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Thursday, January 30, 2014

Osofsky Presents Beyond Worst-First Tax Enforcement Today at Indiana

Osofsky 3Leigh Osofsky (Miami) presents Beyond Worst-First Tax Enforcement at Indiana-Bloomington today as part of its Tax Policy Colloquium Series hosted by Leandra Lederman:

When enforcement resources are limited, how should the scarce enforcement resources be allocated to maximize compliance with the law? The answer to this question can determine to what extent the law on the books translates to the law in practice. A dominant school of thought in the tax literature suggests that they should be allocated based on a “worst-first” method, whereby the individuals likely to be most noncompliant are targeted. However, “worst-first” methods suffer some underappreciated weaknesses. While “worst-first” methods can encourage all individuals to increase compliance so as not to be deemed the “worst,” they can also provide cover to engage in noncompliance that is perceived moderate for the relevant population. This dynamic can become most problematic in highly noncompliant populations. In such populations, existing, high levels of noncompliance, and underlying, structural causes of the high noncompliance can serve as coordinating mechanisms, providing mutual assurance of low compliance. Moreover, “worst-first” theories do not provide a comprehensive explanation for the group and project-based enforcement practices that are found in a number of actual enforcement settings. In response to these deficits in existing theory, I draw on work from across different disciplines to develop a new layer of analysis regarding the allocation of scarce tax enforcement resources. I suggest that, under certain conditions, deterrence can be enhanced by allocating scarce enforcement resources among a low-compliance population of taxpayers through a process I call microdeterrence. After setting forth the theoretical case for microdeterrence, I examine how it might apply in the cash business tax sector, a setting that presents particular challenges for “worst-first” methods. I conclude that microdeterrence may increase compliance, meriting its application and empirical evaluation. More fundamentally, this Article underscores the importance of the allocation of scarce enforcement resources, some of the deficits in existing theory, and the potential benefits of integrating additional layers of analysis.

January 30, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Rosenthal Presents Local Public School Finance in a Time of Institutional Change Today at UCLA

RosentahlHoward Rosenthal (NYU, Department of Politics) presents The Twilight of the Setter? Local Public School Finance in a Time of Institutional Change (with Sean Corcoran (NYU, School of Culture, Education, and Human Development) & Thomas Romer (Princeton, Woodrow Wilson School of Public and International Affairs)) at UCLA today as part of its Tax Policy and Public Finance Colloquium hosted by Jason Oh, Kirk Stark, and Alexander Wu:

The operation and financing of primary and secondary public schools in the US is highly decentralized. Most of the budget of each of the 13,000+ school districts comes from a combination of local and state revenues. State constitutions and statutes determine the degree of local district autonomy and scope of taxing power.

As part of an ongoing project on the political economy of education finance, this paper reports on some developments in school spending in one state during a time when some of the state’s constitutional rules governing local school district taxing powers changed. In part, the paper provides a replication of tests of a model of bureaucratic agenda-setting in the financing of elementary and secondary public education.

Continue reading

January 30, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Lipton Presents Tribune, Canal Corp., and the New Proposed Partnership Tax Regs Today at Temple

LiptonRichard M. Lipton (Baker & McKenzie, Chicago) presents Leveraged Partnerships Under Fire? IRS Attacks Tribune's Transactions, 119 J. Tax'n 73 (Aug. 2013), and Tax Court Drains Canal Corporation's Leveraged Partnership Transaction, 113 J. Tax'n 340 (Dec. 2010), at Temple today as part of its Tax Policy & Administration Colloquium Series hosted by Alice Abreu & Andrea Monroe:


An internal IRS document indicates the manner in which the Service will argue against the results sought by a structured partnership transaction. Some of the Service's arguments, however, do not withstand scrutiny. It can be anticipated that this determination will not be accepted by the taxpayer involved. In CCA 201324013, the IRS set forth the reasons that it planned to attack a ‘leveraged partnership‘ transaction that was quickly identified as the Tribune Company's disposition of Newsday to Cablevision in 2010. The IRS based its attack on the reasoning in the Tax Court's decision in Canal Corporation, 135 TC 199 (2010), as well as the Service's view of the substance of the Tribune transaction.

The publication of the CCA immediately sparked a discussion in the popular press about how the Tribune could owe millions in tax, penalties, and interest as a result of this transaction and a related transaction involving the Chicago Cubs.  On a close review, however, it is far from clear that the Service's analysis in the CCA is the better view of the applicable law or the application of that law to the facts in the transaction. Indeed, the Service's contention that the transaction should be viewed as a disguised sale appears to be more wishful thinking than a sound consideration of what occurred. 

Canal Corp.:

The IRS has finally prevailed in its latest challenge to a leveraged partnership transaction, in Canal Corporation, 135 TC 199 (2010). The somewhat surprising (and arguably incorrect) holding in Canal was that the taxpayer's indemnification obligation of another partner's guarantee to the creditor of the partnership should be completely disregarded under the anti-abuse rule in Reg. 1.752-2(j) . Even more questionable was the Tax Court's decision to apply the accuracy-related penalty under Sections 6662(a) and (b)(2) for a substantial understatement of income tax. 

REG-119305-11, 79 Fed. Reg. 4826-4839 (Jan. 30, 2014):

This document contains proposed regulations under section 707 of the Internal Revenue Code (Code) relating to disguised sales of property to or by a partnership and under section 752 relating to the treatment of partnership liabilities. The proposed regulations address certain deficiencies and technical ambiguities in the section 707 regulations and certain issues in determining partners’ shares of liabilities under section 752. The proposed regulations affect partnerships and their partners.  

January 30, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Journal of Taxation of Investments Publishes New Issue

Capture 2 The Journal of Taxation of Investments has published its Fall 2013 issue (Vol. 31, No. 1), with these articles:

January 30, 2014 in Scholarship, Tax | Permalink | Comments (0)

Staudt Presents Guns and Taxes at Duke

StaudtNancy Staudt (USC) presented Guns and Taxes (with Thomas Griffith (USC)) at Duke as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

The federal and state governments have long taxed commodities, such as alcohol, gas, cigarettes, guns and ammunition. Firearms, however, have recently taken on a unique status in the lexicon of taxable goods given the Supreme Court case, District of Columbia v. Heller, 554 U.S. 570 (2008), which held the 2nd Amendment protects an individual’s right to own a handgun in the home. For purposes of this paper, we assume that Heller does not create an outright bar to taxing weaponry, but does require clearly articulated economic and policy justifications to pass constitutional muster. Accordingly, we examine three possible rationales and uncover strong arguments both for and against taxation. Ultimately, we conclude that policymakers should operate much like insurers: they should subsidize the safe use of guns and tax high-risk users.

January 30, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (2)

Zelinsky: The First Amendment and the § 107 Parsonage Allowance

Tax Analysys Logo (2013)Edward A. Zelinsky (Cardozo),  The First Amendment and the Parsonage Allowance, 142 Tax Notes 413 (Jan. 27, 2014):

In this report, Zelinsky criticizes the recent district court decision in Freedom From Religion Foundation Inc. v. Lew, declaring section 107(2) unconstitutional on First Amendment grounds. The provision excludes from gross income cash housing allowances furnished to ministers. Zelinsky details three interrelated reasons why the district court’s opinion is unpersuasive.

Prior TaxProf Blog coverage:

January 30, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

CRS: Overview of the Federal Tax System

CRS LogoCongressional Research Service, Overview of the Federal Tax System (RL32808) (Jan. 23, 2014):

The major sources of federal tax revenue are individual income taxes, Social Security and other payroll taxes, corporate income taxes, excise taxes, and estate and gift taxes. This report describes the federal tax structure, provides some statistics on the tax system as a whole, and presents analysis of selected tax concepts.

(Hat Tip: Bruce Bartlett.)

January 30, 2014 in Congressional News, Tax | Permalink | Comments (0)

5th Circuit Nixes Tax Shelter Used by 3 Attorneys to Keep More of $600M Legal Fee Award

ABA Journal, 5th Circuit Nixes Tax Shelter Used by 3 Attorneys to Keep More of $600M Legal Fee Award:

After winning a $600 million attorney fee award in 1998 for representing the state of Texas in litigation against big tobacco companies, three law firm partners sought to reduce the tax bite. But their efforts only made the situation worse: A federal appeals court last week ruled that the tax shelter deployed by the partners of Nix, Patterson & Roach was abusive, imposing a 40 percent gross valuation misstatement penalty as well as other penalties for underpaying income tax.  [NPR Investments LLC v. United States, No. 10-41219 (5th Cir. Jan. 23, 2014)]

January 30, 2014 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 266

Wednesday, January 29, 2014

Doran Presents Tax Legislation in the Contemporary U.S. Congress Today at Duke

DoranMichael Doran (Georgetown; moving to Virginia) presents Tax Legislation in the Contemporary U.S. Congress, 67 Tax L. Rev. ___ (2013), at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

This paper identifies and analyzes a recent trend toward “clean” federal tax legislation. Existing explanations of the tax-legislative process account for the regular, highly particularistic tax legislation prevalent during the 1980s and the early 1990s using legislator-motivation and traditional policy models. But a new tax-legislative process, characterized by alternating periods of tax gridlock and strikingly non-particularistic tax legislation, emerged during the late 1990s. This paper argues that tax gridlock and non-particularistic tax legislation are best understood as companion phenomena, and it examines three general determinants of recent tax-legislative outcomes. First, exogenous events, particularly macro-economic and macro-political developments, typically provide the central policy objective for any item of major tax legislation. Second, the voting behavior of individual legislators on tax legislation corresponds closely to generally accepted understandings of legislator motivations. Third and most importantly, several legislative-organizational developments within Congress – specifically, the emergence of sharp coalitional polarization and strong coalitional cohesion, the re-establishment of centralized chamber management, and the relaxation of restrictions on the federal budget – combined to produce the new tax-legislative process during the late 1990s and the 2000s. This paper does not offer a positive theory of the tax-legislative process or make predictions about tax-legislative outcomes. Rather, it builds on existing accounts to provide an updated and more nuanced explanation of the tax-legislative process in the contemporary Congress.

January 29, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Wooley Presents The Taxation of Families in Canada Today at Toronto

WooleyFrances Woolley (Carleton University, Department of Economics) presents It's Just Not Fair! Canada's On-Going Debate Over the Taxation of Families at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

The aim of this paper is to re-examine the Carter Commission’s stance on the taxation of married couples, and use it to illuminate current debates over the tax treatment of Canadian families. I argue that the Carter Commission’s fairness arguments for income splitting were neither well developed nor empirically grounded. I suggest there is an alternative, more pragmatic explanation of the Carter Commission’s advocacy of joint taxation: a desire to bring Canada’s tax treatment of families in line with the treatment south of the border. The issue was not so much the fairness of Canada’s tax treatment, but envy of American tax treatment. I then argue that a parallel dynamic of envy exists today. When the Carter Commission reported, a man’s standard of living was primarily determined by his own earnings. Two income professional couples were rare. Today, the two-income couple is the norm, and a professional man with a stay-at-home spouse can expect to enjoy a lower standard of living than his contemporaries in dual-career relationships. This, I argue, leads single-earner families to envy dual-earner ones’ greater affluence. While this envy is understandable, it is not the job of the income tax system to remedy it.

January 29, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Elkins Presents The Normative Underpinnings of Source-Country Taxation Today at Touro

Elkins (2014)David Elkins (Netanya College School of Law) presents The Normative Underpinnings of Source-Country Taxation at Touro today:

Taxpayers are subject to income tax imposed by the country to which they have a sufficient personal nexus (home-country taxation) and by the country from which they derive their income (source-country taxation). Home country taxation is ordinarily understood as an application of the principle of ability-to-pay. Source-country taxation is ordinarily understood as a function of benefit theory.

This paper challenges the conventional wisdom and argues that ability-to-pay offers a better normative justification for source-country taxation then does benefit theory. First, it shows that benefit theory cannot satisfactorily explain source-country taxation. Second, it examines current trends in social philosophy and demonstrates that source-country taxation flows from the same principles that support the imposition of income tax by the home country.

January 29, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Journal of Taxation of Investments Publishes New Issue

Capture 2 The Journal of Taxation of Investments has published its Summer 2013 issue (Vol. 30, No. 4), with these articles:

January 29, 2014 in Scholarship, Tax | Permalink | Comments (0)

Brunson: Mutual Funds, Fairness, and the Income Gap

Samuel D. Brunson (Loyola-Chicago), Mutual Funds, Fairness, and the Income Gap, 65 Ala. L. Rev. 139 (2013):

The rich, it turns out, are different from the rest of us. The wealthy, for example, can assemble a diversified portfolio of securities, or can invest through hedge and private equity funds. When the rest of us invest, we do so largely through mutual funds. Nearly half of American households own mutual funds, and mutual funds represented a significant portion of the financial assets held by U.S. households.

The tax rules governing mutual funds create an investment vehicle with significantly worse tax treatment than investments available to the wealthy. In particular, the tax rules governing mutual funds force shareholders to pay taxes on “forced realization income,” even though such income does not increase their wealth.

Because mutual fund investors must pay taxes on non-existent gains, while the wealthy can use alternative investment strategies to avoid such taxes, the taxation of mutual funds violates the tax policy objective of vertical equity. To correct the inequities faced by mutual fund investors, the tax law needs to permit low- and middle-income taxpayers to exclude from their income 10% of the capital gain dividends they receive each year.

January 29, 2014 in Scholarship, Tax | Permalink | Comments (0)

More on Overperforming and Underperforming California Law Schools

CA state bar logo PNGFollowing up on Saturday's post, July 2013 California Bar Exam Results: Donald J. Smythe (California Western), Ranking Law Schools Using Reported California Bar Exam Results: Some Observations and Conjectures:

Law school rankings are ubiquitous and inevitable. That should not be surprising, since they may help prospective law students decide where to study and prospective employers decide which law schools’ graduates to hire. Unfortunately, none of the existing law school rankings are substantially based on measures of student learning outcomes, and most are not helpful in evaluating the relative performance of non-elite law schools. This article attempts to fill the gap in the literature by ranking law schools using the California bar exam results reported by the State Bar of California for first-time takers over the period from 1997-2011 and especially 2007-2011. There are problems with this ranking too. The data are incomplete, the California bar exam has probably varied in difficulty over the period of the study, and bar exams probably do not adequately test law graduates’ preparation for the practice of law. Nonetheless, most law graduates need to pass a bar exam before they can obtain satisfying legal jobs. Moreover, bar exams arguably test law graduates on at least some of the knowledge and skills they will need to succeed in their legal careers. In these respects, at least, bar exam results provide a measure of student learning outcomes that should be important for most prospective law students. Some of the results of this study are interesting and surprising: Yale appears to outperform all other law schools, and Virginia and Emory appear to outperform their US News rankings. Harvard, Columbia, Chicago, Northwestern, and Cornell appear to underperform their US News rankings. There appears to be a surprisingly strong in-state advantage on the California bar exam, and Californian schools generally appear to outperform higher-ranked out-of-state schools, but some Californian schools appear to outperform others: USC, Pepperdine, Loyola, California Western, and Chapman all outperform Californian schools that the US News ranks higher; UC-Davis, UC-Hastings, and San Diego underperform Californian schools that the US News ranks lower. Some Californian schools had such low California bar passage rates over the period of this study that one can only wonder whether they might be at risk of accreditation problems, and some out-of-state schools had passage rates that were even lower and atrocious by any reasonable standards.

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(Hat Tip: Brian Leiter.)

January 29, 2014 in Law School Rankings, Legal Education | Permalink | Comments (1)

Schmalbeck Presents Big-Time College Sports and the Tax System at Duke

SchmalbeckRichard Schmalbeck (Duke) presented Two Strikes Against the Sweetheart Deal Between Big-Time College Sports and the Tax System at Duke as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

The purpose of this essay is not to destroy big-time college sports. If that were the purpose, it would be completely pointless. Big-time sports are deeply and widely popular; they are not going away. But they are also unmistakably commercial, at least in some aspects. While the on-campus aspects of college sports may have some connections, however remote, with the educational purposes of the institution that sponsors them, the televised programming associated with college sports has no substantial connection to those purposes. When the broadcasting of college sports was largely local, and the revenue derived from it quite modest, it may have been appropriate to ignore the tangential connection to exempt purpose. But as the broadcasting of college sports has gone national, and begun to produce prodigious amounts of revenue, it no longer makes sense to ignore the fact that it is generating unrelated business income for the participating universities.

In 1980, the IRS made a mistake, even in light of the facts known at the time, in ruling that television revenue was related to exempt purpose. But as the revenue has grown a hundred fold in the years since, it has become clear that a reevaluation of this mistake is increasingly needed. The doctrine of disaggregating advertising revenue provides a plausible hook for the unrelated business income tax, but in fact any revenue from the sale of television rights has the same basic qualities: it furthers no educational purposes, and cannot be considered related to the university’s reason for exemption.

And when Congress added section 170(l) to the Code twenty-five years ago, it made a mistake. It too may have misjudged the significance of the deduction it was authorizing in declaring eighty percent of “contributions” made to purchase seat licenses was deductible, but that significance has become clearer as big-time sports have grown ever more big-time in the years since. There is now a substantial revenue loss associated with this provision, and the provision has no convincing rationale. Congress should review the rule, and close this loophole.

January 29, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tax-Free Gifts Quadrupled After Increase of Exemption to $5 Million

Estate & Gift TaxBloomberg:  Tax-Free Gifts Quadrupled in U.S. After IRS Limit Lifted, by Richard Rubin & Margaret Collins:

Congress voted in December 2010 to let wealthy Americans make tax-free gifts of as much as $5 million -- and the money flowed.

U.S. taxpayers reported making $122 billion in nontaxable gifts on the returns they filed in 2012, more than four times the amount in each of the two previous years. The Internal Revenue Service released the data today.

Most of the money -- $84 billion -- came in the form of gifts exceeding $1 million, and those were made by fewer than 30,000 people, according to the IRS&.

January 29, 2014 in IRS News, Tax | Permalink | Comments (0)

Kahng: Path Dependence in Tax Subsidies for Home Sales

Lily Kahng (Seattle), Path Dependence in Tax Subsidies for Home Sales, 65 Ala. L. Rev. 187 (2013)

At a time of looming fiscal crisis and virtual unanimity that tax expenditures must be curtailed, tax subsidies for homeownership stand out as among the most costly and unfair of these expenditures. As a result of tax subsidies for homeownership, the government foregoes billions of dollars in revenue each year, most of which benefits wealthy taxpayers. Moreover, subsidies for homeownership encourage overinvestment in housing and underinvestment in other business sectors, which impedes economic productivity, jobs creation and the ability of U.S. businesses to compete in the global marketplace.

Scholars and commentators have analyzed extensively the tax subsidy for home mortgage indebtedness but have paid little attention to tax subsidies for home sales. This Article is the first to undertake a comprehensive examination of tax subsidies relating to home sales. The central thesis of this Article is that these subsidies rest upon questionable policy justifications, flawed logical reasoning, and poor design choices. To support this thesis, the Article traces the evolution of tax subsidies for home sales from their surprising origins in a World War I-era tax preference for requisitioned ships to their present incarnation as a practically unlimited tax exemption. This narrative account leads to several important findings. First, it shows how path dependence and bounded rationality have led lawmakers and policymakers to make questionable decisions and support problematic laws. Second, it demonstrates the power of the real estate lobby to shape the story — and the resultant legal rules ― from both tax and social policy perspectives. Finally, it illuminates the political and rhetorical forces that have shaped tax subsidies for home sales. The Article argues that only by understanding where we were before and how we got to where we are now, can we properly assess where we should go from here.

In assessing tax subsidies for home sales, the Article evaluates the subsidies by reference to the established tax policy criteria of efficiency and fairness while remaining cognizant of the broader context of the social and economic policies regarding homeownership. Although a comprehensive assessment of federal housing policies and the role of tax subsidies in structuring the domestic housing market lie beyond its scope, the Article offers important new insights that will contribute significantly to the ongoing policy dialog about homeownership in our society. In particular, it analyzes the economic impacts of tax subsidies for home sales, including whether and to what extent the subsidies contributed to the real estate bubble. Moreover, the Article highlights the important, but underappreciated, disparate race and gender impacts of homeownership as a wealth-building vehicle. Finally, the Article calls for the repeal of tax subsidies for home sales and argues that the “exogenous shock” of the global financial crisis presents a rare and fleeting opportunity to effect this reform.

January 29, 2014 in Scholarship, Tax | Permalink | Comments (1)

The IRS Scandal, Day 265

IRS Logo 2Wall Street Journal:  Enemies of Friends of Abe: How the IRS Chills Freedom of Association, by James Taranto:

These days "IRS Targets Conservative Group" is a dog-bites-man story. But this one was man-bites-dog by virtue of its placement: on the front page of the New York Times, a newspaper that is usually supportive of this administration's efforts to suppress domestic dissent. Put it down to a sudden outbreak of news judgment.

The news value to the Times may lie more in the nature of the organization than its trouble with the IRS. "In a famously left-leaning Hollywood, where Democratic fund-raisers fill the social calendar, Friends of Abe stands out as a conservative group that bucks the prevailing political winds," reads the lead paragraph.

But Friends of Abe--as in Lincoln--has sought nonprofit status under Section 501(c)(3) of the U.S. Tax Code, which would allow it to collect tax-deductible contributions. The IRS has been reviewing the application for some two years, seeking information about meetings where politicians spoke. A 501(c)(3) is prohibited from engaging in campaign activity, such as hosting a fundraiser, but as the Times notes, "tax-exempt groups are permitted to invite candidates to speak at events."

The most troubling revelation in the Times account is that at one point the IRS "included a demand--which was not met--for enhanced access to the group's security-protected website, which would have revealed member names." The Times points out that FOA "keeps a low profile and fiercely protects its membership list, to avoid what it presumes would result in a sort of 21st-century blacklist" and that "tax experts said that an organization's membership list is information that would not typically be required."

With the possible exception of academia, show business is about as totalitarian a subculture as you will find in America. Conservatives are a tiny minority, and they fear for their livelihoods if exposed. A few high-profile celebrities are exceptions--the Times mentions Gary Sinise, Jon Voight, Kelsey Grammer and Lionel Chetwynd--but for lesser-known actors and people who work in off-camera jobs, confidentiality is crucial. ...

The IRS's intrusive tactics thus have a chilling effect on people who wish to exercise their First Amendment right of free association without attracting public attention--or, more precisely, the attention of vicious ideological antagonists. Even calling attention to those tactics can compound the problem, as illustrated by FOA's need to reassure its members in the wake of the Times story. The gradual accretion of power by a vast administrative state, combined with an administration intolerant of dissent, has produced a clear and present danger to basic American freedoms.

Continue reading

January 29, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, January 28, 2014

Shaheen Presents The GAAP Lock-Out Effect and the Investment Behavior of Multinational Firms Today at NYU

ShaheenFadi Shaheen (Rutgers-Newark) presents The GAAP Lock-Out Effect and the Investment Behavior of Multinational Firms, 68 Tax L. Rev. ___ (2014), at NYU today as part of its Tax Policy Colloquium hosted by Daniel Shaviro and Alan Auerbach:

This paper looks into the investment behavior of multinational firms with respect to earnings of their foreign subsidiaries that are locked-out abroad against the firms’ own real income (present value) interest in order to avoid the repatriation tax and the associated GAAP “penalty.” The paper extends the analysis of the existing theoretical models beyond the optimal repatriation-versus-retention point in order to explore what would be a second-best optimal investment strategy with respect to locked-out earnings. The paper shows that the choice of investment in this second-best optimal setting should differ from that in the first-best optimal setting. One example is that investing locked-out earnings in passive investments would generally generate higher present value than in active investments with higher rates of return. This in turn magnifies the conflict between real and book income considerations, leading firms to act again against their own real income interest when investing locked-out earnings abroad, and resulting in efficiency costs not yet identified, both at the firm level and to the economy in general.

January 28, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

ABA Task Force on the Future of Legal Education Releases Final Report

ABA Logo 2The ABA Task Force on the Future of Legal Education has released its final 41-page report, "which calls on law schools, bar associations, regulators and others to redesign the financial model now prevalent in law schools, revise the system that accredits law schools to permit more experimentation and innovation, and expand opportunities for delivery of legal services."

National Law Journal:  Law Schools Task Force Changes Target for Reform Pitch:

The panel has shelved plans to submit resolutions to the ABA’s House of Delegates during its midyear meeting next month. Instead, chairman Randall Shepard, former chief justice of Indiana, will brief the delegates and task force members will pitch their recommendations to entities directly involved in legal education and bar admissions—law schools, state bar associations and state supreme courts.

“When you get right up to the moment of truth, the report wasn’t written in a format that the House of Delegates was accustomed to seeing,” Shepard said. “The Task Force decided that we could do more good engaging with the entities that have the power to carry out these recommendations.”

“For me, one of the most illuminating aspects of the task force experience has been to shed some light on pricing, scholarships and discounting,” Shepard said. “That’s changed a lot in the past 15 years, and most judges and practitioners don’t know that. Offering scholarships on merit rather than need has changed the face of law schools and affected who can go there.”

The matter was among the panel’s top priorities. In fact, ABA President James Silkenat told the ABA Journal that he plans to ask the Board of Governors to create another task force to examine it specifically.

Among the other key recommendations:

  • The ABA's accreditation standards create unnecessary homogeneity among schools and increase costs, and some standards should be repealed or "dramatically liberalized."
  • The ABA should make it easier and more transparent for schools to receive waivers from the accreditation standards to foster experimentation.
  • Schools should do more to provide students with the practical skills they will need as lawyers and continue the shift away from doctrinal instruction.
  • State supreme courts and bar associations should look for ways to license legal service providers who lack J.D.s but can handle some legal services, which would help address unmet legal needs.

January 28, 2014 in Legal Education | Permalink | Comments (0)

Official Statistics on Inequality, the Top 1%, and Redistribution

Tax Foundation logoTax Foundation, Official Statistics on Inequality, the Top 1%, and Redistribution:

President Obama will reportedly focus much of his State of the Union speech on addressing inequality and mobility in America. Undoubtedly, these issues will generate a considerable amount of rhetoric by pundits and politicians on both sides of the aisle in the days ahead. Much of this rhetoric will not be supported by data or facts.

In order to bolster this discussion with data, we’ve summarized some of the recent work done on inequality and mobility by the Congressional Budget Office and the IRS. Links are provided to the original source material.

Inequality: CBO data shows that inequality today is slightly higher than the average of the past thirty years, but less that it was during the last two years of the Clinton administration.


Progressivity:  According to the CBO’s progressivity index, the federal tax code is as progressive today as it has been at any time during the past thirty years.


The Top 1%:  The Top 1% continues to pay a larger share of the federal income tax burden than the bottom 90 percent combined.


Redistribution:  Using 2006 data, CBO found that tax and spending policies combined to redistribute $1.2 trillion in income from the top 40 percent of non-elderly households to the bottom 60 percent of non-elderly households.


Mobility:  IRS panel data that tracked the same group of taxpayers between 1999 and 2007 showed that Americans can move from one economic group to another fairly quickly.

More than 50% of Taxpayers Moved Out of the Bottom Quintile Between 1999 & 2007

1999 Income Quintile/Percentile

2007 Income Quintile/Percentile










































Tax Foundation calculations based on IRS data from the 1999-2007 SOI Individual Tax Panel.

January 28, 2014 in Tax, Think Tank Reports | Permalink | Comments (2)

Journal of Taxation of Investments Publishes New Issue

Capture 2The Journal of Taxation of Investments has published its Spring 2013 issue (Vol. 30, No. 3), with these articles:

January 28, 2014 in Scholarship, Tax | Permalink | Comments (0)

Sheffrin: Restitution for Ponzi Scheme Victims: The Symbiotic Relationship of Tax and Securities Laws

Steven M. Sheffrin (Tulane), Restitution for Ponzi Scheme Victims: The Symbiotic Relationship of Tax and Securities Laws, 10 Rutgers Bus. L.J. 21 (2013):

PonziThis paper contrasts the restitution processes used by the Securities Investment Protection Corporation ("SIPC") and the Internal Revenue Service ("IRS") to provide restitution to the victims of Ponzi schemes. With its roots in bankruptcy law, the goal of SIPC is to provide reimbursement to victims of Ponzi schemes in an equitable manner, while the IRS is principally concerned with the impact of Ponzi schemes for taxable income. On the surface, the methods used by SIPC and the IRS appears potentially contradictory. Despite these contradictions, these methods are broadly consistent with one another and have a collaborative relationship. Nonetheless, implementation of these policies has proven to bedifficult for both the SIPC and the IRS, which is highlight of this paper. It also provides a welfare framework for evaluating the consequences of alternative restitution strategies.

January 28, 2014 in Scholarship, Tax | Permalink | Comments (0)

2013 Law School Survey of Student Engagement

LSSSE CoverThe Law School Survey of Student Engagement (LSSSE) has released its 2013 Annual Survey Results:

Since 2007, the job market for new law school graduates has been in steady decline. According to the National Association of Law Placement, the overall employment rate was 92% in 2007. By 2012, however, that rate had declined to 85%. Moreover, median starting salaries as well as the proportion of new graduates working in jobs for which the law degree is required have experienced similar declines.

Given the angst engendered by these trends, conventional wisdom dictates that students are less satisfied with their law school experiences, especially the career counseling and job search help they receive. However, newly released data from the Law School Survey of Student Engagement (LSSSE) challenges this assumption. According to the survey, which garnered responses from more than 26,000 students at 86 U.S. law schools, student satisfaction rates have remained relatively stable since before the downturn.

In 2007, 45% of law students in their final year reported satisfaction with job search help provided by their law school. The 2013 satisfaction rate was 45%. When assessing their school’s overall career counseling services, 45% of law students in their final year were satisfied in 2007, compared to 49% in 2013.

These trends suggest that the challenging environment has not led to an increase in the proportion of law students who feel their school shoulders some blame for job search difficulty. The stability of these trends, in light of the overall market, is heartening, given much of the criticism directed at legal education. It is possible that law schools have been able to stem increased dissatisfaction by redoubling efforts to advise students on career-related matters.

But the trends have an unfavorable side. Large percentages of students remain unsatisfied with the career counseling and job search help they have received. In addition, satisfaction with all advising services—career, academic, personal, and financial aid—sharply declines as students progress through their program, with first year students being most satisfied and students in their final year being least satisfied.

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January 28, 2014 in Legal Education | Permalink | Comments (0)

California Bar Hosts 1st Annual Young Tax Lawyers Conference

California State BarThe State Bar of California hosts its First Annual Young Tax Lawyers Conference today:

Luncheon Address:  Karen L. Hawkins (Director of the IRS Office of Professional Responsibility)
Practice Tips And War Stories From Tax Court
The Evolving Role of Young Lawyers in Modern Tax and Estate Planning
Ask the Director of the IRS Office of Professional Responsibility

(Hat Tip: Michael Wood.)

January 28, 2014 in Conferences, Tax | Permalink | Comments (0)

IRS Provides Simplified Extension to Make § 2010(c)(5)(A) Portability Election

IRS Logo 2The IRS yesterday released Rev. Proc. 2014-18:

This revenue procedure provides a simplified method for certain taxpayers to obtain an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to make a “portability” election under § 2010(c)(5)(A) of the Internal Revenue Code (Code), by which a decedent’s unused exclusion amount (deceased spousal unused exclusion amount, or DSUE amount) becomes available to apply to the surviving spouse’s subsequent transfers during life or at death. No user fee is required for submissions filed under this revenue procedure.

January 28, 2014 in IRS News, Tax | Permalink | Comments (0)

Law’s Long Bitter Descent and its Tragic Human Toll

PhotoFollowing up on yesterday's post, NY Times:  A Lawyer and Partner, and Also Bankrupt:, The Death Of A Profession? Law’s Long Bitter Descent And Its Tragic Human Toll:

Whether on blogs, in books, in numerous movies and among friends, there have been no shortage of conversations about unhappy lawyers. This New York Times article by James B. Stewart, however, is in its own league. Stewart brutally details the multitude of horrible problems that have metastasized throughout the industry by telling the story of a lawyer tossed from the pinnacle of his profession into the dark abyss of personal bankruptcy. It is a cautionary tale well worth taking to heart.

After I finished reading the depressing (and frighteningly too common) saga depicted in the Times, I felt compelled to jot down my own thoughts on the modern legal profession -- drawn both from my experiences and those of my friends. ...

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January 28, 2014 | Permalink | Comments (8)

The IRS Scandal, Day 264

Monday, January 27, 2014

Barry & Taylor Present Corporate Inversions Today at San Diego

USDJordan Barry (San Diego) and Willard Taylor (Of Counsel, Sullivan & Cromwell; Visiting Professor, San Diego) present Corporate Inversions at San Diego today as part of its Tax Law Speaker Series:

An inversion, also known as an expatriation, is when a U.S. corporation alters its corporate structure so that it ceases to be a U.S. corporation, such as by re-incorporating (through a merger or otherwise) in another jurisdiction. We analyze current law regarding corporate inversions and the policy issues that inversions present. We provide a short history of inversions and the legislative and regulatory efforts enacted to restrain them. We then discuss which countries U.S. corporations currently expatriate to and why. We present some of the tax risks associated with corporate inversions and survey post-inversion tax planning. Finally, we discuss what policy measures Congress and the IRS might consider in response to the most recent wave of inversion transactions.

January 27, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Robinson Delivers Lecture on Skin in the Game: Invisible Taxpayers, Invisible Citizens? Today at Villanova

RobinsonMildred Robinson (Virginia) delivers the Martin Luther King, Jr. Memorial Lecture today at Villanova on Skin in the Game: Invisible Taxpayers, Invisible Citizens?, 59 Vill. L. Rev. ___ (2014):

“Skin in the game” -- some thing that the interested party has at risk -- has previously been the currency demanded of those seeking to influence an outcome in a variety of contexts including business, finance, betting, and war. ... In any case, the phrase with its unmistakable message has also become a part of everyday American political discourse. ... In short, it seems that “skin in the game” is becoming the price for participation in the political process. Personal financial risk – some personal stake -- is demanded of all “players.” The implications are clear: no skin, no play.

That these are very high stakes indeed should go without saying. Broad participation in political debate has long been the aspiration for American governance. Limiting political participation on the basis of economic participation would certainly undermine that goal and arguably compromises the concept of what it means to be a citizen. That the asserted lack of investment may be, at best, disingenuous is (or should be) a matter of concern.

The requirement for “skin in the game” in the context of the recent deficit debate along with the independently developing “concern” that almost fifty percent of Americans pay no federal income tax is but the latest version of the ongoing political “cut-taxes/reduce governmental size” wrangling. It is yet another play on the high political salience of the federal income tax as an institution. The debate, however, also chillingly illustrates how analytically compromised and therefore specious the standard can be.

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January 27, 2014 | Permalink | Comments (0)

Companies Fleeing Taxes Pay CEOs Extra as § 4985 Backfires

Corporate InversionsBloomberg, Companies Fleeing Taxes Pay CEOs Extra as Law Backfires, by Zachary R. Mider

Ten years ago, Congress passed a law intended to penalize chief executive officers whose companies shift their legal addresses to tax havens.

It hasn’t worked out as planned. Companies have found ways around the law that create new rewards for executives. When Actavis Inc. (ACT) changed its incorporation to Ireland in October, the New Jersey-based drugmaker helped CEO Paul Bisaro avoid the law’s bite by handing him more than $40 million of stock as much as three years ahead of its schedule, then promising him an additional $5 million to remain with the company.

The payouts to executives highlight the ineffectiveness of the 2004 law, which contained a series of provisions aimed at reducing the tax benefits of reincorporating overseas. In the past two years, a fresh wave of companies has fled the U.S. system to avoid hundreds of millions of dollars in taxes.

The 2004 law has “clearly been a failure” in halting the tax exodus, said Edward Kleinbard, a professor at University of Southern California’s Gould School of Law. “And it now has the perverse result of putting money into executives’ pockets sooner.”

The law [§ 4985] imposes a special tax of 15 percent on restricted stock and options held by the most senior executives when a company reincorporates outside the U.S. Since the measure took effect, at least seven large companies have disclosed in securities filings that they risked triggering the tax. All took steps to shield their executives from having to pay.

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January 27, 2014 in Tax | Permalink | Comments (0)

2014 USC Tax Institute

USC CoverThe three-day 2014 USC Gould School of Law Tax Institute kicks off today.  The keynote speakers are:

  • Monday:  Steven A. Bank (UCLA)
  • Tuesday:  Lawrence Gibbs (former IRS Commissioner; Miller & Chevalier, Washington, D.C.)
  • Wednesday:  Edward J. McCaffery (USC)

Other Tax Prof speakers include Richard Granat (Florida Coastal), Don Leatherman (Tennessee), Kevin Mohr (Western State), and Jeffrey Pennell (Emory)

January 27, 2014 in Conferences, Tax | Permalink | Comments (0)

Journal of Taxation of Investments Publishes New Issue

Capture 2 The Journal of Taxation of Investments has published its Winter 2013 issue (Vol. 30, No. 2), with these articles:

January 27, 2014 in Scholarship, Tax | Permalink | Comments (0)

NY Times: A Lawyer and Partner, and Also Bankrupt

Owens 3New York Times:  A Lawyer and Partner, and Also Bankrupt, by James B. Stewart:

Anyone who wonders why law school applications are plunging and there’s widespread malaise in many big law firms might consider the case of Gregory M. Owens.

The silver-haired, distinguished-looking Mr. Owens would seem the embodiment of a successful Wall Street lawyer. A graduate of Denison University and Vanderbilt Law School, Mr. Owens moved to New York City and was named a partner at the then old-line law firm of Dewey, Ballantine, Bushby, Palmer & Wood, and after a merger, at Dewey & LeBoeuf.

Today, Mr. Owens, 55, is a partner at an even more eminent global law firm, White & Case. A partnership there or any of the major firms collectively known as “Big Law” was long regarded as the brass ring of the profession, a virtual guarantee of lifelong prosperity and job security.

But on New Year’s Eve, Mr. Owens filed for personal bankruptcy. ...

Mr. Owens is an extreme but vivid illustration of the economic factors roiling the legal profession, although his straits are in some ways unique to his personal situation. ...

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January 27, 2014 in Legal Education | Permalink | Comments (4)

Johnston: Give to Charity, Turn a Profit

Tax Analysys Logo (2013)David Cay Johnston (Syracuse), Give to Charity, Turn a Profit, 71 State Tax Notes 225 (Jan. 27, 2014):

Arizona lawmakers let some donors make charitable gifts in a way that makes the donors richer, a trend sure to spread unless Congress stops it.

All Tax Analysts content is available through the LexisNexis® services.

January 27, 2014 in Tax, Tax Analysts | Permalink | Comments (5)

NY Times: Some States Are Moving to Loosen Their Estate Taxes

New York Times:  Some States Are Moving to Loosen Their Estate Taxes, by Paul Sullivan:

For most of the United States, the estate tax is now something only the very wealthy have to plan for. The federal exemption for an individual this year is now $5.34 million, or $10.68 million for a married couple. And that amount is indexed to inflation, so it will continue to rise.

The exception is in the 16 states, mostly in the North, where state estate taxes remain and ensnare middle- and upper-middle-class residents — the very people the high federal exemption was supposed to protect.

The worst for taxpayers is New Jersey, with the lowest exemption in the country, $675,000 a person, and a rate that tops out at 16 percent. (Rhode Island is second.) New Jersey also has an inheritance tax — for bequests to, say, a niece or friend — which starts to be applied at $500. The rate is 15 percent until the amount reaches $700,000 and then it rises to 16 percent. (One concession: The estate pays the higher of the two taxes, not both.)

This week, New York’s governor, Andrew M. Cuomo, took a step toward bringing the state’s estate tax in line with the federal one. And he is not alone among governors of cold-weather states (along with the District of Columbia) that have realized affluent residents are moving to states without estate taxes (and in some cases, income taxes) and in doing so, depriving their old state of the other taxes they paid, like property, sales and income tax. ...

New York’s current exemption is $1 million a person with a top rate of 16 percent. Governor Cuomo proposed raising the exemption to $5.25 million by 2019, indexing that to inflation and lowering the top rate to 10 percent. (That tax is still in addition to the 40 percent federal estate tax rate.)

New York is not alone in re-evaluating this. Indiana repealed its inheritance tax, and Ohio ended its estate tax. Tennessee is in the process of phasing out its inheritance tax, and Maryland and the District of Columbia are reviewing their estate taxes.

Wall Street Journal Tax Report:  States You Shouldn't Be Caught Dead In: Investors Need to Contend With Growing State Estate and Inheritance Taxes, by Laura Saunders:

Nineteen states and the District of Columbia, home to just over one-third of the U.S. population, levy an estate tax on the assets of people who die or an inheritance tax on heirs receiving assets. Maryland and New Jersey have both, although each allows offsets to prevent double taxation. ...


In January, Congress voted to keep Uncle Sam's inflation-adjusted estate exemption above $5 million per individual ($10 million per married couple). The change excluded almost all Americans from the federal levy, so state-level taxes loom larger by contrast. (This year, the federal exemption is $5.25 million.)

Many states also have far smaller exemptions than Uncle Sam's. The threshold is $1 million for estate taxes in Massachusetts, New York, Oregon and Minnesota, and just $675,000 in New Jersey. Pennsylvania's and Iowa's inheritance taxes have no exemption in some cases. However, all states allow surviving spouses to inherit tax-free from their partners. ... Only Delaware and Hawaii track the U.S.'s $5 million-plus exemption. ... Rates can be high as well. The top rate often is double digits, with Washington state's the highest: 20%. Most state exemptions aren't indexed for inflation, extending the tax's reach over time. ...

Are these taxes effective—that is, do they raise more revenue than they lose when residents ... decide [to] go elsewhere? Economists are divided, and so are the states.

January 27, 2014 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 263

TaxProf Blog Weekend Roundup

Sunday, January 26, 2014

DOJ Appeals Invalidation of § 107 Housing Allowance for 'Ministers of the Gospel'

Housing AllowanceForbes:  Obama Administration Weak on Church State Separation? Clergy Housing Allowance Appeal, by Peter J. Reilly:

The Justice Department has given notice that it will be appealing Judge Barbara Crabb’s decision that the income tax exemption of cash housing allowances paid to “ministers of the gospel” (Code § 107(2)) is unconstitutional. [Freedom From Religion Foundation v. Lew (W.D. Wisc. Nov. 22, 2013)] Freedom From Religion Foundation, the plaintiff in the case along with a couple of its officers who were paid housing allowances they could not exclude, commented on the appeal. ...  The interesting question is whether President Obama thinks that § 107(2) is constitutional.  In the case of DOMA, he ordered the Justice Department to stop defending a statute that they determined was unconstitutional. ... [W]e can be pretty sure that there will be a good flow of amicus briefs from those with a stake in the housing allowance.  

January 26, 2014 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 262

IRS Logo 2Tax Analysts Blog:  Fortress Secrecy – No News Here, by Christopher Bergin (President and Publisher, Tax Analysts):

The latest chapter in Tax Analysts' ongoing efforts to investigate what did and didn’t happen in the IRS’s self-admitted abuse of power in reviewing the tax-exempt applications of mostly conservative groups was written last week. If you didn’t know, that’s not surprising, because while it got some coverage, it didn’t get a lot and in some ways that makes sense. Other than the fact that the IRS released more documents in response to a Freedom of Information Act request, there wasn’t much news in those documents.

The IRS released the documents in response to a court order that Tax Analysts managed to obtain after the IRS had exhausted every excuse it could think of to delay – I was waiting for "the dog ate my homework” – and continued its whining over how mean we were being in asking it to be transparent to the American people. This is the third installment of documents – documents that are training materials – that the IRS has released and, generally, they haven’t been awfully helpful. And we believe that the odds are good that the IRS's response to a document request that the agency itself agreed was important enough to get "expedited" treatment is not really a response at all.

Last week, Tax Analysts issued a press release, and in it I am quoted as saying:

Retrieving these documents was a small victory in our continuous and ever-growing fight for transparency. But it should be noted that what Tax Analysts asked for were training materials, which should be publicly available to begin with. The fact that it took us eight months, a lawsuit, and a court order to get the training materials the agency released is not, I believe, a positive sign on how the IRS is dealing with its problems.

Since then, I have had more time to think about it, and I believe that where we are is exactly where the IRS wants us to be: Nothing newsworthy here, so just move on. I strongly suggest we not move on.

Anyone familiar with my writing knows that I have bent over backwards to give the IRS the benefit of the doubt in this black eye some call the "exemption scandal." I must admit I'm getting a little tired of bending.

Back in the day, as the saying goes, I often referred to the IRS as Fortress Secrecy, a term meant to describe the agency's obsession with hiding as much of its operations as it can get away with. I am not a casual observer, and I have never seen things this bad. Everything the IRS has done in addressing the exemption scandal leads to just one conclusion: that this agency now believes it is accountable to no one other than itself. Who is responsible for that?

Commissioner Koskinen, you have a problem. President Obama, you have a problem. America, we have a problem. An agency with this much power cannot be unaccountable to the citizens it was designed to serve.

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January 26, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Top 5 Tax Paper Downloads

SSRN LogoThis week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list, with some minor reshuffling of the order of the papers within the Top 5:

  1. [203 Downloads]  The Problem with Stuffing Allocations, by Andrew W. Needham (Cravath, New York)
  2. [175 Downloads]  Important Developments in Federal Income Taxation, by Edward A. Morse (Creighton)
  3. [172 Downloads]  What Do We Know About Base Erosion and Profit Shifting? A Review of the Empirical Literature, by Dhammika Dharmapala (Illinos)
  4. [151 Downloads]  Is the Tax Tide Turning Against the Rich?, by Bruce Bartlett
  5. [141 Downloads]  Sunshine, Stakeholders, and Executive Pay: A Regression-Discontinuity Approach, by Brian D. Galle (Boston College) & David I. Walker (Boston University)

January 26, 2014 in Scholarship, Tax | Permalink | Comments (0)

Solving the Higher Ed Crisis With a Federal Jobs Guarantee

Slate: Raising the Floor, Not Just the Ceiling: To Reform Higher Ed, We Need a Federal Job Guarantee, by Tressie McMillan Cottom (Ph.D. candidate (Sociology), Emory):

100% JobProbably the single best proposal for higher education isn’t a higher-education proposal at all. A federal job guarantee has moved from fringe economic proposal to mainstream consideration. A recent Rolling Stone article may be the general-awareness tipping point, but it isn’t a new idea. For years there has been a steady drumbeat for a wage guarantee that would raise the floor on poverty and economic insecurity. Although you won’t hear much about it from sanitized memorials, Martin Luther King Jr. advocated for a guaranteed living wage. A federal job guarantee would reconfigure the emotional and financial cost of going to college. When living-wage jobs are contracting, people are willing to pay a premium for any leg up in the job market. Choosing college out of desperation justifies rising tuitions and predatory for-profit colleges that market themselves as insurance against job insecurity.

Which all explains why a job guarantee, which is usually considered a labor policy, could also be an education policy. The majority of incoming college freshmen are going to college because they want a job—not just any job, but a good job. They are not alone. People weigh the emotional and financial cost of college against how badly they want a good job. Everyone deserves to choose college without desperation shaping their choices. A floor beneath wages could give that freedom to more Americans. Economists Sandy Darity and Darrick Hamilton have gone further, arguing that a job guarantee, if carefully designed, could also reduce racial discrimination in the labor market. African-Americans and Hispanics at every level of educational attainment earn less than white workers. Essentially, a job guarantee would subsidize the competitive price for minority labor. It is difficult to imagine that doing anything but improving the educational returns for minority students.

Bloomberg op-ed:  Why Uncle Sam Can't Guarantee College Grads a Job, by Megan McArdle:

[T]his is a terrible idea. Over two million people are awarded an associate degree or higher every year in the U.S. Let’s somewhat arbitrarily set the price of a “good job” for a recent graduate at $35,000 a year -- the professional school folks will want more, but the associate degree people will probably demand less, and hopefully it all comes out in the wash. Still, that’s at least a $70 billion program we’ve got here.

Of course, only 53 percent of college grads are underemployed or unemployed. So maybe it’s only a $35 billion a year program. But then, that’s just the first year. Next year there will also be more than 2 million new grads facing a notso-hotso labor market. Now it’s a $70 billion program again. And then a $105 billion program…assuming, of course, that we don’t get more folks flooding into college when they realize that at the end of your college course, a guaranteed job is waiting for you that pays a lot more than whatever you’d otherwise be doing.

This would be great for college professors -- a profession that I take it Tressie McMillan Cottom, a Ph.D. candidate, aspires to join. But it would be a disaster for the rest of the taxpayers

January 26, 2014 in Legal Education | Permalink | Comments (0)

Saturday, January 25, 2014

July 2013 California Bar Exam Results

California State BarThe July 2013 California bar passage rates by school are out. Here are the results for first-time test-takers for the 21 California ABA-approved law schools, along with each school's U.S. News ranking (California and overall):

Bar Pass

Rank (Rate)



US News Rank

CA (Overall)

1 (91.0%)


1 (2)

2 (88.2%)


3 (17)

3 (87.7%)


8 (68)

4 (85.5%)


4 (18)

5 (85.3%)


2 (9)

6 (85.0%)


5 (38)

7 (80.6%)


7 (61)

8 (77.5%)



9 (77.1%)


12 (126)

10 (76.1%)


6 (48)


Statewide Ave. (CA ABA-Approved)

11 (75.3%)

Western State

Tier 2

12 (74.7%)

San Francisco

13 (144)

13 (74.6%)

San Diego

8 (68)

14 (74.2%)


Tier 2

15 (73.0%)

Santa Clara

10 (96)

16 (68.5%)

California Western

Tier 2

17 (67.7%)

La Verne


18 (66.9%)


11 (124)

19 (64.7%)


Tier 2

20 (56.4%)

Golden Gate

Tier 2

21 (50.3%)

Thomas Jefferson

Tier 2

Here are the five out-of-state schools with the highest and lowest pass rates:

  • 95.9%:  Harvard (98 test-takers)
  • 95.7%:  NYU (47)
  • 94.7%:  Cornell (19)
  • 94.1%:  Boston University (17)
  • 93.3%:  Yale (30)
  • 91.7%:  Illinois (12), University of Washington (12)
  • 89.5%:  Texas (19)
  • 88.9%:  Pennsylvania (27)
  • 87.8%:  Michigan (49)
  • 25.0%:  Howard (8), Syracuse (8)
  • 22.2%:  Indiana-Indianapolis (9), Loyola-Chicago (9), UNLV (9)
  • 21.4%:  Arizona (14)
  • 21.0%:  Phoenix (19)
  • 12.5%:  Thomas Cooley (16)
  • 10.0%:  Florida Coastal (10), Suffolk (10)

Prior TaxProf Blog coverage:

January 25, 2014 in Law School Rankings, Legal Education | Permalink | Comments (5)

Yeshiva University's Bonds Downgraded to 'Junk'

YeshivaInside Higher Ed:  Keeping the Faith:

Moody’s Investors Service has said bonds issued for Yeshiva – a highly respected Jewish university in Manhattan – are junk.

But administrators say they are working diligently to make the university sustainable, and some faculty, driven by the notion that the university is unique and has assets and a future beyond the eye-popping short-term math, believe the institution is or can eventually be solid.

Faculty have dealt with a half-decade of frozen pay – though they received a slight increase this year – and a decrease in the university’s contributions to their pension funds. Faculty searches are in jeopardy. President Richard Joel is reportedly ready to sell buildings and cut programs. ...

Yeshiva’s model may be preferable for some Jewish families, particularly parents of high-achieving female students, said Ruth A. Bevan, the director of Yeshiva’s international affairs program. The party schools of the day are just not a good fit for the children of modern Orthodox parents. “I don’t think there is any Orthodox parent that wants put to his or her child into that kind of situation, so YU remains a haven, it’s a safe environment for students to be in,” Bevan said. “We don’t have drugs, we don’t have alcohol, we don’t have staying out all night – that just doesn’t happen at the university.” ...

Moody's sees an institution without much liquidity, that relies on credit to support operations and with "severe cash flow deficits leading to financial resource erosion." A draft of Yeshiva's 2013 financial statements show the university spent $716 million last year -- a whopping $146 million more than it brought in, and a shortfall the size of some smaller institutions' entire budgets.

University officials told Moody’s they expect an “equally poor performance” this year and at least three more years of shortfalls, which come on top of several years of previous shortfalls that average about 16 percent of the institution's operating budget. Moody’s said the shortfalls were driven by operations at Yeshiva’s Albert Einstein College of Medicine campus.

Yeshiva University's 2012 tax return lists President Joel's compensation as $1,242,424, and eleven other salaries in excess of $600,000.

January 25, 2014 in Legal Education | Permalink | Comments (3)

ABA Tax Section Midyear Meeting

ABA Tax Section Logo (2012)The ABA Tax Section midyear meeting concludes today in Phoenix. The full program is here. Tax Profs with speaking roles today include:

  • Current Developments in Individual, Corporate, Partnership and Estate & Gift Taxation:  Elaine Gagliardi (Montana), Bruce McGovern (South Texas), Marty McMahon (Florida)
  • Employee Benefits:  Kathryn Kennedy (John Marshall-Chicago)
  • Pro Bono & Tax Clinics:  Leslie Book (Villanova), Michelle Drumbl (Washington & Lee), Keith Fogg (Villanova), Jan Pierce (Lewis & Clark), George Willis (Chapman)
  • Sales, Exchanges & Basis:  Brad Borden (Brooklyn), Pat Cain (Santa Clara), Roberta Mann (Oregon)
  • Tax Practice Management: Michael Lang (Chapman)

January 25, 2014 in ABA Tax Section, Tax | Permalink | Comments (0)

The IRS Scandal, Day 261

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January 25, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Friday, January 24, 2014

Upward Mobility in the United States Has NOT Declined

EqualityNew York Times, Upward Mobility Has Not Declined, Study Says:

The odds of moving up — or down — the income ladder in the United States have not changed appreciably in the last 20 years, according to a large new academic study that contradicts politicians in both parties who have claimed that income mobility is falling.

Both President Obama and leading Republicans, like Representative Paul Ryan, have argued recently that the odds of climbing the income ladder are lower today than in previous decades. The new study, based on tens of millions of anonymous tax records, finds that the mobility rate has held largely steady in recent decades, although it remains lower than in Canada and in much of Western Europe, where the odds of escaping poverty are higher.



Raj Chetty (Harvard), Nathaniel Hendren (Harvard), Patrick Kline (UC-Berkeley) & Emmanuel Saez (UC-Berkeley), Where Is the Land of Opportunity? The Georgaphy of Intergenerational Mobility in the United States:

We use administrative records on the incomes of more than 40 million children and their parents to describe three features of intergenerational mobility in the United States. First, we characterize the joint distribution of parent and child income at the national level. The conditional expectation of child income given parent income is linear in percentile ranks. On average, a 10 percentile increase in parent income is associated with a 3.4 percentile increase in a child's income. Second, intergenerational mobility varies substantially across areas within the U.S. For example, the probability that a child reaches the top quintile of the national income distribution starting from a family in the bottom quintile is 4.4% in Charlotte but 12.9% in San Jose. Third, we explore the factors correlated with upward mobility. High mobility areas have (1) less residential segregation, (2) less income inequality, (3) better primary schools, (4) greater social capital, and (5) greater family stability. While our descriptive analysis does not identify the causal mechanisms that determine upward mobility, the new publicly available statistics on intergenerational mobility by area developed here can facilitate future research on such mechanisms.

Raj Chetty (Harvard), Nathaniel Hendren (Harvard), Patrick Kline (UC-Berkeley) & Emmanuel Saez (UC-Berkeley) & Nicholas Turner (U.S. Treasury Department, Office of Tax Analysis), Is the United States Still a Land of Opportunity? Recent Trends in Intergenerational Mobility:

We present new evidence on trends in intergenerational mobility in the U.S. using administrative earnings records. We find that percentile rank-based measures of intergenerational mobility have remained extremely stable for the 1971-1993 birth cohorts. For children born between 1971 and 1986, we measure intergenerational mobility based on the correlation between parent and child income percentile ranks. For more recent cohorts, we measure mobility as the correlation between a child’s probability of attending college and her parents’ income rank. We also calculate transition probabilities, such as a child’s chances of reaching the top quintile of the income distribution starting from the bottom quintile. Based on all of these measures, we find that children entering the labor market today have the same chances of moving up in the income distribution (relative to their parents) as children born in the 1970s. However, because inequality has risen, the consequences of the “birth lottery” – the parents to whom a child is born – are larger today than in the past.

January 24, 2014 in Tax | Permalink | Comments (0)

Weekly Tax Roundup

January 24, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Bankman Presents Using the 'Smart Return' to Reduce Tax Evasion Today at San Diego

BankmanJoseph Bankman (Stanford) presents Using the "Smart Return" to Reduce Tax Evasion (with Clifford Nass (Stanford) & Joel Slemrod (Michigan)) at San Diego today as part of its Tax Law Speaker Series:

Tax evasion costs federal, state and local governments over 400 billion dollars a year. Compliance efforts have centered on the monetary payoff of evasion. Evasion has been reduced through third-party reporting, which increases the odds of detection (in some cases, to a near-certainty). Audits and increased penalties have also been used to reduce evasion. At the margin, however, these methods have proven too expensive or politically unpopular to reduce substantially this core residue of evasion.

The explosion of research in social psychology over the past few decades concerning motivation and deception, along with industry experience with data-driven interactive systems, suggests a different approach to the problem: redesign the tax forms and on-line filing process to elicit more truthful responses from taxpayers. To illustrate the potential of this approach, in this paper we propose two different categories of changes that merit testing through pilot studies. The first involves changing the wording on existing returns to increase the psychological cost of evasion and increase the perceived expectation of detection. The second uses on-line "conversational agents" to ask adaptive questions. Adaptive questions incorporate information known about the taxpayer, including information from previous questions. Adaptive questioning is commonly used in e-commerce because it is more efficient. In the tax context, it would allow the IRS to ask more focused questions, which should reduce evasion and audit costs. It could also benefit taxpayers by reducing filing time and eliminating the risk of subsequent audit. Adaptive questioning that is part of a data-driven system allows for continuous experimentation and real-time modification of algorithms to incorporate the results of that experimentation. A data-driven adaptive questioning system can incorporate and optimize a mix of taxpayer filing experience and revenue need. It can co-exist with the existing tax preparation industry, including commercial e-filing systems such as Turbo Tax. In the future, as now, the industry can help clients plan for taxes, take advantage of deductions and complete returns.

January 24, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)