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Wednesday, July 29, 2015

NPR: Should Law Schools Pay If Students Don't Get Jobs?

NPRNPR Marketplace, Should Law Schools Pay If Students Don't Get Jobs?:

Law school doesn't look like a great deal for many students. Tuition keeps going up, which means bigger loans to pay off.

But the job market for lawyers remains weak. At lower-tier schools, less than half of students end up with jobs as attorneys, according to a recent report from an American Bar Association Task Force.

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July 29, 2015 | Permalink | Comments (1)

Senate Permanent Subcommittee on Investigations Shifts Focus From Business To Government

Senate LogoBloomberg, Senate Body Shifts Focus After Years Probing Apple, Goldman, UBS, by Jesse Drucker & Richard Rubin:

A U.S. Senate investigative subcommittee, which has used its power for more than a decade to scrutinize corporations and financial institutions for wrongdoing, is shifting its focus to keeping tabs on the government.

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July 29, 2015 in Congressional News, Tax | Permalink | Comments (0)

Jack Manhire Leaves IRS To Join Texas A&M Law School

ManhireTexas A&M Press Release, Jack Manhire Leaves IRS, Treasury to Join Texas A&M Law:

John T. (“Jack”) Manhire, Jr., former Chief of Legal Analysis for the IRS Office of Professional Responsibility and National Program Chair, Executive Education for the U.S. Treasury Executive Institute, has accepted a position as Director of Program Development at Texas A&M University School of Law.

Some of his prior positions include Director of Technical Analysis & Guidance (Policy and Procedure) for the IRS Taxpayer Advocate Service, and Attorney-Advisor (Tax) to the IRS National Taxpayer Advocate. Before entering full-time government service, he practiced law privately for over a decade, primarily in the field of federal tax controversies, and was Division Chief, Tax Law for the U.S. Coast Guard Auxiliary National Office.

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July 29, 2015 in IRS News, Tax, Tax Prof Moves | Permalink | Comments (2)

Right, Left Agree: Ivy League Stiffs Conservative Supreme Court Justices

Ivy League (2014)National Law Journal, Professor Says Ivy League Stiffs Conservative Justices:

Are the nation’s Ivy League schools giving short shrift to conservative U.S. Supreme Court justices when they confer honorary degrees? A survey by one law professor suggests the answer is yes, and that the reason is ideology.

Of the 14 honorary degrees bestowed by Ivy League institutions to living justices, 12 went to those on the high court’s left side, said conservative legal scholar John McGinnis of Northwestern University School of Law. The two exceptions, from Brown and Yale, went to Justice Sandra Day O’Connor, a moderate conservative, he said.

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July 29, 2015 in Legal Education | Permalink | Comments (1)

Kadet: Attacking Profit Shifting — The Approach Everyone Forgets

Jeffery M. Kadet (University of Washington), Attacking Profit Shifting: The Approach Everyone Forgets, 148 Tax Notes 193 (July 15, 2015):

Kadet uses hypothetical but realistic examples to show how the IRS could combat profit shifting by directly taxing the effectively connected income of controlled foreign corporations. He also urges Treasury to update the ECI regulations as soon as possible to reflect current technology and modern business models and practices. 

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July 29, 2015 in Scholarship, Tax | Permalink | Comments (0)

Mayer: Limits on State Regulation of Religious Organizations

Lloyd Hitoshi Mayer (Notre Dame), Limits on State Regulation of Religious Organizations: Where We Are and Where We Are Going:

The breadth of activities and organizational forms among religious organizations rivals that of nonprofits generally, and religious organizations are vulnerable to the same types of problems that justify state regulation and oversight of nonprofits. Such problems include excessive compensation, improper benefits for board members and other insiders, misleading or fraudulent fundraising, employment discrimination, unsafe working conditions, consumer fraud, improper debt collection, and many others. Religious organizations are different, however, in that under federal and state law they enjoy unique protections from state regulation.

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July 29, 2015 | Permalink | Comments (0)

Why All Attorneys Should Learn About Entrepreneurship In Law School

EntJ. Mark Phillips (Belmont), Entrepreneurial Esquires in the New Economy: Why All Attorneys Should Learn About Entrepreneurship in Law School, 8 J. Bus. Entrepreneurship & L. 59 (2014):

As the legal industry continues to recover from the shock of the recent recession, it finds itself in a fundamentally different place than it was ten years ago, with even more tumultuous change on the horizon. Economic pressure coupled with continued technological innovation has increased attorney unemployment levels, shifted law firm business models, and changed the expectations of legal clientele. Yet, despite this radically shifting market place, legal education has remained fundamentally unchanged. This article examines the current state of the legal industry through an entrepreneurial lens and juxtaposes it with the current state of legal education. In doing so, this article sets forth three key claims:

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July 29, 2015 in Legal Education, Scholarship | Permalink | Comments (7)

The IRS Scandal, Day 811

IRS Logo 2Judicial Watch Press Release, IRS Produces Recovered Lerner Emails:

Judicial Watch released 906 pages of newly recovered Lois Lerner emails from the IRS that are believed to recently have been recovered by the IRS’ internal watchdog – the Treasury Inspector General for Tax Administration (TIGTA).  The IRS released the emails under a court order by U.S. District Court Judge Emmet Sullivan.  The new documents show that Lois Lerner and other top officials in the Exempt Organizations Unit of the Internal Revenue Service (IRS), including soon-to-be Acting IRS Commissioner Steve Miller, closely monitored and approved the controversial handling of tax-exempt applications by Tea Party organizations.  The documents also show that at least one group received an inquiry from the IRS in order to buy time and keep the organization from contacting Congress. ...

“These recovered Lois Lerner emails had to be dragged out of the Obama IRS, which is still resisting a federal court order requiring disclosure of Lerner’s ‘lost’ emails,” said Judicial Watch President Tom Fitton.  “This material shows that the IRS’ cover-up began years ago.  We now have smoking-gun proof that top officials in the Obama IRS unlawfully harassed taxpayers just to keep them from complaining to Congress about IRS’ targeting and abuse.  No wonder the Obama IRS has had such little interest in preserving or finding Lois Lerner’s emails.”

Americans for Tax Reform, IRS Used Instant Messaging System to Hide Internal Communications:

The IRS used a “wholly separate” instant messaging system that automatically deleted office communications, according to documentation released by the House Oversight Committee on Monday. The system appears to have been purposefully used by agency officials responsible for the targeting of conservative non-profits, in order to evade public scrutiny.

MSNBC (The Maddow Blog), House Republicans Pretend IRS ‘Scandal’ Still Exists:

It’s been about two years since Republicans and much of the Beltway media thought it had finally uncovered a real White House “scandal.” According to the narrative, the Obama administration used the Internal Revenue Service to “target” conservatives, which represented an outrageous abuse of power.

For about a week, it looked like a serious, proper controversy, worthy of outrage. Soon after, however, the whole thing collapsed – the tax agency scrutinized liberal, conservative, and non-ideological groups, effectively ending the story. Every allegation, including conspiracy theories about White House involvement, evaporated into nothing. For two years, GOP lawmakers looked for evidence of wrongdoing, and for two years they found no proof to bolster their apoplexy.

It came as a bit of a surprise, then, to see 21 House Republicans hold a press conference late yesterday, trying anew to breathe life into a discredited story. ...

Just so we’re clear, these House Republicans still haven’t uncovered any evidence of official wrongdoing, and they didn’t accuse Koskinen of having any role in “targeting” anyone. Rather, the GOP lawmakers are convinced Koskinen hasn’t done enough to help them find evidence to substantiate allegations that fell apart two years ago.

Or put another way, they want to fire the IRS guy who replaced the other IRS guy who was fired over a “scandal” that never really existed in the first place. ...

[Y]yesterday’s press conference appeared to be an example of House Republicans throwing a tantrum just for the sake of throwing a tantrum – they still have no evidence of an actual scandal and they offered literally nothing new yesterday other than their own misplaced outrage.

This isn’t even a close call. Cummings pointed to the recent release of a report from the IRS inspector general’s office, which made explicitly clear to the Oversight Committee that there’s just nothing here. Republicans accused Lois Lerner of deliberately crashing a hard drive; the inspector general found the opposite. Republicans said back-up tapes were intentionally destroyed; the inspector general found the opposite. Republicans said Koskinen tried to hide information from Congress; the inspector general found the opposite. Republicans said the IRS hid damaging emails; the inspector general found the opposite.

Why GOP lawmakers even bothered with yesterday’s press conference is something of a mystery. Maybe they were bored. Maybe someone needed a pretense for a new fundraising letter. Whatever the reasoning, there’s still no reason to take any of this nonsense seriously.

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July 29, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Tuesday, July 28, 2015

Hickman: The Tax Court Delivers An APA-Based Smackdown

Hickman 2014 2TaxProf Blog op-ed:   Altera Corp. & Subs. v. Commissioner: The Tax Court Delivers An APA-Based Smackdown, by Kristin Hickman (Minnesota):

Since the Supreme Court decided the Mayo Foundation case in 2011, the government has done everything it can to limit the scope of the Supreme Court’s 2011 Mayo Foundation decision.  Even though the Mayo Foundation Court declined “to carve out an approach to administrative review good for tax law only” and otherwise signaled fealty to general administrative law norms in the tax context, the IRS and the Department of Justice have repeatedly pursued a narrow construction of Mayo Foundation, and the Tax Court has often been happy to play along.  Not today.

In Altera Corp. & Subs. v. Comm’r,, 145 T.C. No. 3 (July 27, 2015) the Tax Court unanimously invalidated regulations under Section 482 requiring participants in qualified cost-sharing arrangements to include stock-based compensation costs in the cost pool in order to comply with the arm’s length standard, on grounds that the regulations were not the product of reasoned decisionmaking as required by Administrative Procedure Act (APA) § 706(2)(A) and Motor Vehicle Manufacturers Association of the United States v. State Farm Mutual Automobile Insurance Co.,, 463 U.S. 29 (1983), known in administrative law circles as State Farm.  From top to bottom, the Altera opinion reads like a treatise on general administrative law requirements and norms.  Without delving into the policy details of the regulation at issue, the following paragraphs summarize the Tax Court’s opinion and its potential implications.

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July 28, 2015 in New Cases, Scholarship, Tax | Permalink | Comments (2)

Boston College Seeks To Hire A Tax Prof

Boston College Law School Logo (2014)Boston College Law School:

BOSTON COLLEGE LAW SCHOOL expects to make two faculty appointments in fields that might include constitutional law and/or taxation. Hiring rank would be dependent on the background and experience of the applicant. Applicants must possess a J.D. or equivalent degree and outstanding academic credentials. Relevant experience in private practice, government service, or a judicial clerkship is strongly preferred.

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July 28, 2015 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)

More On Hillary Clinton's Capital Gains Tax Plan

HillaryFollowing up on Sunday's post, Hillary Clinton's Capital Gains Tax Plan

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July 28, 2015 in Political News, Tax | Permalink | Comments (0)

Sanchirico & Shuldiner: The Deferral Effects Of Passing Through Foreign Subsidiaries’ Passive Income

Chris William Sanchirico (Pennsylvania) & Reed Shuldiner (Pennsylvania), The Deferral Effects of Passing Through Foreign Subsidiaries’ Passive Income:

The immediate U.S. taxation of foreign subsidiaries’ passive, but not active income is a scenario of increasing practical importance. This paper builds on Alvin Warren’s recent analysis of this partially deferral-tempering case. It clarifies some of the legal and economic mechanics behind Warren’s formula. It also makes several points de novo. It highlights the conceptual relationship between passive-income pass-through and delayed realization of accrued gains. It points out that delayed realization inside the subsidiary effectively deactivates passive-income pass-through. And it describes when it does and does not matter that the parent takes interim distributions from the subsidiary, as when it uses such distributions to pay its interim pass-through tax liability.

July 28, 2015 in Scholarship, Tax | Permalink | Comments (0)

Brunson & Herzig: Tax Exemption, Public Policy, And Discriminatory Fraternities

SigmaFollowing up on my previous post, Using the Tax Law to Combat Racist Fraternities and Sororities:  Samuel D. Brunson (Loyola-Chicago) & David Herzig (Valparaiso), Tax Exemption, Public Policy, and Discriminatory Fraternities, 35 Va. Tax Rev. ___ (2015):

In this Essay, Professors Herzig and Brunson make the normative argument that the I.R.S. should reject tax-exemptions of discriminatory social clubs. They look to current Supreme Court jurisprudence to demonstrate a willingness of the Court to import a public policy rule into the social club rules. Alternatively, if this position is untenable under traditional administrative law principles, they propose a statutory fix.

July 28, 2015 in Scholarship, Tax | Permalink | Comments (0)

2nd National Symposium On Experiential Education In Law

ElonSecond National Symposium on Experiential Education In Law, 7 Elon L. Rev. 1-430 (2015)

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July 28, 2015 in Legal Education, Scholarship | Permalink | Comments (0)

Baltimore, Boston Launch Legal Practice Incubators For Recent Law School Graduates

IncubatorThree Boston (Boston College, Boston University, and Northeastern) and two Baltimore (Baltimore, Maryland) law schools have launched legal practice incubators, bringing the total number of law schools participating in such programs to over 30.

Baltimore:  "In Baltimore, each school will contribute three graduates who have passed the Maryland bar exam for the inaugural cohort. The participants will spend 12 to 18 months getting their practices off the ground. Tobin said the schools would look for graduates who aspire to solo or small-firm practices and have an entrepreneurial bent. The law schools will provide office space, telephones and equipment, as well as malpractice insurance and bar dues. The graduates will get access to Westlaw, which provides free services to legal incubators."

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July 28, 2015 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 810

IRS Logo 2Jason Chaffetz, Chair of the House Committee on Oversight and Government Reform, and 20 Republican members of the committee, have sent this 32-page letter to President Obama, requesting that he remove IRS Commissioner John Koskinen for obstructing the congressional investigation into the IRS's targeting of conservative groups by (1) failing to comply with a congressional subpoena, (2) failing to testify truthfully, and (3) failing to preserve and produce up to 24,000 emails relevant to the investigation.

(Click on YouTube button on bottom right to view video directly on YouTube to avoid interruption caused by blog's refresh rate.)

Wall Street Journal op-ed:  The Stonewall at the Top of the IRS, by Ron DeSantis (Chair, House Oversight and Government Reform Subcommittee on National Security) & Jim Jordan (Chair, House Oversight and Government Reform Subcommittee on Health Care, Benefits and Administrative Rules):

Internal Revenue Service Commissioner John Koskinen needs to go.

When it was revealed in 2013 that the IRS had targeted conservative groups for exercising their First Amendment rights, President Obama correctly called the policy “inexcusable” and pledged accountability. He even fired the then-acting IRS commissioner because he said it was necessary to have “new leadership that can help restore confidence going forward.”

Unfortunately, Commissioner Koskinen, who took over in the wake of the IRS targeting scandal, has failed the American people by frustrating Congress’s attempts to ascertain the truth. A taxpayer would never get away with treating an IRS audit the way that IRS officials have treated the congressional investigation. Civil officers like Mr. Koskinen have historically been held to a higher standard than private citizens because they have fiduciary obligations to the public. ...

If the president doesn’t remove Mr. Koskinen from his post, then Congress should remove him through impeachment. The impeachment power is a political check that, as Alexander Hamilton wrote in Federalist No. 65 in 1788, protects the public against “the abuse or violation of some public trust.”

Supreme Court Justice Joseph Story echoed Hamilton in 1833 when he distinguished impeachable offenses from criminal offenses, noting that they “are aptly termed political offenses, growing out of personal misconduct or gross neglect, or usurpation, or habitual disregard for the public interests . . . They must be examined upon very broad and comprehensive principles of public policy and duty.”

John Koskinen has violated the public trust, breached his fiduciary obligations and demonstrated his unfitness to serve. Mr. President, it’s time for Commissioner Koskinen to go. If you don’t act, we will.

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July 28, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Monday, July 27, 2015

WSJ: Why Cigna-Anthem And Aetna-Humana Mergers Are Partially Tax-Free, But Not ACE-Chubb Merger

LogosWall Street Journal, Three Mergers, But One Isn’t Tax Free:

This is a tale of three similar mergers with very different tax consequences for shareholders.

One is the $48.4 billion Cigna purchase by Anthem announced Friday. Another is the $34.1 billion combination of two health-care giants, Aetna and Humana, announced July 3. And the final deal is the $28.3 billion merger of two insurance giants, ACE and Chubb, announced July 1.

At first glance, the deals look alike—and like several other mergers this year. In all three, the shareholders of the acquired firms, Cigna, Humana and Chubb, will turn in their current holdings in exchange for about half cash and half shares, assuming regulators approve the deals. The cash payments will generally be taxable as capital gains if the investor’s holdings are in taxable accounts, rather than in tax-sheltered retirement plans such as IRAs or 401(k)s.

There is a big difference between the deals, however. Humana and Cigna shareholders won’t owe tax on their receipt of Aetna and Anthem shares, while Chubb shareholders will owe tax on their receipt of ACE shares.

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July 27, 2015 in Tax | Permalink | Comments (0)

Debate: Is It Time To End Faculty Tenure?

TenureLubbock Avalanche-Journal Debate, Is It Time for Tenure to End?:

This week, Arnold Loewy and Donald May debate the merits of tenure. Donald has been a candidate for Congress and writes an independent blog on lubbockonline.com and Arnold is the George Killiam Professor of Law at Texas Tech University School of Law.

Donald: Tenure strengthens liberals’ campus stranglehold

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July 27, 2015 | Permalink | Comments (2)

McCubbins & Seljan: The Effect Of Proposition 13 On Municipal Revenue Sources

Prop 132Colin H. McCubbins (Stanford) & Ellen Seljan (Lewis & Clark), Staying at Home: The Effect of Proposition 13 on Municipal Revenue Sources:

The effects of California's Proposition 13 are far reaching in both California state and municipal government finance. For local governments, who relied most heavily on property taxes to fund infrastructural development and public services, the effects were especially pronounced. Previous findings have indicated that this has caused local governments to substitute away from property taxes towards uncapped revenue sources, such as sales taxes and charges and fees. To better understand the effects of Proposition 13 on local government finance, we leverage a peculiarity in the letter of the law: homes are reassessed upon sale. As such, we test the effects of high homeowner mobility on local government finances. We find that in municipalities with greater mobility have larger proportions of their revenue generated by property taxes, indicating that as more houses are reassessed, local governments are shifting their revenue burdens back towards property taxes.

July 27, 2015 in Scholarship, Tax | Permalink | Comments (1)

U.S. Tax Court Podcast

PodcastU.S. Tax Court Podcast:

The U.S. Tax Court Podcast features Rik Thakrar of Thakrar Law and Lee Wilson of the Wilson Firm. Rik and Lee both practice in the U.S. Tax Court and frequently discuss various cases and tax related issues that arise in their practice. This weekly podcast is a look into these discussions with an emphasis on giving the listener a sense of what it’s like to practice in the U.S. Tax Court. Please leave us a question or comment here.

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July 27, 2015 in Tax | Permalink | Comments (1)

L.A. Times: 90% Of Students Drop Out Of Unaccredited Law Schools In California

Los Angeles Times, Nearly 9 in 10 Students Drop Out of Unaccredited Law Schools in California:

Nearly 9 out of 10 students at California's unaccredited law schools dropped out, according to a Times investigation based on recent state bar data. ...

LA Times

California is one of a handful of states in the nation that allow students from unaccredited institutions to take the bar exam. The 22 schools offer four-year programs and are required to register with the state bar, but they are held to few academic standards. Most of the schools are operated by small companies or individuals. ...

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July 27, 2015 in Legal Education | Permalink | Comments (3)

Tax Prof Summer Camp

The IRS Scandal, Day 809

IRS Logo 2Rasmussen Reports, Voters Aren’t Buying Obama’s Story About IRS Scandal:

President Obama told comedian Jon Stewart earlier this week that the Internal Revenue Service didn’t target Tea Party and other conservative groups on his watch and that a lack of funding by Congress was to blame for any problems at the tax-collecting agency. But voters still think something criminal was going on and are even more suspicious of what the president knew about it.

Fifty-two percent (52%) of Likely U.S. Voters continue to believe the IRS broke the law when it targeted the groups, according to the latest Rasmussen Reports national telephone survey. Just 24% say the IRS didn’t break the law when it went after Tea Party and other conservative groups, while just as many (24%) are not sure.

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July 27, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

TaxProf Blog Weekend Roundup

Sunday, July 26, 2015

Hillary Clinton's Capital Gains Tax Plan

The Top 5 Tax Paper Downloads

SSRN LogoThere is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new #1 paper and a new paper debuting on the list at #5:

  1. [226 Downloads]  Capital Accounts in LLCs and in Partnerships: Powerful Default Rules and Potential Tax Significance, by Donald J. Weidner (Dean, Florida State)
  2. [200 Downloads]  Reducing Inequality With A Retrospective Tax On Capital, by James Kwak (Connecticut)
  3. [132 Downloads]  How I Learned to Stop Worrying and Love Our Homeowner Tax Rules, by David Hasen (Colorado)
  4. [109 Downloads]  Safe Harbors, Sure Shipwrecks, by Susan C. Morse (Texas)
  5. [107 Downloads]  The International Tax Regime — A Centennial Reconsideration, by Reuven S. Avi-Yonah (Michigan)

July 26, 2015 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

WSJ: Advice For Parents With Children Living At Home After College

BasementWall Street Journal, They’re Back! How to Cope With Returned College Grads, by Rob LaZebnik (Writer, The Simpsons):

Congratulations. Two months ago, your kid graduated from college, bravely finishing his degree rather than dropping out to make millions on his idea for a dating app for people who throw up during Cross Fit training. If he’s like a great many of his peers, he’s moved back home, where he’s figuring out how to become an adult in the same room that still has his orthodontic headgear strapped to an Iron Man helmet.

Now we’re deep into summer, and the logistical challenges of your grad really being home are sinking in. You’re constantly juggling cars, cleaning more dishes and dealing with your daughter’s boyfriend, who not only slept over but also drank your last can of Pure Protein Frosty Chocolate shake.

But the real challenge here is a problem of your own making. You see, these children are members of the Most-Loved Generation: They’ve grown up with their lives stage-managed by us, their college-acceptance-obsessed parents. Remember when Eva, at age 7, was obsessed with gymnastics…for exactly 10 months, which is why the TV in your guest room sits on top of a $2,500 pommel horse?

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July 26, 2015 in Legal Education, Tax | Permalink | Comments (21)

The IRS Scandal, Day 808

IRS Logo 2Newsmax, Jason Chaffetz: Expect News on Probe of IRS 'As Early As Next Week':

Rep. Jason Chaffetz asserts there is evidence that the IRS intentionally targeted conservative groups under Lois Lerner, the former director of the Exempt Organizations Unit at the agency, and said "there will be news … as early as next week."

Chaffetz, the chairman of the House Oversight and Government Reform Committee, is leading the congressional investigation into the IRS scandal. On Thursday, he told a group at the Ripon Society in Washington, D.C., the IRS destroyed documents requested by the committee in March 2014.

"Probably the biggest thing our committee is looking at is the IRS," the Utah Republican said. "You have political targeting that is factual at this point. There are no ifs, ands or buts. You had groups within the IRS who were politically targeting conservatives and impeding their First Amendment rights. You're going to continue to hear more about this. Because when the targeting became evident, the Oversight and Government Reform Committee put in place a subpoena for the documents — a small window of Lois Lerner's emails.

"Internally, the IRS put a preservation order in place — don't destroy or get rid of any of these documents. These documents and emails were in the possession of the IRS. And on March 4, 2014, they destroyed them." ...

Chaffetz said during his address at the Ripon Society the IRS deliberately defied orders by destroying the documents.

"Imagine if the IRS had given you a summons for you to produce documents," Chaffetz added. "You had them in your possession, and then you destroyed them. What would happen to you? Do you think they would say, 'Oh, darn it!' No, which is why Congress has to stand up for itself. You cannot — with a duly issued subpoena and eternal preservation order in place — go out and destroy documents and say there is no consequence to that; nobody's going to be held accountable, and nobody is at fault.

Washington Examiner, House Chairman: Documents Prove IRS 'Political Targeting' of Conservatives:

The chairman of the top House committee probing the IRS political witch hunt of President Obama's foes said documents prove that the agency targeted conservatives and then tried to destroy the evidence and he promised "news" on the panel's investigation next week.

"I promise you – there will be news on the IRS side as early as next week. So stay tuned," said Rep. Jason Chaffetz, chair of the House Oversight and Government Reform Committee.

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July 26, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Saturday, July 25, 2015

This Week's Ten Most Popular TaxProf Blog Posts

College President Becomes Uber Driver 'To Experience How Americans Work'

UberHuffington Post:  A College President Goes Uber, by Lawrence M. Schall (President, Oglethorpe University):

Back in the early 1970's, John Coleman was the President of Haverford College, a close neighbor of my alma mater, Swarthmore College. During his vacations, President Coleman often worked as a laborer, short order cook, or dishwasher. My favorite stories were about his service as a garbageman. [Blue-Collar Journal: A College President's Sabbatical (1974)]  This college CEO and President of the Philadelphia Federal Reserve Bank fancied himself a pretty fair collector of garbage. Of course I didn't imagine he would give up his day job for one of these part time gigs, but I admired him for being open to experiencing a different side of working life.

Whether being an Uber driver today is the equivalent of a garbageman in the 70's is a point I won't argue, but from my first ride with Uber six months ago, the urge to try this out from the driver's seat appealed to me. It seemed like an opportunity to experience how a growing number of Americans experience work.

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July 25, 2015 in Legal Education | Permalink | Comments (3)

Gas Taxes Are Highest In PA (52¢), NY (46¢); Lowest in AK (12¢), NJ (14¢)

Tax Foundation, How High Are Gas Taxes in Your State?:

This week’s tax map takes a look at state gasoline tax rates, using data from a recent report by the American Petroleum Institute. Pennsylvania has the highest rate of 51.60 cents per gallon (cpg), and is followed closely by New York (45.99 cpg), Hawaii (45.10 cpg), and California (42.35 cpg). On the other end of the spectrum, Alaska has the lowest rate at 12.25 cpg, but New Jersey (14.50 cpg) and South Carolina (16.75 cpg) aren’t far behind. These rates do not include the additional 18.40 cent federal excise tax.

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July 25, 2015 in Tax, Think Tank Reports | Permalink | Comments (1)

The IRS Scandal, Day 807

IRS Logo 2Judicial Watch Press Release, New Documents Show IRS Used Donor Lists to Target Audits:

Judicial Watch announced today that it has obtained documents from the Internal Revenue Service (IRS) that confirm that the IRS used donor lists to tax-exempt organizations to target those donors for audits.  The documents also show IRS officials specifically highlighted how the U.S. Chamber of Commerce may come under “high scrutiny” from the IRS.  The IRS produced the records in a Freedom of Information lawsuit seeking documents about selection of individuals for audit-based application information on donor lists submitted by Tea Party and other 501(c)(4) tax-exempt organizations (Judicial Watch v. Internal Revenue Service (No. 1:15-cv-00220)).

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July 25, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Friday, July 24, 2015

Weekly Tax Roundup

Weekly Legal Education Roundup

Weekly SSRN Tax Roundup

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July 24, 2015 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Q: What Kind Of Scholarly Year Are You Having?

A:  Not as good as my friend and colleague Michael Helfand (Pepperdine):

Helfand
(Photo Credit: Office of Pepperdine Law School Dean Deanell Tacha, July 24, 2015)

July 24, 2015 | Permalink | Comments (0)

IRS Directors Of Professional Responsibility And Whistleblower Offices Swap Jobs

Job SwapLee D. Martin, Deputy Director of the IRS Office of Professional Responsibility, has been named Director of the IRS Whistleblower Office.  Stephen A. Whitlock, Director of the IRS Whistleblower Office, has been named Director of the IRS Office of Professional Responsibility. Both appointments are effective August 3, 2015.

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July 24, 2015 in IRS News, Tax | Permalink | Comments (0)

Harper Calls On ABA To Reject Task Force Report On The Financing of Legal Education

ABA Logo 2American Lawyer: ABA Should Just Say No to Student Debt Report, by Steven J. Harper (Adjunct Professor, Northwestern; author, The Lawyer Bubble):

For years, America’s dysfunctional system of financing legal education has produced too many lawyers for too few jobs — and too many law graduates with too much educational debt. A year ago, the ABA created yet another Task Force to consider the problem. The June 17, 2015 Final Report on the Financing of Legal Education embodies the failure of that Task Force’s mission. It now goes to the House of Delegates for approval.

If the Delegates are interested in rehabilitating the ABA’s credibility and restoring public confidence in the profession on an issue of critical importance to the country, they could take this simple step: reject the Task Force Report. That’s right. Rather than giving the typical rubber stamp of approval amid flowery speeches thanking Task Force members for their time and effort in generating a hollow ABA statement summarizing the obvious, the House of Delegates could just say no. ...

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July 24, 2015 in Legal Education | Permalink | Comments (3)

Grewal: Petaluma Takes A Bizarre Turn

Andy Grewal (Iowa), Petaluma Takes a Bizarre Turn:

Petaluma FX v. Commissioner, a case involving some complex tax procedure issues, has gone on for nearly a decade and has made three trips to the D.C. Circuit. The strangest twist seemingly occurred in 2012 when, in a case involving similar issues, the Tax Court performed a “reverse benchslap” on the D.C. Circuit, allegedly flouting the court’s first opinion in Petaluma. However, things have managed to get even stranger.

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July 24, 2015 in Scholarship, Tax | Permalink | Comments (0)

Trigger Warnings And The Law School Crisis

Trigger Warning 2Kim Chanbonpin (John Marshall), Crisis and Trigger Warnings: Reflections on Legal Education and the Social Value of the Law, 90 Chi.-Kent. L. Rev. 615 (2015):

This Essay begins by understanding the law school crisis through the framework of disaster capitalism. This framing uncovers the ways in which reformers are taking advantage of the current crisis to restructure legal education. Under the circumstances, faculty may reasonably read the contemporaneous student-led movement to require trigger warnings in the classroom as an assault on academic freedom. This reading, however, clouds the water. Part II attempts to clear the confusion by decoupling the trigger-warning movement from the broader phenomenon of law school corporatization. Trigger-warning demands might alternatively be read as a student critique of traditional law school pedagogy. Especially in the first year, the role of faculty is to indoctrinate students in a system of dispassionate analysis where subjective experiences and emotional reactions have no place. In this light, the trigger warning debate offers an opportunity to fundamentally alter the learning process by inviting students to become partners in the production of knowledge by allowing them to reclaim power in the classroom. Attending to student concerns facilitates robust discussions where the assigned materials are thoroughly dissected and debated, a result that ultimately benefits everyone in the classroom. Part III proposes that law school is still a good option for those students who are interested in both rigorous intellectual exercise and developing the practical skills necessary for the effective representation of clients. This discussion lays the foundation for a reflection on a broader question—the role of law in a democracy. Although the U.S. legal system falls short of perfect justice and equality, lawyers ought to be vigilant when confronted with market demands that would force law and society to cede ground to powers that represent solely private interests.

July 24, 2015 in Legal Education, Scholarship | Permalink | Comments (7)

The IRS Scandal, Day 806

IRS Logo 2GAO, IRS Should Strengthen Internal Controls for Exempt Organization Selection (GAO-15-753T):

There are several areas where EO's controls were not well designed or implemented. The control deficiencies GAO found increase the risk that EO could select organizations for examination in an unfair manner—for example, based on an organization's religious, educational, political, or other views. Examples of internal control deficiencies GAO found include the following:

Staff could deviate from procedures for some selection processes without executive management approval. GAO found that procedures for some processes—such as applying selection criteria to organizations under consideration for review—are not included in the IRM, as required by IRS policy. As a result, staff are not required to obtain executive management approval to deviate from these procedures. This increases the risk of unfair selection of organizations' returns for examination.

EO management does not consistently monitor selection decisions. GAO found that IRS does not consistently monitor examinations and database files to ensure that selection decisions are documented and approved, to help ensure fairness. GAO's review of examination files found that approval of some selection decisions was not documented, as required by EO procedures. For example, GAO's analysis of a sample of files suggests that an estimated 12 to 34 percent of cases where staff initially selected an organization for examination, but ultimately decided not to perform the examination, were missing the indication of management approval of the final decision, as required in the IRM. Continuous monitoring is an element of internal control; EO management has not been conducting sufficient monitoring to ensure that required approvals were taking place.

House Committee on Ways and Means Subcommittee on Oversight Hearing, IRS Audit Selection Process (July 23, 2015):

Subcommittee Chairman Peter Roskam, Opening Statement:

Welcome, everyone. Today we’re going to review a new report from the independent Government Accountability Office, or GAO, about how the IRS decides to audit tax-exempt organizations.

Two years ago, we learned that the IRS was targeting conservative organizations that were applying for tax-exempt status. The Exempt Organizations division, under Lois Lerner’s direction, had a checklist of reasons to select certain groups for extra scrutiny. That checklist included criteria such as whether an organization’s application referred to conservative buzzwords like ‘Tea Party,’ or ‘Patriots,’ or if the groups criticized how the country was being run. Targeted groups were subjected to intrusive and burdensome questionnaires. An Iowa pro-life group was outrageously instructed to tell the IRS about their prayers. Many of these groups had to wait for years to get an answer from the IRS on their applications—if they got one at all. We’re here today because some of those groups, in addition to all of that scrutiny, also got audited.

To date, the IRS has basically tried to assure this committee and the American people that this won’t happen again simply by saying ‘Lois Lerner doesn’t work here anymore.’ But after we learned about the targeting of non-profit applicants, this committee asked GAO to review whether the problem was much bigger than that. We asked: can the IRS target tax-exempt groups in the audit process?

GAO released that report today. It says:

The control deficiencies GAO found increase the risk that [the Exempt Organizations unit] could select organizations for examination in an unfair manner—for example, based on an organization’s religious, educational, political, or other views.

GAO found many examples where the IRS failed to follow its own internal controls or document audit selection decisions. Failure to document is a real problem because where there is no documentation, there is no way to know if an audit was commenced based on merit or bias. There is also no way to hold someone accountable for bad acts.

I’m deeply concerned about how the IRS decides which organizations to audit in the first place. Many times when a non-profit organization is audited, it’s because a computer program flags problems with an organization’s paperwork. But about 20 percent of audits are set in motion because the IRS gets a complaint about an organization. These so-called referrals can come from an individual, from the news media or even from someone’s political adversary.

When the IRS receives a complaint, an employee looks to see if there is a likely tax violation. There are only five IRS employees who serve as these gatekeepers of the audit process, and they each cover only one issue area. The gatekeeper reviewing political activity complaints has been there since 2009. That means that for the past 6 years, only one person in the entire IRS has been reviewing political activity referrals to decide if they should move on in the audit process.  

If one of these gatekeepers decides there is audit potential, the complaint is sent to a referral committee with disturbingly lax standards. What’s worse, over 25 percent of audits GAO reviewed that were started because of a complaint had no description of the allegation in the file—that is, one in four audits GAO looked at had no explanation of the reason for the audit. In some instances, GAO found that entire case files were missing. This means no one can go back and determine if the audit was begun for a fair reason, or an unfair reason.

It is stunning that in response to these findings, the IRS said that ‘although the report states that a hypothetical risk exists that returns could be selected unfairly, the draft report did not find any evidence that this has happened.’

As we will show today, that’s just not true. The Inspector General tells this committee they have referred multiple cases of improper audit selection to the Justice Department for criminal prosecution in 2014 alone.  There’s nothing hypothetical about that.

And I’ll remind my colleagues that in 2013, after the Inspector General concluded the IRS unfairly targeted groups applying for non-profit status, the IRS response was very similar. They said, ‘[W]e have not found evidence of intentional wrongdoing by IRS personnel.’

To the contrary, this Committee uncovered evidence showing Ms. Lerner acted in defiance of internal controls that were supposed to prevent any one IRS employee from blocking a group’s application or sending them to audit. Ms. Lerner was not only familiar with these internal controls, but these were policies she created and spoke of publicly as a way of commending the agency’s impartiality. The evidence shows that Ms. Lerner maliciously and intentionally bypassed these controls, reaching into her division and directing specific organizations be subjected to audit, something IRS rules said she could not do.

It is disappointing that over two years later, it is still possible that the IRS can select groups for adverse treatment based on their personal political, religious, or educational beliefs. There isn’t proper documentation of allegations or decisions to audit; there are a handful of gatekeepers with sweeping authority and broad discretion; and there is a broken referral committee process.

The IRS has been entrusted with powerful authority to review and audit organizations, and with that comes a very serious responsibility to the American people. The IRS must acknowledge these problems and take concrete action to ensure a Lois Lerner 2.0 situation cannot happen. This committee will continue to work to reform this broken system and ensure the IRS treats all Americans fairly and equally.

House Committee on Ways & Means Oversight Subcommittee on Oversight, Watchdog Report: IRS Audit Process at Risk of Abuse, Targeting

Today, the Government Accountability Office (GAO) released a report detailing striking flaws in the IRS audit selection process that could lead to targeting of organizations based on their political beliefs and other First Amendment protected views. In the wake of the Lois Lerner scandal—which revealed that the IRS targeted conservative groups—the Ways and Means Committee asked GAO to look into the IRS audit process for tax-exempt organizations. The committee feared that the IRS could use its vast auditing power to target groups the same way. These fears were confirmed in today’s report. 

GAO’s final report shows that the current audit process indeed is ripe for improper targeting. According to GAO, “the control deficiencies GAO found increase the risk that EO (Exempt Organizations unit) could select organizations for examination in an unfair manner—for example, based on an organization’s religious, educational, political, or other views.”

The GAO report’s supporting findings include:

  • IRS’s audit procedures are not sufficiently documented or followed, and in some instances, GAO found that even the IRS did not have a record of why certain cases were selected for audit.
  • The same small group of people have been reviewing audit referrals, which are essentially third-party complaints made to IRS, for years without sufficient review or oversight of their decisions.
  • Management within IRS does not consistently monitor selection decisions, which could allow people with bias to unfairly select organizations for audit.

These weaknesses undermine the agency’s commitment to serving taxpayers, as well as the integrity of tax administration as a whole. Audits can cost a huge amount of time and money—and can devastate a non-profit organization. After all that has taken place, it is astonishing that the IRS still operates in a way that allows the targeting of people based on their beliefs to go unchecked.

Panel #1:

  • Jay McTigue (Director, Strategic Issues, Government Accountability Office) (Testimony)
  • John Koskinen (Commissioner, IRS) (Testimony)

Panel #2:

  • Michelle Easton (President, Clare Boothe Luce Policy Institute) (Testimony)
  • Joseph R. Metzger (Vice President, Leadership Institute) (Testimony)
  • Elizabeth J. Kingsley (Partner, Harmon, Curran, Spielberg & Eisenberg) (Testimony)

Press and blogosphere coverage:

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July 24, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Thursday, July 23, 2015

NY Times: IRS Shuts Down Private Equity Management Fee Waiver Tax Game

New York Times:  I.R.S. Targets Tax Dodge by Private Equity Firms, by Gretchen Morgenson:

The Internal Revenue Service on Wednesday proposed a rule aimed at ending a common and lucrative practice among private equity firms that allows them to artificially lower their partners’ personal income tax bills.

The practice targeted by the I.R.S. allows private equity firms to convert management fees they receive from their investors, which would normally be taxed as ordinary income, into capital contributions invested in their funds. Profits generated on such contributions are treated as capital gains or dividend income and subject to a sharply lower tax rate.

Converting a management fee to a capital contribution may be a “disguised payment for services,” the I.R.S. said in its proposed rule making, which it said was intended to provide guidance to partnerships and their overseers that such arrangements will be disallowed if they were done in such a way that no entrepreneurial risk was involved. ...

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July 23, 2015 in IRS News, Tax | Permalink | Comments (0)

Henderson: What You Learn Is More Important Than Rank Of Law School Attended (Part 2)

Following up on Monday's post, What You Learn Is More Important Than Rank Of Law School Attended:   The Legal Whiteboard:   What is More Important for Lawyers: Where You Go to Law School or What You Learned? (Part II), by William Henderson (Indiana):

If you're trying to maximize the financial value of an undergraduate degree, it is better to bet on course of study than college prestige.  Indeed, prestige is largely irrelevant to those who major in engineering, computer science, or math.  In contrast, prestige does matter for art & humanities grads, albeit the financial returns are significantly lower than their tech counterparts.  

These are some of the takeaways from Part I of this blog post. Part I also presented data showing that law is a mix of both: financial returns have been high (cf. "red" tech majors) and prestige matters (cf. "blue" arts & humanities crowd).  

The goal of Part II is to address the question of whether the pattern of high earnings/prestige sensitivity will change in the future. I think the answer to this question is yes, albeit most readers would agree that if law will change is a less interesting and important question than how it will change.  Speed of change is also relevant because, as humans, we want to know if the change is going to affect us or just the next generation of lawyers. ...

I am confident that the future of law is going to be a lot different than its past. But I want to make sure I break these changes into more discrete, digestible parts because (a) multiple stakeholders are affected, and (b) the drivers of change are coming from multiple directions.

Dimension 1: basic supply and demand for legal education

To unpack my point regarding multiple dimensions, let's start with legal education. Some of the challenges facing law schools today are entirely within the four corners of our own house.  Yet, legal education also has challenges (and opportunities) that arise from our connection to the broader legal industry.  This can be illustrated by looking at the relationship between the cost of legal education (which law schools control, although we may blame US News or the ABA) and entry level salaries (which are driven largely by the vagaries of a client-driven market).  

The chart below looks at these factors.  My proxy for cost is average student debt (public and private law schools) supplied by the ABA.  My income variables are median entry level salaries from NALP for law firm jobs and all entry level jobs.  2002 is the first year where I have all the requisite data.  But here is my twist:  I plot debt against entry-level salary based on percentage change since 2002.  

Debtversusincome-2002

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July 23, 2015 in Legal Education | Permalink | Comments (5)

Cono Namorato Sails Through Senate Hearing On Nomination To Be Assistant Attorney General, Tax Division

ConoRepublicans and Democrats alike praised  Cono R. Namorato, President Obama's nominee to be Assistant Attorney General for the Tax Division of the Department of Justice, in a Senate Judiciary Committee hearing yesterday. Mr. Namorato's testimony is here.

Cono R. Namorato is currently a Member of the law firm Caplin & Drysdale, a position he has held since 2006 and previously from 1978 to 2004. From 2004 to 2006, Mr. Namorato served as Acting Deputy Commissioner for certain designated matters and as Director of the Office of Professional Responsibility for the Internal Revenue Service (IRS) in the Department of the Treasury. Before beginning his career at Caplin & Drysdale, Mr. Namorato held various positions within the Tax Division of the Department of Justice (DOJ), including Deputy Assistant Attorney General from 1977 to 1978, Assistant Chief and then Chief of the Criminal Section from 1973 to 1977, and Supervisory Trial Attorney and Trial Attorney from 1968 to 1973. Mr. Namorato began his career in 1963 as a Special Agent for the Criminal Investigation Division of the IRS in the Brooklyn District.

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July 23, 2015 in Congressional News, Tax | Permalink | Comments (1)

North Carolina Retains 64% Of Faculty Who Receive Lateral Offers; Lawsuit Challenges Alleged Agreement With Duke To Forswear Lateral Hiring Of Each Other's Faculty

UNCDurham Herald-Sun, UNC Having Success in Faculty-retention Fight:

Figures from 2013-14 suggest that fewer UNC faculty sought outside job offers, “a good thing” for a university that wants to keep its best professors, Provost Jim Dean told campus trustees Wednesday.

Over the year, 56 faculty members received outside offers. In 64 percent of those cases, UNC wound up keeping the professor in question.

The number of outside offers was down sharply from the recession-years peak of 110 university officials heard about in 2010-11. ...

The retention percentage varies from year to year, depending in part on the willingness and ability of campus administrators to match the outside offers. But the 64 percent retention rate reported for 2013-14 was roughly in line with that for three of the preceding four years. ...

UNC administrators need an OK from trustees to match or top outside offers to faculty. The full board is scheduled to ratify two such moves today. One will give nearly a 17-percent, $22,150-a-year raise to a law school professor who’s gotten an offer from Seattle University [an increase from roughly $130,000 to $152,000]..

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July 23, 2015 in Legal Education | Permalink | Comments (4)

George Washington Seeks To Hire A Tax Prof

George Washington Law Logo (2016)GW Jobs:

The George Washington University Law School may make one full-time junior faculty appointment in the Tax area. 

Applications for lateral positions are being accepted on an ongoing basis until the position is filled.

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July 23, 2015 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)

Indiana Tech Law School Gives 100% Scholarships To Every Student In Effort To Retain 57 2Ls/3Ls, Recruit 20 1Ls In Wake Of Accreditation Denial

Indiana Tech Law SchoolKPC News, Law School Skips Appeal, Reapplies to ABA:

The Indiana Tech Law School did not appeal a June decision by the American Bar Association’s Council on Legal Education denying it accreditation — but only because the university’s leaders decided reapplying for the ABA’s endorsement would be the quicker, more effective approach. ...

The school’s enrollment the first two years did not live up to expectations. It had hoped for 100 the first year, and enrolled 25. The second year was a little better, but the school ended the year with just 57 first- and second-year students.

Because of the uncertainty over the accreditation status, some of those students may well transfer elsewhere, Cercone acknowledged. It also has put a damper on recruitment.

“Obviously, in the posture we’re in this year, I don’t expect that to improve,” he said. “We would like to have 20 students in the incoming class, and that’s what we’re shooting for.”

As an added enticement, the university is giving 100-percent scholarships to every single student enrolled there next year.

“It shows the university’s and the board of trustees’ support for the law school and their belief in the law school, and we hope that’s going to incentivize students to stay,” Cercone said.

As Oprah Winfrey might say: "You get free tuition! You get free tuition! Everybody gets free tuition!

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July 23, 2015 in Legal Education | Permalink | Comments (6)

Purdue Makes Student Mentoring Atop Research In Tenure Standard

PurdueInside Higher Education, Mentoring as Tenure Criterion:

Purdue University, like most colleges and universities, evaluates faculty members up for tenure on their accomplishments in research, teaching and service. And as is the case at most research universities, research has tended to be prominent.

But university administrators told the Purdue board last week of plans to make significant changes in those criteria. On top of them all in the policy -- coming first in the policy to signal overarching importance -- will be an expectation that faculty members are active mentors to undergraduates, especially to at-risk students. And teaching evaluations will feature two new measures: commitment to involving undergraduates in research and to pedagogical innovation.

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July 23, 2015 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 805

IRS Logo 2Washington Examiner, Obama to Jon Stewart: IRS Never Targeted Conservatives:

President Obama in a taped appearance with the Daily's Shows Jon Stewart Tuesday denied that IRS targeted conservatives, an assertion that Stewart then appeared to ridicule him for making. ...

[President Obama noted] that Stewart and others had jumped on a story that employees had been targeting conservatives.

"It turns out," Obama said, that wasn't true. He said Congress "passed a crummy law" that provided vague guidance to the people who worked at the IRS. And he said that employees implemented the law "poorly and stupidly."

"Boy, you really do have only a year left," Stewart interjected.

But Obama jumped back in, blaming Congress for not providing enough funds for both the IRS and the Department of Veterans Affairs to work properly.

The real scandal around the IRS, he said, "is that they have been so poorly funded that they cannot go after these folks who are deliberately avoiding tax payments."

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July 23, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Wednesday, July 22, 2015

Rental Car Companies Cannot Deduct Collision Damages To Its Vehicles As § 165 Casualty Losses

Rental CarChief Counsel Memorandum 2015-29-008 (July 17, 2015):

[T]he Taxpayer operates E. The amount of the overall repair costs for damaged vehicles is large. The Taxpayer did not suffer unusual casualty or an abnormal loss because it is normal and expected that its vehicles will be damaged when it rents such vehicles to numerous customers to be operated over public highways.

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July 22, 2015 in IRS News, Tax | Permalink | Comments (1)