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Tuesday, September 9, 2014

Remembering Dan Markel

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

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

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

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

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

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

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

Zelinsky Presents The Proposed Minnesota Snowbird Tax Today at Minnesota

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

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

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

Dean Gershon: Do Law Schools Need the AALS?

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

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

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

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

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

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

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

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

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

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

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

COD Income and Student Loan Debt Forgiveness

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

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

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

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

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

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

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

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

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

The IRS Scandal, Day 488

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(Image credit: grassfire.com)

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

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

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

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

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

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

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

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

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

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

Monday, September 8, 2014

The 100 Most Influential People in Tax and Accounting

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The IRS Scandal, Day 487

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

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

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

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

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

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

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

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

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

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

As Reason.com stated,

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

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

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

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

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

TaxProf Blog Weekend Roundup

Sunday, September 7, 2014

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

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

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

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

Tax Foundation 1

 Tax Foundation 2

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

Edward Kleinbard (USC):

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Top 5 Tax Paper Downloads

SSRN LogoThere is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads on SSRN, with a new paper debuting on the list at #5.  The #1 paper is now #22 in all-time downloads among 10,280 tax papers:

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

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

The IRS Scandal, Day 486

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

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

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

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

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

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

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

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

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

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

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

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

Saturday, September 6, 2014

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

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

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

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

Using Humor in the Law School Classroom

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

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

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

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

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

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

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

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

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

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

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

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

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

The IRS Scandal, Day 485

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

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

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

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

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

Friday, September 5, 2014

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

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

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

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

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

Weekly Tax Roundup

Weekly Roundup

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

Weekly Legal Education Roundup

Weekly Roundup

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

Weekly SSRN Tax Roundup

Weekly Roundup

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

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

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

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

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

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

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

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

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

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

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

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

Cain: Taxation of Same-Sex Couples After United States v. Windsor

Patricia Cain (Santa Clara), Taxation of Same-Sex Couples After United States v. Windsor: Did the IRS Get It Right in Revenue Ruling 2013-17?, 6 Elon L. Rev. 269 (2014):

The tax world for same-sex couples changed dramatically on June 26, 2013, when the United States Supreme Court handed down its decision in United States v. Windsor. The Court ruled that section 3 of the Defense of Marriage Act (DOMA) was unconstitutional. As a result the IRS would be required to recognize same-sex spouses as validly married for tax purposes. There were three major issues facing the IRS after Windsor: (1) Which marriages should be recognized for tax purposes? (2) How much retroactive effect should be given to the decision? (3) Should marriage equivalent statuses such as registered domestic partnerships and civil unions be treated the same as marriages? On August 29, 2013, the IRS issued Revenue Ruling 2013-17 which answered these three questions. This essay asks whether or not the IRS got it right in the ruling and concludes that for the most part it did. However, serious questions are raised by the fact that the IRS refuses to recognize registered partnerships and civil unions as marriages. The essay concludes that more thought should be given to this issue.

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

Scholarly Incentives, Scholarship, Article Selection Bias, and Investment Strategies for Today's Law Schools

Dan Subotnik (Touro) & Laura Ross (Touro), Scholarly Incentives, Scholarship, Article Selection Bias, and Investment Strategies for Today's Law Schools, 30 Touro L. Rev. 615 (2014):

Anecdotal evidence supplied by authors suggested that article acceptance by law reviews was based to a significant extent on the affiliation and prestige of the author. The implication for readers was that most law professors could not expect a fair reading and that, indeed, those from 3rd and 4th tier schools had only the feeblest prospects of cracking the top tier. With many aspects of employment tied to law review placement --e.g. faculty recruitment and tenure -- law professors could understand the need to tamp down career expectations. And law students could begin to see the small benefit they got from law review production. 

Table 2

Table 3A

Table 4

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September 5, 2014 in Legal Education, Scholarship | Permalink | Comments (4)

The IRS Scandal, Day 484

IRS Logo 2Judicial Watch Press Release:  New IRS Documents Show Lerner Did Not Need Conservative Group Donor Lists – Emails Mention “Secret Research Project” by Top IRS Official:

Judicial Watch today released a new batch of Internal Revenue Service (IRS) email documents revealing that under former IRS official Lois Lerner, the agency seems to acknowledge having needlessly solicited donor lists from non-profit political groups. According to a May 21, 2012, memo from the IRS Deputy Associate Chief Counsel: “such information was not needed across-the-board and not used in making the agency’s determination on exempt status.” Later, in her May 10, 2013, remarks in which Lerner first revealed in response to question she planted about the IRS targeting of conservative groups, she conceded that the requests for donor names was “not appropriate, not usual.” The new documents obtained by Judicial Watch also reveal that 75% of the groups from whom the lists were solicited were apparently conservative, with only 5% being liberal.

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September 5, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Thursday, September 4, 2014

NY Times Debate: Should Pro-Sport Leagues Get Tax Breaks?

New York Times Debate:  Should Pro-Sport Leagues Get Tax Breaks?:


NY Times Room for DebateThe league offices and associations for several professional sports are tax-exempt nonprofit groups. The teams themselves pay taxes on their revenue, but critics say the leagues are lucrative enough to pay for their administrative expenses without a tax break, especially since some executives get enormous compensation.

Should pro sports leagues enjoy nonprofit status or are taxpayers paying too many of their bills?

  • Ryan Alexander (Taxpayers for Common Sense), End the NFL Tax Breaks:  "Sports leagues like the NFL help teams make money through business ventures – a fine goal for teams, but not one taxpayers need to subsidize. "
  • Patrick Hruby (Journalist), Sports Leagues Do Not Need Taxpayer Help:  "The NFL as a whole takes in over $9 billion in annual revenue, more than the reported 2013 GDP of 49 countries. "
  • Judith Grant Long (University of Michigan), Ending Sports Leagues' Tax-Exempt Status Might Not Bring in More Money:  "Focusing on the nonprofit issue detracts from the more substantial burdens placed on taxpayers in the building and taxing of sports stadiums and arenas."
  • Richard Steinberg (Purdue University), Nonprofit Teams Rather than Leagues? "Many Commercial Organizations Are Nonprofits, as Billion-dollar Universities Sell Education and Hospitals Sell Healthcare."
  • Andrew Zimbalist (Smith College), Nonprofit Status Is Irrelevant:  "The tax exemption does not apply to the individual teams, but to the leagues, which operate as pass-through entities."

September 4, 2014 in Tax | Permalink | Comments (0)

This Is Your Brain on Law School

BrainAbigail A. Patthoff (Chapman), This is Your Brain on Law School: The Impact of Fear-Based Narratives on Law Students, 2015 Utah L. Rev. ___:

Law students regularly top the charts as among the most dissatisfied, demoralized, and depressed of graduate student populations. As their teachers, law professors cannot ignore the palpable presence of this stress in our classrooms – unchecked, it stifles learning, encourages counterproductive behavior, and promotes illness. Yet, in the name of persuasion, professors frequently, and perhaps unwittingly, introduce additional fear into the classroom as a pedagogical tool via a common fear-based narrative: the cautionary tale. By taking lessons from existing social science research about “fear appeals” – scare tactics designed to frighten the listener into adopting a particular behavior – this article suggests that we can actively manage one source of law student anxiety by more thoughtfully using cautionary tales.

September 4, 2014 in Legal Education | Permalink | Comments (1)

Public Pension Funds Stay Mum on Corporate Inversions

New York Times Deal Book:  Public Pension Funds Stay Mum on Corporate Expats, by Andrew Ross Sorkin:

NY Times Dealbook (2013)In the outcry about the recent merger mania to take advantage of the tax avoidance transactions known as inversions, certain key players have been notably silent: public pension funds.

Many of the nation’s largest public pension funds — managing trillions of dollars on behalf of police and fire departments, teachers and others — have major stakes in American companies that are seeking to renounce their corporate citizenship in order to lower their tax bill.

While politicians have criticized these types of deals — President Obama has called them “wrong” and he is examining ways to end the practice — public pension funds don’t appear to be using their influence as major shareholders to encourage corporations to stay put.

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September 4, 2014 in Tax | Permalink | Comments (0)

Students Who Exercise Regularly Have Higher GPAs

Purdue University, College Students Working Out at Campus Gyms Get Better Grades:

PurdueCollege students who visit their campus gyms are more likely to succeed in the classroom, according to data from Purdue University.

"Students who worked out at Purdue's gym at least once a week were more likely to earn a higher grade point average than students who visited less or not at all," says Tricia Zelaya, assistant director for student development and assessment at Purdue's Division of Recreational Sports. "Going to the gym is so much more than going to the gym. Students who are motivated by fitness and wellness tend to have better time management skills, and research shows that being fit is good for the mind. It all ties together."

For example, the more than 1,820 students who visit Purdue's France A. Córdova Recreational Sports Center at least 16 times a month earned a GPA of 3.10 or higher. The correlation between grades and gym use also is shown with moderate users. Students who used the gym at least seven times a month had an average GPA of 3.06. The average GPA for students who did not regularly use the gym was a 2.81.

(Hat Tip: Inside Higher Ed.)

September 4, 2014 in Legal Education | Permalink | Comments (2)

Morrow: Repealing the Mortgage Interest Deduction

Rebecca N. Morrow (Wake Forest), Billions of Tax Dollars Spent Inflating the Housing Bubble: How and Why the Mortgage Interest Deduction Failed, 17 Fordham J. L. & Fin. L. 751 (2012):

The mortgage interest deduction is an incredibly popular, politically well-supported and hugely expensive tax incentive. Yet economic studies consistently show that the mortgage interest deduction fails to advance its fundamental purpose. It does not increase the rate of homeownership. On the contrary, to the extent that it is effective in influencing human behavior, it does so by inflating home prices and encouraging borrowing against equity. These effects inflated home prices and excessive borrowing contributed to the economic crisis of 2008. In the years leading up to the crisis, Americans spent billions of tax dollars further inflating a dangerously unstable housing bubble. Even if we had the will to change this policy, we did not have the means. The mortgage interest deduction is insensitive to market conditions and resistant to change. These attributes make the mortgage interest deduction bad policy. Rather than perpetuating this costly deduction, Congress should phase it out in its entirety and replace it with targeted tax incentives designed to stimulate the housing market only when the market is weak. Future tax incentives should avoid the structural flaws that caused the mortgage interest deduction to fail by focusing on market responsiveness, timing and flexibility.

September 4, 2014 in Scholarship, Tax | Permalink | Comments (1)

Northwestern Symposium: 100 Years Under the Income Tax

Northwestern (2014)Symposium, 100 Years Under the Income Tax, 108 Nw. U. L. Rev. 767-1136 (2014):

September 4, 2014 in Scholarship, Tax | Permalink | Comments (0)

Morriss: The Future of Offshore Financial Centres: The Tax Question

Accountancy Live:  Future of Offshore Financial Centres: The Tax Question, by Andrew Morriss (Dean, Texas A&M):

When the US Congress passed the Foreign Account Tax Compliance Act (FATCA) in 2010 as part of its post-financial crisis efforts at economic stimulus, there was little debate or discussion about the costs or benefits of such a massive expansion of financial regulation. Since then, the UK has adopted its own ‘son of FATCA’ and France a ‘mini-FATCA’.

Elsewhere more such measures are being debated. FATCA and its progeny have spawned a raft of intergovernmental agreements (IGAs) promising transparency to tax authorities around the world. Not to be outdone, prime minster David Cameron is pushing for beneficial ownership registries for the UK, the Crown Dependencies and the Overseas Territories.

New York University’s John Blank and [University of] Virginia’s Ruth Mason argue in a recent Tax Notes article that, taken together, these agreements and laws offer ‘an aspirational new global standard for automatic exchange of information.’ Does this mean the end of offshore financial centres?

No. Critics of offshore financial centres (OFCs), like US senator Carl Levin, the Tax Justice Network, and Oxfam, might wish it were so but the demand for offshore financial services will continue for three reasons.

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September 4, 2014 in Tax | Permalink | Comments (0)

Professor Shoots Himself in the Foot in Classroom. Literally.

ShootIdaho State Journal, ISU Instructor Shoots Himself in the Foot:

An instructor was wounded in the foot after his concealed handgun discharged in a classroom at the Physical Science Complex on the Idaho State University campus at about 4 p.m. Tuesday. ... “It was in his pocket.” ... “He did have an enhanced concealed carry permit.”

The instructor, who was teaching in the chemistry department, was not taken by ambulance to Portneuf Medical Center, but his wound was treated and he was released from the hospital Tuesday evening. “It's unfortunate,” ISU President Arthur Vailas said. “I'm sure the incident was scary and embarrassing.”

Vailas, who is a gun owner and hunter, said he likes guns but not on campus. He joined other Idaho university professors and chief of police from cities with universities during the last Idaho legislative session in opposition to legislation that now allows concealed carry on campuses in Idaho so long as the person has obtained an enhanced permit. Enhanced permits require additional training. ...

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September 4, 2014 in Legal Education | Permalink | Comments (0)

IRS Releases EITC Overpayment Data

IRS, Compliance Estimates for the Earned Income Tax Credit Claimed on 2006-2008 Returns:

EITC Logo (2014)This report presents information about the nature of errors taxpayers made when claiming the Earned Income Tax Credit (EITC) in Tax Years 2006 through 2008. This is the latest of several analyses of EITC compliance undertaken by the IRS over the years to help understand behavior and develop strategies for improving the administration of the credit. Prior to this report, the most recent analysis was conducted for Tax Year (TY) 1999 in a report commonly called the 1999 Compliance Study. 

As with the earlier studies of compliance, the analysis in this report relies on audit data; in this case, the audits were conducted by IRS’ National Research Program (NRP). NRP audits are like other IRS audits but provide the added benefit that they can be used for population estimates of taxpayer reporting compliance. One challenge with using audit data is that taxpayers do not always respond to or participate in the audit as required. In particular, 15 percent of EITC filers selected for an NRP audit of a TY 2006-2008 return did not participate in the audit, compared to 6 percent selected for an audit for a TY 1999 return. When this happens, the audit outcomes may not reflect their “true” eligibility for the credit.1 To address this uncertainty, two sets of estimates are presented throughout this paper, reflecting different assumptions about the true compliance behavior of these taxpayers: the “higher” estimate assumes that audit nonparticipants are generally noncompliant and the “lower” estimate assumes that the true compliance of audit non-participants is the same as the compliance of otherwise similar audit participants.

We find no discernible change in the overall tendency for noncompliance between 1999 and 2006-2008. This is based on a comparison of “dollar overclaim percentages,” defined as total dollars overclaimed as a percent of total dollars initially claimed for EITC (before considering IRS corrections or enforcement). In TY 2006-2008, the estimates of the overclaim percentage are 28.5 percent (lower estimate) and 39.1 percent (higher estimate).

Table 2b

Comparable figures from the 1999 Compliance Study are 30.9 percent and 35.5 percent. ...

While the overall tendency for noncompliance is little changed, the growth in the EITC program has led to an increase in total dollars of claims and overclaims since 1999. Averaging over returns filed for TY 2006-2008, an estimated 23.7 million taxpayers claimed an annual total of $49.3 billion in EITC, compared with 18.8 million taxpayers claiming a total of $31.3 billion in EITC in TY 1999. Total overclaims for TY 2006-2008 are estimated to be $14.0 billion (lower estimate) or $19.3 billion (higher estimate). Similar figures from the 1999 Compliance Study are $12.3 and $14.0 billion, after adjusting for inflation ($9.7 and $11.1 billion in current dollars).

(Hat Tip: Leslie Book.)

September 4, 2014 in IRS News | Permalink | Comments (0)

The IRS Scandal, Day 483

IRS Logo 2Wall Street Journal editorial:  Tax Collectors in the Cafeteria: The IRS Doesn't Like the Way Silicon Valley Does Lunch:

Having harassed the Tea Party for years, the Internal Revenue Service is now targeting Silicon Valley. The tax collectors are offended by the practice, common in the technology industry, of providing meals to employees without counting the food as taxable compensation. ...

[L]ast week the Treasury published the annual list of IRS priorities and ominously included a plan for new guidance "regarding employer-provided meals." As a large bureaucracy, the IRS has no fewer than 317 such projects on its priority list. In this case they seem to mean it. The Journal reports that IRS auditors are now flagging the issue and demanding back taxes from companies amounting to 30% of the meals' fair-market value, according to lawyers for the firms.

You don't have to be a software programmer to think that the IRS ought to focus on other priorities. For example, not one of the 317 projects is devoted to accurate and complete disclosure of the agency's role in targeting the President's philosophical opponents.

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September 4, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Wednesday, September 3, 2014

Fleischer: Court Challenge to New Inversion Rules Would Face Long Odds

New York Times Dealbook:  Court Challenge to New Inversion Rules Would Face Long Odds, by Victor Fleischer (San Diego):

NY Times Dealbook (2013)The Treasury Department is considering new regulations that would make corporate inversions less profitable.  Hedge fund managers, investment bankers and others are handicapping the timing and scope of any new rules and to whom they would apply. Possibilities include further limiting earnings stripping, reclassifying certain debt held by United States subsidiaries of foreign corporations as equity or restricting the repatriation of untaxed offshore cash from corporations that have gone through an inversion.

Another question is whether any new regulations will hold up in court.  Even Treasury Secretary Jacob J. Lew questioned whether his department had the legal authority to act unilaterally. But after Stephen E. Shay, a law professor at Harvard University, published an article urging Treasury to act, the department’s lawyers began developing some options. Mr. Shay suggested that by looking beyond Section 7874, the specific code section that addresses inversions, the Treasury Department might find other ways to curb some of the economic tax benefits of an inversion. In my view, Professor Shay’s suggestions are indeed within the lawful authority of the Treasury Department.

But reasonable minds may differ. To examine the likelihood of a successful challenge, I thought it would be useful to look at the Treasury’s track record in court. ...

The short answer is that the Treasury’s track record is strong, especially in recent years. Since 1986, just 13 of 55 challenges in the United States Tax Court have been successful, or 23 percent. Of those, just eight survived an appeal. The last successful challenge I found that survived appeal was 14 years ago. ...

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September 3, 2014 in Tax | Permalink | Comments (1)

Believers Flee Pews as Germany Enforces 9% Church Tax on Capital Gains

Wall Street Journal, In Germany, Many Believers Balk at Tweak to Church Tax; As Loophole Closes, Disgruntled German Catholics and Protestants Opt to Officially Leave Churches:

Church TaxI
n Germany, being an official church member usually means paying an extra tax. But a change in the country's tax code is now causing many believers to leave the fold.

Germany is just one of a number of European countries where members of the main organized religions pay a special levy on income to provide the bulk of churches' finances. But when a loophole concerning income from capital gains closes next year, church leaders have good reason to expect an exodus.

So far this year, the number of Germans leaving the country's Protestant and Catholic churches has reached its highest level in 20 years, twice last year's level—a surge many clergy and finance experts blame on the changes in how the tax is levied.

The outflow is now fueling a debate about whether a levy that goes back to the 19th century is an appropriate way to finance churches in an increasingly secularized Germany.

 WSJ

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September 3, 2014 in Tax | Permalink | Comments (1)

Robert Reich: College Is a Ludicrous Waste of Money

Salon:  College Is a Ludicrous Waste of Money, by Robert Reich (UC-Berkeley):

InequalityThis week, millions of young people head to college and universities, aiming for a four-year liberal arts degree. They assume that degree is the only gateway to the American middle class.

It shouldn’t be.

For one thing, a four-year liberal arts degree is hugely expensive. Too many young people graduate laden with debts that take years if not decades to pay off.

And too many of them can’t find good jobs when they graduate, in any event. So they have to settle for jobs that don’t require four years of college. They end up overqualified for the work they do, and underwhelmed by it.

Others drop out of college because they’re either unprepared or unsuited for a four-year liberal arts curriculum. When they leave, they feel like failures.

We need to open other gateways to the middle class. 

Press reports last month noted that Reich earns a $243,000 salary at UC-Berkeley and is teaching one class this semester.

September 3, 2014 in Legal Education | Permalink | Comments (4)

Burger King: It's Not the Taxes. Experts: Dollars to Doughnuts, That's a Whopper

Bloomberg:  Burger King: It's Not the Taxes. Experts: Dollars to Doughnuts, That's a Whopper, by Zachary R. Mider:

BKTHDaniel Schwartz, chief executive officer of Burger King Worldwide Inc., said last week he doesn’t expect “meaningful tax savings” when the company adopts a new legal address in Canada through the purchase of a doughnut chain there.

While Schwartz’s statement may have blunted criticism from U.S. politicians who are calling the Miami-based hamburger maker’s address change a tax dodge, it’s hard to square with the reality of the countries’ tax laws, according to experts on both sides of the border. “If they don’t see any tax benefits going forward, they are probably not looking very hard,” said Edward Kleinbard, a tax professor at the University of Southern California and a former partner at New York-based Cleary Gottlieb Steen & Hamilton LLP.

Kleinbard and other authorities [Reuven Avi-Yonah, Dick Harvey, Robert Willens] said in interviews that Burger King will almost certainly reduce its taxes because Canada’s corporate income tax system is simply less expensive for multinational companies. Canadian companies can collect dividends from most foreign subsidiaries without paying more tax in their home country -- an advantage over the U.S., which is one of the few countries that apply a second layer of tax on foreign income.

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September 3, 2014 in Tax | Permalink | Comments (1)

Law School, I Love You

Gawker:  Law School, I Love You, by David Shapiro (Brooklyn Law School 3L):

LoveI went to NYU for college and finished as fast as I could because I didn't enjoy it and wasn't engaged by what I was studying (economics, history, metropolitan studies). After that, for about two years, I worked at a part-time clerical job so menial that I couldn't tell my best friends what I did. I made $13,689.60 a year. My mom told me that when she found out what I was doing, her heart sunk. One time, on the phone, my Dad asked me how old I thought I would be before he stopped supporting me. ...

I was sitting in my Civil Procedure class when I realized I loved law school. ... I sent a Google Chat message to my friend who was sitting next to me that said, "i think i love law school? is that possible/reasonable?" She didn't respond because she was focusing on the lecture. I Googled it and found a message board posting entitled, simply, "does anyone else love law school." The common thread running through the replies was incredulity. Nobody had ever told me, or any of these students on this message board apparently, that law school could be a thing that you could love. I thought it was just a thing you had to drag yourself through before you could become a lawyer. It would be like if someone told me to go to the dentist not only to get my teeth cleaned but also because I might really have a good time hanging out with the dentist.

I also noticed, for the first time, I didn't dread getting out of bed to go to school. I was going to office hours with my professors just to talk. ... More than anything, I loved learning about the rational underpinnings for the beliefs of people I disagree with—for a liberal law student, reading one of Justice Scalia's opinions is like going on an ideological safari through an awe-inspiring argument in a parallel universe. In the winter, before finals, I sat in the library, seven days a week, most days until after midnight. I'd never worked harder, cared more about what I was doing, or been happier. Over winter break after my first semester, my Dad hung my grades up on the refrigerator. They weren't perfect grades but, for the first time, he said he was proud of me.

After two years of law school, I still feel this way about it, but there is a lingering problem: It can be really embarrassing to tell people that I go to law school. I think that's driven in part by a long-held belief that people who go to law school can't hack it in the professional world, are cursedly uncreative, or have given up on their dreams. (Some students in law school confirm this; most don't.)

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