TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Thursday, July 23, 2015

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

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

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

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

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

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

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

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

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

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

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

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

Dimension 1: basic supply and demand for legal education

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

George Washington Seeks To Hire A Tax Prof

George Washington Law Logo (2016)GW Jobs:

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

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

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

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

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

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

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

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

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

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

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

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


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

Purdue Makes Student Mentoring Atop Research In Tenure Standard

PurdueInside Higher Education, Mentoring as Tenure Criterion:

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

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

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

The IRS Scandal, Day 805

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

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

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

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

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

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

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

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

Wednesday, July 22, 2015

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

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

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

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

Bernstein: The Case For A Financial Transaction Tax

FTTNew York Times op-ed:  The Case for a Tax on Financial Transactions, by Jared Bernstein (Center on Budget and Policy Priorities):

Senator Bernie Sanders ... [has proposed] a financial transaction tax: a small excise tax, typically a few hundredths of a percent, on trades of stocks, bonds, derivatives and other securities. An itty-bitty, one-basis-point transaction tax (a basis point is one-hundredth of a percentage point, or 0.01 percent) would raise $185 billion over 10 years, according to new estimates by the nonpartisan Tax Policy Center. That would be enough to finance an ambitious expansion of prekindergarten programs for 3- and 4-year-olds and restore funding of college assistance for low-income students.

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July 22, 2015 in Tax | Permalink | Comments (0)

Who’s Right on Marijuana? Justice Or The IRS?

Vapor RoomFollowing up on my previous post, 9th Circuit: Marijuana Dispensaries Cannot Deduct Business Expenses, Must Pay Taxes On 100% Of Their Gross Income:  Newsweek, Who’s Right on Marijuana? Justice Or the IRS?:

In downtown Washington, D.C., the Department of Justice asserts that marijuana enterprises are free to exist, while immediately across 10th Street, the IRS tells those businesses they are illegal drug-trafficking operations ineligible for the benefits other corporate entities enjoy.

Which is it? Right now, it is both. This dual status presents commercial challenges for marijuana businesses, carrying serious consequences for individuals, patients, investors, law enforcement, courts, accountants and others.

Last week, one challenge—the issue of tax deductions for marijuana enterprises—had its day in court. In Olive v. Commissioner of Internal Revenue [CIR], the U.S. Court of Appeals for the Ninth Circuit reviewed whether a medical marijuana enterprise in California—Vapor Room Herbal Center in San Francisco—could deduct business expenses under U.S. tax law (the Internal Revenue Code).

The case made its way to the Ninth Circuit on appeal from a decision from the United States Tax Court. The Tax Court previously ruled in favor of the commissioner of the IRS because Vapor Room Herbal Center was a business that “consist[ed] of trafficking in controlled substances” (26 U.S.C. § 280E). Section 280E of the tax code limits businesses from deducting business expenses under such circumstances.

The Ninth Circuit upheld the Tax Court decision. The appeals court outlined two clear reasons (among others) why Vapor Room Herbal Center could not deduct business expenses.

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

NYC Requires Disclosure Of LLC Members Who Buy/Sell Real Estate

I Love New YorkNew York Times, New Disclosure Rules for Shell Companies in New York Luxury Real Estate Sales:

Seeking to increase transparency in the luxury real estate market, the de Blasio administration has imposed new disclosure requirements on shell companies buying or selling property in New York City.

The changes will help remove a “veil of secrecy” surrounding high-end real estate sales by requiring that the names of all members of a shell company buying or selling property be disclosed to the city, the finance commissioner, Jacques Jiha, said.

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

Tax Court Throws Marvel For $16 Million Loss In NOL Adjustment Case

MarvelMarvel Entertainment Group v. Commissioner, 145 T.C. No. 2 (July 21, 2015):

MEG was an affiliated group that filed consolidated returns. On Dec. 27, 1996, certain MEG member entities filed for bankruptcy under 11 U.S.C. ch. 11 and subsequently excluded cancellation of indebtedness (COD) income from their respective gross incomes under I.R.C. sec. 108(a)(1)(A) for MEG’s short taxable year ending Oct. 1, 1998. Pursuant to I.R.C. sec. 108(b)(2)(A), MEG reduced each member entity’s allocable share of consolidated net operating loss (CNOL) by each member entity’s previously excluded COD income. MEG carried forward into its successor affiliated group a $47,424,026 CNOL and used this amount to offset income of the successor group for its taxable years ending Dec. 31, 2003 and 2004.

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July 22, 2015 in New Cases, Tax | Permalink | Comments (0)

Anderson: Law Students Should Speak Up For Paid Externships

ABA Logo 2Following up on Monday's post, Law Profs, Law Grads Debate Changing Accreditation Standards To Permit Paid Externships:  Rob Anderson (Pepperdine), Law Students: Speak Up!:

The American Bar Association Section on Legal Education and Admissions to the Bar has published a series of proposed changes to the rules for law schools. One of them is a change to "Interpretation 305-2" (current 305-3), a change that would repeal the current ban on law schools giving academic credit for field placements (i.e., externships) for which law students are paid. The current Interpretation prohibits your law school from giving you credit for paid work experience, no matter how practical the experience gained or how closely related to your proposed area of practice. The proposed change would lift this prohibition to allow law schools to decide whether to offer such credit.

I don't think I need to remind you that law school is expensive and that most students graduate with debt, often substantial debt. One of the best things a law student can do during law school is to work at a law firm to gain practical experience and defray some of the costs of tuition and living expenses. ...

Unfortunately, a small but organized minority of law professors don't want you to be able to be paid for work and receive academic credit at the same time, and they are the ones being heard by the ABA.

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July 22, 2015 in Legal Education | Permalink | Comments (3)

Rand Paul: How Would You Kill The Tax Code?

July 22, 2015 in Political News, Tax | Permalink | Comments (3)

Fall 2015 Law Review Article Submission Guide

Nancy Levit (UMKC) & Allen Rostron (UMKC) have updated their incredibly useful document, which contains two charts for the Fall 2015 submission season covering 204 law reviews.

The first chart (pp. 1-52) contains information gathered from the journals’ websites on:

  • Methods for submitting an article (such as by e-mail, ExpressO, regular mail, Scholastica, or Twitter)
  • Any special formatting requirements
  • How to request an expedited review
  • How to withdraw an article after it has been accepted for publication elsewhere

The second chart (pp. 53-60) contains the ranking of the law reviews and their schools under six measures:

  • U.S. News: Overall Rank
  • U.S. News: Peer Reputation Rating
  • U.S. News: Judge/Lawyer Reputation Rating
  • Washington & Lee Citation Ranking
  • Washington & Lee Impact Factor
  • Washington & Lee Combined Rating

They also have posted a list of links to the submissions information on each law journal’s website. Nancy notes:

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July 22, 2015 in Legal Education, Scholarship | Permalink | Comments (0)

The IRS Scandal, Day 804

IRS Logo 2Senate Finance Committee Press Release, Finance Committee to Review IRS Report in Closed Session:

The Senate Finance Committee today voted to hold an upcoming executive session, which is required to be closed, to review findings from the Committee’s bipartisan investigation into the Internal Revenue Service (IRS) treatment of organizations applying for tax-exempt status and discuss release of the final report. In the closed session, as required by law, members will be briefed by Committee staff with 6103 authority to review private taxpayer information. This vote follows the completion of the Treasury Inspector General for Tax Administration (TIGTA) investigation into the cause of Lois Lerner’s hard drive crash, and TIGTA’s efforts to recover any emails that may have been lost as a result of the crash.”

“With TIGTA’s investigation completed, we are now able to move forward with the Committee’s bipartisan report into the IRS’s treatment of tax-exempt organizations,” Hatch and Wyden said. “Throughout this process, we have been committed to ensuring a complete and thorough investigation, and this closed session will give members an opportunity to review our findings and vote to submit the report to the full Senate if they choose.” 

The date for the closed session has not been announced but is expected to occur before the Senate breaks for the August state work period.


On May 20, 2013, the leaders of the Senate Finance Committee sent a detailed, 41-question document request to the Internal Revenue Service (IRS) seeking information about the alleged targeting by the IRS of certain social welfare organizations applying for tax-exempt status based on those organizations’ presumed political activities. That letter marked the beginning of a bipartisan investigation by the Committee into the IRS’ activities related to the review of tax-exempt applications and related issues raised by the Treasury Inspector General for Tax Administration (TIGTA) in his May 14, 2013, report. 

To date, Committee investigators have interviewed more than 30 current and former IRS and Treasury employees and have reviewed nearly 1.5 million pages of documents. In June 2014, the Committee learned that the IRS was not able to produce all emails originating from Lois Lerner and other IRS officials needed to complete the Senate Finance Committee investigation. As a result, Chairman Hatch and Ranking Member Wyden asked TIGTA to investigate the matter. Specifically, TIGTA looked into: 1) what records the IRS lost; 2) if there was any attempt to deliberately destroy records, or otherwise impede congressional and federal investigations; and 3) whether any of the missing information can be recovered.

TIGTA provided their findings to the Committee on June 30, 2015.

The Hill, Senate Finance to Discuss IRS in Secret:

The Senate Finance Committee is going to meet in secret in the coming weeks to delve into the panel's bipartisan inquiry into the IRS's improper treatment of Tea Party groups.

Finance Chairman Orrin Hatch (R-Utah) and the committee's top Democrat, Sen. Ron Wyden (D-Ore.), have said that they want to release the report before the Senate goes on its August recess, but have yet to set a date for the closed session. The committee needs to close the session over its IRS report to protect taxpayer information, the Finance panel said Tuesday.

Fox News, Senate Finance Working to Release IRS Targeting Report

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July 22, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Tuesday, July 21, 2015

Diana Leyden Leaves UConn To Be NYC Taxpayer Advocate

LeydenFrom the Hartford Courant:

Thumbs up to Diana Leyden, founder and director of the UConn School of Law tax clinic. Since 1999, she has run the free legal service that helps low-income earners with their tax problems. She is leaving for a newly created position, taxpayer advocate for the New York City Finance Department. In Connecticut, she has trained and supervised many law students (as well as volunteer attorneys) to represent clients in audits and at tax court, and she has helped set up free tax-preparation sites around Hartford so families can claim the Earned Income Tax Credit. She even wrote the book on the topic: Advocating for Low Income Taxpayers: A Clinical Studies Casebook.

July 21, 2015 in Legal Education, Tax, Tax Prof Moves | Permalink | Comments (0)

Henderson: What You Learn Is More Important Than Rank Of Law School Attended

The Legal Whiteboard:  What Is More Important for Lawyers: Where You Go to Law School or What You Learned? (Part I), by William Henderson (Indiana):

The Economist reports a very interesting analysis from Payscale.  The questions being asked are pretty simple: If you want to generate earnings that justify the time and cost of an undergraduate education, what should you study and where should you enroll?

Lots of people have strong opinions on this set of questions, but Payscale has the data to answer them empirically. It turns out that at the undergraduates level, course of study is much more important than the prestige of the college or university you attend.  The hard evidence is shown below.


For those working in law or thinking about attending law school, a natural question to ask is whether the legal industry is closer to the blue dot (art & humanities) or red dot pattern (engineering/CS/math).  A second, related question whether the future of law is more blue or more red.

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July 21, 2015 in Legal Education | Permalink | Comments (2)

Shobe: Disaggregating The State And Local Tax Deduction

Gladriel Shobe (Weil, Gotshal & Manges, New York), Disaggregating the State and Local Tax Deduction, 35 Va. Tax Rev. ___ (2015):

The appropriateness of a federal deduction for state and local taxes is a frequent point of contention among scholars and policymakers, and various proposals have been offered to limit or modify the deduction. All of the debates and proposals surrounding the deduction treat states and localities as if they were the same. This Article disaggregates state and local governments to show that the way they tax and spend is different in many ways that are relevant to the deduction. When state and local government revenues are disaggregated, it becomes clear that the “state and local tax deduction” is actually two distinct deductions, one primarily for state income taxes and another primarily for local property taxes. Property taxes, which make up nearly three-quarters of local taxes, are fully deductible. Sales taxes, which make up nearly half of state revenue, can only be deducted in lieu of income taxes, an option that few itemizing taxpayers take. When state and local expenditures are disaggregated, it becomes apparent that local expenditures provide more direct benefits to taxpayers living within relatively homogeneous localities while state expenditures provide fewer public benefits to those who pay state taxes and are more likely to result in redistribution.

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July 21, 2015 in Scholarship, Tax | Permalink | Comments (2)

ABA Tax Section Publishes Summer 2015 Issue Of News Quarterly

ABA News QuarterlyThe ABA Tax Section has published 34 News Quarterly No. 4 (Summer 2015):

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July 21, 2015 in ABA Tax Section, Tax | Permalink | Comments (0)

Weiser: Innovation In Law Firm Hiring (And Law School Training): Grades, School Rank Are Out; Resilience, Teamwork, Empathy & Leadership Are In

Legal RebelsABA Journal Legal Rebels, The New Normal: How Law Firms Are Innovating When It Comes to Hiring, by Phil Weiser (Dean Colorado):

The legacy model of law firm hiring, which has prevailed over the last several decades, involves screening applicants purely on grades and what schools they attended. The second screen, often conducted without regard to identified competencies that matter for clients or success, is “would I enjoy going out to lunch with this person?” For many applicants, the test is therefore “can I put on a good face at lunch?”

For most industries, such hiring processes are truly yesterday’s practices. For starters, many have observed how unstructured and subjective standards can allow implicit biases to hold sway in hiring decisions. Such approaches also generate poorer results. At Google, for example, even the first screen used by law firms is now out, with Laszlo Bock, the senior vice president of people operations for Google, revealing to the New York Times that “our data crunching” tells us that GPA is “worthless as a criteria for hiring.” By contrast, a major law firm partner told me recently that the firm might not hire a very successful lawyer, even if that lawyer had a significant book of business, if that lawyer had not been in the top 10 percent of his or her law school class. Just another concrete example that change is hard, particularly for our tradition-bound profession.

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July 21, 2015 in Legal Education | Permalink | Comments (5)

Microsoft, IRS Square Off In Court Today: 'The IRS Claims It Has No Money To Answer Its Phones, Yet Can Pay Millions To Hire Private Lawyers'

MicrosoftSeattle Times, Microsoft, IRS Going to Court Over Longtime Tax Scrutiny:

Microsoft and the federal government have squared off in court over the years, and this week another high-stakes match is in the offing, this time involving the Internal Revenue Service.

The case is part of the IRS’ campaign to ensure that U.S. companies, particularly those in the tech sector, follow the law when they make moves involving overseas subsidiaries that have tax consequences. Such practices have been the subject of congressional hearings and are a hotly debated political topic.

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July 21, 2015 in IRS News, Tax | Permalink | Comments (6)

2015 Legal Education Data Deck

AccessAccess Group, 2015 Legal Education Data Deck: Key Trends on Access, Affordability, and Value:

On February 20, 2015, Access Group released the 2015 Legal Education Data Deck (Data Deck). It is comprised of a set of data points showing trends organized around the three driving principles of Access Group’s research agenda — access, affordability and the value of legal education. The Data Deck was developed for the legal education community, policymakers, and others interested in legal education, to provide them with key pieces of data about national trends in legal education.

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July 21, 2015 in Legal Education | Permalink | Comments (2)

The IRS Scandal, Day 803

IRS Logo 2Forbes:  IRS Denies Exempt Status To Group Helping Undocumented Aliens Leave USA, by Peter J. Reilly:

I have been something of a skeptic of the narrative of the IRS Exempt Division targeting conservative organizations. As a matter of fact, one of my less than attentive commenters recently accused me of being, if you will excuse the expression, a Democrat. So when I see something, otherwise unremarked, that might support the narrative, I’m going to take notice. Such is Private Letter Ruling 201527043. The PLR is a denial of exempt status to an organization that I will call Ticket Back Home (TBH). (The public version of a private letter ruling does not include identifying information, so when I write about them I try to make up an appropriate name.)

TBH is concerned with illegal immigration, which is one of the Tea Party’s biggest issues. Being descended from some of the huddled masses yearning to breathe free, famine refugees no less, I have a hard time connecting emotionally with the Tea Party animus toward the undocumented. Even if he is breaking the law, I just can’t get mad at somebody who is shaping up at the Home Depot to go hang drywall or do some landscaping so he can send money home to the Old Country. ...

I have been unable to penetrate the redaction on this ruling, so I have no candidates for the particular organization that was denied exempt status by this ruling. Reading between the lines of the ruling, it does seem to be coming from a place of right-wing populism, that I am not really that sympathetic with. Nonetheless, I think the IRS case for denying exempt status is on the weak side.

One thing that I have noted about the exempt organization controversy is that a lot of noise is made about all the hoops that organizations have to jump through to get exempt status, but there is little attention paid when there is an outright denial. This ruling, which has received no other coverage I could find is another example of that phenomenon.

I can’t rule out that there is something altogether unsavory about this group that would cause me to sympathize with IRS in turning them down, but the rationale in the ruling does not really stand up.

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July 21, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Monday, July 20, 2015

'Going To Law School Is Becoming A Thing Again'

Following up on my previous post, Light At The End Of The Law School Tunnel?:  Matt Leichter, LSAT Tea-Leaf Reading: June 2015 Edition:


In other surprising news, the number of law school applicants is … about the same as last year.

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July 20, 2015 in Legal Education | Permalink | Comments (1)

America's Best Program For The Poor May Be Even Better Than We Thought

EITC Logo (2014)Hilary W. Hoynes (UC-Berkeley) & Ankur J. Patel (U.S. Treasury Department), Effective Policy for Reducing Inequality? The Earned Income Tax Credit and the Distribution of Income:

In this paper, we examine the effect of the EITC on the employment and income of single mothers with children. We provide the first comprehensive estimates of this central safety net policy on the full distribution of after-tax and transfer income. We use a quasi-experiment approach, using variation in generosity due to policy expansions across tax years and family sizes. Our results show that a policy-induced $1000 increase in the EITC leads to a 7.3 percentage point increase in employment and a 9.4 percentage point reduction in the share of families with after-tax and transfer income below 100% poverty. Event study estimates show no evidence of differential pre-trends, providing strong evidence in support of our research design. We find that the income increasing effects of the EITC are concentrated between 75% and 150% of income-to-poverty with little effect at the lowest income levels (50% poverty and below) and at levels of 250% of poverty and higher. By capturing the indirect effects of the credit on earnings, our results show that static calculations of the anti-poverty effects of the EITC (such as those released based on the Supplemental Poverty Measure, Short 2014) may be underestimated by as much as 50 percent.

Vox, America's Best Program for the Poor May be Even Better Than We Thought:

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July 20, 2015 in Scholarship, Tax | Permalink | Comments (5)

2014-15 College Faculty Salaries

Inside High Ed, Faculty Salaries:

Top Private Universities for Faculty Salaries for Full Professors, 2014-15


Average Salary

1. Stanford University


2. Columbia University


3. University of Chicago


4. Princeton University


5. Harvard University 


6. Yale University


7. University of Pennsylvania


8. New York University


9. Massachusetts Institute of Technology


10. Duke University


Top Public Universities for Faculty Salaries for Full Professors, 2014-15


Average Salary

1. University of California at Los Angeles


2. New Jersey Institute of Technology


3. University of California at Berkeley


4. University of Michigan at Ann Arbor


5. University of Maryland at Baltimore


6. University of Virginia


7. University of Maryland at College Park


8. University of California at San Diego


9. University of California at Santa Barbara


10. University of California at Irvine


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July 20, 2015 in Legal Education | Permalink | Comments (1)

The Case For Replacing Investment Income Taxes With An Annual Wealth Tax

S. Douglas Hopkins (Krestel Consulting, Sparta, NJ), The Case for Replacing Investment Income Taxes with an Annual Wealth Tax, 147 Tax Notes 1305 (June 15, 2015):

The tax reform debate in America is largely framed as a conflict of competing principles rather than shared goals and the resulting politicized power struggle has left us blind to a critical flaw in fiscal policy: Structural preferences that shelter wealth from direct taxation are subsidizing unproductive and illiquid capital, thereby distorting investment incentives and obstructing sustainable economic growth and job creation. Those preferences are both inefficient and inequitable, contrary to core principles of both democracy and capitalism.

A properly designed annual wealth tax could facilitate removal of those preferences and serve as the cornerstone element of simultaneously more equitable and efficient comprehensive tax reform: a) stimulating more productive investment and thereby job growth, while allowing us to b) equalize effective tax rates between labor and capital, and c) lower the maximum marginal tax rate to 25%.

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July 20, 2015 in Scholarship, Tax | Permalink | Comments (2)

Police Release New Details In Dan Markel's Murder

Following up on Saturday's post, Dan Markel Deserves Justice:  Tallahassee Police Department, Investigation into Markel Murder Continues:

The Tallahassee Police Department Violent Crimes Unit, with assistance from the FBI, have been actively investigating the murder of Florida State University Law Professor Daniel Markel since his death on July 18, 2014. TPD is releasing two updates to the case, one focusing on the vehicle specifics and the other focuses on a new reward amount.

Please see the attached images of the suspect car, determined to be a 2006-2009 Toyota Prius. The color is named 'Silver Pine Mica' by Toyota and appears metallic to light green, depending on lighting. The windows of the car are dark tinted.


The vehicle has three (3) distinctive characteristics:

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July 20, 2015 in Legal Education | Permalink | Comments (10)

Law Profs, Law Grads Debate Changing Accreditation Standards To Permit Paid Externships

ABA Logo 2ABA Journal, Educators and Young Lawyer Take Opposing Sides at Hearing Over Academic Credit for Paid Externships:

The governing council of the ABA Section of Legal Education and Admissions to the Bar has approved six proposed changes to the law school accreditation standards for notice and comment.

But only one—a proposal to eliminate the current ban on students receiving academic credit for paid externships—drew any testimony at a public hearing Thursday.

Representatives from two legal education groups—the Society of American Law Teachers and the Clinical Legal Education Association—spoke out against the proposed change.

But Mathew Kerbis, immediate-past chair of the ABA Law Student Division, argued in favor of it.

Under the current standard, law students are barred from receiving both pay and credit for an externship or field placement. Under the proposed change, a law school could decide for itself whether a student should receive credit, but only if the school can demonstrate that it has maintained sufficient control over the experience to ensure that the requirements of the standards are being met.

In order to ensure that those requirements are being met, a law school granting credit where compensation is provided would also have to maintain separate records of the placement so accreditors can periodically evaluate the quality of the program. ...

The council has received nearly four dozen written comments (PDF) on its six proposed changes in the standards, mostly about the credit-for-paid-externships proposal and most of them in opposition to any change in the current prohibition, section officials say.

The proposed changes will come back to the council for final consideration July 31. If approved, they will be reviewed by the House of Delegates at the ABA’s Annual Meeting in early August. The House can either concur with a change in the standards or refer it back to the council for reconsideration. But the council has the final word.

Deborah Jones Merritt (Ohio State), More on Paid Clinical Externships:

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July 20, 2015 in Legal Education | Permalink | Comments (2)

Turmoil Continues At SUNY-Buffalo Law School

SUNY 2Following up on my previous posts:

Buffalo News:  UB Law School Faculty Must Be Held Accountable, by Andrew Remley (J.D. 2017, SUNY-Buffalo):

The University at Buffalo Law School leaves much to be desired. Last fall, as reported by The News, Dean Makau Mutua was forced to step down following allegations that he perjured himself in a gender-based wrongful termination lawsuit in Federal Court.

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July 20, 2015 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 802

IRS Logo 2IJReview, New Documents Link Justice Department to IRS Scandal, But How Ted Cruz Reacted is the Big Surprise:

Has Senator Ted Cruz lost his bark?

When the news broke in mid-2013 that the Internal Revenue Service (IRS) had spent much of the past three years singling out conservative groups for extra scrutiny in their nonprofit applications, Cruz was among the first to call for a special prosecutor to investigate the scandal rather than the Department of Justice (DOJ).

But now that a slew of new documents has come to light this week, revealing that the DOJ, along with the FBI, actually played a much more hands-on role with IRS than previously thought, Cruz has gone mum. ...

Since the release of Judicial Watch’s documents, Cruz has not commented on the documents or released an official press statement. Cruz’s office did not return multiple requests for comment on whether the Republican presidential candidate would call for Loretta Lynch, the current attorney general, to appoint a special prosecutor.

A DOJ spokesman told IJReview only that the “investigation into the IRS’ handling of applications by tax-exempt organizations” is ongoing and declined to comment further.

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July 20, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

TaxProf Blog Weekend Roundup

Sunday, July 19, 2015

Merritt: The White Bias in Legal Education

Following up on Tuesday's post, LSAT Is Poor Predictor Of Law School Grades: 6 LSAT Points = 0.1 LGPA:  Deborah Jones Merritt (Ohio State), The White Bias in Legal Education:

Alexia Brunet Marks and Scott Moss have just published an article that analyzes empirical data to determine which admissions characteristics best predict law student grades. Their study, based on four recent classes matriculating at their law school (the University of Colorado) or Case Western’s School of Law, is careful and thoughtful. Educators will find many useful insights.

The most stunning finding, however, relates to minority students. Even after controlling for LSAT score, undergraduate GPA, college quality, college major, work experience, and other factors, minority students secured significantly lower grades than white students. The disparity appeared both in first-year GPA and in cumulative GPA. The impact, moreover, was similar for African American, Latino/a, Asian, and Native American students. ...

What accounts for this disturbing difference? Why do students of color receive lower law school grades than white students with similar backgrounds?

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July 19, 2015 | Permalink | Comments (2)

The 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, with a new #1 paper and new papers debuting on the list at #4 and #5:

  1. [200 Downloads]  Citizenship Taxation, by Ruth Mason (Virginia)
  2. [196 Downloads]  Reducing Inequality With A Retrospective Tax On Capital, by James Kwak (Connecticut)
  3. [151 Downloads]  Capital Accounts in LLCs and in Partnerships: Powerful Default Rules and Potential Tax Significance, by Donald J. Weidner (Dean, Florida State)
  4. [106 Downloads]  How I Learned to Stop Worrying and Love Our Homeowner Tax Rules, by David Hasen (Colorado)
  5. [101 Downloads]  Safe Harbors, Sure Shipwrecks, by Susan C. Morse (Texas)

July 19, 2015 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

NY Times: Judges Rebuke Limits On Wiping Out Student Loan Debt

Student LoansNew York Times, Judges Rebuke Limits on Wiping Out Student Loan Debt:

[A judicial ruling has] ruling captured the attention of other judges and legal scholars because of a judge’s bluntly worded written opinion that rebuked the widely adopted hardship standard used to determine whether a [student loan] debtor is worthy of a discharge.

The judge, Jim D. Pappas, in his concurring opinion for the bankruptcy appellate panel decision in the United States Court of Appeals for the Ninth Circuit, said the analysis used “to determine the existence of an undue hardship is too narrow, no longer reflects reality and should be revised.”

He added: “It would seem that in this new, different environment, in determining whether repayment of a student loan constitutes an undue hardship, a bankruptcy court should be afforded flexibility to consider all relevant facts about the debtor and the subject loans.” But the current standard, he wrote, “does not allow it.”

Judge Pappas isn’t the only critic. Although plenty of cases still hew closely to a strict interpretation of the test, some judges and courts have signaled in recent years that they believe the rigid standard — known as the Brunner test — should be reconsidered, even if they are still bound to it now.

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July 19, 2015 in Legal Education | Permalink | Comments (3)

The IRS Scandal, Day 801

IRS Logo 2The Daily Signal, How the IRS, FBI and Justice Department Are Agents of Modern American Tyranny:

Imagine having a vision for your country.

You worked hard to start an organization to promote the ideas and values that you believe can fix our nation.

When you apply for tax-exempt status, which should be a simple matter of paperwork, you face repeated delays and demands from the government that stretch the process across months and years.

Then you learn—not from the government, but from an outside source—that your private information was shared with multiple government agencies, all of whom wanted to “piece together” criminal charges against you.

Imagine being awakened in the middle of the night by a gang of police, shouting and waving their weapons at you. They turn your house inside-out, steal your laptop and phone, then order you not to tell anyone they were there.

All this happened because your political beliefs landed on the wrong side of those officials in power.

This is not a scenario from China, Russia, or Iran.

Welcome to the very real tyranny of modern America.

Think it can’t happen here? Just do some reading on the John Doe proceedings in Wisconsin, or the IRS targeting scandal.

As documents slowly begin to trickle out, the scandal of the IRS targeting conservative political organizations only grows bigger.

We learned a year ago that the IRS was helping the Department of Justice trump up charges on conservative groups by 2013.

New documents show this was in the works as early as 2010.

These two dates perfectly bookend the period of time that conservative groups were intentionally harassed and their applications for tax-exempt status delayed. From the first reaction to Citizens United to the week of Lois Lerner’s misleading admission of targeting, multiple government agencies were in on it together. ...

We have now entered a time in America when citizens can be labeled as “political dissident” and targeted by their own government for harassment and prosecution.

Abuse that formerly only went on in places like China, Russia, and Iran has repeatedly happened right here within the USA. This is not the nation we used to know and love.

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July 19, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Saturday, July 18, 2015

Dan Markel Deserves Justice

MarkelTallahassee Democrat editorial, Dan Markel Deserves Justice:

On Friday morning, July 18, 2014, an assailant, some speculate that it could have been a professional hit man, shot Florida State law professor Dan Markel as he sat in his car in his garage.

Markel’s murder represents a diminishment of our community on so many levels: as a father, educator, scholar, neighbor, congregant and human being. The loss is compounded by the frustration over the lack of progress in bringing his killer or killers to justice. All lives matter, but the need for justice in this case seems more urgent than ever. If this can happen to Dan Markel, then we are all vulnerable.

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July 18, 2015 in Legal Education, Obituaries | Permalink | Comments (7)

This Week's Ten Most Popular TaxProf Blog Posts

P&G's Use Of Reverse Morris Trust In Selling 43 Beauty Brands To Coty For $12.5 Billion: 'A Thing Of Tax Beauty'

P&GWashington Post:  For Tax Techies, P&G’s Deal With Coty Is a Thing of Beauty, by Allan Sloan:

To most people, Procter & Gamble is known for powerhouse brands such as Tide, Tampax and Pampers. But to people whose stomachs churn when American companies go to great lengths to avoid taxes, there’s a more appropriate P&G product: Pepto-Bismol.

My stomach got a bit queasy when I examined P&G’s deal to sell 43 beauty brands to Coty, the big beauty company, for $12.5 billion (what Coty said it’s paying) or maybe $15 billion (the deal’s value the day it was announced last week).

Either way, the transaction is a thing of beauty to tax techies — although not to regular taxpayers. P&G is using a “Reverse Morris Trust” to avoid billions in taxes that it would have owed in a straight-up sale of the brands, which include Wella, Clairol, Max Factor and Covergirl.

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July 18, 2015 in Tax | Permalink | Comments (3)

The IRS Scandal, Days 701-800

July 18, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

The IRS Scandal, Day 800

IRS Logo 2Forbes:  Court Agrees Lois Lerner's Group Did Not Trigger Individual Audits, by Peter J. Reilly:

The perennial never-ending IRS scandal now on Day 795 by TaxProf count , in part, is a search for smoking guns.  Sometimes it turns out that all that can be found is unloaded, never fired guns. The response of those promoting the scandal narrative is that, you have to look harder.  Enough is never enough. Sometimes the courts agree that the IRS must search its records more assiduously. Earlier this month, though the DC District issued an enough is enough ruling on one of Judicial Watch’s Freedom of Information Requests.

The FOIA request concerned Lois Lerner’s Cincinnati gang that couldn’t sort straight causing individuals connected in one way or another to the exempt applications to have their individual returns audited.  There is anecdotal evidence that this sort of thing was going on.  Various Tea Party people came forward and indicated that they were audited for the first time after they became involved.  The problem with that type of anecdotal evidence is that every year some number of people are going to be audited for the first time.  You would expect that some number of those audited in say 2011 were active in the Tea Party or similar groups.

You are never going to convince most of those people that it was just luck of the draw.  It would be very hard to make a statistical inference about whether Tea Party affiliation or something like that affected individual audit probability, since it is hard to define the group that the sample is being drawn from and it is possible, even likely, that the people who became involved in the conservative causes were people who already had a higher than average probability of being audited. ...

Certainly Judicial Watch thinks so.  They brought up indications that IRS had communicated with DOJ about prosecuting people for lying on 501(c)(4) exemption applications.  That particular assertion has created some media excitement.  I haven’t figured out what is scandalous about it, particularly since it appears nobody was ever prosecuted.  Those applications are signed under penalties of perjury and there is some indication that on some of them people were kind of shading the truth just a bit.  The Court noted, though, that the communication to DOJ had nothing to do with audit referrals. ...

I suspect that the IRS scandal will keep going at least through the upcoming Presidential election, since it allows Republicans to run against Lois Lerner.  It is apparently also pretty good for fundraising.  According to its 2013 Form 990, Judicial Watch raised over $20 million just shy of $6 million of that was spent on fundraising.  I didn’t see any mention of this DC District decision on their website in the weekly updates.

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July 18, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Friday, July 17, 2015

Tax Prof Wedding: Allen Madison

Congratulations to Tax Prof Allen Madison and DaVida Russell, who were married yesterday in Stonington, Connecticut:


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July 17, 2015 in Legal Education, Tax, Tax Prof Weddings, Tax Profs | Permalink | Comments (3)

Weekly Tax Roundup

Weekly Legal Education Roundup

Weekly SSRN Tax Roundup

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July 17, 2015 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Taylor: Should Payroll Taxes Be Repealed?

Willard B. Taylor (NYU & Sullivan & Cromwell), Should Payroll Taxes Be Repealed?, 148 Tax Notes 213 (July 13, 2015):

This article argues that serious consideration should be given to the repeal or payroll taxes, i.e., of FICA and SECA, and of the 3.8% tax on net investment income, and Social Security and Medicare benefits funded with personal income tax revenues. There is no sound reason not to do so, apart from politics, and repeal would focus Congress on the regressive structure of taxes imposed on labor income and eliminate the complexity (and distortion with respect to, e.g., the choice of entity to carry on a business) of three separate taxes.

July 17, 2015 in Scholarship, Tax | Permalink | Comments (1)

University of Chicago Law School Study: Better Scholars Are Better Teachers

Tom Ginsburg (Chicago) & Thomas J. Miles (Chicago), The Teaching/Research Tradeoff in Law: Data from the Right Tail, 39 Evaluation Rev. 46 (2015):

Background: There is a long scholarly debate on the trade-off between research and teaching in various fields, but relatively little study of the phenomenon in law. This analysis examines the relationship between the two core academic activities at one particular school, the University of Chicago Law School, which is considered one of the most productive in legal academia. Method: We measure of scholarly productivity with the total number of publications by each professor for each year, and we approximate performance in teaching with course loads and average scores in student evaluations for each course. In OLS regressions, we estimate scholarly output as a function of teaching loads, faculty characteristics, and other controls. We also estimate teaching evaluation scores as a function of scholarly productivity, fixed effects for years and course subject, and faculty characteristics. Result: Net of other factors, we find that, under some specifications, research and teaching are positively correlated. In particular, we find that students’ perceptions of teaching quality rises, but at a decreasing rate, with the total amount of scholarship. We also find that certain personal characteristics correlate with productivity. Conclusion: There recent debate on the mission of American law schools has hinged on the assumption that a trade-off exists between teaching and research, and this article’s analysis, although limited in various ways, casts some doubt on that assumption.

Chicago Chart

Orin Kerr (George Washington), Is There a Teaching/Scholarship Trade-off in Law Schools?:

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July 17, 2015 in Legal Education, Scholarship, Teaching | Permalink | Comments (1)

Madison: The Denial Of IRS Access To The Taxpayer's Playbook

PlaybookAllen D. Madison (South Dakota), The Denial of IRS Access to its Adversary's Playbook, 60 S.D. L. Rev. 232 (2015):

When examining a corporate taxpayer, the IRS often seeks special accounting documents called tax accrual workpapers. These workpapers often contain privileged documents, but the IRS does not care. It believes it is entitled to the documents despite that the work product doctrine protects the documents from the IRS's investigation authority. Although the law seems clear, some courts appear to have ignored the law and permitted the IRS to obtain the documents in some cases. Differing results under similar circumstances have made the law less clear. The IRS should stop trying to obtain taxpayers' work product, and the Supreme Court should clear up the law with respect to these documents.

July 17, 2015 in Scholarship, Tax | Permalink | Comments (0)