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Wednesday, August 20, 2014

Welcome to the Law School Class of 2017: Should You Stay or Should You Go?

Forbes:  Law School Begins: Here's A Message to the New Crop of 1L's, by Michael I. Krauss (George Mason):

Clash 1Later this week I will teach the first Torts class to George Mason Law School’s newly matriculated 1L’s.  Here is my message, both to them and to 1L’s nationally.

You have decided to enter law school during “interesting” times.  The business model for the private practice of law is a-changin, and many say it is broken.  Law school tuition is higher than ever, yet incomes are stagnant and perhaps dropping.  Law school loans, guaranteed by Uncle Sam and not dischargeable by bankruptcy, help you pay for tuition, but every increase in the generosity of federal largess is yet another incentive for universities to capture rents by increasing tuition further.

Mason students are at a “top-50″ school, but many readers of this column will be matriculating at lower-ranked institutions (and others will be at higher-rated schools).  Most Mason students ranked near the top of their undergraduate class and did quite well on their LSAT.  But half of you will get GPA’s at Mason that are lower than you’ve ever experienced before, both because your undergrad institution had succumbed to grade inflation and because our mandatory GPA mean immunizes us against this to some extent.  Those in the bottom half of the class won’t be eligible for Law Review, and they generally won’t be invited to those coveted on-campus interviews with BigLaw firms.  For them, and for many in the top half of the class as well, “summer camp” at a BigLaw firm after 2L will never happen; and the famous $160K starting salary after graduation will be pie in the sky.  Most law grads learn to their sorrow that the income distribution for freshly-minted JD’s is quite bimodal.  And those who do catch that brass ring will be in for a life that is usually exhausting and often boring, if not soul-destroying.

Are these facts part of an effort to get you to rethink your decision to attend law school?  For some of you, frankly, yes; but for others, absolutely not.  ...

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August 20, 2014 in Legal Education | Permalink | Comments (9)

Tax Profs Debate President Obama's Authority to Stop Tax Inversions

Following up on my previous posts:

Wall Street Journal editorial, Beltway 'Strip' Club: Democrats Imagine New Ways to Raise Taxes on Corporations:

Washington's tax collectors fear that foreign firms may fund their U.S. subsidiaries with debt so these U.S. units can deduct the interest payments. The foreign parent companies can then receive these interest payments. With more debt held in the U.S., the firms may be able to boost the profits of their overseas units and pay less in taxes, since taxes are lower nearly everywhere else in the world than in the U.S. ...

The White House is nonetheless looking to raise corporate taxes administratively while Mr. Schumer seeks to do so legislatively. Team Obama was thrilled by a recent paper from former Treasury official and current Harvard Law School professor Stephen Shay. Mr. Shay claims that without any change in the law the Administration can simply overturn years of precedent by declaring that some debt will now be treated as equity, and voila, higher tax bills.

This would involve claiming authority under a provision of law known as Section 385 that was not intended to stop corporate inversions, but rather to define generally what is stock and what is debt. As Mr. Shay admits, "Section 385 is not normally thought of as an antiabuse provision (indeed, it has hardly been thought of at all since it was amended in 1992) and this proposal is to apply it to only a subset of related party cases—those involving expatriated entities."

No doubt a wave of lawsuits would follow. But if Treasury is looking for a short-term political victory it could issue a temporary regulation, avoid the usual notice and comment period, and earn headlines by interrupting pending inversion deals. Another full election cycle might pass before the courts rule on the legality of this tax grab.

The Harvard Law brand might seem to lend some heft to this novel idea, but in his paper Mr. Shay credits the intellectual contributions of two, er, scholars from Change to Win, the advocacy shop funded by labor unions. And nobody does disinterested legal analysis like the Teamsters. ...

Bloomberg BNA, Executive Action on Inversions? Not So Fast:

Can President Obama deal with corporate inversions-which occur when a U.S. company merges with a foreign competitor in order to create a parent organization with a tax residency abroad--on his own?

After pressure from his fellow Democrats, Obama and the Department of Treasury have said they're looking into it. Some former officials -- including Stephen Shay, a professor of law at Harvard University and a former deputy assistant secretary at Treasury -- have suggested that Obama can use his executive authority to deal with earnings stripping, one of the chief incentives for inversion deals.

The dynamic might make it seem like the issue is mainly a political one -- that, as with immigration and climate change, the main consideration for the White House is whether the policy goal is worth enraging Congress even further.

But, in fact, the legal authority for Obama or the Treasury Department to act is far from certain. In fact, many tax experts -- some who share the goal of cracking down on inversions -- believe the president has very little leeway to act without support from Congress.

"The arguments for Treasury regulation are based on laudable policy instincts, which I share. But they are very strained readings of the relevant regulatory authority," said Edward Kleinbard, a professor of law at the University of Southern California and the former chief of staff for the U.S. Congress Joint Committee on Taxation. "In fact, they are so strained, I think in the long term they would do more harm than good in terms of Treasury's ongoing relationships with Congress, and its ability to take courageous stands through regulation in the future." ...

"My reading of this rule is that they are authorized to have a general rule that distinguishes debt from equity," said Reuven Avi-Yonah, director of the international tax LL.M. program at the University of Michigan Law School. "If they try to do that, I think the companies would sue them." ...

Ultimately, the statement that Treasury was looking into possible anti-inversion regulations may be more important than any actual regulations the department might issue. "I frankly think it's a question of whether they could make enough noise to scare people," said Willard Taylor, an adjunct professor of law at New York University, who has written about inversions in the past. "As to specific options, I really don't see very much there."

August 20, 2014 in Tax | Permalink | Comments (1)

The IRS Scandal, Day 468

IRS Logo 2Wonkette:  Laura Ingraham Explains That Thugs Gonna Thug:

What do you think would have happened, guys, if tea party activists, right, came to Washington D.C. after the IRS scandal broke and decided to start smashing windows, rampaging through neighborhoods, throwing fire bombs. What do you think Eric Holder and Barack Obama would do? Would they start saying, ‘Well, we understand that people are angry, we really get your emotion here, but this isn’t acceptable. Do you really think there would have been this nuanced language, this emoting that has become the pastime of this administration?

Washington Times:  Intolerance on the Left: The Marketplace of Ideas Can’t Function Without Civility:

We often hear those on the right branded as “intolerant.” We’re all a bunch of extremists who just want to shut down the other side, right? We’re unlike those on the left, who welcome debate and want to give all viewpoints a respectful hearing.

Or so we’re told. We might even start to believe it — until we encounter the oh-so-tolerant voices of our loyal opposition. Voices such as: ...

Lois Lerner: According to emails written by the former Internal Revenue Service official, conservatives are “crazies” and another word too obscene to quote. Conservatives who dare to criticize the government, in her view, want to “take us down.” Small wonder that the agency targeted conservative groups during Ms. Lerner’s tenure.

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August 20, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, August 19, 2014

NY Times: Tax Burden in U.S. Not as Heavy as It Looks, Kleinbard Says

New York Times DealBook:  Tax Burden in U.S. Not as Heavy as It Looks, Report Says, by Andrew Ross Sorkin:

NY Times Dealbook (2013)For years, chief executives have complained bitterly about the United States corporate tax code, arguing that it is too complicated and that rates are too high. The issue has reached a near boiling point this summer as many large American companies have sought to buy smaller foreign rivals so they can renounce their United States corporate citizenship and reincorporate overseas to lower their tax bills. Others are considering the move, known as an inversion.

Again and again, we hear that these deals are being driven by an effort to make our companies more competitive globally and that unless we “reform” our tax system — which is code for “lower our corporate tax rate” — we will lose business to foreign rivals.

It is a compelling narrative. But it may be wrong.

Edward D. Kleinbard, a professor at the Gould School of Law at the University of Southern California and a former chief of staff to the Congressional Joint Committee on Taxation, makes a captivating argument in an academic paper ['Competitiveness' Has Nothing to Do With It] that the United States tax code — counter to the conventional wisdom — is not impeding global competitiveness. In fact, the opposite is true.

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August 19, 2014 in Tax | Permalink | Comments (2)

Perkins: Salience and Sin -- Designing Taxes in the New Sin Era

Rachelle Holmes Perkins (George Mason), Salience and Sin: Designing Taxes in the New Sin Era, 2014 BYU L. Rev. 143 (2014):

Tax salience reflects the extent to which consumers take into account the after-tax cost of a good or service prior to making their consumption decision. Recent empirical work on tax salience has revealed something that is perhaps intuitive, but nevertheless important to the design of sin taxes. Taxpayers are more likely to make consumption decisions based on pre-tax rather than post-tax prices when the salience, or visibility, of a tax is diminished. Thus, consumers are less likely to change their demand for a particular product if shelf prices are tax-exclusive rather than tax-inclusive. Economically, this makes low salience taxes mimic some of the benefits of taxes on inelastically demanded goods. Because a taxpayer’s demand change in response to a tax increase is diminished, the deadweight loss generated by the imposition of the tax can be reduced. Notwithstanding the potential for efficiency gains, politicians and academics alike have expressed various fairness, distributional, and normative concerns regarding the use of low salience taxes. In fact, a number of countries already require tax-inclusive pricing for consumer products in order to purportedly preserve consumer awareness and transparency.

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

TIGTA: ObamaCare Medical Device Tax Is Raising 25% Less Revenue Than Expected, IRS Administration of Tax Is Rife With Errors

TIGTA The Treasury Inspector General for Tax Administration today released The Affordable Care Act: An Improved Strategy Is Needed to Ensure Accurate Reporting and Payment of the Medical Device Excise Tax (2014-43-043):

The Affordable Care Act includes a tax provision that provides for an excise tax equal to 2.3 percent of the sales price for medical devices sold beginning January 1, 2013. Manufacturers, producers, and importers are responsible for collecting the medical device excise tax and must file a Form 720, Quarterly Federal Excise Tax Return. The Joint Committee on Taxation estimated revenues from the medical device excise tax of $20 billion for Fiscal Years 2013 through 2019. ...

Our review found that both the number of Forms 720 filed reporting the medical device excise tax and the amount of the associated revenue reported are lower than estimated. The IRS is attempting to develop a compliance strategy to ensure that businesses are compliant with medical device excise tax filing and payment requirements and has taken several measures to advise medical device manufacturers of the new excise tax. However, the IRS cannot identify the population of medical device manufacturers registered with the Food and Drug Administration that are required to file a Form 720 and pay the excise tax.

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August 19, 2014 in Gov't Reports, IRS News, Tax | Permalink | Comments (0)

Taxing the Rich Can Strengthen Democracy

Washington Post:  Can Taxing the Wealthy Strengthen Democracy?, by Deborah Boucoyannis (Virginia):

“Taxing the rich” has emerged as a controversial proposal on how to deal with the historic rise in inequality of the last few decades. Thomas Piketty recently recommended taxing the top 1 percent globally to redistribute wealth, reduce inequality and provide a generous social safety net. The policy has been attacked on both the left and the right as unfeasible, unpredictable in its effects, even unconstitutional, and in any case inadequate to address the needs of a welfare state, although other research powerfully contradicts them.

The historical record, however, suggests that taxing the wealthiest does have an important, but different, consequence: making the wealthy vested in the common good. In fact, taxing the wealthy was crucial for the emergence of representative government itself. ...

“[T]axing the rich” can actually help democracy. When the government is strong enough to impose a substantial obligation on the richest people, they are inclined to lobby the government to ensure those funds are efficiently spent. This is quite different than the pattern that mostly occurs today, where the wealthy lobby the government for tax breaks or private interests—and the state is too weak or too unwilling to resist. “Taxing the rich something more than in proportion” to their wealth is what Adam Smith himself still praised about the English system of taxation many centuries after its Parliament was born.

August 19, 2014 in Tax | Permalink | Comments (0)

Obama's Use of Executive Authority: Could a Republican President Refuse to Enforce the Estate Tax?

New York Magazine:  Obama's Immigration Plan Should Scare Liberals, Too, by Jonathan Chait:

What if a Republican president announced that he would stop enforcing the payment of estate taxes?

The New Republic, The Liberal Fear of Obama's Executive Action Is Irrational, by Brian Beutler:

[L]et’s look at the estate tax. First, it’s important to note that Obama isn’t proposing to “suspend” immigration law. It’s impossible to reconcile Chait’s admission that the action Obama’s considering is legal with the suggestion that he will be suspending the law. He’s rather proposing to direct resources toward enforcing the law against higher-priority offenders. Washington Post reporter Greg Sargent’s expert sources have more here. So the proper comparison isn’t to a Republican president who suspends the estate tax, but to a Republican president who decides to enforce the estate tax against the highest priority offenders—the super-duper rich—rather than the merely exorbitantly wealthy.

I can’t claim to know (yet) whether a presidential administration has identical discretion over tax law as it does over immigration law, so I don’t know whether this would pass the threshold test of legality. I suspect the president has more discretion over the latter than the former, and if deferred action for recently deceased wealthy people were slam-dunk illegal, I would oppose it on those grounds. But assuming President Ted Cruz could plausibly shield estates valued below, say, $20 million from tax, within the bounds of the law, my instinct would neither be to scream “Caesar!” nor to blame Obama for setting a bad precedent, but to note that Cruz was insane. It’d be crazy for any president to apply tax law more leniently to people who hit the estate tax threshold than to regular people who don't accrue much if any wealth, and I believe they’d ultimately lose that fight in the political realm, either through legislation or at the ballot or upon the election of a Democratic president who would resume strict enforcement. ...

If Ted Cruz becomes president and his Republican Congress gets to work on a comprehensive tax reform plan that would (among other things) abolish the estate tax, a decision to defer estate tax enforcement through 2017 might make sense (again, assuming legality) to avoid penalizing people who have the misfortune of dying before Cruz can sign the bill. If that bill were to fail, enforcement would surely resume at some point. Norms wouldn't have very much to do with it.

The Daily Caller:  Nice Try, New Republic, by Micky Kaus:

[V]irtually any categorical we-won’t-prosecute-you decree will serve the interests of “consistency” and “predictability.” Take the hypothetical that Obama’s defenders seem to have the most trouble dealing with: Imagine Mitt Romney, campaigning on a platform of raising the limit on taxable estates to $20 million dollars (from the current $5.3 million).  Romney wins the election. He’s President! But he can’t get his estate tax bill through Congress. He decides he can’t wait! If Congress won’t act to boost the incentives to “job creators,” he will! His IRS announces that, as a matter of “prosecutorial discretion,” no estates under $20 million that fail to pay estate tax will be pursued by the IRS.  Romney could grant case by case leniency power to IRS auditors and lawyers — but a blanket categorical free pass makes the law so much more predictable, don’t you think? And predictability is important for job creators!  They have investments to make. You wouldn’t want an IRS with the leeway to play favorites — going soft on Republicans, or Romney donors, while coming down hard on dead multimillionaire Democrats. ...

President Romney, for example, could cite the Internal Revenue Code’s goal of increasing tax receipts and spurring economic growth — and argue that because a zero capital gains rate would encourage revenue-producing asset sales, he would now exercise his discretion to avoid punishing people who don’t pay their (legislated) capital gains taxes as well as most of  those who duck their estate taxes. Jonathan Chait is right to be worried.

P.S.: TNR‘s Brian Beutler takes a simpler approach. He appears to argue that, if there aren’t statutory provisions that would make a Romney estate-tax move “slam-dunk illegal” (which there probably aren’t) then Romney is free to go ahead. He’d be “insane,” Beutler says. The voters would probably reinstall the Democrats at the next election. But democracy itself would provide the limit.

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August 19, 2014 in Tax | Permalink | Comments (3)

Johnston: Kinder Morgan’s Evolving Tax Strategy

Tax Analysys Logo (2013)David Cay Johnston (Syracuse), Kinder Morgan’s Evolving Tax Strategy, 144 Tax Notes 881 (Aug. 18, 2014):

Johnston looks at Kinder Morgan’s recent announcement that it would be folding two master limited partnerships into a C corporation holding company.

August 19, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

NY Times: Behind Closed Doors, Obama Crafts Executive Action on Tax Inversions

Following up on yesterday's post, WSJ: Meet the Law Professor Who’s Crashing the Inversion Party: New York Times, Behind Closed Doors, Obama Crafts Executive Actions:

When President Obama announced in June that he planned to bypass congressional gridlock and overhaul the nation’s immigration system on his own, he did so in a most public way: a speech in the White House Rose Garden.

Since then, the process of drafting what will likely be the only significant immigration changes of his presidency — and his most consequential use of executive power — has been conducted almost entirely behind closed doors, where lobbyists and interest groups invited to the White House are making their case out of public view.

Mr. Obama’s increasingly expansive appetite for the use of unilateral action on issues including immigration, tax policy and gay rights has emboldened activists and businesses to flock to the administration with their policy wish lists. It also has opened the president, already facing charges of executive overreach, to criticism that he is presiding over opaque policy-making, with the potential to reward political backers at the expense of other interests, including some on the losing side who are threatening to sue. ...

Consumer groups and organized labor want the Treasury Department to act on its own to limit financial incentives for companies that move overseas for tax breaks and stop so-called inversions. ... One group, Change to Win, a labor union-backed consumer advocacy organization that has pressed for congressional action to block corporate inversions, sought out a legal expert with Obama administration ties, Stephen E. Shay, to press its case.

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August 19, 2014 in Tax | Permalink | Comments (0)

The Cause of Higher Tenure Rates for Men: Productivity or Sexism?

Inside Higher Ed, Productivity or Sexism?:

In discussions about the gender gap among tenured professors at research universities, there is little dispute that there are far more men than women with tenure in most disciplines. But why? Many have speculated that men are outperforming women in research, which is particularly valued over teaching and service at research universities. With women (of those with children) shouldering a disproportionate share of child care, the theory goes, they may not be able to keep up with publishing and research to the same extent as their male counterparts.

A study presented here Sunday at the annual meeting of the American Sociological Association finds that those assumptions may be untrue in some disciplines. [Kate Weisshaar (Stanford), Measuring the Glass Ceiling Effect: An Assessment of Discrimination in Academia.] The study compared tenure rates at research universities in computer science, English and sociology -- and then controlled for research productivity. 

Not only are men more likely than women to earn tenure, but in computer science and sociology, they are significantly more likely to earn tenure than are women who have the same research productivity. In English men are slightly (but not in a statistically significant way) more likely than women to earn tenure. ...

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August 19, 2014 in Legal Education | Permalink | Comments (6)

Tax Inversions Often Don't Produce Big Returns for Investors

Reuters,  When Companies Flee U.S. Tax System, Investors Often Don't Reap Big Returns:

Establishing a tax domicile abroad to avoid U.S. taxes is a hot strategy in corporate America, but many companies that have done such "inversion" deals have failed to produce above-average returns for investors, a Reuters analysis has found.

Looking back three decades at 52 completed transactions, the review showed 19 of the companies have subsequently outperformed the Standard & Poor's 500 index, while 19 have underperformed. Another 10 have been bought by rivals, three have gone out of business and one has reincorporated back in the United States. ...

It is impossible to know how the companies might have fared in the market had they not inverted. Innumerable factors other than taxes influence a stock's performance, and no two of these deals are identical, complicating simple comparisons. But the analysis makes one thing clear: inversions, on their own, despite largely providing the tax savings that companies seek, are no guarantee of superior returns for investors.

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August 19, 2014 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 467

IRS Logo 2Forbes:  Are 'Expendables 3' & IRS Equally Expendable?, by Robert W. Wood:

The Expendables 3 is a little like the IRS. Did we need this third installment of the action movie franchise? It had a lackluster opening weekend and tepid reviews, so perhaps with ‘Expendables 3′ the Third Time’s Not a Charm. But it may have a hidden message.

An expendable movie about a cadre of aging action stars is a little like the sagging IRS. The IRS may never have been a star, but its star has fallen in recent years. For over a year now, it has been plagued by scandal and what sometimes seems like downright arrogance at the top. Even in the face of these sad developments, some claim there is not a ‘Smidgen Of Corruption’ at the IRS.

Like an aging action star demanding too much money and being frozen out, such behavior doesn’t bode well for the IRS. ... Expendables—the IRS—features an agency that collects billions and is charged with administering the nation’s tax laws. Make no mistake, that’s no easy job. Yet on the whole, I still think the IRS does a generally good job (no hate mail please). That is why it’s so terribly important that we restore some trust and accountability. ...

Does our our country have more important problems? Sure we do. But it’s still wrong that we cannot seem to get straight answers. The latest order from Judge Emmet G. Sullivan in the litigation filed by Judicial Watch asks for answers about the recently ‘lost’ emails of Lois Lerner and other IRS officials. See Judicial Watch v. IRS (No. 1:13-cv-1559).

The fact that a federal judge has had to launch this inquiry into the issue of the missing emails is a sad day for the IRS, regardless of whether the IRS realizes it. The IRS filings were at least lackluster and seemed not to take seriously the judge’s request for sworn declarations about the IRS email issue. The judge really means it.

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August 19, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, August 18, 2014

Ajay Mehrotra's Making the Modern American Fiscal State Wins 2014 U.S. Intellectual History Book Award

Ajay2014 Society for U.S. Intellectual History Book Award Winner:

We are pleased to announce our selection of Ajay K. Mehrotra’s Making the Modern American Fiscal State: Law, Politics, and the Rise of Progressive Taxation, 1877-1929 (Cambridge University Press, 2013) as this year’s winner of the S-USIH annual book award for 2014.

Mehrotra’s important and ambitious book chronicles the early 20th-century transformation in American tax policy and public finance. It analyzes the shift from the nineteenth-century “regime of indirect, hidden, partisan, and regressive taxes” to the “direct, transparent, professionally administered, and progressive tax system” we know today. A book on taxation may well seem a curious choice for an intellectual history prize, but we were struck by how successfully Mehrotra weaves together the intellectual, legal, administrative threads of his argument. Mehrotra takes ideas seriously. He traces legal and administrative change to a prior “conceptual revolution,” wrought primarily by a cohort of professionally trained intellectuals, including Henry Carter Adams, Richard Ely, and Edwin R.A. Seligman. And he shows how notions of economic justice, political obligation, ethical duty, and democratic reciprocity underwrote the new progressive conception of what Mehrotra aptly labels “fiscal citizenship.” He also shows what happened to those ideas as they traveled through a contested political process and were embodied in a complex administrative apparatus with paradoxical and often unintended consequences. Mehrotra’s book is thus a history of ideas in action. It makes a signal contribution to the field by demonstrating how even the most seemingly mundane features of our world have strikingly rich intellectual histories.

August 18, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (0)

Johnston: Income of Highest Earners Fell From 2000 to 2012

Al Jazeera:  Highest Earners Making Less, Social Security Data Show, by David Cay Johnston (Syracuse):

It is getting much harder to earn big bucks in America, my new analysis of official wage data shows.

The number of workers making $2 million or more per year declined almost 5 percent, from 39,650 in 2000 to 37,714 in 2012. This decline is especially remarkable, given 11 percent population growth.

These top jobs paid less too, despite 22 percent real growth in the economy over those 12 years. Measured in 2012 dollars, average pay at the top was $5.04 million, down from $5.27 million in 2000. That’s 4.3 percent less pay per top worker.

Combined, the decline in big bucks jobs and average pay meant top earners got a smaller slice of the national wage pie. The pie grew 7.2 percent. But the $2 million and up workers saw their slice shrink from 3.4 percent to 2.9 percent. ...

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August 18, 2014 in Tax | Permalink | Comments (3)

Financial Times Offers $25k Prize for Business Book of the Year

FTThe Bracken Bower Prize:

The Financial Times and McKinsey & Company, organisers of the Business Book of the Year Award, want to encourage young authors to tackle emerging business themes. They hope to unearth new talent and encourage writers to research ideas that could fill future business books of the year. A prize of £15,000 [$25,000] will be given for the best book proposal. ...

The inaugural prize will be awarded to the best proposal for a book about the challenges and opportunities of growth. The main theme of the proposed work should be forward-looking. In the spirit of the Business Book of the Year, the proposed book should aim to provide a compelling and enjoyable insight into future trends in business, economics, finance or management. The judges will favour authors who write with knowledge, creativity, originality and style and whose proposed books promise to break new ground, or examine pressing business challenges in original ways. Only writers who are under 35 on November 11 2014 (the day the prize will be awarded) are eligible.

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August 18, 2014 in Scholarship, Tax | Permalink | Comments (0)

Tax Man Too Incompetent to be Trusted With Tax Grab Powers

The Telegraph, HMRC Too Incompetent to be Trusted With Tax Grab Powers:

HMRCThe taxman is too incompetent to be trusted with powers to raid people's bank accounts, according to Britain's banking industry.

In a letter to the Chancellor, the British Bankers' Association, which represents UK lenders, said HM Revenue and Customs could not be trusted with the power to grab money directly from the accounts of people with unpaid tax bills.

(Hat Tip:  Andy Morriss.)

August 18, 2014 in Tax | Permalink | Comments (0)

Quinnipiac Law School Opens New $50 Million Building Amidst 33% Decline in 1L Enrollment

New Haven Register News, Quinnipiac University Opens New Law School Building in North Haven:

Quinnipiac LogoOn Monday, Quinnipiac University law students will start the academic year in a $50 million new building at the school’s North Haven campus. ...

Currently, the school has 292 students enrolled, but [President John] Lahey said the new building was built with the potential to grow the law student population after numbers declined from 400 students. “It’s designed to get back to 400, but it can hold up to 500,” Lahey said.

Despite student enrollment dropping, Lahey said he’s looking forward to the law school growing in its new location. “There’s a decline for the demand for lawyers. Even with the decline, we’re the only school in country to spend $50 million for a new (law)school. It shows that Quinnipiac has a long-term, strategic commitment to law. It reflects my confidence and the university’s confidence in [Dean] Jen Brown,” Lahey said. 

Quinnipiac enrolled 84 students (65 full time) in Fall 2013 (with 154 LSAT/3.34 GPA medians), compared to 127 students (107 full time) in Fall 2012 (with 156 LSAT/3.39 GPA medians).

(Hat Tip: Above the Law.)

Update:  News 8, Tuition on the Rise at Quinnipiac

August 18, 2014 in Legal Education | Permalink | Comments (2)

Law School Accreditation Standards: Implementation and Next Steps

ABA Logo 2Following up on last week's post, ABA Approves Changes to Law School Accreditation Standards:

ABA Section of Legal Education and Admission to the Bar, Transition to and Implementation of the New Standards and Rules of Procedure for Approval of Law Schools:

The Standards Review process was a major project, and now the Council, Accreditation Committee, staff, and law schools have another major undertaking in implementing what the Council has adopted. Faculties and staff will have to consider the ways in which the new Standards require action and changes to their program of legal education. For the Section, implementing and transitioning to the new Standards and Rules involves questions of timing; substantial work that will need to be done to the Site Evaluation Questionnaire (SEQ), Annual Questionnaire (AQ), and related documents; and education and training for schools, the Council and Accreditation Committee, and site evaluators.

The revised Standards (referred to here as the “new Standards”) and Rules became legally effective at the end of the ABA Annual Meeting on August 12, 2014. ...

While the new Standards and Rules are effective now, some of the new Standards will require changes that it will take schools time to make. It will also take time to integrate all of the changes into our systems and processes. In the past when a Standards change required a phase-in period or a delayed effective date, that has been done, and we will do that on this occasion as well.

With that background, the transition and implementation plan is ...

Dan Rodriguez (Dean, Northwestern), What’s Next for ABA Standards Review?:

One suspects that the ABA Council is taking a deep breath, and perhaps also a victory lap, after several years in which it reviewed existing standards and made some meaningful reforms. Attention rightly shifts to the implementation of these reforms and, one hopes, to working constructively with law schools to best manage the burdens (and also the benefits) of these new standards.

But we should not lose sight of the fact that there is much more constructive work to do. The multiyear process just completed was described as a comprehensive one. Yet, the most comprehensive approach to reform would look freshly at all the rules in toto, asking simultaneously the questions: What is the fundamental purpose of law school regulation? How do the standards maintain public confidence in legal education while encouraging law schools to revisit their basic instructional and economic models, in light of the changing landscape for students, faculty, and lawyers? And how can these standards be framed as drivers of innovation and of creative reform, rather than as maintenance of a model of legal education that is coming under challenge, and from many quarters, as ill-suited to the needs, wants, and exigencies of the profession?

Drilling deep into these questions can assist the Council and its many stakeholders in opening the kind of dialogue that promises to lead, albeit not in the next few months or even couple years, to important change.

More specifically, the ABA Council might think in earnest about the following ...

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August 18, 2014 in Legal Education | Permalink | Comments (1)

WSJ: Meet the Law Professor Who’s Crashing the Inversion Party

Following up on my previous posts (here and here):  Wall Street Journal, Meet the Law Professor Who’s Crashing the Inversion Party:

ShayHarvard Law School professor Stephen Shay may have single-handedly crashed the corporate inversion party.

The U.S. Treasury Department has in recent days begun weighing how it could use its power to write regulations that would eliminate some of the key economic benefits U.S. corporations get when they acquire a non-U.S. company.

Mr. Shay, who served for seven years in the Treasury during two different administrations and spent 22 years as a tax partner at Ropes & Gray LLP, appeared to be the first person to make the government aware of its powers to crack down on the advantageous tax treatment of inversions in an article published on July 29, 2014 in Tax Notes, a publication closely followed by tax professionals.

“I just started asking the question, ‘What could be done with regulation rather than legislation’,” Mr. Shay said in an interview.

His answers — in the article entitled Mr. Secretary, Take the Tax Juice Out of Corporate Expatriations — have sent chills through corporate boardrooms and the law firms that have been profiting off the recent merger mania.

August 18, 2014 in Legal Education, Scholarship, Tax | Permalink | Comments (1)

Welcome, Pepperdine 1Ls

Welcome to the Pepperdine 1Ls, beginning their legal education today with a week-long program put on by our new Parris Institute for Professional Formation, ably led by Al Sturgeon and Danny DeWalt.

LAUNCH WEEK 2014

August 18, 2014 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 466

IRS Logo 2New York Observer: Deadline: Judge Emmet Sullivan Lays Down the Law:

On behalf of the country, Judge Emmet Sullivan is pounding the IRS and appears as unsatisfied as most of America with the agency’s stalling, side-stepping, neglect, arrogance, and cavalier attitude toward its legally required record-retention responsibilities. Late yesterday afternoon, Judge Sullivan entered an order that demands answers to a lot more questions.

The IRS’s filing in Judge Sullivan’s court Monday evidenced no interest in finding the emails all of us know are out there somewhere. The fact that the IRS took thirty days to file its meager declarations, which actually said less than it had disclosed to Congress, is truly insulting. The agency better take Judge Sullivan seriously—and fast—or he’s the one who will be furious. Have IRS officials Kane and Koskinen still not reviewed what this fearless enforcer of the law did to the last Department of Justice prosecutors who played games with the truth in his courtroom? ...

The IRS is represented by Department of Justice attorneys. Do they not read the news, the latest books, or the law? This column has tried to warn them repeatedly that, like Toto, they’re not in Kansas any more. They are in the federal courtroom of a real Article III judge who has powers they should bloody well know not to ignore—the same kind wielded by Judge John Sirica, whose integrity and persistence in dealing with the Watergate case led to the resignation of Richard M. Nixon.

This is the same Emmet Sullivan who appointed a special prosecutor and initiated criminal contempt proceedings and a full investigation of the Department of Justice attorneys who played unethical and dishonest games in the prosecution of United States Senator Ted Stevens.

Someone in DOJ or the IRS better find those emails, fast, or this Judge will do it for them and they’ll just think they were caught up in a Category V tornado—or wish they had been and carried off to Oz instead. Judge Sullivan will keep on until he finds the man behind the curtain.

One of the things I can’t help but continue to wonder is, if the emails and all the information truly were not recoverable from the Lerner hard drive, why did the hard drive have to be “degaussed” and destroyed to “protect taxpayer privacy”? And why did someone testify to Congress that an IRS IT expert said it should be given to an outside vendor to retrieve the messages—and instead, the hard drive was degaussed and shredded?

With each turn, the IRS has raised more questions than it has answered. But this time it’s not the media and the citizens doing the asking. They’ve now got a week to answer to a judge.

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August 18, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, August 17, 2014

Who Killed Dan Markel?

Hit the Reset Button in Your Brain

New York Times Sunday Review:  Hit the Reset Button in Your Brain, by Daniel J. Levitin (McGill) (author, The Organized Mind (2014)):

Organized MindThis month, many Americans will take time off from work to go on vacation, catch up on household projects and simply be with family and friends. And many of us will feel guilty for doing so. We will worry about all of the emails piling up at work, and in many cases continue to compulsively check email during our precious time off.

But beware the false break. Make sure you have a real one. The summer vacation is more than a quaint tradition. Along with family time, mealtime and weekends, it is an important way that we can make the most of our beautiful brains. ...

If you’re feeling overwhelmed, there’s a reason: The processing capacity of the conscious mind is limited. This is a result of how the brain’s attentional system evolved. Our brains have two dominant modes of attention: the task-positive network and the task-negative network (they’re called networks because they comprise distributed networks of neurons, like electrical circuits within the brain). The task-positive network is active when you’re actively engaged in a task, focused on it, and undistracted; neuroscientists have taken to calling it the central executive. The task-negative network is active when your mind is wandering; this is the daydreaming mode. These two attentional networks operate like a seesaw in the brain: when one is active the other is not. ...

Every status update you read on Facebook, every tweet or text message you get from a friend, is competing for resources in your brain with important things like whether to put your savings in stocks or bonds, where you left your passport or how best to reconcile with a close friend you just had an argument with.

If you want to be more productive and creative, and to have more energy, the science dictates that you should partition your day into project periods. Your social networking should be done during a designated time, not as constant interruptions to your day.

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August 17, 2014 in Book Club, Legal Education, Tax | Permalink | Comments (0)

Are You a Faculty of Hunters or a Faculty of Farmers?

Above the Law, Are You A Hunter Or A Farmer?:

David Maister, in his classic book Managing the Professional Firm, makes an observation that most professional firms fall into two categories: Farmers and Hunters.

Hunters

Traits

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August 17, 2014 in Legal Education | Permalink | Comments (0)

Top 5 Tax Paper Downloads

SSRN LogoThere is quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads on SSRN, with a new #1 paper and new papers debuting on the list at #4 and #5:

  1. [370 Downloads]  Guide to FATCA Compliance (Chapter 1, Background and Current Status of FATCA) (LexisNexis 2d ed. 2014), by William Byrnes (Thomas Jefferson), Denis Kleinfeld, & Alberto Gil Soriano
  2. [228 Downloads]  Desperate Retirees: The Perplexing Challenge of Covering Retirement Health Care Costs in a YOYO World, by Richard L. Kaplan (Illinois)
  3. [203 Downloads]  Unconstitutional Perpetual Trusts, by Steven Horowitz (Sidley Austin, Chicago) & Robert Sitkoff (Harvard)
  4. [153 Downloads]  The Futility of Tax Protestor Arguments, by Allen D. Madison (South Dakota)
  5. [128 Downloads]  The Most Critical Issue Facing Tax Administration Today -- And What to Do About It, by George K. Yin (Virginia)

August 17, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 465

IRS Logo 2Bloomberg: Federal Judge Wants Answers From the IRS on Missing E-mails:

A federal judge signaled that he doesn’t believe the Internal Revenue Service did all it could to unearth the missing e-mails at the heart of a Congressional investigation into the agency’s treatment of Tea Party organizations.

U.S. District Judge Emmet Sullivan late yesterday asked the IRS for a list of steps it took to retrieve e-mails of Lois Lerner, who was the official in charge of determining whether the antitax Tea Party groups could qualify for nonprofit status. The IRS has said a crash of her hard drive wiped out e-mails from 2009 to 2011.

Sullivan, appointed to the court by former President Bill Clinton in 1994, gave the IRS until next week to answer several questions about how it decided the e-mails were beyond recovery. Among them, he asked the agency whether it sought e-mails from alternate sources, such as a BlackBerry, iPhone, or iPad; to explain how it tracks computer parts when they’re serviced or taken out of use; and to provide a statement from an outside vendor “who can verify the IRS’ destruction policies concerning hard drives.”

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August 17, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Saturday, August 16, 2014

Why Law School Rankings Matter More Than College, Business School, and Medical School Rankings

U.S. News (2015)Forbes, Why Law School Rankings Matter More Than Any Other Education Rankings:

[I]s all the hysteria warranted? Does a higher rank really guarantee better job prospects, higher salaries, and ultimately, a better life? The data says no…for the most part. While rankings are certainly helpful in a broad, directional sense, most of the obsession is groundless…with the exception of law school. At FindTheBest, we took a look at each major type of institution—undergraduate, business, medicine, and law—to see which rankings actually matter.

Undergraduate Rankings ... Conclusion: rankings don’t matter much
Business School Rankings ... Conclusion: rankings only matter a little, and can change quickly
Medical School Rankings ... Conclusion: rankings do matter, to a point, but residencies and concentrations should be your primary concern

Law School Rankings And so we finally arrive at law school, where as it turns out, rankings couldn’t be more important. For starters, consider that the top 14 schools in the nation have remained unchanged for 25 years—without a single new contender since US News started publishing law school rankings in 1989. Yes, the exact order among these 14 has changed a bit from year to year, but the top 14 (often abbreviated as the T14), has maintained its elite, unassailable status.

The T14’s dominance has created a year-after-year, self-fulfilling prophecy, where students covet these top institutions, the best professors desire to teach at these institutions, and law firms choose to hire from these institutions, essentially ensuring that the same group will remain the T14 for years to come. Employers admit that JDs from the T14 will be welcomed at law firms across the nation, while graduates of even the next best schools (like UCLA or Texas, perennially ranked between 15-20) will be much better off sticking to local markets.

Note how the top 14 schools claim the best employment rates in the nation:

The discrepancy is even more obvious if you look at employment at the largest, most desirable firms:

The T14 phenomenon has been around for decades, but recent trends in the legal market have exacerbated the situation. With an over-saturated pool of lawyers and law firms receiving an unprecedented number of applications, employers can be extremely picky, choosing only candidates guaranteed to be stellar. T14 graduates quickly snap up spots at the best employers, leaving lower-ranked law school graduates the smaller-firm crumbs.

Conclusion: rankings matter tremendously—a spot in a top 14 school is essential

So when it comes to most educational rankings, don’t worry so much about whether you’re attending the #1, #10, or even #50 school: students end up doing just as well, and there are often more important details to keep in mind. Don’t worry, that is, unless you’re going to law school, where it can make all the difference in the world.

Above the Law, Why You Absolutely Should Care About Law School Rankings

August 16, 2014 in Law School Rankings, Legal Education | Permalink | Comments (7)

Dear Mr. President, Why I'm Leaving America

America Getting OutForbes, Dear Mr. President, Why I'm Leaving America:

Dear Mr. President,

I am writing with a heavy heart as I, my husband, and our daughter are all seriously contemplating giving up our U.S. citizenship. We are doing this not to avoid paying U.S. taxes but because we strongly object to a system that is blatantly discriminatory and unfair to law-abiding Americans living outside the country. In addition, it has become too expensive, too difficult, and frankly, too frightening, to try to comply with all of the tax filing requirements that now apply to citizens living abroad. ...

[T]he overall burden and the unfairness have become too heavy to reasonably bear. My earliest known American ancestor, who sailed from Europe and settled in Kentucky 166 years ago, is probably “rolling over in his grave” to think that I am giving up my U.S. citizenship. However, growing up in Colorado I was raised and educated to stand up for what is right. I have been doing that ever since.

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August 16, 2014 in Tax | Permalink | Comments (2)

Massive (50%-70%?) Faculty Layoffs at Cooley Law School

WMU Cooley logoLansing City Pulse, Cooley 'Right-Sizing': Large-Scale Layoffs Underway at WMU Cooley Law School:

Western Michigan University Thomas M. Cooley Law School is delivering pink slips to faculty and staff in all of its Michigan campuses.

Sources in Lansing who are being laid off say the cuts are deep, upwards of 50 percent, according to one. Another said the impact could be as high as 70 percent. A Cooley spokesman disputed the amount, but said he did not have numbers.

“We have non-disparagement and confidentiality clauses upon which our severance packages hinge so I cannot say anything on the record and very little off the record other than to confirm that the cuts to faculty and staff are significant and I am among those in that category,” shared one faculty member, who spoke under condition of anonymity. “Plus I am really, really pissed.” ... Cooley, the country’s largest law school by enrollment, boasted a faculty of 271, full time and part time, according to its website.

James Robb, associate dean of external affairs and senior counsel to the school, confirmed the layoffs are underway. They are a “painful but necessary” process to help “right-size the organization,” he said. ... WMU Cooley Law School has seen more than a 40 percent drop in enrollment over the past few years. Cooley has raised tuition by 9 percent. S&P gave it a negative rating at the end of last year. ...

When asked if the cuts were as deep as 50 percent Robb said, “I think you’re hearing wrong.” ... Robb said he expects the layoff process to be completed by the end of August.

August 16, 2014 in Legal Education | Permalink | Comments (1)

The IRS Scandal, Day 464

IRS Logo 2Legal Insurrection:  Judge Launches Special Inquiry Into Missing IRS Emails and Lerner Hard Drive, by William Jacobson (Cornell):

Judicial Watch has sued over missing IRS emails in the federal district court in D.C., pursuant to its FOIA request for such documents.

The IRS was ordered to provide explanations as to missing emails, particularly Lois Lerner.

The IRS provided explanations, but those were not good enough for the Judge, who launched his own inquiry into the matter, as Judicial Watch explained in a statement posted on its website.

Here is the Judge’s Order (emphasis added, hard paragraph breaks inserted for ease of reading):

MINUTE ORDER. In light of [26] the Declarations filed by the IRS, the IRS is hereby ORDERED to file a sworn Declaration, by an official with the authority to speak under oath for the Agency, by no later than August 22, 2014.
In this Declaration, the IRS must:
(1) provide information about its efforts, if any, to recover missing Lois Lerner emails from alternate sources (i.e., Blackberry, iPhone, iPad);
(2) provide additional information explaining the IRS’s policy of tracking inventory through use of bar code property tags, including whether component parts, such as hard drives, receive a bar code tag when serviced. If individual components do not receive a bar code tag, provide information on how the IRS tracks component parts, such as hard drives, when being serviced;
(3) provide information about the IRS’s policy to degauss hard drives, including whether the IRS records whose hard drive is degaussed, either by tracking the employee’s name or the particular machine with which the hard drive was associated; and
(4) provide information about the outside vendor who can verify the IRS’s destruction policies concerning hard drives.
Signed by Judge Emmet G. Sullivan on August 14, 2014.

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August 16, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Friday, August 15, 2014

Weekly Tax Roundup

August 15, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Is Legal Scholarship Politically Biased?

Adam S. Chilton (Chicago) & Eric A. Posner (Chicago), An Empirical Study of Political Bias in Legal Scholarship:

Law professors routinely accuse each other of making politically biased arguments in their scholarship. They have also helped produce a large empirical literature on judicial behavior that has found that judicial opinions sometimes reflect the ideological biases of the judges who join them. Yet no one has used statistical methods to test the parallel hypothesis that legal scholarship reflects the political biases of law professors. This paper provides the results of such a test. We find that, at a statistically significant level, law professors at elite law schools who make donations to Democratic political candidates write liberal scholarship, and law professors who make donations to Republican political candidates write conservative scholarship. These findings raise questions about standards of objectivity in legal scholarship.

Figure 3

Professors who are Democrats (adjusted)—shown in the left panel—have an average article ideology of -2.67 with a 90% confidence interval of -3.13 to -2.21. Using a t-test, we can say that this is statistically different from zero (p-value < 0.00). Professors who are Republicans (adjusted)—shown in the right panel—have an average article ideology of 0.17 with a 90% confidence interval of -0.72 to 1.10. For these professors, we cannot reject the possibility that the true net ideology of their articles is zero (p-value = 0.72). In other words, our data suggest that Democrats in our sample do not write articles that are on balance neutral, but that Republicans in our sample may write articles that are on balance neutral. ...

[I]f it is in fact the case that Republicans write less ideologically biased scholarship than Democrats do, then one would naturally ask why. The most plausible explanation is that if the dominant ethos in the top law schools is liberal or left-wing,51 then Republicans are likely to conceal their ideological views in their writings. Republican professors might fear that scholarship that appears conservative may be rejected by leftleaning law review editors, and disparaged or ignored by their colleagues, which will damage their chances for promotions, research money, and lateral appointments. This would explain why even nondonors tilt left. Republicans could suppress their ideological views by avoiding controversial topics, taking refuge in fields that have little ideological valence, focusing on empirical or analytical work, or simply writing things that they don’t believe.

Table 4

The data presented in Table 4 suggest that constitutional rights scholars are less ideologically diverse than other legal scholars. Among constitutional rights scholars, 77% are net Democratic donors, and 4% are net Republican donors. In the rest of the sample, 40% are net Democratic donors, and 20% are net Republican donors. It also shows that constitutional rights scholars are more likely to produce biased research (mean of -3.85 conservative articles) than Republican and Democratic scholars in other fields (mean of -1.35 conservative articles).

August 15, 2014 in Legal Education, Scholarship | Permalink | Comments (3)

Weekly SSRN Tax Roundup

Weekly Legal Education Roundup

Weekly Student Tax Note Roundup

UC-Hastings Dean: It's Time to Rethink Law School

San Francisco Daily Journal:  It's Time to Rethink Law School, by Frank Wu (Dean, UC-Hastings):


DangerThere are two schools of thought about legal education. One insists that law schools are fundamentally fine. They face only a momentary lull in demand. They will recover so long as they continue to do as they have done. Another contends that the educational program leading into legal practice is fundamentally flawed. It needs reform even if the marketplace improves. The recent economic crisis exposed problems that always had been there. I count myself among those who embrace the latter view. ...

The problem of legal education is more than one problem. At least three major concerns need to be addresses. First, there appears to be a glut of lawyers. ... Second, there is the cost structure of legal education. ... Third, there are the perennial complaints about the skills imparted during three years of formal schooling. ...

Put all this together. There has not been, in the recollection of anyone now living, a similar set of challenges for law schools. As with all such situations, however, leaders must spot the issues. We are in danger. We should not deny that.

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August 15, 2014 in Legal Education | Permalink | Comments (2)

Johnson: Repealing the Tax Subsidies to Qualified Retirement Plans

Tax Analysys Logo (2013)Calvin H. Johnson (Texas),  Amazing Waste: Tax Subsidies To Qualified Retirement Plans, 144 Tax Notes 727 (Aug. 11, 2014):

The proposal would repeal the tax advantages given to qualified retirement plans. Qualified plans are ineffective or counterproductive for their given rationales, which makes them a rich source of revenue when the United States needs money. Johnson argues that qualified plans provide a safety net where there is little need for it and provide no safety net where it is needed. Qualified plans are said to improve the value of a dollar by moving it from high-income working years to low-income retirement years. However, the tax advantages are distributed under a reverse-Robin Hood pattern to high income groups (many with soaring salaries) and by negating the tax brackets. That distribution of benefits can be expected to reduce the utility of a dollar. Qualified plans are said to be an incentive for savings, but when government cost and deficits are considered, the plans reduce net national savings. It would be cost free and effective to increase retirement savings by mandating savings for retirement or by imposing default rules without a tax subsidy.

August 15, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1)

Have You Had Difficulty Using the Internet This Week? 512k Is the Culprit.

Wall Street Journal, Engineers Buzz That Internet Is Outgrowing Its Gear; Routers That Send Data Online Could Become Overloaded as Number of Internet Routes Hits '512K':

InternetNetwork engineers are buzzing this week as the Internet outgrows some of its gear.

Internet providers, corporations and universities all rely on a common map of routes to send emails, videos and everything else on the Web where it's supposed to go. That Internet atlas has thickened, and some of the machines that read it are now straining to hold all the pages.

While a precise count is elusive, many technicians are reporting that the total number of world-wide Internet routes is near or already past half a million, usually abbreviated 512K. Older network routers from Cisco and other makers can't hold any more unless they are tweaked.

The fix is simple. Engineers can buy new gear or raise their routers' memory caps and reboot. But some Web companies need to reconfigure each device one at a time, and the fallout is hard to judge given the numbers involved. The work already caused some websites to go offline Tuesday. ... More websites and broadband firms are likely to feel the pinch in coming days as they hit the seemingly arbitrary limit.

August 15, 2014 in Legal Education, Tax | Permalink | Comments (0)

Law Prof Loses Slip-and-Fall Case Against University of Texas; Claimed Injury Prevents Him From Playing Tennis

Texas Lawyer, Law Prof Loses Slip-and-Fall Claim at Third Court:

SampsonA divided Third Court of Appeals has tossed out a law professor's claims against The University of Texas at Austin for injuries he said he suffered after he tripped over an extension cord that was strung across a walkway to provide lighting for a nearby tailgate party [University of Texas v. Sampson]. At the time in November 2009, it was dark, and professor John "Jack" Sampson was walking to The University of Texas School of Law, where he works. ...

Sampson said he would appeal the 2-1 Third Court decision. He said he tore a tendon in his right shoulder and lost the ability to play tennis. "I played tennis two to three times per week, sometimes four. Of course, I can't serve, and I can't hit hard, so I can't play tennis. That is the tragedy of the accident … it stopped me from ever playing tennis again," said Sampson.

August 15, 2014 in Legal Education | Permalink | Comments (1)

The IRS Scandal, Day 463

IRS Logo 2Bloomberg, Judge Prods IRS on Effort to Save Lois Lerner’s E-Mail:

A federal judge asked the U.S. Internal Revenue Service for more information on efforts it made to recover missing e-mail from the computer of an agency official at the heart of a quarrel between Congress and the Obama administration.

U.S. District Judge Emmet Sullivan’s order today giving the IRS until Aug. 22 to come up with further details on what it did to retrieve e-mail from the malfunctioning computer of Lois Lerner signals his dissatisfaction with the agency’s earlier explanation, contained in an Aug. 11 filing. 

The order comes in a Freedom of Information Act lawsuit filed by the activist group Judicial Watch. The complaint seeks Lerner’s e-mail and other communications concerning the processing of applications for tax-exempt status.

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August 15, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Thursday, August 14, 2014

Fleischer: Kinder Morgan Is Playing Tax Arbitrage With Itself

New York Times DealBook:  Kinder Morgan Is Playing Tax Arbitrage With Itself, by Victor Fleischer (San Diego):

NY Times Dealbook (2013)Kinder Morgan’s plan to “roll up” its affiliated master limited partnerships into a single behemoth corporation makes little sense from a tax perspective. Kinder Morgan is swapping a tax-efficient structure for an inefficient one.

Such a move can only be justified by large nontax benefits. The company projects that it will have a lower cost of capital for future acquisitions and investments. But is a projected economic benefit tomorrow worth a higher tax bill today?

Kinder Morgan is organized as a “C corporation” that pays corporate taxes, but it currently conducts most of its business through two affiliates — Kinder Morgan Energy Partners and El Paso Pipeline Partners — that are organized as master limited partnerships with separate shareholders, known as unit holders, who own about half of each company.

The master limited partnerships are publicly traded. Unlike most publicly traded businesses, however, they qualify as partnerships for tax purposes and pay no corporate tax. Instead, gains and losses are passed through to individual shareholders, who pay tax on their individual tax returns. And like other energy sector partnerships, generous depreciation and amortization allowances pass through to individual unit holders in each partnership, who can often use those tax losses to shelter income from the partnership. (The losses typically cannot be used to offset other income.) ...

[A] significant portion of the value created by the deal is merely being shifted from unit holders to KMI shareholders. Unit holders will benefit indirectly if they continue to hold the KMI stock they receive in the exchange, but they are, in effect, sharing a tax benefit that they paid for. The bottom line is that under the old structure, when an oil pipeline is depreciated, the tax benefit mostly flows to the unit holders. Under the new structure, those deductions will shelter corporate income instead. ...

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August 14, 2014 in Tax | Permalink | Comments (0)

Fall 2014 Law School Applicants Decline 8.2%

LSAC, Three-Year ABA Volume Comparison:

As of 8/08/14, there are 352,406 fall 2014 applications submitted by 54,527 applicants. Applicants are down 6.7% and applications are down 8.2% from 2013. Last year at this time, we had 100% of the preliminary final applicant count ... [and] 100% of the preliminary final application count.

A line chart titled Fall ABA Applicants by Week. The horizontal axis represents months November through August. Along its vertical axis are numbers 0 through 100,000 indicating number of applicants. The line labeled Fall 2012 steadily rises from 16,719 in November to 59,090 in March, then begins to plateau from March until August ending at 67,735. The line labeled Fall 2013 increases from 12,728 in November to 48,674 in March, then begins to plateau from March until August ending at 59,426. The line labeled Fall 2014 rises slightly from 11,340 to 54,527 at the beginning of August.

Matt Leichter, 54,527 Law School Applicants in 2014:

Here’s what this year looks like compared to previous years.

No. Applicants Over App Cycle

August 14, 2014 in Legal Education | Permalink | Comments (1)

TIGTA: IRS Puts Confidential Taxpayer Information at Risk By Giving It to Contractors Without Required Background Checks

TIGTA The Treasury Inspector General for Tax Administration today released Some Contractor Personnel Without Background Investigations Had Access to Taxpayer Data and Other Sensitive Information (2014-10-037):

IRS policy requires contractor personnel to have a background investigation if they will have or require access to Sensitive But Unclassified (SBU) information, including taxpayer information. Allowing contractor personnel access to taxpayer and other SBU information without the appropriate background investigation exposes taxpayers to increased risk of fraud and identity theft.

Taxpayer and other SBU information may be at risk due to a lack of background investigation requirements in five contracts for courier, printing, document recovery, and sign language interpreter services. For example, in one printing services contract, the IRS provided the contractor a compact disk containing 1.4 million taxpayer names, addresses, and Social Security Numbers; however, none of the contractor personnel who worked on this contract were subject to a background investigation. In addition, TIGTA found 12 contracts for which IRS program and procurement office staff correctly determined that contractor personnel required background investigations because they would have access to SBU information; however, some contractor personnel did not have interim access approval or final background investigations before they began working on the contracts. Further, TIGTA identified 20 contracts for which either some or all contractor personnel did not sign nondisclosure agreements. In June 2013, after the period covered by our audit, the IRS issued more explicit guidance requiring the execution of nondisclosure agreements.

August 14, 2014 in Gov't Reports, IRS News, Tax | Permalink | Comments (1)

Another Tax Reform Solution: Taxing Consumption

Washington Post op-ed:  Another Tax Reform Solution: Taxing Consumption, by Charles Lane:

According to much conventional wisdom, the flap over corporate “tax inversions” is just the latest evidence that the tax code needs a comprehensive overhaul like the one agreed to by congressional leaders and President Reagan in 1986. Whether you consider it greedy and unpatriotic for U.S. companies to establish corporate headquarters in lower-tax foreign countries, or merely regrettable but rational, part of the solution is to lower that rate and recoup lost revenue by closing loopholes, it is said.

“Lower rates, broader base” was the cardinal principle of the 1986 reform. And it is still the mantra of tax reformers today. House Ways and Means Committee Chairman Rep. Dave Camp (R-Mich.) unveiled a 1986-style plan in March that would trim the top individual and corporate rates, while pinching popular breaks such as the mortgage interest deduction.

There’s just one problem: In 2014, the 1986 model looks like “a dead end.” Or so argues Michael J. Graetz, a former Treasury official in the first Bush administration and longtime advocate of radical tax reform who teaches at Columbia Law School. In his latest paper [The Tax Reform Road Not Taken -- Yet, 67 Nat'l Tax J. 419 (2014)], Graetz contends, plausibly, that the 1986 tax reform worked because it was then possible to pay for rate reductions by eliminating billions of dollars in individual and corporate tax shelters without tackling middle-class breaks like the mortgage interest deduction. Today, though, there’s less low-hanging fruit; a 1986-style reform would be politically difficult because it would be financially difficult, as Camp’s plan and similar attempts at “revenue-neutral” reforms suggest.

Even if our politicians did manage to push this boulder up the hill, Graetz notes, it would roll right back down. At the behest of lobbyists, Congress began fiddling with the 1986 reform almost as soon as it was enacted, giving us today’s loophole-ridden mess.

The United States’ real problem, according to Graetz, is its undue dependence on income taxes — corporate and individual — in the first place. ... Graetz would put a 12.9 percent VAT at the center of a new system — using the revenue to slash the corporate tax rate to 15 percent and eliminate income taxes for all households earning less than $100,000 ($50,000 for singles), that is, 80 percent of current filers. For those above that threshold, there would be two rates, 16 percent and 25.5 percent. Payroll tax rates would stay the same, with credits for low-income workers to offset the regressive impact of the VAT, as well as an additional child tax credit. ...

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August 14, 2014 in Tax | Permalink | Comments (0)

Ryznar: Incentivizing Parental Support for College Tuition through the Tax Code

Margaret Ryznar (Indiana-Indianapolis), Incentivizing Parental Support for College Tuition through the Tax Code, 2013 Mich. St. L. Rev. ___:

University tuition costs continue to increase, while education continues to be important. Efforts to alleviate this problem must be undertaken carefully as to not simply aggravate the problem. To this end, this Article proposes that parental contribution towards university tuition be treated more favorably by the tax code, and in particular, be treated as tax deductible. Universities already expect parental contributions as part of a child’s financial aid package, and this proposed tax deduction may help fulfill that expectation. Furthermore, this proposed deduction would spare students some reliance on the loan system, including the risk of default. This proposed deduction, finally, may be structured in a cost-neutral way. Specifically, the funds used for this deduction would be the taxpayer funds saved from the decrease in loan defaults and loan interest subsidies, which currently cost tens of billions of tax dollars.

August 14, 2014 in Scholarship, Tax | Permalink | Comments (0)

Applications at New York State Law Schools

New York Law Journal, Four N.Y. Schools Buck Trend in Declining Applications:

New York StateAt least four of New York's 15 law schools are bucking a national trend in declining applications, according to preliminary figures provided by the schools.

New York University [+8%], St. John's [+14%], Syracuse [+6%] and Touro [+5%] all received more applications in the 2014 admissions cycle than they did last year. Another five saw their applicants decline [Albany (-20%), Cardozo (-14%), Fordham (-9%), Hofstra (-9%), Cornell (-2%)] while six did not provide numbers to the New York Law Journal.

Nationwide, applications are down 8.2% since last year, according to the latest figures released Wednesday by the Law School Admission Council. And they have fallen more than 34 percent since 2008.

August 14, 2014 in Legal Education | Permalink | Comments (1)

More Tax Inversion, MLP News

Rebrand: Western Michigan University Cooley Law School

Press Release, Cooley Law is now Western Michigan University Cooley Law School:

WMU Cooley logoAfter reviews by the Higher Learning Commission and the ABA, an affiliation agreement in the works for more than a year has led to a new identity for the nation's largest law school--the Western Michigan University Thomas M. Cooley Law School.

August 14, 2014 in Legal Education | Permalink | Comments (0)