TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Tuesday, December 20, 2016

Grewal:  The Un-Precedented Tax Court

Tax Court Logo 2Andy Grewal (Iowa), The Un-Precedented Tax Court, 101 Iowa L. Rev. 2065 (2016):

Around the turn of this century, a "highly-charged" debate erupted over unpublished federal appellate court opinions. Some argued that the common prohibition against citation to those opinions posed no constitutional problems, while others argued that no-citation rules improperly eliminated a significant check on the judicial power.

This debate might have been expected to reach, but has not yet reached, issues related to the purportedly nonprecedential nature of most Tax Court opinions. Under court practices, Memorandum Opinions nominally lack precedential value. And by Congressional fiat, Summary Opinions cannot be cited as precedent.

This Article explores the constitutional and practical problems raised by non-precedential Tax Court opinions.

Continue reading

December 20, 2016 in Scholarship, Tax | Permalink | Comments (0)

Wendi Adelson's Lawyer Lists Seven Reasons That 'Conclusively Establish Her Innocence' In Dan Markel's Murder — And Monitors Web Comments That May Give Rise To Defamation Actions Against Those Proclaiming Her Guilt

AdelsonFollowing up on my previous post, 'The Prosecution Does Not Believe That Wendi Ordered The Hit' On Dan Markel:  David Lat (Above the Law), The Dan Markel Case: Watch Your Words About Wendi Adelson:

[S]ome posters [on Websleuths] have criticized me because they disagree with my view that Wendi Adelson did not know in advance about the murder of her ex-husband Dan Markel and was not involved in planning it. ...

I am not a fan of Wendi Adelson as a person. She was perfectly nice the one time I met her in person, but I know from talking to Dan that she put him through hell. I thought that the way she handled the end of their marriage — taking the kids (and many of the marital possessions) and splitting while he was out of town, leaving behind a mattress with divorce papers on top — was just abominable. And I think it’s terrible — and terribly sad — that she has changed the names of her two children with Dan to remove all traces of him from their lives. (She changed their surnames from “Markel” to “Adelson” and also removed the middle name of one child who was named in honor of one of Dan’s late relatives.)

Continue reading

December 20, 2016 in Legal Education | Permalink | Comments (11)

A Practitioner's Guide To Section 2036

Leslie M. Levy, Section 2036 of the Internal Revenue Code: A Practitioner's Guide, 51 Real Prop. Tr. & Est. L.J. 75 (2016):

This Article summarizes the current law and issues surrounding section 2036 of the Internal Revenue Code (Code). Specifically, this Article examines retained rights that trigger section 2036. It also addresses the issues surrounding the definition of a “bona fide sale” and the different tests employed by different courts. Lastly, this Article examines the definition of “adequate and full consideration in money or money’s worth” and two highly debated issues in that area.

Continue reading

December 20, 2016 in Scholarship, Tax | Permalink | Comments (0)

Anderson:  Deans, Denial, And The California Bar Exam

California (2016)Following up on yesterday's TaxProf Blog op-ed by Deans Boise and Morriss, The Shameful Truth Is That Many Law Schools Have Admitted Students With Low LSAT Scores To Prop Up Tuition Revenue And Now Seek To Avoid Accountability For The Ensuing Poor Bar Passage Results:  Robert Anderson (Pepperdine), Deans, Denial, and the California Bar Exam:

On Thursday a number of California law deans wrote pieces in the Daily Journal criticizing the State Bar of California over the abysmally low bar passage rates some of their schools achieved on the July 2016 exam. Many of the deans' perspectives displayed a profound lack of understanding of how the bar exam works and even ventured into conspiracy theories, leading them to place the blame where it doesn't belong. Sadly, not of them pointed the finger where the blame actually belongs, which is with the deans and their faculties themselves. This is an illustration of the psychological defense mechanism called denial.

The reason that the 2016 pass rate declined so much is that deans, faculties, and to some extent parent universities are not willing to downsize faculty and class size adequately to meet the current lower demand for the JD degree, as I wrote previously. The deans didn't mention a word about this in their blame shifting exercise. I could spend days knocking down all the incorrect information disseminated by these deans, so I had to pick a few of the most egregiously uninformed comments to discuss. ...

Continue reading

December 20, 2016 in Legal Education | Permalink | Comments (5)

Apple Hits Back Over EU Irish-Tax Decision

Apple EUWall Street Journal, Apple Hits Back Over EU Irish-Tax Decision:

The European Commission, which released the details of its decision on Monday, says that Ireland was “inconsistent” in applying tax laws.

Apple on Monday fought back against the European Union’s decision that €13 billion ($13.6 billion) in tax breaks the company received from Ireland were illegal, as the feuding sides dug in for a protracted legal battle.

The iPhone maker filed its appeal on the day the European Commission disclosed new details of the 130-page decision from August, which ordered Ireland to recoup the allegedly unpaid taxes from Apple.

Continue reading

December 20, 2016 in Tax | Permalink | Comments (0)

The ABA’s Proposed 75% Bar Passage Rule And The Coming Legal Job Destruction Caused By Artificial Intelligence

ROSSDavid Barnhizer (Cleveland State), The ABA’s New 75% Bar Passage Rule:

The issue of ABA law school accreditation and the passage rates achieved by law schools is obviously quite volatile. The arguments pro and con the proposed ABA rule on accreditation and the need for law schools to achieve a 75% bar passage rate over a two year period contain hidden agendas that involve preset political positions and the self interest of a variety of groups, including the ABA, HBCU’s and law teachers who are already threatened by sharply falling enrollments.

I have tried to stay away from this issue for several reasons, one of which is that I am working away on a book on Artificial Intelligence/robotics (AI/robotics), job destruction and the resulting harm to the remnants of our “democracy” caused by having a very large number of chronically unemployed people who must somehow be supported in a system that has massive and growing governmental debt issues. As I write that book it has become increasingly apparent that job loss on all levels, including law, promises to be considerably more significant and rapid than we might think.

Continue reading

December 20, 2016 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 1321: Maureen Dowd, Donald Trump, And The IRS Scandal

IRS Logo 2New York Times:  Election Therapy From My Basket of Deplorables, by Maureen Dowd:

My little basket of deplorables, as I call my conservative family, gloated with Trump toasts galore, and [my brother] Kevin presented me with his annual holiday column with an extra flourish. ... [H]ere is what Kevin, an affluent, educated suburbanite, has to say in his column, titled an “Election Therapy Guide for Liberals”:

Donald Trump pulled off one of the greatest political feats in modern history by defeating Hillary Clinton and the vaunted Clinton machine.

The election was a complete repudiation of Barack Obama: his fantasy world of political correctness, the politicization of the Justice Department and the I.R.S., an out-of-control E.P.A., his neutering of the military, his nonsupport of the police and his fixation on things like transgender bathrooms. Since he became president, his party has lost 63 House seats, 10 Senate seats and 14 governorships. ...

As Eddie Murphy so eloquently stated in the movie “48 Hrs.”: “There’s a new sheriff in town.” And he is going to be here for 1,461 days. Merry Christmas.

Continue reading

December 20, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (10)

Monday, December 19, 2016

It Begins . . . Department Of Education Cuts Off Federal Student Loans For Charlotte Law School, Effective Dec. 31

FCFollowing up on my previous post, ABA Places Charlotte Law School On Probation, Censures Valparaiso: U.S. Department of Education, Charlotte School of Law Denied Continued Access to Federal Student Aid Dollars:

The U.S. Department of Education today announced that on Dec. 31, 2016, it will end access to federal student financial aid for Charlotte School of Law (CSL), a for-profit member institution in the InfiLaw System. This action furthers the Department’s commitment to vigorously protect students, safeguard taxpayer dollars, and increase institutional accountability among postsecondary institutions.

Following a review of the relevant information, the Department concluded that CSL’s non-compliance with the fundamental standards set by its accreditor, the American Bar Association (ABA), resulted in its violation of the Higher Education Act, the Department’s regulations, and CSL’s Program Participation Agreement with the Department. Additionally, the Department concluded that CSL made substantial misrepresentations to current and prospective students regarding the nature and extent of its accreditation and the likelihood that its graduates would pass the bar exam. Both findings merit denial of the school’s request for continued participation in the federal student aid programs.

Continue reading

December 19, 2016 in Legal Education | Permalink | Comments (8)

Senate Uncovers 'Troubling' Aspects Of IRS Travel Policy

A Review of IRS Employee TravelSenate Finance Committee Majority Staff Report, A Review of IRS Employee Travel: Reductions in IRS Long-Term Travel Spending Needed:

The Committee’s review of IRS travel policies as well as the actual long-term travel habits of some of its employees have led to a number of troubling findings. The number of employees who travel more than half of the year and the cost at which they do so is simply unacceptable. These findings also raise questions about the travel habits of other IRS employees who were outside the scope of this review but who may have had longer travel assignments. More troubling is that the IRS has the tools within its grasp to significantly reduce travel per diem rates and yet it elects not to do so. While the IRS believes that it cannot limit payments to employees for travel expenses to levels below the per diem amount solely to reduce administrative costs, the Committee strongly disagrees with this assertion. The Committee urges the IRS to consider further internal guidance better defining long-term travel (not just for taxable purposes) and instructing approving officials to routinely reduce per diem rates for long-term travel in accordance with Section 301-11.200, Subpart C – Reduced Per Diem of the FTR and Section 1.32.11.8.2.1, Reduced Per Diem of the IRM.

Continue reading

December 19, 2016 in Congressional News, IRS News, Tax | Permalink | Comments (4)

Grewal:  Should Congress Impeach President Obama For His Emoluments Clause Violations?

Following up on my previous post, Trump’s Emolument Tax Problem:  Andy Grewal (Iowa), Should Congress Impeach Obama for His Emoluments Clause Violations?, Yale J. on Reg.: Notice & Comment (Dec. 13, 2016):

My prior post explained how ordinary business transactions between foreign governments and Trump businesses do not create violations of the foreign Emoluments Clause. That post concluded that the term “emolument” refers only to payments made in connection with the holding of an office, and does not refer to any conceivable foreign government payment. The prior post relied on Supreme Court opinions, Office of Legal Counsel opinions, definitions in legal dictionaries, and so on.

However, some commentators, most notably Professor Richard Painter (Minnesota) and Norm Eisen (Brookings Institution), have argued for a much broader definition of emolument. The legal basis for their interpretation remains unclear  because they make no mention of Supreme Court opinions, OLC opinions, or other legal authorities, but their article in The Atlantic defines emoluments as reaching anything of value.” (Their longer Brookings Institution report, co-authored with Larry Tribe, takes a similarly broad approach without citing relevant authorities. See page 11.) This post explains how their interpretation, if accepted, would support the impeachment of President Obama. ...

Continue reading

December 19, 2016 in Political News, Tax | Permalink | Comments (4)

Tax Policy In The Trump Administration

Boise & Morriss:  The Shameful Truth Is That Many Law Schools Have Admitted Students With Low LSAT Scores To Prop Up Tuition Revenue And Now Seek To Avoid Accountability For The Ensuing Poor Bar Passage Results

BMTaxProf Blog op-ed:  Preparing Graduates to Pass the Bar Exam Should Be a Central Obligation of All ABA-Accredited Law Schools, by Craig M. Boise (Dean, Syracuse) & Andrew P. Morriss (Dean, Texas A&M):

We write in response to Indiana University law dean Austen Parrish's recent op-ed in the Indiana Lawyer criticizing the new, higher bar passage standard approved last month by the ABA's Council on Legal Education and Admission to the Bar. See Indiana Dean: The ABA’s Troubling Focus on The Bar Exam, TaxProf Blog (Nov. 17, 2016).

Dean Parrish opposes the higher bar passage standard principally because he believes that the bar exams administered by virtually every state are not good measures of competence to practice law, and law schools therefore should not be held accountable for their students' performance on them. Unfortunately, Dean Parrish's conclusion does not follow from his premise and this mistake taints his analysis. No matter whether bar exams test practice skills or not, passing the bar exam is a hurdle that law graduates must clear to practice law. Preparing graduates to pass the bar exam has thus long been a centerpiece of legal education and represents a focus that is neither "emerging" nor "troubling." It is, in fact, a central obligation of all ABA-accredited law schools.

Continue reading

December 19, 2016 in Legal Education | Permalink | Comments (10)

Women Receive Lower Grades Than Men In Large Law School Classes

Daniel E. Ho (Stanford) & Mark G. Kelman (Stanford), Does Class Size Affect the Gender Gap? A Natural Experiment in Law, 43 J. Legal Stud. 291 (2014):

We study a unique natural experiment in which Stanford Law School randomly assigned first year students to small or large sections of mandatory courses from 2001 to 2011. We provide evidence that assignment to small sections closed a slight (but substantively and highly statistically significant) gender gap existing in large sections from 2001 to 2008; that reforms in 2008 that modified the grading system and instituted small graded writing and simulationintensive courses eliminated the gap entirely; and that women, if anything, outperformed men in small simulation-based courses. Our evidence suggests that pedagogical policy—particularly small class sizes—can reduce, and even reverse, achievement gaps in postgraduate education.

Figure 1

Continue reading

December 19, 2016 in Legal Education, Scholarship | Permalink | Comments (3)

The IRS Scandal, Day 1320:  How The GOP Establishment Teamed With Nancy Pelosi To Table Impeachment Vote On IRS Commissioner

IRS Logo 2Conservative Review, How the GOP Establishment Teamed With Nancy Pelosi to Save the Corrupt IRS Chief:

The last nail in the coffin went in handily.

After Rep. Jim Jordan R-Ohio, Freedom Caucus’ outgoing chairman, invoked a privileged resolution on Tuesday to force an impeachment vote on IRS Commissioner John Koskinen, the House voted 342-72 to refer the measure back to the Judiciary Committee, where it will gather dust for the indefinite future.

It was the last maneuver available to the House Freedom Caucus’s hopes of impeaching Koskinen, who they say has lied to Congress about the targeting of conservative groups.

Wednesday afternoon, Rep. Tim Huelskamp posted an instructive timeline of events on Facebook, outlining just how GOP leaders worked with Democratic Minority Leader Rep. Nancy Pelosi, D-Ca.  to kill the impeachment effort:

After learning of conservatives [sic] plans to force the House to take a recorded vote on the impeachment resolution, GOP leaders responded by making a deal with Nancy Pelosi to use a procedural gimmick to effectively kill the effort. The little-used ‘motion to refer’ sent the impeachment resolution back to committee where it is unlikely to ever see the light of day again.” Instead of waiting for a vote on the privileged resolution on Thursday —when lawmakers intended to vote on it — Pelosi led the House Democrats in a move to table the motion. The move failed 180 to 235.

Rep. Bob Goodlatte R-Va. then offered a motion to refer the resolution back to the Judiciary Committee, which has jurisdiction over impeachment hearings. Privileged resolutions must be voted on within two days of being offered, but Pelosi’s move to table the motion on Tuesday ensured an even swifter end to the impeachment measure. ...

This week’s defeat of the effort to impeach John Koskinen is the end of the line for the many Freedom Caucus members who’ve slaved away trying to do right by their constituents, for justice.

Continue reading

December 19, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

TaxProf Blog Weekend Roundup

Sunday, December 18, 2016

For The First Time, Women Outnumber Men In American Law Schools (But Not At Elite Schools)

ABA Section On Legal Education (2016)Following up on my previous post, More Law Degrees For Women, But Fewer Good Jobs:  according to the just-released ABA law school data, for the first time in history, there are more women (55,766, 50.32%) than men (55,059, 49.68%) enrolled in American law schools. Women 1Ls (19,032, 51.4%) outnumber male 1Ls (18,058, 48.6%). Deborah Jones Merritt (Ohio State), A Milestone for Legal Education:

After crunching the latest disclosures, there remains a strong (and statistically significant) correlation between a law school’s US News rank and its percentage of female students: On average, the better ranked schools enroll a significantly smaller percentage of women students.

Eight of the Top 10, 20 of the Top 24, and 28 of the Top 36 law schools enroll more men than women.

Continue reading

December 18, 2016 in Legal Education | Permalink | Comments (0)

2016 Tannenwald Tax Writing Competition Winners

Tannenwald (2016)The Theodore Tannenwald, Jr. Foundation for Excellence in Tax Scholarship has announced the winners of the 2016 tax writing competition:

First Prize $5,000:
Jesse Boretsky (Yale), Redefining a Blurry Line: A Proposal to Reform the Taxation of Pension Fund Business and Investment Income
Faculty Sponsor:  Yair Listokin

Second Prize (tie, $2,000):

Continue reading

December 18, 2016 in Scholarship, Tax, Teaching | Permalink | Comments (0)

The Top 5 Tax Paper Downloads

SSRN LogoThis week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list:

  1. [670 Downloads]  Aggressive Tax Planning & the Ethical Tax Lawyer, by Heather M. Field (UC-Hastings)
  2. [344 Downloads]  The Up-C Revolution, by Gregg D. Polsky (Georgia) & Adam H. Rosenzweig (Washington University)
  3. [312 Downloads]  Estate Planning for Digital Assets: Assigning Tax Basis and Value to Digital Assets, by Elizabeth Ruth Carter (LSU)
  4. [289 Downloads]  IRS Issues Final and Temporary Debt-Equity Regulations Under Section 385, by David S. Miller (Proskauer, New York) & Janicelynn Asamoto Park (Proskauer, New York)
  5. [193 Downloads]  Were Trump's Fake Losses Legal as Tax Deductions?, by Calvin H. Johnson (Texas)

December 18, 2016 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Clergy Ask Court To Reject Atheist Lawsuit Against § 107 Housing Allowances For 'Ministers Of The Gospel'

Housing AllowancesFollowing up on my previous post, Atheists Try Again To Strike § 107 Housing Allowance for 'Ministers of the Gospel':  

The Becket Fund for Religious Liberty, South Side, Chicago Pastor Fights Discriminatory Lawsuit:

Chicago-based Bishop Ed Peecher filed in court today to protect ministers and churches against a lawsuit by the Freedom From Religion Foundation, an atheist organization trying to prevent churches from providing housing benefits available to other non-profit organizations and businesses.

Continue reading

December 18, 2016 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 1319:  How Will The Koskinen Saga End?

IRS Logo 2Going Concern, Accounting News Roundup:

One of the more colossal wastes of time this past year has been the effort by some House Republicans to impeach IRS commissioner John Koskinen. They were dealt a blow earlier this week when the full House voted overwhelmingly to send the matter to the Judiciary Committee.

From here it could a couple of ways: Koskinen ends up serving the rest of his term which ends in 2017 or he could be forced out after ugh Donald Trump becomes president. In a fun twist, however, Trump and Koskinen have a bit of a history. Politico's Morning Tax pointed to a New York Times article from 1975 where the two were on opposite sides of a couple real estate deals. This leaves the door open to...maybe Trump reappointing Koskinen? It's probably a longshot, but it would almost make all this worth it.

Continue reading

December 18, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Saturday, December 17, 2016

This Week's Ten Most Popular TaxProf Blog Posts

The Inside Story of Apple's $14 Billion Tax Bill: The iPhone Came Out In 2007, So Why Was Apple Still Paying Taxes Like It Was 1990?

Apple EUBloomberg, The Inside Story of Apple's $14 Billion Tax Bill: The iPhone Came Out in 2007. So Why Was Apple Still Paying Taxes Like It Was 1990?:

“The Maxforce” is the European Union team that ordered Ireland to collect billions of euros in back taxes from Apple Inc., rattled the Irish government, and spurred changes to international tax law. You’d think it might have earned the name by applying maximum force while investigating alleged financial shenanigans. It didn’t. It’s just led by a guy named Max.

Continue reading

December 17, 2016 in Tax | Permalink | Comments (0)

Osofsky Reviews Satterthwaite's Tax Elections As Screens

Jotwell (2016)Leigh Osofsky (Miami), Real-World Tax Screening (JOTWELL) (reviewing Emily Satterthwaite (Toronto), Tax Elections as Screens, 42 Queen’s L.J. ___ (2016)):

The concept of “screening” taxpayers is theoretically appealing. According to optimal tax theory, our tax system should impose tax liability based on ability, which is a characteristic that reflects relative well-being. However, since ability cannot be directly observed, the tax system has to rely largely on income, a presumed surrogate of ability, as a tax base. The problem is that income is easily manipulable, making the tax system an inefficient tax on ability. Screening is a potential, partial solution to this problem.

Continue reading

December 17, 2016 in Scholarship, Tax | Permalink | Comments (1)

'The Prosecution Does Not Believe That Wendi Ordered The Hit' On Dan Markel

AdelsonFollowing up on Wednesday's post, Does The Prosecution Believe (And Can It Prove) That Wendi Adelson (And Not Charlie Or Donna) Hired Katherine Magbanua And Sigfredo Garcia To Kill Dan Markel?:  David Lat (Above the Law), The Dan Markel Case: Slow Your Roll On Wendi Adelson:

[I]s Wendi a murderess? I have defended her against speculation that she knew about or was involved in Danny’s killing, but I know that many readers hold different opinions. ...

[A] number of readers have excitedly shared with me this account of last Friday’s bail hearing for Katherine Magbanua, posted over at Websleuths by “reallybusy,” who attended in person. The juiciest part:

The prosecution made it a point to say in closing arguments “Wendi Adelson” hired KM and SG to commit the murder. No mention of Donna or Charlie. This was important because of all the speculation prior that Wendi was unaware and this murderous act was carried out on her behalf without her knowledge. The prosecution made a crystal clear point that Wendi ordered the hit.

This claim has been picked up by writers and commenters on several other widely read blogs, including TaxProf Blog (Paul Caron) and Jonathan Turley (in the comments). But is it an accurate representation of what the prosecution claimed at the hearing?

Continue reading

December 17, 2016 in Legal Education | Permalink | Comments (8)

The IRS Scandal, Day 1318:  More On Koskinen And Trump

IRS Logo 2Politico Morning Tax, Koskinen Gets Expansive:

IRS Commissioner John Koskinen sat down with Tax Analysts recently, and dropped some pretty interesting tidbits — his meeting with the Trump transition team, for instance, didn’t touch on whether he’d finish his term. (He added that he’d step aside if Trump asked him to, but that he thinks it’s best for the agency if he serves until his term expires in November.)

Koskinen also said it could be a real pain for the agency if Congress does repeal Obamacare, given all the resources the IRS allocated to implement the health care law. And he said he’s concerned that the sort of treatment he received from congressional Republicans might make talented people in the private sector think twice about hopping over to the government. (Though to be fair, Trump’s Cabinet choices suggest there are still people from the business world willing to make the jump.)

Morning Tax’s favorite part of the interview was Koskinen’s discussion of how he worked with Trump on a Manhattan hotel deal four decades ago. Koskinen, who called Trump “irrepressible,” said the real estate magnate didn’t coast like other children of wealth. “It was clear that Donald was going to make a career for himself,” Koskinen said. “I mean, he didn't have a hobby. He worked all day and all night.” (Bonus content: Trump called Koskinen to congratulate him after the IRS chief was nominated in 2013, and has since then sent him a note to say that he’d been criticized for defending the commissioner in a television interview.)

Continue reading

December 17, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Friday, December 16, 2016

Weekly Tax Highlight And Roundup

This week, Joe Kristan (CPA & Shareholder, Roth & Company (Des Moines, Iowa); Editor, Tax Update Blog) discusses how Sec. 263A can apply to a cash-basis farmer.

KristanSec. 263A – it’s not just for inventories.

Nuts. Few farmers worry much about the so-called “inventory capitalization” rules of Sec. 263A. After all, they don’t have inventories. A California almond grower learned in Tax Court yesterday how Sec. 263A can sneak up even on a cash-basis farmer.

Most farmers deduct their input costs when they buy them under “cash basis” accounting. That’s a sweet deal, as other producers have to capitalize their input costs — raw materials, supplies, labor, etc. — into the cost of the goods they produce, recovering the costs only at the time the production is sold.

Sec. 263A, enacted with the 1986 tax reforms, requires producers to capitalize indirect costs into inventory that formerly were expensed. Most farmers aren’t required to keep inventories, so they don’t waste time worrying about inventory capitalization.

Continue reading

December 16, 2016 in New Cases, Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly SSRN Tax Article Review And Roundup

This week, Ari Glogower (Ohio State) reviews a new article by Donald Marron (Urban Institute), Goldilocks Meets Private Equity: Taxing Carried Interest Just Right, 31 Tax Policy and the Economy (Urban Institute & Brookings Institution Tax Policy Center, 2016).

Glogower (2016)Policy debates over carried interest reform generally focus on the benefits to the carry recipient: the fund manager.  Marron’s article takes a fresh look at the issue by instead considering the tax consequences of the carried interest payment to the fund’s other investors.  

Like other advocates of carried interest reform, Marron argues that current law, which taxes carried interest at a preferential rate to the extent paid from the fund’s capital gains and qualified dividends, undertaxes managers for their labor on behalf of the fund (in Marron’s terminology, the “Labor Services View”).  The preferential treatment of carried interest also presents an arbitrage game, whereby a fund’s nontaxable investors can pass the benefits of preferential tax rates to the managers, while capturing a portion of this benefit by paying the managers less (the “Joint Tax View”). 

Continue reading

December 16, 2016 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (2)

Weekly Legal Education Roundup

29th Annual George Washington-IRS International Tax Institute

GWIRSTax Prof speakers at the 29th Annual George Washington-IRS International Tax Institute:

  • Karen Brown (George Washington)
  • Linda Galler (Hofstra)
  • Daniel Hemel (Chicago)
  • Robert Peroni (Texas)
  • Diane Ring (Boston College)
  • David Rosenbloom (NYU)

Continue reading

December 16, 2016 in Conferences, Tax | Permalink | Comments (0)

California Law School Deans Blast State Bar's Historically Low Pass Rate On July 2016 Exam

California (2016)Following up on my previous posts (links below) on the July 2016 California bar exam carnage: several California law school deans have written op-eds criticizing the California State Bar for the historically low pass rate (43% overall, 62% for graduates of California's 21 ABA-approved law schools):

  • Erwin Chemerinsky (Dean, UC-Irvine), Does the Bar Even Measure the Right Skills?: "An even more important question than why the results were so low this year is whether the bar exam is even measuring the skills that show a person is likely to be a competent attorney."
  • David L. Faigman (Acting Dean, UC-Hastings), It's Not the State Bar's Responsibility to Control Lawyer Supply: "The issue of whether there are too many lawyers is a fair one to ask, but it is not the California Bar's job to control that supply. Such a protectionist motive, if that is the bar's intent, presents substantial policy and, possibly, legal concerns."

Continue reading

December 16, 2016 in Legal Education | Permalink | Comments (5)

Crane Reviews Kleinbard's The Trojan Horse Of Corporate Integration

Jotwell Charlotte Crane (Northwetsern), Trojan Horse, or Merely a Mask for the Costume Ball? (JOTWELL) (reviewing Edward Kleinbard (USC), The Trojan Horse of Corporate Integration, 152 Tax Notes 957 (Aug. 15, 2016)):

Edward Kleinbard’s The Trojan Horse of Corporate Integration critiques the U.S. Senate Finance Committee’s current proposal for corporate integration. This is an important read for those who have not yet come to grips with the forces at play in contemporary tax policy. Kleinbard refers to these forces as the “political economy agenda” behind the proposal. That agenda has as much to do with appearances relating to tax liabilities as it does with any cash actually being paid. ...

Continue reading

December 16, 2016 in Scholarship, Tax | Permalink | Comments (0)

Muller:  The Complete Collapse Of Bar Passage Rates In California

California (2016)Following up on my previous posts (links below) on the July 2016 California Bar Exam carnage: Derek Muller (Pepperdine), The Collapse of Bar Passage Rates in California:

My colleague Paul Caron has helpfully displayed the data of the performance of California law schools in the July 2016 California bar exam. It's worth noting that the results aren't simply bad for many law schools; they represent a complete collapse of scores in the last three years.

The chart here shows the performance of first-time California bar test-takers who graduated from California's 22 ABA-accredited law schools in the July 2013, 2014, 2015, and 2016 administrations of the exam.

Continue reading

December 16, 2016 in Legal Education | Permalink | Comments (1)

The IRS Scandal, Day 1317:  Koskinen Says He Is Willing To Serve Another Term As IRS Commissioner If Trump Wants To Reappoint Him

IRS Logo 2Bloomberg BNA, IRS Chief Would Continue to Lead Agency If Trump Were to Ask:

Internal Revenue Service Commissioner John Koskinen said he would be willing to remain in the agency’s top job if President-elect Donald Trump were to re-appoint him.

“I’ve never said no. That’s part of my problem,” he told reporters at an event sponsored by George Washington University Law School and the IRS. “It’s an honor to be the commissioner.”

President Barack Obama appointed Koskinen, 77, to the job in 2013. His term ends next November. Members of the conservative House Freedom Caucus tried to impeach Koskinen during his term, saying he improperly withheld evidence during investigations into the agency’s handling of organizations applying for tax-exempt status. Moderate Republicans and Democrats said the effort was unwarranted.

Continue reading

December 16, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, December 15, 2016

Buchanan Reviews Phillips' Registered Savings Plans And Middle Class Canada: A Performative Theory Of Tax Policy

Jotwell (2016)Neil H. Buchanan (George Washington), Telling the Middle Class How to Be Middle-Class: Tax Incentives for Saving (JOTWELL) (reviewing Lisa Philipps, Registered Savings Plans and the Making of Middle Class Canada: Toward a Performative Theory of Tax Policy, 84 Fordham L. Rev. 2677 (2016)):

Analyses of tax policy are typically based on a familiar cost-benefit framework. There are important debates about which costs and benefits should be included (and which are measurable), but the standard formula is simple: (1) Describe the policy goal; (2) Present the costs and benefits of a policy that is meant to achieve that goal; and (3) Conclude that the policy is good or bad, depending on whether benefits exceed costs or vice versa.

In her important new article, Professor Lisa Philipps uses a Canadian tax policy debate to show that this approach is fundamentally misleading.

Continue reading

December 15, 2016 in Scholarship, Tax | Permalink | Comments (0)

Death Of Tim Edgar (Osgoode Hall)

EdgarRemembering Osgoode Hall Law School Professor Tim Edgar:

The York University community mourns the loss of Osgoode Hall Law School Professor Tim Edgar (LLM '88) who died Dec. 9 after a long illness. A small family memorial service in London, Ontario will be held later this month.

“Tim was an exceptional tax scholar, a wonderful colleague, and a dedicated teacher,” said Osgoode Dean Lorne Sossin. “Colleagues will remember Tim as a careful, thoughtful, and engaged person and for his many contributions during his time at the law school.”

Edgar joined the Osgoode faculty in 2011 after a long career at Western Law School where he taught tax law and policy for 21 years. He published articles on taxation in the Canadian Tax Journal, New Zealand Journal of Taxation Law and Policy, Virginia Tax Review, SMU Law Review and other periodicals.

Continue reading

December 15, 2016 in Legal Education, Obituaries, Tax | Permalink | Comments (4)

165 Law Schools Have Reduced The Size Of Their 1L Classes Since 2011, 53 By 33% Or More

ABA Section On Legal Education (2016)Following up on my last post, ABA Releases 2016 Standard 509 Information Reports For All 204 Law Schools: J.D. Enrollment Fell 2.6%, Non-J.D. Enrollment Increased 4.5%: Keith Lee mines the 2011-2016 1L matriculant data and includes great charts, sorted alphabetically and by percentage changes in 2016 from 2011 and 2015.

165 schools decreased the size of their 1L classes from 2011 to 2016, including 53 by 33% or more. 12 law schools had decreases of at least 50%:

Continue reading

December 15, 2016 in Legal Education | Permalink | Comments (4)

ABA Releases 2016 Standard 509 Information Reports For All 204 Law Schools: J.D. Enrollment Fell 2.6%, Non-J.D. Enrollment Increased 4.5%

ABA Section On Legal Education (2016)The ABA Section of Legal Education and Admissions to the Bar today released Standard 509 Information Reports for all 204 law schools, along with this data overview:

ABA-approved law schools are required to post their Standard 509 Information Reports on their websites under their ABA Required Disclosures, annually by December 15. The 2016 reports should now be available on each school’s website. The ABA Section of Legal Education and Admissions to the Bar website provides access to that information for all law schools, including downloadable spreadsheets of aggregate data that the law schools report. The Section is also providing spreadsheets on a school-by-school basis that report applicant data and LSAT and UGPA information for each school’s 1L matriculants, changes in the 1L classes on a school-by-school basis, and a report on 1L enrollment by gender and race/ethnicity (to come). Over the next several months, the ABA Section of Legal Education and Admissions to the Bar intends to produce and publish additional reports about this data.

ABA 1

ABA 2

Continue reading

December 15, 2016 in Legal Education | Permalink | Comments (0)

Citi:  Demand For Law Firm Services Grew 0.3% In 2016 And Will Remain Tepid In 2017

CHAmerican Lawyer, Citi Report Claims Growth Will Remain Slow in 2017:

The legal industry can expect to see low single-digit growth in revenue and profitability next year, just as it did in 2016, according to a report released Tuesday by Citi Private Bank’s law firm group and Hildebrandt Consulting. ... The report, which is released annually, noted that demand for law firm services grew by 0.3 percent in the first three quarters of this year, while expenses grew by 3.4 percent during the same time period, thanks in part to the rise in associate pay. Still, firms were able to raise revenue by 3.7 percent, largely because lawyer rates grew by 3.2 percent. ...

We expect that, similar to 2010-16 performance levels, 2017 will see low single-digit growth in industry revenue and profitability.

Citi Private Bank & Hildebrandt Consulting, 2017 Client Advisory:

Chart 2

Continue reading

December 15, 2016 in Legal Education | Permalink | Comments (0)

Bernstein:  It Will Take More Than Faster Growth To Reverse Inequality

Following up on my previous post, Piketty, Saez & Zucman: Economic Growth in the United States — A Tale of Two Countries:  Washington Post: It Will Take More Than Faster Growth to Reverse Inequality, by Jared Bernstein:

It’s not the heat growth, it’s the humidity inequality. ...

[Y]ou’ve got Trump advisers and Cabinet designees going on about how their agenda will double the growth rate, from 2 percent to 4 percent. I don’t see how they get there, especially if they’re banking on trickle-down growth effects from their big, regressive tax cut, but my point today is something different.

From the perspective of the living standards of the middle class and the poor, growth is necessary. But it is not sufficient.

The theory of the case is very simple. If GDP, or aggregate income growth, speeds up but the gains mostly go to those at the top of the scale, then there’s less income left for middle- and lower-income households. In a seasonal sports analogy, growth does an end run around the middle class on its way up to a few percentiles at the top of the income scale.

The next two figures give you a sense of the problem. Both are from important new research by inequality scholars, Thomas Piketty (yep, that guy), Emmanuel Saez and Gabriel Zucman, wherein they’ve assigned all of the U.S. national income, including labor, capital, fringe benefits, taxes and government transfers, to adults in the population going back a bunch of years.

The first figure makes the point that, yes, growth has slowed in recent decades (first two bars), but inequality of growth has been a much larger factor in terms of how much, or little, of that reduced growth reached different income classes. Overall growth in the first 34-year period, before taxes, was 95 percent (1946-80), but it slowed by a third in the latter period, a significant downshift.

Continue reading

December 15, 2016 in Tax | Permalink | Comments (7)

Anderson:  The Top Ten Myths About the Bar Exam

Robert Anderson (Pepperdine), Top Ten Myths About the Bar Exam:

Myth #1. Bar exam difficulty is similar across all jurisdictions.
The fact is that the difficulty of passing the bar varies greatly from state to state. A person could pass the bar with a significant margin to spare in one state and still fail by a significant margin in another. The difficulty of most state bars is scaled to a passing score based on the Multistate Bar Exam. California and Delaware have the highest required scores to pass, and most other states have much lower scores. To give an illustration, in the California July 2016 bar only 43% passed. If they had taken the bar in New York, 70% would have passed.

Myth #2. The New York bar exam is a very difficult exam compared to other states.

Continue reading

December 15, 2016 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 1316:  IRS Commissioner Koskinen Says Resignation Did Not Come Up In Meeting With Trump Transition Team

IRS Logo 2The Hill, IRS Chief: Resignation Didn't Come Up in Meeting With Trump Team:

IRS Commissioner John Koskinen says he met with members of President-elect Donald Trump's transition team last week, but the subject of whether Trump would ask him to resign was not discussed.

"In none of that conversation did anything come up about my tenure," Koskinen said in an interview with Tax Analysts published Wednesday. "It was really focused on the agency, its challenges and what it would take to allow it to improve its operations, its outreach to taxpayers."

Many Republican lawmakers have been critical of Koskinen and have accused him of engaging in misconduct during congressional investigations into IRS handling of Tea Party groups' tax-exempt status. Earlier this month, the House Freedom Caucus tried to force a floor vote on impeaching Koskinen, but the effort failed and the House voted to refer the impeachment resolution to the Judiciary Committee.

Koskinen's term ends in November 2017. He reiterated to Tax Analysts that he plans to finish his term but would step aside if the incoming president requested him to do so. "I have not considered resigning," he said. "I've made it clear, particularly to the employees who care a lot about this, that I am committed to finishing out my term, which, as you know, ends next November. Although as I also made it clear, I serve at the pleasure of the president. And the president-elect will make whatever decisions he thinks are best going forward."

Continue reading

December 15, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Wednesday, December 14, 2016

Is Malcolm Gladwell Right: Do 50% Of Harvard Law Students Take Drugs To Enhance Their Academic Performance?

MHLSBloomberg Law, Is ‘More Than 50%’ of Harvard Law School on Drugs?:

Malcolm Gladwell, the author of Blink, The Tipping Point, and Outliers, was a guest [on Lance Armstrong's podcast] in October. Armstrong and Gladwell’s conversation turned to performance enhancing drugs and therapeutic use exemptions. Gladwell commented on how debates about high performance in sports parallel debates about high performance in society. By way of example, he pointed to extraordinarily high uses of drugs like Adderall among students at elite universities. From there, Gladwell went on to speculate about students at Harvard Law School…

Continue reading

December 14, 2016 in Legal Education | Permalink | Comments (9)

Trump's Cabinet Will Reap Hundreds Of Millions In Tax Savings Under I.R.C. § 1043 On Sales To Avoid Conflicts Of Interest

Trump (President Elect)Following up on my previous posts (links below): Wall Street Journal, Trump’s Nominees Stand to Reap Tens of Millions of Dollars in Potential Tax Deferrals:

President-elect Donald Trump’s top personnel picks stand to delay paying tens of millions of dollars in personal taxes on investment gains when they take up their posts, according to a Wall Street Journal analysis of corporate filings and other financial disclosures.

The potential tax benefits are the result of a longstanding federal policy designed to let incoming appointees sell their shares and other assets, to avoid conflicts of interest in their new jobs, without racking up huge tax bills.

The tens of millions of dollars in possible tax deferrals are a conservative estimate; the actual benefit is likely much greater. That is because the Journal’s analysis only includes paper gains on shares of publicly traded companies, where the appointee has recently been an officer, director or major shareholder. A number of the candidates—including Commerce Secretary appointee Wilbur Ross and Mr. Trump’s Treasury pick, Steven Mnuchin—derive large portions of their wealth from closely held investment vehicles about which there is scant financial information in the public domain, but which they’d likely need to divest.

“It’s a great thing for the nominees,” says Robert Willens, a tax professor at Columbia Business School. “They get to diversify their portfolios on a tax-free basis.” He estimated that the total tax savings for the appointees likely will add up to hundreds of millions of dollars. ...

Continue reading

December 14, 2016 in Political News, Tax | Permalink | Comments (3)

What Law Prof Learned In Suing His Law School For Admissions Data

Arkansas Little RockFollowing up on my previous posts (links below): Robert Steinbuch (Arkansas-Little Rock), The Value of Data and Litigation:

I recently sued my law school (the UALR-Bowen School of Law) to get access to admissions and bar-passage data. I wasn’t planning on doing that, but it became necessary after the administration refused my Freedom of Information Act request about these matters. After I filed suit, the school gave me the data I wanted. When I examined that data, I discovered a set of uncomfortable facts that was difficult to reconcile with the narrative that my law school had presented.

Continue reading

December 14, 2016 in Legal Education | Permalink | Comments (7)

Oxfam:  The Dangerous Race To The Corporate Tax Bottom

OxfamOxfam, Tax Battles: The Dangerous Race to the Bottom on Corporate Tax (summary) (methodology):

Collecting tax is one of the key means by which governments are able to address poverty and inequality. But big business is dodging tax on an industrial scale, depriving governments across the globe of the money they need to address poverty and invest in healthcare, education and jobs. This report exposes the world’s worst corporate tax havens — extreme examples of a destructive race to the bottom on corporate tax which has seen governments across the globe slash corporate tax bills in an attempt to attract business. It calls on governments to work together to put a stop to this before it is too late.

Table 1

Continue reading

December 14, 2016 in Tax, Think Tank Reports | Permalink | Comments (7)

Mark Mazur To Replace Len Burman As Director Of Tax Policy Center

MazurWall Street Journal, Treasury Tax Policy Chief to Lead Tax Policy Center Think Tank:

The top tax policy expert at the U.S. Treasury Department will take over the Tax Policy Center, the nonprofit Washington think tank best known for its analyses of political and congressional tax proposals.

Mark Mazur, assistant secretary for tax policy, will become the center’s director on Feb. 1, the group announced today. The Tax Policy Center is a project of the Urban Institute and Brookings Institution, and it operates a model that allows policymakers to see the impact of tax plans on different income groups.

Mr. Mazur, an economist, has had a long career in the government, including a stint as the Internal Revenue Service’s director of research, analysis and statistics. President Barack Obama nominated him to his current job, which he has held since 2012.

Tax Vox:  Mark Mazur to Take Over as TPC Director, by Leonard E. Burman:

Continue reading

December 14, 2016 in Tax, Think Tank Reports | Permalink | Comments (2)

Country-By-Country Tax Reporting And Global Inequality

Tax Justice NetworkTax Justice Network, Country-By-Country Reporting: How Restricted Access Exacerbates Global Inequalities in Taxing Rights:

Fully public country-by-country reporting would enable a dramatic shift in the accountability of both multinationals and tax jurisdictions. Estimates of the losses due to tax avoidance imply that lower-income countries would benefit disproportionately, as this transparency would offer powerful leverage against the current, highly unequal global distribution of taxing rights over multinationals. The OECD’s welcome adoption of the Tax Justice Network’s original proposal is, however, critically undermined by the decision to impose multiple limits on access to the data. This paper explores these limits, and demonstrates how the resulting unequal access is likely to exacerbate, rather than ameliorate that inequality in taxing rights.

Continue reading

December 14, 2016 in Tax, Think Tank Reports | Permalink | Comments (0)

Does The Prosecution Believe (And Can It Prove) That Wendi Adelson (And Not Charlie Or Donna) Hired Katherine Magbanua And Sigfredo Garcia To Kill Dan Markel?

AdelsonFollowing up on Sunday's post, Judge Denies Bond For Katherine Magbanua, Charged With First Degree Murder In Killing Of Dan Markel:  commenters to several websites claim that the prosecution at the bond hearing said in "closing arguments [that] 'Wendi Adelson' hired [Katherine Magbanua] and [Sigfredo Garcia] to commit the murder. No mention of Donna or Charlie [Adelson]. This was important because of all the speculation prior that Wendi was unaware and this murderous act was carried out on her behalf without her knowledge. The prosecution made a crystal clear point that Wendi ordered the hit."

Prior TaxProf Blog coverage:

Continue reading

December 14, 2016 in Legal Education | Permalink | Comments (8)

The IRS Scandal, Day 1315:  Bureaucratic Bumbling Or Targeting Of Conservatives?

IRS Logo 2Forbes: IRS Says Fixing Up Your Own House Is Not Charity, by Peter J. Reilly:

Got a run down old house that needs some spiffing up? Here is an idea. Get it designated an historic landmark. Then you can form a not-for-profit and get grants to do some renovations. Since it is an historic landmark, you'll have to let people see it sometimes. ...

[I]t did not end well for the organization (Let's call it This Really Old House (TROH))) that was the subject of Private Letter Ruling 201648020. ...

[T]he gatekeeper sorting the wheat from the chaff is the IRS Tax Exempt and Government Entities Division, sometimes referred to as EO. There are also state agencies of greater or less ferocity, usually the Attorney General rooting out phony charities, but mainly we seem to rely on IRS EO to prevent the charitable sector from being overrun by the less than charitable. The reliance was probably never that reasonable, but the developments over the last few years have made things much worse.

At its very heart the interminable IRS scandal, now on Day 1312 by TaxProf count was about exempt status applications.  Applications from Tea Party and similar organizations were held up and applicants were asked intrusive question.  Here is the thing. I am the last agnostic on the IRS scandal.  Was it bureaucratic bumbling or targeting of conservatives? I never found the targeting argument persuasive, but both Joe Kristan and George Will did, which gives me pause.

Regardless of whether it was bumbling or targeting, the end result has not been good for the integrity of the charitable sector. The IRS has streamlined the process and now many, possibly most applications are receiving no scrutiny thanks to the new Form 1023-EZ. You can find commentary to the effect that the corrupt IRS is still persecuting the Tea Party. I really think the only way out of the mess is to turn the vetting of exempt status over to a different agency. In the states supervision of not for profits generally falls under the Attorney General, not the revenue department. Maybe they are on to something.

The targeting believers will never accept that the IRS has been punished enough or that enough will be done to protect against future targeting, so taking the job away from the IRS might be the only way out of a downward spiral.

Continue reading

December 14, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Tuesday, December 13, 2016

NY Times:  GOP Embraces Alan Auerbach's Destination-Based Corporate Tax, Paving Way For Fundamental Tax Reform

ABNew York Times: New Approach to Corporate Tax Law Has House G.O.P. Support, by Steve Lohr:

President-elect Donald J. Trump has vowed to protect and create American manufacturing jobs, even threatening high tariffs on imports to help achieve that goal. So far, though, his plan seems to lean heavily on one-at-a-time deals, like the one struck late last month to save jobs at the Carrier plant in Indianapolis.

But proponents of a more far-reaching approach say it could achieve many of Mr. Trump’s goals without tariff walls or presidential jawboning: a sweeping overhaul of the corporate tax system that embraces a concept endorsed by House Republican leaders in their blueprint for tax reform, announced in late June.

“It would be the biggest change in business tax law ever in the United States,” said Martin A. Sullivan, the chief economist at Tax Analysts, a nonprofit tax research organization and publisher. “It might actually work, and I don’t think it’s a partisan issue.”

A central idea is that goods would be taxed based on where they were consumed rather than where they were produced, meaning that imports would be taxed by Washington while exports would not. Tax experts call this a destination-based consumption tax.

This would be a sharp departure for the United States in a number of ways, but taxing imports but not exports is in step with nearly all of America’s trading partners, which have so-called value-added taxes. The import-and-export tax treatment is known as border adjustment.

The proposed overhaul would have other changes. The cost of capital investments would be deducted immediately rather than depreciated over years, but interest costs would no longer be deductible.

The package of ideas has evolved over years, mainly in academic circles. Its principal intellectual champion in the United States is Alan Auerbach, an economist at the University of California, Berkeley. Mr. Auerbach’s goal, he said, is to transform the economics of the corporate tax system so that “incentives will align with the national interest.”

Continue reading

December 13, 2016 in Tax | Permalink | Comments (3)