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Editor: Paul L. Caron
Pepperdine University School of Law

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Monday, April 14, 2014

NY Times: Buyers Evade State Taxes by Loaning Purchased Art to Museums in Non-Tax States

New York Times:  Buyers Find Tax Break on Art: Let It Hang Awhile in Oregon:

Collectors who buy art in one state but live in another can owe thousands, tens of thousands, even millions of dollars in state “use taxes”: taxes often incurred when someone ships an out-of-state purchase home. But if they lend the recently purchased work first to museums ..., located in a handful of tax-friendly states, the transaction is often tax-free.

Beyond the benefit to museums, this lucrative, little-known tax maneuver has produced a startling pipeline of art moving across the United States as collectors cleverly — and legally — exploit the tax codes. ... [L]oans — which rarely extend beyond a few months — also flow into other museums in Oregon, and occasionally New Hampshire and Delaware, all states that have neither a sales nor a use tax. ...

ArtPortland officials say collectors lend art for a variety of reasons, not just for the tax break. But only a few weeks after the painting [Three Studies of Lucian Freud] sold for a stunning $142 million last fall at Christie’s in New York, it landed, to the surprise of many, in the Portland museum, where it drew large crowds for 15 weeks. By shipping the painting first to Oregon, instead of her home in Las Vegas, the new owner, Elaine Wynn, may be eligible to avoid as much as $11 million in Nevada use taxes, though it is not clear whether she intends to take advantage of the break.

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April 14, 2014 in Tax | Permalink | Comments (3)

Daddy's Home!

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April 14, 2014 in Legal Education, Tax | Permalink | Comments (0)

The IRS Scandal, Day 340

IRS Logo 2National Review:  Woodward on IRS Scandal: ‘There’s Obviously Something Here’:

The Washington Post’s Bob Woodward knows a thing or two about investigating Washington scandals, and he believes the Internal Revenue Service’s targeting of conservative groups merits a deeper look.

“We should dig in to it — there should be answers,” he said on Fox News Sunday. “For the president to take that position is very, very unusual and say there’s not a ’smidgen of evidence here.’”

Woodward raised questions about the Republican House committees’ ability to properly and effectively carry out such an investigation. He laid out what his approach would be to dealing with stonewalling from Lois Lerner, as well as the administration, including speaking with others close to the situation rather than just the major players. But Woodward also warned of congressional Republicans’ crossing the line in their accusations of Lerner and others involved.

“There’s obviously something here,” he explained. “The question is, does this committee know how to investigate.”

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April 14, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, April 13, 2014

Law School Matriculants by Major, LSAT, & UGPA

MajorFollowing up on Tuesday's post, College Majors That Produce the Highest (and Lowest) LSATs and UGPAs:  Derek Muller (Pepperdine), Sorting Law School Matriculants by Major, LSAT, & UGPA:

Here are the LSAT and UGPA for matriculants to law school. As with the applicants post, majors with at least 150 self-reported matriculants are included.

As before, here are the Top 10 and Bottom 10 (the full list of 37 majors is here):

Top 10


Bottom 10

April 13, 2014 in Legal Education | Permalink | Comments (0)

Top 5 Tax Paper Downloads

Caron Family 2013-14 House Group

One of the joys of working at Pepperdine and living on campus is the opportunity to interact in a more intimate way with students.  In this our first full academic year at Pepperdine, my wife and I had the privilege of hosting a house group organized by the campus church and open to any undergraduate student.  Each Thursday night, my wife and I welcomed 12 undergrads into our home for dinner and fellowship.  Last Thursday was our last evening with Brianna, Christina, Samantha #1, Samantha #2, Jake, Peter, Garrett, Brooke, Jesssica, Joel, Justina, and Andrew (not pictured).  It was a great year, and we are very grateful to have had the chance to do life together with these wonderful young men and women. We undoubtedly fell short of the house group goal to create "a space so abundant in forgiveness, mercy, grace and accountability that it invites and compels honest confession and true vulnerability," but we gave it our best shot.


April 13, 2014 in Legal Education | Permalink | Comments (3)

The IRS Scandal, Day 339

Saturday, April 12, 2014

Law School Rankings: Grads With Bar Passage-Required or J.D.-Advantage Jobs

Following up on two of my previous posts:

Derek Muller (Pepperdine), Legal Employment Outcomes in 2013:

[The following chart] includes the "full weight" positions as determined by U.S. News & World Report, which are full-time, long-term, bar passage-required or J.D.-advantage positions. It includes the 2015 USNWR peer score, the 2013 full-time, long-term, bar passage-required and J.D.-advantage positions, along with the year-over-year increase or decline in points from the 2012 rate. It then lists the raw number of students who obtained such positions, along with a parenthetical notation of how many of those positions were school-funded. The same is listed for 2012.

The full ranking of the 198 law schools is here.  The Top 20 are:


April 12, 2014 in Law School Rankings, Legal Education | Permalink | Comments (1)

Korb Presents Forty Years in Tax at Case Western

Korb (2014)Donald L. Korb (Partner, Sullivan & Cromwell; former IRS Chief Counsel) delivered the Norman A. Sugarman Memorial Lecture on 40 Years in Tax: A Look Backward (As Well As a Look Forward) at Case Western last week:

Don Korb has been involved in the practice of tax law for over 40 years, both as a private practitioner and as a tax administrator. His talk will be about how the U.S. federal income tax system has changed over his career and how the role of tax advisors/practitioners has evolved over that same time period. He will speak from the standpoint of someone who has moved back and forth between the private and public sectors and not only has sat on “both sides of the table” but has also occupied leadership positions at the IRS (Assistant to the Commissioner of Internal Revenue in the mid-1980’s and Chief Counsel for the Internal Revenue Service from April 2004 through December 2008) which allowed him to play a significant role in some of the changes to the tax system and the evolution of the role of tax advisors/practitioners which have occurred since he began practicing law in 1974.

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April 12, 2014 in Tax | Permalink | Comments (0)

IRS Debunks Tax Protester Arguments

IRS Logo 2The IRS yesterday released (IR-2014-51) its annual update of The Truth about Frivolous Tax Arguments:

This document describes and responds to some of the common frivolous arguments made by individuals and groups who oppose compliance with the federal tax laws. The first section groups these arguments under five general categories, with variations within each category. Each contention is briefly explained, followed by a discussion of the legal authority that rejects the contention.

A. The Voluntary Nature of the Federal Income Tax System

  1. Contention: The filing of a tax return is voluntary
  2. Contention: Payment of tax is voluntary
  3. Contention: Taxpayers can reduce their federal income tax liability by filing a “zero return”
  4. Contention: The IRS must prepare federal tax returns for a person who fails to file
  5. Contention: Compliance with an administrative summons issued by the IRS is voluntary

B. The Meaning of Income: Taxable Income and Gross Income

  1. Contention: Wages, tips, and other compensation received for personal services are not income
  2. Contention: Only foreign-source income is taxable
  3. Contention: Federal Reserve Notes are not income
  4. Contention: Military retirement pay does not constitute income

C. The Meaning of Certain Terms Used in the Internal Revenue Code

  1. Contention: Taxpayer is not a “citizen” of the United States, thus not subject to the federal income tax laws
  2. Contention: The “United States” consists only of the District of Columbia, federal territories, and federal enclaves
  3. Contention: Taxpayer is not a “person” as defined by the Internal Revenue Code, thus is not subject to the federal income tax laws
  4. Contention: The only “employees” subject to federal income tax are employees of the federal government

D. Constitutional Amendment Claims

  1. Contention: Taxpayers can refuse to pay income taxes on religious or moral grounds by invoking the First Amendment
  2. Contention: Federal income taxes constitute a “taking” of property without due process of law, violating the Fifth Amendment
  3. Contention: Taxpayers do not have to file returns or provide financial information because of the protection against self-incrimination found in the Fifth Amendment
  4. Contention: Compelled compliance with the federal income tax laws is a form of servitude in violation of the Thirteenth Amendment
  5. Contention: The Sixteenth Amendment to the United States Constitution was not properly ratified, thus the federal income tax laws are unconstitutional
  6. Contention: The Sixteenth Amendment does not authorize a direct nonapportioned federal income tax on United States citizens

E. Fictional Legal Bases

  1. Contention: The Internal Revenue Service is not an agency of the United States
  2. Contention: Taxpayers are not required to file a federal income tax return, because the instructions and regulations associated with the Form 1040 do not display an OMB control number as required by the Paperwork Reduction Act
  3. Contention: African Americans can claim a special tax credit as reparations for slavery and other oppressive treatment
  4. Contention: Taxpayers are entitled to a refund of the Social Security taxes paid over their lifetime
  5. Contention: An “untaxing” package or trust provides a way of legally and permanently avoiding the obligation to file federal income tax returns and pay federal income taxes
  6. Contention: A “corporation sole” can be established and used for the purpose of avoiding federal income taxes
  7. Contention: Taxpayers who did not purchase and use fuel for an off-highway business can claim the fuels tax credit
  8. Contention: A Form 1099-OID can be used as a debt payment option or the form or a purported financial instrument may be used to obtain money from the Treasury

The second section responds to some of the common frivolous arguments made in collection due process cases brought pursuant to sections 6320 and 6330. These arguments are grouped under ten general categories and contain a brief description of each contention followed by a discussion of the correct legal authority. A final section explains the penalties that the courts may impose on those who pursue tax cases on frivolous grounds. The court opinions cited as relevant legal authority illustrate how these arguments are treated by the IRS and the courts. Note that courts often decline “to refute [frivolous] arguments with somber reasoning and copious citation of precedent” for a variety of reasons. Wnuck v. Commissioner, 136 T.C. 498 (2011) (quoting Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984)).

This document, including the relevant legal authorities cited, is not intended to provide an exhaustive list of frivolous tax arguments. Merely because a frivolous argument is not included in this document does not mean that it is not frivolous. Taxpayers may not rely on frivolous arguments to avoid or evade federal taxes. The government and courts are not precluded from penalizing taxpayers who raise a frivolous argument not addressed in this document.

April 12, 2014 in IRS News, Tax | Permalink | Comments (1)

The IRS Scandal, Day 338

IRS Logo 2Tax Analysts Blog: The Gift That Is Lois Lerner, by Christopher Bergin:

[W]hen you see all of what the Ways and Means Committee compiled about Lerner, it hardly paints a pretty picture of her. To me, it certainly shows that she did many stupid things and that she probably abused her power as a high-ranking IRS official. Did she break the law? I don’t know, but that is why I agree with Ways and Means Republicans that there should be a Justice Department investigation – although I thought one was already going on. ...

The bad behavior going on at the IRS – whether it is politically motivated or not – does not stop with Lerner. It has to go higher than that. How much higher, I do not know, but that’s yet another reason why we need an investigation – a real one.

And that is why I think the Ways and Means Republicans are doing the IRS – and, perhaps, the Obama administration – a huge favor. Making Lerner the scapegoat changes the conversation. It makes it about her. It’s not about her. It’s about the IRS. Something bad happened here. And however bad her behavior, the problem isn’t Lerner. The problem is a culture that allows what she did to continue and that probably allows behavior that’s much, much worse. That is what new IRS Commissioner John Koskinen must deal with.

And here is where I agree to some degree with Ways and Means Democrats. The GOP committee members have become so obsessed with the political dimensions of this scandal that they are forgetting their job -- a job they actually explain at the top of the letter to the DOJ. Their job is not to fix blame; it’s to fix the problem. Their job is not to destroy the IRS; it is to protect the rights of ALL American taxpayers. This scandal isn’t about Lerner; it’s about our tax system. If all of this goes to the White House, so be it. But it’s about getting to the truth, not getting to the president of the United States. You’d think the GOP would have learned that from Monica Lewinsky. Think what you want about that so-called scandal, but I think this so-called scandal poses a far bigger threat to the country.

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April 12, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Friday, April 11, 2014

Obama and Biden Release Their 2013 Tax Returns

Obama 2013 Tax Return

President Obama and Vice-President Biden today released their 2013 tax returns. Here are charts putting the 2013 returns in context with their earlier returns:





Charitable Gifts












































































Charitable Gifts


















































































April 11, 2014 in Tax | Permalink | Comments (8)

Tax Salience Panel at Law & Econ Conference Today at Duke

TriangleThere is a tax panel at today's 5th Annual Triangle Law & Econ Conference on Rethinking Regulation and Reform: Behavioral Economics and the Regulatory State at Duke:

Tax Salience

  • Peter Barnes (Caplin & Drysdale, Washington, D.C.)
  • Jasper Cummings (Alston & Bird, Washington, D.C. & Raleigh, NC)
  • David Gamage (UC-Berkeley)
  • Kathleen Thomas (North Carolina)
  • Larry Zelenak (Duke) (facilitator) 

April 11, 2014 in Conferences, Tax | Permalink | Comments (0)

Weekly Tax Roundup

 Weekly Roundup

April 11, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

April 11, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Student Tax Note Roundup

Crawford & Blattmachr: Planning With Portability Do-Overs

Tax Analysys Logo (2013)Bridget J. Crawford (Pace) & Jonathan G. Blattmachr (Interactive Legal Systems), Planning With Portability Do-Overs (But Only for a Limited Time), 143 Tax Notes 117 (Apr. 7, 2014):

In this article, the authors discuss Rev. Proc. 2014-18, in which the IRS provides some estates with a simplified method for making a portability election and having that election treated as timely even though the statutory deadline may have passed. The authors suggest that once the estate tax exemption of a first spouse to die has been preserved under Rev. Proc. 2014-18, an effective estate plan for the surviving spouse may include creating and funding a lifetime trust structured as a grantor trust.

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

Bank: Historical Perspective on the Corporate Interest Deduction

Steven A. Bank (UCLA), Historical Perspective on the Corporate Interest Deduction, 18 Chapman L. Rev. ___ (2014):

One of the so-called “pillars of sand” in the American business tax structure is the differential treatment of debt and equity. Corporations may deduct interest payments on their debt, but may not deduct dividend payments on their equity. This “ancient and pernicious” feature is criticized because it distorts corporate financing choices and inevitably leads to line drawing problems as the government engages in a futile chase to catch up with the latest financial innovation. Both the Obama administration and new Senate Finance Committee Chairman Ron Wyden have proposed capping the deductibility of corporate interest to mitigate these concerns. This has led commentators to come to the defense of the full corporate interest deduction, relying in part on a historical justification based on the origins of the corporate income tax as a proxy for reaching shareholder income. According to this argument, an entity-level tax was necessary to reach income that might be distributed as a dividend, since it could otherwise be avoided by deferring the dividend, but an entity-level tax was not necessary to reach income that might be paid out as interest, since interest payments were fixed and regular and non-deferrable. Therefore, interest payments were made deductible, but dividend payments were not.

This Essay, prepared in connection with a Chapman Law Review symposium on Business Tax Reform, contends that although there may be appropriate arguments in favor of maintaining a full corporate interest deduction, the historical premise for the origins of the corporate income tax system is not one of them. Corporate interest was deductible and dividend payments were not both in 1894, when deferral was not a concern because corporations routinely distributed all of their profits each year, and in 1909, when there was no individual income tax and therefore no tax incentive to retain earnings.

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

The IRS Scandal, Day 337

CNN:  Should Lois Lerner Be Held In Contempt?:

CNN Crossfire

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

Wiedenbeck: Recovering the Tax Shelter Limitation Aspect of ERISA

Peter J. Wiedenbeck (Washington University), 'Ninety-Five Percent of Them Will Not Be Missed': Recovering the Tax Shelter Limitation Aspect of ERISA, 6 Drexel L. Rev. ___ (2014):

ERISA is justly hailed as a paramount achievement in labor and social welfare legislation. The worker-protective elements of ERISA get most of the attention. Yet Congress also emphasized that employee benefit plans “substantially affect the revenue of the United States because they are afforded preferential Federal tax treatment” which justified a coordinate declaration of policy, “to protect...the Federal taxing power”. ERISA § 2(a), (c), 29 U.S.C. § 1001(a), (c). The tax-subsidized but largely unregulated regime that preceded ERISA facilitated widespread tax abuse. Reducing wasted revenue by focusing preferential tax treatment on plans providing retirement savings to a broad cross-section of the workforce — not just to the business owners — is the often-overlooked dual objective of ERISA. This article seeks to recover the tax shelter limitation aspect of ERISA. Part II briefly explains the origins of ERISA’s tax controls. Part III surveys ERISA’s accomplishments and limitations in suppressing pension tax shelters. Part IV describes later momentous developments to which ERISA pointed the way.

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

Tax Increment Financing Districts and Taxable Properties

Randall K. Johnson, How Tax Increment Financing (TIF) Districts Correlate With Taxable Properties, 34 N. Ill. U. L. Rev. 39 (2013):

This article deals with Tax Increment Financing (TIF), which is a popular economic development tool. TIF borrows against future tax revenues to subsidize current development projects. In Illinois, this economic development tool is justified by its promise to expand the local tax base: by increasing tax revenues, increasing the number of tax payers or increasing the number of taxable properties in the area. However, it is not clear that TIF delivers on its promise. A new dataset, which is introduced in this article, helps to clarify the issue. It does so by providing information about the number of TIF Districts in suburban Cook County, Illinois, the number of taxable properties therein and the nature of the relationship between these variables. If these variables move together, which would indicate that TIF Districts positively correlate with taxable properties, this article will find that TIF delivers on its promise.

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

Thursday, April 10, 2014

ABA Releases 'Bleak' Jobs Data for 2013 Law School Grads

ABA Logo 2Press Release, ABA Releases Class of 2013 Law Graduate Employment Data:

The ABA Section of Legal Education and Admissions to the Bar today released data on law graduate employment outcomes for the class of 2013. The data covers the employment status of the 2013 graduates of ABA-approved law schools as of Feb. 15, 2014, approximately nine months after spring 2013 graduation.

Law schools reported that 57% of graduates of the class of 2013 were employed in long-term, full-time positions where bar passage was required, compared with 56.2% for the class of 2012. In addition, 10.1% of graduates of the class of 2013 were employed in long-term, full-time positions where holding a J.D. provides an advantage in obtaining or performing the job, compared with 9.5% for the class of 2012.

Schools reported outcomes for 97.7% of their 2013 graduates. The size of the 2013 graduating class was the largest ever at 46,776, slightly larger than the 2012 class of 46,364. The data show both more jobs and a slightly higher percentage of graduates obtaining jobs in which a J.D. was required or considered relevant.

The ABA released this chart with aggregate data breakdowns and comparisons to the previous year, along with definitions of the various categories:

ABA Chart_Page_1

The ABA also released individual pdfs for each of the ABA-approved law schools, as well as a spreadsheet with all of the data for each of the schools.

Law School Transparency, New Law School Jobs Data Indicate Flat Entry-Level Legal Market:

The national full-time, long-term legal rate is 57.0%.

  • By definition these jobs:
    • require bar passage or are judicial clerkships; and
    • require 35+ hours per week and have an expected duration of at least one year.
  • At 64 law schools (31.8%), 50% of graduates or less had these legal jobs.
    • 33 schools (16.4%) had 40% or less;
    • 13 schools (6.5%) had 33% or less.
  • 103 schools (51.2%) exceeded the national rate of 57.0%.
    • 51 schools (25.4%) had 66% or more;
    • 21 schools (10.4%) had 75% or more;
    • 5 schools (2.5%) had 90% or more.

The national full-time, long-term legal rate, excluding jobs funded by law schools, is 55.3%.

  • The richest schools were able to hire their struggling graduates full time and long term; only 18 schools (9.0%) paid 5.0% or more of their graduates for long-term, full-time jobs that required bar passage.
    • 50% of these schools (9) were in the top 20 on the full-time, long-term rate without the benefit of the school-funded jobs; including school-funded jobs in the rate puts 67% of those schools (12) in the top 20.
    • Excluding school-funded jobs from the full-time, long-term legal rate caused all 5 schools over 90% to drop below that threshold.
  • Although the absolute number of full-time, long-term legal jobs funded by schools was relatively small (775, 2.0% of all employed graduates), there were 50% more of these jobs this year compared to last year.

Law School Transparency also released individual profiles of each law school, as well as sortable rankings for all law schools by various categories, including its "employment score" (full-time, long-term, bar passage-required jobs, excluding self-employed solo practitioners).

Matt Leichter ranks all 201 law schools by full-time, long-term, bar passage-required jobs, excluding law school-funded jobs.  Here are the Top 50, along with each school's U.S. News Ranking:

Percent Employed Full-Time/Long-Term Bar Passage-Required Jobs (Excluding Law-School-Funded Jobs)
 Law School (US News Rank)20122013Change
1 COLUMBIA (4) 85.3% 88.3% 3.0%
2 CHICAGO (4) 87.0% 86.5% -0.5%
3 NEW YORK UNIVERSITY (6) 79.0% 86.2% 7.2%
4 PENNSYLVANIA (7) 91.9% 85.7% -6.1%
5 DUKE (10) 84.9% 85.1% 0.2%
6 STANFORD (3) 89.0% 85.1% -3.9%
7 HARVARD (2) 84.6% 84.9% 0.4%
8 CORNELL (13) 85.3% 81.3% -3.9%
9 MICHIGAN (10) 81.7% 81.2% -0.5%
10 VIRGINIA (8) 79.7% 79.7% 0.0%
11 UC-BERKELEY (9) 85.9% 78.4% -7.5%
12 VANDERBILT (16) 71.4% 78.2% 6.7%
13 NORTHWESTERN (12) 75.9% 77.5% 1.5%
14 IOWA (27) 71.4% 76.3% 5.0%
15 TEXAS (15) 75.3% 75.1% -0.2%
16 KENTUCKY (58) 74.1% 74.4% 0.3%
17 YALE (1) 77.0% 74.4% -2.6%
18 NEW MEXICO (72) 67.2% 73.7% 6.5%
19 GEORGETOWN (13) 66.8% 72.4% 5.6%
20 SOUTHERN ILLINOIS (Tier 2) 52.3% 72.1% 19.7%
21 ALABAMA (23) 77.3% 71.7% -5.6%
22 SMU (42) 75.1% 70.9% -4.2%
23 NOTRE DAME (26) 65.3% 70.7% 5.3%
24 BAYLOR (51) 67.1% 70.5% 3.4%
25 FLORIDA STATE (45) 66.4% 69.6% 3.2%
26 NEW HAMPSHIRE (93) 60.9% 69.2% 8.3%
27 MONTANA (121) 61.0% 69.1% 8.2%
28 SETON HALL (68) 65.8% 68.9% 3.1%
29 GEORGIA (29) 69.4% 68.4% -1.1%
30 MINNESOTA (20) 64.3% 68.2% 3.9%
31 SOUTH CAROLINA (93) 70.4% 68.2% -2.2%
32 ARKANSAS, FAYETTEVILLE (61) 70.5% 68.2% -2.3%
33 NORTH CAROLINA (31) 67.6% 68.1% 0.6%
34 UNIVERSITY OF WASHINGTON (24) 68.0% 67.8% -0.2%
35 LSU (72) 76.7% 67.4% -9.3%
36 WYOMING (129) 56.0% 67.1% 11.1%
37 COLORADO (43) 51.4% 67.0% 15.6%
38 SOUTH TEXAS (146) 71.4% 67.0% -4.4%
39 OHIO NORTHERN (Tier 2) 59.4% 66.7% 7.3%
40 UCLA (16) 70.0% 66.6% -3.4%
41 OKLAHOMA CITY (Tier 2) 53.6% 66.5% 12.8%
42 FLORIDA (49) 56.8% 66.4% 9.6%
43 OKLAHOMA (58) 66.5% 66.3% -0.2%
44 NEBRASKA (54) 65.6% 66.1% 0.5%
45 WASHINGTON UNIVERSITY (18) 67.0% 66.0% -1.0%
46 MERCER (104) 72.5% 65.6% -6.9%
47 UC-DAVIS (36) 60.9% 65.3% 4.4%
48 TENNESSEE (72) 65.2% 65.3% 0.1%
49 LOUISVILLE (87) 66.9% 64.8% -2.1%
50 BYU (36) 63.3% 64.6% 1.4%

Seventeen schools ranked in the Top 50 by U.S. News are ranked outside the Top 50 for full-time, long-term, bar passage-required jobs, excluding law school-funded jobs:

Employment Rank

Law School

US News Rank





Boston College









George Washington






Arizona State



Boston University






Ohio State









Wake Forest



Washington & Lee



William & Mary








Press and blogosphere coverage:


April 10, 2014 in Law School Rankings, Legal Education | Permalink | Comments (12)

Blank Presents Reconsidering Corporate Tax Privacy at Harvard

BlankJoshua D. Blank (NYU) presented Reconsidering Corporate Tax Privacy, 11 N.Y.U. J. L. & Bus. ___ (2014), at Harvard yesterday as part of its Current Issues in Tax Law, Policy, and Practice Seminar hosted by Daniel Halperin and Stephen Shay:

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

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

New Yorker: A Four-Decade Tax War

The New Yorker:  A Four-Decade Tax War, by Jeffrey Frank:

New YorkerThe nearness of April 15th is enough to remind us of the words of Jimmy Carter, who, when he accepted the Democratic Party’s nomination for President, in 1976, said, “It is time for a complete overhaul of our income-tax system … It is a disgrace to the human race.” Perhaps that was a bit hyperbolic in a world with so many people and events in the running to represent disgraces to humanity. But, in spirit, Carter was not wrong. The tax system is disgraceful, and what amazes is that, despite wide agreement on that point, and despite so many good intentions, so little has been done to fix it.

The problem begins with its innate unfairness, which can’t be separated from a tax code that is so complex and illogical that it’s routine to hire professionals simply to interpret and fill out basic forms. Sometimes, the professionals need to consult more professionals—more accountants and lawyers, or a team of them. That’s not restricted to any income group; if you’re renting out a spare room to help pay the mortgage, you’ve got forms to fill out and arithmetic to do, and very likely some explaining to do, too. We’re so used to this that, when April 15th (or its requested extension) arrives, it barely registers beyond the time-consuming, receipt-gathering, costly, baffling, headache-inducing inconvenience of it all.

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April 10, 2014 in Tax | Permalink | Comments (2)

Call for Papers: McGill Symposium on Tax Justice and Human Rights

McGillMcGill Faculty of Law, Call for Papers:  Tax Justice and Human Rights Research Collaboration Symposium:

We invite paper proposals for a Tax Justice and Human Rights Research Collaboration Symposium, to be held at the McGill Faculty of Law, Montreal, Quebec, from Wednesday to Friday, 18-20 June, 2014. 

The symposium will explore the fundamental connections between taxation and human rights by providing a forum for collaboration among emerging scholars, established academics, civil society organization representatives, tax justice advocacy groups, tax policy makers, and researchers from around the world. The symposium seeks especially to bring developing-world perspectives into the discourse and to foster scholarly work for dissemination both within and beyond the academic setting.

The plurality of experience, in terms of training, background, country of origin, and area of expertise, will ensure that discussions and activities at the conference will have real-world impact. Indeed, there is a need within the tax-policy world for more cross-pollination between academic researchers and on-the-ground decision-makers. The connections and networking that we envision will take place at this conference should allow for meaningful discussions for years to come.

Paper proposals must be between 300-500 words in length and should be accompanied by a short résumé.

Please submit your proposal to the conference convener Professor Allison Christians, at

Deadline for submissions: 30 April 2014. Successful applicants will be notified in early May 2014.

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

Critiquing the 'Gladiator Ethos' of Student-Edited Law Reviews

GladiatorEvelyn A. Grosenick (Public Defender, Nevada), In Defense of the Law Review, 45 McGeorge L. Rev. 305 (2013) (a response to Megan S. Knize (Editor-in-Chief, UC Davis Law Review, 2007-08), The Pen Is Mightier: Rethinking the "Gladiator" Ethos of Student-Edited Law Reviews, 44 McGeorge L. Rev. 309 (2013)):

I recognize that experiences vary greatly among law reviews and individuals. Despite individual differences among law review cultures, the need to publish issues influences the definition of success on all law reviews, which creates a common experience in some respects. Furthermore, this need to publish differentiates the definition of success in the law review context from the definition of success in the legal field and legal education. The main weakness of the gladiator model as an analytical tool for criticizing the law review is that it fails to take into account the full definition of success on the law review. Whereas the definition of success as winning drives the gladiator culture at law schools under Professor Sturm’s gladiator theory, the definition of success on the law review also includes producing a publication, which requires the members to work as a team. Publication cannot be accomplished without many of the aspects of the law review that Knize criticizes. In addition, the publication requirement encourages teamwork and creates an environment that celebrates prioritizing the needs of the team over the desires of the individual.

I am not arguing that the law review as an institution is perfect, nor do I believe that it is insulated from gender inequality. Rather, I am suggesting in response to Knize’s article that the necessity for teamwork on the law review counteracts the potential effect of the gladiator ethos and makes the law review more female-friendly than the typical law school classroom. Further, the hierarchical structure, rules, and deadlines serve essential gender-neutral purposes on law review and beyond.

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

Ventry: The Case for Tax Whistleblowers in the States

Dennis J. Ventry, Jr. (UC-Davis), Not Just Whistling Dixie: The Case for Tax Whistleblowers in the States, 59 Vill. L. Rev. ___ (2014):

This Article examines the successes and failures of current tax whistleblower regimes, with particular emphasis on the states. It considers and then refutes several popular arguments against permitting whistleblowers to submit tax claims, under either a state’s False Claims Act (FCA) or standalone statute, including: (i) whistleblower statutes have historically been used to uncover and prosecute fraudulent behavior, not mere noncompliance with the law; (ii) the “knowing” standard of liability under FCAs creates new liability on taxpayers in jurisdictions permitting false claims pertaining to tax; and (iii) tax law is more complex and uncertain than other areas of the law and therefore off limits to whistleblower actions.

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April 10, 2014 | Permalink | Comments (0)

Oei: The Uneasy Case Against Tax Lien Subordination

Shu-Yi Oei (Tulane), The Uneasy Case Against Tax Lien Subordination, 11 Pitt. Tax Rev. ___ (2014):

I.R.C. § 6323, which governs how the federal tax lien ranks against the interests of the taxpayer’s other creditors, subordinates the tax lien to the claims of other creditors in various ways. Tax lien subordination is commonly justified on the grounds that it enhances taxpayer asset value, facilitates commercial transactions, and reduces monitoring costs for private creditors. This short symposium essay argues, however, that these benefits may be illusory. Tax lien subordination may, in fact, be unnecessarily costly and distortive and may lead to unfair distributive results. This essay suggests that the tax lien priority scheme might be made less costly by reducing its multiple levels of subordination. This could be accomplished in two ways: First, by reducing the magnitude or number of the superpriorities and other prioritized interests; and second, by eliminating the priority of the four horsemen over the un-noticed federal tax lien, or, alternatively, by moving away from a system of pure public notice and toward a semi-private inquiry-based system.

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

Shanske: Revitalizing Local Political Economy Through Modernizing the Property Tax

Darien Shanske (UC-Davis), Revitalizing Local Political Economy Through Modernizing the Property Tax, 68 Tax L. Rev. ___ (2014):

As the Great Recession dramatically illustrated, state and local governments need a more stable revenue source. Accordingly, states and localities as diverse as Texas and San Francisco, are experimenting with new kinds of taxes. However, there has been essentially no experimentation with the oldest and most traditional local tax, namely the tax on real property.

This blindness to the property tax is unfortunate for many reasons, including that the property tax is both relatively efficient and stable compared to the other taxes available to states and localities. Of course, it is possible that the property tax has been ignored because, despite its merits, it has structural weaknesses that cannot be reformed. For instance, property tax liability is based on the value of the property and not on the income of the owner, which means that property taxes can impose great burdens on taxpayers on a fixed income. Furthermore, property taxes are typically collected once or twice a year, which imposes a significant obligation on taxpayers to budget correctly.

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

Templin: The Politics of Social Security Tax Reform

Benjamin A. Templin (Thomas Jefferson), Social Security Reform: The Politics of the Payroll Tax, 32 Quinnipiac L. Rev. 1 (2013):

This Article examines the principal reform proposals that would increase tax revenue for the Social Security trust fund--weighing the pros and cons of each. [FN13] The Article also considers the prospects for political agreement on a reform proposal given the past efforts and the looming crisis. Part I of the Article recounts the latest data on insolvency projections and discusses the methods by which the Office of the Chief Actuary measures the effect of proposed reforms. Part II provides an overview of the payroll tax and benefit calculations. The factors used in calculating both tax and benefits are key components used in many reform proposals. The Article groups tax reform proposals in two types: (1) proposals that increase the tax rate, which is the subject of Part III; and (2) proposals that increase the maximum taxable income, which is discussed in Part IV. Part V examines the political realities of reform proposals and suggests ways in which political bargaining can be structured to maximize the chances of success.

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

The IRS Scandal, Day 336

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April 10, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Wednesday, April 9, 2014

Rostain Presents Lawyers, Accountants, and the Tax Shelter Crisis Today at Duke

Tanina Rostain (Georgetown) presents Confidence Games: Lawyers, Accountants, and the Tax Shelter Crisis (MIT Press, 2014) (with Milton C. Regan, Jr. (Georgetown)) at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

ConfidenceFor ten boom-powered years at the turn of the twenty-first century, some of America’s most prominent law and accounting firms created and marketed products that enabled the very rich—including newly minted dot-com millionaires—to avoid paying their fair share of taxes by claiming benefits not recognized by law. These abusive domestic tax shelters bore such exotic names as BOSS, BLIPS, and COBRA and were developed by such prestigious firms as KPMG and Ernst & Young. They brought in hundreds of millions of dollars in fees from clients and bilked the U.S. Treasury of billions in revenues before the IRS and Justice Department stepped in with civil penalties and criminal prosecutions. In Confidence Games, Tanina Rostain and Milton Regan describe the rise and fall of the tax shelter industry during this period, offering a riveting account of the most serious episode of professional misconduct in the history of the American bar.

Rostain and Regan describe a beleaguered IRS preoccupied by attacks from antitax and antigovernment politicians; heightened competition for professional services; the relaxation of tax practitioner norms against aggressive advice; and the creation of complex financial instruments that made abusive shelters harder to detect. By 2004, the tax shelter boom was over, leaving failed firms, disgraced professionals, and prison sentences in its wake. Rostain and Regan’s cautionary tale remains highly relevant today, as lawyers and accountants continue to face intense competitive pressure and regulators still struggle to keep pace with accelerating financial risk and innovation.

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

Wells Presents Tax Base Erosion and Section 482 at Northwestern

WellsBret Wells (Houston) presented Tax Base Erosion: Reformation of Section 482's Arm’s Length Standard, 15 Fla. Tax Rev. ___ (2014), at Northwestern last week as part of its Tax Colloquium Series hosted by by Herbert Beller, Charlotte CraneDavid Cameron, Philip Postlewaite, Jeffrey Sheffield, and Robert Wootton:

The United States has repeatedly attempted to stop tax base erosion for almost the entire post-World War I era, and yet the same problems exist today. The need for fundamental tax reform is front-page material in the major newspapers with the US transfer pricing rules and US multinationals portrayed as public enemy #1. This year, the OECD issued a report entitled “Addressing Base Erosion and Profit Shifting” and last month it issued a “Action Plan” for how it plans to proceed to address base erosion and profit-shifting. In a competing fashion, several important developing countries have initiated their own pact to develop cooperative strategies on these issues outside of the framework of the OECD and UN. It is fair to say that a solution to the base erosion and profit-shifting practices of multinational corporations is the “holy grail” of international tax policy.

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April 9, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Harvey Presents FATCA and the Taxation of U.S. Citizens Living Abroad Today at Penn

HarveyJ. Richard "Dick" Harvey, Jr. (Villanova) presents Offshore Accounts: Insider's Summary of FATCA and Its Potential Future, 57 Vill. L. Rev. 472 (2012), and Worldwide Taxation of U.S. Citizens Living Abroad: Impact of FATCA and Two Proposals, 5 Geo. Mason J. Int'l Comm. L. ___ (2013), at Pennsylvania today as part of its Center for Tax Law & Policy Seminar Series hosted by Michael Knoll, Chris Sanchirico, and Reed Shuldiner:

When FATCA was unilaterally enacted in March 2010 it was far from clear whether it would ultimately be successful. The major issue was whether the US would need multilateral action in order for FATCA to be a success. Currently the US has signed 25 intergovernmental agreements with many more in the final stages of negotiation. When coupled with the OECD's recent issuance of a Common Reporting Standard, it appears that FATCA or some version is here to stay. However, there will be growing pains, and some of those pains could be significant.

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

Wealthy New Yorkers Face 164% Estate Tax Rate

CNBC, New York Rich Face Tax Surprise When They Die:

If you're a New York multimillionaire, you now have another incentive to stay alive.

A change this month in New York's estate tax, which was billed as tax relief for the wealthy, contains a hidden wrinkle that could leave some multimillionaires with a much bigger surprise tax upon their death. Certain estates could even wind up with a tax rate of 164 percent on portions of their estates, according to one tax expert.

April 9, 2014 in Tax | Permalink | Comments (6)

Testimony in Yesterday's Congressional Tax Hearings

Capitol HillSenate Budget Committee, Supporting Broad-Based Economic Growth and Fiscal Responsibility through a Fairer Tax Code:

  • John L. Buckley (Former Chief Counsel, House Ways & Means Committee and former Chief of Staff, Joint Committee on Taxation)
  • Jane Gravelle (Senior Specialist in Economic Policy, Congressional Research Service)
  • Diana Furchtgott-Roth (Senior Fellow, Manhattan Institute for Policy Research)

Senate Finance Committee, Protecting Taxpayers from Incompetent and Unethical Return Preparer: (detailed coverage here):

House Ways & Means Committee, The Benefits of Permanent Tax Policy for America’s Job Creators:

April 9, 2014 in Congressional News, Tax | Permalink | Comments (0)

IRS Computers Are Still Running Windows XP, Confidential Taxpayer Data Is At Risk

Washington Post:  A Week Before Tax Day, IRS Misses Crucial Windows XP Deadline:

XPMicrosoft on Tuesday stopped providing free support and security updates for Windows XP. The long-planned expiration of the popular operating systems has sent millions of users scrambling to upgrade their computer systems.

Among who still that need to make the transition is the Internal Revenue Service, which has yet to complete its migration away from Windows XP, less than a week ahead of its own important deadline: Tax Day.

The agency is "struggling" to find $30 million dollars to complete its move to Windows 7, according to Rep. Ander Crenshaw (R. - Fla.), chairman of the financial services and general government subcommittee. During a hearing on IRS budget Monday, Crenshaw questioned why the agency had not prioritized the move "even though Microsoft announced in 2008 that it would stop supporting Windows XP past 2014."

IRS Commissioner John Koskinen defended the agency's efforts, noting that it has been operating amid budget uncertainty for years. The migration to Windows 7 was just one of nearly $300 million dollars worth of information technology projects that has not been completed due to funding shortfalls, he said.

"You're exactly right," Koskinen said of the timing. "It's been some time where people knew Windows XP was going to disappear." But testifying just a day before Microsoft ended support for the operating system, he conceded the agency was still trying to finish up the transition. "So we are very concerned that if we don't complete that work, we're going to have an unstable environment in terms -- in terms of security."

The GAO yesterday released IRS Needs to Address Control Weaknesses That Place Financial and Taxpayer Data at Risk (GAO-14-405):

GAOThe IRS continued to make progress in addressing information security control weaknesses and improving its internal control over financial reporting; however, weaknesses remain that could affect the confidentiality, integrity, and availability of financial and sensitive taxpayer data. During fiscal year 2013, IRS management devoted attention and resources to addressing information security controls, and resolved a number of the information security control deficiencies that were previously reported by GAO. However, significant risks remained. Specifically, the agency had not always (1) installed appropriate patches on all databases and servers to protect against known vulnerabilities, (2) sufficiently monitored database and mainframe controls, or (3) appropriately restricted access to its mainframe environment. In addition, IRS had allowed individuals to make changes to mainframe data processing without requiring them to follow established change control procedures to ensure changes were authorized, and did not configure all applications to use strong encryption for authentication, increasing the potential for unauthorized access.

An underlying reason for these weaknesses is that IRS has not effectively implemented portions of its information security program. The agency has established a comprehensive framework for the program, and continued to improve its controls; however, components of the program did not always function as intended. For example, IRS's testing procedures over financial reporting systems were not always thorough in that its testing methodology did not always determine whether required controls were operating effectively. In addition, IRS had not updated key mainframe policies and procedures to address issues such as users accessing files used by one processing environment from a different environment. Further, IRS did not include sufficient detail in its authorization procedures to ensure that access to systems was appropriate.

Until IRS takes additional steps to (1) more effectively implement its testing and monitoring capabilities, (2) ensure that policies and procedures are updated, and (3) address unresolved and newly identified control deficiencies, its financial and taxpayer data will remain vulnerable to inappropriate and undetected use, modification, or disclosure. These deficiencies, including shortcomings in the information security program, were the basis of our determination that IRS had a significant deficiency in its internal control over its financial reporting systems for fiscal year 2013.

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

NY Times: Elite College Acceptance Rate Hits All-Time Low

New York Times:  Best, Brightest and Rejected: Elite Colleges Turn Away Up to 95%:

Enrollment at American colleges is sliding, but competition for spots at top universities is more cutthroat and anxiety-inducing than ever. In the just-completed admissions season, Stanford University accepted only 5 percent of applicants, a new low among the most prestigious schools, with the odds nearly as bad at its elite rivals.

Deluged by more applications than ever, the most selective colleges are, inevitably, rejecting a vast majority, including legions of students they once would have accepted. Admissions directors at these institutions say that most of the students they turn down are such strong candidates that many are indistinguishable from those who get in. ...

Stanford received 42,167 applications for the class of 2018 and sent 2,138 acceptance notices, for a first-year class that, ultimately, will number about 1,700.

The University of California, Los Angeles, the national leader in applications, had more than 86,000 requests — twice as many as in 2005 — for space in a first-year class of about 6,000, and it also received 19,000 applications to transfer from other colleges and universities. This year, for the first time, the admission rate for first-year applicants at UCLA and the University of California, Berkeley, could drop below 20 percent. ...

This was the second year in a row that Stanford had the worst odds of admission among top colleges, a title that in previous years was usually claimed by Harvard. This year, by the April 1 deadline for most colleges to send admission notices, Harvard and Yale had accepted about 6 percent of applicants, Columbia and Princeton about 7 percent, and the Massachusetts Institute of Technology and the University of Chicago about 8 percent.

Several universities, including Stanford, Duke, Northwestern, Cornell and the University of Pennsylvania, had admission rates this year that were less than half of those from a decade ago. The University of Chicago’s rate plummeted to a little over 8 percent, from more than 40 percent.

The most competitive small colleges draw comparably accomplished applicants, but far fewer of them relative to their size, so their admission rates are higher. Even so, the acceptance rates at Pomona, Amherst, Harvey Mudd, Bowdoin, Claremont McKenna, Swarthmore, Middlebury, Williams and others were between 10 and 20 percent this year.

April 9, 2014 in Legal Education | Permalink | Comments (1)

Great April Fool's Prank on Professor

Economics Professor Stephen Barrows (Aquinas College) has a strict cell phone policy:  if a student's phone rings in class, the student must answer on the speaker.  Check out what happened in his class on April 1:

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

IRS Offer in Compromise Acceptance Rate at All-Time High in 2013

The IRS Scandal, Day 335

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

Tuesday, April 8, 2014

Tahk Presents The Tax War on Poverty Today at NYU

TahkSusannah Camic Tahk (Wisconsin) presents The Tax War on Poverty at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Auerbach:

In recent years, the war on poverty has moved in large part into the tax code. Scholarship has started to note that the tax laws, which once exacerbated the problem of poverty, have become increasingly powerful tools that the federal government uses to fight against it. Yet questions remain about how this new tax war on poverty works, how it is different from the decades of non-tax anti-poverty policy and how it could improve. To answer these questions, this Article looks comprehensively at the provisions that make up the new tax war on poverty. First, this Article examines each major piece of the tax war on poverty. The Article looks at its mechanics of each, its political history and its effectiveness at addressing poverty. Second, this Article analyzes the tax war on poverty as a whole, identifying commonalities across its different provisions and highlighting its distinctive features. Third, this Article proposes ways that the tax war on poverty could be more effective. In particular, this Article examines how tax lawmakers and tax lawyers could approach this task. In so doing, this Article conceptualizes tax law as the new poverty law and proposes a growing role for public-interest tax lawyers.

April 8, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

The Life of the Law Podcast: People and their Taxes

Life of the Law LogoThe Life of the Law Podcast:  People and their Taxes:

One of Life of the Law’s new advisors, Ajay Mehrotra, is tax historian and associate dean at the University of Indiana’s Maurer School of Law. Professor Mehrotra invited some of his fellow scholars to talk about taxation and citizenship. You’ll hear him speaking with Duke University law professor Lawrence Zelenak; Molly Michelmore, an associate professor of history at Washington and Lee University; and Beth Pearson, a PhD candidate at the University of California Berkeley who’s studying the evolution of state tax laws.

April 8, 2014 in Tax | Permalink | Comments (0)

Toder & Viard: A Call for Structural Reform of the U.S. Corporate Income Tax

Eric Toder (Tax Policy Center) & Alan D. Viard (American Enterprise Institute), Major Surgery Needed: A Call for Structural Reform of the U.S. Corporate Income Tax:

Corporate tax system flaws are amplified by the high US statutory tax rate. Here are two ways to fix it:

  1. Eliminate corporate income tax, but tax US shareholders at ordinary income tax rates on their dividends and accrued capital gains.
  2. Seek international agreement on allocating income of multinational corporations among countries to determine tax obligation.

April 8, 2014 in Scholarship, Tax, Think Tank Reports | Permalink | Comments (0)

Osofsky: Unwinding the Ceiling Rule

Leigh Osofsky (Miami), Unwinding the Ceiling Rule, 33 Va. Tax Rev. ___ (2014):

As is widely known, the so-called “ceiling rule,” which applies under the traditional method for section 704(c) allocations, can create the wrong tax result. Specifically, the ceiling rule can result in misallocations of income, gain, loss, and deduction to both a partner contributing property and to the noncontributing partners. Notwithstanding these predictable misallocations, the Treasury Department still permits application of the ceiling rule under section 704(c). This Article challenges longstanding assumptions regarding the operation of the ceiling rule in the context of section 704(c). Historically, Congress and partnership tax experts assumed that the ceiling rule is perfectly unwound on liquidation or sale of a partnership interest. This assumption still operates to some extent today. The assumption glosses over a significantly more complicated reality. This Article closely examines the history of section 704(c) and the interaction between the ceiling rule and the rules regarding sales and liquidations of partnership interests. Doing so reveals that when and to what extent the perfect unwinding assumption holds depends (perhaps to a surprising degree) on (1) a variety of relatively arbitrary facts regarding the assets held by the partnership on liquidation or sale, and (2) the unintended interactions of inordinately complicated partnership tax rules. In reaching this conclusion, this Article displays that the ceiling rule, which has always been part of the section 704(c) regime, is even worse than it is commonly thought to be.

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

Leff & Hackney: Tax Planning for Marijuana Dealers

Iowa Law Review LogoBenjamin M. Leff (American), Tax Planning for Marijuana Dealers, 99 Iowa L. Rev. 523 (2014):

In recent years, many states have legalized marijuana while the federal government continues to consider all marijuana sales and use illegal. But marijuana industry insiders consider not federal criminal law but federal tax law to be the biggest impediment to the development of a legitimate marijuana industry. State-sanctioned marijuana sellers are required to pay federal income taxes pursuant to § 280E, a formerly largely symbolic provision that Congress enacted to punish drug dealers, but which now could potentially drive legitimate marijuana sellers underground.

This paper proposes a tax strategy that enables state-sanctioned marijuana sellers to avoid the impact of § 280E by qualifying as a tax-exempt organization. The IRS has already stated that a marijuana seller cannot be exempt under § 501(c)(3) because the so-called “public policy doctrine” does not permit a charity to have purposes that are contrary to law. This paper proposes that a state-sanctioned marijuana seller could qualify as tax-exempt under § 501(c)(4), since the public policy doctrine only applies to charities, and § 501(c)(4) organizations are not charities. The organization would have to be operated to improve the social and economic conditions of a neighborhood blighted by crime or poverty, by providing job training, employment opportunities, and improved business conditions for commercial development in the neighborhood, just like many existing community economic development corporations that run businesses.

This novel argument is more than just a clever strategy – a “tax loophole” so to speak – to avoid the impact of § 280E. Rather, IRS recognition of tax-exempt status for marijuana sellers could actually provide a mechanism to resolve the federalism issues raised by the conflict between state and federal marijuana laws. A federal policy that incentivizes marijuana sellers to be non-profit, neighborhood-based organizations whose primary purpose is improving the neighborhood in effect ties federal approval to local support. By following this policy, the IRS would promote state and local policy harmonization by permitting community-based nonprofits to sell marijuana, but only when local community groups favored it. This would surely be better for the IRS than its current role as a lightning rod of the conflict between state and federal policy objectives.

Philip T. Hackney (LSU), No 'Fagin' School of Pickpockets Allowed -- A Response to Professor Leff on Tax Planning for Marijuana Dealers, 99 Iowa L. Rev. Bull. 25 (2014):

Professor Benjamin Leff argues in a forthcoming article entitled Tax Planning for Marijuana Dealers that a tax-exempt social welfare organization described in § 501(c)(4) may sell medical marijuana without putting its exempt status in jeopardy. He argues that (1) the “public policy” doctrine applicable to charitable organizations under § 501(c)(3) does not apply to social welfare organizations, and (2) a social welfare organization may consider “community” law and ignore federal law in considering whether its activity meets the idea of social welfare. I argue that Leff is wrong and that the public policy doctrine applicable to charitable organizations applies to social welfare organizations equally. Tax-exempt organizations derive exempt status primarily by supplying significant public benefits. Violating federal, state or local law causes public harm; thus, any tax-exempt organization, including a social welfare organization, may not violate established public policy as a substantial purpose. Additionally, the “community” requirement for social welfare organizations is to ensure the organization is dedicated to a public purpose rather than a private one. Violating any law, including federal, is more likely to ensure an organization is operating for a private rather than public purpose. Contrary to Leff’s claim therefore, this article argues that a social welfare organization may not sell medical marijuana and maintain its exempt status.

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

Cain & Herzig: Notice 2014-19 and the Application of Windsor to Qualified Retirement Plans

Cain HerzigPatricia A. Cain (Santa Clara) and David Herzig (Valparaiso) have written op-eds for TaxProf Blog on Notice 2014-19, Application of the Windsor Decision and Rev. Rul. 2013-17 to Qualified Retirement Plans:

The purpose of this notice is to provide guidance on the application (including the retroactive application) of the decision in United States v. Windsor, 570 U.S. ___, 133 S. Ct. 2675 (2013), and the holdings of Rev. Rul. 2013-17, 2013-38 I.R.B. 201 (Sept. 16, 2013), to retirement plans qualified under section 401(a) of the Internal Revenue Code (Code).

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April 8, 2014 in IRS News, Tax | Permalink | Comments (0)

Muller: College Majors That Produce the Highest (and Lowest) LSATs and UGPAs

MajorDerek Muller (Pepperdine), The Best Prospective Law Students Read Homer:

Several years ago, Professor Michael Nieswiadomy (North Texas) released a paper (available on SSRN) [blogged here] on the LSAT scores of economics majors. I thought I'd make some inquiries with LSAC for some data on this subject to follow up.

I asked for all data of 2013 applicants and matriculants to law school. Applicants self-identified one of 142 majors; they could select more than one if they so desired. I obtained the median LSAT scores, and the median GPA scores, for these groups. ...

As you can see, the best prospective law students were the Classics majors. Even though there were just 190 of them, they achieved a 159.8 LSAT and a UGPA of 3.477--the highest in both categories. ... The chart below includes the comprehensive list of all majors with at least 150 applicants, sorted by LSAT score. Some very small majors (e.g., Art History, Music, and Policy Studies) scored quite well. ... Among those majors with at least 1000 takers, the top major was Philosophy, followed by Economics, History, English, and Political Science.

Here are the Top 10 and Bottom 10 college majors by LSAT and GPA (the full list of 46 majors is here).

Derek 1


Derek 2

April 8, 2014 in Legal Education | Permalink | Comments (6)

Johnston: How to Cheat on Your Taxes

Newsweek:  How to Cheat on Your Taxes, by David Cay Johnston (Syracuse):

There's never been a better time to cheat on your taxes. Or a better way.

As millions of Americans rush to file their tax returns on time, trying to be ever-so-careful in hopes of avoiding an audit or, far worse, prosecution, they will find it instructive, and infuriating, to learn about Jerry Curnutt.

Curnutt can show people how to cheat on their taxes and not get caught. His trick won't work if you are a wage earner, but those rich enough to invest in real estate partnerships have escaped paying billions of dollars in the past decade by using this technique.

Now Curnutt's mission in life, at age 76, is to get states and the IRS to go after these cheats. ...

[T]he tax-cheat ploy Curnutt uncovered is remarkably easy. On Form 1065, the one partnerships file, just leave Line 10 on Schedule K blank, or report a smaller figure than the real one.

Why does that one line go unnoticed when the IRS selects tax returns for audit? IRS software scans only for what it is told to look for. (Think of those Star Trek episodes in which the Enterprise scans a planet for life, detects none and then discovers life forms the scanners were not tuned to notice.)

This week, news broke that the IRS effectively fails to audit massive partnerships, like hedge funds and private equity funds, even though corporations of the same size are under constant IRS audit. A short video, "Tax Analysts Video Examines Audit-Proof Businesses," explains how partnerships escape audits.

Curnutt knows this because he is a tax detective. He retired from the Internal Revenue Service in 2000 as one of its top snoops, overseeing all investment partnerships. Using his desktop computer, Curnutt discovered a simple way to cheat that no one at the IRS had noticed. Call it Curnutt cheating.

For his brilliant sleuthing, the IRS gave Curnutt commendations and multiple cash awards, each for about $1,000. It sent him around the country to conduct 64 training sessions so IRS auditors could learn how to efficiently spot these cheats. He also trained state tax auditors from California, Indiana, New Jersey and New York.

But the IRS never put Curnutt's insights into practice and never cracked down on the cheaters, allowing them to escape paying tens of billions of dollars in federal and state taxes.

The odds for taxpayers overall, according to IRS data analyzed by Syracuse University's Transactional Records Access Clearinghouse for 2013 and 1993, per million taxpayers:






Recommended for Prosecution as Tax Cheat









Sentenced to Prison



Caught for “Curnutt Cheating” in Real Estate Partnerships

Tax Analysts:  Why It Matters That the IRS Has Trouble Auditing Partnerships, by Amy S. Elliott

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