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Thursday, September 11, 2014

Remus Reviews Rostain & Regan's Confidence Games

ConfidenceDana A. Renus (North Carolina), Confidence Breach: A Breakdown in Professional Self-Regulation, 92 Tex. L. 1599 (2014) (reviewing Tanina Rostain (Georgetown) & Milton C. Regan, Jr. (Georgetown), Confidence Games: Lawyers, Accountants, and the Tax Shelter Crisis (MIT Press, 2014)):

At the turn of the twenty-first century, lawyers at several of the country’s most prestigious law and accounting firms participated in a fraudulent tax shelter scandal that cost the U.S. Treasury billions of dollars. It was not the first time lawyers had participated in a high-profile corporate scandal, nor would it be the last. What was unique was the extent and nature of the lawyers’ involvement. As Mitt Regan and Tanina Rostain explain in their new book, Confidence Games: Lawyers, Accountants, and the Tax Shelter Industry, “[lawyers’] fingerprints were everywhere: on the shelters they designed, the promotional materials they prepared, the client pitches they made, and the opinion letters they drafted and signed.” The resulting scandal, the authors argue, “likely represents the most serious episode of lawyer wrongdoing in the history of the American bar.”

In Confidence Games, Regan and Rostain set out to explain how and why such widespread and pervasive wrongdoing occurred. They challenge the narratives that laid blame on a finite number of bad actors and seek to offer a more comprehensive account of the actors and events that gave rise to the scandal. One of their core insights is that a complete understanding must account for institutional factors and not just individual actors. The authors focus on three factors in particular—a lax regulatory environment, a competitive global economy, and intense organizational pressures within law and accounting firms. In exploring these related causes, Regan and Rostain offer valuable insights on how the structures and cultures of the implicated law and accounting firms undermined and distorted lawyers’ professional judgment. They conclude Confidence Games with promising proposals for improving the regulation of tax practice.

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September 11, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (0)

The Return of Class in American Tax Policy

Guy Charlton (City University of Hong Kong) & Peter Skilling (Auckland University of Technology), Legal and Policy Narratives and the Return of Class in American Tax Policy, 47 Creighton L. Rev. 219 (2014):

In the late 19th and early 20th centuries, tax politics were structured by a bitter class struggle. Much of this struggle revolved around the government's competence to ensure the appropriate liberty, equality of opportunity and fairness to individuals, and the use of governmental power to ameliorate social and economic problems. For much of the 20th century, however, income tax was framed in a “hegemonic logic” in which re-distributive concerns were subordinated to an assumption of the shared benefits of economic growth. This Article discusses the recent return of a class-based politics to income tax politics in the United States. Drawing on the problem definition and narrative analysis literature, it argues that despite the recent resurgence of class-based rhetoric and political action, it is unlikely that America will return to the redistributive zero-sum income tax policies advocated prior to the 1920s. The underlying premises of the historical American liberal state, as evidenced in early substantive due process decisions: liberty, equality, and a distrust of governmental authority, which suggest a continuous fear of governmental power being used to interfere with individual liberty, circumscribes the debate over tax policy and lessens its class basis.

September 11, 2014 in Scholarship, Tax | Permalink | Comments (0)

State Tax Haven Laws

Tax Analysys Logo (2013) Daniel M. Dixon, Michael A. Jacobs, Michael I. Lurie & Jack Trachtenberg (all of Reed Smith), To Blacklist or Not to Blacklist -- The Trend Toward State Tax Haven Laws, 73 State Tax Notes 635 (Sept. 8, 2014):

In this article, the authors discuss tax havens and how states are cracking down on multinational corporations that are perceived as abusing the tax laws of tax haven nations. The authors argue that both of the tax haven tests used by states -- the factor test and tax haven blacklist -- have constitutional issues.

September 11, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Student Loans, Moral Hazard, and a Law School Mess

Steven J. Harper (Northwestern), Student Loans, Moral Hazard, and a Law School Mess:

If the ability of a school’s graduates to use their legal training initially in a JD-required job is an appropriate way to measure a law school’s success, then many are unambiguous failures. For the class of 2013, 33 of 201 ABA-accredited schools placed fewer than 40 percent of their graduates in long-term full-time JD-required employment (excluding law school-funded jobs).

But here’s the kicker. Thanks to the moral hazard that the federally-backed loan program creates, some schools with the worst employment records for recent graduates have students with the highest levels of law school loan debt.

For the class of 2013, three of the top ten schools with the highest average student loan debt at graduation placed less than one-third of their graduates in full-time long-term JD-required jobs (again, excluding law school-funded positions). They were: Thomas Jefferson ($180,000 average student debt; 29 percent employment rate), Whittier ($154,000 average student debt; 27 percent employment rate), and Florida Coastal ($150,000 average student debt; 31 percent employment rate).

How do these schools and others like them accomplish this economically perverse feat? Large doses of prospective student confirmation bias combine with federally-backed student loans to create a dysfunctional market.

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September 11, 2014 in Legal Education | Permalink | Comments (3)

Fifth Circuit Denies Dow Chemical's $2 Billion Tax Shelter Deduction

DowThe Fifth Circuit yesterday disallowed $2 billion in deduction claimed by Dow Chemical in a tax shelter promoted by Goldman Sachs and King & Spalding.  Chemtech Royalty Associates v. United States, No. 13-30887 (5th Cir. Sept. 10, 2014). For more, see Reuters.

September 11, 2014 in New Cases, Tax | Permalink | Comments (0)

Collaboration Networks in Legal Scholarship

Following up on Paul H. Edelman (Vanderbilt) & Tracey E. George (Vanderbilt), Six Degrees of Cass Sunstein: Collaboration Networks in Legal Scholarship, 11 Green Bag 2d 19 (2007):  Ryan Whalen (Northwestern), Top Coauthors in Legal Academia:

The role that collaboration plays in creativity and the production of knowledge is an major focus of my recent research. As such, I’m generally interested in patterns of collaboration. ...  [T]he legal academy’s coauthorship rate appears to be much lower than most social sciences, and more comparable to those seen in the humanities.

The Thomson Reuters Web of Science indexes many legal journals, including about 100 student-edited Law Reviews. The indexing begins in 1956, and between then and now contains data on around 100,000 law review articles. I pulled metadata on all of these articles and used them to create a legal academic coauthorship network. The initial 100,000 papers listed 52,945 unique author names. I selected all the multi-authored pieces and constructed a network with links between any individuals listed as coauthors on these pieces. The result is a network with 11,474 authors, linked together quite sparsely with 12,546 coauthorship relations. ... The table below lists the top 30 collaborators and their number of coauthors. ...

These top 30 are the coauthoring superstars. The vast majority of authors didn’t coauthor at all (they’re excluded from the network) and those who did coauthor tended to only do so with one or two other authors. The diagram below shows this distribution. The x-axis here starts at 1 (because I excluded those with 0 coauthoring relationships) so you can see that over 6000 of our 11,474 authors only coauthored with one other author. The number of academic partnerships drops off quickly before reaching the maximum of 38.

coauthorship_dist

September 11, 2014 in Legal Education, Scholarship | Permalink | Comments (1)

The IRS Scandal, Day 490

IRS Logo 2Commentary:  Is Eric Holder Trying to Protect the IRS?:

[I]t looks like Holder’s Department of Justice is seeking to help the IRS and the Democrats protecting the IRS. And the only reason the public knows about it is that Holder’s office accidentally called the wrong phone. Oops.

The left’s response to the IRS targeting scandal has morphed over time as more information has come to light. Mostly gone are the truthers who think nothing unethical happened or that this is an aimless witch hunt. It’s now clear to any sentient person that the IRS was indeed engaged in this targeting scheme ahead of a presidential election. Additionally, as I wrote last week, it’s since been revealed that the IRS began destroying evidence once the investigation into the targeting began.

That particular destruction of evidence concerned Lois Lerner, the former official at the center of the scandal, in order to get rid of her email correspondence. The media yawned at the revelation of the destruction of evidence, apparently tiring of this story. So the same day of Fallon’s phone call to Issa’s staff, the IRS admitted it lost the email of “five more workers who figure in the investigation into the alleged targeting of conservative nonprofit groups,” as the Wall Street Journal reported.

The Democratic response to the investigation has thus gone from the eminently silly denial that anything untoward took place to actively trying to thwart the investigation and run interference for the IRS–which, in its targeting scheme, was only following the pronouncements of high-level congressional Democrats, after all. And those Democrats have gotten quite uncomfortable with the investigation. Democratic Sen. Carl Levin has put together a report attacking the inspector general conducting the investigation.

Such interference and/or stonewalling wouldn’t be out of character for this DOJ. As the Washington Examiner reported yesterday, according to the department’s inspector general “Department of Justice senior officials have barred or delayed the inspector general there from gaining access to documents crucial to high-visibility investigations.”

The “nothing to see here” brigade has lost any semblance of credibility. In response, they’d like to make sure there’s actually nothing to see by the time investigators come looking for it.

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September 11, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Wednesday, September 10, 2014

Edwards Presents Does Earnings Lockout Make U.S. Multinationals Attractive to Acquirers? Today at Toronto

EdwardsAlex Edwards (University of Toronto, Rotman School of Management) presents Does Earnings Lockout Make U.S. Multinationals Attractive to Acquirers? at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

The ability for deferral of home country taxation on multinationals’ foreign earnings within the U.S. tax code creates an incentive for firms to avoid or delay repatriation of earnings to the U.S. Consistent with this notion, prior research has documented a substantial lockout effect resulting from the current U.S. worldwide tax and financial reporting systems. We hypothesize and find that U.S. domiciled M&A target firms with more locked-out earnings are more attractive M&A targets for foreign bidders and are more likely to be acquired by foreign bidders, compared to domestic bidders. The effect is economically significant; a standard deviation increase in our proxy for locked-out earnings is associated with a 14% relative increase in the likelihood that an acquirer is foreign. We also examine the impact of the home country tax system of the foreign acquirers. Because multinationals facing territorial tax systems are able to shift income to save taxes to a greater extent than firms domiciled in worldwide countries, the advantages for a foreign firm acquiring a U.S. target with locked-out earnings are potentially greater when the foreign firm operates under a territorial tax system. We find that foreign acquirers of U.S. target firms with locked-out earnings are more likely to be residents of countries that use territorial tax systems.

September 10, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

More on College Rankings

It's Time to End the 'Philanthropic Gamesmanship' of Donor-Advised Funds

Following up on my previous posts (links below):  New York Review of Books, Stop the Misuse of Philanthropy!, by Lewis B. Cullman (Author, Can’t Take It With You—The Art of Making and Giving Money (2014)):

Can'tAt ninety-five, as a businessman and philanthropist, I want to call attention to little-known ploys in US philanthropy that rob our society of hundreds of millions of dollars earmarked for important charitable causes—leaving money stashed away in financial institutions and doing no good for anyone except money managers and other financial intermediaries.

In the past twenty years, I’ve given away close to $500 million of my own money. ... I saw how private foundations were able to take unfair advantages of the charitable deduction. ... But now I want to complain about a newer wrinkle that makes me even more indignant, one I deem “philanthropic gamesmanship.”

The more aggressive game in philanthropy I have in mind, one with a soothing but misleading name, is called Donor-Advised Funds (DAFs). Back in 1991, the Boston-based Fidelity Investments applied to the Brooklyn IRS and got a ruling that drastically changed the tax landscape governing charitable donations. Donors get the same tax benefits when they give to a DAF that they would get by contributing to a museum, soup kitchen, university, or any other federally accepted charity. But rather than having the gift made directly to a charity, the funds can simply sit in the account awaiting instructions from the donor. If the donor never gets around to making distributions, they stay in the account earning substantial fees for investment managers. Recently, mutual fund management companies such as Fidelity, Vanguard, and Charles Schwab have set up separate charity accounts to compete for funds.

These funds can provide such tax benefits because the donor must give up all legal control over his or her money when the transfer is made to a DAF. The control is transferred to the administrators of the DAF. ...

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September 10, 2014 in Book Club, Conferences, Tax | Permalink | Comments (1)

ABA Tax Section Releases 2014-15 Law Student Tax Challenge Problem

Lstc-14thThe ABA Tax Section has released the J.D. Problem (rules; entry form) and LL.M. Problem (rules; entry form) for the 14th Annual Law Student Tax Challenge (2014-2015):

An alternative to traditional moot court competitions, the Law Student Tax Challenge asks two-person teams of students to solve a cutting-edge and complex business problem that might arise in everyday tax practice. Teams are initially evaluated on two criteria: a memorandum to a senior partner and a letter to a client explaining the result. Based on the written work product, six teams from the J.D. Division and four teams from the LL.M. Division receive a free trip (including airfare and accommodations for two nights) to the Section of Taxation 2015 Midyear Meeting, January 29-31 in Houston, TX, where each team will defend its submission before a panel of judges consisting of the country’s top tax practitioners and government officials, including tax court judges. The competition is a great way for law students to showcase their knowledge in a real-world setting and gain valuable exposure to the tax law community. On average, more than 60 teams compete in the J.D. Division and more than 40 teams compete in the LL .M. Division. For examples of the "Best Written" winners from past competitions, please click here.

IMPORTANT DATES

  1. Submission Deadline: November 7, 2014
  2. Notification of Semifinalists and Finalists: December 19, 2014
  3. Semifinal and Final Oral Defense Rounds: January 30, 2015 in Houston, TX

September 10, 2014 in ABA Tax Section, Legal Education, Tax, Tax Analysts, Teaching | Permalink | Comments (0)

How Much of a Writer's (or Blogger's) Income is Subject to the 3.8% Investment Income Tax?

Forbes:  Tax Thriller: Best Selling Crime Writer Karin Slaughter Versus The IRS, by Janet Novack:

BlindsidedSince her first crime thriller, Blindsighted, became a bestseller in 2001, Karin Slaughter’s books have sold more than 30 million copies  and earned her tens of millions in royalties.  Now, the 43-year-old Atlanta writer has a new and fearsome antagonist: the Internal Revenue Service. ...

But the biggest dollar issue and the most intriguing legal one in both cases is this: for nearly six decades, the IRS has held (see Revenue Rulings 55-385 and 68-498) that 100% of book royalties received by an active writer (as opposed to one who is no longer in the writing biz) is self-employment income subject to Social Security and Medicare taxes. (The IRS has taken a similarly hard line in its internal audit guides for entertainers and musicians, saying royalties they receive are all for services rendered and subject to self-employment taxes, according to Claudia Hill, a Cupertino, Cal. tax pro and Forbes contributor.) ...

That IRS position became a much bigger deal for best selling authors and other celebrities after 1993, when Congress removed the cap on the amount of self-employment earnings subject to the 2.9% Medicare levy. (The Social Security tax is still imposed on only a fixed amount of wages or net self-employment income–$117,000 in 2014.) Since then, successful self employed folks have looked for ways to move earnings off of Schedule C, which reports profit and loss from a sole proprietorship i.e. self employment income. One ploy, used by former House Speaker and President candidate Newt Gingrich, among others, is to form an S corporation (which pays no corporate tax, but passes all of its income and losses through to its owners’ personal tax return) and then write a book, deliver speeches and otherwise earn income as an employee of that corporation, classifying most of the S corp’s earnings as profits, not compensation for services.  Not surprisingly, the IRS often challenges such accounting, arguing more of the profits should be treated as pay subject to Social Security and Medicare taxes. ...

Slaughter and her tax advisers, for their part,  reduced the Medicare bite by reporting the bulk of her book income on Schedule E as “Royalties” instead of on Schedule C as self-employment income. In the new suit they argue that this is proper because most of  the millions she receives are for use of “her name, her image, intellectual property rights, fan base, and other assets, and not for services rendered.”

In 2008, Slaughter originally assigned just 18% of her $4.6 million in book income to her Schedule C and put the rest on Schedule E.  In 2010 and 2011, she put only  16% and 26% of her book royalties, respectively, on Schedule C.  In all cases, IRS auditors said 100% of her royalties belonged on Scheduled  C. For 2008 alone, they demanded  nearly $116,000 more in self employment tax. ...

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September 10, 2014 | Permalink | Comments (0)

Tax Prof Moves, 2014-15

Moves VAP Hire

  • Julian Fray (Boston University Tax LL.M.) to Northeastern

Entry Level Hires

  • Tessa Davis (VAP, Tulane) to South Carolina
  • Erin Scharff (VAP, NYU) to Arizona State
  • Bernard Schneider (Tax LL.M., NYU) to Queen Mary University of London

Lateral Moves

Promotions, Tenures, Chairs, and Professorships

  • Jordan Barry (San Diego) to Professor of Law with Tenure
  • Jennifer Bird-Pollan (Kentucky) to James and Mary Lassiter Associate Professor of Law with Tenure
  • Craig Boise (Dean. Cleveland-Marshall) to Baker & Hostetler Chair in Law
  • Sam Brunson (Loyola-Chicago) to Associate Professor of Law with Tenure
  • Roger Colinvaux (Catholic) to Professor of Law with Tenure
  • Rebecca Kysar (Brooklyn) to Professor of Law with Tenure
  • Shu-Yi Oei (Tulane) to Hoffman F. Fuller Associate Professor of Tax Law with Tenure
  • Bret Wells (Houston) to Associate Professor of Law with Tenure

Administrative Appointments

Visits

  • Jennifer Bird-Pollan (Kentucky) to Vienna University (Fulbright) (2014-15)
  • John Brooks (Georgetown) to Columbia (Spring 2015)
  • Danshera Cords (Albany) to Pittsburgh (2014-16)
  • Cliff Fleming (BYU) to Vienna University (Oct. 2013), Central European University (Apr. 2015)
  • David Herzig (Valparaiso) to Louisville (2014-15)
  • Tracey Kaye (Seton Hall) to University of Luxembourg (Fulbright) (Fall 2014)
  • Michelle Kwon (Tennessee) to SMU (Fall 2014)
  • John Miller (Idaho) to UC-Hastings (Spring 2015)
  • Ann Murphy (Gonzaga) to Shanghai University (Fulbright) (2014-15)
  • Shu-Yi Oei (Tulane) to UC-Hastings (Fall 2014)
  • Gregg Polsky (North Carolina) to Duke (2014-15)
  • James Puckett (Penn State) to Alabama (Fall 2014)
  • Tracey Roberts to UC-Hastings (2014-16)
  • David Schizer (Columbia) to Georgetown (Spring 2015)
  • Michael Simkovic (Seton Hall) to North Carolina (Fall 2014), Fordham (Spring 2015)
  • Larry Zelenak (Duke) to Northwestern (2014-15)

Retirements

  • Ron Chester (New England)
  • Joseph Dodge (Florida State)
  • Ron Pearlman (Georgetown)
  • Gail Richmond (Nova)
  • Dan Schneider (Northern Illinois)
  • Bill Turnier (North Carolina)

For prior years' Tax Prof Moves, see:

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September 10, 2014 in Legal Education, Tax, Tax Prof Moves | Permalink | Comments (1)

The U.S. Virgin Islands: A Made-in-America Offshore Tax Haven

NewsweekNewsweek:  A Made-in-America Offshore Tax Haven, by Lynnley Browning:

Each month, millions of Americans send a check to Ocwen Financial Corp., a little-known giant in the lucrative if unglamorous business of processing and servicing home mortgages.

Handling loan payments, modifying soured mortgages and foreclosing on borrowers is a profitable line of work. But Ocwen’s success has been turbocharged by its subsidiaries in an unlikely offshore tax haven: the United States Virgin Islands. It is a slice of paradise that some experts consider the nation’s one and only, officially sanctioned, full-blown offshore tax shelter.

Tax shelters are perfectly legal and certainly commonplace, but the recent merger of Burger King and Tim Hortons, the Canadian coffee and doughnut chain, has sparked public anger about U.S. companies lowering their tax bills by moving profits abroad. What’s lost in the debate, however, is that Congress—both directly and indirectly—not only tolerates but actually encourages corporations to take advantage of these arrangements. And that’s especially true if the tax haven in question is an American territory.

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September 10, 2014 in Tax | Permalink | Comments (1)

The Ivy League Is Broken and Only Standardized Tests Can Fix It

The New Republic:   The Trouble With Harvard: The Ivy League Is Broken and Only Standardized Tests Can Fix It, by Steven Pinker (Harvard):

Ivy League (2014)It’s not surprising that William Deresiewicz’s Don’t Send Your Kid to the Ivy League has touched a nerve. Admission to the Ivies is increasingly seen as the bottleneck to a pipeline that feeds a trickle of young adults into the remaining lucrative sectors of our financialized, winner-take-all economy. And their capricious and opaque criteria have set off an arms race of credential mongering that is immiserating the teenagers and parents (in practice, mostly mothers) of the upper middle class.

Deresiewicz writes engagingly about the wacky ways of elite university admissions, and he deserves credit for opening a debate on policies which have been shrouded in Victorian daintiness and bureaucratic obfuscation. Unfortunately, his article is a poor foundation for diagnosing and treating the illness. Long on dogmatic assertion and short on objective analysis, the article is driven by a literarism which exalts bohemian authenticity over worldly success and analytical brainpower. And his grapeshot inflicts a lot of collateral damage while sparing the biggest pachyderms in the parlor. ...

But the biggest problem is that the advice in Deresiewicz’s title is perversely wrongheaded. If your kid has survived the application ordeal and has been offered a place at an elite university, don’t punish her for the irrationalities of a system she did nothing to create; by all means send her there! The economist Caroline Hoxby has shown that selective universities spend twenty times more on student instruction, support, and facilities than less selective ones, while their students pay for a much smaller fraction of it, thanks to gifts to the college. Because of these advantages, it’s the selective institutions that are the real bargains in the university marketplace. Holding qualifications constant, graduates of a selective university are more likely to graduate on time, will tend to find a more desirable spouse, and will earn 20 percent more than those of less selective universities—every year for the rest of their working lives. These advantages swamp any differences in tuition and other expenses, which in any case are often lower than those of less selective schools because of more generous need-based financial aid. The Ivy admissions sweepstakes may be irrational, but the parents and teenagers who clamber to win it are not. ...

At the admissions end, it’s common knowledge that Harvard selects at most 10 percent (some say 5 percent) of its students on the basis of academic merit. At an orientation session for new faculty, we were told that Harvard “wants to train the future leaders of the world, not the future academics of the world,” and that “We want to read about our student in Newsweek 20 years hence” (prompting the woman next to me to mutter, “Like the Unabomer”). The rest are selected “holistically,” based also on participation in athletics, the arts, charity, activism, travel, and, we inferred (Not in front of the children!), race, donations, and legacy status (since anything can be hidden behind the holistic fig leaf). ...

Jerome Karabel has unearthed a damning paper trail showing that in the first half of the twentieth century, holistic admissions were explicitly engineered to cap the number of Jewish students. Ron Unz, in an exposé even more scathing than Deresiewicz’s, has assembled impressive circumstantial evidence that the same thing is happening today with Asians. ...

Knowing how our students are selected, I should not have been surprised when I discovered how they treat their educational windfall once they get here. A few weeks into every semester, I face a lecture hall that is half-empty, despite the fact that I am repeatedly voted a Harvard Yearbook Favorite Professor, that the lectures are not video-recorded, and that they are the only source of certain material that will be on the exam. I don’t take it personally; it’s common knowledge that Harvard students stay away from lectures in droves, burning a fifty-dollar bill from their parents’ wallets every time they do. Obviously they’re not slackers; the reason is that they are crazy-busy. Since they’re not punching a clock at Safeway or picking up kids at day-care, what could they be doing that is more important than learning in class? The answer is that they are consumed by the same kinds of extracurricular activities that got them here in the first place. ..

What would it take to fix this wasteful and unjust system? Let’s daydream for a moment. If only we had some way to divine the suitability of a student for an elite education, without ethnic bias, undeserved advantages to the wealthy, or pointless gaming of the system. If only we had some way to match jobs with candidates that was not distorted by the halo of prestige. A sample of behavior that could be gathered quickly and cheaply, assessed objectively, and double-checked for its ability to predict the qualities we value….

We do have this magic measuring stick, of course: it’s called standardized testing.

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September 10, 2014 in Legal Education | Permalink | Comments (6)

Call for Tax Papers: Akron Law Review

AkronFrom Rich Lavoie:  The Akron Law Review is seeking tax articles for its annual tax issue (formerly the  stand-alone Akron Tax Journal).  For more information or to submit an article, contact Nathaniel Tucker.

September 10, 2014 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 489

IRS Logo 2Washington Post:  IRS Chief’s Legal Adviser Spread Word of Missing E-mails to Treasury Lawyer:

Internal Revenue Service Commissioner John Koskinen testified this summer that he played no part in spreading word of the agency’s controversial missing e-mails to the Treasury Department or the White House. But one of his closest advisers apparently did.

Transcripts of closed-door testimony with the House Oversight and Government Reform Committee show that IRS attorney Catherine Duval acknowledged telling Treasury legal counsel Hannah Stott-Bumsted about the matter. A Fox News affiliate first revealed the testimony in a report Monday.

Washington Post:  Issa Accuses Holder Spokesman of Attempting to ‘Conspire’ With Democrats on IRS Documents:

Attorney General Eric Holder’s communications director is being accused of calling the House Oversight Committee Republican staff and asking for help spinning a story. The twist? The GOP staff alleges that Holder’s spokesman thought he was talking to the Democrats.

Oversight Committee Chairman Darrell Issa (R-Calif.) sent a letter to Holder on Monday about the incident, saying he was “extremely troubled” that the Justice Department may have been trying to coordinate with the minority staff on the release of documents to the committee regarding the Internal Revenue Service targeting certain political groups.

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September 10, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, September 9, 2014

2015 U.S. News College Rankings


US NewsU.S. News & World Report today released its 2015 College Rankings. Here are the Top 25 National Universities and Liberal Arts Colleges (along with their 2012-2014 rankings): 

2015

Rank

 

National Universities

2014

Rank

2013

Rank

2012

Rank

1

Princeton

1

1

1

2

Harvard

2

1

1

3

Yale

3

3

3

4

Columbia

4

4

4

4

Stanford

5

6

5

4

Chicago

5

4

9

7

MIT

7

6

5

8

Duke

7

8

10

8

Penn

7

8

5

10

Cal-Tech

10

10

10

11

Dartmouth

10

10

11

12

Johns Hopkins

12

13

13

13

Northwestern

12

12

12

14

Washington (St. Louis)

14

14

14

15

Cornell

16

15

15

16

Brown

14

15

15

16

Vanderbilt

17

17

17

18

Notre Dame

18

17

19

19

Rice

18

17

17

20

UC-Berkeley

20

21

21

21

Emory

20

20

20

21

Georgetown

20

21

22

23

UCLA

23

24

25

23

Virginia

23

24

25

25

Carnegie Mellon

23

23

23

25

USC

23

24

23

27

Wake Forest

23

27

25

2015

Rank

 

Liberal Arts Colleges

2014

Rank

2013

Rank

2012

Rank

1

Williams

1

1

1

2

Amherst

2

2

2

3

Swarthmore

3

3

3

4

Wellesley

7

6

6

5

Pomona

4

4

4

5

Bowdoin

4

6

6

7

Middlebury

4

4

5

8

Carleton

7

8

6

8

Haverford

9

9

10

8

Clermont-McKenna

9

10

9

11

Davidson

9

12

11

11

Vassar

13

10

14

13

U.S. Naval Academy

12

14

14

14

Washington & Lee

14

14

12

15

Hamilton

14

16

17

15

Harvey Mudd

16

12

18

15

Colby

22

18

21

15

Wesleyan

22

22

21

19

Bates

17

17

12

19

Grinnell

17

22

19

19

Smith

20

18

19

22

Colgate

20

18

21

23

Oberlin

25

 

24

24

Macalester

24

24

 

24

Scripps

25 

24

 

24

U.S. Military Academy

17 

18

14

Update:  Washington Post, U.S. News College Rankings Trends, 2010-2015:

These tables show the top 150 drawn from each of two U.S. News lists of national universities and national liberal arts colleges.  

National

Liberal

September 9, 2014 in Law School Rankings, Legal Education | Permalink | Comments (0)

Remembering Dan Markel

It has been almost two months since the tragic death of Dan Markel.  Some updates:

There is a memorial service tonight in New York City at NYU from 7:00-9:00 p.m. (registration here).

Remembering DannyDan's friends and family have set up a website, Help Us Tell Dan Markel’s Story:

The outpouring of kind words in memorials and remembrances of Danny has been overwhelming. We are so grateful to see how many lives he has touched. We want to collect all of your thoughts and memories about Danny so that Ben and Lincoln will know the impact their father had on all of you. Please help us tell his story by sharing yours below.

We’d also love to receive any videos you have of Danny, and any video messages you may have or would like to create. For instructions on what to do with those, please email us at rememberingdanmarkel@gmail.com.

For more memorial tributes to Dan, see here.  For updates on the investigation into Dan's murder, see here.

September 9, 2014 in Legal Education | Permalink | Comments (0)

Zelinsky Presents The Proposed Minnesota Snowbird Tax Today at Minnesota

ZelinskyEdward Zelinsky (Cardozo) presents Apportioning State Personal Income Taxes to Eliminate the Double Taxation of Dual Residents: Thoughts Provoked by the Proposed Minnesota Snowbird Tax, 15 Fla. Tax Rev. 533 (2014), at Minnesota today as part of its Perspectives on Taxation Lecture Series hosted by Kristin Hickman:

In the last two budget cycles, Governor Mark Dayton has proposed what has become known as the “snowbird tax,” suggesting that Minnesota alter its rules governing state income taxation to allow the state to collect more taxes on income realized by individuals who divide their time between Minnesota and another state. Although the Minnesota legislature has not enacted Governor Dayton’s proposal, Professor Zelinsky will use the proposal as a springboard for arguing that states should revisit the laws governing state personal income tax apportionment. In doing so, Professor Zelinsky will contend that states should tax income with respect to which they have source jurisdiction irrespective of residence and income over which they have only residence-based jurisdiction proportionally, based on the part of the year a dual resident spends in each state.

September 9, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Dean Gershon: Do Law Schools Need the AALS?

Richard Gershon (Dean, Mississippi), Do Law Schools Need the AALS?:

AALS (2014)[D]o law schools even need the AALS anymore? Ten years ago, schools would have never asked that question, and new schools were eager to join, because of the enhanced prestige of AALS membership. After all, you wanted to be listed in the Directory under “Member Schools,” instead of “Fee Paid Schools.” But, there are around 180 member schools out of approximately 200 total law schools (around 90%), so does membership really add prestige? AALS membership might matter to other legal academics, but I am convinced that lawyers and judges, for the most part, do not care whether their law school is a member school, and prospective students only really care about rankings and ABA approval.

The cost of membership in AALS is over $10,000 for most law schools (the AALS Bylaws state that fees are determined by FTE). Additionally, law schools pay the cost of sabbatical review by the association. These dues pay the salaries of a fulltime staff, and overhead. Recently, the AALS has decided to purchase a building.

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September 9, 2014 in Legal Education | Permalink | Comments (0)

Clausing: Swift, Targeted Action Is Needed to Stem Tax Inversions

Kimberly A. Clausing (Reed College), Corporate Inversions:

Recently, there has been a spate of corporate inversions, where U.S. multinational corporations have combined with foreign companies, arranging their corporate structure to locate the residence of the resulting corporation in a foreign country with an attractive corporate tax climate. Several features of the U.S. tax system provide strong incentives for corporate inversion: a high statutory tax rate, a worldwide system of taxation, and limits on income shifting. Corporate inversions allow more flexible access to foreign cash stockpiles and easier shifting of income out of the U.S. tax base. The recent surge in inversions has likely resulted from the large accumulation of unrepatriated foreign cash together with pessimism about the prospect of policy changes that would reduce the U.S. tax burden associated with cash repatriations. If unfettered, corporate inversions are likely to undermine the U.S. tax base, so swift policy action is likely warranted. Inversions can be effectively addressed in a targeted fashion.

September 9, 2014 in Scholarship, Tax | Permalink | Comments (0)

Call for Papers: BC-ACTEC Symposium on The Centennial of the Estate Tax: Perspectives and Recommendations

BC ACTEC 2Boston College Law School and The American College of Trust and Estate Counsel have issued a Call for Papers  for a symposium on The Centennial of the Estate Tax: Perspectives and Recommendations, to be held at Boston College Law School on Friday, October 2, 2015:

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September 9, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

COD Income and Student Loan Debt Forgiveness

Tax Analysys Logo (2013)Kiran Sheffrin, Trapped by Forgiveness: Taxing COD Income, 144 Tax Notes 1191 (Sept. 8, 2014):

In this article, Sheffrin discusses the student loan debt crisis and problems with the current proposals for reform. She identifies two ways that the tax treatment of forgiven student loans can be used to achieve policy goals: partial recognition of cancellation of indebtedness income based on a household’s ability to pay, and spreading the payment of amounts owed over a fixed number of years.

September 9, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1)

CPAs File Class Action Against IRS Seeking Recovery of $150 Million in Fees Paid by Tax Practitioners

Press Release, CPAs File Class Action Seeking Recovery of More Than $150 Million in Fees Collected by IRS From Tax Practitioners:

RTRPTwo certified public accountants (CPAs) filed a class action complaint in the United States District Court for the District of Columbia earlier today challenging Internal Revenue Service (IRS) regulations requiring tax practitioners to annually register and pay a fee to the agency to obtain and maintain a preparer tax identification number (“PTIN”).  The class action involves more than 700,000 individual practitioners.  It seeks an injunction barring collection of the fee and recovery of the more than $150 million in fees the IRS has collected since 2010.

The challenged regulations were issued several years ago as part of a broad IRS initiative to radically expand its oversight of attorneys, accountants, and other tax return preparers who prepare tax returns for compensation.  Earlier this year, the D.C. Circuit Court ruled that large portions of the regulations issued by the IRS were invalid because the IRS lacked statutory authority to issue the regulations. Loving v. United States, 742 F.3d 1014 (D.C. Cir. 2014). 

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September 9, 2014 in IRS News, Tax | Permalink | Comments (0)

Is Beyoncé's Birthday a Valid Excuse for a Student to Miss Class?

The IRS Scandal, Day 488

IRS Logo 2New York Observer: Will Orange Be the New Black for IRS Chief Lois Lerner?, by Sidney Powell:

With five more Computer Crashes, a “pattern of racketeering activity” may be emerging.

Late last Friday afternoon, in a blatant “late news dump” to avoid making headlines about the Internal Revenue’s witch hunt against conservative non-profits, the IRS disclosed to Congress that five more of the IRS computers containing relevant records had mysteriously crashed. Those computers belonged to colleagues of Lois Lerner, whose conduct is at the center of the investigation.

Perhaps there is some strange computer virus that selectively trashes records inconvenient to incumbents, like the “glitch” that erased part of Nixon’s tapes. How else to explain the fact that this is the fourth announcement of an ever-expanding computer calamity connected to Lois Lerner to emerge from the IRS? First it was just Lerner’s computer that was affected, then those of her closest co-conspirators, then “no more than twenty” computers, and now an ever larger batch of burned out workstations.

Even more interesting, the IRS has apparently not yet shared this newest tidbit with Judge Emmet G. Sullivan, the distinguished and courageous jurist presiding over Judicial Watch’s Freedom of Information Act lawsuit. Judge Sullivan has made the most progress so far in uncovering the conspiracy among Lerner and friends to target, harass and illegally obtain information from conservative non-profit organizations to benefit Mr. Obama’s reelection campaign—for which the law firm of Ms. Lerner’s husband, Michael Miles, also hosted a voter registration event. ...

While the agency continues to blame “computer crashes” for the now more than 20 people whose emails are “missing,” no IRS official has yet to identify when or how each computer crashed—much less why. We know Lois Lerner’s hard drive, which was “scratched” only a matter of days after receiving a letter from Congress requesting her emails. The IRS then destroyed it. The IRS followed a year later with the destruction of her unimpaired Blackberry containing emails for the same period. As we reported first, it made no effort whatsoever to obtain information from the Blackberry—despite being well into the Congressional inquiry. That is obstruction of justice and destruction of evidence—worse than the conduct for which Leslie Caldwell, now head of the Criminal Division of the Department of Justice, destroyed Arthur Andersen LLP and its 85,000 jobs.

Any number of federal criminal statutes might apply to these facts, including Title 18 of the United States Code, Section 1343—Wire Fraud; Section 1503—Influencing officer generally; 1505—Obstruction of proceedings before department, agencies and committees; and Section 1519—Destruction, alteration, or falsification of records in federal investigations. Sections 1343 and 1503 are also predicate offenses for the federal Racketeering Statute, Section 1961, which provides that a “pattern of racketeering activity” can be proved by committing two predicate acts. These statutes are punishable by terms of imprisonment varying from five to twenty years. ...

So yet again, the IRS simply creates more questions and at least five more reasons for Judge Sullivan to name a special prosecutor. When did each of the now more than 20 computer crashes occur—by date and time? How could that possibly happen? Why did the IRS prematurely cancel its longstanding contract for backup? Why did it take this long to find out that 5 more had “crashed?” Where is the Blackberry or other device for each of the persons whose computer crashed? What servers are implicated? Whose resignations are forthcoming? Why is Koskinen still there? Who is on Emmet Sullivan’s short list to be the special prosecutor?

Evidence is mounting by the day that Lois Lerner and her co-conspirators abused the power of the sovereign, violated the trust of the people, lied to Congress, destroyed documents and evidence of their wrongdoing, and violated multiple criminal statutes.

With the revelations of this last week, Lois Lerner and the IRS might as well be sitting on a ticking bomb . . . and it’s about to explode.

Forbes:  IRS Loses Emails Of 5 More Key Employees, Including Lois Lerner's Aide, by Robert W. Wood:

The IRS announced that it lost emails from five more IRS workers relevant to the ongoing investigation into whether the IRS targeted conservative groups. It’s a new black eye for an agency that has had many. It was only a few months ago that the IRS revealed that Lois Lerner’s emails were gone.

Lerner remains the key figure at the heart of the controversy. Now, in another belated announcement, the “we lost five more too” raises new questions why no one seems to know very much. Or maybe they won’t say. When the whole mess came to light, Mr. Lerner refused to testify and was held in contempt of Congress. She could be prosecuted and face jail, though that’s unlikely.

The five employees include a senior aide to Ms. Lerner. Two of the latest 5 IRS employees with “computer crashes” worked in the Cincinnati IRS office processing applications for tax-exempt status. The Cincinnati office, it’s worth remembering, was where those “rogue” employees of the IRS were off supposedly doing their own thing without the say-so of their bosses at the headquarters of the IRS in DC.

(Image credit: grassfire.com)

(Demand an IRS Independent Prosecutor Petition available at http://grassfire.com/2014/06/irs-independent-prosecutor/. Image credit: grassfire.com)

Again blaming computer crashes, the IRS said it found no evidence that anyone deliberately destroyed evidence. But Rep. Darrell Issa (R., Calif.), chairs the House Oversight and Government Reform Committee, and he isn’t so sure.

“First it was only Lois Lerner,” Rep. Issa said. “Now we learn there are 5 others, several months after the administration supposedly came clean about email losses. To the contrary.… each of the five hard drive issues resulting in a probable loss of emails substantially predates the onset of the investigations in 2013.”

The IRS had a backup tape system, but officials have said the agency routinely recycled the tapes. Besides, some of the real juice may be in text or instant messages. In 2013 when the IRS targeting scandal was already brewing, Ms. Lerner asked an IRS IT specialist if the IRS saved texts. No, they are not automatically saved, came back the response. The IT person went on to say that saving them was possible, though, so be careful.

“Perfect,” came Ms. Lerner’s reply. Congressional investigators, Judicial Watch and others doubtless want emails and texts, especially since it now appears that there was a little more off-the-grid mentality when it came to texts. Many Republicans think former IRS official Lois Lerner knows a lot.

USA Today:  E-mails Show IRS Attempts at Damage Control:

Lerner has emerged as the central figure in the IRS' handling of tax-exemption applications by conservative groups before the 2012 election. The Exempt Organizations office she headed subjected groups with names such as "Tea Party" and "Patriots" to more scrutiny and longer wait times than similar liberal advocacy groups, according to congressional Republicans.

The Democratic-controlled Senate Permanent Subcommittee on Investigations released the documents Friday along with a report finding that mismanagement, and not political bias, was responsible for the targeting.

The documents show Lerner's efforts to persuade Treasury auditors that there was no institutional bias at the IRS, the agency's attempts to head off a damaging investigation with a pre-emptive apology, and Lerner's pep talk to her staff after the apology.

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September 9, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Monday, September 8, 2014

The 100 Most Influential People in Tax and Accounting

100 Most InfluentialI am honored to be included on the list of Accounting Today's 100 Most Influential People in Tax and Accounting for the ninth year in a row:

Caron once stood out as one of the few serious tax bloggers out there; now that there are a lot more tax blogs online, he stands out even more -- because they all refer to him and his near-comprehensive content.

Near-comprehensive?  In any event, I am flattered to be on the list with such high-powered people in the tax and accounting worlds, including:

(2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014)

September 8, 2014 in About This Blog, Legal Education, Tax | Permalink | Comments (4)

Hauer Presents The Virtues of Dual Tier Capital Taxation Today at UC-Berkeley

UC Berkeley Primary Logo Berkeley BlueAndreas Hauer (University of Munich) presents Reforming an Asymmetric Union: On the Virtues of Dual Tier Capital Taxation at UC-Berkeley today as part of the Robert D. Burch Center for Tax Policy and Public Finance Seminar:

The tax competition for mobile capital, in particular the reluctance of small countries to agree on measures of tax coordination, has ongoing political and economic fallouts within Europe. We analyse the e ects of introducing a two tier structure of capital taxation, where the asymmetric member states of a union choose a common, federal tax rate in the rst stage, and then non-cooperatively set local tax rates in the second stage. We show that this mechanism e ectively reduces competition for mobile capital between the members of the union. Moreover, it distributes the gains across the heterogeneous states in a way that yields a strict Pareto improvement over a one tier system of purely local tax choices. Finally, we present simulation results, and show that a dual structure of capital taxation has advantages even when side payments are feasible.

September 8, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Democrats' Anti-Inversion Tax Plan Could Reach Back to 1994

Bloomberg:   Schumer Anti-Inversion Tax Plan Could Reach Back to 1994, by Richard Rubin:

A proposal from a top Senate Democrat could limit deductions for companies that moved their tax addresses out of the U.S. as long ago as 1994, according to a draft obtained by Bloomberg News.

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September 8, 2014 in Tax | Permalink | Comments (1)

ABA Tax Section Accepting Nominations for 2015-2017 Public Service Fellowships


ABA Tax Section (2014)The ABA Tax Section is accepting applications for Public Service Fellowships for 2015-2017:

The Christine A. Brunswick Public Service Fellowships provide salaries and benefits, as well as law school debt assistance, by means of charitable contributions to the sponsoring organizations to fellows selected. The Section plans to award two fellowships each year.

Applications must be received by November 14, 2014, to be considered. Interviews will be conducted during the Section’s Midyear Meeting in Houston on January 29-31, 2015. The Section will cover the cost of travel and accommodations for applicants selected for interviews.

To apply for the ABA Tax Section Public Service Fellowships, please click here.

The 2014-2016 Christine A. Brunswick Public Service Fellowship class:

September 8, 2014 in ABA Tax Section, Tax | Permalink | Comments (0)

Newsweek: Corporate Deadbeats -- How Companies Get Rich Off Of Taxes

Newsweek:  Corporate Deadbeats: How Companies Get Rich Off Of Taxes, by David Cay Johnston (Syracuse):

NewsweekYou and your wallet have a big stake in huge tax-dodging deals being crafted by big American companies, like Burger King merging with Tim Hortons, the Canadian coffee and doughnut chain.

Burger King is looking to swap the 35 percent corporate tax rate in the U.S. for Canada’s 15 percent rate, even though its working headquarters will remain in Miami. The little people—the millions of us who pay our taxes week to week—will pick up some of the tax burden Burger King and other multinationals shirk through these so-called inversions, in which they move their headquarters, on paper, to escape taxes while continuing to enjoy all the benefits of doing business in America.

It’s just one of several ways multinationals don’t pay their fair share, and they get away with it because the federal government encourages such behavior. If Congress taxed you the way it taxes multinational corporations, you would have a much fatter wallet. If you were Apple, General Electric, Google or Microsoft, taxes would not be a burden at all. Instead, taxes would help you prosper.

How can a tax burden become a boon? Simple. Congress lets multinationals earn profits today but pay their taxes by-and-by. In effect, Uncle Sam is loaning these companies all that money they do not immediately turn over as taxes. And all of these loans come with the same attractive interest rate: zero.

Imagine how your bank statement would look if, instead of having taxes taken out of your weekly paycheck, Congress let you keep that dough in return for your promise to pay your taxes years or decades from now—and sometimes, never.

That’s the extraordinary deal Congress gives many big American companies now sitting on hundreds of billions of dollars of what are, essentially, interest-free loans. Apple and GE owe at least $36 billion in taxes on profits being held tax-free offshore, Microsoft nearly $27 billion and Pfizer $24 billion, according to Citizens for Tax Justice, a nonprofit organization respected for the integrity of its numbers even by groups that dislike its progressive perspective.

The big companies get such “interest-free loans” in myriad ways, but most of them involve delaying the payment of taxes. Delay is a modern philosopher’s stone, but instead of turning lead into gold, this tax alchemy makes the black ink of profits look red when examined by Internal Revenue Service auditors.

One technique is for American multinationals to pay their offshore subsidiaries royalties for the use of patents, logos and manufacturing techniques. This converts profits earned in the U.S. into tax-deductible expenses. You could do the same thing by moving a dollar from your left pocket to your right, but with one crucial difference—you won’t get to deduct that dollar. But big companies do.

The use of offshore tax havens to convert profits into expenses stems from a 1986 change to Section 531 of the tax code. Starting in 1909, Congress imposed a 15 percent penalty on corporate cash-hoarding. That was supposed to encourage companies to reinvest and pay salaries and dividends, rather than weaken the economy by stuffing profits into the corporate equivalent of the proverbial mattress.

The 1986 amendment said companies could hold unlimited amounts of cash, provided it was in offshore accounts. Today at least 362 of the Fortune 500 companies have more than 7,800 tax haven subsidiaries, many stuffed with cash, according to a tiny nonprofit research organization, the Institute on Taxation and Economic Policy. Its detailed analysis of company disclosure statements found that in the five-year period from 2008 through 2012, no taxes were paid by 25 of 288 big American companies. Those 25 got cash back—refunds—from Uncle Sam on their tax bills. The immensely profitable Verizon earned more than $30 billion in profits over those five years, but instead of paying taxes, it collected income tax refunds of more than a half-billion dollars, which works out to a tax rate of minus 1.8 percent. Pepco, which counts on taxpayers to buy a big chunk of the electricity it sells in and around the nation’s capital, dodged taxes so skillfully that it enjoyed a tax rate of minus 33 percent. Looked at another way, for each dollar of profit earned, Uncle Sam gave Pepco a grant of 33 cents. ...

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September 8, 2014 in Tax | Permalink | Comments (2)

Tax Policy Center Hosts Program Today With Jacob Lew on Business Tax Reform: What Can Be Done?

Tax Policy Center LogoThe Tax Policy Center hosts a program today on Business Tax Reform: What Can Be Done? featuring Treasury Secretary Jacob Lew:

The corporate income tax is under increasing pressure and business tax reform is critically important to help stop this trend. While the United States has the highest corporate tax rate in the developed world, some businesses pay the full rate and others pay hardly anything due to inefficiencies and special-interest loopholes.  To address these issues, proposals have been put forward to simplify the code, eliminate wasteful carve-outs and tax expenditures, broaden the base, and lower the corporate tax rate.  

Treasury Secretary Jacob J. Lew will speak on the importance of business tax reform to level the playing field and make the United States a more attractive place to invest. After the Secretary’s remarks, a panel of experts will focus on one important aspect of business tax reform -- the issue of corporate inversions, whereby companies legally change their official residence to foreign countries to avoid the U.S. corporate tax. Will Congress tackle business tax reform? Will they address inversions? And, failing Congressional action, can and should Treasury take steps to slow the tide of inversions?

  • Sarah Rosen Wartell (President, Urban Institute) (moderator)
  • Sally Katzen (NYU)
  • Steven Rosenthal (Tax Policy Center)
  • John M. Samuels (General Electric)
  • Stephen Shay (Harvard)

Update:  Bloomberg, Treasury to Decide in ‘Near Future’ Action on Inversions: Lew

September 8, 2014 in Conferences, Tax | Permalink | Comments (1)

Should Universities Profit From Vodka Jell-O Shots Consumed by Their Students?

Inside Higher Ed, Jell-O Shots: University-Approved?:

Jello ShotsLast month -- just in time for a new season of college football -- Kraft Foods released a new line of Jell-O molds in the shapes of various university logos. Four of the "jiggler mold kits" were unveiled last year, but products for 16 more teams have now been added, including the University of Alabama, Ohio State University, and the University of California at Los Angeles.

In a press release, Kraft said the kits are meant to be used in creating Jell-O treats for tailgate parties for alumni and fans. But some are concerned that the themed molds could be seen as university-endorsed invitations to create alcohol-laced "Jell-O shots" -- a mixed message for universities fighting to curb binge drinking among students. ... Aaron White, the program director of college and underage drinking prevention research at the National Institute on Alcohol Abuse and Alcoholism: "If I were a student, I'd be awfully confused if I heard about the dangers of drinking and drinking games at freshman orientation and then when I got to Wal-Mart, I found these Jell-O molds with my school's logo on it."

Kraft admits that it is aware Jell-O shots are a popular way to consume the dessert, but the company told the website Vocativ that it doesn't condone using the molds for that purpose. The half-dozen universities contacted for this article did not return requests for comment.

The financial details behind the universities' licensing deals with Kraft have not been released, but colleges have a profitable history of licensing their trademarks to products that may sometimes send a mixed message to students. Shot glasses and pint glasses sporting college logos have been a mainstay at university bookstores for decades. Some colleges have even licensed their logos to appear on Ping-Pong balls and so-called "tailgate tables." Many college students have other names for the products, often used for the campus favorite beer pong.

Jell-O shots can be a particularly risky form of binge drinking, White said. Because Jell-O masks the flavor of the alcohol, it can be difficult for students to recognize how many drinks they've actually consumed. Like the similarly fruit-flavored and highly alcoholic college staple "Jungle Juice," when students consume Jell-O shots "the line between a small buzz and a dangerous overdose is very thin," White said. Students may also think of Jell-O as food, he added, meaning the consumption could be happening on a dangerously empty stomach.

Jell-O Shot kits are available for these twenty universities:

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September 8, 2014 in Legal Education | Permalink | Comments (1)

The IRS Scandal, Day 487

IRS Logo 2Washington Post:  Why Did the IRS Clean Out Lois Lerner’s Blackberry as Probes Began?:

Congress had little opportunity to debate the Internal Revenue Service’s missing-e-mail controversy while on break during the past month, but lawmakers will have plenty to talk about when they return next week.

One question likely to come up is why the IRS wiped out Lois Lerner’s Blackberry shortly after congressional staffers interviewed the then-IRS official about suspected targeting of conservative groups.

So far, the IRS has provided no answer. ...

IRS attorney Thomas J. Kane said in a separate declaration that the agency “removed or wiped clean” information from the Blackberry in June 2012, shortly after congressional staffers questioned Lerner about the targeting allegations and in the same month that the IRS inspector general began examining the issue.

Kane offered no explanation for why the IRS “removed or wiped clean” the data, and the IRS did not respond to the same question when asked by The Washington Post on Wednesday.

Taxable Talk:  IRS Won’t Say Why It Erased Lois Lerner’s Blackberry, by Russ Fox:

Let’s assume you’re under a court order to find some emails. Your hard drive crashed, but you think that some of them are saved on your Blackberry. Would you:

(a) Try to find them on the Blackberry,
(b) Do nothing, or
(c) Erase the Blackberry.

If you’re the IRS, the answer is (c). After the IRS was on notice about the missing Lois Lerner emails the IRS then wiped clean Ms. Lerner’s Blackberry. ...

As Reason.com stated,

There may be a reasonable explanation for all this. But if there is, the IRS has yet to provide it, and in fact has refused when asked to do so. Combined with all the other suspicious and convenient omissions, lapses, and losses related to this case, it does make one wonder if perhaps there isn’t a reasonable explanation to be offered.

There’s nothing to add to Reason’s conclusion.

Washington Examiner:  We Still Don't Know Why Lois Lerner's Blackberry Was Wiped Clean

Glenn Reynolds (Tennessee):  Well, I Can Certainly Guess:  "At this point, I don’t think even the most credulous can really regard all this data destruction as anything other than a criminal conspiracy to cover up evidence of wrongdoing."

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September 8, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

TaxProf Blog Weekend Roundup

Sunday, September 7, 2014

The Tax Foundation and Ed Kleinbard Debate the Impact of Inversions on the Corporate Tax Base

Scott Hodge (President, Tax Foundation), IRS Data Contradicts Kleinbard’s Warnings of Earnings Stripping from Inversions:

Tax Foundation logoOne of the loudest critics of the recent wave of corporate inversions is University of Southern California law professor Ed Kleinbard, who warns that these transactions will erode the U.S. corporate tax base because these newly relocated firms will use “intragroup interest payments” to “strip” income out of their U.S. subsidiary.  ['Competitiveness' Has Nothing to Do With It, 144 Tax Notes 1055 (Sept. 1, 2014)]

While this is thought to be a common practice with multinational corporations, IRS data actually shows that the U.S. subsidiaries of foreign-based companies have smaller interest deductions relative to their total receipts than do American-headquartered firms and, interestingly, they have higher effective tax rates than their domestic counterparts. Thus, Kleinbard’s warnings would seem to be much ado about nothing. ...

Tax Foundation 1

 Tax Foundation 2

Of course, the real threat to the U.S. corporate tax base is our corporate tax code itself, with the third-highest overall rate in the world and a worldwide system that requires American companies to pay a toll charge to bring their profits back home. Thus, the solution to the inversion “problem” is to dramatically cut the corporate rate and to move to a territorial tax system, not add even more unnecessary rules to an already complicated tax code.

Edward Kleinbard (USC):

KleinbardPaul Caron has kindly given me an opportunity to respond to the Tax Foundation’s blog post, IRS Data Contradicts Kleinbard’s Warnings of Earnings Stripping from Inversion, authored by Scott Hodge. The data and relevant research in fact point in exactly the opposite direction as that suggested by the Tax Foundation in this post.

First, it should be obvious that inversions have been relatively rare transactions for the last decade, until the current wave of inversion mania infected Wall Street firms, and through that vector the larger corporate community. At the same time, genuinely foreign-controlled U.S. firms are a very large part of the U.S. domestic economy — holding roughly 20 percent of U.S. corporate assets, for example. This means that IRS Statistics of Information (SOI) data in general are insufficiently granular (to borrow a useful turn of phrase from the blog post) to shed much light on post-inversion tax planning. But we have a great deal of other information, in the form of Wall Street analyst reports, practice-oriented advisories, financial news reporting, and similar sources, all of which identify earnings stripping as one important objective in some current inversion trades. (Very generally, trades now or recently in the market lean primarily towards either the earnings stripping or the section 956 hopscotch strategies — one of the two dominates the other.) In short, the past is a poor predictor of future tax avoidance strategies in respect of the highly tax-motivated acquisition structures now in the marketplace.

But let’s persevere, as the blog post did not find this first observation disabling to its ability to mine for data to support its conclusion. The basic idea of the blog post was to take SOI data on all active U.S. corporations, and subtract out from those figures the corresponding numbers for foreign-controlled U.S. firms. The remainder was assumed to represent the results of domestic-controlled domestic corporations. I have no objections to that (other than to repeat that inversion transactions will not be visible in this data, where the numbers in some case are in the trillions of dollars). But the blog post then made two unstated modeling decisions that colored the results.

First, the blog post muddled data drawn from both financial and non-financial firms. Everyone who works with aggregate financial or tax data knows not to do that, because the two have radically different capital structures and regulatory environments. (In turn the insurance and non-insurance segments of the financial services industries have very different capital structures when compared to each other, because the liabilities on an insurance company’s balance sheet represented by current or future insurance claims against the company are non-interest bearing.) Financial services firms of course account for a very substantial percentage of corporate gross assets, liabilities, and interest expense. I am not aware of any financial services firm engaging in an inversion transaction. Following general practice in tax analysis, then, the blog post should have parsed its data one more level down, to compare foreign-controlled U.S. non-financial firms to domestic-controlled U.S. non-financial firms.

Second, the blog post compares interest expense to total receipts. But as anyone who has worked on foreign tax credit planning questions knows, interest expense does not support revenues, it supports assets. That is, you borrow money to buy stuff, not to buy free-floating revenues. So the relevant question is, how do the interest-to-assets ratios of foreign-controlled and domestic-controlled non-financial U.S. firms compare?

I do not run a tax think tank and so do not have a computer set up with the last 20 years or so of SOI data, but I did look at this question for 2011 (the most recent year for which data are available). Oddly enough, when you ask the right question, you discover that the 2011 interest-to-assets ratio for foreign-controlled non-financial U.S. firms is a bit higher, not lower, than the comparable ratio for domestic-controlled non-financial firms. Foreign-controlled firms are incurring a bit more interest cost per dollar of assets supported by the underlying borrowings.

And of course one can use the same approach to get a peek at larger earnings stripping and expense stuffing activities, by looking at the same SOI spreadsheets’ taxable income (formally, "income subject to tax”) entries. When you do, you discover that in 2011 domestic-controlled U.S. non-financial firms earned about 2.4 percent in “income subject to tax” on their gross assets. Foreign-controlled non-financial firms, by contrast, earned about 1.9 percent. You can claim that this is because all foreign investments are young and fresh, and therefore still in an expansionary mode, while domestic-controlled firms are old and tired, just collecting an annuity, but this excuse is belied by reality (e.g, Silicon Valley firms), and has grown tiresome after so many decades of use.

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September 7, 2014 in Tax, Think Tank Reports | Permalink | Comments (1)

NY Times Debate: Why Don’t Americans Take Vacation?

New York Times Room for Debate:  Why Don’t Americans Take Vacation?:

NY Times Room for DebateAccording to a new report, four in 10 American workers allow some of their paid vacation days to go unused. Why aren’t we taking time off? Is it because we’re a culture of workaholics or are companies not doing enough to accommodate paid vacation?:

  • Ellen Bravo (Family Values @ Work), We Need Standards for Paid Time Off:  "Employees create value and earn compensation. That compensation should include time to recover when ill, and to relax and rejuvenate."
  • John de Graaf (Take Back Your Timem), Many Feel Trapped by Work:  "It's up to business leaders to see the value of vacations for their employees, give them time off and encourage them to take it."
  • Bruce Elliott (Society for Human Resource Management), Unlimited Vacation — So Crazy It Works:  "For young workers, flexibility when it comes to paid time off is a major factor in employee retention."
  • Adam Okulicz-Kozaryn (Rutgers Universitym), Overworking Is Part of Our Identity:  "My research shows that Americans who work over 40 hours a week are more happy than those who work less, but that doesn't always translate into economic success."
  • Tweets on Vacation, or Lack Thereof:  "Room for Debate rounded up reader responses from Twitter."

New York Times Deal Book:  What I Learned on My Vacation, by Tony Schwartz:

NY Times Dealbook (2013)I have spent much of my adult life struggling to believe it is acceptable to simply, and deeply, relax. I come by this conviction honestly. Both my parents worked obsessively. I grew up believing my value was inextricably connected to what I accomplished — with my brain — in every moment. If I wasn’t producing something tangible, I quickly began to feel anxious and unmoored. ...

[T]he more renewal I built into my life, the more productive I became. Because I rested more regularly, I found that when I worked, I was more energized, focused and efficient. I got more done, at a higher level of quality, in less time. I built a company to teach these principles to others, and encouraged employees to make time off the job as important in their lives as time on the job. For starters, we give all of our employees at least five weeks off a year.

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September 7, 2014 in Legal Education, Tax | Permalink | Comments (2)

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 #22 in all-time downloads among 10,280 tax papers:

  1. [2822 Downloads]  'Competitiveness' Has Nothing to Do with it, by Edward D. Kleinbard (USC)
  2. [511 Downloads]  Guide to FATCA Compliance (Chapter 1, Background and Current Status of FATCA) (LexisNexis 2d ed. 2014), by William Byrnes (Thomas Jefferson), Denis Kleinfeld, & Alberto Gil Soriano
  3. [324 Downloads]  2013 Developments in Connecticut Estate and Probate Law, by Jeffrey A. Cooper (Quinnipiac) & John R. Ivimey (Reid and Riege, Hartford)
  4. [199 Downloads]  The Futility of Tax Protester Arguments, by Allen D. Madison (South Dakota)
  5. [180 Downloads]  Public Pressure and Corporate Tax Behavior, by Scott Dyreng (Duke), Jeffrey Hoopes (Ohio State) & Jaron Wilde (Iowa)

September 7, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 486

IRS Logo 2Sharyl Attkisson, IRS Says It Has Lost Emails From 5 More Employees:

The Internal Revenue Service has lost emails from five more employees who are part of congressional probes into the treatment of conservative groups that applied for tax-exempt status, the tax service disclosed Friday.

The IRS said in June that it could not locate an untold number of emails to and from Lois Lerner, who headed the IRS division that processes applications for tax-exempt status. The revelation set off a new round of investigations and congressional hearings.

On Friday, the IRS issued a report to Congress saying the agency also lost emails from five other employees related to the probe, including two agents who worked in a Cincinnati office processing applications for tax-exempt status. ...

The IRS blamed computer crashes for all the lost emails. In a statement, the IRS said all the crashes happened well before Congress launched its investigations.

The IRS first told Congress in June that other employees involved in the probe also had computer problems. At the time, IRS Commissioner John Koskinen promised lawmakers a report on whether any had lost emails. The report was issued Friday.

"Throughout this review, the IRS has found no evidence that any IRS personnel deliberately destroyed any evidence," said the IRS statement. "To the contrary, the computer issues identified appear to be the same sorts of issues routinely experienced by employees within the IRS, in other government agencies and in the private sector."

When Congress started investigating the IRS last year, the agency identified 82 employees who might have documents related to the inquiries. The IRS said 18 of those people had computer problems between September 2009 and February 2014. Of those employees, five probably lost emails - in addition to Lerner - the agency said Friday.

Lerner, who was placed on leave and has since retired, has emerged as a central figure in congressional investigations. The other five employees appear to be more junior than she. In addition to the Cincinnati workers, they include a technical adviser to Lerner, a tax law specialist and a group manager in the tax-exempt division.

In general, the IRS said the workers archived emails on their computer hard drives when their email accounts became too full. When those computers crashed, the emails were lost. "By all accounts, in each instance the user contacted IT staff and attempted to recover his or her data," said the IRS statement. The IRS has said it stored emails on backup tapes but those tapes were re-used every six months. The inspector general's office is reviewing those tapes to see if any old emails can be retrieved..

"The IRS has lost thousands of emails, but worse yet, completely lost the American people's trust," said Sarah Swinehart, a spokeswoman for House Ways and Means Republicans. "The DOJ must appoint a special prosecutor so the full truth can come out."

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September 7, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Saturday, September 6, 2014

Hayashi Presents Phantom Income and the Simple Economics of Paying In Kind at Florida

HayashiAndrew Hayashi (Virginia) presented Phantom Income and the Simple Economics of Paying In Kind at Florida yesterday as part of its Graduate Tax Program Colloquium Series:

Modern tax instruments impose cash taxes on non-cash bases. Property taxes, income taxes, gift taxes and estate taxes all must be paid in cash, even though income, gifts and estates only sometimes take the form of cash, and property never does. If it is costly to convert the tax base into cash, taxpayers may suffer from liquidity problems that require them to make painful adjustments to their savings or consumption. Although concern about taxpayer liquidity has shaped tax law and looms large in current debates about wealth taxation, tax accounting, and mark-to-market reforms, the economic factors that influence the welfare costs of cash tax collection have not been explored in a rigorous way. In this paper I present an economic analysis of the liquidity problem, identifying the factors that determine the welfare costs of cash tax collection. I apply this analysis to the property tax and to the taxation of income that accrues before it is received, sometimes called “phantom income.”

September 6, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Using Humor in the Law School Classroom

Humor 3Wall Street Journal, Law School Should be Funnier, Says Professor:

Stephen F. Reed, a clinical law professor at Northwestern University School of Law, says professors shouldn’t underestimate the pedagogical power of laughter. “[H]umor can have value in creating a lively classroom environment in which students are ready to learn, and in its best forms can help faculty accomplish their pedagogical goals,” Mr. Reed writes. ...

He encourages professors to brush up on pop culture and jot down ideas before class. And he also cautions against going overboard with slapstick:  "I cannot emphasize this enough: do not be a clown in class; be a professor with a sense of humor."

Stephen F. Reed (Northwestern), The Lively Classroom: Finding the Humor in Business Associations, 59 St. Louis L.J. ___ (2015):

I have yet to meet a faculty member who does not, in at least some small way, use humor in the classroom. It almost seems to be part of human nature, and some of its value is obvious: it commands attention, it relaxes both the speaker and the audience, and it provides a release in stressful situations. It may even help us to better retain information.2 This article is not intended to justify humor in the classroom, which other authors have covered,3 but takes as a given that humor can have value in creating a lively classroom environment in which students are ready to learn, and in its best forms can help faculty accomplish their pedagogical goals.

My main project, then, is to give you ideas on how to introduce humor to your course no matter how “unfunny” you consider yourself to be. I understand that those of you who do not believe you can use humor effectively in the classroom may dismiss this piece immediately.4 Although I implore you to give the ideas below at least a pilot run next semester, I understand completely why you might think it futile. ... Too often, we ignore that much of what happens in the classroom depends on certain inherent physical and personality traits of the instructor. Many of us wonder - even fear - that maybe some faculty have just “got it” and we do not. Anyone can buy a dapper new outfit, but only Brad Pitt or Angelina Jolie can wear it like Brad Pitt or Angelina Jolie, while the rest of us middle-aged professors in the “prime” of our careers wear the same outfit like Buddy Hackett or Carol Channing.7See material on staying current with cultural references, infra.

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September 6, 2014 in Legal Education, Teaching | Permalink | Comments (0)

WSJ: More Parents Foot the Bill For MBAs For Their Kids

Wall Street Journal, More Parents Foot the Bill for Business School M.B.A.s; Aim to Minimize Debt to Keep Career Options Open:

MBAProspective business students are trying to steer clear of student loans. Instead, they're sidling up to more familiar investors: their parents.

Forty-four percent of people considering graduate business degrees last year expected to tap mom and dad for financial assistance, up from 38% in 2009, according to the Graduate Management Admission Council, which administers the GMAT business-school entrance exam and surveys thousands of hopeful students annually. They also expected their parents to foot more of the bill: 20% in 2013, compared with 13.7% four years earlier. ...

The shift in expected funding sources is due in part to concerns that institutional debt will limit postgraduation job opportunities, students and career services officials say. Graduating M.B.A.s are increasingly drawn to entrepreneurial ventures and early-stage startups. By minimizing their debt loads they can better afford to give up the steady paychecks of traditional finance or consulting jobs, they say.

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September 6, 2014 in Legal Education | Permalink | Comments (4)

The IRS Scandal, Day 485

IRS Logo 2Senate Permanent Committee on Investigations Majority Report, IRS and TIGTA Management Failures Related to 501(c)(4) Applicants Engaged in Campaign Activities:

The primary conclusion of the Majority staff report is that, contrary to common understanding and widespread reporting, the IRS actually exhibited no bias in its review of conservative groups. The Majority staff report claims that the IRS targeted liberal and conservative groups equally and that a Treasury Inspector General for Tax Administration (TIGTA) report on the targeting of conservative groups was fundamentally flawed.

Senate Permanent Committee on Investigations Minority Report,  IRS Targeting Tea Party Groups

The Subcommittee Minority staff sharply disagrees with the conclusions reached by the Majority staff report. While some liberal groups were examined by the IRS from May 2010 to May 2012, there were far fewer such groups, they were systematically separate from the review of conservative groups, their questioning was far less intrusive, and, in some cases, the liberal groups were affiliates of specific organizations like ACORN that had behaved illegally in the past and could reasonably expect additional scrutiny. The inclusion of a scant few liberal groups by the IRS does not bear comparison to the targeting of conservative groups.

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September 6, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Friday, September 5, 2014

ABA Journal Question of the Week: Tell Us About Your Craziest Classmate From Law School

ABA Journal (2014)ABA Journal Question of the Week: Tell Us About Your Craziest Classmate From Law School:

Nearly all students, from kindergarten through law school, have returned to classes at this point. In honor of that, we ask you to remember your time in law school—specifically, your fellow students.

Tell us about your craziest classmate from law school, whether he or she was crazy smart; had crazy sleeping or eating habits; or took crazy risks. And if you know what that former classmate is doing now, please share! (And please use pseudonyms if necessary to protect his or her identity.)

September 5, 2014 in Legal Education | Permalink | Comments (0)

Weekly Tax Roundup

Weekly Roundup

September 5, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly Legal Education Roundup

Weekly Roundup

September 5, 2014 in Legal Education, Weekly Legal Education Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

Weekly Roundup

September 5, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

WSJ: How Washington's Revolving Door Spurred Obama Administration's Anti-Inversion Push

Wall Street Journal, AstraZeneca Called the Obama Team to Say: Stop Those Tax Inversions!!:

Revolving Door 3If you were wondering why the White House suddenly took an interest in the consequences of tax inversion deals last spring, here is the reason – a pair of Wall Streeters with ties to the Obama administration made some calls on behalf of AstraZeneca which, you may recall, was trying to fend off an unwanted bid from Pfizer. Pfizer cited a tax inversion as one reason for its offer.

Specifically, AstraZeneca employed Thomas Nides, a Morgan Stanley vice chairman who was deputy secretary of state in the Obama administration until last year, and who also served in the Clinton administration. The drug maker also tapped Roger Altman of Evercore Partners, a former deputy Treasury Secretary in the Clinton administration, according to The Wall Street Journal. ...

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September 5, 2014 in Tax | Permalink | Comments (2)

Barnhizer: The ‘Death’ of Law Schools and the Five Stages of Grief

David Barnhizer (Cleveland State), The Kubler-Ross Criteria and the ‘Death’ of Law Schools:

StagesJust for fun I thought it might be interesting to take a brief look at the psychological context of the rapid decline and possible “death” of a number of American law schools. It seemed appropriate to adopt Elisabeth Kubler-Ross’s hypothesis about the stages we go through when coping with fundamental crises such as death, job loss, permanent disability or the fracturing of a key relationship [denial, anger, bargaining, depression and acceptance]. ... This seems to offer a useful heuristic for evaluating the conditions and fates of law schools experiencing plummeting demand for their services, challenges to their educational quality, a legal profession in the midst of a profound transformation, and the decay of the financial resource base due to declining tuition revenues.

I suggest that for many law schools what is occurring is a “transformative tsunami”. While it is psychologically dispiriting for many traditional law faculty members whose privileged worlds are turning out to be built on shifting sand, the conditions are creating a set of exciting challenges and opportunities for an entrepreneurial inventiveness. We can only hope that the changes will improve the quality of legal education and the delivery of legal services. Unfortunately, and inevitably, that inventiveness is being compelled from outside the law schools. ...

Below the top-rated forty or fifty law schools the competitive conditions demand context-specific strategic action adapted to the strengths and mitigating the vulnerabilities of the institutions. The harsh fact is that some of the lesser ranked law schools are likely to (and should) “die”. Some will “expire” by actually going out of existence. Others will change their operational systems into forms different from the “cookie cutter” model of university law schools for the past century. These changes will be exciting, innovative and productive in the sense that Joseph Schumpeter intended in his description of the periodic process of “creative destruction” where the old ways of doing things are transformed into new forms of production. Most tenure track law faculty will not be pleased.

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September 5, 2014 in Legal Education | Permalink | Comments (15)