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Saturday, September 20, 2014

S&P Lowers Thomas Jefferson Law School's Junk Bond Rating to CC (3 Notches Lower Than Venezuela's); Default Is Expected

Following up on Wednesday's post, Thomas Jefferson Law School Defaults on $133m of Junk Bonds, Hopes to Restructure Debt and Remain Open:  Standard & Poor's, Thomas Jefferson School of Law, CA Rating Lowered To 'CC' From 'B+', On Watch Neg; Failure To Make Loan Payments Cited:

Thomas Jefferson Logo Standard & Poor's Ratings Services lowered its long-term rating to 'CC' ["default imminent with little prospect for recovery"] from 'B+' [highly speculative"] on the California Statewide Communities Development Authority's series 2008A tax-exempt revenue bonds and series 2008B taxable revenue bonds issued for Thomas Jefferson School of Law (TJSL). At the same time, Standard & Poor's placed the rating on CreditWatch with negative implications.

"The rating action reflects our view of TJSL's failure to make payments in full to the trustee of its June 26 loan payment, which secures the series 2008 bonds, and our anticipation that it will not make its Sept. 26 loan payment in full either," said Standard & Poor's credit analyst Carlotta Mills. We understand the school has made partial payments toward debt service, though we were unable to confirm from the trustee or the school if the debt service reserve has been drawn upon to pay bondholders.

"The CreditWatch designation reflects our understanding that the school has had multiple forbearance agreements with its bondholders and that it is working toward a restructuring of the debt, due to be in place by Oct. 17," continued Ms. Mills. We expect that the bonds will default once the restructuring is completed.

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September 20, 2014 in Legal Education | Permalink | Comments (5)

The IRS Scandal, Day 499

IRS Logo 2Press Release,  Citing IRS Wrongdoing, Judicial Watch Asks Federal Court to Permit Discovery to Find ‘Missing’ Emails in IRS Abuse Scandal:

Judicial Watch announced today that it has filed a Motion for Limited Discovery in its Freedom of Information (FOIA) lawsuit against the Internal Revenue Service (IRS) in order to force the agency to comply with federal court orders to produce information about how “lost and/or destroyed” IRS records relating to the targeting of conservative groups may be retrieved. The motion was filed on September 17, 2014, in the U.S. District Court for the District of Columbia, and requests a hearing for oral argument. The matter is before U.S. District Court Judge Emmet Sullivan (Judicial Watch v. IRS (No. 1:13-cv-1559)).

Judicial Watch notes that this litigation “presents a rare case in which revelations about crashed hard drives and missing emails, conflicting public reports about backup systems, and material omissions to the Court raise serious questions about the agency’s compliance with FOIA. Limited discovery is needed to answer these questions.”

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September 20, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Details Emerge in Murder of Dan Markel

Markel[Continually Updated]  More details are emerging in the July 18 murder of Dan Markel, D’Alemberte Professor of Law at Florida State and founder of PrawfsBlawg, as the result of a shooting in his home:

I have collected links to the many tributes to Dan here.

Dan Markel Memorial Fund To Benefit His Sons, Benjamin Amichai Markel and Lincoln Jonah Markel:

Markel

September 20, 2014 in Legal Education | Permalink | Comments (3)

Friday, September 19, 2014

Tax-Free $10-$20 Million Disability Policy May Keep Anthony Kim Off PGA Tour

Sports Illustrated, Anthony Kim, MIA Since 2012, Wrestles With Whether To Tee It Up Again or Reap an Eight-Figure Disability Settlement:

KimAnthony Kim has become golf's yeti, an elusive figure who is the source of endless conjecture. What we know for sure is that Kim, 29, has not teed it up at a PGA Tour event in more than 28 months. Once considered the future of U.S. golf, he is now estranged from the game that brought him fame and fortune. ... In some circles, Kim has become golf's Voldemort -- a name that dare not be spoken. ...

Kim's mysterious disappearance has left a void on Tour, to which he brought a much-needed swagger. His first year in the big leagues was 2007, and as a 23-year-old Ryder Cup rookie at Valhalla in '08 he was given the freighted task of leading off in the Sunday singles. "I felt like he was our team leader," says U.S. captain Paul Azinger. "He was an emotional juggernaut. His enthusiasm was infectious. He wanted to go out there and take somebody down. And he did." Kim's 5-and-4 thrashing of Sergio García remains the signature moment of his career, and it helped propel the U.S. to its only Ryder Cup victory since 1999. ...

Kim's hyperaggressive play carried him to two big-time victories on Tour in 2008 -- at Congressional and Quail Hollow -- as he finished sixth on the money list with $4.7 million. At the '09 Masters he made a record 11 birdies during a second-round 65, and the next year he nearly stole the green jacket, going birdie, birdie, birdie, eagle, birdie on the back nine on Sunday before he ran out of holes and settled for third place, four shots behind Mickelson. But even then Kim was battling an injury to his left thumb, which was operated on a month after Augusta. He struggled to regain his form in '11, cracking only two top 10s while struggling with tendinitis in his left wrist, which he said was the result of compensating to protect his thumb. The injuries kept coming. In May 2012 he ruptured his left Achilles tendon while running on a beach in San Diego. Kim had surgery the following month, and his self-imposed exile began.

No IMG staffer would comment for this story, but the party line is that Kim is still injured and expected to return to the Tour someday. ...

So what is? The answer very well may lie in an insurance policy Kim has against a career-ending injury. An IMG source pegged its value at $10 million, tax-free. Kim's friend, who has had financial discussions with him, says, "It's significantly north of that. Not quite 20, but close. That is weighing on him, very much so. He's trying to weigh the risk of coming back. The way he's phrased it to me is, 'If I take one swing on Tour, the policy is voided.'"

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September 19, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

Weekly Tax Roundup

September 19, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly Legal Education Roundup

September 19, 2014 in Legal Education, Weekly Legal Education Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

September 19, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (1)

Ropes & Gray: Tax Consequences of the O'Bannon and Northwestern Rulings

Following up on my previous post, Northwestern Athletes May Face Big Tax Hit From Unionization Victory:  Ropes & Gray, Game On! Recent Legal Developments and Tax Issues for Collegiate Athletics:

While it is not surprising that the payments permitted under O’Bannon will give rise to taxable income to the student-athletes, there has been very little focus on the tax reporting, the amount or the timing of such income

Under current law, a student who receives a scholarship covering room and board and other expenses has taxable income to the extent such scholarship exceeds the amount of a “qualified scholarship” covering the cost of tuition, books and fees. Part or all of the additional support payments authorized by the NCAA described above, however, would likely be reportable by the institution to the IRS and to the student-athlete on Form 1099. Further, to the extent the scholarship itself is conditioned on the student remaining on the team for which he or she was recruited, the scholarship is potentially subject to tax because it would constitute a payment for services rather than a qualified scholarship.

In light of the Northwestern union vote, Senator Richard Burr requested information from the IRS regarding its position on the taxability of college athletic scholarships. IRS Commissioner John Koskinen responded to the request by issuing a public letter [IRS Information Letter 2014-0016] in which he stated that the NLRB ruling with regard to labor law does not control the tax treatment of student-athletes, and he confirmed the IRS’s position that a “qualified scholarship” for a student-athlete (which does not include support for room and board or other expenses) can qualify for tax-free treatment if the student is not required to serve on the team in exchange for the scholarship, even though such service may be expected. Despite these reassurances, a negotiated agreement with the student that involves additional cash and a share of royalties could cause the IRS to conclude that an athletic scholarship is part of a larger compensation package and that the entire package is therefore taxable. If the student is represented by a union, this result may be even more likely as the qualified scholarship would presumably become a negotiated term of the contract. The well-advised student will insist on a tax gross-up provision in his or her agreement with the school, which would significantly increase costs to schools as they try to recruit the most talented athletes.

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

St. Thomas Hosts Conference Today on Religious Identity in a Time of Challenge for Law Schools

RALThe University of St. Thomas School of Law hosts the annual Religiously Affiliated Law Schools Conference on Religious Identity in a Time of Challenge for Law Schools today in Minneapolis:

  • Keynote Address:  Robert Cochran (Pepperdine) & David VanDrunen (Westminster Seminary), Justice and Mercy
  • Deans' Panel: Jeff Brauch (Regent), Mike Simons (St. John's), Deanell Tacha (Pepperdine), Robert Vischer (Dean, St. Thomas)
  • Employment & Student Well-Being:  Judith McMorrow (Boston College), Derek Muller (Pepperdine), Jerry Organ (St. Thomas), Amy Uelman (Georgetown)
  • Faculty Scholarship:  John Breen (Loyola-Chicago), Howard Lesnick (Penn), Nekima Levy-Pounds (St. Thomas), Brett Scharffs (BYU)
  • The Changing World: Pope Francis and Religious Freedom:  Janet Epps-Buckingham (Trinity Western), Susan Stabile (St. Thomas), Michael Scaperlanda (Oklahoma) 

September 19, 2014 in Conferences, Legal Education | Permalink | Comments (0)

Boston College Hosts Convention on Promoting Meaningful Reform in Philanthropy

Boston College hosts a Convention on Promoting Meaningful Reform in Philanthropy:

Boston College Law School Logo (2014)On September 18-19, 2014, leaders in philanthropy from diverse backgrounds—including legal scholars, economists, political scientists, historians and foundation and nonprofit leaders—will convene at Boston College Law School for a historic meeting to assess whether the current rules governing philanthropy adequately support the public good.

The Convention on Promoting Meaningful Reform in Philanthropy is designed to provide non-partisan engagement with issues designed to align the charitable deduction and the public good. With the guidance of the Convention, we anticipate the formation of a Forum on Philanthropy and the Public Good, a time-limited project organized in the manner of a think-tank. Our purpose is not to create a new, permanent institution but a lively and flexible and non-partisan forum that will exist for a period of no more than five years.

Together the group will consider current issues in philanthropy including questions such as:

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September 19, 2014 in Conferences, Tax | Permalink | Comments (0)

Scott Brown and Debbie Wasserman Schultz: The Deductibility of Politicians' Grooming and Clothing Expenses

BrownThe American Democracy Legal Fund has sent this letter requesting the IRS to investigate certain deductions claimed by New Hampshire Republican Senatorial Candidate Scott on his 2010 and 2011 tax returns, including $3,550 for "TV makeup and grooming.

Forbes, When It Comes to Grooming, Scott Brown Is No Debbie Wasserman Schultz:

It’s true that purely personal expenses are never tax deductible (women’s makeup, men’s suits, etc.)  But that’s not what Brown was deducting. He deducted special television makeup products, the pancake powder they put on your face before you yell into a camera for five minutes. That has no non-television application outside in the real world, unlike the cosmetic products and clothes that Ms. Hamper unsuccessfully tried to claim. Brown’s expenses would very likely hold up under examination as an ordinary and necessary business expense related directly to the production of his income.

DebbieThis is a little embarrassing for Democrats timing-wise. On the same day they raised this calumny against Brown, Politico ran a long piece showing how Democrats, too, cringe every time they see or hear Democratic National Committee (DNC) Chairperson Debbie Wasserman-Schultz.  President Obama reportedly dislikes her intently, and if you’ve ever seen her nastiness on television it’s not hard to see why.

Apparently, Ms. Wasserman Schultz tried, and tried, and tried to get the DNC to pay for her clothing, tax-free.  She tried during the convention, she tried during the inaugural, and she tried every time she had the chance.  I have no doubt she has succeeded in getting the DNC to pay for other personal expenses if she was this aggressive with clothes–a clear violation of both election law and tax law.  Personal expenses paid by your employer are wages and should be added to your W-2.

Read the hilarity below:

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September 19, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

GAO: The IRS Needs to Ramp Up Audits of Large Partnerships

GAOGovernment Accountability Office, With Growing Number of Partnerships, IRS Needs to Improve Audit Efficiency (GAO-14-732):

The number of large partnerships has more than tripled to 10,099 from tax year 2002 to 2011. Almost two-thirds of large partnerships had more than 1,000 direct and indirect partners, had six or more tiers and/or self reported being in the finance and insurance sector, with many being investment funds.

The Internal Revenue Service (IRS) audits few large partnerships. Most audits resulted in no change to the partnership’s return and the aggregate change was small. Although internal control standards call for information about effective resource use, IRS has not defined what constitutes a large partnership and does not have codes to track these audits. According to IRS auditors, the audit results may be due to challenges such as finding the sources of income within multiple tiers while meeting the administrative tasks required by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) within specified time frames. For example, IRS auditors said that it can sometimes take months to identify the partner that represents the partnership in the audit, reducing time available to conduct the audit. TEFRA does not require large partnerships to identify this partner on tax returns. Also under TEFRA, unless the partnership elects to be taxed at the entity level (which few do), IRS must pass audit adjustments through to the ultimate partners. IRS officials stated that the process of determining each partner’s share of the adjustment is paper and labor intensive. When hundreds of partners’ returns have to be adjusted, the costs involved limit the number of audits IRS can conduct. Adjusting the partnership return instead of the partners’ returns would reduce these costs but, without legislative action, IRS’s ability to do so is limited. 

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September 19, 2014 in Gov't Reports, Tax | Permalink | Comments (1)

The IRS Scandal, Day 498

IRS Logo 2Government Executive:  IRS Chief Rebuts Claim of Governmentwide Email Backup:

Internal Revenue Service Commissioner John Koskinen on Wednesday responded for the first time to assertions by a legal nonprofit that missing emails relating to the political targeting controversy at the tax agency exist on a governmentwide backup system.

His conclusion: There is no such governmentwide email trove, and confusing media accounts were based on a misunderstanding.

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September 19, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, September 18, 2014

Georgia Dean Finalists

Gale & Samwick: The Effects of Income Tax Changes on Economic Growth

William G. Gale (Brookings) & Andrew A. Samwick (Dartmouth), Effects of Income Tax Changes on Economic Growth:

This paper examines how changes to the individual income tax affect long-term economic growth. The structure and financing of a tax change are critical to achieving economic growth. Tax rate cuts may encourage individuals to work, save, and invest, but if the tax cuts are not financed by immediate spending cuts they will likely also result in an increased federal budget deficit, which in the long-term will reduce national saving and raise interest rates. The net impact on growth is uncertain, but many estimates suggest it is either small or negative. Base-broadening measures can eliminate the effect of tax rate cuts on budget deficits, but at the same time they also reduce the impact on labor supply, saving, and investment and thus reduce the direct impact on growth. However, they also reallocate resources across sectors toward their highest-value economic use, resulting in increased efficiency and potentially raising the overall size of the economy. The results suggest that not all tax changes will have the same impact on growth. Reforms that improve incentives, reduce existing subsidies, avoid windfall gains, and avoid deficit financing will have more auspicious effects on the long-term size of the economy, but may also create trade-offs between equity and efficiency.

Figure 4

Al Jazeera:  Tax Cuts Can Do More Harm Than Good, by David Cay Johnston (Syracuse):

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

Thomas: The Psychic Cost of Tax Evasion

Kathleen DeLaney Thomas (North Carolina), The Psychic Cost of Tax Evasion, 56 B.C. L. Rev. ___ (2015):

Each year, the government loses hundreds of billions of dollars in tax revenue due to underreporting by individual taxpayers. According to standard deterrence theory, policymakers should be able to reduce tax evasion by increasing tax penalties, raising the audit rate, or some combination of the two. This Article refers to these strategies as increasing the “monetary cost” of tax evasion. To date, budgetary limitations and political hurdles have made these strategies difficult for the government to employ.

There is, however, another potential means by which the government can improve tax compliance, apart from raising the monetary cost of evasion. Empirical evidence shows that people experience some form of psychological discomfort when they are dishonest, which may deter them from cheating. This Article proposes employing subtle behavioral interventions that encourage more honest tax reporting by raising the level of psychological discomfort experienced from underreporting. I refer to this approach as increasing the “psychic cost” of tax evasion.

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September 18, 2014 in Scholarship, Tax | Permalink | Comments (1)

Freedman: Designing a General Anti-Abuse Rule: Striking a Balance

Judith Freedman (Oxford), Designing a General Anti-Abuse Rule: Striking a Balance:

This article argues that statutory general anti-avoidance or anti-abuse provisions (GAARs) are an essential part of a modern tax system, since specific legislation will not catch every abuse. Properly drafted GAARs with appropriate protections can give administrators and courts an important tool to use in cases of egregious abuse, but the use must be within a legitimate framework suitable for the jurisdiction in question. GAARs are not the appropriate mechanism for a fundamental rewriting of domestic or international tax law, but they are a valuable element of the statute book in the fight to combat artificial tax arrangements.

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

Cassidy: Reforming the Law School Curriculum from the Top Down

R. Michael Cassidy (Boston College), Reforming the Law School Curriculum from the Top Down, 64 J. Legal Educ. ___ (2014):

With growing consensus that legal education is in turmoil if not in crisis, law schools need to take advantage of industry upheaval to catalyze innovation in the way they train their students. Curriculum reform, long the “third rail” of faculty politics, is now essential if some law schools are going to survive the present tsunami of low enrollments and stagnant hiring. One cautiously optimistic note within this doomsday symphony is that law school deans are now in extremely strong bargaining positions with their faculties and boards of trustees with respect to curriculum innovation.

In this essay, the author proposes a pivotal reform to the third year curriculum involving team-taught “Advanced Legal Problem Solving” workshops in subject specific areas, and describes the precise structure, content and staffing of such capstone courses. He argues that such workshops would significantly enhance the preparation of law students for entry into the profession, and would create an efficient and cost-effective route for law schools to satisfy rigorous new ABA accreditation standards regarding experiential learning and outcomes assessment.

September 18, 2014 in Legal Education | Permalink | Comments (4)

NY Times Debate: Should the ABA Allow Paid Externships for Law Students?

NY Times Room for DebateNew York Times Room for Debate: Getting Pay and Credit for a Legal Education:

The American Bar Association prohibits law students from receiving pay for internships and externships that grant them academic credit. Critics have pressured the organization to reverse this standard, as law students face mounting debt and a slow job market.

Should law students be compensated for internships that count toward graduation?

  • Michael Cardozo (Partner, Proskauer Rose, New York), Don’t Deny Credit When Credit Is Due:  "Government and nonprofit offices provide part-time work and academic credit, which would be denied if the students were paid."
  • Olympia Duhart (Professor, Nova Law School), Money Changes Everything:  "Yes, law students need money but rolling back the prohibition on allowing them to receive pay and credit for the same work ignores some key realities."
  • Aaron Sohaski (Student, Cooley Law School), Let Us Get Paid:  "Before granting credit, law schools could still evaluate paid externship opportunities on a case-by-case basis to ensure they meet stringent educational requirements."

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

One Law Prof, Two Lawyers Receive $625,000 MacArthur Fellowships

Mcarthur-foundationOne law professor and two lawyers are among the 21 recipients of $625,000 MacArthur Fellowships (formerly Genius Grants):

Sarah Deer (Professor of Law, William Mitchell)

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September 18, 2014 | Permalink | Comments (1)

Public Finance Textbooks and the Excess Burdens of Taxation

Public FinanceCecil Bohanon, John Borowitz & James McClure (all of Ball State), Saying Too Little, Too Late: Public Finance Textbooks and the Excess Burdens of Taxation, 11 J. Econ. Watch 277 (2014):

Taxation has several significant excess burdens, including enforcement costs, compliance costs, and deadweight losses. Most estimates find that raising a dollar of tax revenue costs much more than a dollar. Unfortunately, commonly used public finance textbooks do not integrate these costs into discussions of public goods or cost-benefit analyses. Not including these costs means that the optimal levels of public goods will be overestimated. Textbooks say too little, too late about the excess burdens of taxation. They could easily introduce excess burdens early, represent them in public goods diagrams, and integrate them throughout public finance instruction.

September 18, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (1)

Philadelphia Trial Lawyer Gives $50 Million to Drexel Law School; 4th Largest Gift to a U.S. Law School

Philadelphia Inquirer, Trial Lawyer Kline Gives $50M to Drexel Law School:

DrexelIn one of the largest gifts ever to a U.S. law school, Drexel University said Wednesday that Philadelphia trial lawyer Thomas R. Kline will give the eight-year-old institution $50 million to bolster its effort to reach the top ranks of legal education.

Drexel president John A. Fry said the money will be used to fund scholarships, add faculty and to expand the law school's trial advocacy program, which provides training for lawyers who plan to focus on courtroom practice.

Included in the gift is the former Beneficial Saving Fund Society building at 12th and Chestnut Streets, an imposing classical revival style structure that has been vacant since 2001 and that will house the law school's Institute for Trial Advocacy.

In recognition of the gift, the law school will be named the Thomas R. Kline School of Law. ...

Kline’s gift is the fourth-largest ever to a U.S. law school, Drexel said. The largest was a $130 million contribution to the University of Arizona law school in 1999 from broadcasting executive James Rogers; next is a $100 million gift from Domino’s Pizza founder Thomas S. Monaghan to the law school of Ave Maria University in Florida; in third place is a $55 million gift to the Chapman University law school from real estate developer Dale E. Fowler and his wife, Sarah Ann.

September 18, 2014 in Legal Education | Permalink | Comments (5)

The IRS Scandal, Day 497

IRS Logo 2Wall Street Journal:  Koskinen Faces Fresh IRS Fire at House Hearing:

House Republicans took Internal Revenue Commissioner John Koskinen to task again on Wednesday, citing his recent criticisms of congressional investigations into alleged IRS targeting of conservative groups. Wednesday’s hearing marked a renewal of GOP attacks on the IRS chief, after a period of relative quiet while Congress was on its summer break.

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September 18, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Wednesday, September 17, 2014

Census Bureau: U.S. Income Flat, Poverty Rate Falls

A Red Letter Day at Pepperdine

Red LetterAs I have blogged before, one of my favorite things about Pepperdine is the opportunity to meet some of the interesting people drawn to this place.  I had the privlege last night of hearing Tony Campolo deliver a public lecture, followed by a breakfast meeting this morning with Tony and fifty students, faculty, and staff to discuss his provocative book, Red Letter Revolution, co-authored with Shane Claiborne (whom I blogged about here):

For all the Christians facing conflict between Jesus’ words and their own lives, for all the non-Christians who feel they rarely see Jesus’ commands reflected in the choices of his followers, Red Letter Revolution is a blueprint for a new kind of Christianity, one consciously centered on the words of Jesus, the Bible’s “red letters.”

Framed as a captivating dialogue between Shane Claiborne, a progressive young evangelical, and Tony Campolo, a seasoned pastor and professor of sociology, Red Letter Revolution is a life-altering manifesto for skeptics and Christians alike. It is a call to a lifestyle that considers first and foremost Jesus’ explicit, liberating message of sacrificial love.

Shane and Tony candidly bring the words of Jesus to bear on contemporary issues of violence, community, Islam, hell, sexuality, civil disobedience, and twenty other critical topics for people of faith and conscience today. The resulting conversations reveal the striking truth that Christians guided unequivocally by the words of Jesus will frequently reach conclusions utterly contrary to those of mainstream evangelical Christianity.

September 17, 2014 in Book Club, Legal Education, Tax | Permalink | Comments (0)

NFL’s Tax Break Foes Face 4th and 20

NFLBloomberg:  NFL’s Tax Break Foes Face 4th and 20 With Wind in Face, by Richard Rubin:

If there were ever a politically opportune time for Congress to remove the National Football League’s tax exemption, it would seem to be now.

A handful of U.S. lawmakers have seized on the domestic violence, child abuse and team-name controversies swirling around the league to renew calls for ending the tax break for the NFL’s central office. They aren’t making much progress, though, in advancing a measure through Congress.

Influential lawmakers in both parties, dealing with military action in Iraq and Syria and international tax rules, aren’t interested. That adds a roadblock in a Congress that can’t pass tax policies on which there is broad agreement. ...

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

More on Faculty Development, Faculty Incentives, and Law School Innovation

Following up on my previous post,  Faculty Development, Faculty Incentives, and Law School Innovation:  American Bar Foundation, Analyzing Carnegie's Reach: The Contingent Nature of Innovation:

ABF 3Analyzing Carnegie’s Reach: The Contingent Nature of Innovation, a recent article published in the Journal of Legal Education [63 J. Legal Educ. 585 (2014)] by ABF Research Professor Stephen Daniels (with Martin Katz and William Sullivan), explores curricular innovation and institutional change in American law schools between 2001 and 2011. Since the economic downturn of 2008–09 and the related contraction of the legal market, lawyers, journalists, legal educators and pundits have written and debated about the state of legal education and the need for change. Given rising levels of student debt, and shrinking job prospects, is law school “worth it”? Are law students well prepared to enter the market? Are the schools too beholden to the ranking system of US News and World Report, and other similar outlets? There has been discussion of “failing law schools,” even an influential book by that title by Brian Tamanaha, of Washington University School of Law (University of Chicago Press, 2012), but far too little systematically collected and analyzed data on what efforts law schools have or have not made to change the status quo.

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September 17, 2014 in Legal Education, Scholarship | Permalink | Comments (0)

Aprill: Reconciling Nonprofit Self-Dealing Rules

Ellen P. Aprill (Loyola-L.A.), Reconciling Nonprofit Self-Dealing Rules, 48 Real Prop. Tr. & Est. L.J. 411 (2014):

Charities must serve public rather than private interests. Much of the enforcement effort in this area of the law tries to ensure that such organizations do not engage in impermissible self-dealing, that is, in providing unreasonable benefits to insiders. That is, limits on self-dealing are crucial to regulation of this section. Both state law and federal tax law include provisions designed to prevent such behavior. These laws, however, often exhibit inefficiencies and differences that impose unnecessary burden on organization seeking to comply with applicable law.

State law regulates both trusts and nonprofit corporations. If the organization is formed as a trust, the “no further inquiry rule” of common law applies. Under this rule, a trustee, whether of a charitable trust or a private trust, is per se liable so long as a beneficiary shows that the trustee had a personal interest in the transaction; harm to the trust is irrelevant. If the organization is formed as a corporation, nonprofit corporation statutes generally include requirements as to the procedures for board approval of self-dealing transactions, procedures that, in practice, are usually easy to meet.

Tax law supplies self-dealing rules for organizations exempt under section 501(c)(3) of the Internal Revenue Code. Under federal tax law, public charities must satisfy the so-called intermediate sanction rules, which impose excise taxes on transfers between the organization and an insider that confer an “excess benefit” on the insider. Private foundations, which are section 501(c)(3) organizations that, in general, receive their support from a single individual or corporate source or family group and make grants to other charitable organizations, face stricter rules than public charities regarding self-dealing. They face two-tier excise taxes that in practice prohibit transactions between the private foundation and certain specified insiders, even when the transaction would benefit the organization.

This article uses both the economic theory of deterrence and norms theory to argue for a change to both state law and federal tax law. Using the California nonprofit corporation statute and the availability of individual exemptions from the prohibited transactions rules of ERISA, it argues for advance approval procedures. Making state and federal self-dealing rules as similar as possible would best carry out the rules’ shared purpose. Reconciling these rules would aid nonprofit charitable organizations in adopting a set of operating procedures to ensure compliance with the various laws applicable to them. Similar rules would also render state and federal enforcement easier and more efficient.

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

Thomas Jefferson Law School Defaults on $133m of Junk Bonds, Hopes to Restructure Debt and Remain Open

Thomas Jefferson LogoFollowing up on my previous post, S&P Downgrades Many Law Schools, Thomas Jefferson Falls to Junk Bond Status:  Above the Law, Troubled Law School Defaults On Its Bonds, May Be Forced To Cease Operations:

Under the copy of the Event Filing and Agreement we received, the law school had until September 5, 2014, before remedial action would be taken by its Bondholders under the direction of its acting Trustee. ...  (Ed. note: In its official response, TJSL states that a new Agreement is now in effect, and that it runs through October 17, 2014.) Thomas Jefferson Law may not be able to stay open if it can’t restructure its financial obligations, which currently total $133,390,000. As set forth in the Agreement, TJSL pledges that it will “work in good faith to diligently negotiate a reasonable restructuring of its obligations under the Loan Agreement that will enable TJSL to remain in operation.”

We received this official statement from a representative of the Thomas Jefferson School of Law after the original story was published exclusively on Above the Law:

While it is correct that the School did not make a payment on June 26th, the School has paid most of the June payment and has engaged in constructive dialogue with its bondholders to restructure its obligations. Those constructive discussions have resulted in a series of agreements through which the bondholders have agreed not to exercise their remedies. The most current such agreement runs through October 17th (not September 5), and we are confident that a consensual restructuring will occur.

For several months the School, its legal counsel, and financial advisors have worked closely with the bondholders, their representatives, legal counsel, and financial advisors. The parties have a mutual interest restructuring the law school’s debt in a way that will allow the school to remain in operation and prosper. As part of the negotiations, various potential structures and restructuring alternatives have been discussed. At the core of each alternative is ensuring the school can provide the educational experience required of an ABA accredited school and ensure the school’s long term success.

The parties are currently considering the various approaches that have been developed by the advisors to the school and the bondholders, and are confident that an agreement will be reached in the near term.

The School expects to have additional positive information concerning our work with the bondholders within the next few weeks. Because a restructuring of the School’s obligations to the bondholders is likely, the School believes that it will be able to continue to prosper.

ABA Journal, Law School Misses Bond Payment, Seeks to Restructure Obligations

Thomas Jefferson's students have the lowest bar exam pass rate (50%) among California's 21 ABA-accredited law schools; the second-fewest full-time, long-term jobs as lawyers (29%) within nine months of graduation among California's 21 ABA-accredited law schools; and the most law school debt ($180,665) among the nation's 200 law schools.  Thomas Jefferson's latest available Form 990 lists the Dean's total compensation as $528,430 and nine other faculty and adminstrations with total compensation in excess of $175,000.

Update:  Wall Street Journal, Thomas Jefferson School of Law Gets Reprieve after Missed Bond Payment:

Thomas Jefferson School of Law is scrambling to restructure its debt after blowing a bond payment deadline.

The downtown San Diego private law school has disclosed in a financial filing that it failed to meet its entire debt obligations in June. But an agreement the school struck with creditors staves off doomsday at least until Oct. 17, while requiring it to come up with another $2 million.

School officials say they’re counting on reaching a restructuring deal with bondholders, who’ve agreed not to pursue legal remedies for the time being.

September 17, 2014 in Legal Education | Permalink | Comments (8)

PolitiFact: Democrats Are Recycling False Accusation That Republicans Support Tax Breaks for Companies That Ship Jobs Overseas

PolitiFact.com, Is There a Corporate Tax Break That Ships Jobs Overseas?:

FalseDemocrats and their advocates have washed, rinsed and are now repeating one of their favorite talking points from 2012: that "(Insert Republican Here) supports tax breaks for corporations that ship jobs overseas."

There’s a lot packed into this insult. It implies that the person on the receiving end is beholden to corporate interests, against sensible tax reform and unconcerned about American employment. It plays to Americans’ economic woes and fits into the recent discussions about corporate tax reform, following Burger King’s merger with a Canadian company.

 

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September 17, 2014 in Tax | Permalink | Comments (7)

Tax Doubts Dampen Hiring by US Companies

Financial Times, Tax Doubts Dampen Hiring by US Companies:

US chief executives see little chance of Congress reforming the country’s tax system after November’s midterm elections, leaving them cautious about hiring and investing for the next six months, a survey of chiefs has found.

Randall Stephenson, chief executive of telecoms group AT&T, said pessimism over the prospect of tax reform – which big business wants – explained a “disconnect” between corporate expectations of rising sales and timid spending plans.

The Business Roundtable, a lobby group that Mr Stephenson chairs, released a quarterly survey of 135 chief executives that showed companies scaling back their plans for recruitment and business investment from three months ago.

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September 17, 2014 in Tax | Permalink | Comments (2)

QS World University Rankings 2014-15

QSQS World University Rankings 2014-15:

1.  MIT
2.  Cambridge
2.  Imperial College London
4.  Harvard
5.  Oxford
5.  University College London
7.  Stanford
8.  Cal-Tech
9.  Princeton
10.  Yale
11.  Chicago
12.  ETH Zurich (Swiss Federal Institute of Technology)
13.  Penn
14.  Columbia
14.  Johns Hopkins
16.  King's College London
17.  Edinburgh
17.  Ecole Polytechnique Fédérale de Lausanne
19.  Cornell
20.  Toronto
21.  McGill
22.  National University Singapore
23.  Michigan
24.  Ecole normale supérieure, Paris
25.  Australian National
25.  Duke

QS 2

September 17, 2014 in Law School Rankings, Legal Education | Permalink | Comments (4)

The IRS Scandal, Day 496

IRS Logo 2New York Times op-ed:  Apples and Hurricanes: Obama Beyond Bush, by Frank Bruni:

Whenever Barack Obama seems in danger of falling, do we have to hear that George W. Bush made the cliff? ... The I.R.S. scandal was not as bad as Watergate. (Nothing’s ever as bad as Watergate, which serves a nifty historical function as the gold standard of executive malfeasance and mendacity.) ...

If we’re determined to glance back at a figure who flatters Obama, let’s really have at it and look all the way to Warren Harding. Golf wasn’t his only distraction. He also had a thing for poker. And when it came to seeming and feeling overwhelmed, the 29th president, an Ohio Republican, reputedly confessed to friends that he was lost in the job. By that measure Obama is a rock. But it doesn’t make him a boulder.

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September 17, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, September 16, 2014

Blank Presents Reconsidering Corporate Tax Privacy Today at UC-Irvine

BlankJoshua D. Blank (NYU) presents Reconsidering Corporate Tax Privacy, 11 N.Y.U. J. L. & Bus. ___ (2014), at UC-Irvine today as part of its Faculty Workshop Series:

For over a century, politicians, government officials and scholars in the United States have debated whether corporate tax returns, which are currently subject to broad tax privacy protections, should be publicly accessible. The ongoing global discussion of base erosion and profit shifting by multinational corporations has generated calls for greater “tax transparency.” Throughout this debate, participants have focused narrowly on potential reactions of a corporation’s managers, shareholders and consumers to a requirement that the corporation publish its own tax return information. There is, however, another perspective: how would the ability of a corporation’s stakeholders and agents to observe other corporations’ tax return information affect the corporation’s compliance with the tax law?

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September 16, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Google-Style Tax Dodging Targeted as OECD Draws Up Battle Plan

Bloomberg:  Google-Style Tax Dodging Targeted as OECD Draws Up Battle Plan, by Jesse Drucker:

BEPS 2The tax-avoidance strategies that companies like Google Inc., Apple Inc. and Amazon.com Inc. use to escape more than $100 billion a year of levies in the U.S. and Europe are under threat from a plan drawn up by the Organization for Economic Cooperation and Development.

The Paris-based OECD, a research institute funded by 34 countries including the U.S., recommended governments limit the techniques those companies use to avoid taxes, such as assigning valuable patent rights to shell companies based in tax havens, according to draft rules released today. All of the OECD member countries and 10 others, including China and Russia, have approved the recommendations, though further action by countries would be required for them to take effect.

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September 16, 2014 in Tax | Permalink | Comments (0)

Retired IRS Agent Pushes NY to Audit Tax Cheats

Following up on my previous posts (links below):  Albany Times-Union, Audits Sought on Tax Cheats:

New York StateFor two years, a retired Internal Revenue Service officer has been urging state officials to audit big real estate partnerships, particularly in Manhattan, to track down tax cheats owing the state hundreds of millions of dollars.

But Jerry Curnutt hasn't gotten traction at the state Department of Taxation and Finance, and he hasn't been able to impress upon the state comptroller or attorney general how big a deal the matter is. "Why are they not doing them?" he said. "The reason: Don't make waves."

David Cay Johnston, the Pulitzer-Prize winning tax reporter for the New York Times, is so sure of Curnutt's abilities in finding real estate partnership tax cheats that the journalist said he would pay $10,000 out of his own pocket to cover Curnutt's fees. Curnutt, a 77-year-old consultant from Texas who retired from the IRS in 2000, was employed by Pennsylvania for six years on such an assignment through 2008. During that time he charged the state $190,483, at $140 an hour plus expenses. The Keystone State assessed $49 million against real estate partners who had not reported gains, its tax department said. "Additionally, Curnutt helped the department develop a case involving $700 million in nonreported income," said Department of Revenue spokeswoman Elizabeth Brassell.

September 16, 2014 in IRS News, Tax | Permalink | Comments (2)

A Bad Dream: Tax Code Grounds Airport's Plans to Install Sleeping Pods for Passengers

Alaska Dispatch News, IRS Regulations Prevent Sleeping Pods at Anchorage Airport:

Sleep PodsPlans to install sleeping pods at Ted Stevens Anchorage International Airport have been grounded by, of all things, Internal Revenue Service codes.

The pods, which were planned for the airport's C concourse, would have contained two to three bunks each for weary and laid-over travelers to get some cheap rest before boarding their next flight. Their installation would have made Anchorage's airport one of the first in the nation to utilize the so-called "micro hotels" and would have increased the airport's already growing nonflight revenue.

But after going through an IRS audit a few months ago, airport bond managers noticed a prohibition in the tax code covering allowable uses for tax-free bonds against building lodging facilities.

And there's the catch. The main terminal and C Concourse have been renovated (beginning in 1999) with a combination of AMT tax-free bonds and private equity bonds. With more than $500 million still outstanding on the tax-free AMT bonds, the airport is bound by IRS codes that are meant to prohibit public bonds from being used to compete with private businesses.

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September 16, 2014 in Tax | Permalink | Comments (4)

Romney-Sized IRAs Get Scrutiny as Government Studies Tax Breaks

Bloomberg:  Romney-Sized IRAs Get Scrutiny as Government Studies Tax Breaks, by Richard Rubin:

About 9,000 U.S. taxpayers have each accumulated at least $5 million in individual retirement accounts, said the Government Accountability Office, raising questions about some investors’ tax-advantaged returns.

The preliminary report attaches data to an issue that drew attention during the 2012 presidential campaign, when Republican nominee Mitt Romney reported an IRA worth $20 million to $102 million. ...

Today’s GAO report said someone who contributed the maximum amount each year to an IRA from 1975 to 2011 and invested it in the Standard & Poor’s 500 Index would have about $350,000. The maximum contribution this year is $5,500, plus an extra $1,000 for people age 50 and older.

GAO, Preliminary Information on IRA Balances Accumulated as of 2011 (Sept. 16, 2014):

For tax year 2011 (the most recent year available), an estimated 43 million taxpayers had individual retirement accounts (IRA) with total reported fair market value of $5.2 trillion. About 99 percent of those taxpayers had aggregate IRA balances (including inherited IRAs) of $1 million or less. As shown in the table below, few taxpayers had aggregated balances exceeding $5 million as of 2011. Generally, taxpayers with IRA balances of $5 million or more tend to have higher adjusted gross incomes, be joint filers, and 65 or more years old. The Internal Revenue Service (IRS) statistical data GAO analyzed may not provide a precise estimate of the number of taxpayers or other quantities when the number of taxpayers in a particular reporting group is very small. Even assuming maximum contributions sustained over decades and rolled over from an employer plan, it would take an aggressive stock market investment strategy to accumulate an IRA balance over $5 million. There is no total statutory limit on IRA accumulations or rollovers from employer defined contribution plans. An individual who made the maximum contributions every year since 1975 to a traditional IRA could have accumulated about $303,420 achieving investment returns equal to the average annual Social Security interest rates.

Estimated Taxpayers with IRA by Size of IRA Balance, Tax Year 2011

Number of taxpayers

Total IRA fair market value balances($ Billions)

IRA Balance

Estimate

95% confidence

interval

Estimate

95% confidence

interval

$1 million or less

42,382,192

42,094,009

42,670,375

$4,092

$4,038

$4,147

> $1to $2 million

502,392

470,897

533,887

674

632

717

> $2 to $3 million

83,529

72,632

94,426

198

173

224

> $3 to $5 million

36,171

30,811

41,531

133

114

153

> $5 to $10 million

7,952

6,120

9,783

52

40

64

> $10 to $25 million

791

596

985

11

8

13

> $25 million

314

115

650

81

8

225

September 16, 2014 in Gov't Reports, Tax | Permalink | Comments (0)

SSRN Tax Professor Rankings

SSRN LogoSSRN has updated its monthly rankings of 944 American and international law school faculties and 3,000 law professors by (among other things) the number of paper downloads from the SSRN database.  Here is the new list (through September 1, 2014) of the Top 25 U.S. Tax Professors in two of the SSRN categories: all-time downloads and recent downloads (within the past 12 months):

 

 

All-Time

 

Recent

1

Reuven Avi-Yonah (Mich.)

40,041

Reuven Avi-Yonah (Mich.)

6669

2

Paul Caron (Pepperdine)

26,595

Ed Kleinbard (USC)

4504

3

Louis Kaplow (Harvard)

22,889

Richard Ainsworth (BU)

2695

4

D. Dharmapala (Chicago)

20,320

Paul Caron (Pepperdine) 

2627

5

Vic Fleischer (San Diego)

20,071

D. Dharmapala (Chicago)

2509

6

James Hines (Michigan)

19,825

Omri Marian (Florida)

1977

7

Ted Seto (Loyola-L.A.)

19,186

Robert Sitkoff (Harvard)

1949

8

Richard Kaplan (Illinois)

19.073

Richard Kaplan (Illinois)

1915

9

Katie Pratt (Loyola-L.A.)

16,168

Katie Pratt (Loyola-L.A.)

1801

10

Ed Kleinbard (USC)

15,859

Bridget Crawford (Pace)

1794

11

Dennis Ventry (UC-Davis)

15,397

Brad Borden (Brooklyn)

1588

12

Carter Bishop (Suffolk)

15,140

Jen Kowal (Loyola-L.A.)

1558

13

Jen Kowal (Loyola-L.A.)

14,418

Jeff Kwall (Loyola-Chicago)

1497

14

David Weisbach (Chicago)

14,359

Dick Harvey (Villanova)

1436

15

Chris Sanchirico (Penn)

14,253

Louis Kaplow (Harvard)

1434

16

Richard Ainsworth (BU)

14,065

James Hines (Michigan)

1407

17

Robert Sitkoff (Harvard)

13,974

Francine Lipman (UNLV)

1375

18

David Walker (BU)

13,935

Dan Shaviro (NYU)

1348

19

Francine Lipman (UNLV)

13,921

Ted Seto (Loyola-L.A.)

1335

20

Bridget Crawford (Pace)

13,883

David Gamage (UCBerkeley)

1313

21

Brad Borden (Brooklyn)

13,853

Vic Fleischer (San Diego)

1276

22

Herwig Schlunk (Vanderbilt)

12,507

Carter Bishop (Suffolk)

1251

23

Dan Shaviro (NYU)

12,101

David Weisbach (Chicago)

1186

24

Ed McCaffery (USC)

11,748

Gregg Polsky (North Carolina)

1167

25

Wendy Gerzog (Baltimore)

11,733

Chris Sanchirico (Penn)

1129

Note that this ranking includes full-time tax professors with at least one tax paper on SSRN, and all papers (including non-tax papers) by these tax professors are included in the SSRN data.

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September 16, 2014 in Scholarship, Tax, Tax Prof Rankings | Permalink | Comments (1)

Florida State Remembers Dan Markel

MarkelFlorida State is holding a memorial service today to remember Dan Markel, who was shot and killed on July 18. Speakers include faculty from Florida State and other law schools, current and former students, and Dan's sister. Dean Don Weidner will present the Alumni Class of 1966 Award to Dan’s Parents, Phil Markel and Ruth Markel. For the full program, see here

Dan's friends and family have set up a website, Help Us Tell Dan Markel’s Story.  For more memorial tributes to Dan, see here.  For updates on the investigation into Dan's murder, see here.

September 16, 2014 in Legal Education | Permalink | Comments (0)

U.S. Ranks 32nd (out of 34 OECD Countries) in International Tax Competitiveness

Tax Foundation, 2014 International Tax Competitiveness Index:

Tax Foundation logoThe Tax Foundation’s International Tax Competitiveness Index (ITCI) measures the degree to which the 34 OECD countries’ tax systems promote competitiveness through low tax burdens on business investment and neutrality through a well-structured tax code. The ITCI considers more than forty variables across five categories: Corporate Taxes, Consumption Taxes, Property Taxes, Individual Taxes, and International Tax Rules. The ITCI attempts to display not only which countries provide the best tax environment for investment but also the best tax environment to start and grow a business.

Tax Foundation

Wall Street Journal editorial, We're Number 32! A New Global Index Highlights the Harm From the U.S. Tax Code.:

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September 16, 2014 in Tax, Think Tank Reports | Permalink | Comments (7)

Applications Decline at All Five Georgia Law Schools

The IRS Scandal, Day 495

IRS Logo 2Wall Street Journal editorial:  Covering for the IRS:

The IRS targeting of conservative groups has now become a story about the cover-up. More than a year after the scandal became public, the most transparent Administration in history has done everything in its power to spin the story, stymie Congressional investigators and run out the clock.

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September 16, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, September 15, 2014

Benzarti Presents How Taxing is Tax Filing? Today at UC-Berkeley

UC Berkeley Primary Logo Berkeley BlueYoussef Benzarti (UC-Berkeley, Department of Economics) presents How Taxing is Tax Filing? Leaving Money on the Table Because of Compliance Costs at UC-Berkeley today as part of the Robert D. Burch Center for Tax Policy and Public Finance Seminar:

I use a quasi-experimental design to estimate the burden of complying with the tax code. Employing a sample of US income tax returns, I observe the preferences of taxpayers over itemizing deductions or claiming the standard deduction. Treated taxpayers forgo $800 on average to avoid the cost of itemizing. A revealed preference argument implies that itemizing deductions is as painful as working more than 17 hours at one’s regular job. The amount of foregone benefits is larger for richer households, consistent with the fact that the value of time increases with income. I explore two explanations of the magnitude of the estimates. First, it could be due to an extreme aversion to filing taxes. Such aversion implies that itemizing deductions imposes an aggregate compliance cost of 0.24% of GDP and an extrapolation to filing federal taxes implies that the overall cost of compliance is 1.55% of GDP. Second, if taxpayers are time-inconsistent the revealed preference argument fails, introducing a wedge between foregone benefits and compliance costs. Being present-biased leads taxpayers to forego large benefits even when compliance costs are relatively small. I provide evidence of taxpayers being present-biased. Both explanations - whether driven by preferences or mistakes - suggest that the burden imposed on society by tax compliance is significantly larger than previously estimated. I discuss policy implications of the result.

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

Shurtz Presents Long-Term Care and the Tax Code: A Feminist Perspective Today at Loyola-L.A.

ShurtzNancy Shurtz (Oregon) presents Long-Term Care and the Tax Code: A Feminist Perspective at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

Long-term care is a feminist issue. Not only do women live longer but we suffer more from a multitude of degenerative physical and mental ailments that require supervised and concentrated care. We comprise 70% of the unpaid caregiver and over 90% of the paid caregiver. Because of low wages, interruptions in work for care of children and parents, lower pensions, women have fewer resources and thus may not adequately save or plan for expensive future long-term care expenses. Consequently, women are more likely to use social insurance (Medicare, Medicaid) and long term care insurance. From home care, adult care, continuing care to nursing home care, the tax code provides numerous but ineffective and inequitable subsidies. The tax system favors the purchase of long-term care insurance over savings, fails to value the unpaid caregiving services of family members, and inadequately supports the low-wage care worker. This paper suggests tax reform in addition to non tax reform. The Community Living Assistance Support and Services (CLASS) Act of the Affordable Care Act should be reinstated and funded and the Family Medical Leave Act should be modified and expanded. Eventually, the federal government will probably need to institute a Medicare tax on workers to fund the growing problem of financing and supporting elder care in America.

Vivian Wu (USC) is the commentator.

September 15, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

NY Times: Student Loans Increasingly Burden the Elderly, Not Just the Young

New York Times:  Student Loan Debt Burdens More Than Just Young People, by Elizabeth Olson:

NY Fed[A]n estimated two million Americans age 60 and older ... are in debt from unpaid student loans, according to data from the Federal Reserve Bank of New York. Its August Household Debt and Credit Report said the number of aging Americans with outstanding student loans had almost tripled from about 700,000 in 2005, whether from long-ago loans for their own educations or more recent borrowing to pay for college degrees for family members.

The debt among older people is up substantially, to $43 billion from $8 billion in 2005, according to the report, which is based on data from Equifax, the credit reporting agency. As of July 31, money was being deducted from Social Security payments to almost 140,000 individuals to pay down their outstanding student loans, according to Treasury Department data. That is up from just under 38,000 people in 2004. Over the decade, the amounts withheld more than tripled, to nearly $101 million for the first seven months of this year from over $32 million in 2004.

While older debtors account for a small fraction of student loan borrowers, who have accumulated nearly $1 trillion in such debt, the effect of owing a constantly ballooning amount of debt but having a fixed income can be onerous, said Senator Bill Nelson, Democrat of Florida, chairman of the Senate Special Committee on Aging.

“Those in default on their loans can see their Social Security checks garnished, leaving them with retirement income that leaves them well below the poverty line,” he said at a committee hearing this week to examine the issue. “Some may think of student loan debt as a young person’s problem,” he said, “but, as it turns out, that is increasingly not the case.” ...

The Government Accountability Office warned this week about the growth of educational debt among seniors. It released a report that relied on different data from that used by the Federal Reserve Bank of New York, but nonetheless painted an ominous picture of lingering debt burden.

GAO

More than 80 percent of the outstanding balances are from seniors who financed their own education, the GAO report concluded, and only 18 percent were attributed to loans used to finance the studies of a spouse, child or grandchild. But the default rate for these loans is 31 percent — a rate that is double that of the default rate for loans taken out by borrowers between the ages of 25 and 49 years old, according to agency data.

(Hat Tip: Mike Talbert.)

September 15, 2014 in Legal Education | Permalink | Comments (1)

State Tax Fairness Rankings

Wallet Hub, 2014′s Most & Least Fair State Tax Systems:

Fair TaxAs a follow up to our 2014 Tax Fairness Survey which focused largely on federal tax policy, WalletHub has analyzed and ranked the 50 states based on the fairness of their state and local tax systems. To rank the states, Wallethub conducted a nationally representative online survey of 1,050 individuals to assess what Americans think a fair state and local tax system looks like. Our analysts then compared what Americans think is fair to data on the real structure of tax systems in all 50 states. We believe this is the first ever ranking of state and local tax fairness that matches representative data on what Americans think is fair with real data on the structure of state and local tax systems.

WalletHub

 

Most Fair Tax Systems

 

Least Fair Tax Systems

 

1

Montana

 

41

Tennessee 

 

2

Oregon

 

42

Texas 

 

3

South Carolina 

 

43

Arizona 

 

4

Delaware 

 

44

Mississippi 

 

5

Idaho 

 

45

Indiana 

 

6

Virginia 

 

46

Florida

 

7

Minnesota 

 

47

Illinois 

 

8

California 

 

48

Arkansas 

 

9

Maryland 

 

49

Hawaii 

 

10

Vermont 

 

50

Washington 

(Hat Tip: Bruce Bartlett.)

September 15, 2014 in Tax | Permalink | Comments (1)

Understanding Thomas Piketty and His Critics

PikettyThe Heritage Foundation: Understanding Thomas Piketty and His Critics, by Curtis S. Dubay & Salim Furth:

Thomas Piketty’s Capital in the Twenty-First Century is a treatise on how wealth inequality evolves in capitalistic economies. Piketty uses data stretching back to the 18th century to describe the historical evolution of wealth and inequality, proposes a model that matches the data, and uses that model to predict rising wealth inequality in the 21st century. He recommends punitive taxes on high incomes and wealth to prevent the scenario that he predicts. However, the best critiques of Piketty have shown that most of the links in his argument are broken. Piketty’s model does not match his data as well as he claims. His prediction of permanently rising wealth inequality rests on two implausible modeling assumptions. And his recommendation of punitive taxes is based on the glib assumption that capital accumulation is unimportant for wage growth, an assumption at odds with the data and even with his own model. As a result, almost nothing in Capital in the Twenty-First Century can be applied usefully to policymaking.

Heritage

September 15, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (3)

Blanchard Takes Issue With Kleinbard's Call for Anti-Inversion Legislation

Tax Analysys Logo (2013) Kimberly S. Blanchard (Weil, Gotshal & Manges, New York), Blanchard Argues Against More Anti-Inversion Rules, 144 Tax Notes 1335 (Sept. 15, 2014):

I write to comment on Edward D. Kleinbard's recent article ['Competitiveness' Has Nothing to Do With It, 144 Tax Notes 1055 (Sept. 1, 2014)] on the subject of "inversions." Kleinbard is, as usual, erudite and funny, but all the erudition and humor in the universe cannot hide the hole in his argument.

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September 15, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

NY Times: Jeers and Cheers Over Tax Inversions

New York Times:  Jeers and Cheers Over Tax Inversions, by Jeff Sommer:

[M]ost American consumers, investors and politicians have tacitly accepted that if a company is profitable, doesn’t violate the law and produces appealing products and services, it can operate wherever and however it likes. That’s why the furor over tax inversions is so intriguing. ...

Investors appear to like tax inversions. After Burger King said it would embark on one, its shares rose an astonishing 19.5 percent in a single day. No wonder that earlier this month, Newedge USA, a unit of Société Générale, said that “the rising tide of opposition in Washington, D.C., toward reincorporating for tax reasons may, in fact, accelerate deal-making as companies rush to complete conversions and other tax strategies before legislative changes.”

After years of a rising stock market and buoyant profits, much of them held abroad, American companies are engaging in a spree of mergers and acquisitions. And the United States is nearly alone among major industrialized nations in taxing — or, more realistically, trying to tax — all the worldwide income of corporations domiciled within its territory. Canada, Switzerland and nearly every place else tax only the income earned in their own territories. This makes tax planning much simpler. ...

[I]nversions may make it much easier to reduce American corporate taxes, Edward Kleinbard, a professor of law and business at the University of Southern California, said in a recent report. He opposes inversions, saying they are stripping the United States of its tax base. ... 

In a study of “the first wave of tax inversions” — those that took place before Congress tightened the rules in 2004 — [Elizabeth Chorvat, a visiting professor at the University of Illinois college of business] found that companies that moved their tax domiciles outperformed the overall stock market. It’s too early to tell whether the current wave will be similarly lucrative, she said, but corporate motivations are clear. While inversions prompt immediate tax bills for some shareholders, she said, they often end up being beneficial.

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September 15, 2014 in Tax | Permalink | Comments (0)