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Friday, January 23, 2015

Weekly Tax Roundup

Weekly Legal Education Roundup

Weekly SSRN Tax Roundup

C-Span: Economic Inequality and the U.S. Tax System

C-Span Washington Journal, Economic Inequality and the U.S. Tax System:

Edward Kleinbard talked about his book, We are Better Than This: How Government Should Spend Our Money.  He spoke about why the government should do more, including increasing the size of the tax system, to improve the economy and combat income inequality. (Click on button on bottom right to view video directly on C-Span to avoid interruption caused by blog's refresh rate.)

January 23, 2015 in Book Club, Tax | Permalink | Comments (3)

Tax Court: Payments for Donations of Eggs to Infertile Couples Constitute Income, Not Damages Excludable Under § 104

EggFollowing up on my previous posts (links below):  Perez v. Commissioner, 144 T.C. No. 4 (Jan. 22, 2014):

We acknowledge that this case has received some publicity in tax and nontax publications, which is why it is important to state clearly what it does not concern. It does not require us to decide whether human eggs are capital assets. It does not require us to figure out how to allocate basis in the human body, or the holding period for human-body parts, or the character of the gain from the sale of those parts. Fn.4

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January 23, 2015 in New Cases, Tax | Permalink | Comments (0)

ITPF, TPC Conference Today on Corporate Inversions and Tax Policy

TPC 2The International Tax Policy Forum and Tax Policy Center are co-hosting a conference today at the Brookings Institution from 8:50 - 11:15 a.m. (webcast here) on Corporate Inversions and Tax Policy:

Corporate inversions, which change the tax home of a multinational corporation by merging it with a foreign company that then becomes the parent of the multinational group, received considerable attention in 2014, including from the IRS, which in September released a notice describing regulations the government intends to issue to reduce the tax benefits of future inversion transactions. Corporate inversions elicit strong reactions: some call U.S. companies involved in these transactions “unpatriotic,” while others view them as symptomatic of an out-of-step U.S. corporate tax system, with its high rate and worldwide reach that differs from the territorial taxes widely used by other countries. These inversions are also not unique to the U.S, with firms in the United Kingdom and elsewhere also using them during periods when their foreign incomes were subject to high rates of domestic taxation.

On Friday, January 23rd, the Urban-Brookings Tax Policy Center and the International Tax Policy Forum will co-host a conference examining the history, causes, and consequences of corporate inversions, the policy response in the United Kingdom, and what actions the U.S. should take. Experts from a variety of backgrounds will share their perspectives, and Senator Orrin Hatch will give keynote remarks at the close of the event.

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

TurboTax Apologizes for Bait-and-Switch, Provides $25 Refunds to Customers

Turbo Tax (2015)Following up on last week's post, TurboTax Customers Angry Over Change In Tax Return Software:  USA Today, TurboTax 'Messed Up,' Refunds Customers:

Investors outraged by TurboTax’ recent change that forced them to pay 50% more for the tax preparation software: put down your pitchforks. TurboTax isn’t just apologizing, but will refund your money.

Beginning Friday, TurboTax’ maker Intuit will issue $25 refunds back to any TurboTax customer forced to buy the most expensive version of the company’s software this year after buying the less-costly Deluxe version last year. Intuit will put a link up on its Web site on Jan. 23 where TurboTax customers can claim their refund. ...

In addition to refunding $25 to affected customers, TurboTax General Manager Sasan Goodarzi is issuing a lengthy written apology to TurboTax customers for the change.

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January 23, 2015 in Tax | Permalink | Comments (18)

Living Amidst Wildlife in Malibu

LionMy wife and I were watching our DVR'd Saturday Night Live Wednesday night in bed when we received an email warning us that a mountain lion had been spotted on campus a few hundred yards from our home. Pepperdine helpfully included an Emergency Preparedness Guide with specific safety guidelines for encountering a mountain lion: 

Should you encounter a mountain lion, take the following actions:

  • If you see a mountain lion, maintain eye contact and back away slowly. Do not run; the lion’s instinct will be to chase you. Appear as large, loud, and powerful as possible and yell and throw stones. ...
  • If attacked, fight back. Under no circumstances should you fall to the ground or roll into a fetal position. Hit as hard as possible, especially around the animal’s head. If you are attacked from behind, try to reposition yourself to meet the cat face to face.

SNL guest host Kevin Hart apparently lives near us (click on YouTube button on bottom right to view video directly on YouTube to avoid interruption caused by blog's refresh rate):

January 23, 2015 in Legal Education, Tax | Permalink | Comments (3)

The IRS Scandal, Day 624

IRS Logo 2Wall Street Journal, 7 Down, 1 to Go: An Ungracious Address Even By This President’s Standards, by James Taranto:

In four of the past six midterm elections, voters have administered what is sometimes called a “shellacking” or a “thumpin’ ” to the sitting president’s party. In 1994, 2006, 2010 and 2014, the president’s party lost seats in both houses of Congress and the majority in at least one. In 1995, 2007 and 2011 the president began his State of the Union address with an acknowledgment of the other party’s electoral success. ...

This year’s State of the Union was an ungracious address even by this president’s standards. There was no word of congratulation for the Republicans or even for the new Congress. Worse, Obama extemporaneously taunted his adversaries about his own past electoral success.

“I have no more campaigns to run,” the president declared during the speech’s coda. One suspects that was not intended as an applause line, but applaud some in the audience did. Obama began reading his next sentence, then interrupted with a #humblebrag: “My only agenda—I know because I won both of them.”

To which we add the obligatory asterisk: While it is true without qualification that he won the first one, the second came with the assistance of the Internal Revenue Service’s suppression of his opponents. To be sure, one cannot rule out the possibility that he would have won a licit campaign. But then again, it’s not as if it was a 45-7 blowout.

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January 23, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Thursday, January 22, 2015

Knoll Presents Balancing State Sovereignty and Interstate Commerce Today at Northwestern

KnollMichael Knoll (Pennsylvania) presents Striking a Balance Between State Sovereignty and Interstate Commerce, 75 State Tax Notes ___ (2015) (with Ruth Mason (Virginia)), at Northwestern today as part of its Tax Colloquium Series hosted by Lawrence Zelenak:

This Article discusses Wynne v. Comptroller, a dormant Commerce Clause case against Maryland pending before the Supreme Court. We use economic analysis to rebut Maryland’s claim that its tax regime does not discriminate against interstate commerce. We also argue that the parties’ framing of the central issue in the case as whether the Constitution requires states to relieve double taxation draws focus away from the discrimination question, and therefore could undermine the Wynnes’ case and lead to unjustified narrowing of the dormant Commerce Clause. We also show how our approach to tax discrimination resolves many of the issues that seemed to trouble the Justices at oral argument.

January 22, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

D.C. Tax Law Gave Washington Nationals Unique Advantage in Inking Max Scherzer to $210 Million Deal

MaxWashington Post, Can Max Scherzer’s Contract be a Model for Other Superstars Thinking of Washington?:

Washington may have at least one advantage over other pro sports cities when it comes to wooing high-priced free agent talent: the District’s tax laws.

Scott Boras, the agent for pitcher Max Scherzer and several other Nationals stars who has negotiated some of the biggest contracts in sports, said local tax laws allowed Scherzer and the Nationals to hammer out a creative contract that could provide a blueprint of sorts for other area teams courting big-name talent. That includes the kind of deals that likely would be required for the Wizards to lure, say, Kevin Durant back to his home town or for the Nationals to keep slugger Bryce Harper. ...

Boras said Scherzer’s $210 million contract is not only historic in terms of its size but noteworthy in structure. The deal takes advantage of District tax laws to save Scherzer money — possibly in the seven or eight figures — and keeps the team’s annual salary payments down. It would not have worked in New York, Los Angeles or most other baseball cities, he said. ...

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January 22, 2015 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

The Responsible Way Out of the Law School Crisis

Law School (2015)Jay Sterling Silver (St. Thomas), Pedagogically Sound Cuts, Tighter (Not Looser) Accreditation Standards, and a Well-oiled Doomsday Machine: The Responsible Way Out of the Crisis in Legal Education, 66 Rutgers L. Rev. 353 (2014):

With runaway tuition, sky-high graduate debt and unemployment, plummeting law school applications, and the tectonic shift in the nature and delivery of legal services further clouding the picture, we must do more than bitterly bemoan the plight of law students and loosely cast aspersions over how we got here. We must decide, very quickly, exactly what in legal education should be salvaged, what should be reengineered, and what should be tossed overboard. The trouble is, with little agreement on what legal education is supposed to do, how it should do it, or who it is supposed to serve, most of the solutions posed to date are shots in the dark, often liberally laced with acrimony, that will do more harm than good. Dean Erwin Chemerinsky got it right when he said that the measures recently proposed by the ABA's Task Force on the Future of Legal Education to address the crisis in legal education are “definitely not a blueprint for useful reform.”

With an eye to the role of legal education as a training ground, a public and private good, and a unit of the academy, this Article prescribes a clear set of pedagogically sound measures to root out the actual causes of the crisis and significantly reduce law school tuition, graduate debt, and graduate unemployment, while preserving the considerable, but underappreciated, good in legal education. The man who sounded the general alarm with his book Failing Law Schools lays much of the blame at the feet of the professoriate, which, he says, is overpaid, underworked, and resistant to change. According to Professor Brian Tamanaha, the ABA Task Force on the Future of Legal Education, and numerous others, the principal culprits are tenure, high salaries, the shunning of adjuncts, emphasis on scholarship, and the ABA accreditation standards that prop it all up, drive up tuition, and block competition and change. Deregulate legal education, they advise, and allow the marketplace to develop leaner alternatives to the one-size-fits-all model. Specific suggestions include replacing the third year of law school with apprenticeships or lopping it off altogether to eliminate a year of esoteric filler, and replace tenured faculty with adjuncts fresh from practice.

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January 22, 2015 in Legal Education, Scholarship | Permalink | Comments (1)

Herzig: Supreme Court Will Approve Same-Sex Marriage for Tax Reasons

MarriageSlate:  A Taxing Decision, by David Herzig (Valparaiso):

For years people have been trying to predict what the Supreme Court will do about same-sex marriage. That speculation has intensified now that the Supreme Court has decided to hear marriage cases originating in the 6th Circuit that upheld the state-level bans against same-sex marriage and recognition. How will the Supreme Court decide this crucial issue? In fact, it has already tipped its hand on the outcome. To understand why, you have to understand tax law.

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

'Sugar Daddies' and Student Loan Debt

The Atlantic, Where the Sugar Babies Are:

In recent years the rising cost of student debt has given birth to an odd phenomenon: a population of ostensibly generous older men who appear poised to solve the higher-education crisis, one student at a time. Once a relatively underground subculture, this benevolent group of men is coming to the rescue across the country, essentially volunteering to subsidize the students’ tuition costs. But that description could be, shall I say, sugarcoating it.

Yes, these men are ponying up their money—plus more—for financially struggling students. However, it’s not free money, and it’s not all students. In other words, these benefactors typically expect some compensation from their beneficiaries—students who generally tend to be women willing to accept the help from the men in exchange for providing some tender loving care. And, at least, flaunting their good looks.

"Sugar daddies"—the official moniker granted to these wealthy men—and the microcosm they occupy aren’t anything new, but they’ve become more mainstream in recent years. That they’ve emerged as a noteworthy group during America's student-debt crisis is indicative of their growing prevalence—as well as that of "sugar babies," the ones entrenched in that crisis. And the subculture—"daddies" and "babies" alike—appears to be expanding rapidly. 2014 saw a huge spike in sugar babies nationwide, especially in the southern states, according to new data from SeekingArrangement, a site where "babies" and "daddies" sign up and connect. The trend itself, let alone writing about it, might seem frivolous or demeaning. But the data could clarify what's going wrong with the system and where those problems lie. ...

U.S. Colleges With the Highest Number of "Sugar Babies"

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January 22, 2015 in Legal Education | Permalink | Comments (1)

Ryan: Merger Is Indirect Gift In Cavallaro

Kerry A. Ryan (Saint Louis), Merger is Indirect Gift in Cavallaro, 146 Tax Notes 139 (Jan. 5, 2015):

In Cavallaro v. Commissioner, [T.C. Memo. 2014-189,] the Tax Court held that a merger of two family-owned businesses resulted in a substantial taxable gift. The taxpayers avoided penalties by demonstrating that they relied in good faith on the mistaken advice of competent tax advisers.

January 22, 2015 in Scholarship, Tax | Permalink | Comments (0)

Hubbard: A Tax Reform Plan to Enhance Growth, Work and Opportunity

New York Times op-ed:  Obama’s Bad Economic Ideas, by Glenn Hubbard (Dean, Columbia Business School):

[T]he president’s proposals do invite a case for a comprehensive tax and entitlement reform, one based not on redistribution but on growth, work and opportunity.

Our unwillingness to confront mounting inefficiencies in the nation’s tax code and growing obligations in entitlement programs has led to increasingly limited options. Corporate tax reform is held hostage to the misguided idea that tax cuts and tax increases must be balanced within the corporate sector alone, and to the faulty assumption that beneficial tax reform will not raise economic activity.

Piling up child tax credits and subsidies for health care over narrow household income ranges, as the president proposes, leads to high rates of taxation on earnings from work as assistance is phased out. Likewise, raising marginal tax rates on investment by the well-to-do reduces asset prices and is a threat to continued economic expansion.

So how can we enhance growth, work and opportunity? Four steps can help get us there.

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

Why Don't Law Profs Write More Books?

Eugene Mazo (Wake Forest), The Little Legal Academy and the Big Idea Book:

Why does law insist on remaining an article field? In law schools, many professors never aspire to write books. Perhaps worse, many don’t have a book idea in them. In my view, our lack of emphasis on books—and especially on "big idea" books—is detrimental. When legal scholars get together, their conversations seldom concern big idea books. There are too many articles, opinions, and statutes to discern. Law review articles are the coin of the realm, and, as a result, we face a dearth of big idea books—by which I mean books that try to capture or espouse a grand theory or strategy of life. Without big idea books, we are left with far fewer big ideas.

In other fields, big idea books proliferate. ... I’m not claiming that we don’t have best-selling authors in the legal academy. We do. And I’m not claiming that we don’t have books. That would be silly. Obviously, we have plenty of both. I’m not even claiming that we don’t have big idea books. Rather, what I’m arguing is that we don’t have enough of them. And that we don’t place enough emphasis on them, either. A law professor friend told me recently that he had no time for such books. They took too long to write, did not fit his research needs, and were not available (wait for it ... wait for it) on Hein-on-Line.

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January 22, 2015 in Legal Education | Permalink | Comments (2)

Only 38% of Law Students Are Paying Full Tuition

Matt Leichter, Law School Gives Away Free Money to Non-Students (More 509 Errata):

[T]he 2013-14 academic year saw another precipitous drop in the percentage of full-time law students paying full tuition.

Percent Full-Time Law Students Paying Full Tuition

January 22, 2015 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 623

IRS Logo 2Headlines & Global News, Lois Lerner Begged Supervisor To Refrain From Visiting IRS Office Ahead Of 2012 Presidential Election, Bombshell Document Finds:

Ex-IRS official Lois Lerner reportedly pleaded with her supervisor not to deeply inquire about whether the IRS had unfairly targeted Tea Party and conservative groups for tax-exempt status just ahead of the 2012 presidential election, according to new emails obtained by a government watchdog group.

Joseph H. Grant, former Tax Exempt and Government Entities Division deputy director, was specifically asked by Lerner to refrain from visiting the tax agency's Cincinnati office and keep from asking specific questions related to any Congressional inquiries, according to emails obtained by Judicial Watch through a Freedom of Information Act Lawsuit.

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

Wednesday, January 21, 2015

Abreu & Greenstein: The Rule of Law as a Law of Standards -- Interpreting the Internal Revenue Code

Alice Abreu (Temple) & Richard K. Greenstein (Temple), The Rule of Law as a Law of Standards: Interpreting the Internal Revenue Code, 64 Duke L.J. Online 53 (2015):

Although fields of law ordinarily comprise both rules and standards, and foundational tax scholars such as Professors Surrey, Warren, and Bittker understood the importance of standards in tax law, many tax scholars and professionals have come to regard federal tax law as “the paradigmatic system of rules.” The vision of tax-as-rules is particularly alluring because rules have been associated with rule-of-law values, and it seems that the rule of law might be especially important in the field of taxation. The rule of law constrains the coercive power of government, and perhaps few powers are viewed with as much suspicion as the taxing power. Our claim that the existence of many rules in the tax law does not dictate the interpretation of all tax formulations as rules seems to threaten critical rule-of-law values. Nevertheless, we believe with Surrey and Warren that tax, like other areas of law, can flourish only if the IRS and the courts are able to respond to “unforeseen cases as they arise” and that this flexibility demands that many Code provisions be interpreted as standards. We also believe that this use of standards does not threaten rule-of-law values. In this essay we defend both propositions.

To do so we engage pointedly with Professor Larry Zelenak’s critique of the position we took in our earlier article, Defining Income [11 Fla Tax Rev. 295 (2011)], where we claimed that the category of “gross income” in the Internal Revenue Code is best understood as a standard, not a rule. In Custom and the Rule of Law in the Administration of the Income Tax, Professor Zelenak worried that our position threatened the rule of law by “stretch[ing] beyond the breaking point” the concept of interpretation [Custom and the Rule of Law in the Administration of the Income Tax, 62 Duke L.J. 855 (2012)].

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

Are You Paying Too Much for Law School?

Following up on my previous post,  The Variable Affordability of Law School: How Geography and LSAT Profile Impact Tuition Costs:  Bloomberg, Are You Paying Too Much for Law School?:

Law schools are increasingly relying on less-qualified applicants to fill their classes, but according to a new analysis, those people are getting the worst deal on their education.

The data, presented this month at the Association of American Law Schools’ annual meeting in Washington, suggest that people who did poorly on the Law School Admission Test didn’t just pay more than everyone else, they also got less for their money. Low-performing students tended to go to lower-ranked schools, “where the bar passage risk is higher and the employment outcomes are less inspiring,” says University of St. Thomas School of Law professor Jerome Organ, who conducted the study. In other words, the students shelling out the most are often in the most danger of leaving law school with the bleakest prospects.


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

Graetz: Taxation of Unrealized Gains at Death Redux

Michael J. Graetz (Columbia), What Goes Around Comes Around: Taxation of Unrealized Gains at Death:

Forty-two years ago, in the Virginia Law Review, long before Congress twice enacted—and twice repealed—carryover basis for assets transferred at death, I published this article examining and evaluating a number of proposals for taxing gains at death, as well as for carryover basis. (One of these was being advanced by the American Bankers Association.)  [Taxation of Unrealized Gains at Death -- An Evaluation of the Current Proposals, 59 Va. L. Rev. 830 (1973)]  The president, in his State of the Union address on January 20, 2015, has again proposed a tax on gains on assets transferred at death.  This article may be helpful in identifying some of the main issues and alternatives if Congress considers the proposal in its upcoming tax reform deliberations.  I have made no attempt to update this article for current circumstances. Most of the design issues remain unchanged, although the exemption and illustrative numbers are out of date. 

January 21, 2015 in Scholarship, Tax | Permalink | Comments (2)

More Commentary On President Obama's Tax Proposals In His State Of The Union Address

Leviner Presents Tax Policy Making in Israel at Hebrew University Law School

Leviner (2015)Sagit Leviner (Ono) presented Comparative Evaluation of Tax Policy-Making in Israel: Exploring the Trajectories on Monday at the Hebrew University Law School Tax Colloquium:

This project explores the transformation of Israel’s tax policy over the years while placing it within Israel’s broader economic and social context and unique characteristics. To better evaluate the merit and trajectory of this transformation, the project positions the Israeli tax experience under a comparative lens. In other words, the project evaluates whether the Israeli experience brings Israel closer to, or further from, its counterparts in the developed world.

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

Fleischer: Echoes of Piketty in Obama's Proposal to Tax Gifts and Bequests

NY Times Dealbook (2013)New York Times DealBook:  Echoes of Piketty in Obama Proposal to Address Income Inequality, by Victor Fleischer (San Diego):

At the end of his book Capital in the Twenty-First Century, Thomas Piketty proposes a global wealth tax to help address the problem of runaway income inequality. In contrast with the careful research that went into the book, the suggestion of a global wealth tax struck many tax policy veterans as naïve and unhelpful.

By contrast, the White House proposal to treat gifts and bequests as taxable events is eminently sensible as a matter of tax policy. It is also well-targeted at the superrich — the only group that has truly benefited from the economic recovery.

While the White House proposal is not likely to receive proper care and feeding from a Republican Congress, it is important nonetheless. It helps set a progressive economic agenda for the 2016 presidential campaigns and establishes goal posts for negotiations over tax legislation in the meantime. ...

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January 21, 2015 in Tax | Permalink | Comments (1)

Serial Blogging

SerialKudos to Colin Miller, editor of our EvidenceProf Blog for his series of posts beginning November 21, 2014 on the Serial Podcast, which deals with the 1999 prosecution of 17 year-old Adnan Syed for murdering his ex-girlfriend, 18 year-old Hae Min Lee, on January 13, 1999.  In Colin's words:

The purpose of these posts was to create a legal companion to the podcast so that listeners interested in the legal issues raised by the podcast would have some answers. This post collects and categorizes each of those posts.

Colin's posts have produced the most interest of any series of posts in the history of the Law Professor Blogs Network:  925,000 page views, compared with 65,000 page views for EvidenceProf Blog for the corresponding period last year.

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

Pepperdine Dean: Law Schools Need to be More Holistic

U.S. News General Logo (2015)Pepperdine Dean: Law Schools Need to be More Holistic, U.S. News & World Report (The Legal Issue), pp. 38-41:

Deanell Reece Tacha, a former circuit judge appointed by President Ronald Reagan, is dean of Pepperdine University's School of Law.  Before taking the reigns at Pepperdine in 2011, Tacha spent several years as a law professor at the University of Kansas, as well as associate dean and other administrative positions.  Under her leadership, Pepperdine implemented a two-year J.D. program, whose first class graduated in May 2013. Tacha spoke with U.S. News about how law schools are adapting to declining enrollments and new workforce demands -- and where the system of legal education is heading.

January 21, 2015 | Permalink | Comments (0)

Law School Diversity Rankings

PreLaw CoverMost Diverse Law Schools, PreLaw (Winter 2015):

To determine the most diverse law schools, we broke down each school into six categories -- percentage of minority faculty; percentage of black students; percentage of Asian and Hawaiian students; percentage of Hispanic students; percentage of American Indian students; and percentage of Caucasian students.

We assigned each school a score from one to 10 for all categories, except for American Indians.  We assigned each school a score from one to five for that category, given the much smaller number of students.

A school that matched the U.S. national average for any race received a seven (or 3.5 for American Indian), and a school that was 30 percent or greater than the national average received a 10 (or 5 for American Indian). We then weighted the student categories as 75 percent of the final diversity score and faculty at 25 percent.

preLaw ranked the Top 70 law schools for diversity. 28 law schools received an A+ grade, led by:

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January 21, 2015 in Law School Rankings, Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 622

IRS Logo 2New York Times editorial, The Dangerous Erosion of Taxation I.R.S., Already Hobbled, Likely to Be Further Damaged:

The obsession among House conservatives to hobble the Internal Revenue Service is about to pay off this tax season in foolhardy budget cuts to the agency that will cost the government an estimated $2 billion in lost revenue.

That works out to about $6 in lost taxes for every $1 in cuts Congress made in reducing the I.R.S. budget another 3 percent this year, according to the Treasury Department.

The slashed budget is a victory for penny-wise-and-pound-foolish politicians. It amounts to payback demanded by House Republicans to penalize the I.R.S. for daring to scrutinize Tea Party operations that tried to claim exemptions under the tax code for nonpolitical groups. Democratic groups trying the same thing were also scrutinized.

Undermining the I.R.S. was part of the overall budget deal worked out by House Republicans, Senate Democrats and the White House. The agency — hardly the most popular of essential government offices — had too few defenders in the horse-trading. It is likely to suffer even more damage under the new Republican-controlled Congress.

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January 21, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Tuesday, January 20, 2015

Madrian Presents The Roth 401(k): Does Front-Loading Taxation Increase Savings? Today at NYU

MadrianBrigitte Madrian (Harvard) presents Does Front-Loading Taxation Increase Savings? Evidence from Roth 401(k) Introduction (with John Beshears (Harvard), James Choi (Yale) & David Laibson (Harvard)) at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Viard:

Can governments increase private savings by taxing savings up front instead of in retirement? Roth 401(k) contributions are not tax-deductible in the contribution year, but withdrawals in retirement are untaxed. The more common before-tax 401(k) contribution is tax-deductible in the contribution year, but both principal and investment earnings are taxed upon withdrawal. Using administrative data from eleven companies that added a Roth contribution option to their existing 401(k) plan between 2006 and 2010, we find no evidence that total 401(k) contribution rates differ between employees hired before versus after the Roth introduction, which means that the amount of retirement consumption being purchased by 401(k) contributions increases after the Roth introduction. A survey experiment suggests two behavioral factors play a role in the unresponsiveness of contribution rates to their tax treatment: (1) employee confusion about or neglect of the tax properties of Roth balances and (2) partition dependence.

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

Freedman Presents Tax Avoidance and the Proposed Google Tax Today at Florida

FreedmanJudith Freedman (Oxford) presents Tax Avoidance and the Proposed U.K. Diverted Profits Tax (Google Tax) at Florida today as part of its Graduate Tax Program Colloquium Series hosted by Yariv Brauner:

This paper aims to inform the important debate on tax avoidance by exploring the language used and setting this in context. Tax avoidance is something that needs to be tackled with vigour and public confidence that the tax system treats people equitably is vital. Yet the actors concerned ‐ taxpayers, advisers and revenue authorities ‐ operate within a complex domestic and international tax environment. Many of the complexities and flaws in the system can only be tackled by radical structural changes, which will require fundamental policy thinking and change and international co‐operation. Oversimplifying the debate and searching for individual or corporate villains will not assist in remedying the underlying problems. Even if public naming and shaming influences a few taxpayers in the public eye to impose their own voluntary constraints, it will not necessarily affect the worst avoiders, and may even encourage some non‐compliance from those who feel that “everyone is at it”. Only understanding the flaws in the tax system and working on serious changes can give long‐term results.

Ana Paula Dourado (University of Lisbon) is the discussant.

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

Marian Presents A Conceptual Framework for the Regulation of Cryptocurrencies Today at Tulane

MarianOmri Marian (Florida) presents A Conceptual Framework for the Regulation of Cryptocurrencies, 81 U. Chi. L. Rev. Dialogue ___ (2015), at Tulane today as part of its Regulation and Coordination Workshop Series hosted by Adam FeibelmanShu-Yi Oei, and Steve Sheffrin:

This Essay proposes a conceptual framework for the regulation of transactions involving cryptocurrencies. Cryptocurrencies offer tremendous opportunities for innovation and development, but at the same time are uniquely suited to facilitate illicit behavior. The suggested regulatory framework is intended to support (or, at the least, not impair) cryptocurrencies’ innovative potential. At the same time, the aim is to disrupt cryptocurrencies’ utility for criminal activities. To achieve such purposes, this Essay suggests a regulatory framework that imposes costs on the characteristics of cryptocurrencies that make them particularly useful for criminal behavior (in particular, anonymity), but does not impose costs on characteristics that are at the core of the generative potential (in particular, the decentralization of value-transfer processes). Using a basic utility model of criminal behavior as a benchmark, the Essay explains how regulatory instruments can be so designed. One such regulatory instrument is proposed as an example – an elective anonymity tax on cryptocurrency transactions in which at least one party is not anonymous. 

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

Law School Rankings by Alumni Members of Congress

National Law Journal, From Law School to Congress: These Campuses Excel at Producing Lawmakers:

Congress (2015)There is no shortage of lawyers on Capitol Hill — they comprise 45 percent of the 114th Congress [Of the 435 seats in the House of Representatives, 160 are occupied by lawyers. Of the 100 senators, 54 have law degrees.]. But unlike the U.S. Supreme Court, whose nine justices hail from just three elite law schools, a state school law degree won't hamper and may even smooth the way to the U.S. House of Representatives or Senate.

The sitting crop of lawyer-­lawmakers passed through 105 law campuses on their way to Washington. The 20 law schools that sent the most alumni to Congress include some of the country's most prominent. ... But there are plenty of surprises outside the top five.

The Top 13 feeder law schools for members of Congress are:

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January 20, 2015 in Law School Rankings, Legal Education | Permalink | Comments (0)

Comprehensive Bar Exam Preparation: The Secret Behind Chapman's Overperformance on the California Bar Exam

Mario William Mainero (Chapman), We Should Not Rely on Commercial Bar Reviews to Do Our Job: Why Labor-Intensive Comprehensive Bar Examination Preparation Can and Should Be a Part of the Law School Mission:

Chapman Logo (2014)Increasingly, law school bar passage rates are an important concern for faculty and administration, as well as students. The July 2014 bar exam saw a precipitous drop nationally in bar passage rates, including declines ranging from four to over twenty percentage points. At the same time, there have been declines in applications to law schools, declines in admissions statistics (LSAT and undergraduate GPA), and an empirically demonstrable decline in student preparedness for law school. The confluence of these events portends even greater declines in bar passage if law schools do not rethink how they prepare students for the bar exam. This Article examines developments in academic support and bar preparation programs with an eye toward suggesting models for effective in-house bar preparation programs. Specifically, this Article examines: (1) the evolution of academic support programs in law schools to include bar passage programs, with a brief description of the types of programs that traditionally have been available; (2) the particular difficulty posed by the California Bar Exam; (3) the existing types of supplemental programs, and concerns posed by programs that are limited to “bar tips” or even limited practice exams or substantive lectures, given the increased numbers of “at risk” students due to the increase in underpreparedness; (4) the supplemental program at Chapman University’s Fowler School of Law, including the intensity of effort required of both faculty and students in a comprehensive program applicable to all students; and finally, (5) the bar passage results at Chapman University’s Fowler School of Law since adoption of a comprehensive supplemental bar passage program, that have been significantly better than would be expected by some commentators, given its ranking and relative youth as a law school. This Article suggests that the traditional focus of academic support programs, including bar preparation programs, that focus largely on perceived “at risk” students, is insufficient in light of the increased numbers of underprepared students. In order to avoid further calamitous declines in bar passage rates, law schools will have to move from traditional academic support models to models that encourage the entire cohort of students to work together, cooperatively, and that apply extensive time and effort to ensure that all students receive the benefit of these programs.

California Bar Exam Results and U.S. News Rankings by School:

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

Watson: SFRs and Problems in Tax Administration and Enforcement

Tax Analysys Logo (2013)Camilla E. Watson (Georgia), SFRs and Problems in Tax Administration and Enforcement, 146 Tax Notes 363 (Jan. 20, 2015):

When the IRS prepares substitutes for returns (SFRs) for a married couple, it prepares separate returns for each of the parties and considers them married filing separately. It will then send separate notices of deficiency to the parties. If only one of the spouses petitions the Tax Court, this could be problematic for both, even if the court’s decision is favorable to the petitioner. The problems identified in this report, while narrow in scope, highlight broader issues in the administration of the tax system. This report proposes reforms to correct the problems in the SFR process, but these proposals apply more broadly to address general problems in the administration of the tax system.

January 20, 2015 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Piketty's TED Talk on Capital in the 21st Century

Thomas Piketty's TED Talk on his book, Capital in the Twenty-first Century (Harvard 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):

January 20, 2015 in Book Club, Tax | Permalink | Comments (0)

The IRS Scandal, Day 621

IRS Logo 2New York Sun op-ed, Logic of Firing IRS Chief Comes Into Sharp Focus As Agency Bridles at Budget, by Stephen Moore (Heritage Foundation):

The Internal Revenue Service now says that taxpayers had better get used to shabby service from the tax collection agency. The IRS is hardly an agency known for warm and friendly service to begin with. Complaining about belt tightening budget cuts, this week IRS Commissioner John Koskinen lectured: “People who file paper tax returns could wait an extra week — or possibly longer —to see their refund. Taxpayers with errors or questions on their returns that require additional manual review will also face delays.” ...

Congress needs to hold the IRS accountable and demand the firing of Mr. Kostiken because he has he admitted openly he can’t do his job. The IRS is nearly an $11 billion a year agency with some 100,000 employees. Congress wants to cut its budget by less than 4% and the agency says it can’t function. During the recession many businesses took cuts of 30% or 40%, and they did it by becoming more efficient and cutting waste. Meanwhile the IRS has spent millions of dollars on conferences at exotic resorts for its employees with some suites costing $3,000 a night. And Mr. Koskinen says he can’t find places to cut.

The IRS has also been rocked by scandals of targeting, abusing and financially harming individuals and conservative groups it doesn’t agree with. Maybe it could shut down that division and use those resources to help taxpayers. Instead of showing remorse the agency brass is petulant. The attempt to extort more tax dollars out of taxpayers is the so-called Washington Monument ploy, and Congress should demand an immediate private audit of the agency’s spending habits.

Washington demands full accountability and accuracy from tax filers, but the tax collection department is the least accountable agency of government. If the IRS can’t administer the tax code with 100,000 employees, it sounds like we need a new IRS and a new tax system.

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

TaxProf Blog Holiday Weekend Roundup

Monday, January 19, 2015

Mehrotra Reviews Zelenak's Learning to Love Form 1040

Learning to Love 1040Ajay K. Mehrotra (Indiana), Reviving Fiscal Citizenship, 113 Mich. L. Rev. ___ (2015) (reviewing Lawrence Zelenak (Duke), Learning to Love Form 1040: Two Cheers for the Return-Based Mass Income Tax (University of Chicago Press, 2013)): 

In recent years, numerous lawmakers, policy analysts, and scholars have been decrying the many defects of the present U.S. income tax system. Few have attempted to defend our return-based mass income tax. This essay reviews Learning to Love Form 1040, Lawrence Zelenak’s stirring and persuasive defense of a simplified version of our present federal income tax system. In contrast to the conventional economic critiques, Zelenak explores the underappreciated social, cultural, and political benefits of a return-based, mass income tax. Chief among these, he argues, is the existing regime’s potential to raise the tax consciousness of the average citizen and to enhance modern notions of fiscal citizenship.

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January 19, 2015 in Book Club, Scholarship, Tax | Permalink | Comments (1)

Martin Luther King, Jr. and the IRS

In honor of Martin Luther King, Jr. Day:  Tallahassee Democrat, Dr. Martin Luther King Jr. and the IRS:

This past year, much ado was made about the so-called “IRS-Gate” and concerns that the Obama administration may have used the agency to target Tea Party and other right wing groups. ... [W]hat often is not stated during the Martin Luther King Holiday weekend is that King, early in his leadership of the Southern Christian Leadership Conference (SCLC), was routinely subjected to IRS audits of his individual accounts, SCLC accounts as well as accounts of his lawyers, first starting during the administration of President Dwight Eisenhower and continuing through the Kennedy administration. ...

[B]y 1962, King had settled with the IRS for a mere $500 dollars for a deduction that he could not explain to auditors. Two years earlier, in February of 1960, a Montgomery, Alabama Grand Jury made King the first person ever charged in that state with criminal tax fraud charges, alleging that in 1956 and 1958, that King through the Montgomery Improvement Association, the organization that had led the successful bus boycotts in that city and was the precursor to the SCLC, had failed to pay the state approximately $45,000 that it was owed in taxes. ...

Looking back, that King was even indicted proved and proves that when necessary, there were and remain many other Americans who were and are more than willing to use the IRS and other tax authorities to harrass individuals and organizations with which they disagree.

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

January 19, 2015 in Celebrity Tax Lore, IRS News, Tax | Permalink | Comments (0)

Reviews of Piketty's Capital in the Twenty-First Century

Mark W. Hendrickson (Grove City College), Problems with Piketty: The Flaws and Fallacies in Capital in the Twenty-First Century (2014):

HendricksonIf you have read or even heard about Capital in the Twenty-First Century—economist Thomas Piketty’s egalitarian treatise—you owe it to yourself to read Hendrickson’s powerful critique. Hendrickson combines extensive knowledge, mature wisdom, common sense, and a rare ability to render complex subjects clear and easily understood. Problems with Piketty shows us the grim consequences of egalitarian policies; exposes the flaws and explodes the fallacies in Piketty’s book; and presents a stirring defense of free enterprise.

Far more than just a corrective to Capital’s many errors, Problems with Piketty works well as a stand-alone teaching tool. Thanks to a detailed Table of Contents, its multiple lessons are easy to find. You may find yourself referring to this book for years to come.

Michael Potter (Australian National University), Capital in the Twenty-First Century: A Critique of Thomas Piketty’s Political Economy, 21 Agenda 91 (2014):

PikettyThe argument by Piketty and others that there is growing inequality and this is causing damage is not new. But regardless of who is running this argument, it is significantly flawed. The poor have definitely improved their situation, especially if taxes and income support are included, in many countries in the developing world and the US. A focus on inequality to the exclusion of poverty glosses over the large successes over recent decades. It paints a false picture of decline when large improvements have occurred.

To the extent there have been increases in executive wages, this has probably been driven by technology and globalisation, not by poor corporate governance. And the returns to wealth being (relatively) high should be expected given the riskiness of owning wealth, and is actually necessary to ensure that investment occurs. Piketty’s (implied) argument that investment is bad should be dismissed out of hand, as should his argument that high taxes are required on wealth. Instead, the problems generated by ‘unfairly’ acquired wealth should be addressed by removing rents. Policymakers should consider broadening the ownership of capital and assisting those who are in genuine need, and reject proposals that pander to envy.

For my perspective, see Thomas Piketty and Inequality: Legal Causes and Tax Solutions, 64 Emory L.J. Online ___ (2015):

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January 19, 2015 in Book Club, Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 620

IRS Logo 2Wall Street Journal editorial, The IRS Is Not Here to Help You: The Agency Will Punish Tax Filers For its Own Stonewalling:

Hard to believe, but the Internal Revenue Service says its customer service is about to get worse. Commissioner John Koskinen wrote to employees this week: “We now anticipate an even lower level of telephone service than before, which raises the real possibility that fewer than half of taxpayers trying to call us will actually reach us.” A new report from the IRS’s Taxpayer Advocate Nina Olson suggests that the odds of some taxpayers getting satisfactory answers could literally be zero. ...

As a responsible chief executive, President Obama has been aggressively managing this agency crisis to ensure the least disruption for taxpayers most in need. Just kidding. ...

The IRS is pleading poverty due to recent cuts imposed by Congress, which is frustrated with the agency’s lack of cooperation investigating IRS abuse of conservatives. But while Ms. Olson emphasizes budget cuts in bringing the IRS to this pass, she also cites the agency’s failure to prioritize and the targeting of Tea Party groups that eroded public trust.

From 1997 to 2012 the IRS budget increased 64% to $11.8 billion in nominal dollars. IRS abuse of the President’s philosophical opponents came to light in 2013. Agency stonewalling—plus a less friendly environment for discretionary spending given federal debt of more than $18 trillion—resulted in a new budget of $10.9 billion. So now the agency is cutting key services and threatening delayed refunds as it pressures Congress to re-open the budget spigot.

If the IRS continues to stonewall the political targeting investigation, as Mr. Koskinen has, then the only tool Congress has to express disapproval is the power of the purse. In any case it’s hard to imagine the IRS could offer worse service than it already does.

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January 19, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Sunday, January 18, 2015

President Obama Proposes $320 Billion Tax Increase on the Wealthy to Fund Middle Class Tax Cuts

WHite HouseIn advance of Tuesday's State of the Union Address, the White House yesterday released Fact Sheet: A Simpler, Fairer Tax Code That Responsibly Invests in Middle Class Families

The plan would raise $320 billion in revenue over ten years.  Key components include:

  • Close the trust fund loophole – the single largest capital gains tax loophole – to ensure the wealthiest Americans pay their fair share on inherited assets. Hundreds of billions of dollars escape capital gains taxation each year because of the “stepped-up” basis loophole that lets the wealthy pass appreciated assets onto their heirs tax-free.
  • Raise the top capital gains and dividend rate back to the rate under President Reagan. The President’s plan would increase the total capital gains and dividends rates for high-income households to 28 percent.
  • Reform financial sector taxation to make it more costly for the biggest financial firms to finance their activities with excessive borrowing. The President will propose a fee on large, highly-leveraged financial institutions to discourage excessive borrowing.

The plan includes a bevy of middle class tax cuts totaling $175 billion over ten years, including:

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January 18, 2015 in Tax | Permalink | Comments (3)

Final Report Issued on $5.4 Million Forgivable Loan Program for University of Texas Law Profs

Texas LogoAustin American-Statesman, AG’s Office Wraps Up Investigation of Forgivable Loans at UT Law School:

Supplemental compensation from a foundation to University of Texas law professors lacked transparency and violated accountability standards and university rules, whether intentionally or as the product of negligence, according to a much-delayed report by the state attorney general’s office. ...

The report said there is no question that forgivable loans, second mortgages and housing allowances from the UT Law School Foundation helped place the school in a competitive position when it comes to recruiting and retaining faculty members.

“The failure to provide the UT System and Regents the full picture of compensation is subject to one of many narratives depending upon the source,” the report said. “Whether this failure was intentional or simply negligence, the Law School’s failure to follow University rules is also without question.”

The documents list forgivable loans to law faculty totaling $5.4 million:

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January 18, 2015 in Legal Education | Permalink | Comments (0)

The Top 5 Tax Paper Downloads

SSRN LogoThis week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list.  The #1 paper is now #69 in all-time downloads among 10,644 tax papers:

  1. [1631 Downloads]  A Compendium of Private Equity Tax Games, by Gregg D. Polsky (North Carolina)
  2. [223 Downloads]  The Rise and Fall of the Consumption Tax: A Historical Perspective, by Reuven Avi-Yonah (Michigan)
  3. [192 Downloads]  Important Developments in Federal Income Taxation (2014), by Edward A. Morse (Creighton)
  4. [149 Downloads]  Do Audits Matter?: A Parallax Theory of the Relation between Tax Enforcement and Underreporting, by J. T. Manhire (U.S. Treasury Department)
  5. [126 Downloads]  Thomas Piketty and Inequality: Legal Causes and Tax Solutions, by Paul L. Caron (Pepperdine)

January 18, 2015 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 619

IRS Logo 2USA Today, IRS Boss: Please Don't Call During Filing Season:

Grover Norquist, the anti-tax crusader behind Americans for Tax Reform, accused the IRS Wednesday of employing the "Washington Monument" strategy of cutting the most popular programs in response to budget cuts.

It's an allegation Koskinen denied. "It's clearly Illusory at this point that you can cut the budget any further and not have an impact," he said. "If I wanted to do a Washington Monument, I'd shut the place down in the middle of filing season, to demonstrate to people what it would look like. Obviously, we want to do anything but that."

Wall Street Journal, Taxman Shrugged: Will the IRS Go on Strike?, by James Taranto:

[A]nother law-enforcement agency is threatening to follow suit. “Taxpayers could see delays in getting their refunds this year—as well as ‘unacceptable’ customer service—as the IRS commissioner warns budget cuts are forcing the agency to cut back,” Fox News reports. ...

It’s all rather comical—but also galling. The IRS’s abuse of power in its harassment of conservative nonprofits aimed in substantial part at suppressing opposition to ObamaCare. That is, the IRS traduced the free-speech rights of citizens in order to preserve a law expanding IRS power and creating more work for IRS agents.

Now the commissioner complains that the IRS has too much work and not enough resources and threatens to make life even more difficult for taxpayers. It’s like the guy who killed his parents and then pleaded for mercy because he was an orphan.

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January 18, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Saturday, January 17, 2015

Cost Cutting in an Age of Declining Law School Enrollment

Cutting CostsThe Faculty Lounge:  Cost Cutting in an Age of Declining Law School Enrollment, by David Frakt (Barry):

Five years into the great law school recession, most law schools have presumably found all the obvious ways to cut costs and explored feasible alternatives for increasing revenues. The low-hanging fruit having been picked, more and more law schools are going to be faced with some very difficult choices. In this post, I will explore some of those choices and offer some ways that law schools might cut costs so they will not have to lower standards any further. I invite those with other good ideas, either theoretical or based on experience at their schools, to share them in the comments.

  • Voluntary Retirements/Voluntary Pay Cuts 
  • Cuts to Faculty Research Support
  • Cut/Consolidate Administrative Positions
  • Reduce the Number of Course Offerings/Mandate More Courses
  • Law Library
  • International Programs
  • Overhead

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January 17, 2015 in Legal Education | Permalink | Comments (4)

Thomas West Named Tax Legislative Counsel

WestThomas C. West, Jr. (J.D., Temple; LL.M. (Taxation), Georgetown), Deputy Tax Legislative Counsel in the U.S. Treasury Department, has been named Tax Legislative Counsel, replacing Lisa Zarlenga, who served in the positiojn for four years. Prior to joining the Treasury Department, Mr. West was a shareholder at Greenberg Traurig. Previously, he worked at both Ernst & Young and PricewaterhouseCoopers.

January 17, 2015 in IRS News, Tax | Permalink | Comments (0)

American College of Employee Benefits Counsel Student Writing Competition

ACBThe American College of Employee Benefits Counsel is sponsoring its 11th Annual Employee Benefits Writing Competition on any topic in the field of employee benefits law. The competition is open to any J.D. and graduate (L.L.M. or S.J.D) law students enrolled at any time between August 14, 2014 and August 15, 2015. Two $1,500 prizes will be awarded. The submission deadline is June 2, 2015.

January 17, 2015 in Scholarship, Tax, Teaching | Permalink | Comments (0)

The IRS Scandal, Day 618

IRS Logo 2The Blog of the Legal Times, Feds Take Pro-Israel Group's IRS Suit to DC Circuit:

The U.S. Department of Justice is challenging a Washington federal trial judge’s ruling to keep alive a suit that a pro-Israel advocacy group brought over alleged Internal Revenue Service discrimination.

Lawyers with the DOJ Tax Division on Wednesday filed a notice of appeal with U.S. Court of Appeals for the D.C. Circuit, asking the court to review U.S. District Judge Ketanji Brown Jackson's May ruling in favor of Z Street, the plaintiff in the case against the IRS.

Pennsylvania-based Z Street, which advocates for and defends Israel, sued the IRS over what the group claimed was viewpoint discrimination that violated the First Amendment. The organization has claimed that its application for tax-exempt status in 2009 received extra IRS scrutiny due to differing opinions it and the Barack Obama administration have on Israel.

The government argued that the Anti-Injunction Act prohibited Z Street's lawsuit. The law bars cases that seek to restrain the assessment of taxes.

In refusing to dismiss the case, Jackson wrote in an opinion that the group "seeks only to have its application—good or bad—be evaluated using the same standards are criteria that apply to other organizations that the IRS reviews."

(Hat Tip: Ted Seto.)

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January 17, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)