TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Tuesday, October 27, 2015

Computer vs. Lawyer? Many Law Firm Leaders Expect Computers To Win

American Lawyer LogoAmerican Lawyer:  Computer vs. Lawyer? Many Law Firm Leaders Expect Computers To Win:

Junior lawyers are used to feeling like cogs in a machine. According to a new report, a surprising number of law firm leaders expect to be able to replace them with actual machines—and soon.

In a large-scale survey released this month, 35 percent of law firm leaders said they could envision replacing first-year associates with law-focused computer intelligence within the next five to 10 years. That's up from less than a quarter of respondents who gave the same answer in 2011.

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October 27, 2015 in Legal Education | Permalink | Comments (5)

Cockfield: David Foster Wallace On Tax Policy

Pale KingArthur J. Cockfield (Queen's University), David Foster Wallace on Tax Policy, How to Be an Adult, and Other Mysteries of the Universe, 12 Pitt. Tax Rev. 89 (2015):

As one of the most highly acclaimed fiction writers of his generation, David Foster Wallace had many things to say on a seemingly endless variety of topics. In his last work, the unfinished novel The Pale King, he chose to elaborate on, of all things, tax policy and tax administration. Wallace directed tax topics at one of the novel’s main themes: true adulthood often involves overcoming boredom in the workplace to derive a sense of community and care for others. In a sense, the book serves as a guide on how to become a reasonably happy and fulfilled adult. This Essay integrates archival research from the Collected Works of David Foster Wallace at the Harry Ransom Center at the University of Texas at Austin.

Prior TaxProf Blog coverage:

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October 27, 2015 | Permalink | Comments (0)

NY Times: 1/3 Of Law Schools Admit Entering Classes With 25% Or More Students At Risk For Failing The Bar Exam

NY Times Logo (2015)Following up on yesterday's post, 2015 State of Legal Education: An In-Depth Look Into Law School Admissions Choices:  New York Times, Study Cites Lower Standards in Law School Admissions, by Elizabeth Olson:

As law schools across the country try to keep their classrooms full, many are admitting students with lesser qualifications, including those with a lower admissions test score — considered an important predictor of whether a graduate will earn the credentials to practice law.

About a third of the 204 accredited law schools had entering classes last year with at least 25 percent of the class consisting of “at risk” students, or those with law school admissions test scores of below 150, according to a new study by Law School Transparency, a nonprofit advocacy organization.

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October 27, 2015 in Legal Education | Permalink | Comments (4)

Obama Administration Accelerates College Financial Aid Planning To Sophomore Year Of High School

FAFSAWall Street Journal, College Aid Planning To Start One Year Earlier:

Attention, parents of high-school sophomores: There are financial steps you may want to take before year-end to help your child get more financial aid for the freshman year of college.

A recent executive order signed by President Barack Obama will change the rules for the Free Application for Federal Student Aid beginning with aid for the 2017-18 school year. Families will complete the form based on their “prior prior year” income instead of prior-year income as they do now.

That means that current high-school sophomores who graduate in 2018 will use 2016, not 2017, as the base year in reporting family and student income on their first Fafsa form. The government form is used in determining the amount of grants, loans and other forms of financial aid.

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October 27, 2015 in Legal Education | Permalink | Comments (1)

NY Times: Art Collectors Find Safe Harbor In Delaware’s Tax Laws

New York Times, Art Collectors Find Safe Harbor in Delaware’s Tax Laws:

This state is special because storage spots in most other states cannot offer the same tax advantages as Delaware. It is one of only five states without any sales or use tax, meaning that a Manhattan collector who might owe, say, $887,500 in sales tax on the purchase of a $10 million painting at Sotheby’s in New York, would owe nothing by shipping the art to Delaware directly after purchasing it.

Once there, art can be bought and sold within a storage space without any tax on the transactions for as long as it remains there.

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October 27, 2015 in Tax | Permalink | Comments (1)

Medical School Applicants, Enrollees Hit All-Time High

AAMCAssociation of American Medical Colleges, Medical School Applicants, Enrollees Reach New Highs:

The number of students enrolling in the nation’s medical schools has increased 25 percent since 2002, reaching an all-time high of 20,630 this year, according to data released today by the AAMC (Association of American Medical Colleges).

In addition, the total number of applicants to medical school rose by 6.2 percent to 52,550, exactly double the percentage increase from the previous year. First-time applicants—an important indicator of interest in medicine—increased by 4.8 percent to 38,460. ...

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October 27, 2015 in Legal Education | Permalink | Comments (1)

The IRS Scandal, Day 901

IRS Logo 2Politico, Koskinen Back in the Hot Seat:

Let’s be honest: The Justice Department’s decision not to seek criminal charges against Lois Lerner or anyone else for the IRS controversy is about as surprising as the news dribbling out on a Friday afternoon. After all, The Wall Street Journal reported at the beginning of 2014 — more than 21 months ago — that this was the likely outcome. But the timing could make life uncomfortable for the IRS commissioner, John Koskinen, who returns to Capitol Hill to testify on Tuesday about the Senate Finance Committee’s findings [Part 1, Part 2, Part 3, Part 4] on the agency’s improper scrutiny of Tea Party groups seeking tax-exempt status. The news, unsurprising as it is, that Lerner won’t face criminal charges will undoubtedly add a little edge to the GOP senators’ questioning of Koskinen — though the IRS chief at least won’t have to face the more strident House Republicans this time around.

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October 27, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Monday, October 26, 2015

Goupille Presents The Optimal Inheritance Tax Rate Is 55%–70% Today At UC-Berkeley

Goupille-jonathanJonathan Goupille (Paris School of Economics) presents Behavioral Responses to Inheritance Tax (with Jose Infante (AXA France)) at UC-Berkeley today as part of its Robert D. Burch Center for Tax Policy and Public Finance Seminar:

This paper investigates behavioral responses to inheritance taxation in an inter-temporal framework. Our empirical strategy exploits original quasi-experimental variations created by the French preferential tax scheme for inheritance. The analysis is based on first-time access to a unique longitudinal data set of preferential tax savings from Axa over the period 2003-2013.

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October 26, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Henderson Responds To New York Times Editorial On The Law School Crisis

NY Times Logo (2015)Following up on yesterday's post, NY Times: A Majority Of Law Schools Are Scamming Students And Taxpayers:  William Henderson (Indiana), Is There a Right Way to Respond to the "Law School Debt Crisis" Editorial?:

Amidst all the other newsworthy topics, the New York Times editorial board made law school debt the lead editorial for today's Sunday edition.  And the story line is not good.  ...

I don't think the typical member of the legal academy understands the precarious financial condition of legal education.  The precariousness exists on two levels:  (1) our financial fate is in the hands of the federal government rather than private markets; and (2) the Times editorial suggests that we have a serious appearance problem, which draws down the political capital needed to control our own destiny.  With the political winds so goes our budgets. 

I think it is important for the Association of American Law Schools (AALS) to take some decisive action in the very near future.  In this blog post, I explain where the money comes from to keep the law school doors open and why, as a consequence, we need to pay closer attention to the public image of legal education.  I then offer some unsolicited advice to the AALS leadership. 

(1) Who pays our bills?  

Over the last decade, the federal government has, as a practical matter, taken over the financing of higher ed, including legal education. ... The area in green is the volume of money that could disappear from law school budgets if the federal government imposed a hard limit on federally financed law school lending.


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October 26, 2015 in Legal Education | Permalink | Comments (2)

Pasquale Responds To New York Times Editorial On The Law School Crisis

NY Times Logo (2015)Following up on yesterday's post, NY Times: A Majority Of Law Schools Are Scamming Students And Taxpayers:  Frank Pasquale (Maryland), Bootleggers and Baptists in the Student Loan Debate:

The New York Times editorial board has intervened in the student loan debate, focusing on law schools. There are many problems with the piece, but three are fundamental. First, it inexplicably focuses on limiting federal loans to law schools, when the private loans likely to replace them feature harsher terms. Second, it conflates for-profit and non-profit law schools, saying the latter "increasingly" act like the former, while ignoring clear differences in governance and mission. Third, it provides surprisingly little data to back up its assumptions about defaults—assumptions that one of the Times's own contributors questioned last month.

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October 26, 2015 in Legal Education | Permalink | Comments (1)

Number Of Americans Renouncing Their U.S. Citizenship Hits All-Time High

International Tax Blog, 2015 Third Quarter Published Expatriates – A Record High:

Today the Treasury Department published the names of individuals who renounced their U.S. citizenship or terminated their long-term U.S. residency (“expatriated”) during the third quarter of 2015.

The number of published expatriates for the quarter was 1,426.  This is the highest quarterly number of published expatriates ever, surpassing the previous record of 1,335 that was set earlier this year (Q1 2015).


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October 26, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Mankiw, Summers Agree: Keep The 'Cadillac' Tax On Health Plans

New York Times op-ed:  Uniting Behind the Divisive ‘Cadillac’ Tax on Health Plans, by N. Gregory Mankiw (Harvard) & Lawrence H. Summers (Harvard):

One of us, a former member of the Obama administration, remains a fan of the president. The other, not so much. But we agree on one thing: The excise tax on high-cost health care plans, the so-called Cadillac tax, is good policy. Congress should side with President Obama and resist calls to scrap it. ...

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October 26, 2015 in Tax | Permalink | Comments (0)

LST: 2015 State of Legal Education: An In-Depth Look Into Law School Admissions Choices

LST Following up on yesterday's post, NY Times: A Majority Of Law Schools Are Scamming Students And Taxpayers:  Law School Transparency, 2015 State of Legal Education: An In-Depth Look Into Law School Admissions Choices:

A problem for our profession and society

Law school enrollment is the lowest it's been since the 1960's. To remain financially viable, many law schools are admitting many people who face real risk of not completing school or of failing the bar. The bargain is clear: take larger, riskier classes now to survive and deal with the accreditation challenges, angry alumni, and bad press that follow later.


But at what cost, and to whom? And should we collectively enable this bargain?

We need lawyers. Yet too many schools hoping to produce the next generation of lawyers are failing the profession and society today—not to mention the students they're setting up to fail. To reinvigorate the law school pipeline, we must address the substantive issues that drive prospective law students away from the legal profession. We must ensure that law schools make responsible enrollment choices and become more affordable.

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October 26, 2015 in Legal Education | Permalink | Comments (10)

Natelson: The Meaning Of The Constitution's Financial Terms, Including 'Tax,' 'Direct Tax' And 'Apportionment'

Volokh Conspiracy posts by Rob Natelson on the Constitution's financial terms:

The posts are based on his forthcoming article, What the Constitution Means by “Duties, Imposts, and Excises”—and “Taxes” (Direct or Otherwise), 66 Case W. Res. L. Rev. ___ (2016):

This Article recreates the original definitions of the U.S. Constitution’s terms “tax,” “direct tax,” “duty,” “impost,” “excise,” and “tonnage.”

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October 26, 2015 in Scholarship, Tax | Permalink | Comments (0)

Inside Stanford Business School’s Spiraling Sex Scandal

Stanford (2015)Following up on my previous post, Stanford B-School Dean Resigns Amidst Lawsuit By Fired Prof Alleging Dean Had Affair With His Wife (Also A B-School Prof):  Vanity Fair, Inside Stanford Business School’s Spiraling Sex Scandal:

The prestigious school’s sexual-harassment policies proved to be no match for a litigious love triangle involving the dean and two married professors.

When, in November 2013, Stanford University held one of its seminars on sexual harassment, Professor James A. Phills, of the Graduate School of Business, heard a lawyer from the general counsel’s office describe a romance gone sour at a primate-research center. ...  By the time of the seminar, the dean of the business school, Garth Saloner, had been involved with Phills’s estranged wife, Deborah Gruenfeld, a social psychologist and professor of organizational behavior there, for more than a year. And while Saloner had ostensibly removed himself from all decisions involving either Phills or Gruenfeld, Phills believed Saloner had remained enmeshed in his affairs, penalizing him professionally and injecting himself into his divorce and custody battles, all to drive him out of Stanford.

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October 26, 2015 in Legal Education | Permalink | Comments (3)

The IRS Scandal, Day 900

IRS Logo 2Atlanta Journal-Constitution, With IRS Decision, Another Favorite GOP Myth Crumbles Into Dust, by Jay Bookman:

Once again, the Republican response is to brush aside that contradiction as just further evidence of the dark forces that conspire against them. Once again, facts be damned, they refuse to even entertain the notion that their collective mythology might be wrong.

The latest example — coming the same week that the Benghazi story exploded on them — is the decision by the Justice Department not to file charges against former IRS official Lois Lerner, whom conservatives had long ago identified as the perpetrator of a White House-orchestrated plot to use the agency to punish its political enemies. In a letter explaining its findings, the Justice Department said it had indeed found “substantial evidence of mismanagement, poor judgment and institutional inertia” at the agency, all of which had been previously documented.

However, it uncovered “no evidence that any IRS official acted based on political, discriminatory, corrupt, or other inappropriate motives that would support a criminal prosecution. We also found no evidence that any official involved in the handling of tax-exempt applications or IRS leadership attempted to obstruct justice.”

Note the definitive nature of that statement. They found NO evidence. Not insufficient evidence for a prosecution, but NO evidence. After conducting more than 100 interviews over a two-year period, including extensive interviews with Lerner, and after perusing more than a million IRS documents and almost 500 non-profit applications, NO evidence of any criminal wrongdoing or malign intent.


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October 26, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (7)

TaxProf Blog Weekend Roundup

The IRS Scandal, Days 801-900

October 26, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Sunday, October 25, 2015

NY Times: A Majority Of Law Schools Are Scamming Students And Taxpayers

NY Times Logo (2015)New York Times Sunday Review editorial, The Law School Debt Crisis:

American law schools are increasingly charging outrageously high tuition and sticking taxpayers with the tab for loan defaults when students fail to become lawyers.

In 2013, the median LSAT score of students admitted to Florida Coastal School of Law was in the bottom quarter of all test-takers nationwide. According to the test’s administrators, students with scores this low are unlikely to ever pass the bar exam.

Despite this bleak outlook, Florida Coastal charges nearly $45,000 a year in tuition, which, with living expenses, can lead to crushing amounts of debt for its students. Ninety-three percent of the school’s 2014 graduating class of 484 had debts and the average was almost $163,000 — a higher average than all but three law schools in the country. In short, most of Florida Coastal’s students are leaving law school with a degree they can’t use, bought with a debt they can’t repay.

If this sounds like a scam, that’s because it is. Florida Coastal, in Jacksonville, is one of six for-profit law schools in the country that have been vacuuming up hordes of young people, charging them outrageously high tuition and, after many of the students fail to become lawyers, sticking taxpayers with the tab for their loan defaults.

Yet for-profit schools are not the only offenders. A majority of American law schools, which have nonprofit status, are increasingly engaging in such behavior, and in the process threatening the future of legal education.

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October 25, 2015 in Legal Education | Permalink | Comments (10)

The Top 5 Tax Paper Downloads

Death Of Robert Araujo: 'Goodbye, My Friends! See You Soon!'

AraujoFather Robert Araujo, S.J. (profile), John Courtney Murray, S.J. University Professor at Loyola-Chicago Law School, died on October 21 (obituary) after a long battle with cancer.  Father Araujo's farewell less than two months ago on our sister Mirror of Justice blog, Au Revoir, Mes Amis, Au Revoir [Goodbye, My Friends, Goodbye], is especially poignant now:

About three weeks ago, I was informed that my then current chemotherapy had failed. This latest treatment joined its twelve predecessors in the minus rather than the plus column. Failure is not always easy to accept, but with the grace of God it can be. I knew this day would come sooner or later, so, as best I could, I tried to prepare for it with careful thought and sober prayer. With the thought and prayer in place, I concluded that the doctors and I had given it our best to try and control a disease that would eventually be uncontainable. Although my doctors aggressively pursue cancer cure, they know that they must also care for the patient in other ways, one of which is to respect the patient’s informed wishes. This sometimes means that the patient is saying he has had enough treatment that the best medical science can provide, and it is now time for nature and God to take their respective courses. This conclusion that I have made and accepted is not my disposition and vocation alone; they belong to everyone, especially the Christian and those who believe in and pray to God. Miracles can and do happen, but I do not ask for one. As a consequence of my discernment, I am now in palliative/hospice care. This means I receive bi-weekly phereses and blood transfusions at Dana Farber; in addition to these two items, I receive pain management care at my Jesuit infirmary.

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October 25, 2015 in Legal Education, Obituaries | Permalink | Comments (1)

The IRS Scandal, Day 899

IRS Logo 2Investor's Business Daily editorial, IRS' Lois Lerner Skates; An Ugly Precedent Is Set:

The Justice Department declined to file charges against IRS enforcer Lois Lerner, who singled out Tea Party groups for scrutiny on political grounds. With no accountability, it's now open season on dissidents. ...

That's the message the Justice Department sent when, in a classic Friday night news dump, it decided to not file charges against IRS tax-exempt groups chief Lois Lerner. In a letter to the House Judiciary Committee, Justice said that while it found "mismanagement, poor judgment and inertia," there was no case for a criminal prosecution.

This is absurd. Lerner was caught red-handed targeting Tea Party and other conservative groups, wrote partisan emails to prove it, then engaged in a massive cover-up effort — with a suspiciously crashed server, an oddly missing BlackBerry and plenty of excuses.

She evaded even more accountability by shielding herself with the Fifth Amendment in Congress. The consequences to her have been . .. retirement on a full pension with all her bonuses to a multimillion-dollar mansion in the deep D.C. suburbs.

As for her victims — and they were many — there is no justice. Now everyone, no matter what their political leanings, will wonder if they too are a political target by an out-of-control agency protected by the Justice Department.

Because that's the real consequence of this failure to hold Lerner accountable: A precedent has been set.

IRS officials now know they can go after any political opponent they want, ruin them any way they wish, swing an election — as occurred with Lerner's actions — and get away with it. ...

The Democrats may giggle with glee at seeing another of their own skate free based on the president's executive actions through his DOJ flunkies.

But two can play that game. If a Republican as unscrupulous as Obama wins the election, the same banana republic politics in government will make Democrats the next victims.

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October 25, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Saturday, October 24, 2015

This Week's Ten Most Popular TaxProf Blog Posts

Discussion On The Power To Tax And Its Judicial Control Today At George Mason

George MasonThe two-day Eighth Annual Transatlantic Law Forum concludes today at George Mason with a luncheon discussion on:

The Power to Tax and its Judicial Control

In the U.S., judicial controls over the IRS and its exercise of tax and regulatory authority are much weaker than the controls that available under general administrative law. Supposedly, fiscal imperatives warrant this arrangement. However, as the IRS is changing from a mere revenue collector into a regulatory agency, there are reasons to worry about extreme judicial deference. Moreover, other countries with (presumably) the same need for orderly fiscal administration provide rather more robust judicial checks. Germany, for example, subjects tax administrators’ decisions to de novo review by independent courts. What explains these different institutional arrangements, and how well have they served their intended purposes?

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October 24, 2015 in Conferences, Tax | Permalink | Comments (0)

William & Mary Law School Receives $22m Gift For Student Scholarships, Faculty Teaching Award & Annual Leadership Conference

William & Mary (2015)National Law Journal, $22M Anonymous Gift Made to William & Mary Law School:

The College of William & Mary Marshall-Wythe School of Law has received a $22 million anonymous donation to go toward student scholarships and faculty awards, the University announced on Thursday.

The gift creates a $20 million endowment for scholarships to be given to students in the fall 2016 entering class. The remaining funds will be split evenly at $1 million each for an annual conference to bring distinguished speakers to campus and to fund a teaching award to be given for the first time at the law school's spring 2016 graduation ceremony. ...

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October 24, 2015 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 898

IRS Logo 2Wall Street Journal, Obama’s Lobbying of the FBI Flouts the Law: President Obama Is Signaling to Any Willing Listener in the FBI What Action He Wants the FBI to Take:

President Obama’s recent comments in his “60 Minutes” interview about the Hillary Clinton email scandal remind me of his 2010-11 comments about right-wing PACs, which led Lois Lerner to deny fair and equal treatment to conservative PACs. Just by making the comment, President Obama is signaling to any willing listener in the FBI what action he wants the FBI to take. Let’s hope that there is no “Lois Lerner” figure in a position to follow the president’s instructions, and instead that the FBI will proceed in accordance with independent efforts to fulfill its legitimate duties and not subvert those duties to a desired political outcome.

Letter From Peter J. Kadzik (Assistant Attorney General) to Bob Goodlatte (Chair, House Judiciary Committee) and John Conyers, Jr. (Ranking Member, House Judiciary Committee), Oct. 23, 2015:

We write to inform you about the Department of Justice's criminal investigation into whether any IRS officials committed crimes in connection with the handling of tax-exemption applications filed by Tea Party and ideologically similar organizations. Consistent with statements from the Department of Justice (the Department) throughout the investigation, we are pleased to provide additional information regarding this matter now that we have concluded our investigation. In recognition of not only our commitment to provide such information in this case, but also the Committee's interest in this particular matter, we now provide a short summary of our investigative findings.

In collaboration with the FBI and Treasury Inspector General for Tax Administration (TIGTA), the Department's Criminal and Civil Rights Divisions conducted an exhaustive probe. We conducted more than 100 witness interviews, collected more than one million pages of IRS documents, analyzed almost 500 tax-exemption applications, examined the role and potential culpability of scores of IRS employees, and considered the applicability of civil rights, tax administration, and obstruction statutes.  Our investigation uncovered substantial evidence of mismanagement, poor judgment, and institutional inertia, leading to the belief by many tax­ exempt applicants that the IRS targeted them based on their political viewpoints. But poor management is not a crime. We found no evidence that any IRS official acted based on political, discriminatory, corrupt, or other inappropriate motives that would support a criminal prosecution. We also found no evidence that any official involved in the handling of tax-exempt applications or IRS leadership attempted to obstruct justice.  Based on the evidence developed in this investigation and the recommendation of experienced career prosecutors and supervising attorneys at the Department, we are closing our investigation and will not seek any criminal charges.

Throughout the investigation, not a single IRS employee reported any allegation, concern, or suspicion that the handling of tax-exempt applications-or any other IRS function­ was motivated by political bias, discriminatory intent, or corruption. Among these witnesses were several IRS employees who were critical of Ms. Lerner’s and other officials’ leadership, as well as others who volunteered to us that they are politically conservative. Moreover, both TIGTA and the IRS’s Whistleblower Office confirmed that neither has received internal complaints from IRS employees alleging that officials’ handling of tax-exempt applications was motivated by political or other discriminatory bias. ...

The Department searched exhaustively for evidence that any IRS employee deliberately targeted an applicant or group of applicants for scrutiny, delay, denial, or other adverse treatment because of their viewpoint. Intentional viewpoint discrimination may violate civil rights statutes, which criminalize acting under color of law to willfully deprive a person of rights protected by the Constitution or federal law. See 18 U.S.C. §§ 241, 242. Intentional viewpoint discrimination may also violate criminal tax statutes that prohibit IRS employees from committing willful oppression under color of law, for example by deliberately failing to perform official duties with the intent of defeating the due administration of revenue laws, or by corruptly impeding or obstructing the administration of the Tax Code. See 26 U.S.C. §§ 7214(a)(l ), 7214(a)(3), 7212(a). These statutes require proof beyond a reasonable doubt that an IRS official specifically intended to violate the Constitution, Tax Code, or another federal law.

As applied to this case, a criminal prosecution under any of these statutes would require proof that an IRS official intentionally discriminated against an applicant based upon viewpoint. It would be insufficient to prove only that IRS employees used inappropriate criteria to coordinate the review of applications, acted in ways that resulted in the delay of the processing applications, or disproportionately subjected some applicants to burdensome or unnecessary questions. Instead, we would have to prove that such actions were undertaken for the very purpose of harassing or harming applicants. Proof that an IRS employee acted in good faith would be a complete defense to a criminal charge; and proof that an IRS employee acted because of mistake, bad judgment, ignorance, inertia, or even negligence would be insufficient to support a criminal charge.

Our investigation found no evidence that any IRS employee acted with criminal intent. We analyzed the culpability of every IRS employee who played a role in coordinating for review applications or handling them afterwards, from line-level revenue agents and managers in the Cincinnati-based Determinations Unit, to tax law specialists and senior executive officials based in Washington, D.C. Apart from the belief by many tax-exempt applicants affiliated with the Tea Party and similar ideologies that they had been targeted, we found no evidence that any IRS employee intentionally discriminated against these groups based upon their viewpoints. To the contrary, the evidence indicates that the decisions made by IRS employees, though misdirected, were motivated by the desire to treat similar applications consistently and avoid making incorrect decisions. Their plans to treat applications consistently were poorly implemented, due to a combination of ignorance about how to apply section 501(c)(4)'s requirements to organizations engaged in political activity, lack of guidance from subject matter experts about how to make decisions in an area most witnesses described as difficult, and repeated communication and management issues. Moreover, many employees failed to engage in critical thought about the effect their actions (or inactions) would have upon those who applied for tax-exempt status. We found that many IRS employees' failure to give adequate attention to the applications at issue was caused by competing demands on their time and an unwillingness to be held accountable for difficult decisions over sensitive matters. We did not, however, uncover any evidence that any of these employees were motivated by intentional viewpoint discrimination.

The IRS mishandled the processing of tax-exempt applications in a manner that disproportionately impacted applicants affiliated with the Tea Party and similar groups, leaving the appearance that the IRS' s conduct was motivated by political, discriminatory, corrupt, or other inappropriate motive.  However, ineffective management is not a crime.  The Department of Justice's exhaustive probe revealed no evidence that would support a criminal prosecution. What occurred is disquieting and may necessitate corrective action - but it does not warrant criminal prosecution.

We hope this information is helpful. We have made a substantial  effort  to  provide detailed information regarding our findings in this letter, and would be pleased to offer a briefing to address any questions you may have on this matter. Please do not hesitate to contact this office if we may provide additional assistance regarding this or any other matter.

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October 24, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Friday, October 23, 2015

Tulane Hosts Conference Today On Reforming State And Local Tax Systems

Tulane (2015)Tulane hosts a conference today on Reforming State and Local Tax Systems:

This one-day conference, organized by the Murphy Institute and the Department of Economics at Tulane University, will explore new research on state and local tax reforms, including empirical, experimental, and theoretical contributions, in the face of increasing challenges in areas such as the growth of services and internet sales, increased tax competition, greater factor mobility across state (and national) boundaries, and other similar developments.

Paul Eliason (Duke) & Byron Lutz (Federal Reserve Board), Can Fiscal Rules Constrain the Size of Government? An Analysis of the “Crown Jewel" of Tax and Expenditure Limitations
Discussant: Patrick Button (Tulane)

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October 23, 2015 in Conferences, Scholarship, Tax | Permalink | Comments (1)

Weekly Tax Roundup

Weekly Legal Education Roundup

Weekly SSRN Tax Roundup

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October 23, 2015 in Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Charleston Law School Files Counterclaims Against Two Fired Tenured Professors

ZFollowing up on my earlier posts:

Charleston Regional Business Journal, Law School Files Counterclaims Against Professors:

The Charleston School of Law has responded and filed counterclaims against two fired professors who sued the school earlier this year.

Nancy Zisk and Allyson Haynes Stuart, tenured professors who were terminated from the school on May 22 along with five other faculty members, filed separate but similar suits against their former employer in June. They say they were fired as retaliation for opposing The InfiLaw System’s purchase of the school.

In response to the lawsuits, the defendants — Charleston School of Law and its owners, Robert Carr and George Kosko — filed answer-and-counterclaims documents on Monday (Zisk; Stuart).

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October 23, 2015 in Legal Education | Permalink | Comments (7)

Boston College Launches Forum On Philanthropy And The Public Good

Boston College Law School Logo (2014)Press Release, BC Law Launches Forum on Philanthropy and the Public Good:

At a time when American society has grown increasingly dependent on philanthropy to fund everything from our most fundamental needs to our highest ideals, two Boston College Law School professors are launching the Forum on Philanthropy and the Public Good to examine public policy issues in charitable giving.

The forum’s inaugural event takes place on Friday, October 23, 2015, at the University Club in Washington, D.C., where it will host “The Rise of Donor-Advised Funds: Should Congress Respond?“, which will look at the $50-billion charitable fund sector. ...

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October 23, 2015 in Conferences, Tax | Permalink | Comments (0)

Shay, Fleming & Peroni: Designing A 21st Century Corporate Tax

Florida Tax Review  (2015)Stephen E. Shay (Harvard), J. Clifton Fleming Jr. (BYU) & Robert J. Peroni (Texas), Designing a 21st Century Corporate Tax — An Advance U.S. Minimum Tax on Foreign Income and Other Measures to Protect the Base, 17 Fla. Tax Rev. ___ (2015):

The 21st Century has seen unprecedented levels of corporate tax aggressiveness and avoidance. This article continues our exploration of second best international tax reforms that would protect the U.S. corporate tax base and have some likelihood of adoption. In this case, we consider how a U.S. minimum tax on foreign income earned by a controlled foreign corporation should be designed to protect the United States against erosion of its corporate income tax base and to combat tax competition by low-tax intermediary countries. In the authors’ view, a minimum tax should be an interim levy that preserves the residual U.S. tax on foreign income, as distinguished from a final minimum tax that partially eliminates the U.S. residual tax. An interim minimum tax would be a significant improvement over current law and would more effectively limit incentives to seek low-taxed foreign income while ameliorating pressure to retain excess earnings abroad.

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October 23, 2015 in Scholarship, Tax | Permalink | Comments (1)

Cantley: Captive Insurance Company Life Insurance Tax Shelters

Beckett Cantley (John Marshall (Atlanta)), Relearning the Lesson: IRS Judicial Doctrine Attacks on the Captive Insurance Company Pre-Planned Tax Deductible Life Insurance Tax Shelter, 14 Hous. Bus. & Tax J. 179 (2015):

There are certain members of the life insurance industry that are in perpetual pursuit of the ultimate potential driver of life insurance sales-tax-deductible life insurance premiums. Some in this industry have previously used aggressive retirement plan funding, and numerous other tax vehicles for these purposes, but in the end the IRS has always succeeded in defeating such strategies through administrative enforcement and litigation. The latest attempt to achieve tax-deductible premiums is the formation of a small business captive insurance company (“CIC”) for the pre-planned purpose of using the CIC funds to invest in life insurance. The owner of a small business forms an IRC § 831(b) CIC, and pays a presumably tax- deductible premium to the CIC for business risk insurance issued by the CIC. Subsequently, the CIC uses a significant part of the tax-free premium immediately to purchase life insurance on the common owner of the small business and CIC. In general, life insurance premiums are not deductible as ordinary and necessary business expenses, and tax-deducted funds should not be used to purchase life insurance. The IRS is likely to view the CIC created and funded for the primary purpose of purchasing personal life insurance for its owner, as an abusive tax shelter. The IRS would see this transaction as the CIC serving as a conduit for the life insurance premiums to follow a circuitous route to achieve the tax deduction. The IRS often argues that judicial tax doctrines should be applied to disallow claimed deductions on what the IRS perceives to be Congressionally unintended life insurance oriented abusive tax shelters. In attacking the CIC pre-planned life insurance transaction, the IRS would likely utilize the following judicial doctrines: (1) the sham transaction doctrine (specifically, as a sham in substance); (2) the economic substance doctrine; (3) the doctrine of substance over form; and (4) the step transaction doctrine.

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October 23, 2015 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 897

IRS Logo 2Daily Kos, Karl Rove's Newest 'Social Welfare' Group Spending Millions to Keep the Senate in Republican Hands:

If you're a regular Digest reader, you've seen reference recently to a new conservative group called One Nation that's been spending money to run ads on behalf of vulnerable Republican senators. The organization is not a super PAC but a 501(c)(4), a type of non-profit that is supposed to promote "social welfare" causes and cannot primarily engage in political activity. Unlike super PACs, these non-profits don't have to disclose their donors, and of course, the rules on limiting political activity are regularly flouted.

There had been talk in recent years about clamping down on these abuses, but after Republicans in Congress successfully mau-maued the IRS with trumped-up charges that the agency had unfairly targeted tea party groups, those enforcement efforts have collapsed. (One grotesque example: A North Carolina "social welfare" outfit called Carolina Rising spent 97 percent of its $5 million budget on ads to help Republican Thom Tillis defeat Democratic Sen. Kay Hagan last year.)

(Hat Tip: Ted Seto.)

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October 23, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Thursday, October 22, 2015

Stephen Carter, Louis C.K., And Monkeys On Inequality

On InequalityStephen Carter (Yale), Inequality Debate Looks in Wrong Direction (reviewing  Harry Frankfurt (Princeton), On Inequality (Princeton University Press, 2015)):

Inequality is on everybody’s lips these days -- everybody on the left, anyway, and a lot of people in the center and on the right as well. But what if everybody’s wrong?

That’s the contention of On Inequality, a small, smart new volume by Princeton University philosopher Harry Frankfurt. At the very beginning, he states a simple but powerful thesis: “Our most fundamental challenge is not the fact that the incomes of Americans are widely unequal. It is, rather, the fact that too many of our people are poor.” Progressives, in other words, are shooting at the wrong target. The moral problem posed by the distribution of wealth isn’t inequality. It’s poverty.

These might seem like the same issue, but Frankfurt shows us with elan that they are not. Suppose, he says, there is a resource that will keep a person alive, but only if that person has five units of it. There are 10 people, and there are 40 units of the resource. If the resource is distributed equally, everybody gets four units -- and everybody dies. To insist on equality in that case, he argues, “would be morally grotesque.” ...

Frankfurt suggests that the instinct that leads many to complain about inequality isn’t about equality at all: “What I believe they find intuitively to be morally objectionable ... is not that some of the individuals in those circumstances have less money than others. Rather, it is the fact that those with less have too little.”

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October 22, 2015 in Book Club, Legal Education, Tax | Permalink | Comments (4)

Tax Planning For Fantasy Football Players

DKFDSyd Gernstein (Bloomberg BNA), Live Every Fantasy Football Player’s Fantasy: Make it Your Job:

Bloomberg Businessweek reports that the two primary daily fantasy football leagues, FanDuel and DraftKings, were expected to bring in $60 million in entry fees in the first week of the NFL season.  The Monday Morning Quarterback reported that one entrant, Saahil Sud, made over $1 million during week 3 of the NFL season, and expects to make more than $5 million for the entire year. Sud uses a computer program that he designed to make his picks. The program factors in data from box scores, weather sites and football analytics sites.

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October 22, 2015 in Tax | Permalink | Comments (0)

Northwestern Receives Largest Gift ($100 Million) Ever Made To An American Law School And Changes Its Name

Northwestern 2Press Release, Pritzker Family Makes Unprecedented Gift to Northwestern Law:

Northwestern University School of Law alumnus J.B. Pritzker and his wife, M.K. Pritzker, have made a $100 million gift that will significantly advance the mission and vision of Pritzker’s alma mater, one of the nation’s leading law schools.

The 156-year-old school will be named the Northwestern Pritzker School of Law.

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October 22, 2015 in Legal Education | Permalink | Comments (9)

Why the Middle Class Should Want to Pay Higher Taxes

The Week:  Why the Middle Class Should Want to Pay Higher Taxes, by Ryan Cooper:

In America, being middle-class is certainly better than being poor. But it could be better — and social democracy offers the way.

Matt Bruenig has calculated that for people in the bottom half of the income distribution, America does objectively worse than the Nordic nations. But what about the upper half — people from the median income on upward, 1 percenters excluded? (Let's call them "Comfortable Americans.") They would benefit from social democracy as well. Taxes would be substantially higher, but the stress, expense, and insecurity of managing college, retirement, and more would be reduced.

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October 22, 2015 in Tax | Permalink | Comments (5)

Heriot: Why Aren’t There More Black Scientists? Racial Preferences In University Admissions.

Wall Street Journal op-ed:  Why Aren’t There More Black Scientists?, by Gail Heriot (San Diego):

The evidence suggests that one reason is the perverse impact of university racial preferences.

Remember when Justice Sandra Day O’Connor predicted in Grutter v. Bollinger (2003) that universities would no longer need race-preferential admissions policies in 25 years? By the end of this year, that period will be half over. Yet the level of preferential treatment given to minority students has, if anything, increased.

Meanwhile, numerous studies—as I explain in a recent report for the Heritage Foundation [A "Dubious Expediency": How Race-Preferential Admissions Policies on Campus Hurt Minority Students]—show that the supposed beneficiaries of affirmative action are less likely to go on to high-prestige careers than otherwise-identical students who attend schools where their entering academic credentials put them in the middle of the class or higher. In other words, encouraging black students to attend schools where their entering credentials place them near the bottom of the class has resulted in fewer black physicians, engineers, scientists, lawyers and professors than would otherwise be the case.

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October 22, 2015 in Legal Education | Permalink | Comments (17)

Hoffer: New Section 529A Is Much More Than A Tax Break

Hoffer (2015)TaxProf Blog op-ed:  New Section 529A Is Much More Than a Tax Break, by Stephanie Hoffer (Ohio State):

Passage of the Achieving a Better Life Experience Act of 2014 (the ABLE Act), which created new § 529A, was a watershed moment for many individuals with serious disabilities.  The new law permits states to create tax-preferred savings programs similar to § 529 college savings programs.  To date, thirty-three states have passed enabling legislation and six more have introduced bills.  With proposed regulations and a notice and comment period  already on the books, § 529A is well on its way to becoming a recognized feature of the federal and state income tax landscape.  Interestingly, though, the program’s tax preference is ancillary to its primary benefit, which is preservation of a beneficiary’s eligibility for Medicaid and other government-funded support systems.

Under § 529A, an individual is eligible to open an ABLE account if she has a severe disability with an onset date prior to age 26.  Each eligible beneficiary can have only one account, and while deposits to the account are not deductible for federal income tax purposes, investment earnings inside of the account are excluded from gross income.  Contribution limits apply, so the opportunity for deferral is not endless.  But deferral is not the account’s most important feature.  Rather, it allows beneficiaries to spend their own funds on costs that previously would have disqualified them from Medicaid.  Like other tax-preferred accounts, an ABLE account can make tax-free distributions for sanctioned expenses, or it can make taxable distributions subject to a 10% penalty for non-sanctioned expenses.  Expenses sanctioned by the ABLE Act are referred to as “qualified disability expenses,” and they are defined broadly as “any expenses related to the eligible individual’s blindness or disability.”  They include education, housing, transportation, personal support, health & wellness expenses, and a number of other items listed in the statute.  Proposed regulations note that even everyday expenses may qualify.  For instance, a “smart phone” could be disability-related because it is “an effective and safe communication or navigation aid for a child with autism.”

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October 22, 2015 in Scholarship, Tax | Permalink | Comments (3)

IRS Releases 2016 Inflation Adjustments

IRS Logo 2The IRS has released various inflation-adjustments for 2016 (IR-2015-118IR-2015-119,  & Rev. Proc. 2015-53), including:

  • Gift Tax Exemption:  $14,000 (same as 2015)
  • Unified Credit:  $5,450,000 (up $20,000 from 2015)
  • Top 39.6% Income Tax Rate:  $415,050 single/$466,950 joint (up $1,850/$2,100 from 2015)
  • Standard Deduction:  $6,300 single/$12,600 joint (same as 2015)
  • Personal Exemption:  $4,050 (up $50 from 2015)

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October 22, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Ed Kleinbard Discusses We Are Better Than This: How Government Should Spend Our Money

We Are Better Than This: How Government Should Spend Our Money (Oxford University Press, 2014)

(Click on YouTube button on bottom right to view video directly on YouTube to avoid interruption caused by blog's refresh rate.)

October 22, 2015 in Book Club, Scholarship, Tax | Permalink | Comments (4)

Treasury Department Issues Proposed Regs Implementing Obergefell And Windsor On Same-Sex Marriage

IRS Logo 2U.S. Treasury Department, Treasury Announces Proposed Regulations Implementing the Supreme Court’s Same-Sex Marriage Decision for Federal Tax Purposes:

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) today announced proposed regulations providing that a marriage of two individuals, whether of the same sex or the opposite sex, will be recognized for federal tax purposes if that marriage is recognized by any state, possession, or territory of the United States.  The proposed regulations would also interpret the terms “husband” and “wife” to include same-sex spouses as well as opposite-sex spouses.  These regulations implement the Supreme Court’s decision in Obergefell v. Hodges.

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October 22, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

The IRS Scandal, Day 896

IRS Logo 2Washington Times, The Leader of the Free World Is Corrupt:

Mr. Obama tried to influence the outcome of an active FBI investigation while on national television. He telegraphed that of course his Department of Justice would not pursue charges against Mrs. Clinton, no matter what the FBI found and what opinion they put forth. Obviously, this is not the first time. We all remember his comments that there was not a smidgen of corruption in the IRS as the agency destroyed evidence, obstructed justice, lied, withheld information from Congress, and did anything to prevent the truth about this administration’s actively targeting the conservative political opposition with federal power during the last election.

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October 22, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Wednesday, October 21, 2015

Simkovic, Sugin Elected To ALI

ALI Logo (2015)Two Tax Profs are among the 72 new members of the American Law Institute:

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October 21, 2015 in Legal Education, Tax, Tax Profs | Permalink | Comments (1)

Which Corporate Giants Pay The Highest And Lowest Tax Rates?

WalletHub, S&P 100 Tax Rate Report – FY 2014:

WalletHub analyzed annual reports for the S&P 100 – the largest and most established companies on the stock market – in order to determine the rates at which they pay taxes at the state, federal and international levels as well as how their tax burdens compare to those of American individuals.

Source: WalletHub

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October 21, 2015 in Tax | Permalink | Comments (0)

EU Orders Starbucks, Fiat To Pay Millions Of Euros In Unpaid Taxes

New York Times, E.U. Orders 2 Nations to Recover Taxes From Starbucks and Fiat:

The European Union on Wednesday ordered the Dutch government to recover money from Starbucks and told Luxembourg to claw back funds from a Fiat Chrysler unit, in an expanding crackdown on tax avoidance by corporations.

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October 21, 2015 in Tax | Permalink | Comments (0)

LoPucki: Dawn Of The Discipline-Based Law Faculty

Lynn M. LoPucki (UCLA), Dawn of the Discipline-Based Law Faculty:

This Article reports on an empirical study of the prevalence of Ph.D.s on law faculties, the rate at which J.D.-Ph.D.s are being hired by those faculties, the impact of that hiring on faculties’ legal experience levels, and the likely resulting future composition of law faculties. Approximately 29% of the tenure-track faculties of the top twenty-six law schools currently hold Ph.D.s, and 67% of those schools’ entry level hires in 2014 and 2015 are J.D.-Ph.D.s. Recent hiring has separated into two tracks. On the growing J.D.-Ph.D. track, both legal experience and preparation time is declining. On the fading J.D.-only track, legal experience and preparation time are increasing. Preparation time for a law teaching job is now slightly lower on the J.D.-Ph.D. track. If current hiring trends continue, a majority of the members of top twenty-six law faculties will hold Ph.D.s by 2028, and a large majority of them will have no experience in law practice. Although Ph.D.-hiring is strongly correlated with school rank, this transformation to discipline-based law faculties will not be confined to the top schools. Already, 11% of tenure-track faculty hires in the bottom quartile of law schools have Ph.D.s. When this transformation is complete, the disciplines will effectively control the scholarly agendas of American law schools.

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October 21, 2015 | Permalink | Comments (4)

Rosenzweig: Source As A Solution To Residence

Florida Tax Review  (2015)Adam H. Rosenzweig (Washington University), Source as a Solution to Residence, 17 Fla. Tax Rev. 471 (2015):

The choice between source-based and residence-based taxation has defined the terms of the debate for the international tax regime since its inception in the early 1900's. The thesis of this Article is that the construct of source and residence as two competing and irreconcilable doctrines is largely incorrect as a legal matter. Rather, both source rules and residence rules can and should be thought of solely as instrumental tools to divide taxing authority in a globalized world with mobile capital. Under this approach, there is no reason why “source” rules as a doctrinal matter need to be used only for “source” taxation as an economic matter, or that “residence” rules as a doctrinal matter need be used for “residence” taxation as an economic matter. Instead, the source rules as a doctrinal matter can actually be used to solve the problems of the residence rules as a doctrinal matter. Put differently, source and residence as doctrinal rules can converge into a single concept in the modern global economy.

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October 21, 2015 in Scholarship, Tax | Permalink | Comments (0)