TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Thursday, November 10, 2016

Number Of Americans Renouncing Their U.S. Citizenship Last Quarter Was Second Highest In History

International Tax Blog, 2016 Third Quarter Published Expatriates — Second Highest Ever:

Today the Treasury Department published the names of individuals who renounced their U.S. citizenship or terminated their long-term U.S. residency (“expatriated”) for the third quarter of 2016. The number of published expatriates for the quarter was 1,380, the second highest quarterly number ever.

ITB

November 10, 2016 in Tax | Permalink | Comments (1)

Fordham Hosts Conference Today On BEPS And International Corporate Tax Avoidance

The IRS Scandal, Day 1281:  Another Federal Court Says The IRS Continues To Harass Conservative Groups

IRS Logo 2 NorCal Tea Party Patriots v. IRS, No. 1:13cv341 (D.C. S.D. OH Nov. 4, 2016) (citations omitted):

Did the IRS subject TPTP to viewpoint discrimination in the manner in which it has processed TPTP’s § 501(c)(4) application for tax-exempt status and is that discrimination still ongoing? The Court concludes in the following analysis that TPTP has established at least a likelihood of success on the merits on those questions. The Court first will explain why granting TPTP preliminary injunctive relief to remedy the ongoing harm against TPTP is appropriate. It then will follow from that analysis why the Government is not entitled to summary judgment.

A. Motion for Preliminary Injunction
Plaintiffs seek a preliminary injunction requiring the IRS to process TPTP’s § 501(c)(4) application in the ordinary course of business. The Government responds that a preliminary injunction is neither justified nor appropriate. ...

2. Likelihood of Success on the Merits
TPTP has made a strong showing of a likelihood of success on the merits on Count II of the Second Amended Class Action Complaint. TPTP alleges that the IRS discriminated against it on the basis of its political viewpoint in the processing of its § 501(c)(4) application. TPTP has put forward evidence demonstrating that the IRS targeted TPTP’s application for special scrutiny and delayed processing because it met the political advocacy criteria found to be inappropriate in the 2013 TIGTA Report. Although the IRS had changed the political advocacy criteria language in May 2012 to focus more on political activities than on party names, an EO screener identified TPTP as a “TEA PARTY” case on the screening checklist in September 2012. Additionally, the IRS Rule 30(b)(6) deponent admitted TPTP’s application was segregated as a Tea Party case. The IRS has held TPTP’s application without further processing since June 2013 after requesting and receiving additional information from TPTP. Processing applications “pursuant to different standards and at different rates depending upon the viewpoint of the applicants [is] a blatant violation of the First Amendment.” Z Street v. Koskinen, 791 F.3d 24, 32 (D.C. Cir. 2015).

The Government responds that the 2015 TIGTA Report proves that the IRS ceased using the inappropriate political advocacy criteria to target dissenting groups at the screening stage based on their political viewpoint no later than June 2013. The Government argues that the Court should not issue an injunction to enjoin behavior which the IRS already has stopped. However, the IRS’s argument misses the mark.

Regardless of the fact the IRS purports to have stopped applying the inappropriate political advocacy criteria in 2013, the evidence is undisputed that the IRS continued to delay processing TPTP’s until August of 2016. The Government appears not to see the forest through the trees when it uses the existence of this lawsuit as grounds to continue the delay that is the subject of this lawsuit. The evidence strongly suggests that the IRS initiated the delay because TPTP’s application was perceived at the screening stage to be a Tea Party case. The Court is not persuaded that the discriminatory animus that motivated the initial decision to segregate and delay TPTP’s application can be neatly separated from the delay that now has continued for three years. Accord True the Vote, Inc. v. Internal Revenue Serv., 831 F.3d 551, 562 (D.C. Cir. 2016) (“It is not at all clear why the IRS proposes that not ceasing [discriminatory conduct] becomes cessation if the victim of the conduct is litigating against it.”).

Moreover, the Court is not convinced that the IRS’s general litigation hold policy justifies the delay in processing TPTP’s application. The Government admitted that it has discretion whether to apply the general litigation hold policy in specific cases during oral arguments in the case of Z Street v. Koskinen, No. 15-5010 (D.C. Cir. May 4, 2015), another case in which a tax-exemption applicant alleged viewpoint discrimination by the IRS.8 Moreover, the litigation hold policy should arise only when an applicant’s tax exemption status is at issue in the litigation. TPTP is not challenging in this suit whether it is entitled to § 501(c)(4) tax-exempt status. There is no disputed issue in this litigation which will affect the IRS’s determination of whether TPTP qualifies for § 501(c)(4) status. Thus, there is no basis to stay determination of the application pending the outcome of this lawsuit. Additionally, the Government has not proven that the so-called cease and desist letter justifies the purported litigation hold. TPTP asked the IRS to process its application during its Rule 30(b)(6) deposition, well after Plaintiffs’ counsel issued the cease and desist letter. Plaintiffs’ counsel later explained at a Court conference that the sole purpose of the cease and desist letter was for the IRS to direct communications regarding the processing of TPTP’s application through its counsel. Yet the IRS has persisted to delay processing the application. Given these facts, TPTP has established a least a likelihood of success on the merits of proving that the IRS’s refusal to finish processing TPTP’s § 501(c)(4) application is a continuation of the discriminatory treatment that appears to have begun when the IRS segregated the application as a Tea Party case.

Likewise, the Government has not proven that a litigation hold was necessary to protect its agents from being named as defendants in this suit. Plaintiffs originally asserted multiple claims against IRS managerial and line-level employees in the Second Amended Class Action Complaint. The Court dismissed the claims against the employees in their individual capacities in its July 17, 2014 Order. It is unclear on what reasonable grounds the agents who process TPTP’s application could be sued given the law of the case doctrine. Also, the evidence that the IRS ceased using the political advocacy criteria to segregate Tea Party-type applications by June 2013 undercuts the Government’s argument. IRS agents who process an application in the ordinary course are not likely to be accused of viewpoint discrimination. The Government’s August 16, 2016 letter explaining that the IRS has decided to process TPTP’s application does not alter this conclusion. To date, the IRS has not issued a decision on the application.

Finally, the Government has not established that a preliminary injunction is inappropriate because such relief is different in kind from the relief sought in Count II of the Second Amended Class Action Complaint. Plaintiffs state in Count II that “[t]his Court may grant declaratory and injunctive relief against the IRS and the Treasury Department . . . declaring that the Defendants’ discriminatory conduct is unlawful and enjoining them from using tax exemption applicants’ political viewpoints to target them and subject them to delay . . . .” The injunctive relief sought in the Motion for Preliminary Injunction is not materially different. TPTP asks the Court for an ordering compelling the IRS to process TPTP’s application in the ordinary course. Such an order would require the IRS to end the three-year delay in processing.

For all these reasons, the Court concludes that Plaintiffs have established TPTP’s likelihood of success on the merits on Count II of the Second Amended Class Action Complaint.

3. Irreparable Harm and the Public Interest
Next, the Government argues that Plaintiffs cannot prove irreparable harm. The Court disagrees. The loss of First Amendment freedoms causes irreparable injury. Liberty Coins, LLC v. Goodman, 748 F.3d 682, 690 (6th Cir. 2014). Additionally, the public interest lies with the protection of constitutional rights. 

Nonetheless, the Government argues that no irreparable harm exists in this case because TPTP has an alternative statutory remedy available. In 2015, Congress amended 26 U.S.C. § 7428 to provide a remedy for § 501(c)(4) applicants whose applications have been pending before the IRS for more than 270 days without a determination. Previously, the remedy was available only to § 501(c)(3) applicants. Now § 501(c)(3) and § 501(c)(4) applicants can file suit in the U.S. Tax Court, the Court of Federal Claims, or the District Court for the District of Columbia for a judicial determination of their tax exemption applications if the IRS has not made a determination in 270 days. 26 U.S.C. § 7428(a)&(b). The Government argues that TPTP will not suffer irreparable harm absent an injunction because it can file a § 7428 suit for judicial determination of its application.

The Government made a substantially similar argument in the Z Street case and it was rejected by the D.C. Circuit Court of Appeals. ... The Court agrees with the Z Street analysis. TPTP is not asking the Court to declare its eligibility for a § 501(c)(4) tax exemption. Instead, TPTP seeks an order prohibiting the IRS from delaying its consideration of its § 501(c)(4) application because of its political viewpoint in opposition to the current presidential administration. It seeks for the IRS to process its application in the ordinary course of business as it would any other § 501(c)(4) applicant. Section 7428 does not provide an adequate alternative remedy for the alleged constitutional wrongdoing.

4. Preliminary Injunctive Relief
The Court concludes for the reasons stated above that Plaintiffs have established that TPTP is entitled to injunctive relief pursuant to Rule 65 of the Federal Rules of Civil Procedure. The Court orders the IRS to process TPTP’s § 501(c)(4) application in the ordinary course of business. The IRS shall direct all necessary communications with TPTP through Plaintiffs’ counsel.

B. Motion for Partial Summary Judgment
Turning to the Motion for Partial Summary Judgment, the Government argues that TPTP’s claim fails as a matter of law on the grounds of mootness or lack of standing. It follows from the foregoing analysis of the preliminary injunction issue that the Court does not agree. ...

The Government argues that the case is moot and that TPTP lacks standing because the IRS has ceased the allegedly wrongful conduct which is the basis of the Count II claim. TIGTA concluded that the IRS discontinued using the inappropriate political advocacy criteria and the BOLO listings to screen cases by June 2013. Plaintiffs do not offer evidence at this point to refute the TIGTA conclusion. The cessation of wrongful conduct by a government entity can moot a case if the cessation appears genuine. Bench Billboard Co. v. City of Cincinnati, 675 F.3d 974, 981 (6th Cir. 2012). However, in True the Vote, Inc. v. Internal Revenue Serv., the D.C. Circuit Court of Appeals was not convinced that statements made by the IRS regarding the suspension of the use of the BOLO listings established that the case was moot. The court explained: “A violation of right that is ‘suspended until further notice’ has not become the subject of voluntary cessation, with no reasonable expectation of resumption, so as to moot litigation against the violation of rights.” This Court agrees. While the cessation of the use of the political advocacy criteria to screen applications did not remedy the alleged ongoing discrimination against TPTP, a preliminary injunction ordering the IRS to process TPTP’s § 501(c)(4) application in the ordinary course will. The Court concludes, therefore, that TPTP has a concrete interest in the outcome of the case, and Count II is not moot. The Court will deny summary judgment to the Government on Count II.

IV. CONCLUSION
For the foregoing reasons, the Government’s Motion to Strike, or in the Alternative Response to, Plaintiff’s Notice of Intention to Supplement Motion for Preliminary Injunction is GRANTED to the extent that it seeks to respond to Plaintiff’s Notice of Intention to Supplement Motion for Preliminary Injunction; the Government’s Motion for Partial Summary Judgment is DENIED; and the Texas Patriots Tea Party’s Motion for Preliminary Injunction is GRANTED.

The Court orders the IRS to process TPTP’s § 501(c)(4) application in the ordinary course of business, directing all necessary communications and requests for additional information to TPTP’s legal counsel. The risk of harm to the IRS if this injunction is overturned is minimal so the Court will require Plaintiffs to submit only a nominal security deposit of $1.00.

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November 10, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Wednesday, November 9, 2016

Polsky Presents The Up-C Revolution Today At Pennsylvania

Polsky (2015)Gregg D. Polsky (Georgia) presents The Up-C Revolution (with Adam H. Rosenzweig (Washington University)) at Pennsylvania today as part of its Tax Policy Workshop Series hosted by Chris Sanchirico and Reed Shuldiner:

Over the past few years, a revolutionary new tax structure, known as the Up-C, has become increasingly popular, particularly in instances where an LLC is being taken public. In such an Up-C IPO, a newly formed C corporation is placed on top of the existing LLC, which continues to operate the business. Shares of the C corporation are sold to new investors, and the proceeds are used by the C corporation to buy an interest in the LLC. Meanwhile, the legacy owners of the LLC (typically, founders and private investment funds) retain their interests in the LLC, while receiving exchange rights that allow them to swap their LLC interests for equivalent-value shares of the C corporation. In addition, the legacy owners often receive the benefit of tax receivables agreements (TRAs), which provide that the owners will receive a specified percentage (usually 85 percent) of the tax benefits to the C corporation resulting from future exchanges. In combination, these features seem to provide a near-nirvana of tax efficiency. It is therefore unsurprising that the popularity of Up-Cs is growing at an exponential rate.

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November 9, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Morse & Allen:  Innovation And Taxation At Start-Up Firms

Susan C. Morse (Texas) & Eric J. Allen (USC), Innovation and Taxation at Start-Up Firms, 69 Tax L. Rev. ___ (2016):

This Article considers capital-constrained start-up firms and conventional income tax breaks meant to encourage innovation. Some argue that these tax breaks provide benefits to encourage innovation that are more certain and earlier in time compared to other possible government policies, such as patent protection. But start-up firms generally cannot use income tax breaks currently, because such firms are not profitable for years after their founding. Instead, investment in income tax planning reduces the funds available to a capital-constrained start-up firm for business investment. This reduces the time a firm has to reach its next stage of success, such as securing external financing.

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November 9, 2016 in Scholarship, Tax | Permalink | Comments (0)

Tax Rate Of S&P 100 Companies

WalletHub, Corporate Tax Rate Report:

With Election Day just days away and tax reform being a major issue this presidential election cycle, the personal-finance website WalletHub today released its latest Corporate Tax Rate Report. This report provides an in-depth analysis of the 2015 rates at which S&P 100 companies — collectively worth more than $12.4 trillion as of Sept. 30 — are taxed at the state, federal and international levels.

WalletHub

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November 9, 2016 in Tax | Permalink | Comments (1)

Soled & Thomas: Revisiting The Taxation Of Fringe Benefits

Jay A. Soled (Rutgers) & Kathleen DeLaney Thomas (North Carolina), Revisiting the Taxation of Fringe Benefits, 91 Wash. L. Rev. 761 (2015):

The receipt of workplace fringe benefits has become increasingly ubiquitous. As a result of their employment, employees often receive a cornucopia of fringe benefits, including frequent-flier miles, hotel reward points, rental car preferred status, office supply dollar coupons, cellular telephone use, home Internet service, and, in some instances, even free lunches, massages, and dance lessons. Technological advances and workforce globalization are important contributory factors to the popularity of what were, until the turn of this century, previously unknown fringe benefits.

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November 9, 2016 | Permalink | Comments (0)

A Scalia Bump? George Mason Increases 1L Class Size, Median LSAT And GPA

Scalia Law SchoolThe Antonin Scalia Law School at George Mason University (ranked #45 in U.S. News) welcomed 179 1Ls this Fall, up 14% from 2015 (157) while also increasing its median LSAT (162, +1) and GPA (3.66, +0.6).  The 2016 class is 41% smaller than 2010 (303), with decreases in its median LSAT (-2, from 164) and GPA (-.12, from 3.82).

Here are George Mason's admission data for the prior six years from Law School Transparency:

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November 9, 2016 in Legal Education | Permalink | Comments (1)

Analysis Of Section 385 Debt-Equity Regulations

Debt v EquityDavid S. Miller (Proskauer, New York) & Janicelynn Asamoto Park (Proskauer, New York), IRS Issues Final and Temporary Debt-Equity Regulations Under Section 385:

On October 13, 2016, the Treasury Department and the Internal Revenue Service issued final and temporary regulations under section 385 of the Internal Revenue Code. The final and temporary regulations recharacterize certain debt instruments as equity for all federal income tax purposes. This paper briefly describes the final and temporary regulations.

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November 9, 2016 in Scholarship, Tax | Permalink | Comments (0)

Judge Denies Richard Sander Access To California Bar Admissions Data To Study Racial Implications Of Bar Passage Rates

California State Bar (2014)Following up on my previous post, UCLA Law Prof's Long Legal Fight Over Access To California Bar Admissions Data Headed To Trial: Wall Street Journal, California Judge Denies Release of Lawyer-Race Data:

A years-long fight over the release of lawyer admissions data in California could finally be over, after a state court judge ruled Monday that publicizing the information on race and exam scores runs too high a risk of violating privacy rights [Sander v. State Bar of California, No. 08-508880 (Nov. 7, 2016))].

UCLA School of Law Professor Richard H. Sander asked the state bar back in 2006 to disclose the bar exam score, grade point average, LSAT score, race, gender and law school alma mater of everyone who applied for bar admission since 1972. He asked for the data to be given to him without names attached, related to his research into “the large and persistent gap in bar passage rates among racial and ethnic groups.”

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November 9, 2016 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 1280: WSJ—Lois Lerner As Precursor To James Comey

IRS Logo 2Wall Street Journal:  The Antonin Scalia Election, by William McGurn:

When Americans find themselves inside the voting booth on Tuesday, for many the decisive factor will be which candidate—Donald Trump or Hillary Clinton—should fill Antonin Scalia’s empty seat on the Supreme Court.

This is no small thing. Still, whose vote will replace Scalia’s on the high court is only half the Scalia story, and perhaps not the important half. Beyond even his jurisprudence, this was a man whose wisdom was to appreciate that American liberty is rooted in the separation of powers—and that the chief means of accountability is the ballot box and not the criminal courts.

The left abandoned this principle long ago. ... Mr. Comey’s real outrage was his acquiescence to the handcuffs the Justice Department put on FBI investigators throughout the Clinton email investigation—especially Justice’s refusal to go to a grand jury, without which investigators have no good way to compel evidence and testimony. The principled stand for an FBI director would have been to inform the attorney general,Loretta Lynch, that unless she gave his agents the standard tools of an FBI investigation, he would resign and tell the American people why.

Instead, Mr. Comey proceeded with the constraints and then showboated with a July press conference absolving Mrs. Clinton of any prosecutable wrongdoing. Never mind that an indictment was not his decision to make.

No doubt Ms. Lynch would not have indicted Mrs. Clinton. But had Mr. Comey kept his mouth shut, she, President Obama and Mrs. Clinton would be answering for the decision—not to mention for the highly unethical meeting between the attorney general and Mrs. Clinton’s husband that would have remained secret but for an intrepid reporter. Now all Mr. Comey has to show for his concern for his personal reputation is to have added the FBI to the list of government institutions the public no longer trusts.

And let’s remember how Republicans blinked on Lois Lerner. When Congress held her in contempt for refusing to testify about IRS targeting of conservative groups, the House had three choices: pursue her civilly (which would take years), jail her until she testified, or refer the matter to the local U.S. attorney. Then-Speaker John Boehner opted for the last, probably realizing the Obama Justice Department would never prosecute.

Throughout it all, Congress was lectured about not doing anything to jeopardize a criminal investigation. But in the American understanding, government is accountable first and foremost to We the People operating through our elected representatives. As a co-equal branch of government, Congress is free to use its own powers regardless of what some executive agency might be doing.

Certainly jailing Ms. Lerner would not have been without its political risks. Then again, the Founders meant for such decisions to require hard political calculations.

And the results of opting for an indictment House Republicans knew would not come? Ms. Lerner has mostly gotten off scot-free. The American people still do not know the whole story. And on Friday, a ruling from a federal judge in Ohio reminded us the IRS is still targeting conservative organizations for illegal scrutiny.

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November 9, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Tuesday, November 8, 2016

Post-Merger Rutgers Law School In 'Crisis' As 1L Enrollment Falls 31% From 2015 (62% From 2011) At Camden

Rutgers Logo (2016)Philadelphia Inquirer, Rutgers Puzzles Law Enrollment in Camden: Why Did Twice as Many Students Choose Newark?:

First-year law-student enrollment at Rutgers-Camden fell 31 percent this year, to its lowest in at least a decade, while its Rutgers-Newark counterpart saw a slight increase. ... The unexpected enrollment imbalance comes in the first year of a merged law school [ranked #92 in U.S. News] which had planned on equal numbers on each campus.

“It’s one of the issues we’re going to be looking at very carefully in the second year,” said Ronald K. Chen, the Newark-based co-dean of Rutgers Law School.

The consequence of students’ preferences, in the aggregate, is a clear imbalance: Newark has 214 first-year law students, exactly double Camden’s 107.

The 2-1 enrollment ratio matches a 2012 crisis at Rutgers-Camden. Law students were reluctant to enroll because of a proposed merger of Rutgers-Camden and Rowan University that sparked fierce resistance from Rutgers-Camden students, faculty, staff, and alumni. That year, the Camden law school enrolled 116 first-year students to Newark’s 225.

Rutgers

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November 8, 2016 in Legal Education | Permalink | Comments (3)

Rosenthal:  Protecting Trump's $916 Million Of NOLs

Trump (2016-3)Steve Rosenthal (Tax Policy Center), Protecting Trump's $916 Million of NOLs, 153 Tax Notes 829 (Nov. 7, 2016):

This article describes how Republican presidential nominee Donald Trump generated $916 million of net operating losses, and how he preserved them for later use.

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November 8, 2016 in Political News, Scholarship, Tax | Permalink | Comments (0)

University Of Victoria Seeks To Hire A Tax Prof

UVicThe University of Victoria Faculty of Law invites applications for two positions:

Appointment(s) will be at the rank of tenure-track Assistant Professor or Associate Professor, and the expected start date would normally be July 1, 2017.

Taxation law and policy is the subject area priority for one position. For the second position, we are interested in hearing from all exceptional candidates regardless of subject matter expertise. Although there are no subject limits for the second position, applications from candidates with the capacities to teach and research in the areas of Immigration and Refugee Law, Family Law, Civil Procedure and Dispute Resolution are especially welcome. ...

 

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November 8, 2016 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (1)

Johnson:  Trump Bought The Law In Wilkie Farr's Tax Opinion

WTCalvin H. Johnson (Texas), Bought Law:

In 1991, Donald Trump bought a tax opinion from Wilkie Farr, a New York law firm, that allowed him to avoid tax on roughly a billion dollars of income. The legal theory behind the opinion is that there was no reduction of deductions if the banks traded their Trump-depleted debt for a partnership interest. The theory has neither the literal wording of the statute nor any court case on its said. Nonetheless the theory called Trump to keep a billion dollars of fake tax losses to shelter a billion dollars' of luxury consumption from tax when nothing was lost as a matter of economics.

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November 8, 2016 in Political News, Scholarship, Tax | Permalink | Comments (1)

WSJ:  Law Professors Grapple With Trump—Some Use The S-Word And Even The C-Word

Trump (2016-3)Wall Street Journal, Law Professors Grapple With Trump:

When it comes to Donald Trump, University of Texas law professor Sanford Levinson doesn’t shy away from using the s-word or even the c-word. Secession. Coup.

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November 8, 2016 in Legal Education, Political News | Permalink | Comments (3)

Professor Althouse, Dean Amar & President Schill On Oregon Tax Prof Nancy Shurtz's Wearing Blackface To Halloween Party

Oregon 2

Following up on my previous posts (links below):

Ann Althouse (Wisconsin), About That Oregon Law Professor Who Wore Blackface as Part Of a Halloween Costume and Provoked Demands That She Resign:

I find it hard to believe that people are willing to be so vengeful over a single instance of bad judgment. Whatever happened to mercy and forgiveness? And what about our shared interest in living in a culture where people aren't fearful that their lives could be ruined if they said one thing wrong — even when they were trying to say something quite bland (like why can't we all get along)?

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November 8, 2016 in Legal Education, Tax | Permalink | Comments (2)

Pratt:  The Bern-ing Fairness Question On Soda Taxes

Pratt (2016)TaxProf Blog op-ed:  The Bern-ing Fairness Question on Soda Taxes, by Katherine Pratt (Loyola-L.A.):

Sugar-sweetened soda tax proposals are on the ballot today in Northern California and Boulder Colorado. Soda tax proponents stress the surprisingly harmful health effects of a sugary soda habit, in addition to Big Soda’s targeting and commercial exploitation of low-income communities, especially communities of color. So guess who Big Soda has been using as its new unofficial spokesperson? Bernie Sanders. During the primary season, Bernie opposed Philadelphia’s proposed soda tax on the grounds that it would be “regressive,” meaning that, as a percentage of income, the tax would be higher for low-income soda drinkers than for high-income soda drinkers. Big Soda has used Bernie’s earlier regressivity objection to soda taxes in its newest campaign to defeat the Bay area and Boulder soda tax measures.

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November 8, 2016 in Tax | Permalink | Comments (0)

After Losing Federal Trademark Case, 'Houston College of Law' Changes Name To 'South Texas College Of Law Houston', Abandons Color Red

South TexasFollowing up on my previous posts (links below): Press Release, University of Houston System Wins Trademark Dispute as Local Law School Adopts New Name:

The University of Houston has prevailed in its federal trademark lawsuit against South Texas College of Law, which briefly changed its name to Houston College of Law earlier this year. The college announced today it has changed its name once again to satisfy a court order. The 93-year-old private law school is now South Texas College of Law Houston and will feature the color navy in future marketing efforts to distinguish the new name.

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November 8, 2016 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 1279: WSJ — Another Federal Court Says The IRS Continues To Harass Conservative Groups

IRS Logo 2Wall Street Journal editorial, IRS vs. Tea-Party Patriots: New Evidence That Harassing Conservatives Has Continued:

The Obama Administration is nearing the end but the legal challenges to the IRS targeting of conservative groups are far from over. On Friday federal Judge Michael Barrett granted a preliminary injunction against the IRS on strong evidence of viewpoint discrimination by the agency.

Judge Barrett ruled (NorCal Tea Party Patriots v. IRS) that the Texas Patriots Tea Party (TPTP) “has made a strong showing of a likelihood of success on the merits.” He added that “TPTP has put forward evidence demonstrating that the IRS targeted TPTP’s application for special scrutiny and delayed processing because it met the political advocacy criteria found to be inappropriate in the 2013 TIGTA Report.”

This case is especially notable because the targeting of TPTP occurred after the time that the Treasury Inspector General for Tax Administration said the IRS had been using the inappropriate targeting criteria. The group, which is based near Fort Worth, applied for tax-exempt status in summer 2012 and was flagged in September 2012 for extra scrutiny as a tea-party group. According to the Treasury report, the IRS’s use of targeting criteria stopped in May that year. ...

Judge Barrett’s injunction requires the IRS to process the group’s application as it would any other, but the tax agency needs a top to bottom house-cleaning.

New York Post, From the Right: IRS Targeting Never Stopped:

Remember the IRS scandal over the agency targeting conservative nonprofits? Well, it’s still happening, writes Rick Moran at PJ Media: “A federal judge in Ohio has had it with the IRS foot-dragging on applications from conservative organizations for exempt status and has ordered the agency to quit stalling.” The order, contained in a filing unsealed Friday, makes clear that “three years after being assured by the IRS that they had stopped singling out conservative organizations for special scrutiny, the targeting continues,” Moran says. It also shows the IRS’ utter contempt for the investigation, according to Moran. The targeting will continue, Moran says, “until a judge holds a couple of IRS managers in contempt and lets them cool their heels in jail for a few days.”

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November 8, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, November 7, 2016

Kuziemko Presents Redistribution In An Age Of Rising Inequality Today At NYU

KuziemkoIlyana Kuziemko (Princeton) presents Support for Redistribution in an Age of Rising Inequality: New Stylized Facts and Some Tentative Explanations (with Vivekinan Ashok (Yale) & Ebonya Washington (Yale)) today at the NYU High-End Inequality Colloquium Series (more here) hosted by Robert Frank (Cornell) and Dan Shaviro (NYU):

Despite the large increases in economic inequality since 1970, American survey respondents exhibit no increase in support for redistribution, in contrast to the predictions from standard theories of redistributive preferences. We replicate these results but further demonstrate substantial heterogeneity by demographic groups. In particular, the two groups who have most moved against income redistribution are the elderly and African-Americans. We find little evidence that these subgroup trends are explained by relative economic gains or growing cultural conservatism, two common explanations. We further show that the elderly trend is uniquely American, at least relative to other developed countries with comparable survey data. While we are unable to provide definitive evidence on the cause of these two groups' declining redistributive support, we offer additional correlations which may offer fruitful directions for future research on the topic.

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November 7, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Hurt Presents Using NOL Poison Pills To Ward Off Activist Investors Today At UC-Irvine

Hurt (2016)Christine Hurt (BYU) presents The Hostile Poison Pill, 50 U.C. Davis L. Rev. ___ (2016), at UC-Irvine today as part of its Business Colloquium Series hosted by Katherine Porter and Funmi Arewa:

Whether one ascribes to the agency theory of shareholder primacy or the contractarian theory of director primacy, boards of directors have great discretion in determining whether, when, and how to sell the corporation. Defensive tactics, like poison pills, can be tools in wielding that discretion in the service of creating shareholder value. However, a poison pill either to oppress a minority shareholder, as in eBay v. Newmark, or to minimize the impact of activist shareholders, as in Versata Enterprises, Inc. v. Selectica, Inc., seems to exceed the “maximum dosage” of the pill. The NOL poison pill, while facially plausible as a tool to protect tax assets from impairment caused by a Section 382 “ownership change,” may be a stepping stone to a low-trigger anti-shareholder pill. Instead of warding off uninvited potential acquirers, the pill could ward off shareholder voice. Though the original poison pills were blessed by the Delaware courts to ward off hostile bidders, now boards can use a hostile poison pill to ward off noisy shareholders.

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November 7, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Goldin Presents Rethinking The Taxation Of Single Parents Today At Loyola-L.A.

GoldinJacob Goldin (Stanford) presents Beyond Head of Household: Rethinking the Taxation of Single Parents (with Zachary Liscow (Yale)) at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Ellen Aprill and Katherine Pratt:

Under current law, unmarried taxpayers with children can take advantage of the head of household filing status (HHFS) to reduce their federal income taxes. We argue that the design of the filing status is largely obsolete, geared toward alleviating a “marriage penalty” in the tax code that is much less important than when the filing status was first established. At the same time, the growth in the fraction of Americans raising children outside of traditional two-parent households has dramatically raised the cost of the filing status to the fisc.

In this article, we highlight two features of the design of HHFS that undermine its goal of providing support to single parent households.

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November 7, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (2)

Dilbert Creator Reiterates His Endorsement Of Trump Due To Clinton's Proposed 65% Estate Tax Rate

Dilbert TrumpFollowing up on my previous post:  Dilbert.com, I Don’t Want a Government Job:

My current tax rate is about half of my income when you add up all of the various taxes. I don’t have many deductions. Clinton proposes an estate tax that would take about half of what is left. In effect, Clinton wants my tax rate to be around 75% for every dollar I earn today.

That level of taxation would make me feel like a government employee. The vast majority of my time and energy would go toward making money that politicians would decide how to spend. That doesn’t feel like a rewarding life. If Clinton wins, I would think hard about retiring early and becoming a user of resources instead of a creator of resources. Because I don’t want a government job.

A Trump presidency, on the the other hand, makes me want to do something useful for the country that is good for me too. That’s a big part of why I have been blogging about Trump’s persuasion skills. I want voters to have a clear view of their options. If voters choose Clinton, I can live with that for six months until Kaine takes over. But I wouldn’t feel good about myself if I didn’t at least try to help people see the Trump option for what it is – an opportunity to “drain the swamp” as he says. ...

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November 7, 2016 in Political News, Tax | Permalink | Comments (1)

Call for Papers:  Michigan Young Scholars’ Conference

MichiganMichigan Law School has issued a call for papers for its Third Annual Young Scholars' Conference:

Overview
The University of Michigan Law School is delighted to invite submissions for its Third Annual Michigan Law Young Scholars' Conference, to be held March 31–April 1, 2017. The conference brings together promising junior scholars to present their work and receive feedback from prominent Michigan Law School faculty. It aims to promote fruitful research collaboration between its participants and to encourage their integration in a community of legal scholars. The Young Scholars' Conference is intended for junior faculty, doctoral students, lecturers, fellows, and individuals in other academic capacities (with an academic appointment of no more than four years) in law and law related disciplines. It also is open to exceptionally promising aspiring legal scholars who are currently engaged in legal practice, and who wish to present a substantial piece of scholarly work in preparation for the entry level teaching market. Abstracts are welcome on any legal or interdisciplinary subject. The selection process will be based on the quality of the abstract, as well as its capacity to engage with other proposals towards a collaborative academic and intellectual dialogue.

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November 7, 2016 in Legal Education | Permalink | Comments (0)

Pratt:  Two Tax Issues Disqualify Trump For The Presidency

Pratt (2016)TaxProf Blog op-ed:  Trump Tax Concerns Persist, by Katherine Pratt (Loyola-L.A.):

Just 24 hours before the presidential election, concerns about Donald Trump’s payment of his tax obligations persist.  Recent press coverage has focused on an issue that (at least so far, based on very limited information) probably does not disqualify him to be our president, and has not focused enough on two more fundamental tax issues that disqualify him to be our president.

In the past few days, press coverage has emphasized a technical business tax question:  what specific tax strategies did Trump use to generate and preserve $916 million of net operating losses (NOLs), despite massive debt discharge, and were those strategies legally questionable? A front page November 1 New York Times article on this topic asserts that the “stock for debt swap” part of Trump’s overall  tax strategy was a new tax “dodge” dreamed up by tax lawyers to avoid debt discharge income (COD) on the cancellation of debt. This characterization of such swaps as a new tax scam is inaccurate. My academic articles on corporate COD explain the long history and theory of the exception and its gradual repeal [Shifting Biases: Troubled Company Debt Restructurings after the 1993 Tax Act, 68 Am. Bankr. L.J. 23 (1994); Corporate Cancellation of Indebtedness Income and the Debt-Equity Distinction, 24 Va. Tax Rev. 187 (2004)]. Suffice it to say that “stock for debt swaps” in bankruptcy cases were relatively common in the 1980s and early 1990s. Unless there is more to be revealed, Trump’s use of the stock for debt exception to COD does not disqualify him to be president.

But Trump’s conduct regarding two other tax issues does disqualify him to be president.

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November 7, 2016 in Political News, Scholarship, Tax | Permalink | Comments (4)

Arizona State Welcomes 230 1Ls, Up 7% From 2015 (80% From 2013) While Maintaining LSATs, GPAs

Arizona State Logo (2016)Arizona State Law School (ranked #25 in U.S. News) welcomed 230 1Ls this Fall, up 7% from 2015 (215) and up 80% from 2013 (128). Despite the large increase in its 1L class size, Arizona State has been able to largely maintain its LSAT medians (161, same as in 2015 and 2010, down only 2 from its 163 peak in 2012) and GPA medians (3.64, up from 2015 (3.63) and 2010 (3.57), down only .01 from its 3.65 peak in 2012). Arizona State admitted a huge number (66) of transfer students this Fall, in line with the past three years when it ranked either first (2015 (65, 47 from Arizona Summit) and 2014 (66, 44 from Arizona Summit)) or second (2013 (73)) in the country as a percentage of its previous first year class (2015: 45.5%; 2014: 51.6%; 2013: 48%)). One wonders about the impact of such large numbers of transfer students on bar passage rates: although Arizona State graduates have led the state the past two years, its pass rate has declined from 92.0% in 2013 to 76.8% in 2016.

Here are Arizona State's admission data for the prior six years from Law School Transparency:

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November 7, 2016 in Legal Education | Permalink | Comments (2)

Columbia Journal Of Tax Law Issues Call For One Tax Paper For Inclusion In Forthcoming Issue

Columbia Journal of Tax Law LogoThe Columbia Journal of Tax Law has issued a call for one paper for inclusion in its forthcoming Volume 8, Issue No. 2:

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November 7, 2016 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1278:  Trump's Refusal To Release His Tax Returns And The IRS Scandal

IRS Logo 2American Thinker: In Defense of Trump's Nondisclosure of His Tax Returns, by Kenneth H. Ryesky (E&Y):

There are ... considerations against disclosure, over and above the political calculus behind Trump's decision to release or not release his tax returns (and, for that matter, the tax return disclosure/nondisclosure decision of any politician for any political office). ...

Ex-IRS commissioner Fred Goldberg asserts that Trump's release of certain limited portions of his tax returns "would have no impact on any pending or future IRS audit of Trump. Zero. None." But there is no denying that the IRS has increasingly of late been sicced by politicians upon their political enemies, and it is not difficult to imagine a government official who is not directly involved in a Trump return audit (including a president or congresscritter), having seen a released copy, pressuring or otherwise inducing a cognizant IRS bureaucrat to take a closer look at one or more particular items on Trump's return (or on the return of a connected person or entity). ...

Notwithstanding (or perhaps because of) my professional standing in the taxation community, my own curiosity about Donald Trump's tax returns is probably greater than that of the average American voter. But given the demonstrated political weaponization of the IRS, perhaps Trump's refusal to play the disclosure game may better serve America's interests in the long run.

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November 7, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

TaxProf Blog Weekend Roundup

Sunday, November 6, 2016

Chodorow:  Trump Should Pay The Political Price For Failing To Release His Tax Returns

Trump (2016-3)Slate:  Keep Harping Over Trump’s Tax Returns, by Adam Chodorow (Arizona State):

His refusal to release them no longer feels like a first-order concern. But it’s one more broken norm that Americans will rue.

It’s fairly evident by now why Trump wouldn’t want his returns to be public—as I’ve written several times throughout the election cycle. There’s no reason to think he’ll reverse course and finally release them in the next week. But this goes far beyond Trump. Every major candidate for the past 26 years has released his or her tax returns, and we risk undermining this important tradition if we allow Trump’s refusal to get lost amid his other scandals and outrageous statements or concerns about Clinton’s emails. Just as candidates now release medical records to assure voters that they are fit for office, tax records are critical because they reveal a candidate’s potential conflicts of interest and commitment to honesty and integrity.

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November 6, 2016 in Political News, Tax | Permalink | Comments (6)

University Of Rochester B-School Professor Pays $100 Million FBAR Penalty Over Swiss Accounts

Horsky 2Department of Justice Press Release, Emeritus Professor Pleads Guilty to Conspiring to Defraud the United States and to Submitting False Expatriation Statement; Hid Account Containing $200 Million Also Paying $100 Million Civil FBAR Penalty:

A Rochester, New York emeritus professor of business administration pleaded guilty today to conspiring with others to defraud the United States and to submitting a false expatriation statement to the Internal Revenue Service (IRS), announced Principal Deputy Assistant Attorney General Caroline D. Ciraolo, head of the Justice Department’s Tax Division, and U.S. Attorney Dana J. Boente of the Eastern District of Virginia, after the plea was accepted by U.S. District Judge T.S. Ellis III.

According to documents filed with the court and statements made during the plea hearing, Dan Horsky, 71, is a citizen of the United States, the United Kingdom and Israel and was employed for more than 30 years as a professor of business administration at a university located in New York [University of Rochester].

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November 6, 2016 in Tax | Permalink | Comments (5)

The 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, with a new paper debuting on the list at #4 and a re-shuffling of the order within the Top 5.  The #1 paper is now #23 in all-time downloads among 12,319 tax papers:

  1. [3,838 Downloads]  Families Facing Tax Increases Under Trump's Latest Tax Plan, by Lily L. Batchelder (NYU)
  2. [237 Downloads]  Aggressive Tax Planning & the Ethical Tax Lawyer, by Heather M. Field (UC-Hastings)
  3. [236 Downloads]  The Up-C Revolution, by Gregg D. Polsky (Georgia) & Adam H. Rosenzweig (Washington University)
  4. [229 Downloads]  Estate Planning for Digital Assets: Assigning Tax Basis and Value to Digital Assets, by Elizabeth Ruth Carter (LSU)
  5. [226 Downloads]  Taxation and Human Rights: A Delicate Balance, by Reuven Avi-Yonah (Michigan) & Gianluca Mazzoni (S.J.D. 2017, Michigan)

November 6, 2016 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Law Schools' Dirty Little Secret: Adderall

AdderallNational Law Journal, Adderall in Law Schools: A Dirty Little Secret:

It’s a law student’s steroid.

Adderall, the drug of choice for nearly all law students who admit to using prescription medication without a doctor’s approval, is attributed with intensifying focus, stimulating thought and eliminating the need for breaks or sleep.

In the cutthroat environment of legal education, where a handful of exams can determine their fate, students use it as a performance enhancer in hopes of gaining a competitive edge, especially when they think other students are taking it, too.

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November 6, 2016 in Legal Education | Permalink | Comments (9)

The IRS Scandal, Day 1277: Second Federal Court Rules IRS Targeted Conservative Groups, Orders IRS To Act On Tea Party Group's Tax-Exempt Application Pending Since 2012

IRS Logo 2Washington Times, Judge Orders IRS to Stop Tea Party Targeting, Approve Four-Year-Old Application:

The IRS is still targeting tea party groups for illegal scrutiny by refusing to process applications that have been pending for years, a federal court said in a ruling made public Friday, ordering the tax agency to quit stalling.

U.S. District Judge Michael R. Barrett said the IRS can still either approve or deny the Texas Patriots Tea Party’s application for nonprofit status, but the agency can no longer sit on its hands. And he said the IRS must give the application an honest evaluation without prejudice stemming from the years long targeting.

In a series of stark findings, Judge Barrett ruled that the IRS did in fact single tea party groups out for special scrutiny because of their political viewpoints in opposition to President Obama — undercutting congressional Democrats who said liberal groups faced the same level of targeting.

“The evidence strongly suggests that the IRS initiated the delay because TPTP’s application was perceived at the screening stage to be a Tea Party case,” Judge Barrett, whose courtroom is in Ohio, said in an opinion that was filed earlier under seal, and was only made public after parts of the 29-page ruling were redacted.

It’s the latest blow to the tax agency, which is facing a separate order from a judge in Washington, D.C., to process a handful of other cases the agency had delayed.

American Thinker, Judge Orders IRS to Stop Targeting Conservative Groups:

A judge in Ohio is ordering the IRS to stop targeting conservative groups applying for tax exempt status and to make an immediate determination on an application by a Tea Party group in Texas.

The decision, made public on Friday, leaves no doubt that despite their claims to the contrary, the IRS is still playing politics in determining the tax exempt status of conservative groups - some of whom have been waiting for years to be approved. ...

The arrogance of this out of control agency is breathtaking. Judge after judge in ruling after ruling has ordered the IRS to halt their illegal targeting of conservative groups, but the IRS has, in effect, thumbed its nose at the courts and continues to play politics with tax exempt applications by conservatives.

The real world impact is that most of these groups who've had their applications slow walked through the system wither and die because donors can't take the tax deduction from monies they contribute to these groups. That, of course, is the heart of the IRS plan, which has worked for 5 years to stifle the free speech of conservatives.

PJ Media, Federal Judge: IRS Still Illegally Targeting Conservatives:

A federal judge in Ohio has had it with the IRS foot-dragging on applications from conservative organizations for exempt status and has ordered the agency to quit stalling.

The order was contained in a sealed filing that became public on Friday. What's clear in the judge's order is that three years after being assured by the IRS that they had stopped singling out conservative organizations for special scrutiny, the targeting continues.

Of course, it isn't just the IRS slow-walking applications through the system that's the problem. The targeting also included outrageous requests for information like donors names and addresses, reading lists, and other private information the agency had no business trying to acquire.

Two federal judges have now ruled against the IRS, rejecting their arguments that they're not targeting conservative organizations.

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November 6, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Saturday, November 5, 2016

This Week's Ten Most Popular TaxProf Blog Posts

Oregon Tax Prof Nancy Shurtz Issues Apology For Wearing Blackface To Halloween Party; Dueling Online Petitions Seek Signatories

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Following up on my previous posts:

Register-Guard, University of Oregon Professor Who Wore Blackface on Halloween Apologizes:

During a Halloween party I hosted at my house, I wore a costume inspired by a book I highly admire, Dr. Damon Tweedy’s memoir, Black Man in a White Coat. I intended to provoke a thoughtful discussion on racism in our society, in our educational institutions and in our professions. As part of my costume, I applied black makeup to my face and wore a white coat and stethoscope.

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November 5, 2016 in Legal Education, Tax | Permalink | Comments (7)

NY Times Special Section:  Giving

First Circuit Affirms Judgment For Harvard Law School In Defamation Lawsuit By Graduate Reprimanded For Plagiarism

HarvardFollowing up on my previous post, Harvard Law School Prevails in Defamation Lawsuit by 2009 Grad Over Plagiarism Reprimand:  National Law Journal, Harvard Grad Reprimanded for Plagiarism Loses Appeal:

Harvard Law School has prevailed again in court against a 2009 graduate who sued for defamation and breach of contract after being reprimanded for plagiarizing a law review article. The U.S. Court of Appeals for the First Circuit on Monday affirmed a lower court’s dismissal of alumna Megon Walker’s suit against the law school [Walker v. President and Fellows of Harvard College, No. 15-1154 (1st Cir. 2016)].

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November 5, 2016 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 1276:  George Will On The 2016 Presidential Election And The IRS Scandal

IRS Logo 2Washington Post op-ed: A Fitting Final Chapter to 2016’s Sleaze Sweepstakes, by George F. Will:

It is grimly hilarious to hear it said that the Justice Department, by not holding Comey to established protocols concerning discussions of ongoing investigations, and concerning pronouncements close to elections, has tainted itself. ... The department has enabled, by not seriously investigating, the IRS’s suppression of political advocacy by conservative groups. Or of the IRS’s subsequent destruction of subpoenaed emails pertinent to this. So, unsurprisingly, the most intrusive and potentially punitive federal agency continues to punish conservative groups for being conservative, according to Cleta Mitchell, a lawyer for political groups who confirms there are indeed conservative organizations who were targeted by the IRS and have still not received their tax-exempt status.

In 2013, President Obama professed himself “angry” about “inexcusable” IRS behavior, before he decided there was not a “smidgen” of IRS corruption. He claimed to have learned about the IRS behavior from the media. Now he claims that he learned from the media about Clinton’s email abuses, although they had exchanged emails using her private server. Perhaps.

The defining scandal of the Obama era has been the media’s lackadaisical consensus that Obama’s administration has had no serious scandal. This, although with the Justice Department protecting the IRS, the administration has (in the words of Richard Nixon’s White House counsel John Dean) used “the available federal machinery to screw our political enemies.”

Clinton, the ultimate author of her current agony, resembles no one so much as Nixon in her paranoia and joyless pursuit of joy. Her government career began with the House committee preparing Nixon’s impeachment. Twenty-two years earlier, he had saved his career by addressing a supposed scandal with his nationally broadcast “Checkers speech,” which was mawkish, abasing and effective. How fitting it would be for a Clinton “Checkers speech” to end our long national nightmare that this campaign has been.

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November 5, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Friday, November 4, 2016

Weekly Tax Highlight And Roundup

This week, Joe Kristan (CPA & Shareholder, Roth & Company (Des Moines, Iowa); Editor, Tax Update Blog) discusses one way the IRS ferrets out business tax cheating.

Kristan"Sure I lie to them, but you can trust me”

No, this isn’t what “double entry bookkeeping” means. A government attorney reminds us of an inherent danger in business tax cheating. In remarks to a meeting of the California Tax Bar reported by Tax Analysts ($link), Tax Division Senior Litigation Counsel Mark Daly told of a technique to sniff out people who systematically underreport business income:

Daly said his favorite cases come from the IRS Criminal Investigation division’s business opportunity program, in which undercover agents pose as prospective buyers of a taxpayer’s business. He explained that when the agents request information on what they’re buying, the taxpayer will frequently show them a second set of books. The beauty is that the agents are wearing a wire and the taxpayer has basically written the search warrant, Daly added. 

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November 4, 2016 in Tax, Weekly Tax Roundup | Permalink | Comments (1)

Weekly SSRN Tax Article Review And Roundup

This week, Ari Glogower (Ohio State) reviews a new article by Hayes Holderness (Illinois), The Unexpected Role of Tax Salience in State Competition for Businesses, 84 U. Chi. L. Rev. (forthcoming 2017).  

Glogower (2016)Hayes Holderness’ article identifies and examines a new form of incentive used by states to attract business activity—the “customer-based incentive.”  Unlike traditional incentives, such as tax credits or abatements, customer-based incentives yield a tax benefit to the businesses customers, not to the business itself.   The article argues that customer-based incentives can be more effective than traditional incentives, by capitalizing on customers’ different behavioral responses to the forms of incentive.  

The article begins with a specific example of an indirect customer-based incentive: relieving a business of the obligation to collect sales tax from customers, in exchange for the business establishing a physical presence in the state.  For example, in 2012 negotiations with the State of New Jersey, Amazon.com, Inc. sought temporary relief from the obligation to collect sales tax, in exchange for building fulfillment centers in the state.  While nominally a concession made to the business, this incentive in fact benefits customers, by effectively foregoing the collection of sales tax altogether (in the case of those rare customers who do not voluntarily report and pay sales and use tax not collected at the point of sale.)

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November 4, 2016 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Legal Education Roundup

Chodorow Presents Rethinking Basis In The Age Of Virtual Currency Today At Florida

Chodorow (2014)Adam Chodorow (Arizona State) presents Rethinking Basis in the Age of Virtual Currency, 35 Va Tax Rev. ___ (2016), at Florida today as part of its Tax Policy Colloquium Series hosted by Yariv Brauner:

In Notice 2014-21, the IRS announced that virtual currencies like Bitcoin would be treated as property — and not foreign currency — for income tax purposes. As a result, taxpayers may owe tax each time they sell or spend such currency. The IRS also declared that the traditional “stand-alone” basis rules would apply to virtual currency. This decision permits taxpayers to manipulate their tax liability by picking and choosing which virtual coins to dispose of. In this Article, I argue that taxpayers should be required to pool the basis of their virtual currency to ensure that tax gains and losses match realized economic gains and losses.

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November 4, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Repetti Presents Tax Rates, Efficiency And Inequality Today At Boston College

Repetti (2015)James Repetti (Boston College) presents Tax Rates, Efficiency and Inequality at Boston College today as part of its Tax Policy Workshop Series:

Traditionally, the great democracies of the western world assigned equal weight to distributive justice and economic efficiency in designing a tax system. In the past few decades, however, economic efficiency has dominated the debate about the best design of a tax system in politics and in analysis by legal academics. Discussions of progressive tax rates often focus on the adverse efficiency effects of high rates while ignoring benefits arising from a progressive rate structure’s reduced burden on lower income individuals. For example, many advocate low tax rates on investment income to reduce the efficiency effects of taxing savings.

In an attempt to increase efficiency, individual tax rates have decreased over the past 60 years. In 1956, the maximum statutory tax rate was 91%. In 2012, the maximum statutory rate was 36%. At the same time that tax rates were reduced, inequality increased, fueled in part by the declining tax rates.

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November 4, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Volokh:  Oregon Law Profs' Attempt To End Colleague's Career Over Halloween Blackface Costume Marks 'Dangerous Place In American University Life'

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The Washington Post (Volokh Conspiracy): Oregon Law Professors Call for Colleague to Resign for ‘Black Man in a White Coat’ Halloween Costume, by Eugene Volokh (UCLA):

Paul Caron (Tax Prof Blog) has the story; see also here. My view: There’s nothing inherently racist about using dress or makeup to pretend to be black, or white, or Hasidic, or what have you. Indeed, if someone wore blackface and imitated an accent in a way that mocked blacks, she could be faulted for mocking blacks (just as somehow dressing up as an Orthodox Jew to mock Orthodox Jews could be faulted for that). But the notion that making oneself up to look black is just somehow per se racist strikes me as very hard to defend, whether one is trying to play President Obama (or, for that matter, Othello) or the title character in a black doctor’s memoir (“Black Man in a White Coat,” which is apparently what the professor was dressing as) or Michael Jackson. ...

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November 4, 2016 in Legal Education | Permalink | Comments (9)

More On Trump's $916 Million Of NOLs

Trump (2016-3)Following up on this week's posts:

Politico Morning Tax, Making Sense of Trump’s Maneuvers:

Ed Kleinbard, the former Joint Committee on Taxation chief of staff, said there was a reason few people were correctly guessing how Trump was able to list a $916 million loss on 1995 state returns. “None of us thought that the reason that Trump would have avoided discharge indebtedness income would have been a partnership equity-for-debt argument," said Kleinbard. "The reason none of us thought of that is because no such exception existed."

But Robert Willens, who said he worked on those kind of deals two decades ago, said they were more common than people might have thought — landing in that gray area where practitioners didn’t know whether it was allowed or not. “I'm a little surprised that the law firm gave such a weak opinion to him and his people back then,” Willens said about an opinion letter that Trump’s people received. “Because at the time I think we were a little more confident that the technique worked.”

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November 4, 2016 in Political News, Tax | Permalink | Comments (0)

The Dan Markel Murder:  Fascinating Details About The Adelson Family Dynamics

Adelson FamilyAbove the Law, The Dan Markel Case: More Details About His Marriage To Wendi Adelson (And About Wendi’s Mother, Donna Adelson):

I’d like to share with you some interesting information that I’ve received from readers.

Danny and Wendi met through a dating website (if I recall correctly, it was JDate) ... When Wendi saw Danny’s picture, Donna Adelson, her mom, was by her — and in fact they chose together. ...

Wendi has another brother, Robert Adelson, who has flown under the radar — partly because, as noted by our first source, he’s estranged from the rest of the family. ...

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November 4, 2016 in Legal Education | Permalink | Comments (8)

The IRS Scandal, Day 1275: The Impact Of The IRS Scandal On The Investigation Of The Clinton Foundation

IRS Logo 2Dallas Observer, The Dallas IRS Office That's Quietly Determining the Fate of the Clinton Foundation:

The Earle Cabell Federal Building in downtown Dallas is an all purpose office complex, a bastion of federal bureaucracy located at 1100 Commerce St. Most people come for a passport or to get business done in front of a federal judge. But inside, a quiet review is underway that has direct ties to the raging presidential election: The local branch of the IRS' Tax Exempt and Government Entities Division is reviewing the tax status of the Bill, Hillary and Chelsea Clinton Foundation.

This IRS review has not generated similar waves as Department of Justice probes into the foundation, and has largely been forgotten in the campaign's melee. It's just not as sexy as private email servers, FBI infighting and charges of political pressure applied to law enforcement.

But even though this examination is less scrutinized and is harder to conceptualize, it's impact may be important. The report won't likely be done in time to influence the presidential campaign — even though the review started more than four months ago — but it could certainly influence the first term of a Hillary Clinton presidency.

As with anything tax related, the status of the foundation may be determined using rules few understand. And that makes understanding the work at 1100 Commerce St. in Dallas that much more important. 

In Washington, D.C., many things start with words printed on congressional letterhead. Earlier this year, 64 GOP members of Congress asked the IRS to investigate why the foundation can keep its nonprofit status. The letter includes “media reports” claiming pay-to-play relationships between former President Bill Clinton, who received large speaking fees, and decisions made by Hillary Clinton to approve choices that benefited foundation donors. The sources of these reports range from The New York Times to hit-piece investigative books.

In July, the IRS sent letters back to the Congress informing members the review had begun. The letter also noted that the Tax Exempt and Government Entities Division (TE/GE) office in Dallas would be conducting the review.

IRS spokespeople in Dallas and Washington won’t say why the review is being conducted in Dallas. Spokespeople claim even this information would violate rules — Code 6103, staff make sure to cite — that stop them from discussing ongoing examinations. IRS officials declined to provide details about the Dallas office, including its size, or comment on the TE/GE work in general. ...

The TE/GE focuses on nonprofit groups, which is specialty work that requires experience. “They are pretty much career people,” says Ben Stoltz, an attorney with Perliski Law Group, a Dallas boutique firm with half of its business representing nonprofit groups. “It’s a different side of the IRS than people are used to seeing. ... They're generally very cooperative, but they're also the watchdogs."

The mix of awareness and enforcement dovetails with cases that get publicity. "They have a limited budget, which is a problem, so they have to pick their targets wisely," Stoltz says. "Because this is a high profile case, they can make an example and show that no one is above the law.” ...

Instead of money changing hands, the IRS is looking to see if the Clintons traded money for preferential treatment. The IRS rules lay out what qualifies as inurement:

Any transaction between an organization and a private individual in which the individual appears to receive a disproportionate share of the benefits of the exchange relative to the charity served presents an inurement issue. Such transactions may include assignments of income, compensation arrangements, sales or exchanges of property, commissions, rental arrangements, gifts with retained interests, and contracts to provide goods or services to the organization.

Given this language, citing “gifts” and “quid pro quo benefits” in emails is a pretty bad move for anyone involved in a nonprofit group. Another bad move: When senior Clinton advisers like Doug Bland call the intersection of the foundation fundraising and the former president’s personal activities “Bill Clinton Inc.” ...

This all leaves the IRS investigation in Dallas as a sideshow to the main Clinton Foundation events playing out in the offices of other federal agencies. However, if other investigations expose pay-to-play schemes, the IRS could take that into consideration, strip the foundation of its nonprofit status and seek payment of back taxes.

Looking forward, there’s one last wrinkle: If the IRS gives the foundation a clean bill of health, it will likely resurrect charges that the tax exemption office operates with a political bias. In 2011 Lois Lerner, the IRS’ head of TE/GE, pleaded the 5th and left her position after a scandal broke surrounding the denial of nonprofit exemptions to right-wing groups.

A Department of Justice probe found "substantial evidence of mismanagement, poor judgment and institutional inertia leading to the belief by many tax-exempt applicants that the IRS targeted them based on their political viewpoints.” A Government Accountability Office report in 2015 found "there are several areas where EO’s controls were not well designed or implemented. The control deficiencies GAO found increase the risk that EO could select organizations for examination in an unfair manner — for example, based on an organization’s religious, educational, political, or other views."

The GAO said the expertise of the TE/GE staff could be a problem, if there are too few "gatekeepers" to pass along referrals for closer looks:

The specialization of the classifiers allows for in-depth knowledge of complex issues and for the opportunity to apply experience; however, internal control risks accompany this approach. First, for political activity, church, and high profile referrals, the classifier appears to serve as an initial gatekeeper for determining whether a referral is reviewed by a committee. Although committee reviews are intended as a safeguard against unfairness in the examination selection process, referrals that do not make it past the classifier do not undergo committee review. 

The GAO recommended a host of changes, much of it focused on better documentation, more training and an increase in staff rotations. The IRS agreed to them — without admitting any guilt. In a response letter by deputy commissioner John Dalrymple, he says the IRS agrees that "internal controls are necessary to ensure we are applying the tax law with integrity and fairness. Although the report says that a hypothetical risk exists that returns could be selected unfairly, the draft report did not find any evidence that this has happened. Nevertheless, Exemptions Organization is committed to further strengthen our internal controls to ensure we continue to select organizations for examination in a fair and consistent manner. "

The DOJ determined that no crimes had been committed but the damage had been done — for many, the TE/GE will forever be partisan. The ruling on the Clinton Foundation's status, either way, will lead some to see continued partisanship inside the IRS or overreaching in a high profile case to prove they are not partisan.

But there is actually a bigger issue at stake as politics batters the nonprofit tax world. After all, the whole point of the IRS' involvement is to ensure that donations are actually used for charitable work.  

“It boils down to the public trust,” Stoltz says. “This division is responsible for the integrity of the system. Americans donate more money to charity than anywhere else in the world. But for the public to donate, people have to believe that it’s legit.”

(Hat Tip:  Glenn Reynolds.)

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November 4, 2016 in IRS News, IRS Scandal, Political News, Tax | Permalink | Comments (1)

Thursday, November 3, 2016

Oregon Tax Prof Nancy Shurtz Says She Wore Blackface To Halloween Party To Teach Lesson As Author Of Black Man In A White Coat

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Following up on this morning's post, 23 Oregon Law Profs Call On Colleague To Resign For Wearing Blackface At Halloween Party:  KEZI 9 News, UO Law Professor Under Fire for Controversial Halloween Costume:

KEZI learned that the professor involved is [tax professor] Nancy Shurtz.

Students are outraged by the incident and have even started a petition demanding her resignation. The petition needs 100 supporters before it can be delivered to the dean of the law school.

Shurtz sent a letter to students explaining why she chose her costume. She said she read a book and wanted to portray the character. She also said she apologizes and never meant to offend anyone.

"I chose my costume based on a book that I read and liked—Black Man in a White Coat.  I thought I would be able to teach with this costume as well (or at least tell an interesting story).

When I asked my daughter who is at Brown Medical School the demographics of her medical school class, she said “they do not give those statistics out mom”, but later when she asked the administration, they said there was not one black male student in the class. She and others were outraged. She was able to get the administration to assign a portion of this book (the one where the black medical student was thought to be the janitor) out to students.

I am sorry if it did not come off well.  I, of all people, would not want to offend.

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November 3, 2016 in Book Club, Legal Education, Tax | Permalink | Comments (7)