TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, October 20, 2017

Weekly Legal Education Roundup

Tax Policy In The Trump Administration

Law School Responses To Speech Protests, From Best (Georgetown) To Worst (Seattle, Thurgood Marshall)

GSTFollowing up on my previous posts:

American Lawyer, At Law Schools, Rowdy Protests Provide Teachable Moments:

Since February, when violent protests canceled a speech by provocative writer Milo Yiannopoulos at the University of California, Berkeley, colleges and universities nationwide have faced criticism for caving to opposition by canceling events.

Law schools have not escaped the clashes. The nationwide free-speech-on-campus debate took root at three law schools this fall as protesters opposed speakers or events, prompting widely different responses from schools.

Those reactions from law school administrators provide examples of best and worst practices in the free-speech realm, and they come at a time when First Amendment advocates say it’s more important than ever for law schools to be role models in upholding free speech. ...

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October 20, 2017 in Legal Education | Permalink | Comments (3)

Does A Professor's Scholarly Productivity Decline With Age?

Inside Higher Ed, Productivity: Age Is Just a Number:

Conventional wisdom on faculty research productivity, backed by decades of studies, says that it’s all downhill after tenure. A new paper challenges that paradigm, suggesting great variability in peak research activity among individual scientists — even if their aggregate productivity curve still feeds the posttenure “dead weight” myth.


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October 20, 2017 in Legal Education, Scholarship | Permalink | Comments (4)

Virginia Tax Review Publishes New Issue

Virginia Tax Review (2016)The Virginia Tax Review has published Vol. 36, No. 3 (Summer 2017):

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October 20, 2017 in Scholarship, Tax | Permalink | Comments (1)

Recent Trends In Like-Kind Exchanges

Gerald Auten (U.S. Treasury Department, Office of Tax Analysis), David Joulfaian (U.S. Treasury Department, Office of Tax Analysis & Romen Mookerjee (Dartmouth), Recent Trends in Like-Kind Exchanges:

Like-kind exchanges enable taxpayers to defer capital gains taxes when certain types of property are exchanged rather than sold. The deferred gains from such exchanges have grown over the years, peaking at over $100 billion before the onset of the Great Recession. Equally noteworthy, the share of corporations of these exchanges has increased in recent years, with much of the corporate deferred gain concentrated in certain sectors and accounted for by a relatively small number of firms.

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October 20, 2017 in Scholarship, Tax | Permalink | Comments (0)

Rethinking Fiscal Federalism’s Tax-Assignment Problem

Lord of the RingsPeter A. Prescott (Butler), One Tax to Rule Them All: Rethinking Fiscal Federalism’s Tax-Assignment Problem, 96 Neb. L. Rev. 1 (2017):

In J.R.R. Tolkien’s The Lord of the Rings, the Dark Lord Sauron created the One Ring to enslave the leaders of the elves, dwarves, and humans. On it, Sauron inscribed the latter half of this poetic warning: “One ring to rule them all, one ring to find them; One ring to bring them all and in the darkness bind them.” The intergovernmental tax system proposed here for the United States might well be described in the same way — one federal-level tax structure to “rule” (and largely replace) the fifty states’ current tax structures. Because the proposed structure is centralized, it would better “find” multi-state taxpayers and it would more efficiently and effectively “bring” and “bind” their corresponding tax bases (e.g., taxable income) before converting those bases into tax revenue that would feed expenditures at the federal and state government levels. To develop and support that proposal, this Article revisits fiscal federalism’s tax-assignment problem using traditional tax policy considerations and with an eye toward reevaluating the conventional wisdom disfavoring centralized taxation in light of recent developments in the field of behavioral economics. ...

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October 20, 2017 in Scholarship, Tax | Permalink | Comments (0)

Thursday, October 19, 2017

Toder Presents Replacing Corporate Revenues With A Mark-to-Market Tax On Shareholder Income Today At San Francisco

Toder (2017)Eric Toder (Tax Policy Center) presents Replacing Corporate Revenues With a Mark to Market Tax on Shareholder Income (with Alan D. Viard) at San Francisco today as part of its Tax Policy Lecture Series:

We propose reducing the corporate tax rate to 15 percent and replacing the foregone revenue with a tax at ordinary income rates on the accrued, or mark-to-market, income of American shareholders of publicly traded corporations, accompanied by an imputation credit for U.S. corporate income taxes paid. The proposal would dramatically reduce the tax significance of the source of corporate profits and the residence of corporations, both of which can be easily manipulated. Lowering the corporate tax rate to 15 percent would encourage a flow of capital into the United States and reduce incentives to shift reported profits overseas and to engage in inversion transactions, while continuing to impose tax on foreigners who earn economic rents from investing in the United States.

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October 19, 2017 in Colloquia, Scholarship, Tax | Permalink | Comments (2)

McCaffery Launches The People's Tax Page

PTPHuffington Post:  The Deep Problem with Tax Policy: No One Understands It, by Edward McCaffery (USC):

As America once again considers tax reform, with President Trump promising the greatest tax cut ever, the nation faces many choices. We could attempt to shore up the individual income tax, or move to a more consumption-based system. We could lower all rates, or just raise the standard deduction. We could cut the payroll tax instead of or in addition to the income tax. We could flatten tax rates or make them more progressive. We could reform and make corporate taxes more sensible, or even eliminate them altogether. And so on: there are many options.

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October 19, 2017 in Tax | Permalink | Comments (4)

McMahon: Pre-Enforcement Litigation Needed For Taxing Procedures

Stephanie Hunter McMahon (Cincinnati), Pre-Enforcement Litigation Needed for Taxing Procedures, 92 Wash. L. Rev. 1317 (2017):

Courts have opened tax guidance to procedural attack. Consequently, taxpayers who are found to owe tax may challenge the validity of the guidance implementing the tax if the procedure used by the Treasury Department in adopting the guidance failed to comply with the Administrative Procedure Act, in particular, with notice-and-comment. This increased willingness to consider tax guidance’s procedural defects offers little to most taxpayers unless they are also given a better means to raise procedural challenges. Under current law and in most circumstances, generally, taxpayers can bring a challenge only after they have been found to owe taxes in an audit and completed an internal IRS appeal process. This delay in the ability to challenge guidance reduces the likelihood taxpayers will challenge the procedure used to create a particular rule. Moreover, delayed litigation requires taxpayers to plan their affairs under the umbrella of guidance that might not survive a procedural challenge. To the extent procedural challenges are accepted in the tax context, this Article argues Congress should narrowly repeal its prior limitations on pre-enforcement litigation of those procedures.

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October 19, 2017 in Scholarship, Tax | Permalink | Comments (0)

Engler: Goodwill Hunting Gone Bad — Tax Law's Outmoded Treatment Of Goodwill

Goodwill HuntingMitchell L. Engler (Cardozo), Goodwill Hunting Gone Bad: Tax Law's Outmoded Treatment of Goodwill, 96 Neb. L. Rev. ___ (2017):

Goodwill reflects the positive consumer association with a business. Goodwill thus overlaps with trademarks and other related assets. This close association impedes the separation of goodwill value from such related assets. Difficulties thus arise when the tax law treats goodwill more (or less) favorably than related intangible assets.

For instance, the tax law previously denied any depreciation deductions for goodwill. Business buyers thus often allocated their costs away from goodwill and towards related assets like depreciable customer lists. The IRS responded with the initial “goodwill hunting” wave, challenging taxpayers’ low goodwill valuations. Congress addressed this litigious area in 1993 with new, matching depreciation rules for purchased goodwill and related intangible assets.

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October 19, 2017 in Scholarship, Tax | Permalink | Comments (0)

The One Percent Across Two Centuries: Piketty Presents Misleading Picture Of The Dynamics Of Wealth Inequality In The United States

PikettyRichard Sutch (UC-Riverside), The One Percent Across Two Centuries: A Replication of Thomas Piketty's Data on the Concentration of Wealth in the United States, 41 Soc. Sci. Hist. 587 (2017) (free earlier online version):

This exercise reproduces and assesses the historical time series on the top shares of the wealth distribution for the United States presented by Thomas Piketty in Capital in the Twenty-First Century. Piketty's best-selling book has gained as much attention for its extensive presentation of detailed historical statistics on inequality as for its bold and provocative predictions about a continuing rise in inequality in the twenty-first century. Here I examine Piketty's US data for the period 1810 to 2010 for the top 10 percent and the top 1 percent of the wealth distribution. I conclude that Piketty's data for the wealth share of the top 10 percent for the period 1870 to 1970 are unreliable. The values he reported are manufactured from the observations for the top 1 percent inflated by a constant 36 percentage points. Piketty's data for the top 1 percent of the distribution for the nineteenth century (1810–1910) are also unreliable. They are based on a single mid-century observation that provides no guidance about the antebellum trend and only tenuous information about the trend in inequality during the Gilded Age. The values Piketty reported for the twentieth century (1910–2010) are based on more solid ground, but have the disadvantage of muting the marked rise of inequality during the Roaring Twenties and the decline associated with the Great Depression. This article offers an alternative picture of the trend in inequality based on newly available data and a reanalysis of the 1870 Census of Wealth. This article does not question Piketty's integrity. ...

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October 19, 2017 in Tax | Permalink | Comments (1)

California Keeps Bar Exam Cut Score At 144, Second Highest In Nation

California Bar ExamCalifornia Courts News Release:

In view of the rising costs of legal education and the financial hardship potentially resulting from non-admission to the California bar, the court determined last February to assess whether the current pass score (cut score) of 1440 for the California bar exam is appropriate for evaluating the minimum competence necessary for entering attorneys to practice law in this state. 

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October 19, 2017 in Legal Education | Permalink | Comments (3)

Nevada Lowers Bar Exam Cut Score From 140 to 138, Pass Rate Increases By 23%

UNLV Logo (2016)Following up on my previous post, Oregon Lowers Bar Exam Cut Score From 142 to 137, Pass Rate Increases By 36%:  Las Vegas Review-Journal, UNLV Law School Sees Big Jump in Bar Exam Passage:

The verdict for Nevada’s most recent bar exam is in, and it’s a positive outcome for UNLV’s Boyd School of Law. Boyd students who sat for the test for the first time in July passed at a rate of 81 percent, 15 percentage points higher than in July 2016. ...

Nevada’s bar exam, which is administered twice a year, is notorious for being one of the nation’s toughest. But this year, the state Supreme Court made several decisions to make the test more user-friendly.

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October 19, 2017 in Legal Education | Permalink | Comments (1)

Real Property, Trust & Estate Law Journal Publishes New Issue

RPTE (2018)The Real Property, Trust and Estate Law Journal has published Vol. 52, No. 1 (Spring 2017):

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October 19, 2017 in Scholarship, Tax | Permalink | Comments (0)

Wednesday, October 18, 2017

Satterthwaite Presents Electing Into A Value-Added Tax Today At Northwestern

SatterthwaiteEmily Satterthwaite (Toronto) presents Electing into a Value-Added Tax: Evidence from Ontario Micro-Entrepreneurs at Northwestern today as part of its Advanced Topics in Taxation Workshop Series hosted by Sarah Lawsky:

Across countries, value-added tax (VAT) statutes typically recognize the disproportionate burden of VAT compliance for smaller firms by exempting “small suppliers” (defined as businesses with annual revenues less than a specified registration threshold) from the obligation to register for, collect, and remit VAT on their sales.  But most input-credit-style VATs also offer small suppliers a curious choice: they can elect into the VAT by voluntarily registering.  Because VAT paid on inputs is refundable for registered firms, small suppliers have stronger incentives to voluntarily register as they (1) purchase more of their inputs from registered firms (the “input channel”) or (2) sell more of their output to registered firms (the “customer channel”).  In theory, these “formality chain effects” can improve the efficiency of a VAT.  In practice, however, many VATs feature registration thresholds that are far lower in dollar terms than recommended by economists.  Where a registration threshold is very low, might microenterprises’ high VAT compliance costs weaken their incentives to voluntarily register, thereby undermining the policy rationale for offering the election?  This paper uses qualitative and quantitative research methods to explore the relevance of the formality chain effect theory in the context of a low registration threshold.

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October 18, 2017 in Scholarship, Tax | Permalink | Comments (0)

Halpern Presents Litigation In The U.S. Tax Court Today At Pennsylvania

Penn (2017)James S. Halpern (Judge, U.S. Tax Court) presents Litigation in the Tax Court at Pennsylvania today as part of its Tax Policy Workshop Series hosted by Chris Sanchirico and Reed Shuldiner:

The Tax Court continues to serve a unique and important role in the Federal government’s tax collection process. The Court provides an impartial tribunal for the adjudication of tax disputes before assessment of the tax (and the government’s ability to invoke its powerful extrajudicial means of seizing property to satisfy tax debts). It also creates a body of precedents that interpret Federal tax law uniformly across the country. The Court’s fundamental role has not changed since …

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October 18, 2017 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Harvard Law School Report On The State Of Black Alumni

HarvardDavid B. Wilkins (Harvard) & Bryon Fong (Harvard), Harvard Law School Report on the State of Black Alumni II 2000-2016:

One hundred and fifty years ago this year, the Law School enrolled George Lewis Ruffin, who would go on to be the first black person to graduate from any law school in the United States. In the intervening years, Harvard has graduated more black lawyers — over 2,700 — than any law school in the country with the exception of the great Howard University School of Law. Among their ranks are some of the most powerful and influential lawyers in the world, including the 44th President of the United States and the country’s former First Lady, Michelle Obama ’88.

In 2000, the Harvard Law School Center on the Legal Profession released a Report on the State of Black Alumni: 1869-2000 chronicling the achievements and continuing challenges of this remarkable group of lawyers on the basis of a comprehensive survey of the careers of over 650 of the school’s African American alumni. In this new Report, based on a second survey of the school’s black alumni, including those that graduated in the new millennium and matured during the Age of Obama, we both bring that history up to date and offer new perspectives for this new era.

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October 18, 2017 in Legal Education | Permalink | Comments (0)

Call for Papers: 2018 International Conference On Tax Administration

UNSWCall for Papers:

The International Conference on Tax Administration is a prestigious biennial event that brings together leading tax administrators, academics and practitioners from around the globe. The theme of the 2018 conference will be Tax System Integrity in a Digital Age. The conference will explore the impact of digital and disruptive technologies upon all aspects of tax administration in developed and developing economies, including (but not limited to): taxpayer and intermediary interactions with revenue authorities; tax filing; tax compliance and compliance costs; tax collection; information and big data management; the cashless economy; blockchain and crypto-financing; harnessing technology in the post-BEPS environment and taxing the virtual economy.

Your proposal should include the following details:

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October 18, 2017 | Permalink | Comments (0)

REMAND Makes National Television Broadcast Premiere Tonight

GashRemand: To remain indefinitely and hopelessly in prison while awaiting trial.

I encourage you to check out tonight’s national television broadcast premiere of the inspiring and award-winning documentary film REMAND.  The BBC and Washington Post both chronicle how Pepperdine Law professor Jim Gash’s representation of a wrongly accused Ugandan juvenile prisoner named Henry led to his exoneration and release.  Revolution Pictures dramatically captures how this case sparked transformative change in Uganda’s entire criminal justice system through the work of Pepperdine’s Sudreau Global Justice Program.

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October 18, 2017 in Legal Education | Permalink | Comments (0)

Hickman & Kerska: Restoring The Lost Anti-Injunction Act

Kristin E. Hickman (Minnesota) & Gerald Kerska (J.D. 2017, Minnesota), Restoring the Lost Anti-Injunction Act, 103 Va. L. Rev. ___ (2017):

Should Treasury regulations and IRS guidance documents be eligible for pre-enforcement judicial review? The D.C. Circuit’s 2015 decision in Florida Bankers Association v. Treasury puts its interpretation of the Anti-Injunction Act at odds with both general administrative law norms in favor of pre-enforcement review of final agency action and also the Supreme Court’s interpretation of the nearly identical Tax Injunction Act. A 2017 federal district court decision in Chamber of Commerce v. Internal Revenue Service, appealable to the Fifth Circuit, interprets the Anti-Injunction Act differently and could lead to a circuit split regarding pre-enforcement judicial review of Treasury regulations and IRS guidance documents.

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October 18, 2017 in Scholarship, Tax | Permalink | Comments (0)

Columbia Is Seventh Law School To Accept GRE For Admissions

Columbia (2017)Following up on my previous posts (links below):  Columbia is the seventh law school to accept the GRE as an alternative to the LSAT,  joining (in chronological order) Arizona, Harvard, Northwestern, Georgetown, Hawaii, and Washington University:

As part of its ongoing commitment to preparing students to be leaders in the legal profession, as well as other fields such as science, technology, public policy, and business, Columbia Law School will accept Graduate Record Exam (GRE) scores in addition to LSAT scores from applicants to the three-year J.D. program beginning on a trial basis in fall 2018. ...

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October 18, 2017 in Legal Education | Permalink | Comments (0)

Pittsburgh Tax Review Publishes New Issue

Tuesday, October 17, 2017

Weisbach Discusses The Unified Framework For Fixing Our Broken Tax Code Today At Columbia

WeisbachDavid A. Weisbach (Chicago) discusses the Treasury Department's Unified Framework For Fixing Our Broken Tax Code at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium Series hosted by Alex Raskolnikov and Wojciech Kopczuk.  The discussion builds on David's article, A Guide to the GOP Tax Plan – The Way to a Better Way,  8 Colum. J. Tax L. 171 (2017):

The tax reform plan — A Better Way — put forward by the chairman of the House Ways and Means Committee Kevin Brady and the Speaker of the House, Paul Ryan would be the most substantial tax reform in the United States since the enactment of the income tax in 1913. At the corporate level, the reform would allow immediate expensing of investments, deny deductions for net interest expense, and eliminate the taxation of income from sales in foreign countries while taxing the full value of imports (together shifting the tax base to a destination basis). At the individual level, the system would tax capital income including interest, dividends, and capital gains at half the rate that wages and salaries are taxed. It would also repeal the estate and generation skipping taxes. These changes would go a long way toward shifting the tax system to taxing consumption rather than income.

This paper considers the implementation of the House GOP tax plan and addresses issues that will need to be resolved if the plan is to work as intended. The plan is based on, and builds off of, a long history of thinking about consumption taxes. To understand the basic choices made in the plan, it is helpful to understand this history and how consumption taxes work in general.

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October 17, 2017 in Colloquia, Scholarship, Tax | Permalink | Comments (2)

Sander & Steinbuch: Mismatch And Bar Passage: A School-Specific Analysis

Richard H. Sander (UCLA) & Robert Steinbuch (Arkansas-Little Rock), Mismatch and Bar Passage: A School-Specific Analysis:

Past research on law school mismatch has been hampered by the absence of school-specific data, thus requiring scholars to estimate individual levels of mismatch through various indirect techniques. In this paper, the authors use data on nearly four thousand students at three law schools to directly measure mismatch levels based on LSAT scores or an academic index. The analysis shows large and statistically significant effects of mismatch; when one controls for mismatch, racial effects lose statistical significance. The results highlight the importance of mismatch in explaining both racial bar passage gaps and individual outcomes on the bar. The results also illustrate the great importance of individual school-level data across a range of schools in studying mismatch.

Table 2

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October 17, 2017 in Legal Education, Scholarship | Permalink | Comments (3)

Council of Economic Advisers: Reducing Corporate Tax Rate From 35% To 20% Would Increase Household Income By $4,000/Year

WHCouncil of Economic Advisers, Corporate Tax Reform and Wages: Theory and Evidence:

Wage growth in America has stagnated. Over the past eight years, the real median wage in the U.S. rose by an average of six-tenths of a percent per year. But even as Americans’ real wages stagnated, real corporate profits soared, increasing by an average of 11 percent per year. The relationship between corporate profits and worker compensation broke down in the late 1980s. Prior to 1990, worker wages rose by more than 1 percent for every 1 percent increase in corporate profits. From 1990-2016, the pass-through to workers was only 0.6 percent, and looking most recently, from 2008-2016, only 0.3 percent.1 The profits of U.S. multinationals are still American profits, but, increasingly, the benefits of those profits do not accrue to U.S. workers.

The deteriorating relationship between wages of American workers and U.S. corporate profits reflects the state of international tax competition. The problem is not unique to America; countries around the world have responded to the international flow of capital by cutting their corporate tax rates to attract capital back from other countries. They have doubled down on such policies as they have seen business-friendly policies benefit workers. This analysis from the Council of Economic Advisers reviews the evidence that has driven other developed countries to pursue the path of lower corporate tax rates and estimates how business tax reform in the Unified Framework for Fixing Our Broken Tax Code2 (hereafter, the “Unified Framework”) is expected to affect wages for American workers.

Reducing the statutory federal corporate tax rate from 35 to 20 percent would, the analysis below suggests, increase average household income in the United States by, very conservatively, $4,000 annually. The increases recur each year, and the estimated total value of corporate tax reform for the average U.S. household is therefore substantially higher than $4,000. Moreover, the broad range of results in the literature suggest that over a decade, this effect could be much larger.

Figure 2

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October 17, 2017 in Gov't Reports, Tax | Permalink | Comments (0)

Shobe:  Supercharged IPOs And The Up-C

Gladriel Shobe (BYU), Supercharged IPOs and the Up-C, 88  U. Colo. L. Rev. 913 (2017):

The “supercharged IPO”, a new and increasingly popular financial transaction, has fundamentally changed the nature of IPOs for many companies. Traditionally, an IPO was a tax nonevent for the company and the owners, meaning it created no tax liability for either. Through creative and questionable tax planning, companies have found a way to do better than this by effectively generating a negative tax liability for the company and its owners. These transactions have received substantial attention from practicing lawyers, investment bankers, journalists, and even briefly caught the attention of Congress. Yet these transactions have attracted surprisingly little scrutiny from scholars, and the attention they have received has failed to consider the different types of supercharged IPOs, which is necessary for understanding why these transactions exist, why they have increased in popularity, and whether they are justified legally and normatively. This Article examines the costs and benefits of the different types of supercharged IPOs to show that some of these transactions have greater tax benefits than scholars have realized. It places a particular emphasis on the Up-C, a structure with the greatest tax benefits, which scholars have overlooked even though it is by far the most common, and increasingly popular, form of supercharged IPO. A closer examination of the Up-C, separate from other supercharged IPOs, reveals that this structure produces tax benefits that are not justified by the regulations that supposedly allow them.

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October 17, 2017 in Scholarship, Tax | Permalink | Comments (0)

Hickman: Altera Meets Chamber Of Commerce

Hickman (2017)TaxProf Blog op-ed:  Altera Meets Chamber of Commerce, by Kristin Hickman (Minnesota):

Last week, a Ninth Circuit panel heard oral arguments in the government’s appeal from Altera Corp. & Subs. v. Commissioner, 145 T.C. 91 (2015).  Frequent readers of this blog will recall that the appeal concerns the Tax Court’s decision to invalidate regulations under Section 482 regarding cost-sharing arrangements on grounds that the regulations were not the product of reasoned decisionmaking as required by the arbitrary and capricious standard of Administrative Procedure Act (APA) § 706(2)(A) and Motor Vehicle Manufacturers Association of the United States v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29 (1983).  For the most part, the oral argument considered the substantive reasonableness of the regulations in question as an interpretation of Section 482, although there was also some discussion of whether the IRS adequately explained its reasoning in the regulatory preamble.  Judge Kathleen O’Malley of the Federal Circuit, sitting by designation, asked a question that in turn raises an interesting issue, particularly in light of recent coverage of Chamber of Commerce v. IRS, in which a federal district court in Texas interpreted the Anti-Injunction Act (AIA), 26 U.S.C. § 7421(a), as allowing pre-enforcement judicial review of an APA procedural challenge against Treasury regulations addressing inversion transactions.

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October 17, 2017 in New Cases, Scholarship, Tax | Permalink | Comments (0)

Harvard Law Review Elects First Ever Majority Female Class

HarvardHarvard Crimson, Law Review Elects First Ever Majority Female Class:

The Harvard Law Review selected more female editors than male editors to join the prestigious journal’s ranks this summer, welcoming a majority-female class for the first time in the publication’s history.

The editorial class, chosen after a rigorous competition tested the skills of prospective first-year law students, consists of 24 women and 22 men.

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October 17, 2017 in Legal Education | Permalink | Comments (0)

The Problem Of Taxpayer Communications And The Return Receipt Requirement

Return Receipt 2Nina Olson, the National Taxpayer Advocate (as if you did not know), had a great blog last week describing a really cool study her office conducted on how to improve taxpayer compliance with the Earned Income Tax Credit (ETIC ... again, as if you did not know).

The basic idea was to see if a simple letter mailed to taxpayers who had demonstrated some identifiable error in their 2014 EITC claims would result in them making fewer errors in their 2015 EITC claims. Not only that, but the study compared that group to a control group of similar taxpayers who made similar errors but who were not sent a letter explaining where they went wrong.

Certainly, my intuition as a teacher is that when you give feedback on what students do wrong, they tend to do better. The study supports that intuition’s application to taxpayers: tell them what they were doing wrong and they will do better overall and will certainly do better than those who get no such feedback.

What struck me as particularly interesting and worth further comment was the feature of just how the Taxpayer Advocate Service sent the letter to the taxpayers. Nina gives this description:

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October 17, 2017 in Bryan Camp, Gov't Reports, Tax, Tax Practice And Procedure | Permalink | Comments (0)

Yu: Cross-Deductions In The Net Investment Income Tax Imposed On A Trust Or Estate With Separate Shares

Michael T. Yu (California-Western), Cross-Deductions in the Net Investment Income Tax Imposed on a Trust or Estate with Separate Shares, 14 Pitt. Tax. Rev. 77 (2016):

The Health Care and Education Reconciliation Act of 2010 imposed, through new Code § 1411, a tax of 3.8% on certain net investment income (NII) of certain individuals, estates, and trusts for taxable years beginning after December 31, 2012 (the Net Investment Income Tax, or NIIT). Final regulations under § 1411 were published on December 16, 2013, which are effective for taxable years beginning after December 31, 2013.2 Section 1411 and the regulations thereunder, despite imposing the NIIT on certain trusts and estates, contain no reference to § 663 or the regulations thereunder (the separate share rule). Neither § 663(c) nor the regulations thereunder have been amended to reflect new § 1411 or the regulations thereunder. Treasury Regulation § 1.1411-1(a) ostensibly incorporates § 663(c) (and all other Chapter 1 Code provisions that determine taxable income under § 63(a), sometimes referred to in this article as the regular income tax) into determining the NIIT, but I argue that the regulation uses imprecise language and should be amended along the lines of my proposed language.

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October 17, 2017 in Scholarship, Tax | Permalink | Comments (0)

Monday, October 16, 2017

Burman Presents A Tax Credit To Make Work Really Pay Today At Loyola-L.A

Burman (2016)Leonard Burman (Tax Policy Center) presents A Tax Credit to Make Work Really Pay at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Katie Pratt and Ted Seto:

Middle class wages have been stagnant for the past four decades, barely keeping up with inflation. This pattern is unlikely to change. The main factor depressing wages for low- and middle-skilled workers is technology. While technology once made workers more productive and boosted wages and employment, technology increasingly substitutes for workers. It is one reason why manufacturing employment in the U.S. has plummeted even as production of manufactured goods has soared. The failure of the market to broadly share the gains from economic growth calls for an intervention.

This paper proposes a universal wage tax credit of 100% of the first $10,000 of earnings financed by a broad-based dedicated value-added tax (VAT) of about 8 percent.

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October 16, 2017 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Law Professors As Triathletes

TriathleteJudith M. Stinson (Arizona State), The Teaching, Scholarship, and Service Triathlon:

How can legal writing faculty, who spend a significant amount of time and energy teaching, commenting on student papers, and working individually with students to explicitly teach the skills of legal analysis and communication, be successful in a discipline that requires the balancing of so many roles? For each professor, one part may be easier than the others or more enjoyable than the others. In addition, individual faculty members may be better at one part than at the others. But legal academia does not offer the luxury of choosing which core requirement or requirements to fulfill. Likewise, triathletes deal with the fundamental challenge of balancing three complementary but different core tasks. Swimming, cycling, and running each require different skills – yet the real difference between a successful and unsuccessful triathlete is how well one accomplishes all three components.

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October 16, 2017 in Legal Education | Permalink | Comments (0)

Head Of Tax Practice At BigLaw Firm Sentenced To 24 Months In Federal Prison For Tax Evasion: 'Everyone — Including Tax Lawyers — Must Be Truthful In Reporting Their Income'

LevineNew York Law Journal, Judge Hands Two-Year Sentence to Ex-Herrick Tax Head:

Four months after pleading guilty to tax charges, former Herrick Feinstein partner Harold Levine in New York was sentenced Wednesday to 24 months in federal prison for his role in a scheme to defraud the IRS.

U.S. District Judge Jed Rakoff of the Southern District of New York in Manhattan handed down the sentence against Levine, who was indicted a year ago this month on wire fraud and tax evasion charges.

U.S. Attorney’s Office for the Southern District of New York Press Release, Manhattan Tax Attorney Sentenced To Two Years In Prison For Participation In Multimillion-Dollar Tax Evasion Scheme And Lying To The IRS:

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October 16, 2017 in IRS News, Tax | Permalink | Comments (0)

Thimmesch, Gamage & Shanske: The Case For Consumer-Based Use Tax Enforcement

Adam B. Thimmesch (Nebraska), David Gamage (Indiana) & Darien Shanske (UC-Davis), The Case for Consumer-Based Use Tax Enforcement, 85 State Tax Notes 1049 (Sept. 11, 2017):

This essay argues that state governments’ current focus on getting vendors to collect their sales and use taxes is insufficient, especially in regard to e-commerce transactions. If state governments want their use taxes to serve as effective and lawful backstops to their sales taxes — as state governments claim is their goal — then states must also focus on the consumer side of the use-tax equation.

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October 16, 2017 in Scholarship, Tax | Permalink | Comments (0)

Yes, U.S. Tax Cuts Will Mainly Benefit Those Who ... Pay the Most Taxes

New York Post op-ed:  Yes, U.S. Tax Cuts Will Mainly Benefit Those Who ... Pay the Most Taxes, by Brian M. Riedl (Manhattan Institute):

A popular Facebook and Twitter game asks friends to post an unpopular opinion. Here is an unpopular fact: Tax reformers cannot deeply cut income taxes for lower-income families, because they already pay no collective income tax.

Tax reform is intended to bring simplification and economic growth. Yet many commentators seem interested in only redistribution.

This explains the teeth-gnashing over the Tax Policy Center estimate that the Republican tax blueprint would save the median family $420, but a family in the top income quintile $10,610.
While that sounds unfair, consider this: The top-earning 20 percent of households currently pay 88 percent of all federal income taxes. So even a proportional income-tax cut will save them the most money.


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October 16, 2017 in Tax | Permalink | Comments (7)

NY Times: U.S. And Europe May Collide On Taxing Amazon And Apple

Amazon appleNew York Times, U.S. and Europe May Collide on Taxing Apple and Amazon:

President Trump and congressional lawmakers are not the only ones interested in collecting taxes on global profits that American corporations are hoarding overseas. European regulators, knee deep in a campaign to stamp out tax avoidance, have their own plans for that money.

Last week, for instance, the European Commission billed Amazon for $293 million in unpaid taxes in Luxembourg, arguing that the country’s failure to collect the tax amounted to an illegal state subsidy. It also took Ireland to court for not following up on the $15.2 billion tax bill imposed on Apple last year.

“The Europeans are targeting U.S. dollars overseas that the U.S. believes should be taxed here,” said Dave Camp, a former Republican representative from Michigan who was chairman of the House Ways and Means Committee and the author of an unsuccessful tax overhaul in 2014. “We have to address this problem before the Europeans get there first.”

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October 16, 2017 in Tax | Permalink | Comments (2)

More Reaction To The Wax & Alexander Op-Ed On The Breakdown Of The 'Bourgeois Culture' 

Following up on my previous coverage of the op-ed by Amy Wax (Pennsylvania) and Larry Alexander (San Diego), Paying the Price for Breakdown of the Country's Bourgeois Culture:

Wall Street Journal op-ed:  Black Americans Need Bourgeois Norms: Frederick Douglass Would Have Agreed With Amy Wax, by Robert L. Woodson:

This summer, law professors Amy Wax and Larry Alexander caused a stir with an op-ed lamenting the decline of what they called “bourgeois norms.” “All cultures are not equal,” they rightly observed. Those that encourage self-restraint, delayed gratification, marriage and a strong work ethic tend to thrive. Those that tolerate or excuse substance abuse, out-of-wedlock pregnancy and dropping out tend to break down.

Ms. Wax and Mr. Alexander were instantly accused of racism by the growing army of angry academics who police the prevailing narrative of black victimhood. According to this narrative, black progress is determined not by personal choices and individual behavior, but by white supremacy, America’s history of slavery and discrimination, and institutional racism. Touting “bourgeois values” is interpreted as an offense against authentic black culture. ...

A better life has always been available to those who reject undisciplined and irresponsible behavior, and embrace self-determination and personal responsibility. So-called bourgeois values have always empowered blacks to persevere and overcome bitter oppression. They provided the moral “glue” that held the black community together during the hardest of times.

The life-affirming values that enabled [Frederick] Douglass and others to survive retain their potency in the 21st century. ...

Above the Law:  Black People Do Have Bourgeois Values: That’s Why So Many White People Are Still Alive, by Elie Mystal:

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October 16, 2017 in Legal Education | Permalink | Comments (2)

TaxProf Blog Weekend Roundup

Sunday, October 15, 2017

Brunson & Herzig: The Treasury Department Should Create Blacklist Of What Constitutes Prohibited Discrimination By Religious Organizations

Samuel D. Brunson (Loyola-Chicago) & David J. Herzig (Valparaiso), A Diachronic Approach to Bob Jones: Religious Tax Exemptions after Obergefell, 92 Ind. L.J. 1175 (2017):

In Bob Jones v. U.S., the Supreme Court held that an entity may lose its tax exemption if it violates a fundamental public policy, even where religious beliefs demand that violation. In that case, the Court held that racial discrimination violated fundamental public policy. Could the determination to exclude same-sex individuals from marriage or attending a college also be considered a violation of fundamental public policy? There is uncertainty in the answer. In the recent Obergefell v. Hodges case that legalized same-sex marriage, the Court asserted that LGBT individuals are entitled to “equal dignity in the eyes of the law.” Constitutional law scholars, such as Lawrence Tribe, are advocating that faith groups might lose their status, citing that this decision is the dawning of a new era of constitutional doctrine in which fundamental public policy will have a more broad application.

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October 15, 2017 in Scholarship, Tax | Permalink | Comments (1)

Court Uses First Amendment To Reverse Conviction Of Man Who Flipped The Bird At His Pastor During A Sermon

ABA Journal, Man Who Flipped the Bird At His Pastor Gets His Conviction Overturned On First Amendment Grounds:

A churchgoer convicted of disorderly conduct for flipping the bird at his pastor was engaging in speech protected by the First Amendment, according to the Georgia Supreme Court.

The court reversed the conviction of David Justin Freeman in a decision on Monday, the Atlanta Journal-Constitution reports.

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October 15, 2017 in Legal Education, Tax | Permalink | Comments (1)

Zelinsky: The House Appropriations Committee And The Johnson Amendment

Edward Zelinsky (Cardozo), The House Appropriations Committee and the Johnson Amendment:

The Committee on Appropriations of the US House of Representatives, in a so-called rider to the pending federal budget bill, has proposed significant procedural restrictions on the IRS’s ability to enforce the Johnson Amendment. The Johnson Amendment is the provision of the Internal Revenue Code which prevents all tax-exempt institutions (including churches) from participating in political campaigns. The Committee’s budget rider is the most recent salvo in the ongoing dispute about churches and politics.

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October 15, 2017 in Congressional News, Tax | Permalink | Comments (0)

The Top Five New Tax Papers

SSRN LogoThere is quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new #1 paper and new papers debuting on the list at #3 and #5:

  1. [1,594 Downloads]  Private Benefits in Public Offerings: Tax Receivable Agreements in IPOs,, by Gladriel Shobe (BYU)
  2. [406 Downloads]  Is Efficiency Biased?, by Zachary Liscow (Yale)
  3. [244 Downloads]  Background and Current Status of FATCA and CRS, by William Byrnes (Texas A&M)
  4. [230 Downloads]  The Rise of Trust Decanting in the United States, by Robert Sitkoff (Harvard)
  5. [208 Downloads]  Rejecting Charity: Why the IRS Denies Tax Exemption to 501(C)(3) Applicants, by Terri Lynn Helge (Texas A&M)

October 15, 2017 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, October 14, 2017

This Week's Ten Most Popular TaxProf Blog Posts

IMF: Higher Taxes On The Rich Will Reduce Inequality Without Hurting Economic Growth

IMF Fiscal Monitor, Tackling Inequality, October 2017:

Rising inequality and slow economic growth in many countries have focused attention on policies to support inclusive growth. While some inequality is inevitable in a market-based economic system, excessive inequality can erode social cohesion, lead to political polarization, and ultimately lower economic growth. This Fiscal Monitor discusses how fiscal policies can help achieve redistributive objectives. It focuses on three salient policy debates: tax rates at the top of the income distribution, the introduction of a universal basic income, and the role of public spending on education and health.


New York Times, I.M.F. Cautions Against Tax Cuts for Wealthy as Republicans Consider Them:

The International Monetary Fund delivered a blunt warning to international policy makers ahead of the fund’s annual meeting this week: Governments risk undermining global economic growth by cutting taxes on the wealthy.

The message, while aimed broadly at all developed nations, carries particular resonance in the United States as the Trump administration and Republican lawmakers push a tax plan that critics say will exacerbate income inequality by reducing taxes for the richest Americans. ...

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October 14, 2017 in Gov't Reports, Tax | Permalink | Comments (4)

Lesson From Tax Court: The Downside of Easy Tax Exemption Approval

These would seem to be fat times for organizations that want tax-exempt status. As everyone and their little dog seems to know, Service resource constraints have made recognition as a tax-exempt organization “virtually automatic” for most applicants on the front end. Even the National Taxpayer Advocate complained that it was too easy for organizations to obtain approval.

This week’s lesson from the Tax Court is that the upside of easy approval on the front end may carry a significant downside on the back end. In the reviewed opinion Creditguard of America, Inc. v. Commissioner, 149 T.C. No. 17, Judge Lauber expressed the Tax Court’s opinion that when the Service revokes an organization’s tax exempt status retroactive to a given year, interest starts running from that retroactive year’s return due date, and not just from the date when the Service made its determination to revoke or actually assessed the tax liability. Why is this such a downside? Because the very resource constraints that make for easy application approval on the front end also create significant delays in completing examinations on the back end. In the Creditguard case, the examined year was 2002, the audit was opened in 2003, completed in 2012 and the resulting deficiency assessed in 2013. And now it’s 2017. That’s a lotta interest. More below the fold.

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October 14, 2017 in Bryan Camp, New Cases, Tax | Permalink | Comments (0)

The Smartest Americans Are Heading West

Bloomberg, The Smartest Americans Are Heading West:

Bloomberg 1

Three cities in Colorado — a state whose fortunes have been tied to the boom and bust of oil, gas and other commodities — are among the top 10 leading destinations for the nation’s best and brightest as old cow and mining towns morph into technology hubs, according to data compiled by Bloomberg. ... Filling out the top 10 of the Brain Concentration Index are cities rich in technology and higher education, including San Francisco (2), Washington (5), Raleigh (6) and Seattle (9).

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October 14, 2017 in Tax | Permalink | Comments (4)

Anne-Marie Rhodes Named John J. Waldron Professor Of Law At Loyola-Chicago

RhodesRhodes Named John J. Waldron Professor of Law:

Loyola University Chicago School of Law is pleased to announce the appointment of Professor Anne-Marie Rhodes as the John J. Waldron Professor of Law.  Rhodes has been a member of Loyola’s full-time law faculty since 1980.  She teaches courses in estate-and-gift tax, income tax, estate planning, trusts and estates, art law, and comparative law, and is a frequent presenter and is widely published in these areas. Her book Fundamentals of Federal Estate, Gift, and Generation-Skipping Taxes (West Academic) was published this year.  Her casebook Art Law & Transactions (Carolina Academic Press) was published in 2011.

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October 14, 2017 | Permalink | Comments (0)

Friday, October 13, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Sloan Speck (Colorado) reviews a new work by Tsilly Dagan (Bar Ilan University), The Future of Corporate Residency.

Speck (2017)Grim. That, in a word, is Tsilly Dagan’s conclusion in her compelling paper, The Future of Corporate Residency. Although Dagan’s position may not surprise many, the route she takes reveals much about the current—and perhaps future—state of international taxation. Dagan begins at the beginning, tracing multinational corporations as legal constructs from the East India Company to the advent of general incorporation statutes in the second half of the nineteenth century. After a brief discussion of the rise and fall of benefits theories of taxation, Dagan exposits a revival in de facto benefits taxation, at least among multinational corporations. Two factors drive this revival: the “marketization” of corporate residence, in which jurisdictions compete for multinationals’ presence, and the “fragmentation” of the state-derived benefits of incorporation, in which multinationals divide their presence among multiple jurisdictions to create “mix-and-match” legal regimes. Dagan is skeptical that cooperation can overcome marketization and fragmentation. Furthermore, Dagan notes that cooperation may be undesirable, if it entails efficiency losses and disadvantages developing countries.

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October 13, 2017 in Scholarship, Tax | Permalink | Comments (0)

Tax Policy In The Trump Administration