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Wednesday, May 21, 2014

AALS Call for Papers: IRS Oversight of Tax-Exempt Organizations

AALS 2014The AALS Section on Nonprofit and Philanthropy Law and the AALS Section on Taxation (Co-Sponsor) have issued a Call for Paper Proposals for a 2015 Annual Meeting Section Panel on IRS Oversight of Charitable and Other Exempt Organizations – Broken? Fixable?:

Proposed papers might address: the role of the IRS in overseeing specific aspects of tax-exempt nonprofit organizations, such as political activity or governance; the relative strengths and weaknesses of IRS oversight compared to oversight by other actors, including state attorneys general and private, self-regulating bodies; the effect of the late-1990s reorganization of the IRS on its ability to oversee tax-exempt nonprofit organizations; or the overlapping jurisdictions of the IRS with other federal agencies that oversee aspects of nonprofit organizations, such as the Federal Election Commission, the Federal Trade Commission, and the Department of Education.

Panelists will be a mix of presenters chosen through this call for paper proposals and solicited panelists with relevant expertise. Presenters will have the opportunity to publish their papers in the faculty-edited Pittsburgh Tax Review. To facilitate such publication, panelists will be expected to have a completed draft by the January 3, 2015 panel presentation and a final draft by February 28, 2015. 

To submit your proposal, please email a short description (no more than 750 words) of your paper to Lloyd Hitoshi Mayer, Chair of the Section on Nonprofit and Philanthropy Law, and Miranda Fleischer, Chair of the Section on Taxation. The deadline for proposals is Friday, August 15, 2014. The Executive Committees of the sponsoring sections will select the papers to be presented by mid-September. Please be aware that pursuant to AALS rules, only full-time faculty members of AALS members law schools are eligible to submit a paper proposal in response to a section’s call for papers. However, fellows from AALS member law schools are also eligible to submit a paper proposal if they include a CV with their proposal. Faculty at fee-paid law schools, international, visiting, and adjunct faculty members, graduate students, and non-law school faculty are not eligible to submit.

May 21, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

DOJ Enters $7.7 Million Consent Decree to Settle ADA Lawsuit Against LSAC Over ADA Accommodation in Administration of LSAT

U.S. Department of Justice Press Release, Law School Admission Council Agrees to Systemic Reforms and $7.73 Million Payment to Settle Justice Department’s Nationwide Disability Discrimination Lawsuit:

LSACThe Justice Department filed a joint motion today for entry of a landmark consent decree to resolve allegations that the Law School Admission Council (LSAC) engaged in widespread and systemic discrimination in violation of the Americans with Disabilities Act (ADA).  Under the proposed consent decree, LSAC will pay $7.73 million in penalties and damages to compensate over 6,000 individuals nationwide who applied for testing accommodations on the Law School Admission Test (LSAT) over the past five years.  The decree also requires comprehensive reforms to LSAC’s policies and ends its practice of “flagging,” or annotating, LSAT score reports for test takers with disabilities who receive extended time as an accommodation.  These reforms will impact tens of thousands of test takers with disabilities for years to come. 

The United States intervened in DFEH v. LSAC Inc., which was originally brought on behalf of California test takers in the U.S. District Court for the Northern District of California.  The United States’ intervention expanded the case to ensure comprehensive and nationwide relief under Title III of the ADA for individuals with disabilities who request testing accommodations for the LSAT – a required examination for anyone seeking admission to an American Bar Association approved law school in the United States.  The allegations in the complaint detail LSAC’s routine denial of testing accommodation requests, even in cases where applicants have a permanent physical disability or submitted thorough supporting documentation from qualified professionals and demonstrated a history of testing accommodations since childhood.  Without the necessary accommodations, test takers with disabilities are denied an equal opportunity to demonstrate their aptitude and achievement level.  The lawsuit further alleged that LSAC engages in discrimination prohibited by the ADA through its practice of flagging the LSAT score reports of individuals who received extended time as a testing accommodation, thereby identifying to law schools that the test taker is a person with a disability.

May 21, 2014 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 377

IRS Logo 2House Commitee on Oversight & Government Reform Press Release,  After DOJ Dodges Questions, Issa Subpoenas Justice Department for IRS Investigation Targeting Documents:

House Oversight and Government Reform Committee Chairman Darrell Issa, R-Calif., today subpoenaed the Justice Department for documents after Richard Pilger, Director of the Department’s Election Crimes Branch, refused to answer critical questions on the instructions of Justice Department counsel during a transcribed interview on May 6, 2014. The subpoena follows an April 23, 2014 letter from 17 Members of the Committee requesting materials concerning the Department’s involvement in efforts to scrutinize tax-exempt applicants after emails surfaced between Pilger and the Internal Revenue Service’s Lois G. Lerner where they discussed singling out and prosecuting tax-exempt applicants, at the urging of a Democratic Senator.  As the Federal Election Commission, the IRS and the Justice Department looked for ways to minimize the impact of the Supreme Court’s decision in Citizens United, a clear outline emerges of government agencies cracking down on constitutionally protected free speech.

In a letter accompanying the subpoena, Chairman Issa stated: “The Department’s refusal to allow Mr. Pilger to testify about matters highly relevant to the Committee’s investigation unnecessarily delays and frustrates the Committee’s Constitutional oversight obligations.  The Department’s obstruction in this regard, coupled with its failure to produce any relevant material to date, leads the Committee to conclude the Department is not seriously committed to cooperating with the Committee’s investigation on the Committee’s terms.”

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May 21, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, May 20, 2014

The Continuing Debate Over Thomas Piketty's Capital in the 21st Century

CapitalFollowing up on my previous posts on the new book by Thomas Piketty (Paris School of Economics), Capital in the Twenty-First Century (Harvard University Press, 2014):

Wall Street Journal op-ed:  Piketty's Numbers Don't Add Up, by Martin Feldstein (Harvard):

Thomas Piketty has recently attracted widespread attention for his claim that capitalism will now lead inexorably to an increasing inequality of income and wealth unless there are radical changes in taxation. Although his book ... has been praised by those who advocate income redistribution, his thesis rests on a false theory of how wealth evolves in a market economy, a flawed interpretation of U.S. income-tax data, and a misunderstanding of the current nature of household wealth.

New York Times:  To Lift the Poor, You Can’t Avoid Taxing the Rich, by Jared Bernstein (Center on Budget and Policy Priorities):

[T]here are three reliable ways to help or “lift” the bottom: subsidies that increase the poor’s economic security today; investment in their future productivity; and targeted job opportunities at decent wages. ... All of the above — the expanded earned-income tax credit, universal preschool, job-creating infrastructure — will take more tax revenue, and much of that new revenue will need to come from those at the top of the wealth scale.

New York Times:  To Lift Up the Poor, Must We Soak the Rich?, by Ross Douthat:

For a three-idea argument, I suppose it’s appropriate to raise three objections. So here they are:

  1. I don’t think even Bernstein believes that it’s actually impossible to improve the situation of the poor without directly raising taxes on the rich.
  2. It’s possible to favor increasing redistribution along something like the lines Bernstein suggests — through an expanded earned income tax credit, for instance — while disagreeing that we need a higher top marginal rate or a Piketty-style wealth tax in order to do it.
  3. Before we talk about significantly expanding our investments in education, elementary and collegiate, how confident should we feel that our existing “investment” in the “future productivity” of the poorest Americans is reaping value-for-the-dollar rewards?

Foreign Affairs:  The Inequality Illusion: Why a Wealth Tax Won't Work, by Wojciech Kopczuk (Columbia) & Allison Schrager (Quartz):

[S]everal prominent economists are proposing an annual wealth tax, which would apply only to those with assets worth more than a set amount. But there’s limited evidence that wealth inequality has actually worsened in the United States in the last 30 years. And, even if it does eventually get worse, imposing a tax on wealth is a terrible way to promote equality. It actually benefits the super wealthy the most.

Democracy -- A Journal of Ideas:  The Inequality Puzzle, by Lawrence H. Summers (Harvard):

I have serious reservations about Piketty’s theorizing as a guide to understanding the evolution of American inequality. And, as even Piketty himself recognizes, his policy recommendations are unworldly—which could stand in the way of more feasible steps that could make a material difference for the middle class. ...

Piketty argues for an internationally enforced progressive wealth tax, where the rate of tax rises with the level of wealth. This idea has many problems, starting with the fact that it is unimaginable that it will be implemented any time soon. Even with political will, there are many problems of enforcement. How does one value a closely held business? Even if a closely held business could be accurately valued, will its owners be able to generate the liquidity necessary to pay the tax? Won’t each jurisdiction have a tendency to undervalue assets within it as a way of attracting investment? Will a wealth tax encourage unseemly consumption by the wealthy?

Bloomberg:  Taxing a Professor's Privilege, by Megan McArdle:

You’ll have to wait on my thoughts on the book until they’re a bit more fully formed. As I've been reading, though, I keep returning to a question I heard at an economics conference a couple of months back: If we did implement a wealth tax, should it tax tenure? ...

Why single out professors? you ask. Isn’t this just more academic-bashing? You’re quite right: We shouldn’t single out professors. Everyone with civil-service protections or similar employment guarantees should probably have that asset taxed.

(Hat Tip: Mike Talbert.)

May 20, 2014 in Book Club, Tax | Permalink | Comments (2)

Redding: Law School Reforms Will Harm Law Students and the Legal Profession

Richard E. Redding (Vice Chancellor, Chapman), The Legal Academy Under Erasure, 65 Cath. U. L. Rev. ___ (2015):

We hear much about the crisis in legal education: high tuition costs, steep declines in law school enrollment, and graduates unprepared for practice who cannot find jobs. Proposals to address the crisis appear to enjoy wide support and may be poised to dramatically change the landscape of legal education. Such reforms will harm law students and the legal profession, placing the legal academy “under erasure,” by: (1) reorienting it from an academically-grounded education towards vocational training, (2) requiring just two years of study for the J.D. degree, (3) allowing graduates of non-ABA accredited law schools to sit for the bar examination, thereby rendering accreditation a toothless mechanism for ensuring academic quality, and (4) gutting faculty scholarship.

Instead, we must make the value of legal education worth its cost by doing a better job of educating and training our students. Legal education is broken because it fails to prepare students for the demands of modern law practice, which is more complex and interdisciplinary than ever before. We need a three-year program that is more robust, one that teaches the core first-year subjects as well as applications of other disciplines (e.g., accounting, economics, psychology) to everyday law practice, exposes students to a reasonable range of specialty areas, and integrates skills training (e.g., client counseling, advocacy, drafting) throughout the curriculum. To accomplish these goals, we should adapt the medical school model to legal education. This would entail a curriculum that provides a comprehensive foundation in basic legal subjects and legally relevant other disciplines, culminating in a series of clinical rotations where the basic doctrinal and interdisciplinary knowledge is applied in practice. I also explain why we should not gut support for faculty scholarship in the hopes that doing so will cut costs and encourage professors to focus on teaching. Contrary to popular claims, engaged scholars are better teachers, and legal scholarship can contribute meaningfully and substantially (though often in ways not readily apparent) to law practice and legal reform efforts. Finally, I suggest that we address the employment problem and improve educational quality by having fewer but better law schools, producing fewer attorneys.

May 20, 2014 in Legal Education | Permalink | Comments (4)

Miller & Maine: The Fundamentals of Wealth Transfer Tax Planning

John A. Miller (Idaho) & Jeffrey A. Maine (Maine), The Fundamentals of Wealth Transfer Tax Planning: 2013 and Beyond, 2013 BYU L. Rev. 879:

On January 1, 2013 Congress avoided the tax part of the so called “fiscal cliff” when it passed the American Taxpayer Relief Act of 2012 (ATRA). Among its many impacts this law prevented the application of a number of sunset provisions that would have dramatically altered the operation of the federal wealth transfer taxes. Instead Congress made permanent two significant transfer tax provisions introduced as temporary measures in 2010: the indexed basic exclusion amount and the deceased spousal unused exclusion amount. The latter provisions are sometimes referred to as the portability rules. ATRA also introduced a new maximum transfer tax rate of 40%. In addition ATRA made permanent a deduction for state death taxes and prevented the return of the state death tax credit. Thus, the main transfer tax emphasis of the actions taken by Congress in ATRA was to stabilize the wealth transfer tax system in a fashion that eliminates or reduces its planning impact on most taxpayers while also permanently establishing a significant new planning tool for the wealthy, the deceased spousal unused exclusion (DSUE) amount.

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

ABA Tax Section Publishes Spring 2014 Issue of News Quarterly

ABA News QuarterlyThe ABA Tax Section has published 33 News Quarterly No. 3 (Spring 2014):

May 20, 2014 in ABA Tax Section, Tax | Permalink | Comments (0)

Infanti: LGBT Families, Tax Nothings

Anthony C. Infanti (Pittsburg), LGBT Families, Tax Nothings, 17 J. Gender Race & Just. 35 (2014):

The federal tax laws have never been friendly territory for LGBT families. Before the enactment of the federal Defense of Marriage Act (DOMA), the federal tax laws turned a blind eye to the existence of LGBT families by tacitly embracing state law discrimination against same-sex couples. When it enacted DOMA in 1996, Congress ensured that it would be able to continue to turn a blind eye to LGBT families even if one or more states were to legally recognize families headed by same-sex couples. In a real sense, LGBT families have been, and continue to be, tax outlaws.

This overt discrimination has not, however, proven to be an insurmountable hurdle for enterprising LBGT families wishing to obtain (at least in some measure) the same tax treatment as “traditional” families. The federal income tax laws provide tax benefits to relationships of dependency in many (though not all) of the same circumstances in which they afford benefits to married different-sex couples. These relationships of dependency are typically between the taxpayer, in the role of parent or caregiver, and a child or other person who cannot care for himself/herself. Often, the only means for same-sex couples to avoid otherwise discriminatory and burdensome tax consequences is for one spouse to qualify as the “dependent” of the other.

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

Law School Rankings: U.S. News (2d Quartile) v. SSRN

US News SSRNIn Ranking Law Schools: Using SSRN to Measure Scholarly Performance, 81 Ind. L.J. 83 (2006), Bernie Black (Northwestern) and I compared the ranking of law schools using U.S. News and SSRN downloads.  Last week, I updated the chart on pages 98-102, showing the ranking of law schools under U.S. News (overall and peer reputation) and SSRN (recent and all-time downloads) of the Top 50 law schools (according to the U.S. News overall ranking).  Here is the chart for law schools ranked in the second quartile (51-99):

School

US News Overall

US News Peer

SSRN Recent

SSRN All-Time

Richmond

51

67

121

129

Baylor

51

76

206

203

Penn State

51

76

54

46

UC-Hastings

54

35

59

79

Connecticut

54

49

80

96

Pepperdine

54

59

69

75

Nebraska

54

67

138

149

Houston

58

59

62

62

Kentucky

58

67

135

124

Oklahoma

58

67

165

154

Temple

61

53

23

26

Miami

61

53

64

71

Arkansas-Fay.

61

87

139

145

Cardozo

64

49

52

31

Case Western

64

59

47

38

Georgia State

64

67

112

110

Missouri

64

67

90

78

Denver

68

59

39

57

Kansas

68

59

89

102

Loyola-Chicago

68

67

51

59

Seton Hall

68

87

33

21

American

72

49

25

23

Tennessee

72

59

24

28

Chicago-Kent

72

67

60

77

Lewis & Clark

72

76

93

94

New Mexico

72

76

127

115

LSU

72

99

142

140

Tulsa

72

116

159

158

San Diego

79

53

30

21

Cincinnati

79

76

134

113

Pittsburgh

81

59

65

69

Rutgers-Camden

81

76

57

56

Brooklyn

83

67

63

54

Rutgers-Newark

83

76

127

118

UNLV

83

87

108

97

West Virginia

83

109

160

163

Loyola-L.A.

87

59

45

35

Indiana-Ind.

87

76

67

84

Michigan State

87

87

48

49

Seattle

87

87

79

76

Louisville

87

99

103

89

Wayne State

87

109

109

100

Marquette

93

76

98

88

Northeastern

93

87

111

126

South Carolina

93

87

125

132

Villanova

93

87

82

80

Stetson

93

109

100

103

St. Louis

93

109

84

101

New Hampshire

93

128

132

114

On page 124 of the article, we listed the most "undervalued" and "overvalued" law schools, based on the spread between their U.S. News peer reputation and SSRN all-time downloads. Here are the updated figures for the second quartile:

Schools Undervalued by US News

Schools Overvalued by US News

School

US News

SSRN

Spread

School

US News

SSRN

Spread

Seton Hall

87

21

-66

Baylor

76

203

+127

Michigan State

87

49

-38

Oklahoma

67

154

+87

San Diego

53

21

-32

Nebraska

67

149

+82

Tennessee

59

28

-31

Richmond

67

129

+62

Penn State

76

46

-30

Arkansas-Fay.

87

145

+58

Temple

53

26

-27

Kentucky

67

124

+57

American

49

23

-26

West Virginia

109

163

+54

Loyola-L.A.

59

35

-24

Connecticut

49

96

+47

Case Western

59

38

-21

South Carolina

87

132

+45

Rutgers-Cam.

76

56

-20

UC-Hastings

35

79

+44

Cardozo

49

31

-18

Georgia State

67

110

+43

New Hampshire

128

114

-14

Kansas

59

102

+43

Brooklyn

67

54

-13

Tulsa

116

158

+42

Seattle

87

76

-11

Rutgers-Newark

76

118

+42

Louisville

99

89

-10

LSU

99

140

+41

Wayne State

109

100

-9

New Mexico

76

115

+39

Loyola-Chicago

67

59

-8

Northeastern

87

126

+39

St. Louis

109

101

-8

Cincinnati

76

113

+37

Villanova

87

80

-7

Miami

53

71

+18

Stetson

109

103

-6

Lewis & Clark

76

94

+18

May 20, 2014 in Law School Rankings, Legal Education | Permalink | Comments (0)

South Carolina Committee Rejects InfiLaw Purchase of Charleston Law School

Charleston LogoFollowing up on my prior posts (links below):  Charleston Post and Courier, South Carolina Committee Rejects InfiLaw Purchase of Charleston School of Law:

The sale of the Charleston School of Law to a private, Florida-based company should be stopped, as the company's lower academic standards and lawsuits against it provide concerns about the company's health and the direction it would take the school, a majority of members on a state higher education panel said Monday.

The Committee on Academic Affairs and Licensing, part of the state's Commission on Higher Education, voted 3-1 to reject recommending a license for InfiLaw to operate the law school. The private, for-profit law school provider has sought to buy Charleston's 10-year-old private law school since last summer over the objection of many alumni and faculty.

The committee's rejection surprised students and alumni who had lobbied against the sale. The company needs an approval for a license from the state's Commission on Higher Education. Monday's vote will act as a guideline for the full, Higher Education Commission when it is expected to decide the issue on June 6.

A majority of the committee agreed with Natasha Hanna, a Myrtle Beach attorney who serves on the commission, that lawsuits against two of the company's schools could pose problems for the entity down the road.

Faculty members at the company's school in Arizona sued InfiLaw for breach of contract and defrauding students. Its school in Florida was sued for misrepresenting claims about its students' success and job placement.

Prior TaxProf Blog posts:

May 20, 2014 in Legal Education | Permalink | Comments (0)

Cowan: Tax Consequences of Faculty Teaching Courses for Free

Mark J. Cowan (Boise State University, Department of Economics), Assignment of Income at the Ivory Tower: Relaxing the Tax Treatment of Services Donated to Charities by their Employees, 40 J.C.& U.L. 1 (2014):

When a faculty member donates time to a college or university by, for example, teaching a summer course for no compensation, the federal income tax treatment of the donation can take one of two forms. One possibility is that the donation will have no tax consequences. The faculty member realizes no income from the donation and gets no charitable deduction. A second possibility is that the faculty member will be required to recognize taxable income equal to the value of the services provided and then may (subject to certain limits) be allowed a charitable contribution deduction. In many cases, the income and deduction do not fully offset, resulting in negative tax consequences for the faculty member. This second possibility occurs when the faculty member directs where the funds saved by the donation are used within the institution. Since faculty members normally would prefer to control the specific use of the saved funds, many donations would result in negative tax consequences sufficient to stifle the donation in the first place. This Article argues that the tax law should be clarified and relaxed to allow faculty members (and other employees of charitable organizations) to donate time to their employer institutions on a tax-free basis in more situations than is currently the case. Alternatively, the Article suggests ways for charities to encourage donations of time by employees, even in the absence of a favorable law change.

May 20, 2014 in Scholarship, Tax | Permalink | Comments (8)

Todres: Tax Shelters and Tax Malpractice

Jacob L. Todres (St. John's), Bad Tax Shelters -- Accountability or the Lack Thereof: Ten Years of Tax Malpractice:

In the 1990’s and early 2000’s the tax landscape in the United States was overrun by an epidemic of tax shelters that was unprecedented. The shelters were designed and sold by seemingly reputable large accounting and law firms. The same shelters were sold to many taxpayers. They became generic, off-the-shelf, products. However, the tax shelters had no business substance. The shelters were eventually found to be invalid by the courts. In light of the invalidity of the shelters, the large fees paid for the shelters and the large damages caused by participating in the invalid shelters, there were predictions that many malpractice suits against the sellers of the shelters would ensue.

For this article I attempted to determine whether the predicted wave of tax malpractice suits occurred and what impact, if any, resulted in the area of tax malpractice litigation.

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

The IRS Scandal, Day 376

IRS Logo 2 Taxable Talk:  Deadlines for Us, But Not for Them (Part 2), by Russ Fox (Clayton Financial and Tax, Las Vegas):

The IRS and Democrats wishing the IRS scandal to vanish won’t make it so. The revelations during the last week are going to harden Republicans’ stance on funding the IRS. The taxpaying public will suffer because of this, but I can’t lay the blame on the GOP here. Someone ordered the targeting of Tea Party groups, and until that person is made known and the IRS stops its delaying tactics on the scandal, the IRS’ budget will go down, not up.

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

Monday, May 19, 2014

Public College and University President Salaries, 2013-14

Chronicle of Higher Education:  Public College and University President Salaries, 2013-14:

  1. E. Gordon Gee (Ohio State University):  $6,057,615
  2. R. Bowen Loftin (Texas A&M University):  $1,636,274
  3. Hamid A. Shirvani (North Dakota University):  $1,311,095
  4. Renu Khator (University of Houston):  $1,266,000
  5. Sally K. Mason (University of Iowa):  $1,139,705
  6. Michael A. McRobbie (Indiana University):  $1,111,924
  7. Michael F. Adams (University of Georgia):  $1,074,869
  8. V. Gordon Moulton (University of South Alabama):  $1,072,121
  9. Mary Sue Coleman (University of Michigan):  $1,037,357
  10. Mark G. Yudof (University of California): $857,085

New York Times, Student Debt Grows Faster at Universities With Highest-Paid Leaders, Study Finds:

One-PercentAt the 25 public universities with the highest-paid presidents, both student debt and the use of part-time adjunct faculty grew far faster than at the average state university from 2005 to 2012, according to a new study by the Institute for Policy Studies, a left-leaning Washington research group.

The study, The One Percent at State U: How University Presidents Profit from Rising Student Debt and Low-Wage Faculty Labor, examined the relationship between executive pay, student debt and low-wage faculty labor at the 25 top-paying public universities.

The co-authors, Andrew Erwin and Marjorie Wood, found that administrative expenditures at the highest-paying universities outpaced spending on scholarships by more than two to one. And while adjunct faculty members became more numerous at the 25 universities, the share of permanent faculty declined drastically.

“The high executive pay obviously isn’t the direct cause of higher student debt, or cuts in labor spending,” Ms. Wood said. “But if you think about it in terms of the allocation of resources, it does seem to be the tip of a very large iceberg, with universities that have top-heavy executive spending also having more adjuncts, more tuition increases and more administrative spending.”

May 19, 2014 in Legal Education | Permalink | Comments (0)

Credit Suisse Pleads Guilty in Criminal Tax Case, Pays $2,6 Billion Fine

NY Times Dealbook (2013)New York Times DealBook:  Credit Suisse Pleads Guilty in Felony Case:

Credit Suisse has done what no other bank of its size and significance has done in over two decades: plead guilty to criminal wrongdoing.

In a sign that banking giants are no longer immune from criminal charges, despite concerns that financial institutions have grown so large and interconnected that they are too big to jail, federal prosecutors demanded that Credit Suisse’s parent company plead guilty to helping thousands of American account holders hide their wealth.

As part of a deal announced on Monday, the Swiss bank met the demands, agreeing to one count of conspiring to aid tax evasion in a scheme that “spanned decades.” Credit Suisse, which has a giant investment bank in New York and whose chief executive is an American, will also pay about $2.6 billion in penalties and hire an independent monitor for up to two years.

The rebuke from federal prosecutors as well as from the Federal Reserve and New York’s state banking regulator, Benjamin M. Lawsky, is intended as a blow against overseas tax dodging and the shadowy world of Swiss bank secrecy. The deal also signals a shift in prosecutors’ tactics. It is the most prominent bank to plead guilty in the United States since Drexel Burnham Lambert in 1989, and the largest to do so since the Bankers Trust in 1999, a bank a fraction the size of Credit Suisse.

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

Preserving Wealth and Inheritance Through Medicaid Planning for Long-Term Care

John A. Miller (University of Idaho College of Law), Sean Bleck (Isenhour Bleck, Seattle) & Barbara Isenhour (Isenhour Bleck, Seattle), Preserving Wealth and Inheritance Through Medicaid Planning for Long-Term Care, 17 Mich. St. U. J. Med. & L. 153 (2013):

Medicaid 2In this article we explain the rules and planning techniques relevant to obtaining government funding for the long term health care of an elderly client. This is called Medicaid Planning. Medicaid planning poses particular challenges because it involves both a federal law template and a state law implementation system. In our article we use the law of the State of Washington to make our analysis concrete and specific, but most of the techniques and strategies that we describe are available in any state because federal law imposes the basic structure of Medicaid.

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

Fogg & Zuraw: Financial Disability for All

Keith Fogg (Villanova) & Rachel E. Zuraw (Office of Staff Counsel, U.S. Court of Appeals for the Fourth Circuit), Financial Disability for All, 62 Cath. U. L. Rev. 965 (2013):

The Internal Revenue Code has four discreet sections that allow late filing of claims and other documents under the circumstances described in those sections. The IRS has promulgated a procedural regulation that allows it to permit late elections under prescribed circumstances. Neither the Code sections nor the Regulation cover all of the circumstances in which taxpayers have a good excuse for missing a time frame. The current provisions have developed in an ad hoc manner. More ad hoc development of this area is possible as equitable tolling litigation seeks to open up time frames under the Code despite the efforts of the IRS to argue the tax code is exceptional.

Rather than continue down the path of ad hoc allowance of late claims and certain other late actions, this Article recommends the creation of a statute that would apply to all situations. The recommendation draws from the current provisions allowing late action and from principles developed in equitable tolling litigation. It proposes a transparent system under which the IRS would make a determination whether the late action qualified and that determination would be subject to judicial review under an abuse of discretion standard.

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

Colon: Mixing Taxable and Tax-Exempt Shareholders in Mutual Funds

Jeffrey M. Colon (Fordham), Oil and Water: Mixing Taxable and Tax-Exempt Shareholders in Mutual Funds, 45 Loy. U. Chi. L.J. 773 (2014):

Mutual FundsAs of 2012, roughly 23% of U.S. households’ assets and 50% of retirement assets are invested in mutual funds, thus making mutual funds one of the most important investment vehicles for U.S. households. The federal taxation of mutual funds and mutual fund shareholders has played a vital role in the development of mutual funds and their appeal to U.S. investors.

Despite the significant amount of mutual fund assets held in retirement accounts, there has been very little analysis of the issues that arise when taxable and tax-exempt shareholders invest together in the same mutual fund. A substantial body of research shows that managers are attuned to the tax consequences of their investment activities, but only very recently have researchers begun to explore how the presence of tax-exempt investors affects managers’ investment strategies.

The current tax regime governing mutual funds imposes tax externalities on both taxable and tax-exempt shareholders. When tax-exempt shareholders predominate, fund managers focus less on managing fund tax liability and thereby generate higher taxes and lower after-tax returns for taxable shareholders. When taxable shareholders hold a significant portion of a mutual fund’s assets, the fund manager, focusing on minimizing fund taxable income, may undertake trades that reduce fund income but do not add economic value. These trades impose costs on all shareholders but benefit only taxable shareholders.

This Article considers various options to mitigate these costs, such as requiring funds to disclose the percentage of tax-exempt investors, adopting principles from partnership taxation to better match taxable and economic income, and prohibiting a fund from being offered to both taxable and tax-exempt investors.

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May 19, 2014 | Permalink | Comments (0)

Ivory Tower: Is College Worth the Cost?

Sunday New York Times Review, Class, Cost and College (reviewing Ivory Tower: Is College Worth the Cost?):

Ivory TowerThe word “crisis” pops up frequently in Ivory Tower, a compelling new documentary about the state of higher education in America.

It pops up in regard to the mountains of student debt. It pops up in regard to the steep drop in government funding for public universities, which have been forced to charge higher and higher tuition in response. That price increase is also a “crisis” in the estimation of one of many alarmed educators and experts on camera.

And “crisis” isn’t even their direst appellation. Andrew Delbanco, a Columbia University professor of American studies who functions as the movie’s conscience, notes an “apocalyptic dimension” to today’s discussion of college’s failings. The movie is set on verdant campuses. It’s rife with lecterns, books and graduation gowns. And yet it’s a kind of horror story.

Scheduled for theatrical release next month, Ivory Tower does an astonishingly thorough tour of the university landscape in a brisk 90 minutes, touching on the major changes and challenges, each of which could sustain its own documentary.

But as I watched it, one theme in particular kept capturing my attention. One set of questions kept coming to mind. How does our current system of higher education square with our concerns about social mobility? What place do the nation’s universities have in our intensifying debate about income inequality? What promise do they hold for lessening it?

The answers in “Ivory Tower” and beyond it aren’t reassuring. Indeed, the greatest crisis may be that while college supposedly represents one of the surest ladders to, and up through, the middle class, it’s not functioning that way, at least not very well.

New York Times Magazine, Who Gets to Graduate?:

When you look at the national statistics on college graduation rates, there are two big trends that stand out right away. The first is that there are a whole lot of students who make it to college — who show up on campus and enroll in classes — but never get their degrees. More than 40 percent of American students who start at four-year colleges haven’t earned a degree after six years. If you include community-college students in the tabulation, the dropout rate is more than half, worse than any other country except Hungary.

The second trend is that whether a student graduates or not seems to depend today almost entirely on just one factor — how much money his or her parents make. To put it in blunt terms: Rich kids graduate; poor and working-class kids don’t. Or to put it more statistically: About a quarter of college freshmen born into the bottom half of the income distribution will manage to collect a bachelor’s degree by age 24, while almost 90 percent of freshmen born into families in the top income quartile will go on to finish their degree.

When you read about those gaps, you might assume that they mostly have to do with ability. Rich kids do better on the SAT, so of course they do better in college. But ability turns out to be a relatively minor factor behind this divide. If you compare college students with the same standardized-test scores who come from different family backgrounds, you find that their educational outcomes reflect their parents’ income, not their test scores.

NYT

(Hat Tip: Mike Talbert.)

May 19, 2014 in Legal Education | Permalink | Comments (1)

Chemerinsky: The Story of UC-Irvine Law School

Erwin Chemerinsky (UC-Irvine), Creating a Law School That Emphasizes Public Interest Law, 7 DePaul J. for Soc. Just. 1 (2013):

UC-Irvine (2014)In 2007, I accepted the position to be the founding dean of the University of California, Irvine School of Law. I decided from the outset to create a law school with a strong emphasis on public service. The Chancellor, Michael Drake, and the Provost, Michael Gottfredson, who hired me agreed to the importance of this. But this, of course, was not the only objective. Several other goals also affected what we could do.

First, the primary goal articulated by Chancellor Drake and Provost Gottfredson was to create a law school that would be ranked in the top 20, by every measure, from the outset. They were terrific in providing the resources to allow us to pursue being a top 20 law school, but this required that our primary criteria in admission be focused on LSAT and GPA numbers. These are a substantial part of every law school's ranking. Commitment to public service, of course, could be a plus in admissions decisions, especially among those with the requisite grades and test scores. But ultimately our admissions decisions would not be very different from other schools that wish to be in the top 20.

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

Kahn: The Individual Mandate Tax Penalty

Jeffrey H. Kahn (Florida State), The Individual Mandate Tax Penalty, 47 U. Mich. J.L. Reform 319 (2014):

In 2010, President Obama signed legislation that significantly altered the healthcare and health insurance markets in the United States. An integral part of that reform is the individual mandate, a provision that requires individuals to purchase and maintain healthcare insurance. Failure to maintain such coverage subjects an individual to a tax penalty. The Supreme Court upheld the constitutionality of that provision under Congress’s taxing power.

Despite the Supreme Court upholding the individual mandate, fundamental questions remain. This Article addresses the question of whether the use of a tax penalty to encourage taxpayers to do something that the government desires is normatively a bad policy. Many commentators have contended that a tax penalty is economically equivalent to the current tax system’s use of deductions and credits to encourage behavior. This Article argues that despite some similarity, there are major differences between the two that should lead Congress to reconsider the desirability of using a tax penalty approach in the future. This Article also considers whether the use of the Internal Revenue Service to administer and enforce a penalty that has little to do with the correct baseline of income will have an adverse effect on general tax compliance.

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

The IRS Scandal, Day 375

TaxProf Blog Weekend Roundup

Sunday, May 18, 2014

Tax Consequences of NYU's $7,000/Month Multi-Year Rent Subsidy for NYC Apartment for Harvard Prof

New York Post, Why NYU Gave a Harvard Professor a Cheap Apartment:

NYU (2014) 2For years, New York University has leased a luxury flat in Chelsea to famous academic Henry Louis Gates Jr. at a deeply discounted rate despite the fact that Gates teaches at Harvard — not NYU. ...

Gates admitted to the The Post that he has long received his pricey housing perk even though he has never held a job at NYU. Instead, Gates said he has an informal “consultancy” with Sexton that is ungoverned by a written contract.  In addition to advising Sexton’s administration on affirmative action and minority faculty hiring, the African-American studies luminary said he has given three or four free talks at NYU over the years.

Gates also suggested that Sexton bestowed the apartment on him as part of an unconventional — and thus far unsuccessful — courting ritual that has dragged on for more than a decade. It isn’t exactly a secret that President Sexton would very much like to recruit me to the NYU faculty,” Gates said. "Although I do not have an offer from NYU, and while I am very happy at Harvard, were I to move anywhere… no university would beckon to me more strongly than NYU,” he added.

Gates said he pays the “full faculty rate” to rent the two-bedroom flat, located in a sleek tower at 120 W. 15th St., but declined to be more specific about the price.

Insiders said two-bedroom apartments in the tower, which boasts a fitness center, outdoor terraces and a 24-hour doorman, are heavily subsidized for NYU faculty, renting for as little as $2,200 a month.  By comparison, a two-bedroom apartment in the adjacent building at 130 W. 15th St., developed in 2002 by Related Cos. in tandem with the NYU tower, is currently being offered at $9,195 a month. ...

The real estate perks come as NYU students have been slapped with the some of the highest tuition fees and skimpiest financial aid in the country. ...

Asked for an explanation of the arrangement, NYU spokesman John Beckman said in an email that Gates “participates in a range of activities in the academic life of the NYU community.”  Beckman also said “NYU has made no secret of its longstanding desire to recruit Professor Gates.” He didn’t respond when asked whether NYU has given housing perks to other professors in an effort to recruit them.

Future of Capitalism, Henry Louis Gates New York Apartment:

What struck me about the deal, though, were the potential tax issues. If NYU just paid Professor Gates $7,000 a month for his lecturing and consulting services — the approximate difference between the rent for a faculty apartment and the free-market rate in an adjacent building, according to the Post article — he'd have to declare it as income and pay income taxes on it. The apartment is a less clear-cut case. Maybe one could make a case that it needs to be declared as barter income by Mr. Gates, and maybe he does make that declaration. But it's a reminder that as marginal tax rates increase, there are all kinds of ways that people will find to pay each other in ways that don't necessarily create easily traceable, IRS-recognizable "income."

Section 119(d) excludes from income "qualified campus lodging" furnished to "employees" -- Prof. Gates does not appear to be NYU's employee for this purpose.  But Gregg Polsky notes that perhaps NYU is using the rental to Prof. Gates to shield NYU faculty having income of $7,000/month.  Section 119(d) requires that faculty are taxable if they pay "inadequate rent," which § 119(d)(2) defines as "(A) the lesser of (i) 5 percent of the appraised value of the qualified campus lodging, or (ii) the average of the rentals paid by individuals (other than employees or students of the educational institution) during such calendar year for lodging provided by the educational institution which is comparable to the qualified campus lodging provided to the employee, over (B) the rent paid by the employee for the qualified campus lodging during such calendar year."  So does the $2,200/month rent paid by Harvard's Gates establish what constitutes adequate rent for NYU faculty for § 119 purposes?

(Hat Tip:  Jacob Gershman.)

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

Top 5 Tax Paper Downloads

In Kansas, Professors Must Now Watch What They Tweet

NPR, In Kansas, Professors Must Now Watch What They Tweet:

The Kansas Board of Regents gave final approval Wednesday to a strict new policy on what employees may say on social media. Critics say the policy violates both the First Amendment and academic freedom, but school officials say providing faculty with more specific guidelines will actually bolster academic freedom on campus. ...

The new policy says that faculty and staff of the state's six universities, 19 community colleges and six technical colleges may not say anything on social media that would incite violence, disclose confidential student information or release protected data. But it also says staffers are barred from saying anything "contrary to the best interests of the university."

Critics say the broad nature of the guidelines would offer administrators enormous latitude in firing people — even those with tenure. Will Creeley, director of legal and public advocacy at the Foundation for Individual Rights in Education, says it's one of the most restrictive social media policies in the country.

(Hat Tip: Greg McNeal.)

 

May 18, 2014 in Legal Education | Permalink | Comments (3)

The IRS Scandal, Day 374

Saturday, May 17, 2014

Justice Scalia Rejects 2-Year Law School, Skills Training; Calls for Cutting Tuition and Faculty Salaries, Increasing Faculty Teaching Loads

ScaliaAntonin Scalia, Commencement Address at William & Mary Law School, Reflections on the Future of the Legal Academy (May 11, 2014):

What I want to discuss with you briefly—and I promise to be brief—is whether (to be blunt about it) you have essentially wasted one of your three years here, and could have done the job in two. It is a current proposal for reform that law students should be permitted to sit for the bar exam and otherwise be eligible to practice law after only two years of study. ...

I vigorously dissent. It seems to me that the law-school-in-two-years proposal rests on the premise that law school is—or ought to be—a trade school. It is not that. It is a school preparing men and women not for a trade but for a profession—-the profession of law. One can practice various aspects of law without knowing much about the whole field. I expect that someone could be taught to be an expert real-estate conveyancer in six weeks, or a tax advisor in six months. And maybe we should train such people—but we should not call them lawyers. Just as someone might become expert in hand surgery without knowing much about the rest of the human body, so also one can become expert in various segments of the law without knowing much about the rest. We should call the former a hand surgeon rather than a doctor; and the latter a real-estate conveyancer, or H&R Block—but not a lawyer. ...

It is something of an open secret now that the second and third years of school offer a student the chance to study whatever strikes his or her fancy—so long as there is a professor who has the same fancy. ... This elimination of a core curriculum, and the accompanying proliferation of narrow (not to say silly) elective courses has not come without its costs. ... And the problem is not just that students are not required to take such fundamental courses. Even those who wish to take them as electives are often frustrated because the courses are not offered frequently enough. ...

Some of the belief that the third year of law school can be eliminated rests upon the notion that what it provides can easily be provided elsewhere—in the words of the ABA’s panel, by “a year of carefully-structured skills-based experience, inside a law school or elsewhere.” ... [I]t is not “skills-based experience” that makes a person learned in the law. Legal learning is what only law schools can effectively convey. You graduates will never again have the opportunity to study systematically and comprehensively entire areas of the law—Intellectual Property, Commercial Law, Environmental Law, etc. ...

And what is the use of having a bar learned in the law? What is wrong with a conglomeration of “skills-based” experts? There are some pragmatic reasons. For one thing, the skills overlap, and even specialized practice in one field requires basic knowledge of another. One cannot write a contract or settle a case in utter ignorance of antitrust law—or, for that matter, the law of evidence; or write a will without knowledge of tax law and trust law; or litigate a case without knowledge of the substantive fields that are involved. Secondly, the lawyer who is familiar with many fields can apply the ancient learning or the new developments in one field to another—the constant interplay between tort and contract law is an example. In this way the law becomes a more cohesive whole, instead of a series of separate fiefdoms. But forget all that. Most of all, it is good to be learned in the law because that is what makes you members of a profession rather than a trade. It is a goal worthy to be. achieved—as you have achieved it—for itself. To say you are a lawyer is to say you are learned in the law. And, to return to the point, you can’t do that in two years. ...

Now for a less palatable part of my talk. It is no mystery what has prompted the current calls for a two-year law degree. It is, quite simply, the constantly increasing cost of a legal education. ... William and Mary, even for out-of-state students, is a great bargain, but even so is not cheap. If I may advert to my own experience at Harvard, once again: In the year I graduated, tuition at Harvard was $1,000. To describe developments since then, in the words of a recent article:

Over the past sixty years, tuition at Harvard Law School has increased ten-fold in constant, inflation-adjusted dollars. In the early 1950s, a year’s tuition at the school cost approximately $5,100 in 2011 dollars. Over the next two decades this figure more than doubled, so that by 1971 tuition was $11,664 in 2011 dollars. Tuition grew at a (relatively) modest pace over the course of the 1970s, so that by 1981 it was $14,476 in 2011 dollars. Then it climbed rapidly again, rising to $25,698 in 1991, $34,484 in 2001, and nearly $50,000 in 2011, again all in constant dollars. Harvard’s current tuition, by the way, is $53,308.

This is obviously not sustainable, given that over the last 25 years there has been a sharp contraction of the legal-services sector, compared with the rest of the American economy. Which means that a legal education has become less rather than more valuable—if you value a legal education in money, which I obviously do not, and urge you not to do. So things have to change. One solution, the worst in my view, is to shorten law school to two years. That will produce (or ought to produce, if reason prevails) a one-third reduction of faculty size.

But if law school is to remain three years, costs have to be cut; the system is not sustainable in its present form. The graduation into a shrunken legal sector of students with hundreds of thousands of dollars of student debt, nondischargeable in bankruptcy, cannot continue. Perhaps—just perhaps—the more prestigious law schools (and I include William and Mary among them) can continue the way they are, though that is not certain. But the vast majority of law schools will have to lower tuition. That probably means smaller law-school faculties—though not necessarily one-third smaller. That would be no huge disaster. Harvard Law School, in the year I graduated, had a faculty of 56 professors, 9 teaching fellows, and 4 lecturers; it now has a faculty of 119 professors, 53 visiting professors, and 115 lecturers in law. A total of 69 then and 287 now. And cutting back on law-school tuition surely means higher teaching loads. That also would not be the end of the world. When I got out of law school, the average teaching load was almost 8 hours per week. Currently it is about half that. And last but not least, professorial salaries may have to be reduced, or at least stop rising. Again, not the end of the world. To use Harvard again as an example: Faculty salaries have much more than doubled in real terms since 1969. Chief Justice John Roberts, “in his [unsuccessful] 2008 entreaty to Congress to raise the pay of federal judges,” noted that federal district judges are paid half as much as senior professors at top schools.

But to return to my main point: Since the modern legal academy appears not to believe that there is a solid and significant core of courses that entitle someone to be admitted to the profession of law, it is small wonder that there are calls for shortening law school to two years. If and when that happens, the shrunken faculties will have only themselves to blame. But for the moment, for you graduating students who have had what I consider not the luxury but the necessity of soaking in the law for three full years, and for the parents who have paid for that experience, welcome to the ranks of—not tradesmen, but men and women learned in the law.

(Justice Scalia's address begins at 56:00.  Click on YouTube button on bottom right to view video directly on YouTube to avoid interruption caused by blog's refresh rate.)

May 17, 2014 in Legal Education | Permalink | Comments (18)

Robinson: Skin in the Game -- Invisible Taxpayers, Invisible Citizens?

Mildred Robinson (Virginia), Skin in the Game: Invisible Taxpayers, Invisible Citizens?, 59 Vill. L. Rev. ___ (2014):

This essay was the basis for the Rev. Dr. Martin Luther King, Jr. Memorial Lecture at the Villanova University School of Law on January 27, 2014. It examines economic justice from a tax perspective.

“Skin in the game” – some thing that the interested party has at risk – has become a part of everyday American political discourse. Personal financial risk – some personal stake – is demanded of all “players.” The implications are clear: no skin, no play. The requirement for “skin in the game” in the context of ongoing fiscal debate along with the “concern” that in 2011 almost fifty percent of Americans paid no federal income tax is the latest version of the ongoing “cut-taxes/reduce governmental size” wrangling. It is also another play on the high political salience of the federal income tax as an institution.

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May 17, 2014 in Scholarship, Tax | Permalink | Comments (0)

The Impact of Headquarter and Subsidiary Locations on Multinationals' Effective Tax Rates

Kevin S. Markle (University of Waterloo) & Douglas A. Shackelford (North Carolina), The Impact of Headquarter and Subsidiary Locations on Multinationals' Effective Tax Rates:

We examine effective tax rates (ETRs) for 9,022 multinationals from 87 countries from 2006 to 2011. We find that, despite extensive investments in international tax avoidance, multinationals headquartered in Japan, the U.S., and some high-tax European countries continue to face substantially higher worldwide taxes than their counterparts in havens and other less heavily taxed locations. Other findings include: (a) Effective tax rates remained steady over the investigation period; (b) Entering a tax haven country for the first time results in a slight reduction in the firm’s ETR; (c) ETR changes vary depending on whether the subsidiary is a financial conduit or an operating subsidiary. These results should aid ongoing international tax policy debates and expand scholars’ understanding about the taxation of multinationals.

May 17, 2014 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 373

Friday, May 16, 2014

LexisNexis Law School Publishing Advisory Board

LexisNexisI have spent the past three days at a meeting of the LexisNexis Law School Publishing Advisory Board at the Wynn Las Vegas.  (LexisNexis is the publisher of my Graduate Tax Series line of books for use in tax LL.M. programs.)  It has been a fascinating opportunity to participate in discussions about how a for-profit publisher can help law schools and law students navigate through the current crisis in legal education.  I gave a talk on the use of blogs and social media.  Next month, I will have the opportunity to engage these issues from a non-profit perspective at the 24th Annual Conference for Law School Computing at Harvard Law School as President of the Center for Computer-Assisted Legal Instruction (CALI) Board of Directors.  I will also reprise my talk on blogs and social media.

May 16, 2014 in Legal Education, Tax | Permalink | Comments (0)

Washington University Symposium: New Ideas in Law and Legal Education

Symposium, New Ideas in Law and Legal Education, 43 Wash. U. J.L. & Pol'y 1-186 (2014):

May 16, 2014 in Legal Education, Scholarship | Permalink | Comments (2)

Weekly Tax Roundup

 Weekly Roundup

May 16, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

May 16, 2014 in Scholarship, Tax | Permalink | Comments (0)

Weekly Student Tax Note Roundup

May 16, 2014 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

Christians: Avoidance, Evasion, and Taxpayer Morality

Allison Christians (McGill), Avoidance, Evasion, and Taxpayer Morality, 44 Wash. U. J.L. & Pol'y ___ (2014):

WashUIn popular discourse, tax evasion by wealthy individuals is conflated with tax avoidance by multinational corporations to tell a single story about tax dodging and its negative impact on society. But conflating avoidance and evasion muddies the tax policy waters in important ways by turning legal obligations into moral ones. This Essay, prepared in connection with the Washington University School of Law colloquium on Conceptualizing a New Institutional Framework for International Taxation, makes the case for caution in using morality as a stop-gap measure to avoid drawing a regulated line between tax evasion and tax avoidance, while still meting out punishment within the undefined space between these two poles. It acknowledges the political gains derived from the rhetoric of morality but argues that the alternate view — that taxpayer behavior must ultimately be managed by law rather than social sanction — has the best chance of driving tax policy toward greater coherence in the long run because it makes the best case for more transparency in both lawmaking and the consequences of legislative decisions.

May 16, 2014 in Scholarship, Tax | Permalink | Comments (1)

IRS Seeks Grant Applications for Funding for Low Income Taxpayer Clinics

IRS Logo 2The IRS announced yesterday (IR-2014-63) that it is accepting grant applications for Low Income Taxpayer Clinics for the 2015 grant cycle (Jan. 1 - Dec. 31, 2015). Applications will be accepted through June 20, 2014. The LITC program awards matching grants of up to $100,000 per year to qualifying organizations to develop, expand, or maintain a low income taxpayer clinic. 

The IRS welcomes all applications and will ensure that each application receives full consideration. The IRS is particularly interested in receiving applications from organizations that will operate in areas that are currently underserved.

Currently underserved areas are as follows:

Identified Underserved Areas

States and Territories

Alabama, Alaska, Georgia, Kansas, Mississippi, North Dakota, South Dakota, Puerto Rico

Metropolitan Areas

Los Angeles, Calif., including the following counties:

Los Angeles, Kern, Riverside, Ventura

Sacramento, Calif., including the following counties:

El Dorado, Placer, Sacramento, San Joaquin, Stanislaus

Northern Virginia, including the following counties:

Arlington, Fairfax, Loudon, Prince William

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

Law Firms in Transition

Altman Weil, Law Firms in Transition:

Large majorities of law firm leaders responding to the survey agree that greater price competition, practice efficiency, commoditization of legal work, competition from nontraditional service providers, and non-hourly billing are all permanent changes in the legal landscape. For the most part, these are changes that have been imposed upon them from without – from more demanding clients and more competitive newcomers who are challenging the rules of legal service delivery.

Each year since 2011 when we first asked the question, more than 90% of firm leaders have said they believe there is a permanent market shift requiring greater efficiency in the delivery of legal services.

When asked if growth in lawyer headcount was a requirement for continued success, just 49% of firm leaders said yes, down 6% from 2013. Numbers for net change in 2013 lawyer headcount seem to support this finding for the most part. Median responses from all survey participants showed a 2% increase in non-equity partners, a 1% increase in partner-track associates, and no net change for equity partners, non-partner track associates and other full-time lawyers.

Two-thirds of law firm leaders think the pace of change in the profession is still increasing. Another 30% believe it will remain at its current pace (which is not inconsiderable).

An ongoing drag on firm leaders’ ability to lead change is found in their partners who are often unaware of the ways in which the profession is changing or who simply don’t want to do things differently. Leaders rate their partners overall awareness of and adaptability to change at a median of ‘6’ on a 0 to 10 scale in both of these areas.

AW

(Hat Tip:  Wall Street Journal Law Blog.)

May 16, 2014 in Legal Education | Permalink | Comments (6)

TIGTA: 47% of Alimony Deductions Claimed Don't Match Alimony Income Reported to IRS

TIGTA The Treasury Inspector General for Tax Administration yesterday Significant Discrepancies Exist Between Alimony Deductions Claimed by Payers and Income Reported by Recipients (2014-40-022):

Individuals who pay alimony can deduct the amount paid from income on their tax return to reduce the amount of tax an individual must pay. Conversely, individuals who receive alimony must claim the amount received as income on their tax return. TIGTA initiated this audit to evaluate the alimony reporting gap and to assess controls the IRS has in place to promote reporting compliance.

Processes have not been developed to address the majority of discrepancies between alimony deductions claimed and income reported. TIGTA’s analysis of the 567,887 Tax Year 2010 returns with an alimony deduction claim identified 266,190 (47 percent) tax returns in which it appears that individuals claimed alimony deductions for which income was not reported on a corresponding recipient’s tax return or the amount of alimony income reported did not agree with the amount of the deduction taken. There is a discrepancy of more than $2.3 billion in deductions claimed without corresponding income reported.

May 16, 2014 in Gov't Reports, IRS News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 372

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

Thursday, May 15, 2014

Blank Presents Reconsidering Corporate Tax Privacy Today at Oxford

BlankJoshua D. Blank (NYU) presents Reconsidering Corporate Tax Privacy, 11 N.Y.U. J. L. & Bus. ___ (2014), at a conference today in London on Tax Risk Management: New Approaches to Tax Compliance organized by Michael Devereux, Judith Freedman, and John Vella and hosted by the Oxford Centre for Business Taxation:

For over a century, politicians, government officials and scholars in the United States have debated whether corporate tax returns, which are currently subject to broad tax privacy rules, should be made publicly accessible. Throughout this age-old debate, participants have speculated about how corporate managers and the IRS might behave differently if they knew that the public could observe corporations’ tax returns and how investors and the general public would respond if they had access to this information. There is, however, another, unexplored perspective: how could seeing other corporations’ tax returns affect how corporate managers engage in tax planning and tax return preparation for their own corporations?

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May 15, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

What Is the Value of an NYU Tax LLM? $1 Billion?

Sports Illustrated, Best Sports Deal Ever? How the Silnas Outsmarted the NBA:

SpiritsThere was no official death notice. The documents are sealed, there will be no autopsy. This will have to pass as the obituary. But after lingering on its deathbed, the great golden goose of the sports world was finally killed off last month. The cause of death: a complex and confidential settlement agreement. The chief survivors, brothers Ozzie and Daniel Silna, surely mourn, but they must take solace knowing that their $1 million investment in a sports team that went out of business nearly 40 years ago turned into more than $1 billion.

In 1974 the Silnas, East Coast garment magnates, bought an ABA franchise and moved it to St. Louis. The Spirits were a lovably dysfunctional collective that lasted only two seasons. ...

At the end of the 1975-76 campaign, ... [t] here were only seven teams left, and in the off-season four joined the NBA -- the Denver Nuggets, Indiana Pacers, New York Nets and San Antonio Spurs. The Virginia Squires simply folded. The owner of the Kentucky Colonels, John Y. Brown, accepted a $3.3 million payout to close up shop. (By decade's end Brown had become the Bluegrass State's governor.)

That left the Spirits. The franchise was unwanted by the NBA, but the aggrieved Silnas were unwilling to take a lump-sum payment to go away. With the help of their lawyer, Donald Schupak [Tax LL.M. 1970, NYU], the brothers cut a deal: The four ABA teams decamping to the NBA would make a one-time payment to the Silnas of $2.23 million, and they would pay the brothers one-seventh of their national broadcast revenues in perpetuity.

All first-year law students worth their highlighters know the danger of contracts without termination periods. The NBA's outside counsel -- including a young lawyer, David Stern -- saw this and tried to indemnify the league from disputes that might arise from the contract.

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May 15, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

American Generosity, State by State

FiveThirtyEight:  American Generosity, State by State:

[W]e have two different measures of generosity for each state. The philanthropy study shows the total amount donated in each state in 2008 (which we can use to calculate per capita donations), while the Gallup poll shows the percentage of people who say they have given money. This comparison doesn’t show that those in certain states are lying — it merely highlights the difference between how many people say they have given to charity and a rough estimate of how much people are actually digging into their pockets. Do they correlate?

At the top of the most-charitable list, survey responses and giving match up. As a state, Utah gave $2.4 billion in 2012; that doesn’t seem like much compared with other places (Tennessee gave $2.7 billion), but Utah’s annual donations per capita ($827) were the highest in the country.

538

May 15, 2014 in Tax | Permalink | Comments (2)

Abusing Donor Intent: The Robertson Family's Epic Lawsuit Against Princeton University

Philanthropy News Digest, Abusing Donor Intent: The Robertson Family's Epic Lawsuit Against Princeton University:

AbusingIt's no surprise that wealthy donors and foundations seek out organizations and institutions that share their own passions and interests. But what do donors really expect from a nonprofit grantee in the long run? In the performance-measured, accountability-driven world of twenty-first century philanthropy, grantee reporting is de rigueur. For most nonprofits chasing after scarce dollars (and hoping for future gifts), the willingness and ability to demonstrate that they've aligned themselves with a donor's intent goes without saying. But what happens when a donor, after many years of happy engagement with an organization or institution, begins to believe that the original intent of the gift is no longer being honored? Our intuition tells us that, at some level, gifts/grants/donations involve a leap of faith, and that when the trust between donor and recipient is compromised, the recipient is unlikely to receive additional future gifts from that donor. A donor or foundation might even go public with its disappointment in order to discourage others from making gifts to the recipient. But rarely does a foundation or donor who has become disenchanted with a recipient ask for their money back. Which raises the question: Should they be able to? And does a statute of limitations ever apply in such a situation?

Those are two of the questions Doug White, a well-known expert in the fields of philanthropy and nonprofit management, tackles in Abusing Donor Intent: The Robertson Family's Epic Lawsuit Against Princeton University. Just as White earlier explored a rogues' gallery of swindlers and incompetent trustees in Charity on Trial, here he invites the reader to look behind the curtain of privilege and wealth, this time to learn just how bad things can get when a donor and beneficiary no longer see eye-to-eye. Informed by the slow burn of a decades-old frustration, not to mention the disposition of hundreds of millions of dollars and the reputation of one of America's oldest and most respected universities, Abusing Donor Intent is equal parts thriller and cautionary tale.

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May 15, 2014 in Book Club, Legal Education, Tax | Permalink | Comments (0)

Soled & Gans: Drawing the Line Between Permissible and Impermissible Tax-Savings Clauses

Jay A. Soled (Rutgers) & Mitchell Gans (Hofstra), The Public Policy Doctrine: Drawing the Line Between Permissible and Impermissible Tax-Savings Clauses, 80 Tenn. L. Rev. 655 (2013):

Over a half-century ago, the Fourth Circuit in Commissioner v. Procter fashioned out of whole cloth what has become known as the public policy doctrine. This doctrine declares void certain tax-savings clauses--those clauses that taxpayers strategically use to negate the risk of additional taxes, interest, and penalties--that simultaneously undermine the ability of the IRS to enforce the tax laws and thwart the judiciary's ability to render justice. As taxpayers have tested the boundaries of the public policy doctrine via their continued use of select tax-savings clauses, the public policy doctrine has evolved. In this analysis, we first explore taxpayers' use of such tax-savings clauses. Next, we review the courts' responses to taxpayers' actions and critique these responses. Finally, we lay the groundwork for the institution of important reform measures in this area of the law. We acknowledge that, in some instances, taxpayers have legitimate reasons to use tax-savings clauses. In many instances, however, reliance upon such clauses poses either a serious public policy threat whereby the very administration of the tax system is at stake or a less serious, but nevertheless important, policy concern whereby taxpayers can readily circumvent their bona fide tax obligations. A line therefore needs to be drawn between permissible and impermissible tax-savings clauses; this line must strike the appropriate balance between the taxpayers' quest for certainty and the IRS's mission to secure tax compliance.

May 15, 2014 in Scholarship, Tax | Permalink | Comments (0)

Fleischer: Why Hedge Funds Don’t Worry About Carried Interest Tax Rules

NY Times Dealbook (2013)New York Times DealBook:  Why Hedge Funds Don’t Worry About Carried Interest Tax Rules, by Victor Fleischer (San Diego):

Hedge fund managers don’t use the carried interest tax loophole. They need something more exotic. ...

Until recently, many fund managers would defer a portion of their fees in a Cayman Islands corporation, which would act as the equivalent of a titanic tax-deferred retirement account. Congress closed that loophole in 2009, although some investments parked offshore will not be deemed repatriated (and will not be taxed) until 2017.

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May 15, 2014 in Tax | Permalink | Comments (0)

Charleston Law School Faculty Oppose Sale to InfiLaw

Charleston LogoFollowing up on my prior posts (links below):  Charleston Post and Courier, Public Hearing Friday on License for InfiLaw to Run Charleston School of Law:

Many Charleston School of Law faculty members are making a last-ditch effort to stop the sale of the school to InfiLaw System. 

Two groups of faculty members last week sent letters to the state Commission on Higher Education, encouraging members not to grant the for-profit InfiLaw a license to operate the law school.

The commission earlier this month was expected to vote on whether to grant InfiLaw a license to operate the private Charleston school. But its Academic Affairs and Licensing Committee deferred the matter, and then scheduled two public hearings to get more input before it makes a final decision. One of those hearings will be held Friday morning. ...

Charleston School of Law faculty members Randall Bridwell and Gerald Finkel already have spoken out publicly against the sale, a move they think would harm the Charleston school. Last week, eight other faculty members joined Bridwell and Finkel in sending a letter to the commission, encouraging members not to support a license for InfiLaw.

In the letter, faculty members said under InfiLaw, the school's sense of community would be replaced with "a culture of intimidation and fear." They also said InfiLaw schools had lower standards than those of the Charleston school. "We do not wish to see the Charleston School of Law mirror the admissions practices, attrition rates, transfer rates, or educational programs at the InfiLaw consortium schools," the letter stated.

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

Small Business Tax Index 2014

Small Business & Entrepreneurship Council, Small Business Tax Index 2014: Best to Worst State Tax Systems for Entrepreneurship and Small Business:

Small BusinessThe Small Business & Entrepreneurship Council’s “Small Business Tax Index 2014” ranks the states from best to worst in terms of the costs of their tax systems on entrepreneurship and small business. This year’s edition of the Index pulls together 21 different tax measures, and combines those into one tax score that allows the 50 states to be compared and ranked.

The 21 measures are: 1) state’s top personal income tax rate, 2) state’s top individual capital gains tax rate, 3) state’s top tax rate on dividends and interest, 4) state’s top corporate income tax rate, 5) state’s top corporate capital gains tax rate, 6) any added income tax on S-Corporations, 7) whether or not the state imposes an alternative minimum tax on individuals, 8) whether or not the state imposes an alternative minimum tax on corporations, 9) whether or not the state’s personal income tax brackets are indexed for inflation, 10) the progressivity of the state’s personal income tax brackets, 11), the progressivity of the state’s corporate income tax brackets, 12) property taxes, 13) consumption-based taxes (i.e., sales, gross receipts and excise taxes), 14) whether or not the state imposes a death tax, 15) unemployment taxes, 16) whether or not the state has a tax limitation mechanism, 17) whether or not the state imposes an Internet access tax, 18) remote seller taxes, 19) gas tax, 20) diesel tax, and 21) wireless taxes.

Here are the Top 10 and Bottom 10 states:

1. Nevada
2. South Dakota
3. Texas
4. Wyoming
5. Washington
6. Florida
7. Alabama
8. Ohio
9. Colorado
10. Alaska
...
41. Connecticut
42. Oregon
43. Vermont
44. Maine
45. New York
46. Iowa
47. Hawaii
48. New Jersey
49. Minnesota
50. California

Taxable Talk, Once Again, Bring Me the Usual Suspects: 2014 Small Business Tax Index

May 15, 2014 in Tax | Permalink | Comments (0)

'You Can Do Anything With a Law Degree'

Slate:  “You Can Do Anything With a Law Degree”:  That’s What Everyone Says. Turns Out Everyone’s Wrong, by Jim Saska (J.D., Georgetown):

When I was considering going to law school, I asked my dad for some advice. What if I don’t like being an attorney? What if I don’t end up like The West Wing’s Sam Seaborn, jumping between a lucrative private practice and rewarding government work? “Don’t worry,” said my usually sagacious father, “you can do anything with a law degree.”

My dad isn’t an attorney. But now I am, and let me assure you: My dad didn’t know what he was talking about.

Everyone who has ever considered law school has heard some variant of “you can do anything with a law degree.” Of course, this statement isn’t technically true. You can’t practice medicine with it, for example, unless you also have a medical degree (which, to the delight of Sallie Mae, some J.D.s also have). But the more general sentiment, that a law degree will afford you a wide range of opportunities, is also total BS.

Getting a J.D. means you can call yourself a lawyer. That’s it. Besides the approval of Jewish mothers (who prefer doctors anyway) and a drinking problem, it won’t give you anything else. And it sure as hell won’t help you get a nonlegal job. ...

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May 15, 2014 in Legal Education | Permalink | Comments (12)