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Wednesday, June 4, 2014

University Provides $2.2 Million Lifeline to Minnesota Law School to Help Close $3 Million Budget Deficit Caused by 18% Enrollment Decline

Minnesota Daily, Facing Low Enrollment, Law School Gets a $2.2 Million Boost:

Minnesota LogoA lower number of new students creates financial problems for the school, Wippman said.

As its enrollment continues to drop, the University of Minnesota’s Law School is set to receive more money to fight financial woes. President Eric Kaler’s proposed budget for next year includes a $2.2 million allocation to help the Law School cover a loss in tuition revenue, an issue plaguing law schools nationwide.

The University’s Law School has had relatively consistent enrollment over the past few years, but Dean David Wippman said the applications to the school and the number of first-year students are sharply declining. In fall 2014, he said, about 180 students will enroll, compared to about 220 first-year students in 2013. ...

If the Law School received no aid from the University and didn’t make changes to its operations, he said, it would face a deficit of about $3 million next year.

To cover the gap, the administration is taking steps like lowering raises for employees, not renewing contracts with adjunct faculty members and moving publications to the web, Wippman said. The school has also admitted more transfer students than normal, Wippman said, and will launch a new one-year master’s program in patent law to attract new students. ...

Wippman said Law School leaders are working to alleviate the need for additional University financial support, but he hopes to get continued monetary help if it’s needed. Last year, the University gave the Law School $950,000 for scholarships, and tuition rose by 5 percent or more for full-time resident students for the 2013-14 school year.

2013-14 tuition was $40,058 (resident), $47,330 (nonresident).

(Hat Tip: Dan Filler.)

June 4, 2014 in Legal Education | Permalink | Comments (1)

Fahey: The Movement to Destroy the Income Tax and the IRS

Diane L. Fahey (New York Law School), The Movement to Destroy the Income Tax and the IRS: Who Is Doing It and How They Are Succeeding, 15 Fla. Tax Rev. 157 (2014):

Florida Tax ReviewThe passage of the Sixteenth Amendment to the United States Constitution in 1913 enabled the federal government to enact an income tax. Until 1941, only a small number of Americans paid the income tax; however, when the United States entered World War II, the income tax was expanded so that most citizens paid something. After the war ended, the federal income tax remained in place as a mass tax. Further, as the tax was expanded it became a major source of revenue for the federal government during and after World War II, thereby enabling the federal government to grow in size and power.

However, from the time the income tax was enacted, there has been a movement to undermine the income tax by financial elites who not only stand to benefit enormously but who are philosophically offended at both the idea of being subject to an income tax and an expanded and powerful federal government. The wealthy who were dismayed by the federal government’s increasingly prominent role in the lives of ordinary Americans recognized that reducing the federal government’s access to funds would reduce its influence and power. This movement has used a several-pronged approach: (1) attack the legitimacy of the federal government itself, and (2) attack the income tax and attack the manner in which the tax is collected.

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June 4, 2014 in Scholarship, Tax | Permalink | Comments (3)

Warren: Credit v. Deduction of Foreign Taxes of a Multinational Corporation

Alvin C. Warren (Harvard), The Relationship between a Credit and a Deduction for the Foreign Taxes of a Multinational Corporation:

A credit for foreign taxes paid by a multinational company is usually described as fundamentally different from a deduction for foreign taxes. The credit has been criticized for eliminating the taxpayer's incentive to reduce foreign taxes, whereas a deduction is said to maintain that incentive. On the other hand, the credit is traditionally defended as a method of eliminating double taxation of cross-border income, whereas the deduction is often criticized for producing multiple levels of taxation (and is therefore not an acceptable method of dealing with double taxation under the standard international tax treaties). The argument of this note is that a credit and a deduction for foreign taxes paid by a multinational company are not as different as the foregoing assertions would suggest. Indeed, credits and deductions can be interchangeable, with the distinction only a matter of labels or nominal tax rates.

June 4, 2014 in Scholarship, Tax | Permalink | Comments (0)

McGeorge Symposium: The State and Future of Legal Education

McGeorgeSymposium, The State and Future of Legal Education, 45 McGeorge L. Rev. 1-160 (2013):

June 4, 2014 in Legal Education, Scholarship | Permalink | Comments (3)

NY Times on InfiLaw's Proposed Acquisition of Charleston Law School

NY Times Dealbook (2013)Following up on my previous posts (links below): Potential Sale of Law School Raises Debate Over Who Should Profit, by Steven M. Davidoff (Ohio State):

The notion of legal education is colliding with the profit motive in Charleston, S.C., where “for profit” and “private equity” are being tossed around as dirty words in the fight against the acquisition of a regional law school.

The battle centers on the proposed acquisition of the Charleston Law School by the InfiLaw System, which runs three for-profit law schools and is owned by the private equity firm Sterling Partners. Opponents are skeptical of InfiLaw’s for-profit business model. The irony is that the law school’s current owners have taken out more than $25 million in profits over the last few years without protest. It all may just boil down to snobbery and who should be allowed to attend law school.

InfiLaw will not be Harvard, but for those who go in with open eyes, it may be a path to being a lawyer. The point is really to make sure that students know the costs and benefits before they matriculate so they can make a sound judgment about whether to attend. In other words, if InfiLaw or Charleston cannot provide an education that helps students obtain jobs, then presumably students will know and not attend. That is really what legal education these days is about at the regional law schools — perhaps they should just acknowledge that they can’t be Harvard and provide students the training they need.

The full commission is meeting on the InfiLaw petition on Thursday. Instead of arguing about who will profit from them, Charleston’s students may instead want to ask who will give South Carolina’s residents the best opportunity to succeed as lawyers at an acceptable price. It’s probably something that would work well for all law schools these days.

Prior TaxProf Blog posts:

(Hat Tip: Mike Talbert.)

Update #1:  Dan Filler (Drexel) reports that the South Carolina Attorney General's office has issued an advisory opinion stating that the Commission of Higher Education lacks the authority to deny the proposed acquisition for reasons outside of the statutory criteria.

Update #2:  Steven J. Harper (Northwestern) criticizes Davidoff's article in The Battle for Charleston:  "Why should anyone profit at all when non-dischargeable student loans are the source of those profits?"

Update #3:

June 4, 2014 in Legal Education | Permalink | Comments (0)

Sullivan: How Will Japan Pay for a Lower Corporate Rate?

Tax Analysys Logo (2013)Martin A. Sullivan (Tax Analysts), How Will Japan Pay for a Lower Corporate Rate?, 74 Tax Notes Int'l 788 (June 2, 2014):

Japanese Prime Minister Shinzo Abe's second term began in December 2012. In the first 12 months, prices on the previously moribund stock market soared 63 percent. In the following six months, they have dropped by 10 percent. ... The rise and fall are largely explained by Abenomics.

TNIThe prime minister's radical break from Japan's previous economic policies has three components, referred to as the three arrows. The first arrow is an enormous expansion of the money supply by the Bank of Japan. The second arrow is a big boost in government spending. By all accounts, both of these measures have been successful in providing short-term stimulus to the economy. ...

But Japan's miraculous made-in-Tokyo recovery is now stalled by a lack of progress on the third arrow of Abe's program: promised but unspecified structural, supply-side reforms like reduced regulation of the labor market, reductions in trade barriers and other protections of favored industries, and a reduction in the corporate tax rate, currently the second highest in the world after the United States. The government's fiscal and economic blueprint, due later this month, is expected to offer proposals on these issues. ...

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June 4, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (1)

Cheating: An Insider's Report on the Use of Race in Admissions at UCLA

CheatingTim Groseclose (UCLA, Department of Political Science), Cheating: An Insider's Report on the Use of Race in Admissions at UCLA (2014):

Because of California's Proposition 209, public universities such as UCLA cannot use race as a factor in admissions. However, as this book shows, UCLA gives significant preferences to African Americans, while it discriminates against Asians. The author, a professor of political science and economics at UCLA, documents what he witnessed as a member of UCLA's faculty oversight committee for admissions.

He also describes findings from a UCLA internal report as well as statistics from a large data set that he has posted online. All show that UCLA is breaking the law. The discrimination is not simply a byproduct of class-based preferences. For instance, for one aspect of the admissions process, a rich African American's chance of admission is almost double that of a poor Asian, even when the two applicants have identical grades, SAT scores, and other factors.

June 4, 2014 in Book Club, Legal Education | Permalink | Comments (17)

Kidder & Lempert: The Law School Mismatch Myth

William C. Kidder (UC-Riverside) & Richard Lempert (Michigan), The Mismatch Myth in American Higher Education: A Synthesis of Empirical Evidence at the Law School and Undergraduate Levels:

This paper presents a comprehensive examination of the empirical literature testing the academic mismatch hypothesis as it applies to affirmative action and students of color in U.S. higher education. The primary focus of this paper is the mismatch research addressing American legal education (Part II). This includes a detailed assessment of the empirical basis of claims made by Richard Sander and, more recently, by Doug Williams, showing flaws in their work, including questionable claims and methodological choices. In particular, this paper calls into question all research using the LSAC Bar Passage Study data that treats schools in tiers 2 and 3 in that study as separate and hierarchically ordered, arguing that this treatment is statistically unjustified and due to idiosyncrasies in the data and factors that in fact distinguish these tiers serves to enhance the odds of finding a mismatch effect while lowering the likelihood of finding reverse mismatch effects. The paper also reviews research on mismatch at the undergraduate level (Part III), specifically examining the outcomes of graduation rates and earnings and again finding that the mismatch hypothesis lacks empirical support and is, if anything, empirically less plausible than claims made for a reverse mismatch effect. In examining both legal and undergraduate education, this paper both critiques work that purports to find evidence of mismatch and references numerous studies that find no evidence of mismatch effects or evidence of reverse mismatch effects, including studies that use state of the art methods to control for selection bias. Overall the social science evidence points clearly in one direction: affirmative action as practiced today is not plagued by mismatch effects; indeed the evidence indicates that underrepresented minority students tend to do better over the life course if they attend the most selective school that will admit them.

June 4, 2014 in Legal Education | Permalink | Comments (0)

The IRS Scandal, Day 391

IRS Logo 2The Hill, Conservative Group Accuses Nine Dem Senators of Unethical Conduct:

A conservative group is calling on the Senate ethics committee to examine nine top Democrats, accusing them of pushing the IRS to investigate specific groups.

The Center for Competitive Politicsannounced their complaint Tuesday, in which they charge that lawmakers tried to get the tax agency to probe outside conservative groups.

“These senators improperly attempted to use the IRS to suppress the free speech of American citizens for their party’s electoral gain,” said Brad Smith, chairman of the Center and a former Chairman of the Federal Election Commission. “We will fight this type of abuse of power and work to ensure that those who have violated Senate Ethics rules are held to account.”

The group wants the ethics panel to look at Sens. Dick Durbin (Ill.), Chuck Schumer (N.Y.), Carl Levin (Mich.), Michael Bennet (Colo.), Sheldon Whitehouse (R.I.), Jeanne Shaheen (N.H.), Al Franken (Minn.), Jeff Merkley (Ore.), and Tom Udall (N.M.).

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June 4, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, June 3, 2014

What Does It Take for a School Ranked 35 in U.S. News to Move Into the Top 20? 'Hundreds of Millions of Dollars and Prayer'

U.S News LogoInside Higher Ed, Rankings Noise:

What would it take for a well-regarded institution -- such as the University of Rochester, and a few dozen more like it -- to be among U.S. News & World Report’s top 20 national universities? Hundreds of millions of dollars and a prayer, according a new peer-reviewed paper co-written by a former Rochester provost and his staff.

The study [Modeling Change and Variation in U.S. News & World Report College Rankings: What would it really take to be in the Top 20?], published by the journal Research in Higher Education, argues that small movements in the rankings are simply “noise” and that any kind of sustained upward movement is both immensely expensive and nearly impossible. ...

The paper found that small movements up or down in the rankings are more or less irrelevant. For most universities in the top 40, any movement of two spots or less should be considered noise, the paper said. For colleges outside the top 40, moves up or down of four spots should be thought of as noise, too. “For example, a university ranked at 30 could be 95 percent confident that its rank will fall between 28 and 32, and only when the rank moves beyond those levels can a statistically significant change be claimed,” the paper said.

Colleges that want to move any farther have a hard row to hoe, the paper argues, because “meaningful rank changes for top universities are difficult and would occur only after long-range and extraordinarily expensive changes, not through small adjustments.”...

[T]he paper, by authors who have all worked at Rochester, adds to the ruminating by administrators over the U.S. News list with several arguments, including in-depth exploration of what it would take for Rochester, consistently in the mid-30s on the list, to break into the top 20. Emory University, Georgetown University and the University of California at Berkeley currently tie for No. 20. ...

If it wanted to move into the top 20, Rochester would have to do a lot on several of the various factors U.S. News uses to rank colleges. To move up one spot because of faculty compensation, Rochester would have to increase the average faculty salary by about $10,000. To move up one spot on resources provided to students, it would have to spend $12,000 more per student. Those two things alone would cost $112 million a year.

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June 3, 2014 | Permalink | Comments (4)

Graetz: The Tax Reform Road Not Taken -- Yet

Michael J. Graetz (Columbia), The Tax Reform Road Not Taken -- Yet, 67 Nat'l Tax J. 419 (2014):

National Tax Journal Logo (2013)The United States has traveled a unique tax policy path, avoiding value added taxes (VATs), which have now been adopted by every OECD country and 160 countries worldwide. Moreover, many U.S. consumption tax advocates have insisted on direct personalized taxes that are unlike taxes used anywhere in the world. This article details a tax reform plan that uses revenues from a VAT to substantially reduce and reform our nation’s tax system. The plan would (1) enact a destination-based VAT; (2) use the revenue produced by this VAT to finance an income tax exemption of $100,000 of family income and to lower income tax rates on income above that amount; (3) lower the corporate income tax rate to 15 percent; and (4) protect low and-moderate-income workers from a tax increase through payroll tax credits and expanded refundable child tax credits. This revenue and distributionally neutral plan would stimulate economic growth, free more than 150 million Americans from having to file income tax returns, solve the difficult problems of international income taxation, and remove the temptation for Congress to use tax benefits as if they are solutions to the nation’s pressing social and economic problems.

June 3, 2014 in Scholarship, Tax | Permalink | Comments (1)

Barnhizer: Rat Time in Law Schools and the Legal Profession

David Barnhizer (Cleveland State), Of Rat Time and Terminators:

RatsAbout twenty years ago Canadian scientists used a community of rats living in a glass cage to determine the effects of population growth within a finite system. As long as the rat population remained relatively low and resources were sufficient, the rats behaved well. But rats breed rapidly. As the population inside the closed system grew but the total food available stayed relatively constant, the per capita resources shrank. The rats exhibited increasingly aggressive behavior, including savagery and cannibalism. Eventually the population fell to a level that once again allowed the rat version of civility to emerge. When rat time hits and the population of a finite system begins to exceed the resources needed for basic sustenance, it is silly to expect rats -- or lawyers -- to behave civilly. When the rat population reaches extremely high levels, mother rats had better lock their doors and hide the little rats.

A version of rat time is being created within the legal profession as law schools pump 40,000 graduates a year into a saturated system. Understanding our present condition as a period of rat time can help us diagnose the problems of the legal profession, identify the future responsibilities of law schools and the profession, and create more effective solutions than the bandaids that have been proposed or applied thus far. This is particularly important because lawyers and law schools have lost their way. They are afraid to address their most troubling problems and to take the principled actions necessary for meaningful reform.

June 3, 2014 in Legal Education | Permalink | Comments (11)

Mayer & Ganahl: Taxing Social Enterprise

Lloyd Hitoshi Mayer (Notre Dame) & Joseph R. Ganahl (J.D. 2013, Notre Dame), Taxing Social Enterprise, 66 Stan. L. Rev. 387 (2014):

The fairly strict divide in the United States between for-profit and nonprofit forms presents a quandary for many entrepreneurs who want to combine doing good with doing well. On the one hand, for-profits offer great flexibility and access to capital and so attract entrepreneurs who would like to take advantage of the ability of for-profits to scale up rapidly to meet growing demand. At the same time, however, for-profit forms also limit entrepreneurs’ ability to engage in philanthropy, due to the fiduciary duties managers owe to the equity holders. On the other hand, nonprofits offer their founders the freedom to prioritize public benefit but limit both their access to capital, in large part due to the bar on equity financing for a nonprofit, and their flexibility in addressing changing societal needs as a result of constraints in the law designed to deter nonprofits from straying into activities unrelated to their narrow primary mission. Hybrids — low-profit limited liability companies, benefit corporations, and other related forms — have been touted as the “both-and” solution to this problem by marrying the capital and innovation that results from the ability to generate a profit for investors with the public benefit goals that characterize most nonprofits.

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June 3, 2014 in Scholarship, Tax | Permalink | Comments (0)

Zelinsky: The Minnesota Snowbird Tax and Double Taxation of Dual Residents

Florida Tax ReviewEdward A. Zelinsky (Cardozo), Apportioning State Personal Income Taxes to Eliminate the Double Taxation of Dual Residents -- Thoughts Provoked by the Proposed Minnesota Snowbird Tax, 15 Fla. Tax Rev. 533 (2014):

As a matter of both tax policy and constitutional law, it is time to apportion state personal income taxes to eliminate the double taxation of dual residents. Individuals who, for income tax purposes, are residents are two or more states should be taxed along the lines recently proposed by Minnesota Governor Mark Dayton for “snowbirds”: As to income with respect to which a state has source jurisdiction, that state should tax such income. As to income which two or more states tax only on the basis of residence, such states should apportion, based on the dual resident’s relative presence in each state of residence. This apportioned approach would eliminate the double taxation of dual residents’ income and would comport better with modern patterns of residence and mobility.

While Minnesota’s legislature did not adopt the Dayton proposal, that proposal should provoke reconsideration of the conventional understanding of personal residence for state income tax purposes. The traditional understanding can cause double taxation when an individual is deemed to be a resident of two or more states, each entitled to tax this dual resident’s entire income. As a matter of tax policy and constitutional law, the formula advanced by Governor Dayton for Minnesota snowbirds is the proper way to tax all dual residents. As to income with respect to which a state has source jurisdiction because the income arises within the state’s geographic boundaries, that state should tax that income, whether or not the taxpayer is a resident of such state. As to income with respect to which two or more states have only residence-based jurisdiction to tax, the states of residence should tax on a proportionate basis, based on the part of the year the dual resident spends in each state. In practice, the income apportioned between states of residence under this approach will typically be dual residents’ intangible investment income such as dividends and interest. To eliminate double residence-based taxation of such income, the Dayton formula should, both as a matter of tax policy and of constitutional law, apply to all individuals who are, for tax purposes, residents of two or more states.

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June 3, 2014 in Scholarship, Tax | Permalink | Comments (0)

McGinnis: The Five Ways Computers are Revolutionizing Legal Practice (and Legal Education)

City Journal:  Machines v. Lawyers: As Information Technology Advances, the Legal Profession Faces a Great Disruption, by John McGinnis (Northwestern):

Big DataLaw schools are in crisis, facing their most substantial decline in enrollment in decades, if not in the history of legal education. Applications have fallen over 40 percent since 2004. The legal workplace is troubled, too. Benjamin Barton, of the University of Tennessee College of Law, has shown that attorneys in “small law,” such as solo practitioners, have been hurting for a decade. Attorney job growth has been flat; partner incomes at large firms have recently recovered from the economic downturn, but the going rate for associates, even at the best firms, has stagnated since 2007.

Some observers, not implausibly, blame the recession for these developments. But the plight of legal education and of the attorney workplace is also a harbinger of a looming transformation in the legal profession. Law is, in effect, an information technology—a code that regulates social life. And as the machinery of information technology grows exponentially in power, the legal profession faces a great disruption not unlike that already experienced by journalism, which has seen employment drop by about a third and the market value of newspapers devastated. The effects on law will take longer to play themselves out, but they will likely be even greater because of the central role that lawyers play in public life.

The growing role of machine intelligence will create new competition in the legal profession and reduce the incomes of many lawyers. The job category that the Bureau of Labor Statistics calls “other legal services”—which includes the use of technology to help perform legal tasks—has already been surging, over 7 percent per year from 1999 to 2010. As a consequence, the law-school crisis will deepen, forcing some schools to close and others to reduce tuitions. While lawyers and law professors may mourn the loss of more lucrative professional opportunities, consumers of modest means will enjoy access to previously cost-prohibitive services. ...

Five key areas of law now face encroachment by this machine intelligence. Some invasions are imminent, and others more distant but no less likely. ...

  1. E-discovery
  2. Computerization of Legal Search
  3. Automation of Legal Forms
  4. Automation of Briefs and Memos
  5. Legal Analytics

Discovering information, finding precedents, drafting documents and briefs, and predicting the outcomes of lawsuits—these tasks encompass the bulk of legal practice. The rise of machine intelligence will therefore disrupt and transform the legal profession.

A relatively small number of very talented lawyers will benefit from the coming changes. These superstars will prosper by using the new technology to extend their reach and influence. ...

But the large number of journeyman lawyers -- such as those who do routine wills, vet house closings, write standard contracts, or review documents on a contractual basis -- face a bleak future. They will have far less to contribute to legal analysis, and they will face relentless evaluation from clients using new data-driven metrics. ...

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June 3, 2014 in Legal Education | Permalink | Comments (2)

Look Up and Alone Together

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

I took a step back and opened my eyes
I looked around and realized
this media we call social is anything but
when we open our computers and it’s our doors we shut. ...

All this technology we have, it’s just an illusion
community, companionship, a sense of inclusion.
Yet when you step away from this device of delusion
you awaken to see a world of confusion.

Sherry Turkle (MIT), Alone Together: Why We Expect More from Technology and Less from Each Other (2012):

Alone TogetherThirty years ago we asked what we would use computers for. Now the question is what don’t we use them for. Now, through technology, we create, navigate, and perform our emotional lives.

We shape our buildings, Winston Churchill argued, then they shape us. The same is true of our digital technologies. Technology has become the architect of our intimacies. Online, we face a moment of temptation. Drawn by the illusion of companionship without the demands of intimacy, we conduct “risk free” affairs on Second Life and confuse the scattershot postings on a Facebook wall with authentic communication. And now, we are promised “sociable robots” that will marry companionship with convenience.

Technology promises to let us do anything from anywhere with anyone. But it also drains us as we try to do everything everywhere. We begin to feel overwhelmed and depleted by the lives technology makes possible. We may be free to work from anywhere, but we are also prone to being lonely everywhere. In a surprising twist, relentless connection leads to a new solitude. We turn to new technology to fill the void,but as technology ramps up, our emotional lives ramp down.

Alone Together is the result of MIT technology and society specialist Sherry Turkle’s nearly fifteen-year exploration of our lives on the digital terrain. Based on interviews with hundreds of children and adults, it describes new, unsettling relationships between friends, lovers, parents, and children, and new instabilities in how we understand privacy and community, intimacy and solitude. It is a story of emotional dislocation, of risks taken unknowingly. But it is also a story of hope, for even in the places where digital saturation is greatest,there are people—especially the young—who are asking the hard questions about costs, about checks and balances, about returning to what is most sustaining about direct human connection. At the threshold of what Turkle calls “the robotic moment,” our devices prompt us to recall that we have human purposes and, perhaps, to rediscover what they are.

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

June 3, 2014 in Legal Education, Tax | Permalink | Comments (0)

Pete Rose: A Tax Dilemma

RoseKostya Kennedy, Pete Rose: An American Dilemma 123 n.5 (2014):

Rose liked giving things to coaches, including, in 1978, Jeeps to nine Reds coaches and trainers, a gift with a value of more than $50,000 that he wrote off on his tax return, saying they were for “services rendered.” When the deduction was denied, Rose sued the IRS, claiming that the coaches were necessary to his success. He testified in court that given his approach to the game, he in particular required coaches and trainers to work long and off hours (early morning treatments, off-day batting practice etc.) He won the case mainly because the jury, as Rose’s lawyer Robert Pitcairn put it, regarded Rose as a “unique athlete.” Rose was delighted that the deduction was restored and made a point of saying publicly that he felt coaches and trainers were too often undervalued and underpaid.

(Hat Tip: Erik Jensen.)

June 3, 2014 in Book Club, Celebrity Tax Lore, Tax | Permalink | Comments (1)

IRS Releases Spring 2014 SOI Bulletin

SOIThe IRS's Statistics of Income Division has released (IR-2014-69) the Spring 2014 SOI Bulletin (Vol. 33, No. 4), with these articles:

June 3, 2014 in IRS News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 390

IRS Logo 2Wall Street Journal op-ed:  Congress Abetted the IRS Targeting of Conservatives, by Bradley A. Smith & David Keating (both of the Center for Competitive Politics):

On Monday the Center for Competitive Politics filed a complaint with the Senate Select Committee on Ethics against nine U.S. senators [Sens. Bennet, Durbin, Franken, Levin, Merkley, Schumer, Shaheen, Udall, Whitehouse]: for interfering with IRS tax proceedings; for misusing official resources for campaign purposes; and for improper conduct that reflects poorly upon the Senate. Attempting to use the IRS to advance a partisan, electoral agenda is a fundamental assault on good government. We believe these elected officials have staged such an assault.

The complaint documents how the senators improperly interfered with IRS adjudications to further their party's electoral prospects. They pressured the IRS to undertake income-tax investigations of specific organizations, to find that specific organizations were in violation of the law, to reach predetermined results pertaining to pending applications by individual organizations for nonprofit status, and to adopt specific regulatory interpretations and policies to further their campaign goals.

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June 3, 2014 in IRS Scandal, Tax | Permalink | Comments (0)

Monday, June 2, 2014

Jones: The IRS Should Reevaluate its Floundering ADR Program

Tax Analysys Logo (2013)Ken Jones (Sutherland Asbill & Brennan, Washington, D.C.), Appeals Arbitration: Not a Compelling Litigation Alternative, 143 Tax Notes 1059 (June 2, 2014):

IRS Appeals announced its initial arbitration program in 2000, and after 14 years, there apparently have been only a few cases resolved by binding arbitration. Appeals arbitration has failed to become popular in the tax controversy marketplace, and there are some likely reasons for the program's lack of success. ... I offer my observations about the arbitration program, why it has not been embraced by taxpayers as a viable alternative to litigation, and why Appeals should reevaluate the role of binding arbitration -- and, indeed, all of its alternative dispute resolution (ADR) tools -- to determine whether they are meeting the needs of the taxpayers and the IRS.

June 2, 2014 in IRS News, Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Law School Rankings by Social Life of Students

GraduatePrograms.com, The 2014 Top Law Schools For Social Life:

Graduate Programs is pleased to announce the Top 25 Law Schools for Social Life. With votes from more than 60,000 students, Graduate Programs ranked the most social law schools in the nation:

  1. Florida (9.65 stars)
  2. Colorado (9.49 stars)
  3. Texas (9.46 stars)
  4. Georgia (9.33 stars)
  5. Alabama (9.24 stars)
  6. Washington (St. Louis) (9.23 stars)
  7. Virginia (9.19 stars)
  8. Northwestern (9.17 stars)
  9. Miami (9.15 stars)
  10. San Francisco (9.14 stars)

California has five law schools in the Top 25 (San Francisco (#10), Stanford (#13), UC-Berkeley (#18), USC (#20), UCLA (#23), the most by far of any state (Florida, Massachusetts, New York, and Texas each has two law schools in the Top 25).

METHODOLOGY:

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June 2, 2014 in Law School Rankings, Legal Education | Permalink | Comments (1)

Did State Taxes Drive Ken Whisenhunt to Coach Tennessee Titans Rather Than Detroit Lions?

Detroit Free Press,  Antonio Gates Thought Ken Whisenhunt Would Coach Detroit Lions ... But Income Tax Might've Tipped Scale:

TMSan Diego Chargers tight end Antonio Gates was as surprised as anyone when he found out that his offensive coordinator, Ken Whisenhunt, decided not to pursue the Detroit Lions’ head coaching job. And Gates has a pretty good idea why Whisenhunt took the Tennessee Titans’ job instead.

“I just knew he was coming here,” Gates, a Detroit Central product, said Thursday, while in town to watch his cousin, boxer Tony Harrison, fight tonight at Cobo Center. “But he took the job in Tennessee, which was a shocker to me. I think the state income tax had an impact on that. That’s my personal opinion.”

Tennessee doesn’t have a state income tax. Michigan does. The difference would be a sizable savings on a coach’s multimillion-dollar deal. In fact, Gates even texted Whisenhunt after he took the Titans job and said that he couldn’t fault his financial decision. 

I told him, ‘You went out there, and they have no state tax. You got a bigger house. You saved more money,’” Gates said. “I said, ‘That’s a smart decision.’

(Hat Tip: Mike Talbert.)

June 2, 2014 in Legal Education | Permalink | Comments (0)

NY Times: To Get an A in Philanthropy Class, Give Away $50,000

NY Times Dealbook (2013)New York Times DealBook:   To Get an A in Philanthropy Class, Give Away $50,000, by William Alden:

Vinay Sridharan must make it through microeconomic theory and the writings of Proust before the end of his senior year at Northwestern in June. But in one course, the final project is far less abstract: give away $50,000.

It is also far more difficult than it may seem.

This course in philanthropy, endowed with a grant from a Texas hedge fund manager, requires students to find and investigate nonprofit organizations and, if they stand up to scrutiny, give them a portion of the five-figure cash pot.

“I didn’t realize they had real money to give,” said Margaret Haywood, the director of work force development at the Inspiration Corporation, a Chicago charity that received $25,000 from the Northwestern students last year.

The workshop — and others like it that have sprung up in the last few years at a dozen universities, including Harvard, Stanford, Princeton and Yale — offers a real-world experience of philanthropy that is rare in the cloistered halls of academia, and which otherwise is reserved for institutions and the affluent. Many students have embraced the challenge, viewing the courses as preparation for work in the nonprofit sector or even as training to one day become wealthy philanthropists themselves.

June 2, 2014 in Legal Education | Permalink | Comments (0)

Sikh Groups Call on President Obama to Reinstate IRS Agent Fired for Wearing Knife to Work

Following up on my previous posts (links below):  Sikh Groups Call on Obama to Reinstate IRS Agent Fired for Wearing Article of Faith (more here):

Tagore1According to information shared by United Sikhs, a US based NGO, [o]n January 28, 2014 letters were sent to President Obama and Attorney General Eric Holder by twelve major American Sikh advocacy organizations, including United Sikhs, calling on the Obama Administration to immediately reinstate Kawaljeet Tagore, a Sikh IRS Agent based out of Houston, TX fired in July, 2006 for wearing a kirpan, a Sikh religious article of faith.

Following her termination, Tagore sued the IRS and the Federal Protective Service (FPS),the federal agency responsible for the security of federal buildings, under Title VII and the Religious Freedom Restoration Act for failing to accommodate her Sikh religious practice of wearing the kirpan, a dagger-like article that symbolizes the Sikhs’ commitment to justice. Even though FPS and IRS allow saws, box cutters, letter openers, and cake knives into federal buildings for work-related purposes, the IRS and FPS defended Tagore’s lawsuit by claiming that a federal criminal law, 18 U.S.C. section 930, prohibits them from according Tagore any accommodation for her kirpan.

In 2012, a Houston federal judge sided with the government and dismissed Tagore’s lawsuit. However, on November 13, 2013, the United States Court of Appeals for the Fifth Circuit—relying on a December, 2012 FPS Policy Directive that requires accommodation of kirpans — reversed the federal judge’s ruling in favor of FPS [Tagore v. United States, No. 12-20214 (Nov. 23, 2013)]. The Fifth Circuit held that the new FPS Policy Directive “contradicts the arguments previously advanced by the government for denying Tagore an exception or exemption for the wearing of her kirpan.

Yet, to date, the government has refused to reinstate Tagore to her position as an IRS agent, compensate her, or accommodate her kirpan.

June 2, 2014 in Tax | Permalink | Comments (0)

Professor of the Year: 'If You Don’t Give Me Any of Your Shitty Papers, You Get an A'

Critical Theory:  Professor of the Year, “If You Don’t Give Me Any of Your Shitty Papers, You Get an A”:

Cover 3Slavoj Zizek fans and haters can finally agree on something: he probably doesn’t like any of you.

Zizek has always been vocal about his general disdain for students and humanity writ large. He once admitted in 2008 that seeing stupid people happy makes him depressed, before describing teaching as the worst job he has ever had. “I hate students,” he said, “they are (as all people) mostly stupid and boring."

In a recent interview at this year’s Zizek Conference at the University of Cincinnati, Zizek talked about his personal life before delving into his thoughts on teaching.

“I hate giving classes,” Zizek said, citing office hours and grading papers as his two biggest peeves.

“I did teach a class here [at the University of Cincinnati] and all of the grading was pure bluff,” he continues. “I even told students at the New School for example … if you don’t give me any of your shitty papers, you get an A. If you give me a paper I may read it and not like it and you can get a lower grade.” He received no papers that semester.

But it’s office hours that are the main reason he does not want to teach.

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

June 2, 2014 in Legal Education | Permalink | Comments (14)

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June 2, 2014 in About This Blog, Legal Education, Tax | Permalink | Comments (0)

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June 2, 2014 in About This Blog, Legal Education, Tax | Permalink | Comments (1)

The IRS Scandal, Day 389

IRS Logo 2Thiago Sorrentino was kind enough to let me know that the Supreme Court of Brazil (the Supremo Tribunal Federal) has cited my daily roundup on the IRS Scandal in Medida Cautelar NA Susepnsao De Tutela Antecipada (STA/752):

Without revealing transparency of the criteria for application of the tax rules , the appeal of the State to protect free enterprise and fair competition declines to a cognitive framework of uncertainty , as that on which the fiscalizatórios thorough review procedures of the Internal Revenue Service U.S. , due to the selectivity of legal interpretation as non- legal criteria ( see, for all the record that Prof. . Caron Paul does in http://taxprof.typepad.com/taxprof_blog/2014/05/the-irs-scandal- 17.html ); In these terms , the argument would only be permissible risk to free enterprise and fair competition that each taxpayer could realize the full control of the criteria used to apply tax rules , both those that define the tax burden as those that effectively prohibit the exercise of activity economic lawful. Given these caveats, impart pled measure to suspend the company - interested in the records of Action to advance protection 

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June 2, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

TaxProf Blog Weekend Roundup

Sunday, June 1, 2014

Legal Education, Religious and Secular: The Trinity Western University Controversy and Beyond

Carissima Mathen (University of Ottawa, Faculty of Law) & Michael Plaxton (University of Saskatchewan, College of Law), Legal Education, Religious and Secular: TWU and Beyond:

TrinityThere has been a vigorous argument in Canada over whether a private Christian educational institution, Trinity Western University (TWU), should be able to open an accredited law school. TWU has come under scrutiny for requiring faculty, students and staff to sign a Community Covenant [FAQ] promising not to engage in a set of biblically prohibited activities, including sexual contact outside of heterosexual marriage. Arguing that the Covenant is discriminatory, many oppose the law school. Their objections have precipitated debates in both academic and regulatory settings.

This paper does not engage with the various constitutional and human rights issues at stake in the TWU controversy. Instead, it engages in a broader discussion of Canadian legal education – its existing conventions, animating aims, and relationship to the legal profession. Though we have deep concerns about the TWU Covenant, and its effect on gay and lesbian students, we also have concerns about the way in which some of the objections to TWU’s law school have been framed. In criticizing TWU, secular law schools and academics should be wary of setting out standards that, in their own institutions, they do not purport to observe.

Prior TaxProf Blog coverage:

June 1, 2014 in Legal Education, Scholarship | Permalink | Comments (2)

Top 5 Tax Paper Downloads

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

  1. [298 Downloads]  The New Flat Tax: A Modest Proposal for a Constitutionally Apportioned Wealth Tax, by John Thomas Plecnik (Cleveland State)
  2. [285 Downloads]  Just Say No: Corporate Taxation and Corporate Social Responsibility, by Reuven S. Avi-Yonah (Michigan)
  3. [195 Downloads]  Carried Interest for the Common Man, by Richard Winchester (Thomas Jefferson)
  4. [193 Downloads]  The Real Problem with Carried Interests, by Heather M. Field (UC-Hastings)
  5. [158 Downloads]  Avoidance, Evasion, and Taxpayer Morality, by Allison Christians (McGill)

June 1, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The Other Harvard Law School Graduation Speech

Following up on Thursday's post, Mindy Kaling’s Harvard Law School Graduation Speech:   Preet Bharara, U.S. Attorney for the Southern District of New York, also gave a wonderful speech:

[T]hat is where your focus should be always — being the guy who does his job. Whether you are an associate, a law clerk, an assistant DA, a public defender, or anything else.

Nothing else matters but doing your job and doing it well. Every day. Even when it’s hard. Even when it’s tedious. Even when it’s dull. Even when the work seems small and beneath your brand-name schooling and God-given talent. It means being the guy who does his job, even when no one is looking and no one will know the good ideas came from you.

If you do that, not only the next job, but your career, will take care of itself. 

(Speech begins at 11:20. Click on YouTube button on bottom right to view video directly on YouTube to avoid interruption caused by blog's refresh rate.)

June 1, 2014 in Legal Education | Permalink | Comments (1)

The IRS Scandal, Day 388

Saturday, May 31, 2014

Today's Law, Society & Taxation Panels

Law & SocietyToday's Law, Society, and Taxation panels at the 2014 Law & Society Association Annual Meeting in Minneapolis:

  • Panel #11:  Social Policy, Human Needs, and Tax Law
  • Panel #12:  Politics, Substance, and Taxation
  • Author Meets Readers: Ajay Mehrotra (Indiana), Making the Modern American Fiscal State

Today's paper presenters, topics, and abstracts are below the fold:

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May 31, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Thomas Piketty Responds to Financial Times Criticism: 'If Anything, My Book Underestimates the Rise in Wealth Inequality'

CapitalFollowing up on my previous posts on the new book by Thomas Piketty (Paris School of Economics), Capital in the Twenty-First Century (Harvard University Press, 2014):

Thomas Piketty (Paris School of Economics), Response to FT:

This is a response to the criticisms -- which I interpret as requests for additional information -- that were published in the Financial Times on May 23 2014. ...

I welcome all criticisms and I am very happy that this book contributes to stimulate a global debate about these important issues. My problem with the FT criticisms is twofold. First, I did not find the FT criticism particularly constructive. The FT suggests that I made mistakes and errors in my computations, which is simply wrong, as I show below. The corrections proposed by the FT to my series (and with which I disagree) are for the most part relatively minor, and do not affect the long run evolutions and my overall analysis, contrarily to what the FT suggests. Next, the FT corrections that are somewhat more important are based upon methodological choices that are quite debatable (to say the least). In particular, the FT simply chooses to ignore the Saez-Zucman 2014 study, which indicates a higher rise in top wealth shares in the United States during recent decades than what I report in my book (if anything, my book underestimates the rise in wealth inequality). Regarding Britain, the FT seems to put a lot of trust in self-reported wealth survey data that notoriously underestimates wealth inequality.

May 31, 2014 in Book Club, Tax | Permalink | Comments (2)

My New Digs

I have spent the past week moving into my new faculty office at Pepperdine, complete with spiffy ocean view (and patio):

Photo

May 31, 2014 in Legal Education, Tax | Permalink | Comments (9)

The IRS Scandal, Day 387

IRS Logo 2Forbes: Did IRS Target Israel? Suit By Pro-Israel Z Street Will Move Forward, by Peter J. Reilly:

This lawsuit much like Teapartygate confirms me in my view, that the evaluation of whether an organization's purposes should allow it exempt status is not something that the IRS should be doing. There are credits for historic buildings, but it is not the IRS that decides whether the buildings are historic. The same principle should apply here.

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May 31, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Friday, May 30, 2014

Weekly Tax Roundup

 Weekly Roundup

May 30, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly Legal Education Roundup

May 30, 2014 in Legal Education, Weekly Legal Education Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

May 30, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Student Tax Note Roundup

NY Times: Harvard Is the Stanford of the East

New York Times, To Young Minds of Today, Harvard Is the Stanford of the East: Riding Technology Wave, Stanford Rises to Top of Some Measures:

SHIn academia, where brand reputation is everything, one university holds an especially enviable place these days when it comes to attracting students and money. To find it from this center of learning, turn west and go about 2,700 miles.

Riding a wave of interest in technology, Stanford University has become America’s “it” school, by measures that Harvard once dominated. Stanford has had the nation’s lowest undergraduate acceptance rate for two years in a row; in five of the last six years, it has topped the Princeton Review survey asking high school seniors to name their “dream college”; and year in and year out, it raises more money from donors than any other university.

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May 30, 2014 | Permalink | Comments (1)

Today's Law, Society & Taxation Panels

Law & SocietyToday's Law, Society, and Taxation panels at the 2014 Law & Society Association Annual Meeting in Minneapolis:

  • Panel #6:  Comparative Issues in Taxation
  • Panel #7:  Corporate Taxation
  • Panel #8:  Rules Versus Standards in Taxation
  • Panel #9:  Businesses and Taxation
  • Panel #10:  The Administration of Tax Systems

Today's paper presenters, topics, and abstracts are below the fold:

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May 30, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

IRS Eyes New Ways to Tax Frequent Flyer Miles

New York Sun:  IRS Eyes New Ways to Tax Miles of Frequent Fliers, by Ira Stoll:

Just in time for your summer vacation, the IRS is getting ready to toughen the tax treatment on frequent flyer miles and hotel loyalty reward programs.

The IRS announced in 2002 that it wouldn’t try to go after individuals for income taxes on frequent flyer miles or hotel loyalty points earned on company-paid business trips.  Yet the temptation to wring some tax revenue out of the vast non-dollar economy of Starwood Preferred Guest Starpoints, Marriott Rewards points, American Airlines AAdvantage miles, Delta Skymiles, and so on is apparently so great that that the government just cannot resist.

Sure enough, the Tax Foundation, a research group that tracks tax issues, flags a recent post on the View From the Wing blog that runs under the provocative headline, “The IRS Looks To Be on the Verge of Imposing a Big Tax Burden on Loyalty Points.”

The IRS’s plans are vague, but they have airlines and hotel owners concerned enough about the issue that they reportedly sent a letter to Treasury Secretary Jacob Lew. “The IRS’ proposal to alter the tax treatment of loyalty programs will impose a significant new tax on existing and future loyalty points that travel customers enjoy and rely upon,” said the letter, according to a report in Politico. “Any change or clarification of loyalty program accounting should be made through the legislative process, not IRS promulgation.”

Frequent flyer mile fanatics got a wake-up call on the issue back in 2012 when Citibank sent IRS Forms 1099, documenting “miscellaneous income,” at a rate of 2.5 cents a mile, to customers who had signed up for an American Airlines-branded credit card and gotten 40,000 AAdvantage miles as a bonus. It was an unpleasant surprise to cardholders who thought they were getting a free trip, not an unwanted extra tax bill.

May 30, 2014 in IRS News, Tax | Permalink | Comments (1)

Charleston Law School Founder Opposes InfiLaw's Proposed Acquisition, Offers to Donate His 1/3 Interest to Create Nonprofit Law School

Charleston LogoFollowing up on my prior posts (links below):  from our Law Deans on Legal Education Blog, Charleston Law Founder Ed Westbrook Counters Infilaw, by I. Richard Gershon (Dean, Mississippi):

Charleston School of Law Founder Ed Westbrook has written an extensive response to questions raised concerning Infilaw's continued push to acquire the law school. Westbrook has been a supporter of moving the law school to nonprofit status since its inception.

Prior TaxProf Blog posts:

May 30, 2014 in Legal Education | Permalink | Comments (2)

Harvard 3L's Website: Correlation Does Not Imply Causation

BBC News, Spurious Correlations: Margarine Linked to Divorce?:

One of the golden rules of statistics is that correlation does not equal causation. Just because the movements of two variables track each other closely over time doesn't mean that one causes the other.

To make this important, but somewhat dry, point more accessible, [Tyler] Vigen, a criminology student at Harvard Law School, wrote a computer programme to mine datasets for statistical correlations. He posts the funniest ones to Spurious Correlations.

Tyler

Cage

May 30, 2014 in Legal Education, Tax | Permalink | Comments (3)

The IRS Scandal, Day 386

IRS Logo 2Commentary:  Phony Scandal? Courts Open Window on the IRS’s Political Litmus Tests, by Jonathan S. Tobin:

Interest in the Internal Revenue Service’s outrageous practice of subjecting politically conservative groups to discriminatory treatment has died down a bit since the revelations about this scandal first hit the news a year ago. But a court decision that was handed down earlier this week about a similar instance of potential government misconduct may shed more light on the way the Tea Party and other right-wing organizations were given the business by Lois Lerner and the rest of what appears to be a highly politicized bureaucracy at the heart of our tax collection system. ...

In other words, this case may be the straw that breaks the camel’s back of the IRS’s politically prejudicial policies. If an IRS agent can reject or stall a pro-Israel group’s application on the grounds that “these cases are being sent to a special unit in the D.C. office to determine whether the organization’s activities contradict the Administration’s public policies,” then no group, no matter what its political orientation or cause is safe from being subjected to a political litmus test designed by any administration of either political party. ...

Using the IRS to punish political foes is blatantly illegal. If, as we suspect, the Z Street case reveals the sort of internal email traffic that will reveal how widespread this practice has become in the last five years, perhaps even a liberal mainstream press that still thinks the problems at the IRS are a “phony scandal” will start to pay attention.

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May 30, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Thursday, May 29, 2014

Today's Law, Society & Taxation Panels

Law & SocietyToday's Law, Society, and Taxation panels at the 2014 Law & Society Association Annual Meeting in Minneapolis:

  • Panel #1:  The Theory of Taxation
  • Panel #2:  Nonprofits and TaxationPanel #3:  Higher Education, Sports, and Taxation
  • Panel #4:  From Local to Global Issues in Taxation
  • Panel #5:  International Taxation

Today's paper presenters, topics, and abstracts are below the fold:

Continue reading

May 29, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Rising College Costs, Politics, and Tax Reform

Wall Street Journal, Efforts to Curb College Costs Face Resistance:

WSJObama administration initiatives intended to help restrain soaring college costs are facing resistance from schools and from a bipartisan bloc of lawmakers looking to protect institutions in their districts.

Groups representing colleges and universities this week formally opposed the administration's plan to more tightly oversee programs that officials say leave students in steep debt but with weak job prospects. The new rules cover for-profit schools along with career-training programs—those that lead to certificates, but not degrees, in a given field, such as mechanics or cosmetology—at public schools and nonprofits. A bipartisan group in Congress is seeking ways to kill the plan, which the administration wants to have in place by November.

At the same time, the administration is planning to delay the rollout of its signature higher-education initiative: a college-rating system that would score institutions based on their affordability and quality. Education Department officials, hoping to have that proposal in place by late 2015, said they need more time to draft the rules after criticism from school officials unnerved by the prospect of federal officials' making value judgments on a school's worth.

Center for American Progress, Harnessing the Tax Code to Promote College Affordability: Options for Reform:

ChartThe United States tax code is full of provisions designed to encourage or reward specific behaviors, such as owning a home or saving for retirement. Tax benefits for higher education are no exception: Contributions to some college savings accounts grow tax-free, college tuition is often tax deductible, and some student-loan borrowers are able to deduct the interest paid on their student loans just as they would the interest paid on their mortgage.

These higher education tax provisions have implications for access, affordability, and equity. Higher-income families benefit from tax-free savings toward future college costs through Section 529 college savings plans. The tax code, however, rewards middle-class families for savings less, because tax benefits are much smaller for those in lower tax brackets, and these families largely do not participate.

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May 29, 2014 in Legal Education, Tax | Permalink | Comments (3)

Hackney: Why Section 501(C)(6) Trade Associations Are Undeserving of Tax Exemption

Philip Hackney (LSU), Taxing the Unheavenly Chorus: Why Section 501(C)(6) Trade Associations Are Undeserving of Tax Exemption, 92 Denv. U. L. Rev. ___ (2014):

Our federal, state, and local governments provide a subsidy that enhances the political voice of business interests. This article discusses the federal subsidy for business interests provided through the Internal Revenue Code (“Code”) and argues why we should end that subsidy. Under the same section that provides exemption from income tax for charitable organizations, the Code also exempts nonprofit organizations classified as “business leagues, chambers of commerce, real-estate boards, boards of trade, or professional football leagues.” Theory supporting tax exemption states that we should subsidize nonprofit organizations that provide goods or services that are undersupplied by the market. A charitable organization that assists the poor is a classic example of a service undersupplied by the market. Business interest group services, however, are found in abundance. Data shows that there is a significant bias in the interest group system in favor of business interests and away from interests such as labor, the poor, and the environment. Tax-exemption at federal, state, and local levels likely fosters at least some of this bias in our democracy. Rather than enhancing a pluralistic society, as some argue is a prime benefit of our tax-exempt system, tax-exemption for business interest groups enhances the voice of the powerful and detracts from the voice of the weak. Thus, because business interests experience little in the way of market failure and tax-exemption for such groups likely leads to a bias in our democratic system I argue we should end exemption for nonprofit business interests.

May 29, 2014 in Scholarship, Tax | Permalink | Comments (0)