TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Monday, March 7, 2016

Aprill Presents The Section 527 Obstacle to Meaningful Section 501(c)(4) Regulation Today At Pepperdine

AprillEllen P. Aprill (Loyola-L.A.) presents The Section 527 Obstacle to Meaningful Section 501(c)(4) Regulation, 13 Pitt. Tax Rev. 43 (2015), at Pepperdine today as part of our Tax Policy Workshop Series funded in part by a generous gift from Scott Racine:

As is well known, on May 10, 2013, at a session of the American Bar Association Tax Section meeting in Washington, D.C., Lois Lerner, at the time the director of the Exempt Organization Division of the Internal Revenue Service (IRS or Service), apologized for IRS mishandling of applications by Tea Party groups for exemption as social welfare groups under section 501(c)(4) of the Internal Revenue Code. A few days later, the Department of the Treasury (Treasury) Inspector General released a report (TIGTA Report) concluding that the “IRS used inappropriate criteria that identified for review Tea Party and other organizations applying for tax-exempt status based upon their names or policy positions instead of indications of potential political campaign intervention.”

Continue reading

March 7, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

My Brilliant (White Male) Professors

Inside Higher Ed, My Brilliant (White Male) Professors:

For years, critics have pointed to flaws in the reliability of RateMyProfessors, which remains popular with many students. As far back as 2006, for example, a study found that students gave the highest ratings to professors seen as easy graders or good-looking.

But a new study raises the possibility that students are not equal opportunity in what they write in their anonymous reviews. And while those reviews may not be used officially, they can easily reflect what students write on their official evaluations of faculty members.

The new study [The Frequency of “Brilliant” and “Genius” in Teaching Evaluations Predicts the Representation of Women and African Americans across Fields], published in PLOS ONE, found that students were two to three times more likely to use the words "brilliant" or "genius" to describe male professors as they were to describe female professors. Further, the study found that the professors most likely to be called one of those terms were in disciplines -- such as physics and philosophy -- with relatively few female or black professors.

Billiant

Continue reading

March 7, 2016 in Legal Education | Permalink | Comments (6)

Merritt:  LSAT, Bar Failure, And Debt

Deborah Jones Merritt (Ohio State), LSAT, Bar Failure, and Debt:

LSSSE reports that 52% of law students with the lowest LSAT scores (145 or less) expect to incur over $120,000 of debt for their legal education. In contrast, only 20% of students with LSATs above 155 will owe that much.

The highest risk students are assuming very heavy debt loads for their legal education. Equally disturbing, the difference between those students and their classmates has grown substantially since the great recession. In 2006, LSSSE notes, debt loads did not differ much by LSAT score. Sixteen percent of students who scored above 155 expected to owe more than $120,000 for their legal education; for students scoring at that cut-off or below, the percentage was the same.

Continue reading

March 7, 2016 in Legal Education | Permalink | Comments (4)

NY Times:  Law Graduate Gets Her Day In Court, Suing Law School

Thomas Jefferson Logo (2015)New York Times, Law Graduate Gets Her Day in Court, Suing Law School:

Nearly a decade has passed since an aspiring young lawyer in California, Anna Alaburda, graduated in the top tier of her class, passed the state bar exam and set out to use the law degree she had spent about $150,000 to acquire.

But on Monday, in a San Diego courtroom, she will tell a story that has become all too familiar among law students in the United States: Since graduating from the Thomas Jefferson School of Law in 2008, she has yet to find a full-time salaried job as a lawyer.

From there, though, her story has taken an unusual twist: Ms. Alaburda, 37, is the first former law student whose case against a law school, charging that it inflated the employment data for its graduates as a way to lure students to enroll, will go to trial.

Continue reading

March 7, 2016 in Legal Education | Permalink | Comments (3)

The Partisan Tax Policy Center

Tax Policy Center (2016)Wall Street Journal op-ed:  The Partisan Tax Policy Center: The Media’s Favorite Tax Policy Shop Uses Outdated Economic Models to Serve Democratic Political Ends, by Marc Sumerlin (Evenflow Macro) & Noah Williams (Wisconsin):

It used to be difficult to evaluate the effect of tax changes on economic growth—but improvements in economic analysis and computer technology have made this analysis far more feasible.

Continue reading

March 7, 2016 | Permalink | Comments (0)

Death Of Cornell President Elizabeth Garrett

Garrett 2Elizabeth Garrett (age 52), former USC Provost who became Cornell's President on July 1, 2015, died last night after a brief battle with colon cancer:

President Elizabeth Garrett died last night at Weill Cornell Medicine after receiving treatment for colon cancer, the University announced this morning. The thirteenth Cornell president and first female president was 52.

Chair of the Board of Trustees Robert S. Harrison ’76 announced in an email last month that Provost Michael Kotlikoff would serve as Acting President of the University after President Elizabeth Garrett underwent surgery related to her illness.

Garrett, who was elected on Sept. 30, 2014 and inaugurated on Sept. 18, announced on Feb. 8 that she was undergoing an “aggressive treatment plan” for colon cancer and had decided to delegate several of her commitments to other members of Cornell’s senior leadership. ...

Continue reading

March 7, 2016 in Legal Education, Tax | Permalink | Comments (5)

ABA May Impose Tougher 75% Bar Passage Standard, Allow Admission To Law School Without Any Standardized Test

ABA Legal EdFollowing up on my previous posts (links below):  Wall Street Journal Law Blog, ABA to Consider Change to Bar-Passage Rule for Law Schools:

Law schools may soon have to do a better job at proving they actually prepare students for the practice of law.

At a meeting next week in Phoenix, the ABA's accrediting arm will consider changing a bar passage rate rule schools must follow to stay accredited. The change would require 75% of a law school’s graduates who sit for a bar exam to pass the test within two years.

Continue reading

March 7, 2016 in Legal Education | Permalink | Comments (4)

Capital Gains Tax Slows Home Sales, Drives Up Prices In San Francisco

San Francisco Chronicle, Where Capital Gains Tax Slows Home Sales and Drives Up Prices:

Real estate agents say the fear of capital gains tax is preventing many homeowners with huge gains from selling. Even if you have no sympathy for these folks, they are one of the reasons for the low inventory of homes for sale, which is helping drive up prices. In San Francisco, the number of homes on the market in January has fallen every year since at least 2011, when it was 1,606. This January it was 584, according to Paragon Real Estate Group.

To see where taxes could be discouraging sales, The Chronicle asked Zillow to estimate how many Bay Area homeowners would owe capital gains tax if they sold their homes. ... [I]n San Francisco, San Mateo, Alameda, Contra Costa, Marin and Santa Clara counties combined, 62 percent of homes are worth at least $250,000 more than their last recorded sales price, and 36 percent have risen by at least $500,000. Going a little over those limits might not discourage a sale — but going a lot over might.

So Zillow looked further and found that 12 percent of homes have gains exceeding $1 million and 5 percent have appreciated by at least $1.5 million. In seven ZIP codes, more than 50 percent of homes had gains over $1.5 million. They were in Atherton, Palo Alto, Stanford, Portola Valley, Los Altos and Los Altos Hills.

Continue reading

March 7, 2016 in Tax | Permalink | Comments (0)

Law Clerks Skew Liberal, Even Ones Hired By GOP Appointees

Adam Bonica (Stanford), Adam S. Chilton (Chicago), Jacob Goldin (Stanford), Kyle Rozema (Northwestern) & Maya Sen (Harvard), The Political Ideologies of Law Clerks and their Judges:

We study the political ideology of judicial law clerks using a novel dataset that combines the most comprehensive data sources on political ideology and the identity of U.S. federal law clerks. First, we examine the distribution of clerks ideology and find that clerks tend to be disproportionately liberal, with clerks on lower courts being more liberal on average than clerks for higher courts. Second, we find that judges tend to consistently hire clerks with similar ideologies and that those ideologies track available measures of the judge’s own ideology. Finally, we develop a dynamic clerk-based measure of judicial ideology and document its value as a complement to existing approaches.

Wall Street Journal Law Blog, Law Clerks Skew Liberal — Even Ones Hired by GOP Appointees — Says Study:

It may not seem all that surprising that judges appointed by Democratic presidents hire mostly clerks who are left-of-center. Indeed, according to the authors, 85% of those clerks lean liberal. What’s more eye-opening is that around two-thirds of clerks hired by Republican-appointees are left-of-center.

Figure 10

Continue reading

March 7, 2016 in Legal Education, Scholarship | Permalink | Comments (0)

The IRS Scandal, Day 1033

IRS Logo 2Right Side News, Obama IRS Scandal Continues:

Don’t think for a minute that we’ve forgotten the “scandal for the ages,” the Obama IRS suppression of conservatives and the Tea Party.  I have an update for you on the compromised Obama Justice Department, which did so much to cover up the scandal for Barack Obama.

We are now asking a federal appellate court to overturn a lower court’s ruling allowing the Obama Justice Department to withhold records detailing the number of hours that agency attorney Barbara Bosserman expended on the investigation of the IRS targeting of conservative groups seeking tax-exempt status during the 2010 and 2012 election cycles.  We filed the appellate brief in the U.S. Court of Appeals for the District of Columbia Circuit last month.

This is the lawsuit that forced the Obama Justice Department to confirm the existence of a criminal investigation into the IRS’ abuses and that Bosserman, a major donor to Obama’s political campaigns and the Democratic National Committee, was part of the team of lawyers criminally investigating the issue.  (On October 23, 2015, the Justice Department announced in a letter that it would not press any charges over the IRS abuse scandal.)

In 2014, Judicial Watch filed a 2014 Freedom of Information Act (FOIA) lawsuit seeking records detailing the number of hours Bosserman expended on the IRS matter.  In 2015, the U.S. District Court for the District of Columbia ruled that the agency had properly withheld the Bosserman records under the “attorney work product doctrine.” Judicial Watch argues to the appellate court:

[T]he Department presented no evidence whatsoever that the records requested by Judicial Watch were created in anticipation of litigation. The District Court also did not make such a finding. Instead the Department argued and the court ruled that some of the information contained in the responsive records was protected by the attorney work product doctrine. Because the requested records were created in the ordinary course of business – to assist senior officials in their management responsibilities – the records do not fall within the scope of the attorney work product doctrine. The records are being improperly withheld in their entirety.

In early January 2014, then-Attorney General Eric Holder reportedly appointed Bosserman to oversee the IRS investigation despite her substantial political activities.  According to Federal Election Commission records, Bosserman contributed $6,750 to Obama’s campaigns and the DNC from 2004 to 2012, including 12 separate contributions to Obama for America between 2008 and 2012.  Then-House Committee on Oversight and Government Reform Chairman Darryl Issa (R-CA) called the Bosserman appointment “a startling conflict of interest [that has] compromised the Administration’s investigation of the IRS.”

All Judicial Watch wants is the number of hours that the Obama donor/Justice Department lawyer spent investigating the worst IRS abuse in American history. The failure to bring charges in the IRS scandal only adds to the public interest in finding out more details about the involvement of the Obama/Democratic Party donor in the criminal investigation.

The media may yawn when two Republicans candidates for the presidency, Donald Trump and Ben Carson, complain of Obama IRS audits.  But it suggests Obama’s IRS corruption never ended.  As with the Clinton email scandal, Judicial Watch has a large number of active lawsuits and investigations into the Obama IRS matter.  Washington politicians from both political parties want to move on, but we are on the case.  In fact, we have more material in the hopper to release over the next few weeks.  So watch this space for additional developments.

Continue reading

March 7, 2016 in IRS News, IRS Scandal | Permalink | Comments (6)

TaxProf Blog Weekend Roundup

Sunday, March 6, 2016

The Value Of A Law Degree By College Major: $29k/Year For STEM Majors, $45k/Year For Humanities Majors

Michael Simkovic (Seton Hall) & Frank McIntyre (Rutgers), Value of a Law Degree by College Major:

We estimate the increase in earnings from a law degree relative to a bachelor’s degree for graduates who majored in different fields in college. Students with humanities and social sciences majors comprise approximately 47 percent of law degree holders compared to 23 percent of terminal bachelor’s. Law degree earnings premiums are highest for humanities and social sciences majors and lowest for STEM majors. On the other hand, among those with law degrees, overall earnings are highest for STEM and Business Majors. This effect is fairly small at the low end of the earnings distribution, but quite large at the top end. The median annual law degree earnings premium ranges from approximately $29,000 for STEM majors to $45,000 for humanities majors.

Simkovic 2

Continue reading

March 6, 2016 in Legal Education, Scholarship | Permalink | Comments (33)

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. [378 Downloads]  The Taxation of Crowdfunding: Income Tax Uncertainties and a Safe Harbor Test to Claim Gift Tax Exclusion, by Paul Battista
  2. [366 Downloads]  Uncle Sam Wants … Who? A Global Perspective on Citizenship Taxation, by Allison Christians (McGill)
  3. [359 Downloads]  What Now? A Boomer's Baedeker for the Distribution Phase of Defined Contribution Retirement Plans, by Richard Kaplan (Illinois)
  4. [270 Downloads]  Profit Shifting Of U.S. Multinationals, by Tim Dowd (Joint Committee on Taxation), Paul Landefeld (Joint Committee on Taxation) & Anne Moore (Joint Committee on Taxation)
  5. [224 Downloads]  Evaluating BEPS, by Reuven Avi-Yonah (Michigan)

March 6, 2016 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

43% Of Young Women Lawyers Experience Gender Bias

Florida Bar Association, Results of the 2015 YLD Survey on Women in the Legal Profession:

A link to an electronic survey was e-mailed on October 21, 2015 to a random sample of 3,137 female members of The Florida Bar’s Young Lawyers Division. By the November 24, 2015 cutoff date, 464 completed surveys were received for a response rate of 15%.

Florida Bar 2

Continue reading

March 6, 2016 in Legal Education | Permalink | Comments (8)

The IRS Scandal, Day 1032

IRS Logo 2Canada Free Press, IRS Chief John Koskinen Honored With an Award For ‘Excellence in Public Service’. Yes, That Guy. Yes, Really.:

You know John Koskinen as the IRS chief who has, repeatedly, been forced to appear before Congress and defend his agency against claims that its agents targeted conservative groups. Koskinen has been caught, over and over again, lying, obfuscating, stalling, and generally stonewalling the investigation into the “service” he oversees. Out here in the real world, that lands you in jail or, at the very least, the unemployment line.  In Washington D.C…..

Well, in Washington D.C. you’re given a major award to honor you for your outstanding commitment to public service. ...

This is the sad, sad, reprehensibly sad, state of the country in which we live. Koskinen should be trotted out as an example of the worst that American government has to offer.  Instead, he’s being honored for allegedly offering the kind of earnest public service to which young people should dedicate their lives.

Hot Air, IRS and EPA Honchos Receive Public Service Awards. No … Seriously.:

You can keep clicking on this link as many times as you like and refreshing the page but it’s not going to redirect you to a story from The Onion. This is apparently a thing that actually happened. The current head of the Internal Revenue Service and the first chief of the Environmental Protection Agency were honored with prestigious public service awards this week. (Government Executive) ...

Koskinen is another matter entirely. I mean, there’s currently a motion on the floor of the Judiciary Committee to impeach the guy. He was at the helm for the entire Lois Lerner affair which saw the Department of Justice weighing the possibility of charges against some of his people. (They conveniently abandoned the case in October.) The agency has been highlighted by scandal, waste and abuse under Koskinen’s tenure and enjoys one of the lowest public approval ratings of the entire administration. This is the guy you choose to gift with an award and tens of thousands of dollars?

Government Executive, IRS Chief, First EPA Head Awarded Public Service Prize:

One is a living hero from the Watergate scandal who in 1970 became the first administrator of the Environmental Protection Agency. The other is a veteran of the 1990s Office of Management and Budget who is under constant political fire as the current commissioner of the Internal Revenue Service.

Both William Ruckelshaus and John Koskinen on Tuesday night were awarded the Elliot L. Richardson Prize for Excellence in Public Service by the National Academy of Public Administration, and both weighed in on the perils of public service in today’s hyperpartisan climate. ...

[Koskinen's] tenure heading the IRS since December 2013 has been marked by tensions with congressional Republicans over investigations into alleged political bias in the agency’s mishandling of nonprofits’ applications for tax-exempt status.

House Oversight and Government Reform Committee Chairman Jason Chaffetz, R-Utah, has approved a resolution calling for Koskinen’s impeachment by the Judiciary Committee. Asked for a comment on the Richardson award, Chaffetz told Government Executive by email that, “If obstructing a congressional investigation and misleading Congress merits an award, then it seems like they have the right guy. I guess I define excellent public service differently.” ...

Koskinen joked that his multi-entry resume in both public and private sector jobs has been interpreted as “I can’t hold a job, but until recently no one had suggested my early departure would be a net gain.” ...

The alleged political targeting took place “in one division, 900 people out of 90,000, but all felt under the gun,” he said, adding that he went on listening tours and personally spoke to 20,000 employees. Noting that IRS has since shrunk to 85,000, Koskinen said an “overwhelming” number of young people still seek employment at the agency. Unlike Ruckelshaus, who returned to EPA for a second tenure during the Reagan administration, Koskinen jokingly announced that he will not be returning for a second run at the IRS.

And when he deals with hostile lawmakers—an experience he likens to “fencing”—he sees much of it as “Kabuki theater, members trying to get their 30 seconds on YouTube or the TV networks.” The current Republican presidential candidates, he said, are competing over “who can give the biggest tax cuts, as if we’re here to give things away” rather than perform public service to make the country a better place.

Koskinen also confided that his desire to meet with his critics—an encounter with the always harsh Wall Street Journal editorial page staff is a possibility—“drives my press team crazy.”

Continue reading

March 6, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Saturday, March 5, 2016

This Week's Ten Most Popular TaxProf Blog Posts

The Economist:  Border Babies v. The IRS

Economist Logo (2015)The Economist, Border Babies v the IRS:

Americans in Canada fight back against the taxman.

When Barack Obama vowed in 2009 to pursue tax cheats abroad, he probably was not thinking of people like Ginny Hillis. Born in Detroit to Canadian parents, the retired lawyer has lived in Canada since she was six. Like many transplanted Americans, she ignored an American law that since 1913 has obliged citizens to file tax returns regardless of where they live.

With the Foreign Account Tax Compliance Act (FATCA), enacted in 2010, that became harder. It demanded that foreign banks report to the Internal Revenue Service (IRS) details of accounts held by Americans abroad. Banks that fail to comply are subject to a 30% tax on payments they receive from the United States. Some 7m Americans outside the country (1m of them in Canada), along with an unknown number of “US persons”, are now caught in FATCA’s net.

Unlike most, Ms Hillis is fighting back through the courts.

Continue reading

March 5, 2016 in IRS News, Tax | Permalink | Comments (0)

Harvard Law School Ditches Its Seal Modeled On Family Crest Of 18th Century Slaveholder After Student Protest

RoyallFollowing up on my previous post, Students Demand Harvard Law School Remove Slaveholding Imagery From Its Seal:  Harvard Law Today, Law School Committee Recommends Retiring Current Shield:

A committee of Harvard Law School faculty, students, alumni, and staff established in November by Dean Martha Minow has recommended to the Harvard Corporation that the HLS shield — which is modeled on the family crest of an 18th century slaveholder — no longer be the official symbol of Harvard Law School. In transmitting the report to the Corporation, Dean Minow endorsed its recommendation.

In a letter to the Corporation, Dean Minow wrote: “There are complex issues involved in preserving the histories of places and institutions with ties to past injustices, but several elements make retiring the shield less controverted than some other issues about names, symbols, and the past. First, the shield is a symbol whose primary purpose is to identify and express who we mean to be. Second, it is not an anchoring part of our history.”

In its report to the Corporation, the committee stated: “We believe that if the Law School is to have an official symbol, it must more closely represent the values of the Law School, which the current shield does not.”

The recommendation of the 12-member committee was not unanimous.

Continue reading

March 5, 2016 in Legal Education | Permalink | Comments (5)

The IRS Scandal, Day 1031

IRS Logo 2Wall Street Journal: It’s Time for The Speech: Like JFK, Nixon and Obama, the Moment Is Now for a Big, Campaign-Saving Speech, by Daniel Henninger:

It’s time for The Speech. ...

Readers who have spent a lifetime absorbing the melodramas of America’s presidential election politics, such as this one, will recognize instantly what I am proposing here. It is time for Marco Rubio or Ted Cruz to deliver The Speech—or lose. Lose the campaign, the party, the Supreme Court and an already diminished country’s next four years. ...

The Trump tax returns do look like his Achilles’ heel but won’t emerge from the Lois Lernerized IRS until the Democratic nominee needs them to drop the scales from the eyes of Mr. Trump’s supporters. 

Continue reading

March 5, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Friday, March 4, 2016

The End of Lawyers, Period.

Legal RebelsABA Legal Rebels:  The End of Lawyers, Period., by D. Casey Flaherty (Procertas):

The law does not exist for the purpose of keeping lawyers employed. I cribbed that line—and many others—from Richard Susskind back in the days when there was still a question mark punctuating The End of Lawyers?

I think it is fair to say that Susskind has gotten past the interrogative. In his latest book, The Future of the Professions, he and his son, Daniel, write “we foresee that, in the end, the traditional professions will be dismantled, leaving most (but not all) professionals to be replaced by less expert people and high-performing systems.” ...

Continue reading

March 4, 2016 in Legal Education | Permalink | Comments (14)

NY Times:  Facebook’s Status Update In Britain Means Millions More In Taxes

FacebookNew York Times, Facebook’s Status Update in Britain Could Mean Millions More in Taxes:

Facebook moved to change its relationship status with the British tax authorities on Friday.

The company announced that it would soon alter how it paid tax in Britain, potentially leading to the company paying millions of dollars more on its operations in the country.

Continue reading

March 4, 2016 in Tax | Permalink | Comments (2)

Weekly Tax Roundup

Weekly Legal Education Roundup

Weekly SSRN Tax Roundup

A Statistical Evaluation Of Bar Exam Program Interventions

Bar 2Scott Johns (Denver), Empirical Reflections: A Statistical Evaluation of Bar Exam Program Interventions, 54 U. Louisville L. Rev. 267 (2016):

The bar exam seems like a formidable hurdle to many law students. Consistent with approaches at other law schools, the University of Denver Sturm College of Law instituted a Bar Passage Program, primarily aimed at academically struggling students, consisting of three core components – a second year legal analysis course, a final semester pre-bar legal analysis problem-solving course, and a post-graduate supplemental bar success workshop program. This article walks through the step-by-step processes of statistically evaluating such interventions and explores whether such interventions are statistically warranted, particularly for students that struggled academically in law school. Using data over the course of a three-year period, this article finds that active learning participation in the Bar Passage Program is beneficial to students, in particular, those who struggled academically in law school.

Table 4

Continue reading

March 4, 2016 in Legal Education, Scholarship | Permalink | Comments (1)

Organ:  1L Attrition Increases As Median LSATs Decline

The Legal Whiteboard:  Updated Analysis of Attrition through the 2014-15 Academic Year, by Jerry Organ (St. Thomas):

In October 2015, I posted a blog discussing attrition rates between 2010 and 2014. With the release of the Standard 509 reports in December, I now have compiled attrition data from all of the fully-accredited ABA law schools outside of Puerto Rico for the last five full academic years. I have calculated average attrition rates for the class as a whole and then broken out average attrition rates by law schools in different median LSAT categories – 160+, 155-159, 150-154 and <150.

In a nutshell, overall first-year attrition has increased each of the last four years, going from 5.81% to 7.04% over that period. This overall increase, however, results largely from increases in overall attrition among schools with median LSATs less than 150, as the overall attrition rates for law schools with medians LSATs of 150 or greater have generally decreased over this period. “Academic attrition” rates increase significantly as median LSAT decreases, while “other attrition” presents more of a mixed record.

Organ

Continue reading

March 4, 2016 in Legal Education | Permalink | Comments (3)

2016 National Tax Moot Court Competition Results

Moot CourtHere are the results of the 2016 National Tax Moot Court Competition sponsored by the Florida Bar Tax Section:

  1. Charleston (photo below)
  2. Loyola-Chicago
  3. Alabama

Best Brief:  Oregon (runner up: Loyola-Chicago)

Best Oralist:  Anna Boning (Charleston)

Charleston Post and Courier, Charleston School of Law Wins National Tax Moot Court Championship:

Continue reading

March 4, 2016 in Tax, Teaching | Permalink | Comments (0)

Gordon, Joulfaian & Poterba:  Effects Of Basis Step-Up At Death — Lessons From The 2010 'Voluntary' Estate Tax Regime

Robert Gordon (NYU), David Joulfaian (Office of Tax Analysis, U.S. Treasury Department) & James Poterba (MIT), Revenue and Incentive Effects of Basis Step-Up at Death: Lessons from the 2010 “Voluntary” Estate Tax Regime:

Executors of wealthy individuals who died in 2010 were not required to file estate tax returns, but if they chose not to do so, beneficiaries of the estate received assets with carryover rather than stepped up basis. The tax returns filed by executors who chose the carryover basis regime provide new insights on the importance of unrealized capital gains on assets transferred at death.

Continue reading

March 4, 2016 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1030

IRS Logo 2Alice G. Abreu (Temple) & Richard K. Greenstein (Temple), Tax as Everylaw: Interpretation, Enforcement, and the Legitimacy of the IRS, 69 Tax Law. ___ (2016):

Although legitimacy is vital to any legal institution, in the case of the IRS legitimacy has been discussed and analyzed only in the face of catastrophic assaults. These include attempts by a President to use the IRS to persecute political enemies; allegations of serious abuse of taxpayers by IRS agents; and most recently allegations that conservative organizations seeking section 501(c)(4) status were disproportionately singled out for intrusive scrutiny and delay.

While these instances have posed significant threats to the agency’s legitimacy, what we explore here is more subtle, more pervasive, and hence, more invidious and threatening. It is the way in which the unexamined assumption of tax exceptionalism – the idea that tax is different – has produced a situation in which the tax law and its administrators are viewed by tax professionals, and eventually by the taxpaying public, as interpreting and enforcing tax law in ways that are not understood, are therefore misperceived, and are ultimately judged illegitimate.

Tax exceptionalism is not a specific idea. Rather, it is a way of conceiving of tax or, still more loosely, an attitude toward tax. At its simplest, tax exceptionalism is “the notion that tax law is somehow deeply different from other law, with the result that many of the rules that apply trans-substantively across the rest of the legal landscape do not, or should not, apply to tax.” We believe that the stubborn persistence of tax exceptionalism is due to an important but previously unidentified and unexplored feature – namely, that tax exceptionalism has two distinct aspects: a visceral aspect and an objective aspect.

Taxpayers experience the tax law as different from other areas of law. No other field of law is thought to be so complex or to compel so many so regularly to bare their financial souls to the government just to be in compliance with the law. This is the visceral aspect of tax exceptionalism and we do not challenge the reality or the intensity of that experience. But we believe that the experience of difference has been reified, so that tax law is thought to be really different – objectively different in kind from other fields of law or perhaps not even law at all. It is this second aspect of tax exceptionalism – the objective aspect – which we want to challenge, for its powerful influence on tax scholarship, administration, and adjudication threatens the legitimacy of the tax law and of the agency that administers it.

Our central claim is that when tax is viewed as objectively exceptional – that is, when tax is thought to be fundamentally different in kind from other fields of law – it is deprived of the analytical tools and vocabulary commonplace in other fields of law. This, in turn, imposes unnatural and unrealistic constraints on the IRS’s interpretive authority and enforcement discretion. The consequence is that what would for ordinary agencies count as legitimate interpretations and enforcement decisions appear inscrutable when performed by the IRS, contributing to taxpayers’ visceral experience of tax as exceptional and thereby perpetuating the cycle. Unmasking and then abandoning that objective aspect of tax exceptionalism has significant implications for tax law, tax administration, and the legitimacy of the IRS.

Continue reading

March 4, 2016 in IRS News, IRS Scandal, Scholarship, Tax | Permalink | Comments (1)

Thursday, March 3, 2016

Fleischer Presents Using An Accessions Tax To Combat Dynastic Wealth Transfers Today At UCLA

Perry Fleischer (2016)Miranda Perry Fleischer (San Diego) presents Divide and Conquer: Using an Accessions Tax to Combat Dynastic Wealth Transfers, 57 B.C. L. Rev. ___ (2016), at UCLA today as part of its Tax Policy and Public Finance Colloquium Series hosted by Jason Oh and Eric Zolt:

The current estate tax raises little revenue, yet is ill designed to further the social goals used to justify it. This Article takes one frequently mentioned goal — minimizing dynastic wealth transfers — and explores what insights focusing on that objective yields for the design of the transfer tax system. It starts from the premise that what renders dynastic wealth transfers problematic is that such transfers can bestow upon the recipient unearned political and economic power, which contravenes the democratic ideal that power should be earned, not inherit-ed. Under this view, the tax system should be concerned with neither the build-up of wealth per se nor transfers of wealth that are not large enough to bestow power upon the recipient. Instead, the tax system should be concerned only with transfers of wealth large enough to confer economic and political power on the recipient. The structure that best reflects this concern is a progressive cumulative accessions tax that focuses on the recipient, instead of an estate tax that focuses on the transferor. Each recipient should have an extremely high exemption amount, given that receiving a few hundred thousand or couple million dollars does not give one power. Lastly, there should be no generation-skipping penalty, because what matters is how many individuals have the ability to use the power accompanying the wealth.

Not So Fast: The Hidden Difficulties of Taxing Wealth:

Continue reading

March 3, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Avi-Yonah Presents Evaluating BEPS Today At Duke

Avi-YonahReuven Avi-Yonah (Michigan) presents Evaluating BEPS (with Haiyan Xu (S.J.D. 2016, Michigan)) at Duke today as part of its Tax Policy Workshop Series hosted by Lawrence Zelenak:

Following the financial crisis and ensuing austerity, politicians discovered the problem of tax avoidance. In response, the OECD and G20 launched the Base Erosion and Profit Shifting (BEPS) project in 2013, and this has in October, 2015 culminated with the release of a series of action steps that the OECD and G20 countries have undertaken to adopt. OECD Secretary-General Angel Gurria has stated that "Base erosion and profit shifting affects all countries, not only economically, but also as a matter of trust. BEPS is depriving countries of precious resources to jump-start growth, tackle the effects of the global economic crisis and create more and better opportunities for all. But beyond this, BEPS has been also eroding the trust of citizens in the fairness of tax systems worldwide. The measures we are presenting today represent the most fundamental changes to international tax rules in almost a century: they will put an end to double non-taxation, facilitate a better alignment of taxation with economic activity and value creation, and when fully implemented, these measures will render BEPS-inspired tax planning structures ineffective".

Continue reading

March 3, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Kamin Presents Legislating For Good Times And Bad Today At Indiana-Bloomington

Kamin (2015)David Kamin (NYU) presents Legislating For Good Times and Bad at Indiana-Bloomington today as part of its Tax Policy Colloquium Series hosted by Leandra Lederman:

Congress tends to move in fits and starts. Major policy changes are often followed by periods of legislative stasis. This means that, even as circumstances change and policies may no longer be appropriate in the new conditions, Congress may not respond. This is the problem of “policy drift.”

The academic literature has recognized this challenge and largely focused on one particular type of solution employed by Congress: empowerment of other institutions, in particular administrative agencies or the courts to more quickly adapt policy. However, this view is far too limited. Congress can keep such authority in its hands and still address policy drift, sometimes even more effectively.

Continue reading

March 3, 2016 | Permalink | Comments (0)

Lodico Presents State Approaches to Incentivizing Conservation Easements Today At Colorado

Lodico2Isaac Lodico (Denver) presents State Approaches to Incentivizing Conservation Easements at Colorado today as part of its Tax Policy Colloquium Series hosted by David Hasen and Sloan Speck:

In order support the preservation of open space and historic properties, many states have adopted a range of laws that encourage contributions of charitable easements. These laws may be as simple as providing recognition of the conservation easement at law thereby preventing common-law doctrines from overriding the charitable interest. In these states, the tax benefit of the easement is generally limited to reduction the value of the property by the easement for purposes of the assessment of real property taxes. However, in Minnesota local assessors are generally prohibited from reducing the property value to reflect the restriction. Other systems offer state credits against tax, where the taxpayer is awarded a credit against tax equal to a percentage of the value of the contributed easement. Depending on the state, tax credits for charitable contributions of conservation easements may be transferable or refundable.

Given the range of state laws incentivizing conservation easements, the following questions arise:

Continue reading

March 3, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Pepperdine Receives Awards of Excellence From Council for Advancement And Support Of Education

Pepperdine received a Gold Medal and a Silver Medal from the Council for Advancement and Support of Education for two remarkable videos about the law school and the university:

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

March 3, 2016 in Legal Education | Permalink | Comments (0)

When Temporary Tax Incentives Work, And For Which Firms

NBER Digest, When Temporary Tax Incentives Work, and for Which Firms:

NBERTemporary tax incentives boost capital equipment purchases when companies see an immediate benefit, according to research by Eric Zwick (Chicago) and James Mahon (Ph.D. Candidate, Harvard) in Tax Policy and Heterogeneous Investment Behavior (NBER Working Paper No. 21876). This is especially the case for small firms, which respond much more strongly than large firms to those tax breaks.

"Bonus depreciation has a substantial effect on investment," the researchers find. Accelerated depreciation on capital equipment raised investment an average of 10.4 percent a year between 2001 and 2004 and 16.9 percent a year between 2008 and 2010, according to their estimates.

These estimates are substantially higher than estimates from most previous studies.

Continue reading

March 3, 2016 in Scholarship, Tax | Permalink | Comments (2)

Why Is Chapman Law School So Scared Of Its Progressive Students?

Chapman Logo (2016)Orange County Register, Why is Chapman Law School So Scared of Its Progressive Students?:

[Today], Chapman University will hold its first-ever Social Justice Symposium. Titled Blinded Justice: A Discussion About Whether The Legal System Values and Protects Diverse Communities, it'll be held at Kennedy Hall, site of Chapman's Law School, a program so notoriously conservative that Supreme Court Justice Clarence Thomas spoke at its opening and it still counts as affiliated faculty notorious anti-gay pundit John Eastman and media loudmouth Hugh Hewitt. 

The symposium, organized by the (deep breath here) Chapman University Dale E. Fowler School of Law Diversity Initiative Symposium and Publication, should be marked as a moment of progress on campus. But instead, progressive students are holding the upcoming gathering of workshops, panels, and speakers as yet another example about how anything hinting at liberalism is dismissed as little better than communism at Chapman and not worthy of school affiliation. 

The struggle goes back to two years ago, when representatives from Chapman various student multicultural organizations got together to push for a diversity initiative.

Continue reading

March 3, 2016 in Legal Education | Permalink | Comments (7)

The IRS Is Using A System That Was Hacked To Protect Victims Of A Hack—And It Was Just Hacked

ID TheftFollowing up on Saturday's post, IRS Says 114,000, 334,000, 724,000 Taxpayer Accounts Were Hacked:  Quartz, The IRS Is Using a System That Was Hacked to Protect Victims of a Hack—And It Was Just Hacked:

To protect the victims of the data breach from further harm, the IRS provided them with “Identity Protection PINs.” The PINs are secret codes those taxpayers now have to put on all of their tax returns, or the IRS won’t accept them. As long as they keep their PINs secret, they should be safe from fraud.

For this master plan to work, though, the IRS would also have to keep the PINs secret. Unfortunately, it seems the agency is having some trouble with that.

Continue reading

March 3, 2016 in IRS News, Tax | Permalink | Comments (2)

ABA Tax Section Publishes Winter 2016 Issue Of Tax Times

ABA Tax Times (2016)The ABA Tax Section has published 35 Tax Times No. 2 (Feb. 2016):

Continue reading

March 3, 2016 in ABA Tax Section, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1029

IRS Logo 2Press Release, Judicial Watch Continues Fight over IRS Criminal Investigation Facts:

Judicial Watch is asking a federal appellate court to overturn a lower court’s ruling allowing the Obama Justice Department to withhold records detailing the number of hours that agency attorney Barbara Bosserman expended on the investigation of the IRS targeting of conservative groups seeking tax exempt status during the 2010 and 2012 elections cycles.  The opening appellate brief was filed in the U.S. Court of Appeals for the District of Columbia Circuit on February 16, 2016 (Judicial Watch v. U.S. Department of Justice (No. 15-5271)).

This lawsuit forced the Obama Justice Department to confirm the existence of a criminal investigation into the IRS’ abuses and that Bosserman, a major donor to Obama’s political campaigns and the Democratic National Committee, was part of the team of lawyers criminally investigating the issue.  (On October 23, 2015, the Justice Department announced in a letter that it would not press any charges over the IRS abuse scandal.)

In 2014, Judicial Watch filed a 2014 Freedom of Information Act (FOIA) lawsuit seeking records detailing the number of hours Bosserman expended on the IRS matter.  In 2015, the U.S. District Court for the District of Columbia ruled that the agency had properly withheld the Bosserman records under the “attorney work product doctrine.”  Judicial Watch argues to the appellate court:

[T]he Department presented no evidence whatsoever that the records requested by Judicial Watch were created in anticipation of litigation. The District Court also did not make such a finding. Instead the Department argued and the court ruled that some of the information contained in the responsive records was protected by the attorney work product doctrine. Because the requested records were created in the ordinary course of business – to assist senior officials in their management responsibilities – the records do not fall within the scope of the attorney work product doctrine. The records are being improperly withheld in their entirety.

In early January 2014, then-Attorney General Eric Holder reportedly appointed Bosserman to oversee the IRS investigation despite her substantial political activities.  According to Federal Election Commission records, Bosserman contributed $6,750 to Obama’s campaigns and the DNC from 2004 to 2012, including 12 separate contributions to Obama for America between 2008 and 2012.  Then- House Committee on Oversight and Government Reform chairman Darryl Issa (R-CA) called the Bosserman appointment “a startling conflict of interest [that has] compromised the Administration’s investigation of the IRS.”

“All Judicial Watch wants is the number of hours that the Obama donor/Justice Department lawyer spent investigating the worst IRS abuse in American history,” said Judicial Watch President Tom Fitton. “The failure to bring charges in the IRS scandal only adds to the public interest in finding out more details about the involvement of the Obama/Democratic Party donor in the criminal investigation.”

Continue reading

March 3, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Wednesday, March 2, 2016

Simkovic Presents The Knowledge Tax Today At Penn

Simkovic 2Michael Simkovic (Seton Hall) presents The Knowledge Tax, 82 U. Chi. L. Rev. 1981 (2015), at Pennsylvania today as part of its Center for Tax Law and Policy Seminar Series hosted by Chris Sanchirico and Reed Shuldiner: :

Labor economists struggle to explain why the rates of return to higher education have remained much higher than the rates of return to other investments. This article proposes a novel explanation: distortionary taxation.

Economic theory suggests that when investments that are substitutes for one another are taxed inconsistently, investors are less likely to choose the investment option that is taxed more heavily. Unfavorable tax treatment of higher education relative to other forms of investment could create an undersupply of educated labor. This distortion would reduce economic growth and social welfare.

Continue reading

March 2, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Oei, Ring Present The Tax Lives Of Uber Drivers Today At Southern, British Columbia

Oei RingShuyi Oei (Tulane) and Diane Ring (Boston College) present The Tax Lives of Uber Drivers: Evidence from Internet Discussion Forums at different law schools today:  Shuyi at Southern University (as part of its Law & Society Faculty Forum) and Diane at University of British Columbia (as part of its Tax Law and Policy Workshop Series): 

In this Article, we investigate the tax issues and challenges facing Uber and Lyft drivers by studying their online interactions in three internet discussion forums: Reddit.com, Uberpeople.net, and Intuit TurboTax AnswerXchange. Using descriptive statistics and content analysis, we examine (1) the substantive tax concerns facing forum participants, (2) how taxes affect their driving and profitability decisions, and (3) the degree of user sophistication, accuracy of legal advising, and other cultural features of the forums.

Continue reading

March 2, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Taylor Presents The U.S. Rules For Taxing Business Entities Today At Toronto

TaylorWillard Taylor (Sullivan & Cromwell, New York) presents Can We Clean This Up? A Brief Journey Through the U.S. Rules for Taxing Business Entities at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

There is no question that the US Federal income tax rules for classifying business entities need repair. As set out above, repairs might address the impact of the growth of passthroughs on the corporate income tax, the disparate treatment for corporate income tax purposes of some REITs and publicly-traded passthroughs, whether it made sense to have one set of rules for non-publicly traded partnerships and S corporations, and the different treatment of foreign investors in stocks, securities and real estate. These are only a few of many issues.

Continue reading

March 2, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Goldin & Liscow:  Rethinking The Taxation Of Single Parents

Jacob Goldin (Stanford) & Zachary Liscow (Yale), Beyond Head of Household: Rethinking the Taxation of Single Parents:

Under current law, unmarried taxpayers with children can take advantage of the head of household filing status (HHFS) to reduce their federal income taxes. We argue that the design of the filing status is largely obsolete, geared toward alleviating a “marriage penalty” in the tax code that is much less important than when the filing status was first established. At the same time, the growth in the fraction of Americans raising children outside of traditional two-parent households has dramatically raised the cost of the filing status to the fisc.

Continue reading

March 2, 2016 in Scholarship, Tax | Permalink | Comments (0)

Taxpayer Confusion: Evidence From The Child Tax Credit

Naomi E. Feldman (Federal Reserve Board), Peter Katuščák (CERGI, Prague) & Laura Kawano (U.S. Treasury Department), Taxpayer Confusion: Evidence from the Child Tax Credit, 106 Amer. Econ. Rev. 807 (2016):

We develop an empirical test for whether households understand or misperceive their marginal tax rate. Our identifying variation comes from the loss of the Child Tax Credit when a child turns 17. Using this age discontinuity, we find that despite this tax liability increase being lump-sum and predictable, households reduce their reported wage income upon discovering they have lost the credit. This finding suggests that households misinterpret at least part of this tax liability change as an increase in their marginal tax rate. This evidence supports the hypothesis that tax complexity can cause confusion and leads to unintended behavioral responses.

Continue reading

March 2, 2016 | Permalink | Comments (1)

McCaffery:  Taxing Wealth Seriously

Edward J. McCaffery (USC), Taxing Wealth Seriously:

The social and political problems of wealth inequality in America are severe and getting worse. A surprise is that the U.S. tax system, as is, is a significant cause of these problems, not a cure for them. The tax-law doctrines that allow those who already have financial wealth to live, luxuriously and tax-free, or to pass on their wealth tax-free to heirs, are simple. The applicable legal doctrines have been in place for nearly a century under the income tax, the primary social tool for addressing matters of economic inequality. The analytic pathways to reform are easy to see once the law is properly understood. Yet our political systems show no serious interest in taxing wealth seriously. We are letting capital off the hook, and ratcheting up taxes on labor, at precisely a time when deep-seated and long-running economic forces suggest that this is precisely the wrong thing to do. It is time -- past time -- for a change. This Article canvasses a century of tax policy in the United States to show that we have never been serious about taxing wealth seriously, and to lay out pathways towards reform.

March 2, 2016 in Scholarship, Tax | Permalink | Comments (9)

Chilton & Posner:  Is Legal Scholarship Politically Biased?

Adam S. Chilton (Chicago) & Eric A. Posner (Chicago), An Empirical Study of Political Bias in Legal Scholarship, 44 J. Legal Stud. 277 (2015):

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.

Continue reading

March 2, 2016 in Legal Education, Scholarship | Permalink | Comments (5)

Why Are 1 In 3 Lawyers Problem Drinkers?

National Law Journal op-ed:   Why 1 in 3 Lawyers Are Problem Drinkers: Competition Plays a Role, But It's More About How Success Is Defined — By Being Tough, by Susan Bandes (DePaul):

More than a third of attorneys are problem drinkers and over a quarter are clinically depressed, reports a study just released in the Jour­nal of Addiction Medicine, conducted by the Hazelden Betty Ford Foundation and the American Bar Association Commission on Lawyer Assistance Programs. Lawyers have the highest rate of major depressive disorder of any occupational group, and among the highest rates of alcoholism.

We are a competitive group, but is this really a contest we want to win?

Continue reading

March 2, 2016 in Legal Education | Permalink | Comments (8)

ABA Tax Section Publishes Fall 2015 Issue Of Tax Times

ABA Tax Times (2016)The ABA Tax Section has published 35 Tax Times No. 1 (Oct. 2015):

Continue reading

March 2, 2016 in ABA Tax Section, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1028

IRS Logo 2Law 360, IRS Pays GOP $20K In Dismissal Of Tax-Exempt Docs Suit:

The Internal Revenue Service and the Republican National Committee have agreed to dismiss a suit over a request for documents on the agency’s treatment of social welfare groups’ applications for tax-exempt status, and the IRS will pay the committee more than $20,000 in attorneys' fees.

The agreement was documented in a Tuesday filing in the District of Columbia federal court, where the RNC launched a lawsuit in 2014 alleging the agency had not complied with a Freedom of Information Act request sent to the agency that year.

The suit sought a declaratory judgment that the IRS' failure to disclose records requested by the RNC violated FOIA and an injunction that would have required the agency to turn over the requested documents. The RNC asked the agency for records relating to its criteria for assessing 501(c)(4) tax-exempt organizations and any agency correspondence from Jan. 1, 2010, through May 20, 2013, containing the words “tea party,” “patriot” and “9/12 project.” ...

Animosity over the IRS' handling of 501(c)(4) organizations stems from a 2013 government report that found the agency used inappropriate selection criteria for subjecting social welfare groups’ applications for tax-exempt status to extra scrutiny. It was revealed that IRS employees maintained a “be on the lookout” list and the tax-exempt status applications of groups with names that included words such as "tea party" or "patriot" were subjected to heightened scrutiny between 2010 and 2012.

The report led to the resignation of then-IRS acting head Steven Miller and prompted an investigation by the U.S. Department of Justice. Former IRS exempt organizations official Lois Lerner also left the agency shortly after the report was released.

A bipartisan report on the controversy released by the Senate Finance Committee last year revealed "gross mismanagement" at the agency's highest levels, though it did not conclude whether the targeting of certain social welfare groups was politically motivated.

Beginning in 2010, Lerner's Exempt Organizations Division undertook no less than seven poorly planned and badly executed initiatives aimed at bringing the growing number of applications from Tea Party and other groups to decision, the report said. Those initiatives ultimately failed, resulting in months and years of unnecessary delays in processing the groups' applications, the committee found.

Few, if any, of the managers in the Exempt Organizations Division were concerned about the delays resulting from the alleged mismanagement, even though they possibly harmed the organizations' ability to function, according to the report. ...

The case is Republican National Committee v. Internal Revenues Service, case number 1:14-cv-00612,  in the U.S. District Court for the District of Columbia.

Continue reading

March 2, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Tuesday, March 1, 2016

Markle Presents The Effect Of Financial Constraints On The Income Shifting Of U.S. Multinationals Today At NYU

MarkleKevin Markle (Iowa) presents The Effect of Financial Constraints on the Income Shifting of U.S. Multinationals (with Scott D. Dyreng (Duke)) at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Chris Sanchirico:

When a U.S. multinational corporation shifts income from the U.S. to foreign jurisdictions, it incurs costs and reaps benefits. The benefits may be reduced if the shifted income must be returned to the U.S. as a dividend in the short term and face the same U.S. tax it would have if the income had not been shifted. Firms, then, have incentive to defer repatriation of earnings and to fund domestic cash needs with external financing. The cost of external financing, however, is increasing in financial constraints, leading to the prediction that constrained firms will be unable to defer repatriation and, therefore, will reap no benefits from shifting. Using a new methodology for measuring income shifting, we find, consistent with predictions, that financially constrained firms shift less income from the U.S. to foreign countries than their unconstrained peers.

Continue reading

March 1, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)