comprehensive explanation for the group and project-based enforcement practices that are found in a number of actual enforcement settings. In response to these deficits in existing theory, I draw on work from across different disciplines to develop a new layer of analysis regarding the allocation of scarce tax enforcement resources. I suggest that, under certain conditions, deterrence can be enhanced by allocating scarce enforcement resources among a low-compliance population of taxpayers through a process I call microdeterrence. After setting forth the theoretical case for microdeterrence, I examine how it might apply in the cash business tax sector, a setting that presents particular challenges for “worst-first” methods. I conclude that microdeterrence may increase compliance, meriting its application and empirical evaluation. More fundamentally, this Article underscores the importance of the allocation of scarce enforcement resources, some of the deficits in existing theory, and the potential benefits of integrating additional layers of analysis.

January 30, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Rosenthal Presents Local Public School Finance in a Time of Institutional Change Today at UCLA

RosentahlHoward Rosenthal (NYU, Department of Politics) presents The Twilight of the Setter? Local Public School Finance in a Time of Institutional Change (with Sean Corcoran (NYU, School of Culture, Education, and Human Development) & Thomas Romer (Princeton, Woodrow Wilson School of Public and International Affairs)) at UCLA today as part of its Tax Policy and Public Finance Colloquium hosted by Jason Oh, Kirk Stark, and Alexander Wu:

The operation and financing of primary and secondary public schools in the US is highly decentralized. Most of the budget of each of the 13,000+ school districts comes from a combination of local and state revenues. State constitutions and statutes determine the degree of local district autonomy and scope of taxing power.

As part of an ongoing project on the political economy of education finance, this paper reports on some developments in school spending in one state during a time when some of the state’s constitutional rules governing local school district taxing powers changed. In part, the paper provides a replication of tests of a model of bureaucratic agenda-setting in the financing of elementary and secondary public education.

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January 30, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Lipton Presents Tribune, Canal Corp., and the New Proposed Partnership Tax Regs Today at Temple

LiptonRichard M. Lipton (Baker & McKenzie, Chicago) presents Leveraged Partnerships Under Fire? IRS Attacks Tribune's Transactions, 119 J. Tax'n 73 (Aug. 2013), and Tax Court Drains Canal Corporation's Leveraged Partnership Transaction, 113 J. Tax'n 340 (Dec. 2010), at Temple today as part of its Tax Policy & Administration Colloquium Series hosted by Alice Abreu & Andrea Monroe:

Tribune:

An internal IRS document indicates the manner in which the Service will argue against the results sought by a structured partnership transaction. Some of the Service's arguments, however, do not withstand scrutiny. It can be anticipated that this determination will not be accepted by the taxpayer involved. In CCA 201324013, the IRS set forth the reasons that it planned to attack a ‘leveraged partnership‘ transaction that was quickly identified as the Tribune Company's disposition of Newsday to Cablevision in 2010. The IRS based its attack on the reasoning in the Tax Court's decision in Canal Corporation, 135 TC 199 (2010), as well as the Service's view of the substance of the Tribune transaction.

The publication of the CCA immediately sparked a discussion in the popular press about how the Tribune could owe millions in tax, penalties, and interest as a result of this transaction and a related transaction involving the Chicago Cubs.  On a close review, however, it is far from clear that the Service's analysis in the CCA is the better view of the applicable law or the application of that law to the facts in the transaction. Indeed, the Service's contention that the transaction should be viewed as a disguised sale appears to be more wishful thinking than a sound consideration of what occurred. 

Canal Corp.:

The IRS has finally prevailed in its latest challenge to a leveraged partnership transaction, in Canal Corporation, 135 TC 199 (2010). The somewhat surprising (and arguably incorrect) holding in Canal was that the taxpayer's indemnification obligation of another partner's guarantee to the creditor of the partnership should be completely disregarded under the anti-abuse rule in Reg. 1.752-2(j) . Even more questionable was the Tax Court's decision to apply the accuracy-related penalty under Sections 6662(a) and (b)(2) for a substantial understatement of income tax. 

REG-119305-11, 79 Fed. Reg. 4826-4839 (Jan. 30, 2014):

This document contains proposed regulations under section 707 of the Internal Revenue Code (Code) relating to disguised sales of property to or by a partnership and under section 752 relating to the treatment of partnership liabilities. The proposed regulations address certain deficiencies and technical ambiguities in the section 707 regulations and certain issues in determining partners’ shares of liabilities under section 752. The proposed regulations affect partnerships and their partners.  

January 30, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Staudt Presents Guns and Taxes at Duke

StaudtNancy Staudt (USC) presented Guns and Taxes (with Thomas Griffith (USC)) at Duke as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

The federal and state governments have long taxed commodities, such as alcohol, gas, cigarettes, guns and ammunition. Firearms, however, have recently taken on a unique status in the lexicon of taxable goods given the Supreme Court case, District of Columbia v. Heller, 554 U.S. 570 (2008), which held the 2nd Amendment protects an individual’s right to own a handgun in the home. For purposes of this paper, we assume that Heller does not create an outright bar to taxing weaponry, but does require clearly articulated economic and policy justifications to pass constitutional muster. Accordingly, we examine three possible rationales and uncover strong arguments both for and against taxation. Ultimately, we conclude that policymakers should operate much like insurers: they should subsidize the safe use of guns and tax high-risk users.

January 30, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (2)

Wednesday, January 29, 2014

Doran Presents Tax Legislation in the Contemporary U.S. Congress Today at Duke

DoranMichael Doran (Georgetown; moving to Virginia) presents Tax Legislation in the Contemporary U.S. Congress, 67 Tax L. Rev. ___ (2013), at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

This paper identifies and analyzes a recent trend toward “clean” federal tax legislation. Existing explanations of the tax-legislative process account for the regular, highly particularistic tax legislation prevalent during the 1980s and the early 1990s using legislator-motivation and traditional policy models. But a new tax-legislative process, characterized by alternating periods of tax gridlock and strikingly non-particularistic tax legislation, emerged during the late 1990s. This paper argues that tax gridlock and non-particularistic tax legislation are best understood as companion phenomena, and it examines three general determinants of recent tax-legislative outcomes. First, exogenous events, particularly macro-economic and macro-political developments, typically provide the central policy objective for any item of major tax legislation. Second, the voting behavior of individual legislators on tax legislation corresponds closely to generally accepted understandings of legislator motivations. Third and most importantly, several legislative-organizational developments within Congress – specifically, the emergence of sharp coalitional polarization and strong coalitional cohesion, the re-establishment of centralized chamber management, and the relaxation of restrictions on the federal budget – combined to produce the new tax-legislative process during the late 1990s and the 2000s. This paper does not offer a positive theory of the tax-legislative process or make predictions about tax-legislative outcomes. Rather, it builds on existing accounts to provide an updated and more nuanced explanation of the tax-legislative process in the contemporary Congress.

January 29, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Wooley Presents The Taxation of Families in Canada Today at Toronto

WooleyFrances Woolley (Carleton University, Department of Economics) presents It's Just Not Fair! Canada's On-Going Debate Over the Taxation of Families at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

The aim of this paper is to re-examine the Carter Commission’s stance on the taxation of married couples, and use it to illuminate current debates over the tax treatment of Canadian families. I argue that the Carter Commission’s fairness arguments for income splitting were neither well developed nor empirically grounded. I suggest there is an alternative, more pragmatic explanation of the Carter Commission’s advocacy of joint taxation: a desire to bring Canada’s tax treatment of families in line with the treatment south of the border. The issue was not so much the fairness of Canada’s tax treatment, but envy of American tax treatment. I then argue that a parallel dynamic of envy exists today. When the Carter Commission reported, a man’s standard of living was primarily determined by his own earnings. Two income professional couples were rare. Today, the two-income couple is the norm, and a professional man with a stay-at-home spouse can expect to enjoy a lower standard of living than his contemporaries in dual-career relationships. This, I argue, leads single-earner families to envy dual-earner ones’ greater affluence. While this envy is understandable, it is not the job of the income tax system to remedy it.

January 29, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Elkins Presents The Normative Underpinnings of Source-Country Taxation Today at Touro

Elkins (2014)David Elkins (Netanya College School of Law) presents The Normative Underpinnings of Source-Country Taxation at Touro today:

Taxpayers are subject to income tax imposed by the country to which they have a sufficient personal nexus (home-country taxation) and by the country from which they derive their income (source-country taxation). Home country taxation is ordinarily understood as an application of the principle of ability-to-pay. Source-country taxation is ordinarily understood as a function of benefit theory.

This paper challenges the conventional wisdom and argues that ability-to-pay offers a better normative justification for source-country taxation then does benefit theory. First, it shows that benefit theory cannot satisfactorily explain source-country taxation. Second, it examines current trends in social philosophy and demonstrates that source-country taxation flows from the same principles that support the imposition of income tax by the home country.

January 29, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Schmalbeck Presents Big-Time College Sports and the Tax System at Duke

SchmalbeckRichard Schmalbeck (Duke) presented Two Strikes Against the Sweetheart Deal Between Big-Time College Sports and the Tax System at Duke as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

The purpose of this essay is not to destroy big-time college sports. If that were the purpose, it would be completely pointless. Big-time sports are deeply and widely popular; they are not going away. But they are also unmistakably commercial, at least in some aspects. While the on-campus aspects of college sports may have some connections, however remote, with the educational purposes of the institution that sponsors them, the televised programming associated with college sports has no substantial connection to those purposes. When the broadcasting of college sports was largely local, and the revenue derived from it quite modest, it may have been appropriate to ignore the tangential connection to exempt purpose. But as the broadcasting of college sports has gone national, and begun to produce prodigious amounts of revenue, it no longer makes sense to ignore the fact that it is generating unrelated business income for the participating universities.

In 1980, the IRS made a mistake, even in light of the facts known at the time, in ruling that television revenue was related to exempt purpose. But as the revenue has grown a hundred fold in the years since, it has become clear that a reevaluation of this mistake is increasingly needed. The doctrine of disaggregating advertising revenue provides a plausible hook for the unrelated business income tax, but in fact any revenue from the sale of television rights has the same basic qualities: it furthers no educational purposes, and cannot be considered related to the university’s reason for exemption.

And when Congress added section 170(l) to the Code twenty-five years ago, it made a mistake. It too may have misjudged the significance of the deduction it was authorizing in declaring eighty percent of “contributions” made to purchase seat licenses was deductible, but that significance has become clearer as big-time sports have grown ever more big-time in the years since. There is now a substantial revenue loss associated with this provision, and the provision has no convincing rationale. Congress should review the rule, and close this loophole.

January 29, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, January 28, 2014

Shaheen Presents The GAAP Lock-Out Effect and the Investment Behavior of Multinational Firms Today at NYU

ShaheenFadi Shaheen (Rutgers-Newark) presents The GAAP Lock-Out Effect and the Investment Behavior of Multinational Firms, 68 Tax L. Rev. ___ (2014), at NYU today as part of its Tax Policy Colloquium hosted by Daniel Shaviro and Alan Auerbach:

This paper looks into the investment behavior of multinational firms with respect to earnings of their foreign subsidiaries that are locked-out abroad against the firms’ own real income (present value) interest in order to avoid the repatriation tax and the associated GAAP “penalty.” The paper extends the analysis of the existing theoretical models beyond the optimal repatriation-versus-retention point in order to explore what would be a second-best optimal investment strategy with respect to locked-out earnings. The paper shows that the choice of investment in this second-best optimal setting should differ from that in the first-best optimal setting. One example is that investing locked-out earnings in passive investments would generally generate higher present value than in active investments with higher rates of return. This in turn magnifies the conflict between real and book income considerations, leading firms to act again against their own real income interest when investing locked-out earnings abroad, and resulting in efficiency costs not yet identified, both at the firm level and to the economy in general.

January 28, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Monday, January 27, 2014

Barry & Taylor Present Corporate Inversions Today at San Diego

USDJordan Barry (San Diego) and Willard Taylor (Of Counsel, Sullivan & Cromwell; Visiting Professor, San Diego) present Corporate Inversions at San Diego today as part of its Tax Law Speaker Series:

An inversion, also known as an expatriation, is when a U.S. corporation alters its corporate structure so that it ceases to be a U.S. corporation, such as by re-incorporating (through a merger or otherwise) in another jurisdiction. We analyze current law regarding corporate inversions and the policy issues that inversions present. We provide a short history of inversions and the legislative and regulatory efforts enacted to restrain them. We then discuss which countries U.S. corporations currently expatriate to and why. We present some of the tax risks associated with corporate inversions and survey post-inversion tax planning. Finally, we discuss what policy measures Congress and the IRS might consider in response to the most recent wave of inversion transactions.

January 27, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Friday, January 24, 2014

Bankman Presents Using the 'Smart Return' to Reduce Tax Evasion Today at San Diego

BankmanJoseph Bankman (Stanford) presents Using the "Smart Return" to Reduce Tax Evasion (with Clifford Nass (Stanford) & Joel Slemrod (Michigan)) at San Diego today as part of its Tax Law Speaker Series:

Tax evasion costs federal, state and local governments over 400 billion dollars a year. Compliance efforts have centered on the monetary payoff of evasion. Evasion has been reduced through third-party reporting, which increases the odds of detection (in some cases, to a near-certainty). Audits and increased penalties have also been used to reduce evasion. At the margin, however, these methods have proven too expensive or politically unpopular to reduce substantially this core residue of evasion.

The explosion of research in social psychology over the past few decades concerning motivation and deception, along with industry experience with data-driven interactive systems, suggests a different approach to the problem: redesign the tax forms and on-line filing process to elicit more truthful responses from taxpayers. To illustrate the potential of this approach, in this paper we propose two different categories of changes that merit testing through pilot studies. The first involves changing the wording on existing returns to increase the psychological cost of evasion and increase the perceived expectation of detection. The second uses on-line "conversational agents" to ask adaptive questions. Adaptive questions incorporate information known about the taxpayer, including information from previous questions. Adaptive questioning is commonly used in e-commerce because it is more efficient. In the tax context, it would allow the IRS to ask more focused questions, which should reduce evasion and audit costs. It could also benefit taxpayers by reducing filing time and eliminating the risk of subsequent audit. Adaptive questioning that is part of a data-driven system allows for continuous experimentation and real-time modification of algorithms to incorporate the results of that experimentation. A data-driven adaptive questioning system can incorporate and optimize a mix of taxpayer filing experience and revenue need. It can co-exist with the existing tax preparation industry, including commercial e-filing systems such as Turbo Tax. In the future, as now, the industry can help clients plan for taxes, take advantage of deductions and complete returns.

January 24, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Thursday, January 23, 2014

Brooks Presents Fiscal Federalism as Risk Management​ Today at UCLA

Brooks (John)John R. Brooks II (Georgetown) presents Fiscal Federalism as Risk Management​ at UCLA today as part of its Tax Policy and Public Finance Colloquium hosted by Jason Oh, Kirk Stark, and Alexander Wu:

In addition to funding government and redistributing income, a redistributive tax-and-transfer system, and a progressive income tax in particular, provides social insurance against the risk of uncertain future income. By providing for high taxes for high incomes, and low taxes, exemptions, and transfers for low incomes, a progressive income tax lowers the volatility of potential after-tax income relative to a lump-sum tax. This insurance function is distinct from the redistributive function of the system, since it provides a direct risk-mitigation benefit to the taxpayer himself, rather than simply redistributing income from one taxpayer to another.

This article analyzes the question of at what level of government to best assign the income tax role in a federal system, given both its redistributive and insurance functions. The standard view in the literature is that redistribution is best done centrally, and thus that an income tax is best used by the federal government, rather than state governments. Yet recent work suggests that states can effectively have some role in redistribution. Income insurance, however, can be more effectively done by the federal government, because of its larger risk pool and better ability to handle revenue fluctuations.

This article argues that states will, and likely should, use progressive income taxes as a tool of greater redistribution. At the same time, the insurance function of a progressive income tax can still be nationalized through policies that resemble re-insurance. In particular, this article looks at the idea of a multi-state rainy-day fund as a form of pooled insurance, as well as alternatives that may achieve some of the same benefits.

January 23, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tuesday, January 21, 2014

Abreu Presents The Rule of Law as a Law of Standards: Interpreting the Tax Code at Northwestern

AbreuAlice Abreu (Temple) presented The Rule of Law as a Law of Standards: Interpreting the Internal Revenue Code at Northwestern last week as part of its Tax Colloquium Series hosted by by Herbert Beller, Charlotte CraneDavid Cameron, Philip Postlewaite, Jeffrey Sheffield, and Robert Wootton:

We begin in Part I by discussing the relationship between rules and the rule of law and explaining why we think so many tax scholars are drawn to a view of the tax law as consisting primarily of rules. In Part II we summarize and expand our previous discussion of the definition of income to determine whether the term is susceptible to construction as a rule. We show that even a brief trip through some of the litigation required to determine whether certain items are income leads to the conclusion that it is not a rule. In Part III we tease out the functions served by interpreting income as a standard and examine the question of where interpretive authority lies with respect to the Code. In Part IV we turn to several examples discussed by Professor Zelenak to distinguish what we regard as interpretation (both “correct” and “incorrect”) from what he, and we, view as either a “disregard” or an “underenforcement” of the law; we think that the contrast clarifies the contours of interpretation.

January 21, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Levmore Presents From Helmets to Savings and Inheritance Taxes Today at NYU

Levmore 3Saul Levmore (Chicago) presents From Helmets to Savings and Inheritance Taxes: Regulatory Intensity, Information Revelation and Internalities Internality Regulation Through Public Choice at NYU today as part of its Tax Policy Colloquium hosted by Daniel Shaviro and Alan Auerbach:

It is easy to overstate the link between information revelation and government intervention. I began by emphasizing that decisions about regulatory intensity require the extraction of private information, and advanced the idea that some regulatory schemes can enable individuals to self-reveal and customize their (self-) regulation.

Even when the scope of inquiry is narrowed to laws that can be understood as driven by internalities, information revelation problems seem more disparate than alike. Self-assessment strategies work where there is little coercion and moral hazard. In most cases, however, it is hard enough to discover the preferences of one’s own future self, and so much more difficult to discover another’s. I have suggested that there may be some areas, like savings, where moderately coercive experiments could reveal useful information about oneself and one’s peers. But such experiments, and mechanism design more generally, need to be sensitive to the political coalitions that make regulatory intervention possible.

January 21, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (1)