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Thursday, March 20, 2014

Missouri Symposium on Promoting Sustainable Energy Through Tax Policy

Mo 1Promoting Sustainable Energy Through Tax Policy, 20 J. Envtl. & Sustainability L. 1-103 (2013):

March 20, 2014 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 315

Wednesday, March 19, 2014

McMahon Presents Reforming Taxation of Privately Held Businesses Today at Duke

McMahon (Marty)Martin J. McMahon, Jr. (Florida) presents Reforming Taxation of Privately Held Businesses at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

Recent proposals to reduce the corporate tax rate and to clean up the base by eliminating tax expenditures are appropriate, but none adequately address the differential treatment of incorporated and unincorporated businesses. Corporate tax reform that involves broadening the base and reducing the rates cannot thoughtfully be addressed without also reconsidering the taxation of unincorporated businesses, in light of the large and increasing percentage of business income realized by unincorporated businesses. Leaving business-related tax expenditures in place for unincorporated business while repealing them for corporations would increase both statutory complexity and planning complexity. Such a change would alter (in a manner that is difficult to describe precisely) the tax-induced distortions in the choice of business entity and most certainly continue the economic inefficiencies attributable to the current system.

My proposed solution would be to tax all businesses (including wholly owned corporations and limited liability companies, as well as unorganized sole proprietorships), at the entity level under a uniform rate schedule, regardless of the form of organization. This proposal emanates from decades long problems with the administration of Subchapter K, governing the taxation of partnerships, and the incoherence of having three separate regimes—Subchapter C, Subchapter K, and Subchapter S—apply to closely held businesses depending of the form of organization and available elections.

March 19, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Senior IRS Lawyer Charges Chief Counsel's New York Office With Waste and Abuse

Tax Analysys Logo (2013)David Cay Johnston (Syracuse), Attorney Details Mismanagement in IRS Chief Counsel's New York Offices, 2014 TNT 53-1 (Mar. 19, 2014):

A veteran IRS lawyer opened a window on the secretive operations of one of the biggest IRS field offices March 18, telling 10 senators in a letter that the Office of Chief Counsel ignores serious problems of waste and employee abuse in two New York offices.

Jane Kim, a 10-year veteran chief counsel attorney for the Small Business/Self-Employed Division, wrote that "a sustained pattern of abuse" by chief counsel's supervising lawyers in Manhattan and Long Island, has led to "gross waste of government resources, gross mismanagement, violation of labor laws, and active abuse and retaliation against employees."

The complaint depicts a workplace culture in which favored employees are given light workloads, while their colleagues who pick up the slack face discipline and retaliation if they chafe at unfair treatment. Meanwhile management turns a blind eye to the problems -- when it isn't actively making them worse.

As a result of that negligence, tax cheats often get away without paying, taxpayers needing help go unaided, and good employees suffer more stress in an agency already struggling to deal with budget cuts and public scorn. ...

Continue reading

March 19, 2014 in IRS News, Tax, Tax Analysts | Permalink | Comments (3)

Toyota Agrees to Forego Tax Deduction for $1.2 Billion Settlement With DOJ

ToyotaThe Department of Justice announced today that it has reached a $1.2 billion settlement with Toyota in a criminal probe of the automaker's handling of safety complaints of sudden acceleration in its cars. As part of the deferred prosecution agreement, "Toyota agrees that it will not claim, assert, or apply for a tax deduction or tax credit with regard to any federal, state, local, or foreign tax for any fine or forfeiture paid pursuant to this Agreement." (At the 35% corporate tax rate, the foregone deduction amounts to $480 million of additional taxes.) Prior TaxProf Blog coverage:

March 19, 2014 in Tax | Permalink | Comments (1)

Ortega Builds $10 Billion Property Empire With Help of Savvy Tax Planning

Bloomberg, Ortega Outbids Pros to Build $10 Billion Property Empire, by Jesse Drucker:

ZaraAmancio Ortega Gaona, already the world’s fourth-richest person based on the success of his Zara fashion retail stores, has quietly amassed a real estate empire worth as much as $10 billion and is emerging as a formidable competitor for prime properties from London to Beverly Hills. Relying on all-cash offers, he has outbid the world’s biggest institutional funds and professional property investors. ...

The precise value of his empire is unclear. He has spent at least $6 billion over the past decade in cities including Berlin, Paris, Chicago, Boston, Miami, Washington and San Francisco, according to Real Capital Analytics and public records. ...

At least two of Ortega’s London properties are owned through Luxembourg entities, which he inherited from the previous owners, records show. Using subsidiaries in Luxembourg, which has lenient capital gains tax rules, is a common tactic among investors. Inditex also uses tax-haven subsidiaries. As reported by Bloomberg News in February, the retailer has shifted $2 billion of profits into a low-tax unit in the Netherlands and Switzerland, helping cut its income tax bill around the world.  

March 19, 2014 in Tax | Permalink | Comments (1)

Grewal: It's Time for the Supreme Court to Address the Economic Substance Doctrine

Andy Grewal (Iowa), It's Time for the Court to Address the Economic Substance Doctrine:

In U.S. v. Woods, 134 S. Ct. 557 (2013), this writer submitted an amicus brief arguing that the Supreme Court should expressly reserve its judgment about the economic substance doctrine, which the district court had applied below. The Supreme Court agreed with that argument, expressly leaving the proper application of the economic substance doctrine to a future case.

That future case has arrived. This amicus brief, supporting the taxpayer’s petition in Wells Fargo v. United States, explains why this case presents the perfect opportunity for the Court to explain what weight, if any, legislative enactments enjoy in deciding economic substance cases. Although this brief is directed to the Justices, it should appeal to anyone who follows developments related to the economic substance doctrine.

March 19, 2014 in Tax | Permalink | Comments (0)

Death of Former IRS Commissioner Randolph Thrower; Was Fired for Refusing President's Request to Audit His Enemies

ThrowerNew York Times, Randolph W. Thrower Dies at 100; Ran IRS Under Nixon:

Randolph W. Thrower, a Republican lawyer who headed the IRS under President Richard M. Nixon from 1969 to 1971 before losing his job for resisting White House efforts to punish its enemies through tax audits, died March 8 at his home in Atlanta. He was 100. ...

The end came in January 1971, after Mr. Thrower requested a meeting with the president, hoping to warn him personally about the pressure White House staff members had been placing on the IRS to audit the tax returns of certain individuals. Beginning with antiwar leaders and civil rights figures, the list had grown to include journalists and members of Congress, among them every Democratic senator up for re-election in 1970, Mr. Thrower told investigators years later. He was certain the president was unaware of this and would agree that “any suggestion of the introduction of political influence into the IRS” could damage his presidency, he said.

Mr. Thrower received two responses. The first was a memo from the president’s appointments secretary saying a meeting would not be possible; the second was a phone call from John D. Ehrlichman, the president’s domestic affairs adviser, telling him he was fired.

He agreed to stay on until a replacement could be found, did not voice his concerns publicly about the administration’s growing appetite for prosecuting its putative enemies, and never disputed the White House explanation for his departure — that he had resigned “for personal reasons.”

In White House tapes and memos released in later years, Nixon described the situation differently. “May I simply reiterate for the record that I wish Randolph Thrower, commissioner of the Internal Revenue Service, removed at the earliest feasible opportunity,” he wrote on Jan. 21, 1971, five days before the White House announced that Mr. Thrower was stepping down.

That May, as the administration continued to look for a successor to Mr. Thrower, Nixon made clear what kind of IRS commissioner he wanted. “I want to be sure he is a ruthless son of a bitch,” he was recorded as saying, “that he will do what he is told, that every income tax return I want to see I see” and “that he will go after our enemies and not go after our friends.”

Marietta Daily Journal, Thrower Set Example Refusing White House Bid to Abuse IRS Power:

Randolph Thrower, who died last week at age 100, had the rare courage to resist a sitting U.S. president, at the cost of his job.

Thrower was a topflight Atlanta lawyer with Sutherland, Asbill & Brennan, former FBI agent and Marine Corps veteran that Richard Nixon appointed commissioner of the IRS in 1969. For two years, Thrower did his job as fairly as he knew how — among other things — refusing tax-exempt status to private schools that practiced racial discrimination.

Then came the acid test. The Nixon White House wanted to use the IRS to go after its “enemies list” by auditing political opponents and tax-exempt organizations — a la the IRS under the Obama administration more recently targeting tea party and other conservative groups by denying or delaying tax exempt status.

Thrower’s response: “Sure, we’ll audit them — just like everyone else when their names come up through the regular audit selection process.”

March 19, 2014 in IRS News, Tax | Permalink | Comments (9)

Eight Senior SUNY-Buffalo Law Profs Accept Buyout

IRS Worker Took Home Confidential Data on 20,000 Employees

IRS Statement on Data Security Employee Issue:

Flash DriveThe IRS informed employees today of a data security issue that has recently been discovered. The information at issue, which we presently believe dates back to 2007 or earlier, included IRS employee-related information and not general taxpayer information or records. The incident stems from an employee's use of an unencrypted thumb drive and does not involve a third-party breach of any of our systems. This was not a problem with our network or systems, but rather an isolated instance. We are working cooperatively with TIGTA, as it continues its review of this matter and will take appropriate action.

At this point, we have no direct evidence to indicate this personal information has been used for identity theft or other inappropriate uses. The IRS strongly believes this situation could not occur in today’s environment, because starting in 2008 we added automatic encryption for any external portable devices attached to our systems.

March 19, 2014 in IRS News, Tax | Permalink | Comments (0)

Dinner in Malibu

I had the pleasure of dining last night with author Steven Pressfield (The Legend of Bagger Vance (movie)) and law prof and blogger Glenn Reynolds (InstaPundit), as well Glenn's InstaWife and the InstaDaughter.  Glenn has helped me (and countless others) get a toehold in the blogosphere by graciously linking to some of my posts -- the resulting InstaLanches have played a huge role in building an audience for TaxProf Blog.

Photo

March 19, 2014 in Legal Education, Tax | Permalink | Comments (1)

The IRS Scandal, Day 314

Tuesday, March 18, 2014

Eduardo Peñalver Named Dean of Cornell Law School

PenalverEduardo M. Peñalver, John P. Wilson Professor of Law at the University of Chicago Law School, has been named Dean of Cornell Law School, effective July 1:

Peñalver, who received his B.A. from Cornell’s College of Arts and Sciences in 1994 and his law degree from Yale Law School in 1999, joined the Cornell faculty in 2006 and the Chicago faculty in 2013. He taught at Fordham Law School from 2003 to 2006 and has been a visiting professor at Harvard and Yale law schools.

Upon completing law school, he clerked for Judge Guido Calabresi of the United States Court of Appeals for the Second Circuit and for Supreme Court Justice John Paul Stevens. Between college and law school, Peñalver studied philosophy and theology as a Rhodes scholar at the University of Oxford.

Praised by colleagues as an important, passionate, and brilliant scholar, Peñalver has had his work on property law published in scholarly law journals at Yale University, the University of Michigan, Cornell, and the University of Pennsylvania. He is considered to be a leading voice in the “progressive property” movement. His research explores how property law creates or reinforces communal bonds and how property rights mediate the relationship between individuals and communities.

Peñalver and his wife, Sital Kalantry ’94, met as undergraduates at Cornell. She will be returning to the law school as a clinical professor; currently Kalantry is a clinical professor at the University of Chicago Law School and founder and director of its International Human Rights Clinic. Together they have two children.

(Hat Tip: Victoria Schwartz.)

March 18, 2014 in Legal Education | Permalink | Comments (1)

Court: Executors Are Personally Liable for Estate's Unpaid Tax Liabilities

In The Estate Tax Non-Gap: Why Repeal a "Voluntary" Tax?, 20 Stan. L. & Pol'y Rev. 153 (2009), Jim Repetti (Boston College) and I argued that estate tax "gap" estimates are likely overstated for a number of reasons, including the failure to take into account the personal liability of the estate's executor for unpaid taxes under 31 U.S.C. § 3713(b):  "An executor who hides value from, or claims excessive deduction on, an estate tax return and then distributes the estate's assets to heirs is personally liable for the estate's tax deficiencies."  20 Stan. L. & Pol'y at 168.  The reality of this risk was confirmed last week in United States v. Shriner, No. 11-2929 (Dist Ct. Md. Mar. 13, 2014), which held the executors personally liable for the estate's $333,292 tax liabilty because the executors' distribution of $470,963 to themselves had left the estate unable to pay it tax liability.

March 18, 2014 in Tax | Permalink | Comments (0)

Hickman: Administering the Tax System We Have

Kristin E. Hickman (Minnesota), Administering the Tax System We Have, 64 Duke L.J. ___ (2014):

Traditional perceptions of tax exceptionalism from administrative law doctrines and requirements have been predicated at least in part on the importance of the tax code’s revenue raising function. Yet, Congress increasingly relies on the IRS to administer government programs that have little to do with raising revenue and much more to do with distributing government benefits to the economically disadvantaged, subsidizing approved activities, and regulating outright certain economic sectors like nonprofits, pensions, and now health care. As the attentions of the Treasury Department and Internal Revenue Service shift away from raising revenue and toward these other matters, the revenue-based justification for tax exceptionalism from general administrative law norms fades. To demonstrate the shift, the Article incorporates empirical analysis of Treasury and IRS regulatory activity over time.

March 18, 2014 in Scholarship, Tax | Permalink | Comments (0)

What Makes Lawyers Happy?

Lawrence S. Krieger (Florida State University, College of Law) & Kennon M. Sheldon (University of Missouri (Columbia), Department of Psychological Sciences), What Makes Lawyers Happy? Transcending the Anecdotes with Data from 6200 Lawyers:

Attorney well-being and depression are topics of great concern, but there has been no theory-driven empirical research to guide lawyers and law students seeking well-being. This article reports a unique study establishing a hierarchy of five tiers of factors for lawyer well-being, including choices in law school, legal career, and personal life, and psychological needs and motivations established by Self-Determination Theory. Data from several thousand lawyers in four states show striking patterns, repeatedly indicating that common priorities on law school campuses and among lawyers are confused or misplaced. Factors typically afforded most attention and concern, those relating to prestige and money (income, law school debt, class rank, law review, and USNWR law school ranking) showed zero to small correlations with lawyer well-being. Conversely, factors marginalized in law school and seen in previous research to erode in law students (psychological needs and motivation) were the very strongest predictors of lawyer happiness and satisfaction. Lawyers were grouped by practice type and setting to further test these findings. The group with the lowest incomes and grades in law school, public service lawyers, had stronger autonomy and purpose and were happier than those in the most prestigious positions and with the highest grades and incomes. Additional measures raised concerns: subjects did not broadly agree that judge and lawyer behavior is professional, nor that the legal process reaches fair outcomes. Specific explanations and recommendations for lawyers, law teachers, and legal employers are drawn from the data, and direct implications for attorney productivity and professionalism are explained.

Chart

Chart 2

March 18, 2014 in Law Review Rankings, Law School | Permalink | Comments (1)

More on the ABA's Decisions on Changing the Law School Accreditation Standards

March Madness, Classroom Edition: Dayton Beats Michigan in Academic Basketball Championship

March MadnessInside Higher Ed, The 2014 Academic Performance Tournament:

[I]n this ninth iteration of Inside Higher Ed's annual academic tournament, the bragging rights go to the fans whose team dominates in the classroom, not on the court. ...

To determine the winners, we look to the Academic Progress Rate, the NCAA's multiyear measure of a team's classroom performance (in this case, from to 2008-12). When two teams tie, as they inevitably do, we turn to the NCAA's Graduation Success Rate, which measures the proportion of athletes on track to graduate within six years. In the event of a GSR tie, our final determinant is the Federal Graduation Rate, a slightly different formula that the government uses to track graduation rates.

Dayton is the national champion in the Academic Performance Tournament, with American, Memphis, and Michigan also in the Final Four.  Harvard loses to Michigan State and Stanford loses to New Mexico in the Round of 32, and Duke loses to Michigan in the Sweet 16.

NCAA

March 18, 2014 in Legal Education | Permalink | Comments (1)

Nancy Staudt Named Dean at Washington University

StaudtTax Prof Nancy Staudt, Vice Dean for Faculty & Academic Affairs and Edward G. Lewis Chair in Law and Public Policy at USC, has been named dean of the Washington University School of Law, effective May 15:

“Nancy Staudt is a great addition to the academic leadership team at Washington University, and our School of Law will be able to enhance its quality, impact and stature under her leadership. I am thrilled she has accepted our invitation to join us as dean of law,” [Chancellor Mark] Wrighton said. ...

Staudt is excited about returning to the Washington University law school, where she served as professor from 2000-06. “This is a wonderful moment in time to rejoin Washington University – one of the most thriving and exciting academic communities in the country today,” Staudt said. ...

Nancy Staudt’s partner, Lee Epstein, PhD, Provost Professor of Law and Public Policy at USC, also will rejoin WUSTL as a university professor. “Dr. Epstein’s scholarly work and teaching at Washington University will add significantly to our academic strength, and we are delighted that she is returning to Washington University to continue her distinguished career with us,” Wrighton added.

(Hat Tip: Francine Lipman.)

March 18, 2014 in Legal Education, Tax | Permalink | Comments (0)

Henderson: A Counterpoint to 'The Most Robust Legal Market that Ever Existed in This Country'

The Legal Whiteboard:  A Counterpoint to "The Most Robust Legal Market that Ever Existed in This Country", by William Henderson (Indiana-Bloomington):

There is a line in Professor Reich-Graefe's recent essay, Keep Calm and Carry On, 27 Geo. J. Legal Ethics 55 (2014), that is attracting a lot of interest among lawyers, law students, and legal academics: 

[R]ecent law school graduates and current and future law students are standing at the threshold of the most robust legal market that ever existed in this country—a legal market which will grow, exist for, and coincide with, their entire professional career.

This hopeful prediction is based on various trendlines, such as impending lawyer retirements, a massive intergenerational transfer of wealth that will take place over the coming decades, continued population growth, and the growing complexity of law and legal regulation.

Although I am bullish on future growth and dynamism in the legal industry, and I don't dispute the accuracy or relevant of any of the trendlines cited by Reich-Graefe, I think his primary prescriptive advice -- in essence, our problems will be cured with the passage of time -- is naive and potentially dangerous to those who follow it.

The primary defect in Reich-Graefe's analysis is that it is a one-sided argument that stacks up all impending positive trendlines without taking into account the substantial evidence that the artisan model of lawyering -- one-to-one consultative legal services that are tailored to the needs of individual clients -- is breaking down as a viable service delivery model.  ...

When I write about the changes occurring the legal marketplace, I worry whether the substance and methodology of U.S. legal education provides an excellent education for a legal world that is gradually fading away, and very little preparation for the highly disciplinary legal world that is coming into being. 

Legal educators are fiduciaries to our students and institutions. It is our job to worry about them and for them and act accordingly.  Surely, the minimum acceptable response to the facts at hand is unease and a willingness to engage in deliberation and planning.  Although I agree we need to stay calm, I disagree that we need to carry on.  The great law schools of the 21st century will be those that adapt and change to keep pace with the legal needs of the citizenry and broader society.  And that task has barely begun.

Update:  ABA Journal, Rosy Times Ahead for Law Grads? Another Law Prof Weighs In

March 18, 2014 in Legal Education | Permalink | Comments (2)

Solove: The Fundamental Problem with the U.S. News School Rankings

U.S. News 2015Daniel Solove (George Washington), The Fundamental Problem with the US News School Rankings:

Last week, all the law schools in America were holding their collective breaths for the latest pronouncement by US News about how their school ranked. For law schools, as well as other graduate schools as well as universities, the US News rankings play an enormously influential role. The rankings affect the number and quality of applicants. Employers use the rankings too, and the rankings thus affect job opportunities. The careers of law school deans can rise and fall on the rankings too. Key decisions about legal education are made based on the potential affect on ranking, as are admissions decisions and financial aid decisions.

In the law school world, grumbling about the US News rankings never ceases. The rankings use a formula that takes into account a host of factors that are often not very relevant, that can easily be misreported, skewed, or gamed, and that ultimately say little of value about the quality or reputation of a school. Each year, I read fervent outcries to US News to improve their formula. These cries are deftly answered with a response that is typically a variant of the following: "We'll look into this. We are always looking to improve our ranking formula." Not much changes, though. The formula is tweaked a little bit, but the changes are never dramatic.

Continue reading

March 18, 2014 in Law School Rankings, Legal Education | Permalink | Comments (1)

Shane: The True Spirit of Law School Reform

Chronicle of Higher Education op-ed:  The True Spirit of Law-School Reform, by Peter M. Shane (Ohio State):

Although a storm of criticism surrounds contemporary legal education, a key group in developing accreditation standards recently responded with welcome caution. The Standards Review Committee of the ABA Section of Legal Education and Admissions to the Bar voted on February 7 to recommend only three relatively modest changes to ABA standards. The committee took no action on what is likely the most contentious issue the section faces—whether to accredit law schools that do not have a tenure system for faculty. ...

The immediate crisis facing law schools is a drop-off in applications. Applications fell last year to a 30-year low. A weak job market, high tuition, and a tsunami of bad publicity are likely causes. At the same time, many Americans lack affordable access to legal services. Getting rid of tenure, however, would not solve these problems—nor would allowing law schools to create a supposedly more practical curriculum taught by larger numbers of lower-salaried faculty members who are not expected to do research. ...

There are four clear problems, however, linking this bleak forecast for the legal profession with recommendations to abolish tenure or facilitate law schools’ move to lower-cost “practice-ready training.”

Continue reading

March 18, 2014 in Legal Education | Permalink | Comments (2)

The IRS Scandal, Day 313

Monday, March 17, 2014

IMF: Redistribution, Inequality, and Growth

In Occupy the Tax Code: Using the Estate Tax to Reduce Inequality and Spur Economic Growth, 40 Pepp. L Rev. 1255 (2013), Jim Repetti and I reviewed the economic literature that presents significant empirical evidence that inequality hurts economic growth. We argued that this literature supports our argument that achieving progressivity in our tax system is an appropriate goal and that the estate tax should be used to advance this goal. For our thoughts on some estate tax reform ideas, see Revitalizing the Estate Tax: Five Easy Pieces, 142 Tax Notes 1231 (Mar. 17, 2014).  For an expanded discussion of the economic literature on the impact of inequality on economic growth, see Jim's earlier articles, Democracy, Taxes, and Wealth, 76 N.Y.U. L. Rev. 825 (2001); and Democracy and Opportunity: A New Paradigm in Tax Equity, 61 Vand. L. Rev. 1130 (2008).

IMFWe are pleased that the IMF staff has confirmed our analysis in a new Discussion Draft, Redistribution, Inequality, and Growth, which uses a new data set and concludes that using the tax system and redistributive policies in a responsible and moderate manner enhances economic growth:

Economists are increasingly focusing on the links between rising inequality and the fragility of growth. Narratives include the relationship between inequality, leverage and the financial cycle, which sowed the seeds for crisis; and the role of political-economy factors (especially the influence of the rich) in allowing financial excess to balloon ahead of the crisis. In earlier work, we documented a multi-decade cross-country relationship between inequality and the fragility of economic growth. Our work built on the tentative consensus in the literature that inequality can undermine progress in health and education, cause investment-reducing political and economic instability, and undercut the social consensus required to adjust in the face of shocks, and thus that it tends to reduce the pace and durability of growth.

Continue reading

March 17, 2014 in Tax | Permalink | Comments (0)

NLJ: California Law Schools Fall in U.S. News Rankings, Seek Change in Methodology

U.S. News 2015Following up on my previous posts (here and here):  National Law Journal:  California Grumbling at U.S. News: Lagging on the Law School Rankings, They Seek a Fix, by Karen Sloan:

Only three of California's 19 law schools accredited by the American Bar Association improved on the U.S. News & World Report annual rankings this year, and the long view looks even worse.

Alarmed at California's consistent tumbling in the rankings, one dean has rallied his colleagues to lobby U.S. News to adjust its law school graduate employment rates so they more accurately reflect the economic realities in each state.

That methodology change would better reflect why states with low employment rates have more trouble finding jobs for their law school graduates, said Tom Campbell, dean of the Chapman University Dale E. Fowler School of Law, which dropped 14 spots this year to No. 140 and has declined 36 spots during the past three years. With an 8.3 percent unemployment rate, California ties with Michigan for fourth highest in the ­country."It's very stark, when you look at the effect over three years," Campbell said. "California is still coming out of the recession, which has nothing to do with the quality of a law school. Knowing this, an adjustment or standardization would be similar to how U.S. News treats bar passage. That's what gave me the idea."

Not a single California school has seen a cumulative increase in ranking during the past three years — notwithstanding that Stanford Law School; the University of California, Berkeley School of Law; the University of California at Los Angeles School of Law; and Pepperdine University School of Law each maintained their rankings.

School

Name

2012

Rank

2013

Rank

2014

Rank

2015

Rank

1 Year

Change

3 Year

Change

Stanford

3

2

2

3

-1

0

UC- Berkeley

9

7

9

9

0

0

UCLA

16

15

17

16

+1

0

USC

18

18

18

20

-2

-2

UC-Davis

23

29

38

36

+2

-13

UC-Hastings

42

44

48

54

-6

-12

Pepperdine

54

49

61

54

+7

0

Loyola-L.A.

54

51

68

87

-19

-33

San Diego

67

65

68

79

-11

-12

Santa  Clara

84

96

96

107

-11

-23

Chapman

104

110

126

140

-14

-36

McGeorge

100

101

124

146

-22

-46

San Francisco

100

106

144

Tier 2

-2 +

-46+

Cal Western

Tier 2

Tier 2

Tier 2

Tier 2

n/a

n/a

Golden Gate

Tier 2

Tier 2

Tier 2

Tier 2

n/a

n/a

Southwestern

121

129

Tier 2

Tier 2

n/a

-25+

T. Jefferson

Tier 2

Tier 2

Tier 2

Tier 2

n/a

n/a

Western State

Tier 2

Tier 2

Tier 2

Tier 2

n/a

n/a

Whittier

Tier 2

Tier 2

Tier 2

Tier 2

n/a

n/a

Continue reading

March 17, 2014 in Legal Education | Permalink | Comments (1)

IDC Herzliya Hosts Symposium Today on A New Era in Taxation in Honor of Nancy Staudt

StaudtIDC Herzliya, Radzyner School of Law (Israel) hosts a symposium today on A New Era in Taxation in honor of Nancy Staudt (Vice Dean for Faculty and Academic Affairs, Edward G. Lewis Chair in Law and Public Policy, and Academic Director, The Schwarzenegger Institute, USC), organized by Rifat Azam and Ruth Zafran:

Keynote Address:  Nancy Staudt (USC), Corporate Shams around the World

Panel #1:  Tax Base Erosion and Profit Shifting

  • Dr. Rifat Azam (IDC Herzliya), Panel Chair
  • Tsilly Dagan (Bar-Ilan), Tax Policy in an Era of Globalization
  • Tamir Shanan (College of Management Academic Studies), Replacing the Transfer Pricing Regime with Formulary Apportionment Approach in the International Settings
  • Rifat Azam (IDC Herzliya), New Stage in the Multinationals v. The International Tax Regime Game: Some Thoughts on the OECD Action Plan on Base Erosion and Profit Shifting

Panel #2:  Current Issues in Tax Policy

  • Adam Shinar (IDC Herzliya), Panel Chair
  • Yoram Margalioth (Tel-Aviv), Why (and how) Income Tax should be Imposed at the Household Level?
  • Sagit Leviner (Ono), Comparative Evaluation of Tax Policy-Making in Israel: Exploring the Trajectories Where are we coming from and What Lays Ahead
  • Jacob Nussim (Bar-Ilan), The Tax Treatment of Losses

Comments & Closing Remarks:  Nancy Staudt (USC)

March 17, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Court Allows Former Qwest CEO's $44.6 Million Tax Deduction for Forfeited Insider Trading Profits To Go Forward

Qwest LogoNacchio v. United States, No. 1:12-cv-20 (Fed. Cl.  Mar. 12, 2014):

Plaintiffs Joseph P. Nacchio and Anne M. Esker seek a refund of $17,974,832 in taxes they paid on gain Mr. Nacchio realized in 2001, but forfeited in 2007 when he was convicted for insider trading.

This matter comes before the Court on Defendant's motion for summary judgment and Plaintiffs' cross-motion for partial summary judgment. To qualify for a tax refund under 26 U.S.C. § 1341, Plaintiffs must establish both that Mr. Nacchio believed he had a claim of right to gain included in Plaintiffs' 2001 joint return, and that they are entitled to deduct the amount forfeited under a separate section of the Internal Revenue Code. Plaintiffs invoke 26 U.S.C. §§ 162 and 165 to claim the forfeiture is deductible as a business expense or loss.

The Government contends that because Mr. Nacchio's forfeiture was imposed as punishment for insider trading, permitting a deduction would contravene both public policy and the prohibition in § 162(f) against the deduction of a "fine or similar penalty" paid to the United States. In addition, the Government submits that Plaintiffs cannot demonstrate that Mr. Nacchio believed that he had a bona fide claim to his 2001 trading gain because he was convicted of "willfully" violating securities laws.

The Court grants Plaintiffs' motion in part, finding that Plaintiffs may deduct the amounts forfeited as a loss under § 165. Whether Mr. Nacchio believed he had a claim of right to the trading proceeds in 2001 is a genuine issue of material fact that cannot be resolved on summary judgment. ...

Backround.
From 1997 to 2001, Mr. Nacchio served as the Chief Executive Officer of Qwest Communications International. In lieu of cash, Mr. Nacchio received a large portion of his compensation as CEO in the form of stock options. In April 2001, when Qwest opened a "trading window" pursuant to company policy to allow its officers to sell Qwest stock, Mr. Nacchio exercised his options and sold 1,255,000 shares of Qwest stock. On May 16, 2001, Mr. Nacchio entered into an automatic sales plan to sell his Qwest stock and continued to sell his stock until May 29, 2001, when it fell in price. ...

Plaintiffs reported $44,632,464.38 in net gain from these stock sales in their 2001 joint tax return and paid $17,974,832 in taxes on this gain. ...

The jury convicted Mr. Nacchio on 19 counts of insider trading relating to stock Mr. Nacchio sold between April 26, 2001 and May 29, 2001. ... [T]he District Court resentenced Mr. Nacchio to 70 months in prison, a $19 million fine, and a $44,632,464.38 forfeiture. While the District Court could not order restitution as a matter of law, it directed that the $19 million fine be deposited into the Crime Victims' Fund to help fund state and local victims' assistance programs. At the conclusion of the resentencing hearing, the prosecution advised the District Court that the Government intended to use Mr. Nacchio's forfeiture "to compensate victims." ...

On or about October 6, 2008, Plaintiffs filed a joint income tax return for the 2007 tax year. Following Mr. Nacchio's forfeiture, Plaintiffs amended this tax return in March 2009, claiming a $17,999,030.00 credit pursuant to § 1341. In a letter dated September 3, 2009, the IRS disallowed Plaintiffs' credit, stating that § 1341 can be invoked only after a valid deduction is claimed pursuant to another Code section. The IRS further stated that because Mr. Nacchio's forfeiture was a penalty for violating the law, it was "not remedial in nature" and a deduction was not permitted under any section of the Code.

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March 17, 2014 in Tax | Permalink | Comments (0)

Law School Rankings by Starting Salaries of Grads

Forbes:  The Law Schools Whose Grads Earn The Biggest Paychecks in 2014, by Susan Adams:

Given the high price of law school and the uncertain job market for lawyers, we thought it would be interesting to investigate, as we have in the past, which law diplomas bring in the biggest paychecks. We turned to salary listing website Payscale, which combed through the profiles of its 40 million unique users who report compensation information about their jobs. Payscale looked at starting salaries of graduates from 97 popular law schools and found 29,800 of them in their database who had reported salary information.  We’re reporting the top 25 here. ...

A note on Payscale’s statistics: The figures are for the first quarter of 2014 and the starting salaries are for grads who finished law school within the last five years. Their median age is 30. Payscale takes the five-year view because some new grads get short-term, high-paying internships just after they graduate, but they don’t sustain that pay over time. Others take judicial clerkships that pay poorly. The wider-year range offers a greater sample size and makes the numbers more reliable. As for mid-career salaries, Payscale looks at law school grads with 10 or more years of work experience, and a median of 15. That sample size is 11,900 and the median age for the group is 46.

1. Columbia Law School
Starting pay: $146,900
Mid-career pay: $176,200

2. Harvard Law School
Starting pay: $125,400
Mid-career pay: $201,400

3. Northwestern University School of Law
Starting pay: $110,800
Mid-career pay: $210,000

4. University of Chicago Law School
Starting pay: $105,100
Mid-caeer pay: $177,500

5. Stanford Law School
Starting pay: $104,000
Mid-career pay: $217,300

6. Yale Law School
Starting pay: $101,800
Mid-career pay: $165,000

7. University of Virginia School of Law
Starting pay: $97,400
Mid-career pay: $153,900

8. University of Michigan Law School
Starting pay: $95,500
Mid-career pay: $198,700

9. Cornell University Law School
Starting pay: $93,500
Mid-career pay: $180,000

10. Duke University School of Law
Starting pay: $87,700
Mid-career pay: $206,900

(Hat Tip: Greg McNeal.)

March 17, 2014 in Law School Rankings, Legal Education | Permalink | Comments (3)

ABA Votes to Maintain Faculty Tenure, Add Requirement of 6 (Not 15) Experiential Credits as Accreditation Requirements, and Send Paid Externship Proposal for Notice and Comment

ABA Logo 2Best Practices for Legal Education, Council on Legal Education Maintains Tenure and 405, Adds Requirement of Six Experiential Credits and Calls for Notice and Comment on Paid Externships:

The ABA Council of the Section on Legal Education met in San Francisco on March 14th and 15th and voted on the final recommendations of the Standards Review Committee’s (SRC’s) comprehensive review of the standards begun in 2008. ...

On the controversial SRC recommendations on faculty tenure, security of position and academic freedom, the Council voted down both alternatives to the current standards, thus retaining the current system of tenure and security of position pursuant to ABA Standard 405. ...

On the competing proposals to require experiential learning for all students, the Council voted to require six credits, rejecting an alternative proposal for 15 credits. ...

As to proposals concerning student pro bono hours, the Council adopted 50 hours as an “aspirational” goal, thus rejecting an hourly requirement such as that imposed by the New York Court of Appeals for admission to the bar in New York. With respect to inclusion of LGBT law students and law students with disabilities, the Council rejected proposals for affirmative inclusion, relying on general non-discrimination language.

Finally, the Council voted to send out for Notice and Comment a proposal to permit students to receive academic credit for paid externships. The Council is expected to vote on this proposal at its June meeting.

Update:  

March 17, 2014 in Legal Education | Permalink | Comments (2)

WSJ: Audit Bait -- Avoiding the Dirty Dozen Tax Triggers

Wall Street Journal Tax Report:  Are You Ready to Be Audited?, by Laura Saunders:

WSJThe IRS's most intimidating weapon is the power to audit—and well-heeled taxpayers are more likely to be the target.

Audits are rare and getting rarer as the agency faces funding cuts. Fewer than 1% of taxpayers endured one last year, according to IRS figures. But while the audit rate has fallen over the past five years for taxpayers who earn less than $200,000, the rate has risen for those earning $200,000 to $1 million.

The increase was particularly sharp for people earning $1 million or more. Nearly one in nine of those taxpayers was audited last year compared with fewer than one in 15 in 2009.

"It's as though they'd rather audit 10 high-income people and get something, rather than 25 cash businesses and get nothing" because the owners can't pay, says Janet Hagy, a certified public accountant in Austin, Texas.

Taxpayers facing an audit also are dealing with an agency that is underfunded and often unresponsive. IRS Commissioner John Koskinen recently told Congress the agency won't be able to answer 18 million phone calls this year, nearly 40% of the calls it receives, and that the wait time for those who do get through will be about 25 minutes, up from 10 minutes in 2010. More than half the letters taxpayers send to the IRS this filing season will take longer than 45 days to answer, he added.

The IRS training budget has dropped 87% since 2010, which is affecting audits of all types, experts say. "In the last few years, I've seen more delays, ill-founded IRS positions and outright bad behavior than ever before," says Andy Biebl, a CPA who oversees tax audits for CliftonLarsonAllen in Minneapolis. ...

Here are other tips for avoiding or surviving an encounter with the IRS.

  • Keep accurate records.
  • Know what you are facing.
  • Don't panic.
  • Think twice before representing yourself.
  • Never ignore an IRS letter.
  • Don't forget your state.

Wall Street Journal:  Audit Bait: The Dirty Dozen -- Moves That Could Trigger IRS Scrutiny:

Some tax moves attract more scrutiny from the IRS than others. One of the biggest is reporting high income. Audit rates start shooting up sharply for taxpayers who make more than $200,000 a year. Here are 12 others.

  1. Forget to claim reported income.
  2. Take outsize deductions, especially for charitable gifts or travel and entertainment.
  3. Hide offshore accounts.
  4. Claim certain items on small-businesses returns.
  5. Pretend a money-losing pastime is a business.
  6. Use suspiciously round numbers.
  7. File an amended return.
  8. Use a dubious tax preparer.
  9. Be a tax protester.
  10. Provoke a whistleblower.
  11. Fail to claim canceled debt as income.
  12. Fail to file.

March 17, 2014 in Tax | Permalink | Comments (0)

TIGTA: The IRS Does Not Follow Procedures in 48% of Taxpayer Bankruptcy Cases

TIGTA The Treasury Inspector General for Tax Administration has released Bankruptcy Procedures Designed to Protect Taxpayer Rights and the Government’s Interest Were Not Always Followed (2014-40-013):

Impact on Taxpayers
The bankruptcy automatic stay provision prohibits the IRS from taking certain collection actions against a debtor (taxpayer) as soon as it learns, or is notified by a U.S. bankruptcy court, that a bankruptcy petition has been filed. Similarly, the debtor may be granted a discharge, which remains after the case is closed and is a permanent injunction order prohibiting the IRS from taking any form of collection action against the debtor personally with respect to discharged debts. If the IRS does not observe the automatic stay or the discharge injunction, taxpayers’ rights could potentially be violated and the IRS could be sued for damages.

Why TIGTA Did the Audit
In Fiscal Year 2012, IRS data showed that the Field Insolvency function received 306,920 bankruptcy cases on taxpayers owing approximately $2.5 billion in taxes, penalties, and interest. This audit was initiated to determine whether the function has effective controls and procedures in place to take appropriate and timely actions to protect the Government’s interest and taxpayers’ rights during bankruptcy proceedings.

What TIGTA Found
Field Insolvency function specialists frequently did not follow required procedures when working bankruptcy cases. Although TIGTA did not identify any violations of taxpayers’ rights and/or failure to protect the Government’s interest during this review, there is a higher risk that this could occur when procedures are not followed.

TIGTA’s review of three random samples of closed bankruptcy cases showed that specialists did not always follow established procedures in 17 (57 percent) of 30 Chapter 7 cases, 15 (50 percent) of 30 Chapter 11 cases, and 13 (43 percent) of 30 Chapter 13 cases reviewed. Specifically, specialists did not always timely or properly conduct the initial case analysis, follow up on scheduled case actions within a reasonable time, or timely or properly close cases.

TIGTA also reviewed a random sample of 30 bankruptcy cases with Automated Proof of Claim flag conditions (errors that need to be resolved by a specialist). Specialists did not timely or properly resolve the flag conditions in 12 (40 percent) of 30 cases.

March 17, 2014 in Gov't Reports, IRS News, Tax | Permalink | Comments (1)

The IRS Scandal, Day 312

IRS Logo 2Lily Kahng (Seattle), The IRS Tea Party Controversy and Administrative Discretion, 99 Cornell L. Rev. Online 41 (2013):

The IRS Tea Party controversy erupted when the Treasury Inspector General issued a report finding that IRS employees in the Cincinnati office had targeted certain organizations’ applications for tax exempt status for heightened scrutiny, in particular singling out groups with “Tea Party” or “Patriot” in their names. A media firestorm ensued, with fevered speculation about a hidden political agenda extending all the way to the White House. A complete picture of the controversy has yet to emerge, but as of the writing of this Essay, it appears that the worst suspicions about political bias are unfounded. Nonetheless, the IRS has suffered reputational damage that undermines its legitimacy and impairs its ability to perform its central function.

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March 17, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

TaxProf Blog Weekend Roundup

Sunday, March 16, 2014

Church Marketing Campaigns for Their Pastor's Books and Private Inurement

Pajama Pages, On Driscoll, It’s Called Inurement, and It’s Probably Illegal:

Real MarriageMark Driscoll may have imperiled his church’s nonprofit status and, with it, cost his congregation millions of dollars in tax deductions. I am neither a lawyer nor an accountant, but I can read IRS publications that describe the kind of hot water that Mars Hill Church and other churches can get into when they use donated money to buy their pastors’ books.

You can read the 50-page IRS description of inurement here, but I’ll try and summarize it for you here and explain why this applies to Driscoll’s NYT campaign and perhaps many other churches that use church resources to benefit their pastors’ publishing careers.

Churches and other charities are granted non-profit status so long as they use the money they raise exclusively for religious, educational or charitable purposes. Although they can pay staff and officers for work they perform to advance their stated purposes for the public, they cannot take special measures to direct the resources of the organization to any private individual or corporate entity, especially an individual that is an insider of the charity. Such activity is considered inurement, but before considering it in more detail, it’s worth reviewing what we know of the Mars Hill/Driscoll arrangement.

Mars Hill spent approximately $220,000 that had been donated to it to purchase services and books to have Driscoll’s book [Real Marriage: The Truth About Sex, Friendship & Life Together] appear on the New York Times best seller list. ... Mars Hill reports that it received $25m in tithes and offerings last year. Assuming an average deduction value of a contribution to be 25 percent, as the Congressional Research Service does, Mars Hill members saved $6.25m in tax payments because of the church’s exempt status. So, a $220,000 investment has the potential to cost church members $6,250,000.

Patheos, Do We Need a Code of Ethics for Mega-Pastors Who Write?:

Recently World Magazine had a piece on Unreal Sales for Mark Driscoll’s Real Marriage to the effect that the Mars Hill Church bought Driscoll’s book a place on the NYT best seller list through a marketing company with a deliberate intent to by-pass the NYT’s own safe guards against authors or publishers artificially inflating the sales figures for their book. This might even violate IRS rules and regulations about non-for-profits committing inurement. CT also has a piece on this where they link to Mars Hill Church’s official response to the issue.

March 16, 2014 in Book Club, Celebrity Tax Lore, Tax | Permalink | Comments (2)

Florida Dean Search Fails

Florida Logo (GIF)Gainesville Sun:  Machen Ends Law School Dean Search, Recommends Interim Instead:

The search for a new dean for the University of Florida Levin College of Law has failed.

UF President Bernie Machen said in a letter to law faculty and staff Friday afternoon that he has decided to end the search for outgoing Dean Robert Jerry’s successor for this academic year.

“The final slate forwarded to the Provost and to me included accomplished candidates, but we did not find one ideally suited to lead the College through a decade that will be simultaneously challenging for the profession and replete with opportunities for growth and advancement,” Machen said.

After paying $90,000 for an executive search company out of Southern California to conduct a nationwide search for suitable candidates, the search committee narrowed a list of 24 recommended candidates to four finalists.

Those four were Alex Acosta, dean of the Florida International University College of Law; David Brennen, dean of the University of Kentucky College of Law; David Huebner, former ambassador to New Zealand and Samoa; and Sam Donaldson, a law professor at Georgia State University and former associate dean at the University of Washington School of Law. ...

The committee debated whether to send all four candidates forward, considering that the law faculty had overwhelmingly rejected Acosta, the law dean at FIU.

Even after being told that not sending all four names forward could result in a failed search, the committee voted 9-2 to reject Acosta and send the other three names to Machen and Provost Joe Glover for consideration. Brennen and Huebner had received high scores from faculty, while many felt Donaldson lacked gravitas.

In the meantime, Machen is recommending that George Dawson, a former associate law dean who served on the search committee, serve as interim dean until a new search can be conducted next year.

(Hat Tip:  Brian Leiter.)  Prior coverage:

Update:  Jeffrey Harrison (Florida) has more here:

At best, a shameful process. At worst a sham. If you think a 49th ranking was unsatisfactory, fasten your seat belt and put on a helmet.

March 16, 2014 in Legal Education | Permalink | Comments (4)

Top 5 Tax Paper Downloads

SSRN LogoThere is quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads on SSRN, with three new papers debuting on the list at #3, #4, and #5:

  1. [399 Downloads]  The Economics of Tax Law, by Daniel Shaviro (NYU)
  2. [267 Downloads]  2012 Developments in Connecticut Estate and Probate Law by Jeffrey A. Cooper (Quinnipiac) & John R. Ivimey (Reid & Riege, Hartford))
  3. [217 Downloads]  As American as Apple Inc.: International Tax and Ownership Nationality, by Chris William Sanchirico (Pennsylvania)
  4. [147 Downloads]  Big (Gay) Love: Has the IRS Legalized Polygamy?, by Anthony C. Infanti (Pittsburgh)
  5. [145 Downloads]  Deferral and Exemption of the Income of Foreign Subsidiaries: A Review of the Basic Analytics, by Alvin C. Warren (Harvard)

March 16, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 311

IRS Logo 2Tax Analysts Blog:  It’s Not Just About Lois Lerner, by Christopher Bergin:

I have written a lot here about the IRS and the issues surrounding the way it treated certain groups applying for tax-exempt status as social welfare organizations. It’s certainly a hot issue – it even made its way into The Economist this week. And wherever you stand on Lois Lerner, I think we can all agree that she is a classic lightning rod. The whole debate about what happened is charged with political intrigue, abuse of power, and Washington melodrama. It’s juicy stuff. I’ve enjoyed the discussion that’s been generated here.

But we need to remind ourselves that there is a lot more potential abuse going on at the IRS than what’s been associated with Lois Lerner. Here are a few examples. I talk to many practitioners who (a) don’t want to be identified, probably for fear of retaliation, and (b) question the independence of the IRS Appeals Office. That is a big problem.

In 2012 a high-ranking IRS executive said in a speech that she believes the government has a higher duty than that of a private litigant. “The government,” the executive said, “represented by the tax administrator, should not pursue a particular outcome and then look for interpretations in the law that support it. The tax administrator should do nothing more or less than find the law and follow it, regardless of outcome. The separation of powers, a bedrock principle of our Constitution, demands it.”

I have a few questions. How many private tax litigators believe that’s actually how the IRS operates? If this noble statement is taken seriously by others in the IRS, why did Tax Analysts have to go to court to get training materials? And why is the IRS being questioned so strongly by Congress on its belief – or, more accurately, the lack thereof -- in the bedrock principle of the separation of powers?

Taxpayer service at the IRS has become a non-priority, if it’s even considered anymore. National Taxpayer Advocate Nina Olson, who is called the taxpayers’ voice at the IRS, has said that the agency is becoming dehumanized, caring more about numbers than taxpayers. In her annual report to Congress in January, she urged the IRS to implement a comprehensive, principle-based taxpayer bill of rights. ...

I’m sorry to say that there is more to worry about regarding what’s going on at the IRS – one of the most powerful agencies and one that affects all of us – than Lois Lerner. ...

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March 16, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Saturday, March 15, 2014

Shrinking Law Schools Face Financial Devastation

Fiscal TimesThe Fiscal Times:  Shrinking Law Schools Face Financial Devastation, by Jonathan Beer:

The depressing state of the legal job market has caused applications to law schools to decline precipitously, resulting in a shortage of attorneys providing services to low-income clients and a glut of attorneys elsewhere. The situation will improve in the coming years as classes at law schools shrink class sizes to their lowest levels in decades, but the pain for lawyers is far from over. ...

The existing glut of lawyers will take time to dissipate, though. “Because far fewer students are enrolling — from 52,000 in 2010 down to 40,000 in 2013, and even lower for 2014 — the oversupply will lessen when they graduate in a few years,” writes Brian Tamanaha, a professor at the Washington University of St. Louis School of Law and the author of Failing Law Schools, in an email.

The pain for law schools could last longer. “The decline in applicants will devastate the financial position of many law schools, and it remains to be seen how they will manage,” Tamanaha wrote. “The number of entering students in 2014 will go down to a level not seen in three decades, when there were 50 fewer law schools.”

As a result, law schools such as [Dayton, Hamline, Vermont, and Widener] have laid off faculty while other law professors have been offered early retirement packages. The survival of some schools is in jeopardy, according to published reports.

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March 15, 2014 in Legal Education | Permalink | Comments (6)

Burke Presents Woods: A Path Through the Penalty Maze at Northwestern

BurkeKaren C. Burke (Florida) presented Woods: A Path Through the Penalty Maze, 142 Tax Notes 829 (Feb. 24, 2014) (with Grayson M.P. McCouch (Florida)), at Northwestern on Thursday as part of its Tax Colloquium Series hosted by by Herbert Beller, Charlotte CraneDavid Cameron, Philip Postlewaite, Jeffrey Sheffield, and Robert Wootton:

The Supreme Court’s recent Woods decision answers two important questions concerning the applicability of penalties when a taxpayer reports artificial losses derived from an inflated basis in a sham partnership. One issue, which has generated a split among the circuits, is whether the 40 percent penalty can apply when the transaction lacks economic substance. The second issue is whether a court has jurisdiction in a partnership-level TEFRA proceeding2 to determine the applicability of penalties triggered by a partner’s misstatement of basis in a sham partnership. The Court has answered both questions in the affirmative, thereby overruling contrary decisions by the Fifth Circuit on the substantive issue and by the D.C. Circuit on the jurisdictional issue.

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March 15, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Oliveri: Why Law School Is Worth It


National JuristNational Jurist op-ed:  Why a Legal Education Is Worth It, by Rigel Oliveri (Associate Dean, Missouri):

Lawyers have always gotten a bad rap. The old saying about everyone hating lawyers until you need one is very true. And lately legal education has come under heavy fire as well. Law schools are criticized for teaching too much theory and not enough practice, for being too expensive, for churning out too many graduates into an already-saturated legal market. The lucky few who do get jobs at big firms are stressed out, bored, and disillusioned with their work – at least, according to the critics.

It’s not that these critiques don’t have some truth. Law schools do need to focus more on practice skills and experiential learning. The employment market for lawyers has gotten tougher, especially for people seeking the plum jobs at big law firms. Student loans, for lack of a more elegant term, suck.

But, and here is where I finally get to my point: The law is fascinating. It is incredibly important in people’s lives. And a legal education is an amazing opportunity to get the tools to understand, and most importantly, work within this system. ...

[I]t breaks my heart to hear about young people who are interested in law deciding not to bother applying to law school. Our society is shaped in innumerable ways by law. We need another generation of the best and brightest to learn the craft, to continue helping people with their legal needs, to make sure our government works the way that it should.

March 15, 2014 in Legal Education | Permalink | Comments (6)

The IRS Scandal, Day 310

Friday, March 14, 2014

Jones: The U.S. News Law School Academic Reputation Scores, 1998-2014

U.S. News 2015Robert L. Jones (Northern Illinois), Downward Trend Continues for Academic Reputation Scores: Addendum to 2013 Longitudinal Study:

This brief essay summarizes the results of the most recent 2014 U.S. News & World Report (“U.S. News”) law school rankings in the context of the longitudinal study I published last year regarding the academic reputation scores that constitute 25% of the U.S. News methodology.  [A Longitudinal Analysis of the U.S. News Law School Academic Reputation Scores between 1998 and 2013, 40 Fla. St. L. Rev. 721 (2013)]

Consistent with the prevailing downward trend in academic reputation scores observed in the 2013 study, the academic reputation scores for law schools continued to decline in 2014. Fifty-eight out of the 172 law schools in the data set (34%) saw their academic reputation scores decline in 2014. In contrast, only fourteen law schools in the data set (8%) enjoyed an improvement to their academic reputation scores in 2014.4 In the aggregate, law schools suffered a decline of 4.6 points (an average of .026 per law school) in 2014.

1

2

3

Here are the seven law schools that increased their academic peer reputation by at least 0.3 from 1998 to 2014:

School

2014 Peer Score

1998 Peer Score

Change

Alabama

3.1

2.5

0.6

Michigan State

2.3

1.8

0.5

Pepperdine

2.6

2.2

0.4

Florida State

2.9

2.6

0.3

Georgia State

2.5

2.2

0.3

Seattle

2.3

2.0

0.3

Gonzaga

2.2

1.9

0.3


Jones explains that Pepperdine's rise in academic reputation coincided with Ken's Starr's appointment as Dean in 2004 and Pepperdine's #1 ranking in the U.S. News Dispute Resolution Speciality Rankings for 13 of the 17 years in the 1998-2014 period, including the past ten years.

Pepperdine Starr

March 14, 2014 in Law School Rankings, Legal Education | Permalink | Comments (1)

ABA to Tackle Tenure Requirement in Accreditation Standards at Today's Meeting

ABA Logo 2National Law Journal:  ABA to Tackle Tenure at Council Metting, by Karen Sloan:

The always-controversial matter of law faculty tenure will be back in the spotlight on Friday and Saturday, when the ABA Council of the Section of Legal Education and Admission to the Bar is scheduled to consider the issue and several other hot-button topics at a meeting in San Diego.

The ABA is in the final stages of a six-year comprehensive review of its law school accreditation standards, and the council is under pressure to reach decisions on a number of touchy matters—not the least of which is whether to get rid of the standard that is understood to mean that law schools must maintain a tenure system for professors in order to be accredited. ...

The council is aiming to have all of its proposed changes in place in order for the ABA’s House of Delegates to consider them at its annual meeting in August. ...  The council will meet one more time before then, in June.

In addition to tenure, the meeting agenda includes discussions on:

Maintaining the minimum bar passage standard. After years of back-and-forth between different proposals, the committee tasked with going through all the standards is recommending no significant changes to the current rule, which requires 75 percent of a law school’s test takers to pass the exam within five years of graduation.

  • Dropping the ban against students receiving both pay and academic credit for legal externships. The committee was divided on the issue, but has recommended doing away with the restriction in order to open up more externship opportunities.
  • Increasing the number of experiential course credits law students must complete. The current requirement stands at just one credit, but the committee has recommended increasing that to six credits. Meanwhile, a vocal group of clinical professors have asked the council to adopt a different proposal that would require 15 credit hours of clinics, externships, and simulation courses.
  • Keeping the requirement that law schools must use the Law School Admission Test in admissions. The committee had earlier discussed ditching the LSAT mandate, but later backed off that plan.
  • Doing away with the requirement that law schools maintain at least one full-time equivalent faculty member for every 30 students, on the grounds that calculating the actual size of a faculty is overly complicated.

Prior TaxProf Blog coverage of the ABA's reconsideration of tenure as an accreditation requirement:

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

Weekly Tax Roundup

Weekly SSRN Tax Roundup

March 14, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Student Tax Note Roundup

Chapman Dean: U.S. News Rankings Methodology Penalizes Most California Law Schools

U.S. News 2015Following up on yesterday's post, Deans Say Rankings Penalize California Law Schools for Bad Economy; U.S. News Rejects Call for State-Adjusted Employment Data:  Tom Campbell (Dean, Chapman) has asked me to post his letter to the editor of The Recorder, U.S. News Methodology Penalizes Most California Law Schools, on TaxProf Blog:

Your article Deans Say U.S. News Rankings Penalize Schools in the Golden State reported the unanimous position of the California law school deans, who agree that California’s poor employment prospects are a drag on the rankings at all 21 accredited California law schools – even though they are no fault of the California law schools or their students. Put simply, if a law school in Iowa, where unemployment is 4.2%, places 85% of its students, and a law school in California, where unemployment is 8.3%, places 84% of its students, U.S. News ranks the Iowa school ahead of the California school. That is nonsense, if the purpose is to rank the quality of the two law schools. Nevertheless, U.S. News’ Bob Morse responded:

The schools that are underperforming or falling in the ranking, [it's] not because of the state of California's employment woes… but because their students are not in demand, or they're unable to obtain real legal jobs." Mr. Morse pointed to the list for proof, stating: "The top ten schools in California have seen little change in their rankings over the last few years, showing that their graduates are still in demand and they're still getting real legal jobs, despite the California employment status.

Mr. Morse’s statement is false: according to U.S. News’ own data.

Let’s look at the top 10 ranked law schools in California, U.S. News Methodology Penalizes Most California Law Schools, over the last three years:

#4 USC, dropped 2 positions in the national rankings;
#5 UC Davis dropped 13 positions in the national rankings;
#6 UC Hastings dropped 12 positions in the national rankings;
#8 Loyola dropped 33 positions in the national rankings;
#9 UC San Diego dropped 12 positions in the national rankings; and
#10 Santa Clara dropped 23 positions in the national rankings.

The other four top-ten California schools [#1 Stanford, #2 UC-Berkeley, #3 UCLA, #7 Pepperdine] stayed the same in the national rankings.

The “California effect” on our rankings has nothing to do with the quality of education our schools provide. So we proposed to U.S. News to normalize the employment data on law schools the same way they do for differing state bar passage percentages. If a law school’s graduates pass their state bar at a 70% level, that means something different about the law school’s quality if the overall state bar passage is 80%, or if it is 60%. So, U.S. News normalizes for the bar passage rate of the state. They should do the same for employment. Otherwise, law students in entire states like California will be penalized in the rankings not because a lack of quality of their training, but instead due to economic factors beyond their control.

Below I share the full chart showing the significant U.S. News rankings downtrend in California. May I kindly ask that you share this chart and my comments here with your readers?

School

Name

2012

Rank

2013

Rank

2014

Rank

2015

Rank

1 Year

Change

3 Year

Change

Stanford

3

2

2

3

-1

0

UC- Berkeley

9

7

9

9

0

0

UCLA

16

15

17

16

+1

0

USC

18

18

18

20

-2

-2

UC-Davis

23

29

38

36

+2

-13

UC-Hastings

42

44

48

54

-6

-12

Pepperdine

54

49

61

54

+7

0

Loyola-L.A.

54

51

68

87

-19

-33

San Diego

67

65

68

79

-11

-12

Santa  Clara

84

96

96

107

-11

-23

Chapman

104

110

126

140

-14

-36

McGeorge

100

101

124

146

-22

-46

San Francisco

100

106

144

Tier 2

-2 +

-46+

Cal Western

Tier 2

Tier 2

Tier 2

Tier 2

n/a

n/a

Golden Gate

Tier 2

Tier 2

Tier 2

Tier 2

n/a

n/a

Southwestern

121

129

Tier 2

Tier 2

n/a

-25+

T. Jefferson

Tier 2

Tier 2

Tier 2

Tier 2

n/a

n/a

Western State

Tier 2

Tier 2

Tier 2

Tier 2

n/a

n/a

Whittier

Tier 2

Tier 2

Tier 2

Tier 2

n/a

n/a

March 14, 2014 in Law School Rankings, Legal Education | Permalink | Comments (3)

Chapman Hosts Symposium Today on Business Tax Reform

Chapman Logo (2013)The Chapman Law Review hosts a symposium today on Business Tax Reform: Emerging Issues in the Taxation of U.S. Entities:

Panel I:  Specific Tax Issues Affecting the Business World: The Policies and Reasons Behind Certain Laws
Moderator: Bobby Dexter (Chapman)

Panel II:  Pass-Through Entity Reform: Is a Major Overhaul Necessary?
Moderator: Bahar A. Schippel (Snell & Wilmer)

Keynote Speaker:  Edward D. Kleinbard (USC)

Panel III:  How Federal Business Tax Reform Affects State and Local Tax
Moderator:  Michael Lang (Chapman)

Panel IV:  Corporate Tax Reform: How to Tax Multinational Corporations
Moderator:  Douglas A. Schaaf (Paul Hastings)

March 14, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Women Should Embrace B's to Make More Later

Washington Post:  Women Should Embrace the B’s in College to Make More Later, by Catherine Rampell:

Claudia Goldin/Harvard University - This chart shows the percentage of male and female students who received a given grade in introductory economics course who then later majored in economics. Data refer to an anonymous research institution, from a study by Harvard Professor Claudia Goldin.

A message to the nation’s women: Stop trying to be straight-A students.

No, not because you might intimidate easily emasculated future husbands. Because, by focusing so much on grades, you might be limiting your earning and learning potential.

The college majors that tend to lead to the most profitable professions are also the stingiest about awarding A’s. Science departments grade, on a four-point scale, an average of 0.4 points lower than humanities departments, according to a 2010 analysis of national grading data by Stuart Rojstaczer and Christopher Healy. And two new research studies suggest that women might be abandoning these lucrative disciplines precisely because they’re terrified of getting B’s.

Claudia Goldin, an economics professor at Harvard, has been examining why so few women major in her field . The majority of new college grads are female, yet women receive only 29 percent of bachelor’s degrees in economics each year.

Goldin looked at how grades awarded in an introductory economics class affected the chance that a student would ultimately major in the subject. She found that the likelihood a woman would major in economics dropped steadily as her grade fell: Women who received a B in Econ 101, for example, were about half as likely as women who received A’s to stick with the discipline. The same discouragement gradient didn’t exist for men. Of Econ 101 students, men who received A’s were about equally as likely as men who received B’s to concentrate in the dismal science.

Another research project, led by Peter Arcidiacono at Duke University, is finding similar trends in science, technology, engineering and mathematics. ...

Women, admirably, want to excel — and usually do, academically. We earn, on average, higher grades than men in almost every subject. (Partly, presumably, because women seem to disproportionately take classes we know we’ll do well in.) But if women want to compete with the big boys, in the disciplines and professions where men continue to dominate, we need to overcome our B-phobia. Rinse yourselves of the intoxicating waters of Lake Wobegon, ladies, and embrace meaningful mediocrity.

(Hat Tip: Greg Mankiw.)

March 14, 2014 in Legal Education | Permalink | Comments (3)

More on the 2015 U.S. News Law School Rankings

U.S. News 2015Fortune, And the U.S. News Law School Ranking Fallout Begins...:

Deans of the country's law schools are either kicking back and breathing a sigh of relief, or quivering in their boots, amid the release of the much-feared U.S. News & World Report on national law school rankings. ...

Critics routinely denounce the rankings as misleading and incomplete, but almost anyone connected in any way with the legal profession obsesses over the results.

For the institutions that moved down the yardstick, second-guessing came fast and furious. Washington & Lee Law School, for example, sank 17 notches, to No. 43, showing how the overhaul in job placement numbers are affecting the rankings. ...

Dean Nora Demleitner attributes the school's drop to "the poor employment and bar passage numbers from 2012, the year that figures into this year's rankings." The Lexington, Va.-based school, she says, has begun to give "stronger bar support and changes in our approach to the employment market," which already has shown improvements for the class of 2013.

At the same time, enrollment at Washington & Lee was down 40%, which also could have been affected by its overhaul of the third year to focus on "practice ready" skills, which has been all the rage as law school administrators try to push back against evaporating enrollment and jobs. Demleitner says she does not believe the ranking "reflects on our third-year curriculum reform," noting that it is likely to "take five to 10 years for the benefits of the program to become apparent."

American University's law school plunged 16 slots, from No. 56 last year -- likely a sign that its nine-month-out employment placement of 53.6% does not pass U.S. News & World Report muster. That compared to an 83% employment figure, for the same period, from Louisiana State University law school, in Baton Rouge.

"There's no question that employment is a major driver for the rankings," said Mike Spivey, a law school consultant. ...

Despite reorienting the rankings to include more real-world concerns, Kyle McEntee, founder of Law School Transparency, writes on Law.com that "despite the importance of job outcomes, they account for only 18% of the rank and credit schools for jobs few attend law school to pursue." 

McEntee also takes the rankings to task for making national comparisons when "only a handful of schools have a truly national reach in job placement. The rest have a regional, in-state, or even just local reach." So comparing two schools in broadly different geographical locations is "virtually meaningless. Graduates from these schools do not compete with one another," he writes.

"It turns out," he says, "that 161 schools place at least half of their employed class of 2012 graduates in one state. The top state destination for each school accounts for 67.3% of employed graduates. "A much smaller 7.7% of employed graduates go to a school's second-most popular destination, with just 4.4% of employed graduates working in the third-most popular destination. Only 20.6% of employed graduates (16.9% of the entire class) end up in a state other than the top three," he says.

However, "rankings are not inherently bad," he concludes, adding that "credibility may be lost when methodologies are unsound, through irrational weighting or meaningless metrics, or when the scope is too broad."

Spivey agrees, but he notes that "my phone has been ringing off the hook [with] people concerned about whether they should go to a school which dropped one place, or [if] they [can] transfer to another school if their current school lost out.

"The rankings do dramatically impact behavior."

Infographic: 2015 Best Law Schools:

2015 Best Law Schools infographic

March 14, 2014 in Law School Rankings, Legal Education | Permalink | Comments (1)