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Tuesday, April 14, 2015

Tax Court: A Snickers Bar Is Not a Deductible Business Expense

SnickersIn Cvancara v. Commissioner, T.C. Memo. 2013-20, the Tax Court disallowed a business expense deduction for a Snickers bar consumed while working.

 

April 14, 2015 in Tax | Permalink | Comments (7)

Graetz: How Do We Fix America’s Tax System?

Michael Graetz (Columbia), How Do We Fix America’s Tax System?:

The United States hobbles itself in today’s international economy by continuing to rely so heavily on income taxation. The truth is that we need a tax reform that is considerably bolder than either Congress or the president is now contemplating. We need to rebalance our federal tax system to take advantage of our status as a low-tax country by relying less rely less heavily on income taxation. To create a simple, internationally competitive and viable long-term solution to our fiscal requirements, we should return the income tax to its original purpose: the collection of a simpler tax on high-income earners who tend to have multiple income sources. In order to do that, we need to tax consumption—that is, sales of goods and services. By enacting a broad-based tax on sales of goods and services now used by more than 150 countries worldwide, we could use the revenues to finance an income-tax exemption of $100,000 of family income and to lower substantially the individual income-tax rate on income above that amount—freeing over 150 million Americans from ever having to deal with the IRS. Through payroll-tax cuts and debit cards to be used at checkout counters, we can protect low- and middle-income families from any tax increase.

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April 14, 2015 in Tax | Permalink | Comments (0)

Tacha: Who Needs a Lawyer Anyway?

Deanell Reece Tacha (Dean, Pepperdine), Who Needs a Lawyer Anyway?, 66 Rutgers L. Rev. 729 (2014):

You are the people who must be the spokespersons for the enduring and essential need for well-trained lawyers who can guide the nation and the world through the challenging and exciting issues and disputes that lie ahead. The lawyers’ ability to focus on germane issues, negotiate reasoned practical resolutions, and settle and litigate disputes, will be in high demand in this complex society. The debate about the value of legal education goes to the core of our understanding of what it is to prepare legal professionals for a world we cannot see with any particularity. That is what lawyers do. What we must foresee clearly, is that the legacy of freedom and of people governed by the rule of law is our highest calling and the source of our professional responsibility. The modes of delivering legal services, and even the understanding of what is a legal service, will change. What will not change is the need for lawyers who are problem solvers, client servers, articulators of the American ideal of self-government, models of the rule of law, and servants of the common good. We will always need lawyer-patriots.

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April 14, 2015 in Legal Education, Scholarship | Permalink | Comments (0)

The IRS Scandal, Day 705

IRS Logo 2Letter From Orrin Hatch (Chair, Senate Finance Committee) to John Koskinen (Commissioner, IRS) (Apr. 13, 2015):

At a recent Senate Finance Committee hearing, I noted the long, historic relationship of the Internal Revenue Service and the Senate Finance Committee. The challenges of the IRS in the coming years will be great, as your agency struggles with the implementation of new federal programs and doing more with limited resources. The next chapter in our relationship is a critical one, and I hope a good one, but as I noted at the hearing, that is ultimately up to you.

I also warned that attempts to limit political speech through the tax code would not be tolerated, and would only serve to “further entangle your agency in political debate and controversy.” Two years ago, your agency put forth proposed regulations that would upend half-century-old rules regarding get out the vote drives, voter registration, and other activities by tax exempt organizations. This rule was withdrawn after intense opposition across the political spectrum. You recently announced that the IRS would seek to broaden the rule, restricting the speech and activities of an even wider range of tax exempt organizations. You are starting down a very dangerous road.

You have explained that this attempt to restrict the rights of groups to organize and speak out was in response to the IRS’s targeting of conservative groups and 2013 recommendations by the Inspector General. You have also explained that new rules were necessary to prevent further targeting. Both claims are false.

Congressional investigations have established that the Treasury Department began work on the proposal in 2011, long before the Inspector General’s recommendations and during the height of the political targeting, rather than in response to it. Furthermore, interviews with front-line IRS employees established that those workers were processing applications from conservative groups in a timely fashion and without difficulty, until political officials in Washington, DC intervened. The problem was not the rules governing tax exempt entities – the problem was officials at IRS and Treasury Department headquarters further involving your agency into the political speech of Americans across the country. Rather than preventing further targeting, the new proposal – should you proceed with it – will be the systemization of targeting through law.

As it is, the IRS faces seemingly insurmountable challenges in implementing the President’s health care overhaul and the Foreign Account Tax Compliance Act with limited resources. The IRS is just beginning to recover its reputation, and your agency is just beginning to regain trust from lawmakers. Do not throw all of that away in a quixotic and bizarre mission to regulate the political activity of Americans. If you do so, in light of your agency’s recent history, your actions will be viewed with the presumption of political bias and bad faith. If you issue this proposed rule, Congress will have no choice but to investigate the reasons behind this power grab, be it political motivation or orders from officials at the Treasury Department or the White House. To that end, and in anticipation of the Administration moving ahead on this issue, I ask that you begin putting in place document retention policies for all documents and communication related to your agency’s work regarding these proposals. This retention should include, but is not limited to, all handwritten notes, memoranda, and electronic communication on the matter.

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April 14, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Monday, April 13, 2015

Republicans Seek to Repeal Estate Tax, Preserve Step-Up In Basis At Death

Estate Tax LogoBloomberg, Why Republicans Want a Bigger U.S. Estate Tax Repeal Than Ever:

Congressional Republicans have narrowed the estate tax so much that it affects only about 5,500 wealthy American households a year. Now they want to eliminate the tax altogether -- with a bonus for heirs.

Under the latest plan, backed by farmers and business groups, estates would pay no taxes. Furthermore, heirs wouldn’t owe any capital gains taxes on the increased value of assets over the deceased’s life.

That move -- simpler and more generous than previous repeal efforts -- would let billions of dollars in income and assets escape all U.S. taxes. The plan would cost the U.S. government $269 billion in lost revenue over a decade. ...

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April 13, 2015 in Tax | Permalink | Comments (1)

WaPo Fact Checker: Who Wrote the 'IRS Code'?

WaPo Fact CheckerWashington Post Fact Checker, Who Wrote the ‘IRS Code’? Hint: It Wasn’t the Internal Revenue Service:

On tax reform, we, right now, have more words in the IRS code than there are in the Bible — not a one of them as good.
–Sen. Ted Cruz (R-Texas), speech at International Association of Fire Fighters legislative conference, March 10, 2015

The Fact Checker previously wrote that Cruz’s comparison was ultimately meaningless — not worthy of a Geppetto Checkmark nor a Pinocchio — because saying one piece of text has more words than another doesn’t really tell you anything. A lot of readers responded to us via e-mail and social media — some critical, some appreciative and a few amused.

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April 13, 2015 in Congressional News, IRS News, Tax | Permalink | Comments (3)

Blair-Stanek: Crisis-Proofing Tax Law

Andrew Blair-Stanek (Maryland), Crisis-Proofing Tax Law, 57 Wm. & Mary L. Rev. __ (2016):

While Congress and the Federal Reserve battled the 2008-09 financial crisis with high-profile bailouts, the IRS fought a parallel, little-noticed battle to ensure that many harsh tax rules did not deepen the crisis. Remarkably, the IRS’s crisis responses cost the government more money than the bailouts, with a handful of companies receiving huge tax windfalls. Yet the IRS also kept its responses too narrowly tailored, causing preventable layoffs and foreclosures.

This Article proposes a novel framework for tax law to handle future crises efficiently and equitably, using the law-and-economics concept of property rules and liability rules.

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April 13, 2015 in Scholarship, Tax | Permalink | Comments (0)

John Oliver and Michael Bolton Defend The IRS

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

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April 13, 2015 in IRS News, Tax | Permalink | Comments (0)

GE Bites Tax Bullet, Repatriates $36 Billion in Foreign Profits

GE 2016Wall Street Journal, GE Bites Tax Bullet in Move to Help Share Buybacks:

As General Electric Co. unveiled a reshaping of its balance sheet and operations, the company’s decision to repatriate $36 billion in foreign cash brings a large tax bill and raises concerns about whether multinationals’ efforts to minimize taxes are taking too heavy a toll back home.

The U.S. tax system, with one of the world’s highest corporate rates, has led U.S. companies with significant overseas operations to park much of their cash offshore. But that decision comes with its own cost in the form of lost opportunities at home, and GE’s decision suggests more companies may be reaching a tipping point, some observers said.

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April 13, 2015 in Tax | Permalink | Comments (0)

HeinOnline Law Faculty Scholarly Influence Rankings

HeinMy colleague Rob Anderson blogs the new HeinOnline faculty scholarship rankings called ScholarCheck, which counts how often your articles have been:

  • Cited in cases
  • Cited in law review articles
  • Accessed on HeinOnline over the past 12 months

Rob notes that measuring the number of times each author's papers have been accessed on HeinoOnline "reduce[s] the 'lag time' between the time a scholar is active and the time that citations accumulate."

Your ScholarCheck ranking is the average of your ranking in each of these three categories.  HeinOnline has released the Top 250 Authors; individual faculty rankings outside the Top 250 are available here.

Two tax professors are in the Top 250:

Kaplow, Louis:

Cited by Cases 23 (Rank 1703)
Cited By Articles 3285 (Rank 80)
Accessed (Past 12 Months) 1219 (Rank 191)
Scholar Check Rank 213

Asimow, Michael:

Cited by Cases 45 (Rank 649)
Cited By Articles 747 (Rank 1002)
Accessed (Past 12 Months) 860 (Rank 421)
Scholar Check Rank 233

Here are the Top 50 law faculty authors:

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April 13, 2015 in Legal Education | Permalink | Comments (0)

Top 20% of Earners Pay 84% of Income Tax

Wall Street Journal Tax Report, Top 20% of Earners Pay 84% of Income Tax:

The tables show just how progressive the income tax is. The three million people in the top 1% of earners pay nearly half the income tax.

Why is the share of income taxes negative for 40% of Americans? In recent decades Congress has chosen to funnel important benefits for lower-income earners through the income tax rather than other channels. Some of these benefits, such as the Earned Income Tax Credit and the American Opportunity Credit for education, make cash payments to people who don’t owe income tax. ...

The share of tax paid by the top 20% of Americans also changes when such social-insurance levies are included: It drops from more than 80% of income taxes to about 67% of all federal taxes.

WSJ

WSJ 2

Bloomberg, How Much Americans Really Pay in Taxes:

The average American pays an income tax rate of 10.1 percent, the Joint Committee shows, although that varies quite a bit depending on income:

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April 13, 2015 in Tax | Permalink | Comments (2)

Kerr: New (And Free) Legal Research Tool From Google

Google Scholar (2015)Orin Kerr (George Washington), New (and Free) Legal Research Tool:

If you use the Google Chrome browser, and you do legal research online, you should add the new Google Scholar Button to your browser. It’s really easy to do. Just click here and add the button. At that point you can use the button to research academic articles using Google Scholar’s database.

 

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April 13, 2015 in Legal Education, Scholarship | Permalink | Comments (0)

The IRS Scandal, Day 704

IRS Logo 2CNS News, Lerner Email Warned IRS Employees of Emails That ‘Can Be Seen By Congress’:

Lois Lerner, former director of the Exempt Organizations Unit at the Internal Revenue Service (IRS), warned other IRS officials that lower-level employees “are not as sensitive as we are to the fact that anything we write can be public--or at least be seen by Congress,” according to documents obtained by Judicial Watch and released on Thursday.

In the latest batch of documents the IRS released to Judicial Watch under the Freedom of Information Act (FOIA), which the agency heavily redacted before handing over, Lerner proposed training to help IRS employees “understand the pitfalls” of discussing “specific Congress people, practitioners and political parties” in emails that could be "seen by Congress" or the public.

“We are all a bit concerned about the mention of specific Congress people, practitioners and political parties. Our filed folks are not as sensitive as we are to the fact that anything we write can be public--or at least be seen by Congress,” Lerner wrote in an email to Holly Paz, former director of the IRS Office of Rulings and Agreements, on Feb. 16, 2012.

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April 13, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

TaxProf Blog Weekend Roundup

Sunday, April 12, 2015

WSJ: Airbnb, The Masters, And Policing The Short-Term Rental Tax Boondoggle

AMWall Street Journal, Airbnb Income May Be Tax-Free–But There’s a Catch:

It is one of the tax code’s best freebies: a provision allowing people to rent out their homes for fewer than 15 days a year and pocket the income-tax-free. This break is often called the Masters exemption because of its popularity in Augusta, Ga., during the famous April golf tournament.

Now services such as Airbnb, HomeAway, Onefinestay and FlipKey are making it easier for people to take advantage of the Masters exemption by offering short-term rentals of their homes. Airbnb alone had more than one million listings at the end of 2014, more than triple the number it had at the end of 2012.

But this boon also is putting some so-called hosts on a collision course with the Internal Revenue Service, tax experts say.

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April 12, 2015 in Tax | Permalink | Comments (0)

Going Clear Filmmaker: Scientology Abuses Its Tax-Exempt Status

Scientology 2Los Angeles Times op-ed:  Going Clear Filmmaker: Scientology Abuses its Tax-exempt Status, by Alex Gibney:

When I made the film Going Clear: Scientology and the Prison of Belief, which aired on HBO on March 29, I assumed that the response from the Church of Scientology would be vitriolic. I was right; but I hold out hope that this reaction may lead to the reform of an organization that has harassed its critics and, in my view, abused its tax-exempt status. ...

A number of articles have even raised the question of whether the church should be permitted to maintain its tax-exempt status in the face of so many alleged or documented civil rights abuses, such as the videotaped harassment of ex-Scientologist Marty Rathbun and his wife, Monique. It's an important question, since it implicates all of us.

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April 12, 2015 in Tax | Permalink | Comments (0)

The Top 5 Tax Paper Downloads

The IRS Scandal, Day 703

IRS Logo 2Washington Examiner, Lerner Pushed Treasury Watchdog to Back Off 'Targeting' Charge in Probe:

Former IRS senior executive Lois Lerner appeared to be pressuring Treasury Department inspector general investigators to back off their conclusion that the federal tax agency had improperly targeted conservative and Tea Party nonprofit tax exemption applicants.

In an email on Jan. 31, 2013, Lerner encouraged Troy Patterson of the Treasury Inspector General for Tax Administration to back off of his investigators' view that the tax agency was targeting political groups for excessive attention.

"We feel your folks are being too narrow in their view and have decided that because of the language on the earlier BOLO list regarding Tea Party, everything that followed was tainted. They seem to believe that if a case was initially sent to the advocacy group, but ultimately determined to be an approval, that our action in putting it into the advocacy group in the first place is incorrect, and illustrates 'targeting,'" she said.

"BOLO" was the tax agency's abbreviation for categories of nonprofit applicants to "be on the lookout" for as they were received.

PJ Media, Lerner Email Shows Attempt to Pressure IG Conclusions in IRS Targeting Scandal:

About 5 months before former director of the IRS exempt division Lois Lerner casually let slip the revelation that her department had been targeting conservative organizations for special scrutiny, she sent an email to the inspector general investigating the matter, accusing the IG of being “too narrow” in their scope of the targeting investigation, claiming that she was just doing her job.

It is unusual for the subject of an investigation to plead their case so directly with the inspector general. But the email also shows that Lerner was well aware of the problems in her office with targeting and was looking for a break from the IG in reaching his conclusions.

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April 12, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Saturday, April 11, 2015

Obama and Biden Release Their 2014 Tax Returns

2014 Obama Tax Return

President Obama and Vice-President Biden yesterday released their 2014 tax returns. Here are charts putting the 2014 returns in context with their earlier returns:

Obama:

Year

AGI

Tax

Charitable Gifts

Gifts/AGI

2014

$477,383

$93,362

$70,712

14.8%

2013

$481,098

$98,169

$59,251

12.3%

2012

$608,611

$112,214

$150,034

24.7%

2011

$789,674

$162,074

$172,130

21.8%

2010

$1,728,096

$453,770

$245,075

14.2%

2009

$5,505,409

$1,792,414

$329,100

6.0%

2008

$2,656,902

$855,323

$172,050

6.5%

2007

$4,139,965

$1,396,772

$240,370

5.8%

2006

$983,826

$277,481

$60,307

6.1%

2005

$1,655,106

$545,614

$77,315

4.7%

2004

$207,647

$40,426

$2,500

1.2%

2003

$238,327

$51,856

$3,400

1.4%

2002

$259,394

$68,958

$1,050

0.4%

2001

$272,759

$86,072

$1,470

0.5%

2000

$240,505

$63,732

$2,350

1.0%

Biden:

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April 11, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

75% of Harvard Law Students Do Not Matriculate Right Out Of College

Harvard Crimson, Law School Admissions ‘Actively Preferences’ Work Experience:

In the last five years, work experience has played an increasing role in Harvard Law School admissions.

Harvard

In 2009, 40 percent of Harvard Law School’s entering class, according to data provided the school’s Admissions Office, arrived directly from their senior year of college, maybe even still sporting the odd T-shirt from last year’s big rivalry football game.

It was the continuation of a years-long trend: From 2005 to 2009, between 39 and 45 percent of each incoming class were just recently undergraduates, with the remainder having spent at least one year working or studying elsewhere. But the next year, in 2010, the young students matriculating straight from undergrad only constituted 28 percent of the entering Law School class. More than two-thirds had post-graduate experience.

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April 11, 2015 in Legal Education | Permalink | Comments (0)

Joint Tax Committee: Choice Of Business Entity

The Joint Committee on Taxation yesterday released Choice Of Business Entity: Present Law And Data Relating To C Corporations, Partnerships, And S Corporations (JCX-71-15 ):

This document, prepared by the staff of the Joint Committee on Taxation, provides information about present law and data relating to C corporations, partnerships (including LLCs), and S corporations. Part A of this document provides background information on the choice of business entity in the United States, describes sole proprietorships and their Federal tax treatment, summarizes present law governing the Federal tax treatment of C corporations, partnerships, and S corporations, and presents a table of the principal differences in tax treatment of these three types of business entities. Part B of this document presents data concerning the distribution of business entities by number, size, industry, and net income.

Figure 1

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April 11, 2015 in Congressional News, Tax | Permalink | Comments (1)

The IRS Scandal, Day 702

IRS Logo 2The Blaze, ‘America Is Fed Up’: GOP Schedules Votes on Major IRS Reforms Next Week:

The House next week is expected to pass several bills aimed at reforming the IRS, in

particular the way the IRS handles applications for groups seeking tax-exempt status.

That issue has been highly controversial since it was revealed that the IRS applied extra scrutiny to conservative groups seeking tax-exempt status just before the 2012 election. The resulting scandal forced former IRS official Lois Lerner to leave the agency, although Lerner has so far dodged any punishment for her role.

For example, the Justice Department just said it won’t prosecute Lerner for her decision not to testify before Congress about her actions in the targeting scandal.

GOP leaders say the IRS needs real reform, and quickly, to ensure it doesn’t become a political weapon for whichever party runs the executive branch.

“The IRS has maliciously targeted individuals and groups simply because of their personal beliefs,” House Majority Leader Kevin McCarthy (R-Calif.) told his colleagues on Thursday. “The current system is unfair and America is fed up.”

Three of the bills up next week deal with the targeting scandal. One of these, from Rep. George Holding (R-N.C.), would try to to ensure the IRS can no longer play politics with tax exempt applications by allowing groups to declare tax-exempt status on their own, without having to wait for the IRS.

Another from Rep. Jim Renacci (R-Ohio) calls for the firing of any IRS worker that delays their tasks for political reasons, such as slow-walking the tax-exempt status of a political group. And the third, from Rep. Pat Meehan (R-Pa.), would require the Treasury Department to issue regulations allowing groups to appeal decisions by the IRS not to grant them tax-exempt status.

The bills are being considered long after the targeting scandal broke, which shows a lingering resentment among conservatives, and a feeling that reforms are still needed at the tax collection agency. Just last month, some Republicans accused the IRS of quietly working to undo some of the reforms Congress has tried to impose on it, by putting forward a budget plan that doesn’t include language related to ending the political targeting of tax-exempt groups.

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April 11, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Friday, April 10, 2015

Merritt: Law School Statistics

Deborah Jones Merritt (Ohio State), Law School Statistics:

Earlier this week, I noted that even smart academics are misled by the manner in which law schools traditionally reported employment statistics. Steven Solomon, a very smart professor at Berkeley’s law school, was misled by the “nesting” of statistics on NALP’s employment report for another law school.

Now Michael Simkovic, another smart law professor, has proved the point again. Simkovic rather indignantly complains that Kyle McEntee “suggests incorrectly that The New York Times reported Georgetown’s median private sector salary without providing information on what percentage of the class or of those employed were working in the private sector.” But it is Simkovic who is incorrect–and, once again, it seems to be because he was misled by the manner in which law schools report some of their employment and salary data. ...

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April 10, 2015 in Legal Education | Permalink | Comments (1)

Weekly Tax Roundup

Weekly Legal Education Roundup

Weekly SSRN Tax Roundup

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April 10, 2015 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Student Tax Note Roundup

NY Times: Past Drug Charges Derail a Law Student’s Education

New York Times, Past Drug Charges Derail a Law Student’s Education:

David Powers came out of a drug rehabilitation program about 15 years ago hungry to swing his life in a significantly different direction. And that he did.

He went back to college and graduated with a 3.9 grade point average. He was hired at a major accounting firm, worked in senior positions at three hedge funds, and was accepted to the law school at St. John’s University.

Mr. Powers still calls the day of his arrest, when he was pulled off a destructive path, the “best day of my life.”

Halfway through his coursework, while trying to get ahead on his application to the bar, he acknowledged to St. John’s how far he had come. Not only had he been convicted of drug possession, a fact he disclosed on his application, but he had also originally been charged with selling drugs, a fact he had not. St. John’s then rescinded his acceptance — kicked him out — saying that if it had known his complete history, it would never have admitted him in the first place.

Mr. Powers sued the school, taking the case all the way to the state’s highest court, the New York Court of Appeals. Last week, the court handed down the final word in a 5-to-1 decision: Mr. Powers would not return to St. John’s.

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April 10, 2015 in Legal Education | Permalink | Comments (2)

Tax Presentations at Today's Indiana Symposium on Living Without in America

Indiana (2015)The Indiana Journal of Law and Social Equality hosts a symposium today on Living Without in America.  Tax Prof Ajay Mehrotra is moderating a panel on Economics and Poverty, with two tax presentations:

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April 10, 2015 in Conferences, Tax | Permalink | Comments (0)

Grewal: The Un-Precedented Tax Court

Tax Court Logo 2Andy Grewal (Iowa), The Un-Precedented Tax Court:

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

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

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April 10, 2015 in Scholarship, Tax | Permalink | Comments (0)

Brunson: Tax and Utopia

UtopiaSamuel Brunson (Loyola-Chicago), Accommodating (Economic) Diversity: Applying the Income Tax to Utopian Communities:

Communalism has a long history in the United States. Throughout the nineteenth century, the country was seemingly dotted with utopian groups. Most were Christian groups, trying to follow the New Testament model of a body of believers that held all property in common. While these groups generally fell apart quickly, in response to inside or outside pressures, several large groups survived the turn of the century.

In the early twentieth century, though, these religious communal groups had to contend with something new: an income tax. Communalism did not fit into the individualistic economic system envisioned by the drafters of the income tax. So Congress designed a special tax regime, now codified in section 501(d) of the Internal Revenue Code, which exempts religious communal holding companies from tax, while imputing the holding companies’ income to the members of the group. Section 501(d) provides communitarian groups with flexibility to reflect their unusual economics.

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April 10, 2015 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 701

IRS Logo 2Judicial Watch Press Release, IRS Documents Reveal Lerner Knew Targeting Criteria of Nonprofit Groups ‘Might Raise Questions’:

Judicial Watch today released a new batch of Internal Revenue Service (IRS) documents, including an email from former IRS official Lois Lerner in February 2012 asking that a program be set up to “put together some training points to help them [IRS staffers] understand the potential pitfalls” of revealing too much information to Congress.  The documents also contain a Lerner email from 2013 in which she says she is willing to take the blame on some aspects of the scandal.  She also indicates that she “understands why the IRS criteria” leading to the targeting of Tea Party and other opponents of the President Obama “might raise questions.”

The documents were released under court order in one of the Judicial Watch’s ongoing Freedom of Information Act (FOIA) lawsuits about the Obama IRS’ abuses (Judicial Watch v. IRS (No. 1:13-cv-1559).

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April 10, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Thursday, April 9, 2015

Kahng Presents The Taxation of Women in Same-Sex Marriages Today at Fordham

Kahng (2015)Lily Kahng (Seattle) presents The Not-So-Merry Wives of Windsor: The Taxation of Women in Same-Sex Marriages, 101 Cornell L. Rev. __ (2015), at Fordham today as part of its Faculty Workshop Series:

In United States v. Windsor, the Supreme Court invalidated the Defense of Marriage Act definition of marriage as “between one man and one woman” and is now poised to recognize a constitutional right to same-sex marriage. Windsor cleared the way for same-sex couples to be treated as married under federal tax laws, and the Obama administration promptly announced that it would recognize same-sex marriages for tax purposes. Academics, policymakers, and activists lauded these developments as finally achieving tax equality between gay and straight married couples. This Article argues that the claimed tax equality of Windsor is illusory and that the only way to achieve actual equality is to eliminate taxation on the basis of marital status.

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April 9, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Muller: Number Of Law School Applicants Has Bottomed Out, But Quality Of Applicants Continues To Plummet

Derek Muller (Pepperdine), The Wrong Sort of Law School Applicants, Visualized:

There's good news and bad news for law schools. The good news is that total law school applicants appear to be reaching the bottom. After projections last year that the worst may be yet to come, it appears that the Class of 2018 will have only slightly fewer applicants than the Class of 2017. Current projections are about a 2.8-point drop in applicants, and that gap may narrow if recent trends of late applicants continue. ...

Muller

But the bad news is [] the quality of the applicants. In short, the wrong sort of applicants are applying. ... 

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April 9, 2015 in Legal Education | Permalink | Comments (3)

Judges Are Far Less Biased Than Law Students

Dan Kahan (Yale), David Hoffman (Temple), Danieli Evans (Yale), Neal Devins (William & Mary), Eugene Lucci (Judge. Ohio Court of Common Pleas) & Katherine Cheng (Yale), 'Ideology' or 'Situation Sense'? An Experimental Investigation of Motivated Reasoning and Professional Judgment, 163 U. Pa. L. Rev. ___ (2015):

This paper reports the results of a study on whether political predispositions influence judicial decisionmaking. The study was designed to overcome the two principal limitations on existing empirical studies that purport to find such an influence: the use of nonexperimental methods to assess the decisions of actual judges; and the failure to use actual judges in ideologically-biased-reasoning experiments. The study involved a sample of sitting judges (n = 253), who, like members of a general public sample (n = 800), were culturally polarized on climate change, marijuana legalization and other contested issues. When the study subjects were assigned to analyze statutory interpretation problems, however, only the responses of the general-public subjects and not those of the judges varied in patterns that reflected the subjects’ cultural values. The responses of a sample of lawyers (n = 217) were also uninfluenced by their cultural values; the responses of a sample of law students (n = 284), in contrast, displayed a level of cultural bias only modestly less pronounced than that observed in the general-public sample. Among the competing hypotheses tested in the study, the results most supported the position that professional judgment imparted by legal training and experience confers resistance to identity-protective cognition — a dynamic associated with politically biased information processing generally — but only for decisions that involve legal reasoning. The scholarly and practical implications of the findings are discussed.

Wall Street Journal Law Bog, Study: Judges Are Far Less Biased Than Law School Students:

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April 9, 2015 in Legal Education, Scholarship | Permalink | Comments (0)

Court Rules San Diego's Law Prof's Blog Post Was Not Defamatory

MartinNational Law Journal, Law Prof’s Blog Post Was Not Defamatory, Court Rules:

A San Diego law professor did not defame the plaintiff in a disability-benefits lawsuit when he blogged about her case in 2012, a California appellate court has ruled.

A three-judge panel of the state Fourth District Court of Appeal on April 2 affirmed dismissal of Melanie Welch’s suit against Shaun Martin [right], a professor at the University of San Diego School of Law, dean Stephen Ferruolo and the university itself.

Martin maintains a blog about decisions by the U.S. Court of Appeals for the Ninth Circuit and California appellate courts.

The court found that the information in Martin’s Jan. 31, 2012, post about the court’s decision in Welch’s lawsuit against the California State Teachers’ Retirement System was pulled directly from the ruling or clearly identifiable as his opinion.

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April 9, 2015 in Legal Education | Permalink | Comments (0)

Lat, Diamond Debate The Law School Crisis

Washington Post op-ed:  Law School Is Way Too Expensive. And Only The Federal Government Can Fix That., by David Lat:

There’s no shortage of lawyers in this country. Only 57 percent of 2013 law school graduates obtained full-time legal jobs nine months after graduation. Yet the federal government subsidizes the production of even more lawyers by lending the cost of attendance to basically anyone who decides to enroll in law school, without regard for the quality of the school or the job prospects of its graduates. A student going to Harvard Law School, where 86.9 percent of 2013 grads had full-time legal jobs, has the same access to federal funds as a student going to Thomas M. Cooley Law School, where just 22.9 percent of 2013 grads work as lawyers.

This policy is hurting students. Federally subsidized loans have enabled law school tuition to spiral out of control. As noted by Professor Paul Campos, “[i]n real, inflation-adjusted terms, tuition at private American law schools has doubled over the past 20 years, tripled over the past 30, and quadrupled over the past 40,” and resident tuition at public law schools has climbed even faster. So long as the federal loans keep coming, tuition is unlikely to stop rising. In the words of Professor Brian Tamanaha author of  Failing Law Schools, “Federal loans are an irresistible (and life-sustaining) drug for revenue addicted law schools … law schools have been ramping up tuition and enrollment without restraint thanks to an obliging federal loan program.”

If the government were to stop lending for law school or even just impose per-student or per-school caps on loan amounts (perhaps combined with making it easier to discharge student loans in bankruptcy), law schools would have to dramatically lower tuition, in order to attract students. There would be no other way for most students to finance their education. (And many law schools are already struggling to fill their seats.) Private lenders might step into the breach – but carefully, because banks have a stronger interest than the government in actually getting repaid. Private lenders would focus on borrowers going to law schools with strong job placement records. And if banks are unwilling to lend to all law students, that’s further proof that the market produces too many lawyers.

Stephen F. Diamond (Santa Clara), Washington Post Feeds the Anti-Law School Myth Making Again:

Above the Law’s David Lat was let into the pages of the Washington Post today in an attempt to feed the beast of myth making about law school. This is becoming a bit of a habit at the Post which recently allowed one of its own columnists to mislead the public about law schools as I explained here. Perhaps it’s the influence of their new owner, Jeff Bezos, known to lean libertarian.

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April 9, 2015 in Legal Education | Permalink | Comments (4)

NBER Public Economics Program Meeting

NBERThe National Bureau of Economic Research's two-day Public Economics Program Meeting kicks off today in Boston with several tax papers:

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April 9, 2015 in Conferences, 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. 617 (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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April 9, 2015 in Scholarship, Tax | Permalink | Comments (0)

NY Times: IRS Shortcut to Tax-Exempt Status Is Under Fire

1023 2New York Times, IRS Shortcut to Tax-Exempt Status Is Under Fire:

Battered by a scandal over delays in approving groups for tax-exempt status and plagued by a backlog tens of thousands of cases long, the Internal Revenue Service unveiled a strikingly stripped-down online application last year to speed the process.

But to critics, the I.R.S.’s version of “don’t ask, don’t tell” is fraught with problems. An unlikely coalition of tax lawyers, state enforcement agents and even many nonprofits that favor simpler rules say that the agency — by not asking any questions about governance, conflicts of interest or function, and saying applicants don’t have to reveal any such issues — is making it too easy to commit fraud.

The form, 1023-EZ, was introduced over the summer and is available to small charities with an annual income of $50,000 or less and assets under $250,000. Instead of wrestling with a painstaking 26-page application that demands extensive documentation, these groups can now fill out a two-and-a-half page checklist that requires no additional paperwork or even a statement of purpose. ...

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April 9, 2015 in IRS News, Tax | Permalink | Comments (0)

Statute of Limitations to Expire on April 13 on Crossroads GPS' First Two Form 990s

Crossroads GPSOpenSecrets.org, Crossroads GPS Might Soon Be Off the Hook for 2010, 2011 Spending:

On April 13, one of the largest and most controversial political groups of the post-Citizens United era will celebrate an important anniversary: The three-year statute of limitations will expire for statements made by Crossroads GPS on tax returns covering its first 18 months, making it nearly impossible for the group to be penalized for activity it reported in the filings.

Crossroads GPS filed its first two Form 990 tax returns on April 13, 2012, covering the period from its founding in June 2010 — when it also filed an application for exempt status as a “social welfare” group — through December 2011. Though nearly five years have elapsed, the IRS still hasn’t ruled on the group’s application, a highly unusual circumstance; the vast majority of such requests are answered within months or, at most, a couple of years, though there are exceptions.

But at this point, even if Crossroads doesn’t receive the IRS’ imprimatur and is deemed a taxable corporation, there’s little chance any penalties will be levied covering the group’s formative months, thanks to the statute of limitations. Taxes would be owed, but only for more recent years.

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April 9, 2015 in Tax | Permalink | Comments (0)

The IRS Scandal, Days 601-700

April 9, 2015 in IRS Scandal, Tax | Permalink | Comments (0)

The IRS Scandal, Day 700

IRS Logo 2Philip T. Hackney (LSU), Should the IRS Never 'Target' Taxpayers? An Examination of the IRS Tea Party Affair, 49 Val. U. L. Rev. ___ (2015):

In 2013, the Treasury Inspector General for Tax Administration faulted the Internal Revenue Service for the appearance of impartiality because it used names and policy positions such as “Tea Party” and conservative ideology to pick applications for tax-exempt status for greater scrutiny. The Inspector General's review came after members of Congress accused the Service of "targeting" conservative organizations. This Article finds the Inspector General's claim lacks a firm foundation. The use of names to select organizations for closer review fits well within the discretionary space that both Congress and courts provide to the Service to collect revenue. However, a narrower legal and ethical claim is supportable: where an enforcement choice impinges on a fundamental constitutional right the Service should exercise a higher degree of care to ensure that its screening choices do not appear biased in an unconstitutional manner. Thus, this review finds the Inspector General's primary claim regarding it being inappropriate to use names to screen applications to be incorrect. However, it finds that the Service violated an ethical norm because it failed to bring a high level of care to a matter that at least impinged on a fundamental Constitutional right. The Article recommends that the Service continue using names to screen applications for tax-exempt status. However, the Article suggests the Service implement procedures to document an unbiased process when evaluating applications that raise questions of a fundamental Constitutional nature.

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April 9, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Wednesday, April 8, 2015

Kane Presents A Defense of Source Rules in International Taxation Today at Penn

Kane (2015)Mitchell Kane (NYU) presents A Defense of Source Rules in International Taxation,  32 Yale J. on Reg. ___ (2015), at Pennsylvania today as part of its Tax Law and Policy Workshop Series hosted by Chris William Sanchirico and Reed Shuldiner:

The concept of “source” is central to the functioning of the current international tax system. To the extent the “source” of income is meant to reflect the spatial location of income, however, many academic commentators have come to regard the concept as completely incoherent. Further, that incoherence is viewed as a partial explanation of the perceived artificiality and frailties of current instantiations of source rules. In this essay I make three basic claims.

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April 8, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Fleischer: Carried Interest Should Be Disclosed on Private Equity Funds' Tax Returns

NY Times Dealbook (2013)New York Times Deal Book:  Carried Interest Should Be Disclosed on Tax Forms, and to Private Equity Investors, by Victor Fleischer (San Diego):

Writing in The Hill, the economist Eileen Appelbaum argues that private equity funds should be required to disclose on the tax return the partnership files for informational purposes the amount of carried interest paid to the general partner. Carried interest is the percentage of an investment fund’s profits — typically 20 percent — paid to the fund’s managers as incentive compensation.

It’s a terrific idea. Under current law, there is no separate tax category for carried interest. Instead, all partners report their distributive shares of partnership income, the character of which is determined at the partnership level.

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April 8, 2015 in Tax | Permalink | Comments (0)

IRS Workers Are Miserable and Overwhelmed

Bloomberg, An Emotional Audit: IRS Workers Are Miserable and Overwhelmed:

Paying taxes to the IRS is no fun. Neither is working there.

The IRS has never been an easy place to work. Its 84,000 employees, 65 percent of them women, generally don’t tell people outside the service where they draw a paycheck. It’s no way to make friends. They toil in purposely anonymous buildings—a big sign outside might attract crazies. In 2010 an antigovernment zealot flew a single-engine plane into a building in Austin, Texas, where 190 agency employees worked, killing one of them. “Well, Mr. Big Brother I.R.S. man, let’s try something different, take my pound of flesh and sleep well,” the pilot, Joseph Stack III, wrote in a six-page suicide note.

More recently, the IRS has become a casualty of the budget battles between the Obama White House and House Republicans. Since the GOP won control of the chamber in 2010, the agency’s annual budget has fallen by $1.2 billion, to $10.9 billion in 2015. Meanwhile, the agency has lost 11 percent of its employees. Last year it started 19 percent fewer criminal investigations than 2013. This year alone, it expects to close at least 46,000 fewer audits. Nobody likes being scrutinized by the IRS, but audits are a key component of the tax system that keeps the U.S. afloat. “It’s core to the country,” says Jeffery Trinca, a former Senate aide turned lobbyist who specializes in tax policy.

The agency’s customer service operation has been hobbled, too. In late March, the IRS said fewer than 40 percent of the people who call during this tax season will get through to someone. A decade ago, the figure was 83 percent. The agency is so short on funds that some employees purchase their own office supplies, even though the IRS says they shouldn’t. “I buy my own pens,” says Catherine Ficco, a revenue officer in West Nyack, N.Y. “I buy my own clips and hole punchers and things of that nature. It’s not uncommon. There’s no money to order supplies or paper for my printer.”

Bloomberg

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April 8, 2015 in IRS News, Tax | Permalink | Comments (28)

WSJ: Working Poor Bank on State EITCs

Wall Street Journal, Working Poor Bank On Tax Break:

California lawmakers, responding to the state’s nation-leading poverty level, are considering the creation of a state EITC program. Already, half of the states and the District of Columbia offer such refunds and credits. Montana legislators are also considering a state EITC this year, and a several states are evaluating expansions of their state credits. Some of the state credits currently add as much as 50% to the federal benefit.

WSJ

EITC programs aren’t popular in all quarters. Critics, including many fiscal conservatives, say the federal program is expensive, amounts to a handout to the poor and is subject to errors. They cite a report published last year by the Internal Revenue Service that found 24% of federal EITC payments made in fiscal 2013 were incorrect, including both overpayments and underpayments. ...

Because the EITC aims to help low-income families, particularly those with children, “it’s well-designed,” said Bruce Meyer, an economist at the University of Chicago’s Harris School of Public Policy. By contrast, he said, the benefits of raising the minimum wage, another increasingly popular antipoverty measure, often go to teenage workers or secondary earners in middle-class and even wealthy families, or to older Americans who receive Social Security and Medicare.

Still, Mr. Meyer said he has mixed feelings about expanding state EITC credits. “The federal credit already is really quite big,” he said. “I’m not sure that it makes sense to increase it much more.”

April 8, 2015 in Tax | Permalink | Comments (0)

Johnston: Top-earning Americans Had Shockingly Good 2012

Al Jazeera:  Top-earning Americans Had Shockingly Good 2012, by David Cay Johnston:

Americans at the top of the income ladder enjoyed an astonishing year in 2012, new data show. Compared with 2011, their incomes increased by half — their second highest ever — while their tax burdens fell to almost the lowest ever.

The tax returns of the top 400 earners reported average income of $335.7 million, a real increase of more than $111 million over 2011, a new IRS report reveals [The 400 Individual Income Tax Returns Reporting the Largest Adjusted Gross Incomes Each Year, 1992–2012].

Even better for the top 400, their taxes came to just 16.7 percent of their adjusted gross income.

Compare that with singletons. More than 1 in 5 who made $75,000 to $100,000 paid a tax rate of 17 percent or more. And more than half who made $100,000 to $200,000 paid 20 percent or more.

The top-400 tax rate  was not much more than the 13.4 percent average for all other taxpayers, my analysis of IRS statistical tables shows. Among the top 400, the IRS report shows that 32 paid nothing to 10 percent in income tax; 123 others paid under 15 percent. ...

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April 8, 2015 in Tax | Permalink | Comments (5)

SSRN Tax Faculty Rankings

SSRN LogoSSRN has updated its monthly rankings of 750 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 April 1, 2015) 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.)

44,724

Reuven Avi-Yonah (Mich.)

6244

2

Paul Caron (Pepperdine)

28,356

Ed Kleinbard (USC)

5725

3

Michael Simkovic (S. Hall)

26,707

Michael Simkovic (S. Hall)

4175

4

Louis Kaplow (Harvard)

23,914

Gregg Polsky (N. Carolina)

3113

5

D. Dharmapala (Chicago)

22,287

D. Dharmapala (Chicago)

2906

6

Vic Fleischer (San Diego)

20,700

Paul Caron (Pepperdine)

2868

7

James Hines (Michigan)

20,529

Richard Ainsworth (BU)

2231

8

Ted Seto (Loyola-L.A.)

19.791

Omri Marian (Florida)

1916

9

Richard Kaplan (Illinois)

19,515

Katie Pratt (Loyola-L.A.)

1753

10

Ed Kleinbard (USC)

18,005

Robert Sitkoff (Harvard)

1703

11

Katie Pratt (Loyola-L.A.)

17,220

David Gamage (UC-Berkeley)

1656

12

Carter Bishop (Suffolk)

15,748

Jeff Kwall (Loyola-Chicago)

1611

13

Dennis Ventry (UC-Davis)

15.645

Louis Kaplow (Harvard)

1586

14

Richard Ainsworth (BU)

15,295

Brad Borden (Brooklyn)

1490

15

Jen Kowal (Loyola-L.A.)

15,291

Jen Kowal (Loyola-L.A.)

1473

16

David Weisbach (Chicago)

15,015

Dick Harvey (Villanova)

1406

17

Chris Sanchirico (Penn)

14,970

William Byrnes (T. Jefferson)

1353

18

Robert Sitkoff (Harvard)

14,883

Dan Shaviro (NYU)

1282

19

Brad Borden (Brooklyn)

14,779

Francine Lipman (UNLV)

1233

20

Francine Lipman (UNLV)

14,509

James Hines (Michigan)

1214

21

Bridget Crawford (Pace)

14,388

Vic Fleischer (San Diego)

1199

22

David Walker (BU)

14,215

Carter Bishop (Suffolk)

1172

23

Dan Shaviro (NYU)

13,015

Chris Sanchirico (Penn)

1150

24

Herwig Schlunk (Vanderbilt)

12,719

Ted Seto (Loyola-L.A.)

1115

25

Wendy Gerzog (Baltimore)

11,994

Christopher Hoyt (UMKC)

1091

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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April 8, 2015 in Legal Education, Scholarship, Tax, Tax Prof Rankings | Permalink | Comments (0)

Brown: The IRS Should Report on Tax Returns Filed by All 535 Members of Congress

535National Journal, Congressional Tax Returns Could Tell Us a Lot:

Dorothy Brown, a professor at Emory University who specializes in tax law, has proposed an idea to finally spur tax reform: examining the tax returns of all 535 members of Congress. I recently spoke with her about the proposal, which she calls "The 535 Report." Our conversation has been edited and condensed. ...

How long have you been talking about the 535 Report?

I spoke about this at a Pepperdine University Law School symposium in January 2013 [Tax Advice for the Second Obama Administration] and wrote a law-review article for the symposium that was published that April. [The 535 Report: A Pathway to Fundamental Tax Reform, 40 Pepp. L. Rev. 1155 (2013)] I study presidential tax returns, which are voluntarily disclosed, and I started thinking: Imagine what I'd find if I had congressional tax returns.

What needs to be done to take this idea further?

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April 8, 2015 in Conferences, Congressional News, Scholarship, Tax | Permalink | Comments (0)