TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

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)

Pepperdine Is Ranked #1 In Alternative Dispute Resolution ... And Tax, Clinical Training, Intellectual Property, Etc.?

StrausThe crown jewel at Pepperdine Law School is our Straus Institute for Dispute Resolution, which has been ranked by U.S. News & World Report as the #1 dispute resolution program in American law schools for an unprecedented 11 consecutive years.

I received in the mail my ballot for the 2017 U.S. News Tax Rankings (2016 U.S. News tax rankings). As in prior years, the survey is intended "to identify the law schools having the top programs in tax law." The survey is sent "to a selection of faculty members involved in tax law programs. Law schools supplied the names of these faculty members to U.S. News in summer 2015."

The survey instructs voters to "[i]dentify up to fifteen (15) schools that have the highest-quality alternative dispute resolution courses or programs. ln making your choices consider all elements that contribute to a program's academic excellence, for example, the depth and breadth of the program, faculty research and publication record, etc."

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

Rasmusen: How I Came To Be Suing Citigroup For $2.4 Billion As A Tax Whistleblower

RasmussenTaxProf Blog op-ed:  How I Came To Be Suing Citigroup for $2.4 Billion  as a Tax Whistleblower, by Eric Rasmusen (Indiana University, Kelley School of Business):

Back in 2011 I wrote an article on General Motors and Tax Code Section 382 with J. Mark Ramseyer, who teaches corporations and Japanese law, for  The Cato Papers on Public Policy.  The U.S. Treasury had issued a series “EESA Notices” (e.g. IRS Notice 2009-14) saying that it interpreted Section 382 as saying that the U.S. Treasury would not be counted as a “shareholder” in thinking about whether an ownership change had occurred.  There was no such exception in the statute, and Treasury offered no reasoning, so we were outraged. It mattered because if Section 382 applies, then after an ownership change a corporation loses its Net Operating Losses (NOL’s), the past losses it can carry forward to set off against future income in profitable years to reduce income tax.

Our article was “real science” in that ultimately we  changed our mind, concluding that GM had not yet underpaid its taxes. GM fell into a legitimate exception, because of two special features: (1) It had gone into Chapter 11, and (2) The U.S. Treasury was a major creditor, and and “old and cold” one who had not lent money intending to convert it to shares later.  Thus, this ownership change counted as a reorganization. I struggled a bit, because the formal ownership transfer occurred as a 363 sale rather than a real Chapter 11 reorganization, but Mark convinced me that it still counted as a reorganization.  Section 382 would still have been triggered if the U.S. government had sold its stock within 3 years but it waited long enough to avoid the trigger (perhaps having read our article?).

Citigroup and AIG were a different matter. They didn’t go into bankruptcy,so they weren’t reorganizations. In the case of Citigroup, the government hadn’t bought over 50% of the shares, but combined with a new issue to the public at the same time, Citigroup did go over the Section 382 threshold.

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October 21, 2015 in New Cases, Tax | Permalink | Comments (6)

Farber: Legal Scholarship In The Progressive Era And Today

Daniel A. Farber (UC-Berkeley), Back to the Future? Legal Scholarship in the Progressive Era and Today, 100 Minn. L. Rev. ___ (2015):

This article introduces volume 100 of the Minnesota Law Review. Like much of legal scholarship today, Issue 1 was deeply and unapologetically embedded in the concerns of its day, which was on the cusp between the Progressive Era and the outbreak of World War I. It is not uncommon to contrast modern legal scholarship with some past era in which scholarship was more doctrinal, less policy oriented, and more focused on issues relevant to practicing lawyers. Yet, of the four articles in Issue 1 of the law review (published in 1917), two are international or comparative, and three (including the comparative article) rely on policy arguments rather than limiting themselves to doctrinal analysis. The subjects include children’s rights and the juvenile justice system along with American neutrality in World War I. Indeed, even by the late nineteenth Century, there were complaints that law professors and law school education had departed too far from the realities of legal practice. The golden age in which practicing lawyers and law professors walked hand in hand into the sunset may be little more than myth, like so many other golden ages.

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

Power Struggle, Faculty Bullying Roil UMass Engineering Department

UMass LogoBoston Globe, Bullying of Faculty Alleged at UMass: Power Struggle Roils Chemical Engineering Department:

It began as minor personality clashes among professors, the type that can be common at any university. But what evolved at the University of Massachusetts Amherst chemical engineering department has proved far nastier.

Over three years, the dispute has turned into an ugly power struggle over an aggressive — one report said “bullying” — attempt by four members of the department to recruit others in a coup to oust their department head.

Documents and e-mails provided to the Globe paint a picture of the extended battle. Some involved in it describe screaming at faculty meetings, a rigged department election, vindictive annual reviews, and an attempt to block a professor from securing a full-time position.

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October 21, 2015 | Permalink | Comments (0)

The IRS Scandal, Day 895

IRS Logo 2Breitbart, Judge Jeanine to Obama: Is the FBI’s Hillary Email Investigation ‘Nothing More Than a Charade?’:

Judge Jeanine Pirro opened her Fox News Channel show “Justice” Saturday with a monologue ripping Democratic presidential candidate Hillary Clinton and President Barack Obama for the Benghazi investigation, including Obama’s standing up for Clinton and her server for saying he did not think it posed a national security issue.

“Our national security not endangered?” she said. “There you go again, Mr. President. Like not a smidgen of corruption in the IRS and then Ferguson and Trayvon Martin and law enforcement. Mr. President, you pre-judge situations before knowing the facts. Why did you appoint Jim Comey if you weren’t going to let him do the job at the FBI? You undercut the investigation. Were you signaling that you’re not going to let the Justice Department bring charges, even if the FBI puts together a case? Is this investigation nothing more than a charade?”

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October 21, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Tuesday, October 20, 2015

Doran Presents The Puzzle Of Non-Qualified Retirement Pay Today At Columbia

Doran (2015)Michael Doran (Virginia) presents The Puzzle of Non-Qualified Retirement Pay at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium Series hosted by Alex Raskolnikov and Wojciech Kopczuk:

Pay arrangements for managers of public corporations typically include substantial amounts of compensation deferred through non-qualified retirement plans. As a departure from the familiar baseline of current payment for current services, this presents something of a puzzle. The academic literature offers two explanations for the practice. The optimal-contracting account argues that non-qualified retirement pay represents "inside debt" that aligns the interests of managers with the interests of the corporation's unsecured general creditors. The managerial-power account argues that non-qualified retirement pay represents "stealth compensation" that facilitates managers' extraction of rents from corporate assets. In this paper, I set out a different explanation based on tax rules and tax considerations.

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October 20, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Tax Court: Asperger’s Syndrome Does Not Excuse Taxpayer's Failure To File Tax Return

Tax Court Logo 2Poppe v. Commissioner, T.C. Memo. 2015-205 (Oct. 19, 2015):

The remaining issues before the Court are ... 2. whether petitioner is liable for additions to tax under sections 6651(a)(1) and (2) and 6654 where he claims he failed to file his Federal income tax returns timely because he suffered from an autistic spectrum disorder (ASD) previously known as Asperger’s Syndrome. ...

Petitioner alleges that his mental impairment--an ASD previously known as Asperger’s Syndrome--constitutes reasonable cause for purposes of section 6651(a)(1) and (2). Petitioner offered testimony of a fact witness, Lynda Geller, Ph.D., to confirm his diagnosis.

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October 20, 2015 | Permalink | Comments (0)

Top Feeder Colleges For Law School Applicants

LSAC, Top 240 ABA Applicant Feeder Schools for Fall Applicants:

  1. UCLA:  649
  2. Florida:  614
  3. UC-Berkeley:  559
  4. Texas:  556
  5. Florida State:  523
  6. Central Florida:  491
  7. Florida International:  481
  8. Arizona State:  442
  9. Michigan:  417
  10. Penn State:  397
  11. Ohio State:  384
  12. Georgia:  359
  13. Washington:  347
  14. USC:  334
  15. Maryland:  329
  16. BYU:  319
  17. Indiana:  304
  18. UC-Irvine:  301
  19. Rutgers:  296
  20. South Florida:  295
  21. Texas A&M:  292
  22. North Carolina:  291
  23. Cornell:  289
  24. George Washington:  285
  25. LSU:  285
  26. Wisconsin:  285

October 20, 2015 in Legal Education | Permalink | Comments (6)

Reynolds: A Climate Change Tax Would Minimize Future Damage From Rising Seas

Seas 2USA Today op-ed:  Tax the Blue Zone, by Glenn Reynolds (Tennessee):

A climate change tax measure Democrats and Republicans alike should get behind.

It’s already too late to stop global warming, say scientists. No matter what we do, sea levels will rise. Some climate activists have even released an interactive map that will let you see how much of, say Washington, DC, will be under water in the next century, with the flooded zones depicted in blue. (Not all of it, alas).

Well, if it’s too late to stop global warming, I have a modest proposal instead: Tax the blue zones. That is, minimize the damage that will occur from flooding many decades in the future by reducing development now.

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October 20, 2015 in Tax | Permalink | Comments (2)

NY Times: In Defense Of The Lecture

LectureNew York Times Sunday Review:  Lecture Me. Really., by Molly Worthen (Professor of History, University of North Carolina):

Before the semester began earlier this fall, I went to check out the classroom where I would be teaching an introductory American history course. Like most classrooms at my university, this one featured lots of helpful gadgets: a computer console linked to an audiovisual system, a projector screen that deploys at the touch of a button and USB ports galore. But one thing was missing. The piece of technology that I really needed is centuries old: a simple wooden lectern to hold my lecture notes. I managed to obtain one, but it took a week of emails and phone calls.

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October 20, 2015 | Permalink | Comments (1)

The Next Wave Of Pepperdine Legal Scholars

Although it cannot match Texas A&M's U.S. News voter swag, Pepperdine sent out this nifty postcard highlighting our spectacular recently tenured faculty:


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October 20, 2015 in Legal Education | Permalink | Comments (0)

SUNY-Buffalo Law School Bars Fired Professor From Campus

Tax Protester Irwin Schiff Dies In Prison At Age 87

Schiff 5New York Times, Irwin Schiff, Fervent Opponent of Federal Income Taxes, Dies at 87:

Irwin A. Schiff, who built a national following by arguing that income taxes are unconstitutional and spent more than 10 years in prison for evading them and for helping thousands of others to do the same, died on Friday at a hospital affiliated with a federal prison in Fort Worth. He was 87.

The cause was lung cancer, his son Andrew said.

At his death, Mr. Schiff was an inmate at the Federal Correctional Institution, where he was serving his third prison term, a 14-year sentence handed down in 2005.

Mr. Schiff sold more than 250,000 copies of six self-published books, including How Anyone Can Stop Paying Income Taxes (1980), The Great Income Tax Hoax (1985) and The Federal Mafia: How the Federal Government Illegally Imposes and Unlawfully Collects Federal Income Taxes (1992).

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October 20, 2015 in Book Club, Obituaries, Tax | Permalink | Comments (1)

Subotnik: Plain Talk About Testing and Race: A Law Review Publishing Drama

Law & InequalityDan Subotnik (Touro), Plain Talk About Testing and Race: A Reply to Professor Harvey Gilmore and a Law Review Publishing Drama:

The following is my response to an essay that was accepted in May 2015 by the University of Minnesota’s Law & Inequality for its winter issue.  The essay in question continues a disputation that I and a number of others have engaged in on the subject of testing and race. In brief, I favor continued use of testing for admission in law school, although with liberal allowance for alternative measures of readiness for law study. Professor Harvey Gilmore, the author of the essay, believes that tests such as the LSAT are virtually useless and that just about any college graduate who wants to go to law school should be able to do so.

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October 20, 2015 in Legal Education, Scholarship | Permalink | Comments (11)

Call For Tax Papers And Panels: Summer 2016 SEALS Annual Conference

SEALs Logo (2013)Jennifer Bird-Pollan (Kentucky) has issued a call for tax papers for the 2016 SEALS Annual Conference to be held August 3-9 in Amelia Island, Florida:

I am happy to do what I have done in years past, which is to help coordinate people who are interested in presenting tax work at the SEALS conference into relevant panel groups.  In addition, we have also had a very successful Tax Policy Discussion Group in recent years.  Panels are generally composed of 4 to 5 people speaking for 15 to 20 minutes each.  I can try to group papers so that panels include papers on similar topics.  The Discussion Group includes about 10 people, each speaking for 5-8 minutes on a topic related to tax policy, broadly interpreted.  This has often included topics that are not necessarily fully formed paper ideas, but are thoughts the presenter has had on something he or she would like to discuss with a group of smart, informed people in an informal setting.  Both types of presentation have been very successful in the past.

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October 20, 2015 in Conferences, Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 894

IRS Logo 2Wall Street Journal, Mrs. Clinton Gets a Pass:

PauL Gigot:  Kim, what did you make of President Obama’s comments about the email scandal, saying there was no intent, no national security problem, No. 1; No. 2, there was no intent to violate federal law. Was that a signal to the FBI?

Kimberly Strassel:  It was an enormous signal to the FBI, saying back off, don’t go after the woman who was likely to be our nominee.

By the way, Paul, this is a habit of the president. Think about it. He did the same thing back when the FBI was supposedly investigating and is still supposedly investigating the IRS scandal. It only took a few months after the revelations about the targeting that happened that he came out and was dismissing it. Within a few months of that, he had declared there was not a, quote, “smidgen of corruption.” Now, there is no way for him to know, just as we assume there’s no way he knows about what has actually happened with Hillary’s server. This isn’t him giving information. This is him giving orders.

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October 20, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Monday, October 19, 2015

Morse Presents Safe Harbors, Sure Shipwrecks Today At Northwestern

Morse (2015)Susan Morse (Texas) presents Safe Harbors, Sure Shipwrecks at Northwestern today as part of its Advanced Topics in Taxation  Workshop Series hosted by Herbert Beller, Charlotte CraneDavid Cameron, Philip Postlewaite, Jeffrey Sheffield, and Robert Wootton:

Safe harbors and sure shipwrecks are rule-standard hybrids that appear throughout statutory, regulatory and case law. Safe harbors guarantee compliance, and also leave open the question of compliance for fact situations not described by the safe harbor. Sure shipwrecks provide a conclusive noncompliance result and also leave open the question of compliance outside the sure shipwreck. Safe harbors and sure shipwrecks produce asymmetric behavioral incentives for persons subject to them.

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October 19, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Gamage Presents Tax Cannibalization And Fiscal Federalism Today At Boston College

Gamage (2014)David Gamage (UC-Berkeley) presents The Tax Cannibalization Problem and Fiscal Federalism in the United States at Boston College today as part of its Tax Policy Workshop Series hosted by James Repetti and Diane Ring:

The design of federal tax law strongly influences the tax policy choices of the individual U.S. states. This article argues that under the current structure of U.S. federal tax law these influences are often perverse. Specifically, the current structure of U.S. federal tax law incentivizes state governments to adopt tax policies that inflict costs on the federal government, at the expense of national welfare. We label this the “tax cannibalization” problem.

This article introduces the tax cannibalization problem to the legal literature for the first time.

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October 19, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)