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Tuesday, September 23, 2014

60 Minutes: The Tax Refund Scam

(Click here to view video directly on CBS to avoid interruption caused by blog's refresh rate.)

GAO, Additional Actions Could Help IRS Combat the Large, Evolving Threat of Refund Fraud (GAO-14-633) (Sept. 22, 2014)

September 23, 2014 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 502

IRS Logo 2Politico:  Exclusive: Lois Lerner Breaks Silence, by Rachael Bade: 

Employers won’t hire her. She’s been berated with epithets like “dirty Jew.” Federal agents have guarded her house because of death threats. And she’s spent hundreds of thousands of dollars defending herself against accusations she orchestrated a coverup in a scandal that has come to represent everything Americans hate about the IRS.

Lois Lerner is toxic — and she knows it. But she refuses to recede into anonymity or beg for forgiveness for her role in the IRS tea party-targeting scandal.

“I didn’t do anything wrong,” Lerner said in her first press interview since the scandal broke 16 months ago. “I’m proud of my career and the job I did for this country.”

Lerner, who sat down with POLITICO in an exclusive two-hour session, has been painted in one dimension: as a powerful bureaucrat scheming with the Obama administration to cripple right-leaning nonprofits. Interviews with about 20 of her colleagues, friends and critics and a survey of emails and other IRS documents, however, reveal a much more complicated figure than the caricature she’s become in the public eye.

The portrait that emerges shows Lerner is, indeed, fierce, unapologetic and perhaps even tone-deaf when she says things that show her Democratic leanings. She had a quick temper and may have intimidated co-workers who could have helped her out of this mess. It’s easy to see how Republicans have seized on the image of a devilish figure cracking down on conservative nonprofits.

Wall Street Journal:  IRS Apologists, by James Taranto:

Politico landed an exclusive interview with Lois Lerner, the former IRS official at the center of the still-unresolved scandal, and to call it a whitewash would be an insult to lime.

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September 23, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, September 22, 2014

Oei Presents Human Equity? Regulating the New Income Share Agreements Today at Loyola-L.A.

OeiShu-Yi Oei (Tulane) presents Human Equity? Regulating the New Income Share Agreements (with Diane M. Ring (Boston College)) at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

A controversial new financing phenomenon has recently emerged. New “income share agreements” (“ISAs”) enable an individual to raise funds by pledging a percentage of her future earnings to investors for a certain number of years. These contracts, which are offered by entities such as Fantex, Upstart, Pave, and Lumni, raise important questions for the legal system: Are they a form of modern-day indentured servitude or an innovative breakthrough in human financing? How should they be treated under the law?

This Article constitutes the first real attempt in the legal literature to comprehensively address the public policy and legal issues raised by ISAs and to articulate an analytical approach to evaluating and regulating them.

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September 22, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Zwick Presents The Effect of Temporary Tax Incentives on Equipment Investment Today at UC-Berkeley

ZwickEric Zwick (Chicago) presents Do Financial Frictions Amplify Fiscal Policy? Evidence from Business Investment Stimulus (with James Mahon (Harvard)) at UC-Berkeley today as part of the Robert D. Burch Center for Tax Policy and Public Finance Seminar:

We estimate the effect of temporary tax incentives on equipment investment using shifts in accelerated depreciation. Analyzing data for over 120,000 firms, we present three findings. First, bonus depreciation raised investment 17.3 percent on average between 2001 and 2004 and 29.5 percent between 2008 and 2010. Second, financially constrained firms respond more than unconstrained firms. Third, firms respond strongly when the policy generates immediate cash flows but not when benefits only come in the future. Implied discount rates are too high to match a frictionless model and cannot be explained entirely by costly finance, unless firms neglect future financial constraints.

September 22, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Johnson Presents Recent Developments Involving Circular 230 and Tax Practitioner Regulation Today at FBA Tax Section Monthly Roundtable

Johnson (Steve)Steve R. Johnson (Florida State) presents Recent Developments Involving Circular 230 and Tax Practitioner Regulation at the Federal Bar Association Tax Section's Federal Tax Practice & Procedure Monthly Roundtable:

The past six months have produced a flood of judicial and agency action involving regulation of tax practitioners by the Service. The courts have suggested substantial limitations upon the Service’s regulatory authority in two recent decisions, and several other cases are pending in which practitioners are challenging other aspects of the Service’s authority. At the same time, the Service has initiated several regulatory efforts to govern practitioners. Professor Johnson, a nationally recognized scholar on tax litigation and procedure, including legislative and administrative law topics in tax, will apprise us of all these developments.

September 22, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Scholars Critique Validity of Student Evaluations: 'Consumer Satisfaction' ≠ 'Product Value'

Chronicle of Higher Education, Scholars Take Aim at Student Evaluations’ ‘Air of Objectivity’:

Student EvaluationsStudent course evaluations are often misused statistically and shed little light on the quality of teaching, two scholars at the University of California at Berkeley argue in the draft of a new paper.

"We’re confusing consumer satisfaction with product value," Philip B. Stark, a professor of statistics at Berkeley, said in an interview.

An Evaluation of Course Evaluations, which he wrote with Richard Freishtat, senior consultant at Berkeley’s Center for Teaching and Learning, lays out a mathematical critique of the evaluations and describes an alternative vision for analyzing and improving teaching.

Even though evaluations have become ubiquitous in academe, they remain controversial because they often assume a high-stakes role in determining tenure and promotion. But they persist because they are easy to produce, administer, and tabulate, Mr. Stark said. And because they are based on Likert scales whose results can be added and averaged, he said, they offer the comfort of a number. But it is a false kind of security. "Averages of numerical student ratings have an air of objectivity," the authors write, "simply because they are numerical."

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September 22, 2014 in Legal Education, Teaching | Permalink | Comments (3)

Tax Court Approves Taxpayer's Use of Predictive Coding to Respond to IRS's Discovery Request, Reducing Costs by 80%

In a case of first impression, the Tax Court has approved a taxpayer's use of predictive coding technology to respond to the IRS's discovery demand for tax information.  Dynamo Holdings LP v. Commissioner, 143 T.C. No. 9 (Sept. 17, 2014):

Predictive CodingRespondent requests that petitioners produce the electronically stored information (ESI) contained on two specified backup storage tapes or, alternatively, that they produce the tapes themselves (or copies thereof). Petitioners assert that it will take many months and cost at least $450,000 to fulfill respondent’s request because they would need to review each document on the tapes to identify what is responsive and then withhold privileged or confidential information. Petitioners request that the Court ... let them use predictive coding, a technique prevalent in the technological industry but not yet formally sanctioned by this Court, to efficiently and economically identify the nonprivileged information responsive to respondent’s discovery request [at a cost of $80,000]. ...

Although it is a proper role of the Court to supervise the discovery process and intervene when it is abused by the parties, the Court is not normally in the business of dictating to parties the process that they should use when responding to discovery. If our focus were on paper discovery, we would not (for example) be dictating to a party the manner in which it should review documents for responsiveness or privilege, such as whether that review should be done by a paralegal, a junior attorney, or a senior attorney. Yet that is, in essence, what the parties are asking the Court to consider--whether document review should be done by humans or with the assistance of computers. ...

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September 22, 2014 in IRS News, New Cases, Tax | Permalink | Comments (1)

Bernie Sanders Calls for Progressive Estate Tax Reform: $3.5m Exemption, 40%-55% Rates, and 10% Billionaire's Surtax

Huffington Post op-ed:  A Progressive Estate Tax, by Bernie Sanders (I-VT):

Estate Tax LogoMore than a century ago, President Theodore Roosevelt recognized the danger of massive wealth and income inequality and what it meant to the economic and political well-being of the country. In addition to busting up the big trusts of his time, he fought for the creation of a progressive estate tax to reduce the enormous concentration of wealth that existed during the Gilded Age. ...

A progressive estate tax on multi-millionaires and billionaires is the fairest way to reduce wealth inequality, lower our $17 trillion national debt and raise the resources we need for investments in infrastructure, education and other neglected national priorities.

I will shortly introduce legislation that will:

  • Call for a progressive estate tax rate structure so that the super wealthy pay their fair share of taxes. The tax rate for the value of an estate above $3.5 million and below $10 million would be 40 percent. The tax rate on the value of estates above $10 million and below $50 million would be 50 percent, and the tax rate on the value of estates above $50 million would be 55 percent.
  • Include a billionaire's surtax of 10 percent. This surtax on the value of estates worth more than $1 billion would currently apply to fewer than 500 of the wealthiest families in America worth more than $2 trillion.
  • Close estate tax loopholes that have allowed the wealthy to avoid billions in estate taxes. Some of the wealthiest Americans in this country have exploited loopholes in the tax code to avoid paying an estimated $100 billion in estate taxes since 2000. My bill would close those loopholes.
  • Exempt the first $3.5 million of an estate from federal taxation ($7 million for couples), the same exemption that existed in 2009. Under this legislation, 99.75 percent of Americans would not pay a penny in estate taxes.

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September 22, 2014 in Tax | Permalink | Comments (1)

$700 Million in New Buildings at Five Law Schools

Nat'l Law Journal, Law Schools Continue to Build Out
NY Law Journal, Fordham Celebrates New Law School

September 22, 2014 in Legal Education | Permalink | Comments (14)

Tax Court: Couple Failed to Report $30 Million Gift, But Not Liable for Penalty Due to Reliance on Advice From EY, WilmerHale

EYWHIn Cavallaro v. Commissioner, T.C. Memo. 2014-189 (Sept. 17, 2014), the Tax Court held that a Massachusetts couple failed to report a $30 million gift to their sons as a result of misvaluations in a merger of their company with their sons' company, but were not liable for penalties because they reasonably relied on the advice of Ernst & Young (now EY) and Hale & Dorr (now William Cutler Hale & Dorr).

Mr. and Mrs. Cavallaro made the requisite showing of reasonable cause. They had little to no advanced education, including no formal accounting, legal, or business education. Mr. and Mrs. Cavallaro hired advisers who were competent professionals with sufficient expertise to justify reliance. They engaged professionals from a well-known accounting firm and a well-known law firm to structure the tax-free merger of their S corporation, Knight Tool, with their sons' S corporation, Camelot Systems. As discussed above, the professionals initially had differing opinions regarding the ownership of the CAM/ALOT technology, and the issue was explicitly considered by those professionals. The team of advisers eventually structured the merger transaction according to the idea proposed by the Cavallaros' attorney Mr. Hamel at Hale & Dorr -- that is, that on the date of the merger, the CAM/ALOT technology belonged to Camelot and not to Knight (and therefore that no gift occurred) because of a prior transfer. They obtained the valuation report by Mr. Maio based on this assumption and allocated the post-merger stock accordingly.

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September 22, 2014 in IRS News, New Cases, Tax | Permalink | Comments (0)

The IRS Scandal, Day 501

IRS Logo 2Forbes:  Congress Moves To Reform The IRS, by Robert W. Wood:

Does the IRS need reforming? Many people think so, and not just people focused on the Tea Party targeting scandal, Lois Lerner and the missing emails. Anyone who has had a seriously bad tax audit or a run-in with an overly aggressive IRS Revenue Agent who many seem to take no for an answer may have a bone to pick.

It still isn’t a happy time for the IRS, and it seemed somehow lackluster when the IRS announced a Taxpayer Bill Of Rights. Many observers yawned. Even so, there is no question but that the IRS has a tough job to do. On the whole, the IRS does an amazingly even-handed job at it too. Yet if you are in the crosshairs, that may not be comforting. And seeing the poor and sometimes evasive testimony for top IRS officials over the last year or so hasn’t been inspiring.

So perhaps it’s not surprising that bills are getting introduced in Congress and some are passing. Well, sort of. The House has passed several recently. All were intended to highlight complaints that the IRS mistreated conservative political groups when they applied for tax-exempt status.

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September 22, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, September 21, 2014

Enrollments Decline at 8 of 9 Ohio Law Schools

The Blade, UT Law School Enrollment Decline Worst in Ohio as Slump Spooks Students:

OhioAs law school enrollment continues a four-year slide locally and across the country, Toledo attorney Randall Dixon didn’t have any trouble coming up with a topic for his first column as president of the Toledo Bar Association. “Don’t let your babies grow up to be lawyers” went the headline on a piece that posed the question, “What do you tell people about pursuing a career in law?” ...

Last week, the University of Toledo, whose law school took the biggest hit in the state this year with a 25.9 percent decline in first-year law students, announced a 13 percent reduction in tuition in an attempt to reverse the trend.

UT law school Dean Daniel J. Steinbock said he believes tuition costs, the resulting debt, and the less-than-promising job market for new lawyers have combined to create an overall decline in people interested in law school. ... Mr. Steinbock dismissed the idea that UT’s ranking as No. 140 in U.S. News and World Report’s annual law school ratings for 2014 played a part in its declining enrollment. ...

All nine of Ohio’s law schools have seen applications and enrollment drop since law school enrollments peaked in 2010.

Ohio

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September 21, 2014 in Legal Education | Permalink | Comments (6)

ABA Tax Section Fall CLE Meeting

ABA Tax Section (2014-2)The ABA Tax Section concludes its three-day Joint Fall CLE Meeting with the ABA Real Property, Trust and Estate Law Section today in Denver. The full program is here.  Tax Profs with speaking roles include:

  • Diversity:  Anthony Infanti (Pittsburgh)
  • Employee Benefits:  Jon Forman (Oklahoma), Kathryn Kennedy (John Marshall)
  • Exempt Organizations:  Nancy McLaughlin (Utah), Elaine Wilson (West Virginia)
  • Federal Income Tax Rules Affecting “Legal” Marijuana Businesses:  Edward Roche (Denver)
  • Individual & Family Taxation:  Lee-Ford Tritt (Florida)
  • Partnerships & LLCs:  Karen Burke (Florida)
  • Pro Bono & Tax Clinics:  Diana Leyden (Connecticut)
  • Sales, Exchanges & Basis:  Brad Borden (Brooklyn), Fred Brown (Baltimore), Erik Jensen (Case Western), Roberta Mann (Oregon)
  • Standards of Tax Practice:  Linda Beale (Wayne State), Steve Johnson (Florida State)
  • Tax Policy & Simplification:  Alice Abreu (Temple), Jon Forman (Oklahoma), Richard Lavoie (Akron), John Plecnik (Cleveland-Marshall)
  • Tax Practice Management:  Mike Lang (Chapman)
  • Teaching Taxation:  Danshera Cords (Albany), Adam Chodorow (Arizona State), Omri Marian (Florida), Diane Ring (Boston College), Kerry Ryan (St. Louis)

September 21, 2014 in ABA Tax Section, Conferences, Tax | Permalink | Comments (0)

Top 5 Tax Paper Downloads

SSRN LogoThere is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads on SSRN, with a new paper debuting on the list at #5.  The #1 paper is now #20 in all-time downloads among 10,321 tax papers:

  1. [2997 Downloads]  'Competitiveness' Has Nothing to Do with it, by Edward D. Kleinbard (USC)
  2. [332 Downloads]  2013 Developments in Connecticut Estate and Probate Law, by Jeffrey A. Cooper (Quinnipiac) & John R. Ivimey (Reid and Riege, Hartford)
  3. [230 Downloads]  Public Pressure and Corporate Tax Behavior, by Scott Dyreng (Duke), Jeffrey Hoopes (Ohio State) & Jaron Wilde (Iowa)
  4. [170 Downloads]  The OECD'S Flawed and Dated Approach to Computer Servers Creating Permanent Establishments, by Monica Gianni (Florida)
  5. [121 Downloads]  State Law Reporting and Disclosure Mandates Under ERISA, by Albert Feuer

September 21, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 500

IRS Logo 2Wall Street Journal: Stonewall Koskinen: The IRS Commissioner Was Supposed to Clean Up the Mess. Instead, He's Running Interference, by Kimberley A. Strassel:

Nine months have passed since President Obama installed John Koskinen as IRS Commissioner, charged with unearthing the agency's targeting scandal and restoring its credibility. It's about nine months past time to acknowledge that Mr. Koskinen is the problem, not the answer.

The 75-year-old former Fannie Mae executive on Wednesday put in another superficial appearance before House investigators, spent another two hours dodging questions, jabbing at investigators, and excusing the misdeeds of the least-trusted organization in America. This from the guy brought in to clean up the mess—a man presented in confirmation as a "turnaround artist" and "reformer."

The Koskinen fail is now becoming a central political focus, as Republicans and even some Democrats question his tenure. Mr. Obama had declared him someone who "knows how to lead in difficult times, whether that means ensuring new management or implementing new checks and balances." Where are the sweeping changes? Where's the accountability? When the best the IRS commissioner can promise America is that "whenever we can, we follow the law"—we're in worse shape than nine months ago.

The only thing Mr. Koskinen has seemed remotely interested in turning around is his agency's ugly story-line. He has yet to even accept his agency did anything wrong, spending a March hearing arguing that the IRS didn't engage in "targeting" and claiming the Treasury inspector general agreed. This was so misleading the Washington Post gave Mr. Koskinen "three Pinocchios, " noting the IG had testified to the exact opposite.

Under his management, the agency has ignored and strung out congressional demands for documents and witnesses. Mr. Koskinen waited months to tell Congress the IRS had "lost" the emails of Lois Lerner, the former IRS official at the center the probe, and arguably only did so because an outside lawsuit revealed that the email record was incomplete. He testified that there were no backup tapes with Lerner emails, but we have since learned there are 760 server drives that may contain copies.

The "reformer" has bristled at every question. He's indignant that investigators might question how the Lerner emails were lost; indignant that they'd ask why her BlackBerry BB.T +0.93% was wiped after their investigation began; indignant that they'd wonder why he didn't tell them about the lost email. We're still waiting for him to show any indignation at the IRS employees who abused the law, and hid the fact.

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

Saturday, September 20, 2014

Harvard Law School Debate: Save the World by Working in BigLaw?

HarvardThe Harvard Law Record: Want to Save the World? Do BigLaw!, by Bill Barlow:

For people systematically chosen for being able to root out and analyze the rationality of arguments, lawyers are pitifully bad at being reasonable. Let us look, for instance, at the current theories about what to do with your law degree. ...

If you really want to do good by law, consider becoming a corporate lawyer, making a lot of money, and donating a substantial sum to charity. This is by far the greatest utility maximizing option you have. Let’s consider the following different scenarios:

Chart

So there you have it—be a corporate lawyer, donate 25% of your post tax income to charity, and save 150 lives a year, or deworm 25,000 kids.  Alternatively, go into Public Interest, Government, or Academia, and feel warm and fuzzy about yourself.  Sadly, when people at this school talk about public service, they mean the latter, rather than the former.  If only people applied the same amount of cognitive skill used in just one LSAT logic game to the most critical question of what to do with their law degree, hundreds of lives could be saved.

Harvard Law Record:  In Response to “Want to Save the World? Do BigLaw!”, by Sima Atri:

I am not responding to this article because I think the arguments merit the time and energy I will spend writing this up. I am writing because I want students, but most especially ILs, to know that there are incredibly critical, thoughtful, committed, intelligent people at Harvard Law School who have made the choice not to go into corporate law for very important reasons.

Yes, it is true that some students are going into non-corporate work for self-interested reasons. I know I love my work and being engaged with causes I care about makes me happier. This does not reduce or demean the impact of the work I am involved in. For those who have all the choices of employment at their fingertips, we should all graduate into employments we love. With all the choices in the world, I also hope we’ll choose well – taking seriously the power society has handed us because of our degrees and profession.

However, even where my work gives me meaning, the emotions I feel while engaging with the world are far from the “warm and fuzzies” the author assumes adequately compensate me (an equally qualified, intelligent, hardworking classmates) for my work. In fact, in my opinion, when you work with marginalized communities, you are reminded every day how unjust and unfair and disempowering our system is. This does not make me feel warm and fuzzy, but rather pretty angry and upset. Through critical engagement with big societal problems, I find that I’ve found communities of people working through effective and empowering strategies that give me moments of hope. But deep down, I realize that the systems that currently exist are set up to marginalize certain populations and to maintain the status quo for those of us who have made it. Not warm and fuzzy realizations.

The article entitled Want to Save the World – Go into Big Law is self-aggrandizing at its best and naïve and unrealistic at worst. Because, I can bet that almost no one going into corporate law next year is donating 30% of their post-tax income to charity. Because, even if they did, charity is not going to deal with the inequality and marginalization that is deeply structural and complex. ...

If you disagree with the way I’ve chosen to do my work, engage with me, and your other classmates. I love to talk about strategies to confront our unequal society and can readily speak to the trade-offs I’ve chosen to make by not making hundreds of thousands of dollars. All I ask is that you are equally honest with yourself, and that you engage with me with respect.

Harvard Law Record:  Fellow Law Students, Do Not Go Gentle Into That Good Night, by Michael Shammas:

Welsh poet Dylan Thomas was thinking of death and old age when he wrote his famous refrain: “Do not go gentle into that good night … Rage, rage against the dying of the light.” Yet this line is applicable to many twenty-something students here at Harvard Law School. Because, quite frankly, a lot of us are, well, dying. ...

Resist the tide. Leave law school not as an attorney, but rather as a human being who happens to be an attorney. Graduate as a more interesting person than you were when you first started your Harvard Law application. It is easy to become complacent and to follow the tide, but too much of value is lost if you surrender to law school’s various conforming pressures. If you wish to judge real people in the future, if you wish to help real people, then you must be a real person—not a mechanical legal automaton.

Do not go gentle into that good night.

September 20, 2014 in Legal Education | Permalink | Comments (7)

Tax Papers at Canadian Law & Economics Association Annual Meeting

Toronto

The two-day Annual Meeting of the Canadian Law and Economics Association concludes today at the University of Toronto Faculty of Law. Here are the tax papers:

  • Mirit Eyal-Cohen (Alabama), Downscaling Regulatory Barriers
  • Wei Cui (British Columbia), Understanding Tax Litigation in China: A Systematic Content Analysis of Published Case Law
  • Richard Kaplan (Illinois), Change and Continuity in Fringe Benefit Taxation: Seeking Sense and Sensibility
  • Tak-kei Lai (Copenhagen Business School), Do Treasure Islands Create Firm Value?
  • Adam Michael Lavecchia (Toronto), Does Raising Contribution Limits Lead to More Saving? Evidence from the ‘Catch-up Limit’ Reform
  • Theodore Seto (Loyola-L.A.), Some Implications of Preference-Shifting for Optimal Tax Theory

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

S&P Lowers Thomas Jefferson Law School's Junk Bond Rating to CC (3 Notches Lower Than Venezuela's); Default Is Expected

Following up on Wednesday's post, Thomas Jefferson Law School Defaults on $133m of Junk Bonds, Hopes to Restructure Debt and Remain Open:  Standard & Poor's, Thomas Jefferson School of Law, CA Rating Lowered To 'CC' From 'B+', On Watch Neg; Failure To Make Loan Payments Cited:

Thomas Jefferson Logo Standard & Poor's Ratings Services lowered its long-term rating to 'CC' ["default imminent with little prospect for recovery"] from 'B+' [highly speculative"] on the California Statewide Communities Development Authority's series 2008A tax-exempt revenue bonds and series 2008B taxable revenue bonds issued for Thomas Jefferson School of Law (TJSL). At the same time, Standard & Poor's placed the rating on CreditWatch with negative implications.

"The rating action reflects our view of TJSL's failure to make payments in full to the trustee of its June 26 loan payment, which secures the series 2008 bonds, and our anticipation that it will not make its Sept. 26 loan payment in full either," said Standard & Poor's credit analyst Carlotta Mills. We understand the school has made partial payments toward debt service, though we were unable to confirm from the trustee or the school if the debt service reserve has been drawn upon to pay bondholders.

"The CreditWatch designation reflects our understanding that the school has had multiple forbearance agreements with its bondholders and that it is working toward a restructuring of the debt, due to be in place by Oct. 17," continued Ms. Mills. We expect that the bonds will default once the restructuring is completed.

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September 20, 2014 in Legal Education | Permalink | Comments (5)

The IRS Scandal, Day 499

IRS Logo 2Press Release,  Citing IRS Wrongdoing, Judicial Watch Asks Federal Court to Permit Discovery to Find ‘Missing’ Emails in IRS Abuse Scandal:

Judicial Watch announced today that it has filed a Motion for Limited Discovery in its Freedom of Information (FOIA) lawsuit against the Internal Revenue Service (IRS) in order to force the agency to comply with federal court orders to produce information about how “lost and/or destroyed” IRS records relating to the targeting of conservative groups may be retrieved. The motion was filed on September 17, 2014, in the U.S. District Court for the District of Columbia, and requests a hearing for oral argument. The matter is before U.S. District Court Judge Emmet Sullivan (Judicial Watch v. IRS (No. 1:13-cv-1559)).

Judicial Watch notes that this litigation “presents a rare case in which revelations about crashed hard drives and missing emails, conflicting public reports about backup systems, and material omissions to the Court raise serious questions about the agency’s compliance with FOIA. Limited discovery is needed to answer these questions.”

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

Details Emerge in Murder of Dan Markel

Markel[Continually Updated]  More details are emerging in the July 18 murder of Dan Markel, D’Alemberte Professor of Law at Florida State and founder of PrawfsBlawg, as the result of a shooting in his home:

I have collected links to the many tributes to Dan here.

Dan Markel Memorial Fund To Benefit His Sons, Benjamin Amichai Markel and Lincoln Jonah Markel:

Markel

September 20, 2014 in Legal Education | Permalink | Comments (3)

Friday, September 19, 2014

Tax-Free $10-$20 Million Disability Policy May Keep Anthony Kim Off PGA Tour

Sports Illustrated, Anthony Kim, MIA Since 2012, Wrestles With Whether To Tee It Up Again or Reap an Eight-Figure Disability Settlement:

KimAnthony Kim has become golf's yeti, an elusive figure who is the source of endless conjecture. What we know for sure is that Kim, 29, has not teed it up at a PGA Tour event in more than 28 months. Once considered the future of U.S. golf, he is now estranged from the game that brought him fame and fortune. ... In some circles, Kim has become golf's Voldemort -- a name that dare not be spoken. ...

Kim's mysterious disappearance has left a void on Tour, to which he brought a much-needed swagger. His first year in the big leagues was 2007, and as a 23-year-old Ryder Cup rookie at Valhalla in '08 he was given the freighted task of leading off in the Sunday singles. "I felt like he was our team leader," says U.S. captain Paul Azinger. "He was an emotional juggernaut. His enthusiasm was infectious. He wanted to go out there and take somebody down. And he did." Kim's 5-and-4 thrashing of Sergio García remains the signature moment of his career, and it helped propel the U.S. to its only Ryder Cup victory since 1999. ...

Kim's hyperaggressive play carried him to two big-time victories on Tour in 2008 -- at Congressional and Quail Hollow -- as he finished sixth on the money list with $4.7 million. At the '09 Masters he made a record 11 birdies during a second-round 65, and the next year he nearly stole the green jacket, going birdie, birdie, birdie, eagle, birdie on the back nine on Sunday before he ran out of holes and settled for third place, four shots behind Mickelson. But even then Kim was battling an injury to his left thumb, which was operated on a month after Augusta. He struggled to regain his form in '11, cracking only two top 10s while struggling with tendinitis in his left wrist, which he said was the result of compensating to protect his thumb. The injuries kept coming. In May 2012 he ruptured his left Achilles tendon while running on a beach in San Diego. Kim had surgery the following month, and his self-imposed exile began.

No IMG staffer would comment for this story, but the party line is that Kim is still injured and expected to return to the Tour someday. ...

So what is? The answer very well may lie in an insurance policy Kim has against a career-ending injury. An IMG source pegged its value at $10 million, tax-free. Kim's friend, who has had financial discussions with him, says, "It's significantly north of that. Not quite 20, but close. That is weighing on him, very much so. He's trying to weigh the risk of coming back. The way he's phrased it to me is, 'If I take one swing on Tour, the policy is voided.'"

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September 19, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Weekly Tax Roundup

September 19, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly Legal Education Roundup

September 19, 2014 in Legal Education, Weekly Legal Education Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

September 19, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (1)

Ropes & Gray: Tax Consequences of the O'Bannon and Northwestern Rulings

Following up on my previous post, Northwestern Athletes May Face Big Tax Hit From Unionization Victory:  Ropes & Gray, Game On! Recent Legal Developments and Tax Issues for Collegiate Athletics:

While it is not surprising that the payments permitted under O’Bannon will give rise to taxable income to the student-athletes, there has been very little focus on the tax reporting, the amount or the timing of such income

Under current law, a student who receives a scholarship covering room and board and other expenses has taxable income to the extent such scholarship exceeds the amount of a “qualified scholarship” covering the cost of tuition, books and fees. Part or all of the additional support payments authorized by the NCAA described above, however, would likely be reportable by the institution to the IRS and to the student-athlete on Form 1099. Further, to the extent the scholarship itself is conditioned on the student remaining on the team for which he or she was recruited, the scholarship is potentially subject to tax because it would constitute a payment for services rather than a qualified scholarship.

In light of the Northwestern union vote, Senator Richard Burr requested information from the IRS regarding its position on the taxability of college athletic scholarships. IRS Commissioner John Koskinen responded to the request by issuing a public letter [IRS Information Letter 2014-0016] in which he stated that the NLRB ruling with regard to labor law does not control the tax treatment of student-athletes, and he confirmed the IRS’s position that a “qualified scholarship” for a student-athlete (which does not include support for room and board or other expenses) can qualify for tax-free treatment if the student is not required to serve on the team in exchange for the scholarship, even though such service may be expected. Despite these reassurances, a negotiated agreement with the student that involves additional cash and a share of royalties could cause the IRS to conclude that an athletic scholarship is part of a larger compensation package and that the entire package is therefore taxable. If the student is represented by a union, this result may be even more likely as the qualified scholarship would presumably become a negotiated term of the contract. The well-advised student will insist on a tax gross-up provision in his or her agreement with the school, which would significantly increase costs to schools as they try to recruit the most talented athletes.

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

St. Thomas Hosts Conference Today on Religious Identity in a Time of Challenge for Law Schools

RALThe University of St. Thomas School of Law hosts the annual Religiously Affiliated Law Schools Conference on Religious Identity in a Time of Challenge for Law Schools today in Minneapolis:

  • Keynote Address:  Robert Cochran (Pepperdine) & David VanDrunen (Westminster Seminary), Justice and Mercy
  • Deans' Panel: Jeff Brauch (Regent), Mike Simons (St. John's), Deanell Tacha (Pepperdine), Robert Vischer (Dean, St. Thomas)
  • Employment & Student Well-Being:  Judith McMorrow (Boston College), Derek Muller (Pepperdine), Jerry Organ (St. Thomas), Amy Uelman (Georgetown)
  • Faculty Scholarship:  John Breen (Loyola-Chicago), Howard Lesnick (Penn), Nekima Levy-Pounds (St. Thomas), Brett Scharffs (BYU)
  • The Changing World: Pope Francis and Religious Freedom:  Janet Epps-Buckingham (Trinity Western), Susan Stabile (St. Thomas), Michael Scaperlanda (Oklahoma) 

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

Boston College Hosts Convention on Promoting Meaningful Reform in Philanthropy

Boston College hosts a Convention on Promoting Meaningful Reform in Philanthropy:

Boston College Law School Logo (2014)On September 18-19, 2014, leaders in philanthropy from diverse backgrounds—including legal scholars, economists, political scientists, historians and foundation and nonprofit leaders—will convene at Boston College Law School for a historic meeting to assess whether the current rules governing philanthropy adequately support the public good.

The Convention on Promoting Meaningful Reform in Philanthropy is designed to provide non-partisan engagement with issues designed to align the charitable deduction and the public good. With the guidance of the Convention, we anticipate the formation of a Forum on Philanthropy and the Public Good, a time-limited project organized in the manner of a think-tank. Our purpose is not to create a new, permanent institution but a lively and flexible and non-partisan forum that will exist for a period of no more than five years.

Together the group will consider current issues in philanthropy including questions such as:

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September 19, 2014 in Conferences, Tax | Permalink | Comments (0)

Scott Brown and Debbie Wasserman Schultz: The Deductibility of Politicians' Grooming and Clothing Expenses

BrownThe American Democracy Legal Fund has sent this letter requesting the IRS to investigate certain deductions claimed by New Hampshire Republican Senatorial Candidate Scott on his 2010 and 2011 tax returns, including $3,550 for "TV makeup and grooming.

Forbes, When It Comes to Grooming, Scott Brown Is No Debbie Wasserman Schultz:

It’s true that purely personal expenses are never tax deductible (women’s makeup, men’s suits, etc.)  But that’s not what Brown was deducting. He deducted special television makeup products, the pancake powder they put on your face before you yell into a camera for five minutes. That has no non-television application outside in the real world, unlike the cosmetic products and clothes that Ms. Hamper unsuccessfully tried to claim. Brown’s expenses would very likely hold up under examination as an ordinary and necessary business expense related directly to the production of his income.

DebbieThis is a little embarrassing for Democrats timing-wise. On the same day they raised this calumny against Brown, Politico ran a long piece showing how Democrats, too, cringe every time they see or hear Democratic National Committee (DNC) Chairperson Debbie Wasserman-Schultz.  President Obama reportedly dislikes her intently, and if you’ve ever seen her nastiness on television it’s not hard to see why.

Apparently, Ms. Wasserman Schultz tried, and tried, and tried to get the DNC to pay for her clothing, tax-free.  She tried during the convention, she tried during the inaugural, and she tried every time she had the chance.  I have no doubt she has succeeded in getting the DNC to pay for other personal expenses if she was this aggressive with clothes–a clear violation of both election law and tax law.  Personal expenses paid by your employer are wages and should be added to your W-2.

Read the hilarity below:

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September 19, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

GAO: The IRS Needs to Ramp Up Audits of Large Partnerships

GAOGovernment Accountability Office, With Growing Number of Partnerships, IRS Needs to Improve Audit Efficiency (GAO-14-732):

The number of large partnerships has more than tripled to 10,099 from tax year 2002 to 2011. Almost two-thirds of large partnerships had more than 1,000 direct and indirect partners, had six or more tiers and/or self reported being in the finance and insurance sector, with many being investment funds.

The Internal Revenue Service (IRS) audits few large partnerships. Most audits resulted in no change to the partnership’s return and the aggregate change was small. Although internal control standards call for information about effective resource use, IRS has not defined what constitutes a large partnership and does not have codes to track these audits. According to IRS auditors, the audit results may be due to challenges such as finding the sources of income within multiple tiers while meeting the administrative tasks required by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) within specified time frames. For example, IRS auditors said that it can sometimes take months to identify the partner that represents the partnership in the audit, reducing time available to conduct the audit. TEFRA does not require large partnerships to identify this partner on tax returns. Also under TEFRA, unless the partnership elects to be taxed at the entity level (which few do), IRS must pass audit adjustments through to the ultimate partners. IRS officials stated that the process of determining each partner’s share of the adjustment is paper and labor intensive. When hundreds of partners’ returns have to be adjusted, the costs involved limit the number of audits IRS can conduct. Adjusting the partnership return instead of the partners’ returns would reduce these costs but, without legislative action, IRS’s ability to do so is limited. 

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September 19, 2014 in Gov't Reports, Tax | Permalink | Comments (1)

The IRS Scandal, Day 498

IRS Logo 2Government Executive:  IRS Chief Rebuts Claim of Governmentwide Email Backup:

Internal Revenue Service Commissioner John Koskinen on Wednesday responded for the first time to assertions by a legal nonprofit that missing emails relating to the political targeting controversy at the tax agency exist on a governmentwide backup system.

His conclusion: There is no such governmentwide email trove, and confusing media accounts were based on a misunderstanding.

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September 19, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, September 18, 2014

Georgia Dean Finalists

Gale & Samwick: The Effects of Income Tax Changes on Economic Growth

William G. Gale (Brookings) & Andrew A. Samwick (Dartmouth), Effects of Income Tax Changes on Economic Growth:

This paper examines how changes to the individual income tax affect long-term economic growth. The structure and financing of a tax change are critical to achieving economic growth. Tax rate cuts may encourage individuals to work, save, and invest, but if the tax cuts are not financed by immediate spending cuts they will likely also result in an increased federal budget deficit, which in the long-term will reduce national saving and raise interest rates. The net impact on growth is uncertain, but many estimates suggest it is either small or negative. Base-broadening measures can eliminate the effect of tax rate cuts on budget deficits, but at the same time they also reduce the impact on labor supply, saving, and investment and thus reduce the direct impact on growth. However, they also reallocate resources across sectors toward their highest-value economic use, resulting in increased efficiency and potentially raising the overall size of the economy. The results suggest that not all tax changes will have the same impact on growth. Reforms that improve incentives, reduce existing subsidies, avoid windfall gains, and avoid deficit financing will have more auspicious effects on the long-term size of the economy, but may also create trade-offs between equity and efficiency.

Figure 4

Al Jazeera:  Tax Cuts Can Do More Harm Than Good, by David Cay Johnston (Syracuse):

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

Thomas: The Psychic Cost of Tax Evasion

Kathleen DeLaney Thomas (North Carolina), The Psychic Cost of Tax Evasion, 56 B.C. L. Rev. ___ (2015):

Each year, the government loses hundreds of billions of dollars in tax revenue due to underreporting by individual taxpayers. According to standard deterrence theory, policymakers should be able to reduce tax evasion by increasing tax penalties, raising the audit rate, or some combination of the two. This Article refers to these strategies as increasing the “monetary cost” of tax evasion. To date, budgetary limitations and political hurdles have made these strategies difficult for the government to employ.

There is, however, another potential means by which the government can improve tax compliance, apart from raising the monetary cost of evasion. Empirical evidence shows that people experience some form of psychological discomfort when they are dishonest, which may deter them from cheating. This Article proposes employing subtle behavioral interventions that encourage more honest tax reporting by raising the level of psychological discomfort experienced from underreporting. I refer to this approach as increasing the “psychic cost” of tax evasion.

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September 18, 2014 in Scholarship, Tax | Permalink | Comments (1)

Freedman: Designing a General Anti-Abuse Rule: Striking a Balance

Judith Freedman (Oxford), Designing a General Anti-Abuse Rule: Striking a Balance:

This article argues that statutory general anti-avoidance or anti-abuse provisions (GAARs) are an essential part of a modern tax system, since specific legislation will not catch every abuse. Properly drafted GAARs with appropriate protections can give administrators and courts an important tool to use in cases of egregious abuse, but the use must be within a legitimate framework suitable for the jurisdiction in question. GAARs are not the appropriate mechanism for a fundamental rewriting of domestic or international tax law, but they are a valuable element of the statute book in the fight to combat artificial tax arrangements.

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

Cassidy: Reforming the Law School Curriculum from the Top Down

R. Michael Cassidy (Boston College), Reforming the Law School Curriculum from the Top Down, 64 J. Legal Educ. ___ (2014):

With growing consensus that legal education is in turmoil if not in crisis, law schools need to take advantage of industry upheaval to catalyze innovation in the way they train their students. Curriculum reform, long the “third rail” of faculty politics, is now essential if some law schools are going to survive the present tsunami of low enrollments and stagnant hiring. One cautiously optimistic note within this doomsday symphony is that law school deans are now in extremely strong bargaining positions with their faculties and boards of trustees with respect to curriculum innovation.

In this essay, the author proposes a pivotal reform to the third year curriculum involving team-taught “Advanced Legal Problem Solving” workshops in subject specific areas, and describes the precise structure, content and staffing of such capstone courses. He argues that such workshops would significantly enhance the preparation of law students for entry into the profession, and would create an efficient and cost-effective route for law schools to satisfy rigorous new ABA accreditation standards regarding experiential learning and outcomes assessment.

September 18, 2014 in Legal Education | Permalink | Comments (4)

NY Times Debate: Should the ABA Allow Paid Externships for Law Students?

NY Times Room for DebateNew York Times Room for Debate: Getting Pay and Credit for a Legal Education:

The American Bar Association prohibits law students from receiving pay for internships and externships that grant them academic credit. Critics have pressured the organization to reverse this standard, as law students face mounting debt and a slow job market.

Should law students be compensated for internships that count toward graduation?

  • Michael Cardozo (Partner, Proskauer Rose, New York), Don’t Deny Credit When Credit Is Due:  "Government and nonprofit offices provide part-time work and academic credit, which would be denied if the students were paid."
  • Olympia Duhart (Professor, Nova Law School), Money Changes Everything:  "Yes, law students need money but rolling back the prohibition on allowing them to receive pay and credit for the same work ignores some key realities."
  • Aaron Sohaski (Student, Cooley Law School), Let Us Get Paid:  "Before granting credit, law schools could still evaluate paid externship opportunities on a case-by-case basis to ensure they meet stringent educational requirements."

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

One Law Prof, Two Lawyers Receive $625,000 MacArthur Fellowships

Mcarthur-foundationOne law professor and two lawyers are among the 21 recipients of $625,000 MacArthur Fellowships (formerly Genius Grants):

Sarah Deer (Professor of Law, William Mitchell)

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September 18, 2014 | Permalink | Comments (1)

Public Finance Textbooks and the Excess Burdens of Taxation

Public FinanceCecil Bohanon, John Borowitz & James McClure (all of Ball State), Saying Too Little, Too Late: Public Finance Textbooks and the Excess Burdens of Taxation, 11 J. Econ. Watch 277 (2014):

Taxation has several significant excess burdens, including enforcement costs, compliance costs, and deadweight losses. Most estimates find that raising a dollar of tax revenue costs much more than a dollar. Unfortunately, commonly used public finance textbooks do not integrate these costs into discussions of public goods or cost-benefit analyses. Not including these costs means that the optimal levels of public goods will be overestimated. Textbooks say too little, too late about the excess burdens of taxation. They could easily introduce excess burdens early, represent them in public goods diagrams, and integrate them throughout public finance instruction.

September 18, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (1)

Philadelphia Trial Lawyer Gives $50 Million to Drexel Law School; 4th Largest Gift to a U.S. Law School

Philadelphia Inquirer, Trial Lawyer Kline Gives $50M to Drexel Law School:

DrexelIn one of the largest gifts ever to a U.S. law school, Drexel University said Wednesday that Philadelphia trial lawyer Thomas R. Kline will give the eight-year-old institution $50 million to bolster its effort to reach the top ranks of legal education.

Drexel president John A. Fry said the money will be used to fund scholarships, add faculty and to expand the law school's trial advocacy program, which provides training for lawyers who plan to focus on courtroom practice.

Included in the gift is the former Beneficial Saving Fund Society building at 12th and Chestnut Streets, an imposing classical revival style structure that has been vacant since 2001 and that will house the law school's Institute for Trial Advocacy.

In recognition of the gift, the law school will be named the Thomas R. Kline School of Law. ...

Kline’s gift is the fourth-largest ever to a U.S. law school, Drexel said. The largest was a $130 million contribution to the University of Arizona law school in 1999 from broadcasting executive James Rogers; next is a $100 million gift from Domino’s Pizza founder Thomas S. Monaghan to the law school of Ave Maria University in Florida; in third place is a $55 million gift to the Chapman University law school from real estate developer Dale E. Fowler and his wife, Sarah Ann.

September 18, 2014 in Legal Education | Permalink | Comments (5)

The IRS Scandal, Day 497

IRS Logo 2Wall Street Journal:  Koskinen Faces Fresh IRS Fire at House Hearing:

House Republicans took Internal Revenue Commissioner John Koskinen to task again on Wednesday, citing his recent criticisms of congressional investigations into alleged IRS targeting of conservative groups. Wednesday’s hearing marked a renewal of GOP attacks on the IRS chief, after a period of relative quiet while Congress was on its summer break.

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September 18, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Wednesday, September 17, 2014

Census Bureau: U.S. Income Flat, Poverty Rate Falls

A Red Letter Day at Pepperdine

Red LetterAs I have blogged before, one of my favorite things about Pepperdine is the opportunity to meet some of the interesting people drawn to this place.  I had the privlege last night of hearing Tony Campolo deliver a public lecture, followed by a breakfast meeting this morning with Tony and fifty students, faculty, and staff to discuss his provocative book, Red Letter Revolution, co-authored with Shane Claiborne (whom I blogged about here):

For all the Christians facing conflict between Jesus’ words and their own lives, for all the non-Christians who feel they rarely see Jesus’ commands reflected in the choices of his followers, Red Letter Revolution is a blueprint for a new kind of Christianity, one consciously centered on the words of Jesus, the Bible’s “red letters.”

Framed as a captivating dialogue between Shane Claiborne, a progressive young evangelical, and Tony Campolo, a seasoned pastor and professor of sociology, Red Letter Revolution is a life-altering manifesto for skeptics and Christians alike. It is a call to a lifestyle that considers first and foremost Jesus’ explicit, liberating message of sacrificial love.

Shane and Tony candidly bring the words of Jesus to bear on contemporary issues of violence, community, Islam, hell, sexuality, civil disobedience, and twenty other critical topics for people of faith and conscience today. The resulting conversations reveal the striking truth that Christians guided unequivocally by the words of Jesus will frequently reach conclusions utterly contrary to those of mainstream evangelical Christianity.

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

NFL’s Tax Break Foes Face 4th and 20

NFLBloomberg:  NFL’s Tax Break Foes Face 4th and 20 With Wind in Face, by Richard Rubin:

If there were ever a politically opportune time for Congress to remove the National Football League’s tax exemption, it would seem to be now.

A handful of U.S. lawmakers have seized on the domestic violence, child abuse and team-name controversies swirling around the league to renew calls for ending the tax break for the NFL’s central office. They aren’t making much progress, though, in advancing a measure through Congress.

Influential lawmakers in both parties, dealing with military action in Iraq and Syria and international tax rules, aren’t interested. That adds a roadblock in a Congress that can’t pass tax policies on which there is broad agreement. ...

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September 17, 2014 in Tax | Permalink | Comments (0)

More on Faculty Development, Faculty Incentives, and Law School Innovation

Following up on my previous post,  Faculty Development, Faculty Incentives, and Law School Innovation:  American Bar Foundation, Analyzing Carnegie's Reach: The Contingent Nature of Innovation:

ABF 3Analyzing Carnegie’s Reach: The Contingent Nature of Innovation, a recent article published in the Journal of Legal Education [63 J. Legal Educ. 585 (2014)] by ABF Research Professor Stephen Daniels (with Martin Katz and William Sullivan), explores curricular innovation and institutional change in American law schools between 2001 and 2011. Since the economic downturn of 2008–09 and the related contraction of the legal market, lawyers, journalists, legal educators and pundits have written and debated about the state of legal education and the need for change. Given rising levels of student debt, and shrinking job prospects, is law school “worth it”? Are law students well prepared to enter the market? Are the schools too beholden to the ranking system of US News and World Report, and other similar outlets? There has been discussion of “failing law schools,” even an influential book by that title by Brian Tamanaha, of Washington University School of Law (University of Chicago Press, 2012), but far too little systematically collected and analyzed data on what efforts law schools have or have not made to change the status quo.

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

Aprill: Reconciling Nonprofit Self-Dealing Rules

Ellen P. Aprill (Loyola-L.A.), Reconciling Nonprofit Self-Dealing Rules, 48 Real Prop. Tr. & Est. L.J. 411 (2014):

Charities must serve public rather than private interests. Much of the enforcement effort in this area of the law tries to ensure that such organizations do not engage in impermissible self-dealing, that is, in providing unreasonable benefits to insiders. That is, limits on self-dealing are crucial to regulation of this section. Both state law and federal tax law include provisions designed to prevent such behavior. These laws, however, often exhibit inefficiencies and differences that impose unnecessary burden on organization seeking to comply with applicable law.

State law regulates both trusts and nonprofit corporations. If the organization is formed as a trust, the “no further inquiry rule” of common law applies. Under this rule, a trustee, whether of a charitable trust or a private trust, is per se liable so long as a beneficiary shows that the trustee had a personal interest in the transaction; harm to the trust is irrelevant. If the organization is formed as a corporation, nonprofit corporation statutes generally include requirements as to the procedures for board approval of self-dealing transactions, procedures that, in practice, are usually easy to meet.

Tax law supplies self-dealing rules for organizations exempt under section 501(c)(3) of the Internal Revenue Code. Under federal tax law, public charities must satisfy the so-called intermediate sanction rules, which impose excise taxes on transfers between the organization and an insider that confer an “excess benefit” on the insider. Private foundations, which are section 501(c)(3) organizations that, in general, receive their support from a single individual or corporate source or family group and make grants to other charitable organizations, face stricter rules than public charities regarding self-dealing. They face two-tier excise taxes that in practice prohibit transactions between the private foundation and certain specified insiders, even when the transaction would benefit the organization.

This article uses both the economic theory of deterrence and norms theory to argue for a change to both state law and federal tax law. Using the California nonprofit corporation statute and the availability of individual exemptions from the prohibited transactions rules of ERISA, it argues for advance approval procedures. Making state and federal self-dealing rules as similar as possible would best carry out the rules’ shared purpose. Reconciling these rules would aid nonprofit charitable organizations in adopting a set of operating procedures to ensure compliance with the various laws applicable to them. Similar rules would also render state and federal enforcement easier and more efficient.

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

Thomas Jefferson Law School Defaults on $133m of Junk Bonds, Hopes to Restructure Debt and Remain Open

Thomas Jefferson LogoFollowing up on my previous post, S&P Downgrades Many Law Schools, Thomas Jefferson Falls to Junk Bond Status:  Above the Law, Troubled Law School Defaults On Its Bonds, May Be Forced To Cease Operations:

Under the copy of the Event Filing and Agreement we received, the law school had until September 5, 2014, before remedial action would be taken by its Bondholders under the direction of its acting Trustee. ...  (Ed. note: In its official response, TJSL states that a new Agreement is now in effect, and that it runs through October 17, 2014.) Thomas Jefferson Law may not be able to stay open if it can’t restructure its financial obligations, which currently total $133,390,000. As set forth in the Agreement, TJSL pledges that it will “work in good faith to diligently negotiate a reasonable restructuring of its obligations under the Loan Agreement that will enable TJSL to remain in operation.”

We received this official statement from a representative of the Thomas Jefferson School of Law after the original story was published exclusively on Above the Law:

While it is correct that the School did not make a payment on June 26th, the School has paid most of the June payment and has engaged in constructive dialogue with its bondholders to restructure its obligations. Those constructive discussions have resulted in a series of agreements through which the bondholders have agreed not to exercise their remedies. The most current such agreement runs through October 17th (not September 5), and we are confident that a consensual restructuring will occur.

For several months the School, its legal counsel, and financial advisors have worked closely with the bondholders, their representatives, legal counsel, and financial advisors. The parties have a mutual interest restructuring the law school’s debt in a way that will allow the school to remain in operation and prosper. As part of the negotiations, various potential structures and restructuring alternatives have been discussed. At the core of each alternative is ensuring the school can provide the educational experience required of an ABA accredited school and ensure the school’s long term success.

The parties are currently considering the various approaches that have been developed by the advisors to the school and the bondholders, and are confident that an agreement will be reached in the near term.

The School expects to have additional positive information concerning our work with the bondholders within the next few weeks. Because a restructuring of the School’s obligations to the bondholders is likely, the School believes that it will be able to continue to prosper.

ABA Journal, Law School Misses Bond Payment, Seeks to Restructure Obligations

Thomas Jefferson's students have the lowest bar exam pass rate (50%) among California's 21 ABA-accredited law schools; the second-fewest full-time, long-term jobs as lawyers (29%) within nine months of graduation among California's 21 ABA-accredited law schools; and the most law school debt ($180,665) among the nation's 200 law schools.  Thomas Jefferson's latest available Form 990 lists the Dean's total compensation as $528,430 and nine other faculty and adminstrations with total compensation in excess of $175,000.

Update:  Wall Street Journal, Thomas Jefferson School of Law Gets Reprieve after Missed Bond Payment:

Thomas Jefferson School of Law is scrambling to restructure its debt after blowing a bond payment deadline.

The downtown San Diego private law school has disclosed in a financial filing that it failed to meet its entire debt obligations in June. But an agreement the school struck with creditors staves off doomsday at least until Oct. 17, while requiring it to come up with another $2 million.

School officials say they’re counting on reaching a restructuring deal with bondholders, who’ve agreed not to pursue legal remedies for the time being.

September 17, 2014 in Legal Education | Permalink | Comments (8)

PolitiFact: Democrats Are Recycling False Accusation That Republicans Support Tax Breaks for Companies That Ship Jobs Overseas

PolitiFact.com, Is There a Corporate Tax Break That Ships Jobs Overseas?:

FalseDemocrats and their advocates have washed, rinsed and are now repeating one of their favorite talking points from 2012: that "(Insert Republican Here) supports tax breaks for corporations that ship jobs overseas."

There’s a lot packed into this insult. It implies that the person on the receiving end is beholden to corporate interests, against sensible tax reform and unconcerned about American employment. It plays to Americans’ economic woes and fits into the recent discussions about corporate tax reform, following Burger King’s merger with a Canadian company.

 

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September 17, 2014 in Tax | Permalink | Comments (7)

Tax Doubts Dampen Hiring by US Companies

Financial Times, Tax Doubts Dampen Hiring by US Companies:

US chief executives see little chance of Congress reforming the country’s tax system after November’s midterm elections, leaving them cautious about hiring and investing for the next six months, a survey of chiefs has found.

Randall Stephenson, chief executive of telecoms group AT&T, said pessimism over the prospect of tax reform – which big business wants – explained a “disconnect” between corporate expectations of rising sales and timid spending plans.

The Business Roundtable, a lobby group that Mr Stephenson chairs, released a quarterly survey of 135 chief executives that showed companies scaling back their plans for recruitment and business investment from three months ago.

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September 17, 2014 in Tax | Permalink | Comments (2)

QS World University Rankings 2014-15

QSQS World University Rankings 2014-15:

1.  MIT
2.  Cambridge
2.  Imperial College London
4.  Harvard
5.  Oxford
5.  University College London
7.  Stanford
8.  Cal-Tech
9.  Princeton
10.  Yale
11.  Chicago
12.  ETH Zurich (Swiss Federal Institute of Technology)
13.  Penn
14.  Columbia
14.  Johns Hopkins
16.  King's College London
17.  Edinburgh
17.  Ecole Polytechnique Fédérale de Lausanne
19.  Cornell
20.  Toronto
21.  McGill
22.  National University Singapore
23.  Michigan
24.  Ecole normale supérieure, Paris
25.  Australian National
25.  Duke

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September 17, 2014 in Law School Rankings, Legal Education | Permalink | Comments (4)