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Monday, September 8, 2014

Hauer Presents The Virtues of Dual Tier Capital Taxation Today at UC-Berkeley

UC Berkeley Primary Logo Berkeley BlueAndreas Hauer (University of Munich) presents Reforming an Asymmetric Union: On the Virtues of Dual Tier Capital Taxation at UC-Berkeley today as part of the Robert D. Burch Center for Tax Policy and Public Finance Seminar:

The tax competition for mobile capital, in particular the reluctance of small countries to agree on measures of tax coordination, has ongoing political and economic fallouts within Europe. We analyse the e ects of introducing a two tier structure of capital taxation, where the asymmetric member states of a union choose a common, federal tax rate in the rst stage, and then non-cooperatively set local tax rates in the second stage. We show that this mechanism e ectively reduces competition for mobile capital between the members of the union. Moreover, it distributes the gains across the heterogeneous states in a way that yields a strict Pareto improvement over a one tier system of purely local tax choices. Finally, we present simulation results, and show that a dual structure of capital taxation has advantages even when side payments are feasible.

September 8, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Democrats' Anti-Inversion Tax Plan Could Reach Back to 1994

Bloomberg:   Schumer Anti-Inversion Tax Plan Could Reach Back to 1994, by Richard Rubin:

A proposal from a top Senate Democrat could limit deductions for companies that moved their tax addresses out of the U.S. as long ago as 1994, according to a draft obtained by Bloomberg News.

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September 8, 2014 in Tax | Permalink | Comments (1)

ABA Tax Section Accepting Nominations for 2015-2017 Public Service Fellowships

ABA Tax Section (2014)The ABA Tax Section is accepting applications for Public Service Fellowships for 2015-2017:

The Christine A. Brunswick Public Service Fellowships provide salaries and benefits, as well as law school debt assistance, by means of charitable contributions to the sponsoring organizations to fellows selected. The Section plans to award two fellowships each year.

Applications must be received by November 14, 2014, to be considered. Interviews will be conducted during the Section’s Midyear Meeting in Houston on January 29-31, 2015. The Section will cover the cost of travel and accommodations for applicants selected for interviews.

To apply for the ABA Tax Section Public Service Fellowships, please click here.

The 2014-2016 Christine A. Brunswick Public Service Fellowship class:

September 8, 2014 in ABA Tax Section, Tax | Permalink | Comments (0)

Newsweek: Corporate Deadbeats -- How Companies Get Rich Off Of Taxes

Newsweek:  Corporate Deadbeats: How Companies Get Rich Off Of Taxes, by David Cay Johnston (Syracuse):

NewsweekYou and your wallet have a big stake in huge tax-dodging deals being crafted by big American companies, like Burger King merging with Tim Hortons, the Canadian coffee and doughnut chain.

Burger King is looking to swap the 35 percent corporate tax rate in the U.S. for Canada’s 15 percent rate, even though its working headquarters will remain in Miami. The little people—the millions of us who pay our taxes week to week—will pick up some of the tax burden Burger King and other multinationals shirk through these so-called inversions, in which they move their headquarters, on paper, to escape taxes while continuing to enjoy all the benefits of doing business in America.

It’s just one of several ways multinationals don’t pay their fair share, and they get away with it because the federal government encourages such behavior. If Congress taxed you the way it taxes multinational corporations, you would have a much fatter wallet. If you were Apple, General Electric, Google or Microsoft, taxes would not be a burden at all. Instead, taxes would help you prosper.

How can a tax burden become a boon? Simple. Congress lets multinationals earn profits today but pay their taxes by-and-by. In effect, Uncle Sam is loaning these companies all that money they do not immediately turn over as taxes. And all of these loans come with the same attractive interest rate: zero.

Imagine how your bank statement would look if, instead of having taxes taken out of your weekly paycheck, Congress let you keep that dough in return for your promise to pay your taxes years or decades from now—and sometimes, never.

That’s the extraordinary deal Congress gives many big American companies now sitting on hundreds of billions of dollars of what are, essentially, interest-free loans. Apple and GE owe at least $36 billion in taxes on profits being held tax-free offshore, Microsoft nearly $27 billion and Pfizer $24 billion, according to Citizens for Tax Justice, a nonprofit organization respected for the integrity of its numbers even by groups that dislike its progressive perspective.

The big companies get such “interest-free loans” in myriad ways, but most of them involve delaying the payment of taxes. Delay is a modern philosopher’s stone, but instead of turning lead into gold, this tax alchemy makes the black ink of profits look red when examined by Internal Revenue Service auditors.

One technique is for American multinationals to pay their offshore subsidiaries royalties for the use of patents, logos and manufacturing techniques. This converts profits earned in the U.S. into tax-deductible expenses. You could do the same thing by moving a dollar from your left pocket to your right, but with one crucial difference—you won’t get to deduct that dollar. But big companies do.

The use of offshore tax havens to convert profits into expenses stems from a 1986 change to Section 531 of the tax code. Starting in 1909, Congress imposed a 15 percent penalty on corporate cash-hoarding. That was supposed to encourage companies to reinvest and pay salaries and dividends, rather than weaken the economy by stuffing profits into the corporate equivalent of the proverbial mattress.

The 1986 amendment said companies could hold unlimited amounts of cash, provided it was in offshore accounts. Today at least 362 of the Fortune 500 companies have more than 7,800 tax haven subsidiaries, many stuffed with cash, according to a tiny nonprofit research organization, the Institute on Taxation and Economic Policy. Its detailed analysis of company disclosure statements found that in the five-year period from 2008 through 2012, no taxes were paid by 25 of 288 big American companies. Those 25 got cash back—refunds—from Uncle Sam on their tax bills. The immensely profitable Verizon earned more than $30 billion in profits over those five years, but instead of paying taxes, it collected income tax refunds of more than a half-billion dollars, which works out to a tax rate of minus 1.8 percent. Pepco, which counts on taxpayers to buy a big chunk of the electricity it sells in and around the nation’s capital, dodged taxes so skillfully that it enjoyed a tax rate of minus 33 percent. Looked at another way, for each dollar of profit earned, Uncle Sam gave Pepco a grant of 33 cents. ...

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September 8, 2014 in Tax | Permalink | Comments (2)

Tax Policy Center Hosts Program Today With Jacob Lew on Business Tax Reform: What Can Be Done?

Tax Policy Center LogoThe Tax Policy Center hosts a program today on Business Tax Reform: What Can Be Done? featuring Treasury Secretary Jacob Lew:

The corporate income tax is under increasing pressure and business tax reform is critically important to help stop this trend. While the United States has the highest corporate tax rate in the developed world, some businesses pay the full rate and others pay hardly anything due to inefficiencies and special-interest loopholes.  To address these issues, proposals have been put forward to simplify the code, eliminate wasteful carve-outs and tax expenditures, broaden the base, and lower the corporate tax rate.  

Treasury Secretary Jacob J. Lew will speak on the importance of business tax reform to level the playing field and make the United States a more attractive place to invest. After the Secretary’s remarks, a panel of experts will focus on one important aspect of business tax reform -- the issue of corporate inversions, whereby companies legally change their official residence to foreign countries to avoid the U.S. corporate tax. Will Congress tackle business tax reform? Will they address inversions? And, failing Congressional action, can and should Treasury take steps to slow the tide of inversions?

  • Sarah Rosen Wartell (President, Urban Institute) (moderator)
  • Sally Katzen (NYU)
  • Steven Rosenthal (Tax Policy Center)
  • John M. Samuels (General Electric)
  • Stephen Shay (Harvard)

Update:  Bloomberg, Treasury to Decide in ‘Near Future’ Action on Inversions: Lew

September 8, 2014 in Conferences, Tax | Permalink | Comments (1)

Should Universities Profit From Vodka Jell-O Shots Consumed by Their Students?

Inside Higher Ed, Jell-O Shots: University-Approved?:

Jello ShotsLast month -- just in time for a new season of college football -- Kraft Foods released a new line of Jell-O molds in the shapes of various university logos. Four of the "jiggler mold kits" were unveiled last year, but products for 16 more teams have now been added, including the University of Alabama, Ohio State University, and the University of California at Los Angeles.

In a press release, Kraft said the kits are meant to be used in creating Jell-O treats for tailgate parties for alumni and fans. But some are concerned that the themed molds could be seen as university-endorsed invitations to create alcohol-laced "Jell-O shots" -- a mixed message for universities fighting to curb binge drinking among students. ... Aaron White, the program director of college and underage drinking prevention research at the National Institute on Alcohol Abuse and Alcoholism: "If I were a student, I'd be awfully confused if I heard about the dangers of drinking and drinking games at freshman orientation and then when I got to Wal-Mart, I found these Jell-O molds with my school's logo on it."

Kraft admits that it is aware Jell-O shots are a popular way to consume the dessert, but the company told the website Vocativ that it doesn't condone using the molds for that purpose. The half-dozen universities contacted for this article did not return requests for comment.

The financial details behind the universities' licensing deals with Kraft have not been released, but colleges have a profitable history of licensing their trademarks to products that may sometimes send a mixed message to students. Shot glasses and pint glasses sporting college logos have been a mainstay at university bookstores for decades. Some colleges have even licensed their logos to appear on Ping-Pong balls and so-called "tailgate tables." Many college students have other names for the products, often used for the campus favorite beer pong.

Jell-O shots can be a particularly risky form of binge drinking, White said. Because Jell-O masks the flavor of the alcohol, it can be difficult for students to recognize how many drinks they've actually consumed. Like the similarly fruit-flavored and highly alcoholic college staple "Jungle Juice," when students consume Jell-O shots "the line between a small buzz and a dangerous overdose is very thin," White said. Students may also think of Jell-O as food, he added, meaning the consumption could be happening on a dangerously empty stomach.

Jell-O Shot kits are available for these twenty universities:

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September 8, 2014 in Legal Education | Permalink | Comments (1)

The IRS Scandal, Day 487

IRS Logo 2Washington Post:  Why Did the IRS Clean Out Lois Lerner’s Blackberry as Probes Began?:

Congress had little opportunity to debate the Internal Revenue Service’s missing-e-mail controversy while on break during the past month, but lawmakers will have plenty to talk about when they return next week.

One question likely to come up is why the IRS wiped out Lois Lerner’s Blackberry shortly after congressional staffers interviewed the then-IRS official about suspected targeting of conservative groups.

So far, the IRS has provided no answer. ...

IRS attorney Thomas J. Kane said in a separate declaration that the agency “removed or wiped clean” information from the Blackberry in June 2012, shortly after congressional staffers questioned Lerner about the targeting allegations and in the same month that the IRS inspector general began examining the issue.

Kane offered no explanation for why the IRS “removed or wiped clean” the data, and the IRS did not respond to the same question when asked by The Washington Post on Wednesday.

Taxable Talk:  IRS Won’t Say Why It Erased Lois Lerner’s Blackberry, by Russ Fox:

Let’s assume you’re under a court order to find some emails. Your hard drive crashed, but you think that some of them are saved on your Blackberry. Would you:

(a) Try to find them on the Blackberry,
(b) Do nothing, or
(c) Erase the Blackberry.

If you’re the IRS, the answer is (c). After the IRS was on notice about the missing Lois Lerner emails the IRS then wiped clean Ms. Lerner’s Blackberry. ...

As stated,

There may be a reasonable explanation for all this. But if there is, the IRS has yet to provide it, and in fact has refused when asked to do so. Combined with all the other suspicious and convenient omissions, lapses, and losses related to this case, it does make one wonder if perhaps there isn’t a reasonable explanation to be offered.

There’s nothing to add to Reason’s conclusion.

Washington Examiner:  We Still Don't Know Why Lois Lerner's Blackberry Was Wiped Clean

Glenn Reynolds (Tennessee):  Well, I Can Certainly Guess:  "At this point, I don’t think even the most credulous can really regard all this data destruction as anything other than a criminal conspiracy to cover up evidence of wrongdoing."

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September 8, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

TaxProf Blog Weekend Roundup

Sunday, September 7, 2014

The Tax Foundation and Ed Kleinbard Debate the Impact of Inversions on the Corporate Tax Base

Scott Hodge (President, Tax Foundation), IRS Data Contradicts Kleinbard’s Warnings of Earnings Stripping from Inversions:

Tax Foundation logoOne of the loudest critics of the recent wave of corporate inversions is University of Southern California law professor Ed Kleinbard, who warns that these transactions will erode the U.S. corporate tax base because these newly relocated firms will use “intragroup interest payments” to “strip” income out of their U.S. subsidiary.  ['Competitiveness' Has Nothing to Do With It, 144 Tax Notes 1055 (Sept. 1, 2014)]

While this is thought to be a common practice with multinational corporations, IRS data actually shows that the U.S. subsidiaries of foreign-based companies have smaller interest deductions relative to their total receipts than do American-headquartered firms and, interestingly, they have higher effective tax rates than their domestic counterparts. Thus, Kleinbard’s warnings would seem to be much ado about nothing. ...

Tax Foundation 1

 Tax Foundation 2

Of course, the real threat to the U.S. corporate tax base is our corporate tax code itself, with the third-highest overall rate in the world and a worldwide system that requires American companies to pay a toll charge to bring their profits back home. Thus, the solution to the inversion “problem” is to dramatically cut the corporate rate and to move to a territorial tax system, not add even more unnecessary rules to an already complicated tax code.

Edward Kleinbard (USC):

KleinbardPaul Caron has kindly given me an opportunity to respond to the Tax Foundation’s blog post, IRS Data Contradicts Kleinbard’s Warnings of Earnings Stripping from Inversion, authored by Scott Hodge. The data and relevant research in fact point in exactly the opposite direction as that suggested by the Tax Foundation in this post.

First, it should be obvious that inversions have been relatively rare transactions for the last decade, until the current wave of inversion mania infected Wall Street firms, and through that vector the larger corporate community. At the same time, genuinely foreign-controlled U.S. firms are a very large part of the U.S. domestic economy — holding roughly 20 percent of U.S. corporate assets, for example. This means that IRS Statistics of Information (SOI) data in general are insufficiently granular (to borrow a useful turn of phrase from the blog post) to shed much light on post-inversion tax planning. But we have a great deal of other information, in the form of Wall Street analyst reports, practice-oriented advisories, financial news reporting, and similar sources, all of which identify earnings stripping as one important objective in some current inversion trades. (Very generally, trades now or recently in the market lean primarily towards either the earnings stripping or the section 956 hopscotch strategies — one of the two dominates the other.) In short, the past is a poor predictor of future tax avoidance strategies in respect of the highly tax-motivated acquisition structures now in the marketplace.

But let’s persevere, as the blog post did not find this first observation disabling to its ability to mine for data to support its conclusion. The basic idea of the blog post was to take SOI data on all active U.S. corporations, and subtract out from those figures the corresponding numbers for foreign-controlled U.S. firms. The remainder was assumed to represent the results of domestic-controlled domestic corporations. I have no objections to that (other than to repeat that inversion transactions will not be visible in this data, where the numbers in some case are in the trillions of dollars). But the blog post then made two unstated modeling decisions that colored the results.

First, the blog post muddled data drawn from both financial and non-financial firms. Everyone who works with aggregate financial or tax data knows not to do that, because the two have radically different capital structures and regulatory environments. (In turn the insurance and non-insurance segments of the financial services industries have very different capital structures when compared to each other, because the liabilities on an insurance company’s balance sheet represented by current or future insurance claims against the company are non-interest bearing.) Financial services firms of course account for a very substantial percentage of corporate gross assets, liabilities, and interest expense. I am not aware of any financial services firm engaging in an inversion transaction. Following general practice in tax analysis, then, the blog post should have parsed its data one more level down, to compare foreign-controlled U.S. non-financial firms to domestic-controlled U.S. non-financial firms.

Second, the blog post compares interest expense to total receipts. But as anyone who has worked on foreign tax credit planning questions knows, interest expense does not support revenues, it supports assets. That is, you borrow money to buy stuff, not to buy free-floating revenues. So the relevant question is, how do the interest-to-assets ratios of foreign-controlled and domestic-controlled non-financial U.S. firms compare?

I do not run a tax think tank and so do not have a computer set up with the last 20 years or so of SOI data, but I did look at this question for 2011 (the most recent year for which data are available). Oddly enough, when you ask the right question, you discover that the 2011 interest-to-assets ratio for foreign-controlled non-financial U.S. firms is a bit higher, not lower, than the comparable ratio for domestic-controlled non-financial firms. Foreign-controlled firms are incurring a bit more interest cost per dollar of assets supported by the underlying borrowings.

And of course one can use the same approach to get a peek at larger earnings stripping and expense stuffing activities, by looking at the same SOI spreadsheets’ taxable income (formally, "income subject to tax”) entries. When you do, you discover that in 2011 domestic-controlled U.S. non-financial firms earned about 2.4 percent in “income subject to tax” on their gross assets. Foreign-controlled non-financial firms, by contrast, earned about 1.9 percent. You can claim that this is because all foreign investments are young and fresh, and therefore still in an expansionary mode, while domestic-controlled firms are old and tired, just collecting an annuity, but this excuse is belied by reality (e.g, Silicon Valley firms), and has grown tiresome after so many decades of use.

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September 7, 2014 in Tax, Think Tank Reports | Permalink | Comments (1)

NY Times Debate: Why Don’t Americans Take Vacation?

New York Times Room for Debate:  Why Don’t Americans Take Vacation?:

NY Times Room for DebateAccording to a new report, four in 10 American workers allow some of their paid vacation days to go unused. Why aren’t we taking time off? Is it because we’re a culture of workaholics or are companies not doing enough to accommodate paid vacation?:

  • Ellen Bravo (Family Values @ Work), We Need Standards for Paid Time Off:  "Employees create value and earn compensation. That compensation should include time to recover when ill, and to relax and rejuvenate."
  • John de Graaf (Take Back Your Timem), Many Feel Trapped by Work:  "It's up to business leaders to see the value of vacations for their employees, give them time off and encourage them to take it."
  • Bruce Elliott (Society for Human Resource Management), Unlimited Vacation — So Crazy It Works:  "For young workers, flexibility when it comes to paid time off is a major factor in employee retention."
  • Adam Okulicz-Kozaryn (Rutgers Universitym), Overworking Is Part of Our Identity:  "My research shows that Americans who work over 40 hours a week are more happy than those who work less, but that doesn't always translate into economic success."
  • Tweets on Vacation, or Lack Thereof:  "Room for Debate rounded up reader responses from Twitter."

New York Times Deal Book:  What I Learned on My Vacation, by Tony Schwartz:

NY Times Dealbook (2013)I have spent much of my adult life struggling to believe it is acceptable to simply, and deeply, relax. I come by this conviction honestly. Both my parents worked obsessively. I grew up believing my value was inextricably connected to what I accomplished — with my brain — in every moment. If I wasn’t producing something tangible, I quickly began to feel anxious and unmoored. ...

[T]he more renewal I built into my life, the more productive I became. Because I rested more regularly, I found that when I worked, I was more energized, focused and efficient. I got more done, at a higher level of quality, in less time. I built a company to teach these principles to others, and encouraged employees to make time off the job as important in their lives as time on the job. For starters, we give all of our employees at least five weeks off a year.

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September 7, 2014 in Legal Education, Tax | 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.  The #1 paper is now #22 in all-time downloads among 10,280 tax papers:

  1. [2822 Downloads]  'Competitiveness' Has Nothing to Do with it, by Edward D. Kleinbard (USC)
  2. [511 Downloads]  Guide to FATCA Compliance (Chapter 1, Background and Current Status of FATCA) (LexisNexis 2d ed. 2014), by William Byrnes (Thomas Jefferson), Denis Kleinfeld, & Alberto Gil Soriano
  3. [324 Downloads]  2013 Developments in Connecticut Estate and Probate Law, by Jeffrey A. Cooper (Quinnipiac) & John R. Ivimey (Reid and Riege, Hartford)
  4. [199 Downloads]  The Futility of Tax Protester Arguments, by Allen D. Madison (South Dakota)
  5. [180 Downloads]  Public Pressure and Corporate Tax Behavior, by Scott Dyreng (Duke), Jeffrey Hoopes (Ohio State) & Jaron Wilde (Iowa)

September 7, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 486

IRS Logo 2Sharyl Attkisson, IRS Says It Has Lost Emails From 5 More Employees:

The Internal Revenue Service has lost emails from five more employees who are part of congressional probes into the treatment of conservative groups that applied for tax-exempt status, the tax service disclosed Friday.

The IRS said in June that it could not locate an untold number of emails to and from Lois Lerner, who headed the IRS division that processes applications for tax-exempt status. The revelation set off a new round of investigations and congressional hearings.

On Friday, the IRS issued a report to Congress saying the agency also lost emails from five other employees related to the probe, including two agents who worked in a Cincinnati office processing applications for tax-exempt status. ...

The IRS blamed computer crashes for all the lost emails. In a statement, the IRS said all the crashes happened well before Congress launched its investigations.

The IRS first told Congress in June that other employees involved in the probe also had computer problems. At the time, IRS Commissioner John Koskinen promised lawmakers a report on whether any had lost emails. The report was issued Friday.

"Throughout this review, the IRS has found no evidence that any IRS personnel deliberately destroyed any evidence," said the IRS statement. "To the contrary, the computer issues identified appear to be the same sorts of issues routinely experienced by employees within the IRS, in other government agencies and in the private sector."

When Congress started investigating the IRS last year, the agency identified 82 employees who might have documents related to the inquiries. The IRS said 18 of those people had computer problems between September 2009 and February 2014. Of those employees, five probably lost emails - in addition to Lerner - the agency said Friday.

Lerner, who was placed on leave and has since retired, has emerged as a central figure in congressional investigations. The other five employees appear to be more junior than she. In addition to the Cincinnati workers, they include a technical adviser to Lerner, a tax law specialist and a group manager in the tax-exempt division.

In general, the IRS said the workers archived emails on their computer hard drives when their email accounts became too full. When those computers crashed, the emails were lost. "By all accounts, in each instance the user contacted IT staff and attempted to recover his or her data," said the IRS statement. The IRS has said it stored emails on backup tapes but those tapes were re-used every six months. The inspector general's office is reviewing those tapes to see if any old emails can be retrieved..

"The IRS has lost thousands of emails, but worse yet, completely lost the American people's trust," said Sarah Swinehart, a spokeswoman for House Ways and Means Republicans. "The DOJ must appoint a special prosecutor so the full truth can come out."

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September 7, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Saturday, September 6, 2014

Hayashi Presents Phantom Income and the Simple Economics of Paying In Kind at Florida

HayashiAndrew Hayashi (Virginia) presented Phantom Income and the Simple Economics of Paying In Kind at Florida yesterday as part of its Graduate Tax Program Colloquium Series:

Modern tax instruments impose cash taxes on non-cash bases. Property taxes, income taxes, gift taxes and estate taxes all must be paid in cash, even though income, gifts and estates only sometimes take the form of cash, and property never does. If it is costly to convert the tax base into cash, taxpayers may suffer from liquidity problems that require them to make painful adjustments to their savings or consumption. Although concern about taxpayer liquidity has shaped tax law and looms large in current debates about wealth taxation, tax accounting, and mark-to-market reforms, the economic factors that influence the welfare costs of cash tax collection have not been explored in a rigorous way. In this paper I present an economic analysis of the liquidity problem, identifying the factors that determine the welfare costs of cash tax collection. I apply this analysis to the property tax and to the taxation of income that accrues before it is received, sometimes called “phantom income.”

September 6, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Using Humor in the Law School Classroom

Humor 3Wall Street Journal, Law School Should be Funnier, Says Professor:

Stephen F. Reed, a clinical law professor at Northwestern University School of Law, says professors shouldn’t underestimate the pedagogical power of laughter. “[H]umor can have value in creating a lively classroom environment in which students are ready to learn, and in its best forms can help faculty accomplish their pedagogical goals,” Mr. Reed writes. ...

He encourages professors to brush up on pop culture and jot down ideas before class. And he also cautions against going overboard with slapstick:  "I cannot emphasize this enough: do not be a clown in class; be a professor with a sense of humor."

Stephen F. Reed (Northwestern), The Lively Classroom: Finding the Humor in Business Associations, 59 St. Louis L.J. ___ (2015):

I have yet to meet a faculty member who does not, in at least some small way, use humor in the classroom. It almost seems to be part of human nature, and some of its value is obvious: it commands attention, it relaxes both the speaker and the audience, and it provides a release in stressful situations. It may even help us to better retain information.2 This article is not intended to justify humor in the classroom, which other authors have covered,3 but takes as a given that humor can have value in creating a lively classroom environment in which students are ready to learn, and in its best forms can help faculty accomplish their pedagogical goals.

My main project, then, is to give you ideas on how to introduce humor to your course no matter how “unfunny” you consider yourself to be. I understand that those of you who do not believe you can use humor effectively in the classroom may dismiss this piece immediately.4 Although I implore you to give the ideas below at least a pilot run next semester, I understand completely why you might think it futile. ... Too often, we ignore that much of what happens in the classroom depends on certain inherent physical and personality traits of the instructor. Many of us wonder - even fear - that maybe some faculty have just “got it” and we do not. Anyone can buy a dapper new outfit, but only Brad Pitt or Angelina Jolie can wear it like Brad Pitt or Angelina Jolie, while the rest of us middle-aged professors in the “prime” of our careers wear the same outfit like Buddy Hackett or Carol Channing.7See material on staying current with cultural references, infra.

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September 6, 2014 in Legal Education, Teaching | Permalink | Comments (0)

WSJ: More Parents Foot the Bill For MBAs For Their Kids

Wall Street Journal, More Parents Foot the Bill for Business School M.B.A.s; Aim to Minimize Debt to Keep Career Options Open:

MBAProspective business students are trying to steer clear of student loans. Instead, they're sidling up to more familiar investors: their parents.

Forty-four percent of people considering graduate business degrees last year expected to tap mom and dad for financial assistance, up from 38% in 2009, according to the Graduate Management Admission Council, which administers the GMAT business-school entrance exam and surveys thousands of hopeful students annually. They also expected their parents to foot more of the bill: 20% in 2013, compared with 13.7% four years earlier. ...

The shift in expected funding sources is due in part to concerns that institutional debt will limit postgraduation job opportunities, students and career services officials say. Graduating M.B.A.s are increasingly drawn to entrepreneurial ventures and early-stage startups. By minimizing their debt loads they can better afford to give up the steady paychecks of traditional finance or consulting jobs, they say.

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September 6, 2014 in Legal Education | Permalink | Comments (4)

The IRS Scandal, Day 485

IRS Logo 2Senate Permanent Committee on Investigations Majority Report, IRS and TIGTA Management Failures Related to 501(c)(4) Applicants Engaged in Campaign Activities:

The primary conclusion of the Majority staff report is that, contrary to common understanding and widespread reporting, the IRS actually exhibited no bias in its review of conservative groups. The Majority staff report claims that the IRS targeted liberal and conservative groups equally and that a Treasury Inspector General for Tax Administration (TIGTA) report on the targeting of conservative groups was fundamentally flawed.

Senate Permanent Committee on Investigations Minority Report,  IRS Targeting Tea Party Groups

The Subcommittee Minority staff sharply disagrees with the conclusions reached by the Majority staff report. While some liberal groups were examined by the IRS from May 2010 to May 2012, there were far fewer such groups, they were systematically separate from the review of conservative groups, their questioning was far less intrusive, and, in some cases, the liberal groups were affiliates of specific organizations like ACORN that had behaved illegally in the past and could reasonably expect additional scrutiny. The inclusion of a scant few liberal groups by the IRS does not bear comparison to the targeting of conservative groups.

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September 6, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Friday, September 5, 2014

ABA Journal Question of the Week: Tell Us About Your Craziest Classmate From Law School

ABA Journal (2014)ABA Journal Question of the Week: Tell Us About Your Craziest Classmate From Law School:

Nearly all students, from kindergarten through law school, have returned to classes at this point. In honor of that, we ask you to remember your time in law school—specifically, your fellow students.

Tell us about your craziest classmate from law school, whether he or she was crazy smart; had crazy sleeping or eating habits; or took crazy risks. And if you know what that former classmate is doing now, please share! (And please use pseudonyms if necessary to protect his or her identity.)

September 5, 2014 in Legal Education | Permalink | Comments (0)

Weekly Tax Roundup

Weekly Roundup

September 5, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly Legal Education Roundup

Weekly Roundup

September 5, 2014 in Legal Education, Weekly Legal Education Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

Weekly Roundup

September 5, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

WSJ: How Washington's Revolving Door Spurred Obama Administration's Anti-Inversion Push

Wall Street Journal, AstraZeneca Called the Obama Team to Say: Stop Those Tax Inversions!!:

Revolving Door 3If you were wondering why the White House suddenly took an interest in the consequences of tax inversion deals last spring, here is the reason – a pair of Wall Streeters with ties to the Obama administration made some calls on behalf of AstraZeneca which, you may recall, was trying to fend off an unwanted bid from Pfizer. Pfizer cited a tax inversion as one reason for its offer.

Specifically, AstraZeneca employed Thomas Nides, a Morgan Stanley vice chairman who was deputy secretary of state in the Obama administration until last year, and who also served in the Clinton administration. The drug maker also tapped Roger Altman of Evercore Partners, a former deputy Treasury Secretary in the Clinton administration, according to The Wall Street Journal. ...

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September 5, 2014 in Tax | Permalink | Comments (2)

Barnhizer: The ‘Death’ of Law Schools and the Five Stages of Grief

David Barnhizer (Cleveland State), The Kubler-Ross Criteria and the ‘Death’ of Law Schools:

StagesJust for fun I thought it might be interesting to take a brief look at the psychological context of the rapid decline and possible “death” of a number of American law schools. It seemed appropriate to adopt Elisabeth Kubler-Ross’s hypothesis about the stages we go through when coping with fundamental crises such as death, job loss, permanent disability or the fracturing of a key relationship [denial, anger, bargaining, depression and acceptance]. ... This seems to offer a useful heuristic for evaluating the conditions and fates of law schools experiencing plummeting demand for their services, challenges to their educational quality, a legal profession in the midst of a profound transformation, and the decay of the financial resource base due to declining tuition revenues.

I suggest that for many law schools what is occurring is a “transformative tsunami”. While it is psychologically dispiriting for many traditional law faculty members whose privileged worlds are turning out to be built on shifting sand, the conditions are creating a set of exciting challenges and opportunities for an entrepreneurial inventiveness. We can only hope that the changes will improve the quality of legal education and the delivery of legal services. Unfortunately, and inevitably, that inventiveness is being compelled from outside the law schools. ...

Below the top-rated forty or fifty law schools the competitive conditions demand context-specific strategic action adapted to the strengths and mitigating the vulnerabilities of the institutions. The harsh fact is that some of the lesser ranked law schools are likely to (and should) “die”. Some will “expire” by actually going out of existence. Others will change their operational systems into forms different from the “cookie cutter” model of university law schools for the past century. These changes will be exciting, innovative and productive in the sense that Joseph Schumpeter intended in his description of the periodic process of “creative destruction” where the old ways of doing things are transformed into new forms of production. Most tenure track law faculty will not be pleased.

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September 5, 2014 in Legal Education | Permalink | Comments (15)

Cain: Taxation of Same-Sex Couples After United States v. Windsor

Patricia Cain (Santa Clara), Taxation of Same-Sex Couples After United States v. Windsor: Did the IRS Get It Right in Revenue Ruling 2013-17?, 6 Elon L. Rev. 269 (2014):

The tax world for same-sex couples changed dramatically on June 26, 2013, when the United States Supreme Court handed down its decision in United States v. Windsor. The Court ruled that section 3 of the Defense of Marriage Act (DOMA) was unconstitutional. As a result the IRS would be required to recognize same-sex spouses as validly married for tax purposes. There were three major issues facing the IRS after Windsor: (1) Which marriages should be recognized for tax purposes? (2) How much retroactive effect should be given to the decision? (3) Should marriage equivalent statuses such as registered domestic partnerships and civil unions be treated the same as marriages? On August 29, 2013, the IRS issued Revenue Ruling 2013-17 which answered these three questions. This essay asks whether or not the IRS got it right in the ruling and concludes that for the most part it did. However, serious questions are raised by the fact that the IRS refuses to recognize registered partnerships and civil unions as marriages. The essay concludes that more thought should be given to this issue.

September 5, 2014 in Scholarship, Tax | Permalink | Comments (0)

Scholarly Incentives, Scholarship, Article Selection Bias, and Investment Strategies for Today's Law Schools

Dan Subotnik (Touro) & Laura Ross (Touro), Scholarly Incentives, Scholarship, Article Selection Bias, and Investment Strategies for Today's Law Schools, 30 Touro L. Rev. 615 (2014):

Anecdotal evidence supplied by authors suggested that article acceptance by law reviews was based to a significant extent on the affiliation and prestige of the author. The implication for readers was that most law professors could not expect a fair reading and that, indeed, those from 3rd and 4th tier schools had only the feeblest prospects of cracking the top tier. With many aspects of employment tied to law review placement --e.g. faculty recruitment and tenure -- law professors could understand the need to tamp down career expectations. And law students could begin to see the small benefit they got from law review production. 

Table 2

Table 3A

Table 4

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September 5, 2014 in Legal Education, Scholarship | Permalink | Comments (4)

The IRS Scandal, Day 484

IRS Logo 2Judicial Watch Press Release:  New IRS Documents Show Lerner Did Not Need Conservative Group Donor Lists – Emails Mention “Secret Research Project” by Top IRS Official:

Judicial Watch today released a new batch of Internal Revenue Service (IRS) email documents revealing that under former IRS official Lois Lerner, the agency seems to acknowledge having needlessly solicited donor lists from non-profit political groups. According to a May 21, 2012, memo from the IRS Deputy Associate Chief Counsel: “such information was not needed across-the-board and not used in making the agency’s determination on exempt status.” Later, in her May 10, 2013, remarks in which Lerner first revealed in response to question she planted about the IRS targeting of conservative groups, she conceded that the requests for donor names was “not appropriate, not usual.” The new documents obtained by Judicial Watch also reveal that 75% of the groups from whom the lists were solicited were apparently conservative, with only 5% being liberal.

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September 5, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Thursday, September 4, 2014

NY Times Debate: Should Pro-Sport Leagues Get Tax Breaks?

New York Times Debate:  Should Pro-Sport Leagues Get Tax Breaks?:

NY Times Room for DebateThe league offices and associations for several professional sports are tax-exempt nonprofit groups. The teams themselves pay taxes on their revenue, but critics say the leagues are lucrative enough to pay for their administrative expenses without a tax break, especially since some executives get enormous compensation.

Should pro sports leagues enjoy nonprofit status or are taxpayers paying too many of their bills?

  • Ryan Alexander (Taxpayers for Common Sense), End the NFL Tax Breaks:  "Sports leagues like the NFL help teams make money through business ventures – a fine goal for teams, but not one taxpayers need to subsidize. "
  • Patrick Hruby (Journalist), Sports Leagues Do Not Need Taxpayer Help:  "The NFL as a whole takes in over $9 billion in annual revenue, more than the reported 2013 GDP of 49 countries. "
  • Judith Grant Long (University of Michigan), Ending Sports Leagues' Tax-Exempt Status Might Not Bring in More Money:  "Focusing on the nonprofit issue detracts from the more substantial burdens placed on taxpayers in the building and taxing of sports stadiums and arenas."
  • Richard Steinberg (Purdue University), Nonprofit Teams Rather than Leagues? "Many Commercial Organizations Are Nonprofits, as Billion-dollar Universities Sell Education and Hospitals Sell Healthcare."
  • Andrew Zimbalist (Smith College), Nonprofit Status Is Irrelevant:  "The tax exemption does not apply to the individual teams, but to the leagues, which operate as pass-through entities."

September 4, 2014 in Tax | Permalink | Comments (0)

This Is Your Brain on Law School

BrainAbigail A. Patthoff (Chapman), This is Your Brain on Law School: The Impact of Fear-Based Narratives on Law Students, 2015 Utah L. Rev. ___:

Law students regularly top the charts as among the most dissatisfied, demoralized, and depressed of graduate student populations. As their teachers, law professors cannot ignore the palpable presence of this stress in our classrooms – unchecked, it stifles learning, encourages counterproductive behavior, and promotes illness. Yet, in the name of persuasion, professors frequently, and perhaps unwittingly, introduce additional fear into the classroom as a pedagogical tool via a common fear-based narrative: the cautionary tale. By taking lessons from existing social science research about “fear appeals” – scare tactics designed to frighten the listener into adopting a particular behavior – this article suggests that we can actively manage one source of law student anxiety by more thoughtfully using cautionary tales.

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

Public Pension Funds Stay Mum on Corporate Inversions

New York Times Deal Book:  Public Pension Funds Stay Mum on Corporate Expats, by Andrew Ross Sorkin:

NY Times Dealbook (2013)In the outcry about the recent merger mania to take advantage of the tax avoidance transactions known as inversions, certain key players have been notably silent: public pension funds.

Many of the nation’s largest public pension funds — managing trillions of dollars on behalf of police and fire departments, teachers and others — have major stakes in American companies that are seeking to renounce their corporate citizenship in order to lower their tax bill.

While politicians have criticized these types of deals — President Obama has called them “wrong” and he is examining ways to end the practice — public pension funds don’t appear to be using their influence as major shareholders to encourage corporations to stay put.

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September 4, 2014 in Tax | Permalink | Comments (0)

Students Who Exercise Regularly Have Higher GPAs

Purdue University, College Students Working Out at Campus Gyms Get Better Grades:

PurdueCollege students who visit their campus gyms are more likely to succeed in the classroom, according to data from Purdue University.

"Students who worked out at Purdue's gym at least once a week were more likely to earn a higher grade point average than students who visited less or not at all," says Tricia Zelaya, assistant director for student development and assessment at Purdue's Division of Recreational Sports. "Going to the gym is so much more than going to the gym. Students who are motivated by fitness and wellness tend to have better time management skills, and research shows that being fit is good for the mind. It all ties together."

For example, the more than 1,820 students who visit Purdue's France A. Córdova Recreational Sports Center at least 16 times a month earned a GPA of 3.10 or higher. The correlation between grades and gym use also is shown with moderate users. Students who used the gym at least seven times a month had an average GPA of 3.06. The average GPA for students who did not regularly use the gym was a 2.81.

(Hat Tip: Inside Higher Ed.)

September 4, 2014 in Legal Education | Permalink | Comments (2)

Morrow: Repealing the Mortgage Interest Deduction

Rebecca N. Morrow (Wake Forest), Billions of Tax Dollars Spent Inflating the Housing Bubble: How and Why the Mortgage Interest Deduction Failed, 17 Fordham J. L. & Fin. L. 751 (2012):

The mortgage interest deduction is an incredibly popular, politically well-supported and hugely expensive tax incentive. Yet economic studies consistently show that the mortgage interest deduction fails to advance its fundamental purpose. It does not increase the rate of homeownership. On the contrary, to the extent that it is effective in influencing human behavior, it does so by inflating home prices and encouraging borrowing against equity. These effects inflated home prices and excessive borrowing contributed to the economic crisis of 2008. In the years leading up to the crisis, Americans spent billions of tax dollars further inflating a dangerously unstable housing bubble. Even if we had the will to change this policy, we did not have the means. The mortgage interest deduction is insensitive to market conditions and resistant to change. These attributes make the mortgage interest deduction bad policy. Rather than perpetuating this costly deduction, Congress should phase it out in its entirety and replace it with targeted tax incentives designed to stimulate the housing market only when the market is weak. Future tax incentives should avoid the structural flaws that caused the mortgage interest deduction to fail by focusing on market responsiveness, timing and flexibility.

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

Northwestern Symposium: 100 Years Under the Income Tax

Northwestern (2014)Symposium, 100 Years Under the Income Tax, 108 Nw. U. L. Rev. 767-1136 (2014):

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

Morriss: The Future of Offshore Financial Centres: The Tax Question

Accountancy Live:  Future of Offshore Financial Centres: The Tax Question, by Andrew Morriss (Dean, Texas A&M):

When the US Congress passed the Foreign Account Tax Compliance Act (FATCA) in 2010 as part of its post-financial crisis efforts at economic stimulus, there was little debate or discussion about the costs or benefits of such a massive expansion of financial regulation. Since then, the UK has adopted its own ‘son of FATCA’ and France a ‘mini-FATCA’.

Elsewhere more such measures are being debated. FATCA and its progeny have spawned a raft of intergovernmental agreements (IGAs) promising transparency to tax authorities around the world. Not to be outdone, prime minster David Cameron is pushing for beneficial ownership registries for the UK, the Crown Dependencies and the Overseas Territories.

New York University’s John Blank and [University of] Virginia’s Ruth Mason argue in a recent Tax Notes article that, taken together, these agreements and laws offer ‘an aspirational new global standard for automatic exchange of information.’ Does this mean the end of offshore financial centres?

No. Critics of offshore financial centres (OFCs), like US senator Carl Levin, the Tax Justice Network, and Oxfam, might wish it were so but the demand for offshore financial services will continue for three reasons.

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September 4, 2014 in Tax | Permalink | Comments (0)

Professor Shoots Himself in the Foot in Classroom. Literally.

ShootIdaho State Journal, ISU Instructor Shoots Himself in the Foot:

An instructor was wounded in the foot after his concealed handgun discharged in a classroom at the Physical Science Complex on the Idaho State University campus at about 4 p.m. Tuesday. ... “It was in his pocket.” ... “He did have an enhanced concealed carry permit.”

The instructor, who was teaching in the chemistry department, was not taken by ambulance to Portneuf Medical Center, but his wound was treated and he was released from the hospital Tuesday evening. “It's unfortunate,” ISU President Arthur Vailas said. “I'm sure the incident was scary and embarrassing.”

Vailas, who is a gun owner and hunter, said he likes guns but not on campus. He joined other Idaho university professors and chief of police from cities with universities during the last Idaho legislative session in opposition to legislation that now allows concealed carry on campuses in Idaho so long as the person has obtained an enhanced permit. Enhanced permits require additional training. ...

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

IRS Releases EITC Overpayment Data

IRS, Compliance Estimates for the Earned Income Tax Credit Claimed on 2006-2008 Returns:

EITC Logo (2014)This report presents information about the nature of errors taxpayers made when claiming the Earned Income Tax Credit (EITC) in Tax Years 2006 through 2008. This is the latest of several analyses of EITC compliance undertaken by the IRS over the years to help understand behavior and develop strategies for improving the administration of the credit. Prior to this report, the most recent analysis was conducted for Tax Year (TY) 1999 in a report commonly called the 1999 Compliance Study. 

As with the earlier studies of compliance, the analysis in this report relies on audit data; in this case, the audits were conducted by IRS’ National Research Program (NRP). NRP audits are like other IRS audits but provide the added benefit that they can be used for population estimates of taxpayer reporting compliance. One challenge with using audit data is that taxpayers do not always respond to or participate in the audit as required. In particular, 15 percent of EITC filers selected for an NRP audit of a TY 2006-2008 return did not participate in the audit, compared to 6 percent selected for an audit for a TY 1999 return. When this happens, the audit outcomes may not reflect their “true” eligibility for the credit.1 To address this uncertainty, two sets of estimates are presented throughout this paper, reflecting different assumptions about the true compliance behavior of these taxpayers: the “higher” estimate assumes that audit nonparticipants are generally noncompliant and the “lower” estimate assumes that the true compliance of audit non-participants is the same as the compliance of otherwise similar audit participants.

We find no discernible change in the overall tendency for noncompliance between 1999 and 2006-2008. This is based on a comparison of “dollar overclaim percentages,” defined as total dollars overclaimed as a percent of total dollars initially claimed for EITC (before considering IRS corrections or enforcement). In TY 2006-2008, the estimates of the overclaim percentage are 28.5 percent (lower estimate) and 39.1 percent (higher estimate).

Table 2b

Comparable figures from the 1999 Compliance Study are 30.9 percent and 35.5 percent. ...

While the overall tendency for noncompliance is little changed, the growth in the EITC program has led to an increase in total dollars of claims and overclaims since 1999. Averaging over returns filed for TY 2006-2008, an estimated 23.7 million taxpayers claimed an annual total of $49.3 billion in EITC, compared with 18.8 million taxpayers claiming a total of $31.3 billion in EITC in TY 1999. Total overclaims for TY 2006-2008 are estimated to be $14.0 billion (lower estimate) or $19.3 billion (higher estimate). Similar figures from the 1999 Compliance Study are $12.3 and $14.0 billion, after adjusting for inflation ($9.7 and $11.1 billion in current dollars).

(Hat Tip: Leslie Book.)

September 4, 2014 in IRS News | Permalink | Comments (0)

The IRS Scandal, Day 483

IRS Logo 2Wall Street Journal editorial:  Tax Collectors in the Cafeteria: The IRS Doesn't Like the Way Silicon Valley Does Lunch:

Having harassed the Tea Party for years, the Internal Revenue Service is now targeting Silicon Valley. The tax collectors are offended by the practice, common in the technology industry, of providing meals to employees without counting the food as taxable compensation. ...

[L]ast week the Treasury published the annual list of IRS priorities and ominously included a plan for new guidance "regarding employer-provided meals." As a large bureaucracy, the IRS has no fewer than 317 such projects on its priority list. In this case they seem to mean it. The Journal reports that IRS auditors are now flagging the issue and demanding back taxes from companies amounting to 30% of the meals' fair-market value, according to lawyers for the firms.

You don't have to be a software programmer to think that the IRS ought to focus on other priorities. For example, not one of the 317 projects is devoted to accurate and complete disclosure of the agency's role in targeting the President's philosophical opponents.

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September 4, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Wednesday, September 3, 2014

Fleischer: Court Challenge to New Inversion Rules Would Face Long Odds

New York Times Dealbook:  Court Challenge to New Inversion Rules Would Face Long Odds, by Victor Fleischer (San Diego):

NY Times Dealbook (2013)The Treasury Department is considering new regulations that would make corporate inversions less profitable.  Hedge fund managers, investment bankers and others are handicapping the timing and scope of any new rules and to whom they would apply. Possibilities include further limiting earnings stripping, reclassifying certain debt held by United States subsidiaries of foreign corporations as equity or restricting the repatriation of untaxed offshore cash from corporations that have gone through an inversion.

Another question is whether any new regulations will hold up in court.  Even Treasury Secretary Jacob J. Lew questioned whether his department had the legal authority to act unilaterally. But after Stephen E. Shay, a law professor at Harvard University, published an article urging Treasury to act, the department’s lawyers began developing some options. Mr. Shay suggested that by looking beyond Section 7874, the specific code section that addresses inversions, the Treasury Department might find other ways to curb some of the economic tax benefits of an inversion. In my view, Professor Shay’s suggestions are indeed within the lawful authority of the Treasury Department.

But reasonable minds may differ. To examine the likelihood of a successful challenge, I thought it would be useful to look at the Treasury’s track record in court. ...

The short answer is that the Treasury’s track record is strong, especially in recent years. Since 1986, just 13 of 55 challenges in the United States Tax Court have been successful, or 23 percent. Of those, just eight survived an appeal. The last successful challenge I found that survived appeal was 14 years ago. ...

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September 3, 2014 in Tax | Permalink | Comments (1)

Believers Flee Pews as Germany Enforces 9% Church Tax on Capital Gains

Wall Street Journal, In Germany, Many Believers Balk at Tweak to Church Tax; As Loophole Closes, Disgruntled German Catholics and Protestants Opt to Officially Leave Churches:

Church TaxI
n Germany, being an official church member usually means paying an extra tax. But a change in the country's tax code is now causing many believers to leave the fold.

Germany is just one of a number of European countries where members of the main organized religions pay a special levy on income to provide the bulk of churches' finances. But when a loophole concerning income from capital gains closes next year, church leaders have good reason to expect an exodus.

So far this year, the number of Germans leaving the country's Protestant and Catholic churches has reached its highest level in 20 years, twice last year's level—a surge many clergy and finance experts blame on the changes in how the tax is levied.

The outflow is now fueling a debate about whether a levy that goes back to the 19th century is an appropriate way to finance churches in an increasingly secularized Germany.


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September 3, 2014 in Tax | Permalink | Comments (1)

Robert Reich: College Is a Ludicrous Waste of Money

Salon:  College Is a Ludicrous Waste of Money, by Robert Reich (UC-Berkeley):

InequalityThis week, millions of young people head to college and universities, aiming for a four-year liberal arts degree. They assume that degree is the only gateway to the American middle class.

It shouldn’t be.

For one thing, a four-year liberal arts degree is hugely expensive. Too many young people graduate laden with debts that take years if not decades to pay off.

And too many of them can’t find good jobs when they graduate, in any event. So they have to settle for jobs that don’t require four years of college. They end up overqualified for the work they do, and underwhelmed by it.

Others drop out of college because they’re either unprepared or unsuited for a four-year liberal arts curriculum. When they leave, they feel like failures.

We need to open other gateways to the middle class. 

Press reports last month noted that Reich earns a $243,000 salary at UC-Berkeley and is teaching one class this semester.

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

Burger King: It's Not the Taxes. Experts: Dollars to Doughnuts, That's a Whopper

Bloomberg:  Burger King: It's Not the Taxes. Experts: Dollars to Doughnuts, That's a Whopper, by Zachary R. Mider:

BKTHDaniel Schwartz, chief executive officer of Burger King Worldwide Inc., said last week he doesn’t expect “meaningful tax savings” when the company adopts a new legal address in Canada through the purchase of a doughnut chain there.

While Schwartz’s statement may have blunted criticism from U.S. politicians who are calling the Miami-based hamburger maker’s address change a tax dodge, it’s hard to square with the reality of the countries’ tax laws, according to experts on both sides of the border. “If they don’t see any tax benefits going forward, they are probably not looking very hard,” said Edward Kleinbard, a tax professor at the University of Southern California and a former partner at New York-based Cleary Gottlieb Steen & Hamilton LLP.

Kleinbard and other authorities [Reuven Avi-Yonah, Dick Harvey, Robert Willens] said in interviews that Burger King will almost certainly reduce its taxes because Canada’s corporate income tax system is simply less expensive for multinational companies. Canadian companies can collect dividends from most foreign subsidiaries without paying more tax in their home country -- an advantage over the U.S., which is one of the few countries that apply a second layer of tax on foreign income.

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September 3, 2014 in Tax | Permalink | Comments (1)

Law School, I Love You

Gawker:  Law School, I Love You, by David Shapiro (Brooklyn Law School 3L):

LoveI went to NYU for college and finished as fast as I could because I didn't enjoy it and wasn't engaged by what I was studying (economics, history, metropolitan studies). After that, for about two years, I worked at a part-time clerical job so menial that I couldn't tell my best friends what I did. I made $13,689.60 a year. My mom told me that when she found out what I was doing, her heart sunk. One time, on the phone, my Dad asked me how old I thought I would be before he stopped supporting me. ...

I was sitting in my Civil Procedure class when I realized I loved law school. ... I sent a Google Chat message to my friend who was sitting next to me that said, "i think i love law school? is that possible/reasonable?" She didn't respond because she was focusing on the lecture. I Googled it and found a message board posting entitled, simply, "does anyone else love law school." The common thread running through the replies was incredulity. Nobody had ever told me, or any of these students on this message board apparently, that law school could be a thing that you could love. I thought it was just a thing you had to drag yourself through before you could become a lawyer. It would be like if someone told me to go to the dentist not only to get my teeth cleaned but also because I might really have a good time hanging out with the dentist.

I also noticed, for the first time, I didn't dread getting out of bed to go to school. I was going to office hours with my professors just to talk. ... More than anything, I loved learning about the rational underpinnings for the beliefs of people I disagree with—for a liberal law student, reading one of Justice Scalia's opinions is like going on an ideological safari through an awe-inspiring argument in a parallel universe. In the winter, before finals, I sat in the library, seven days a week, most days until after midnight. I'd never worked harder, cared more about what I was doing, or been happier. Over winter break after my first semester, my Dad hung my grades up on the refrigerator. They weren't perfect grades but, for the first time, he said he was proud of me.

After two years of law school, I still feel this way about it, but there is a lingering problem: It can be really embarrassing to tell people that I go to law school. I think that's driven in part by a long-held belief that people who go to law school can't hack it in the professional world, are cursedly uncreative, or have given up on their dreams. (Some students in law school confirm this; most don't.)

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September 3, 2014 in Legal Education | Permalink | Comments (3)

Yin: Stopping Corporate Inversions Sensibly and Legally

Tax Analysys Logo (2013)George K. Yin (Virginia), Stopping Corporate Inversions Sensibly and Legally, 144 Tax Notes 1087 (Sept. 1, 2014):

A recent article by Mindy Herzfeld, What Can Treasury Do About Inversions?, 144 Tax Notes 895 (Aug. 25, 2014), overlooks a simple and sensible alternative available to the Treasury Department that is not of questionable legality. Treasury could submit a proposal to Congress to redefine a corporation's "residence" for tax purposes -- which determines whether the entire panoply of U.S. tax rules applies to it -- based on the location of the enterprise's principal customer base.

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

WSJ: Law Schools Boost Enrollment After Price Cuts

Wall Street Journal: Law Schools Boost Enrollment After Price Cuts; Some Institutions Trim Tuition Amid Dearth of New Students, by Jennifer Smith:

A strategy rarely employed in legal education—price-cutting—appears to be paying off for a handful of law schools.

Three institutions that trimmed tuition for some or all students [Iowa, Roger Williams, La Verne] are set to boost their first-year class sizes by 22% to 52% this fall compared with 2013, according to an analysis of preliminary enrollment data compiled by The Wall Street Journal. At a fourth {Penn State], a new grant program that effectively cuts the cost of tuition nearly in half for all in-state students has also been followed by a substantial jump in new students.

The gains—which at two of the schools were accompanied by a slight downtick in test scores—are notable given the broader plunge in U.S. law-school enrollment since 2010 amid a grim legal job market. ...

First-year enrollment figures at two law schools outside the 100 top-ranked schools [Akron, Ohio Northern] slid even after they reduced cost. ...

After a three-year downturn in enrollment, many law schools across the U.S. are weighing whether to maintain tuition revenue by loosening admission standards, or keep classes smaller to avoid jeopardizing their rankings. Among the tuition-choppers, the median LSAT score dipped by one point at Iowa Law, to 160, though the school's median GPA increased to 3.64, compared with 3.59 in 2013. At Roger Williams, the median LSAT also went down one point, to 148, and the median GPA dropped slightly, from 3.18 in 2013 to 3.16.

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

Death of Brittany McGrath (J.D. 2014, Brooklyn Law School)

Daily Hampshire Gazette:  A Father-Daughter Bond That Ended Far Too Soon:

EdWednesday morning at 10, people who loved Edward Daniel McGrath Jr. and his daughter, Brittany Danielle McGrath, gather in Northampton to attempt what must seem impossible: Accept that this doting dad and loving child, joined for a late-summer motorcycle ride and both in love with partners who appreciated their unique ways, died because a driver addled by heroin allegedly nodded off and crossed the center line. ...

James Walter Ainsworth ... will face two counts of felony motor vehicle homicide under the influence of drugs, as well as operating to endanger, possession of heroin and driving with a suspended license. Police say Ainsworth climbed into a potentially lethal weapon, an SUV, and allowed it to collide with innocent people.

According to an Easthampton police report, witnesses at the scene said Ainsworth climbed out of the SUV and looked passively at the wrecked motorcycle. He lit a cigarette. A witness reported seeing Ainsworth slumped minutes before against the driver’s side window, apparently asleep. He was heard to say at the scene, “The curb woke me up.” ...

Ed and Brittany liked to ride together, her obituary said. It was part of their bond. She was about to take a job with a British law firm, having just graduated magna cum laude from Brooklyn Law School, following years in New York City studying at Fordham University. Their Thursday afternoon ride north toward Northampton was surely a joyous reunion.

Obituary, Brittany McGrath (1985-2014):

BrittanyAfter graduating from Fordham with honors and awards she went on to work for the Manhattan District Attorney's office as a trial prep assistant. Her experience working at the DA's office deepened her desire to pursue social justice, so she pursued an education in law, continuing studies at Brooklyn Law School. While at Brooklyn Law she continued leading her Moot Court team to multiple international victories, including at Oxford University. Continuously on the Dean's list she was a member of the Law Review and was sought after by many professors to assist in legal research. Just three short months ago, she graduated magna cum laude from BLS, and had accepted a position at an international British law firm, Allen and Overy. She would have started on September 15th volunteered for the coalition of the homeless, was a member of the board of directors for the Harlem Youth Baseball Organization, and was a fierce advocate for as a junior associate. She children and animal rights, both adopting and placing many homeless animals. She had a magical connection with everyone she met, and will forever be missed. ...

Brittany is survived by her mother, Iris McGrath, best friend and sister Chelsea McGrath, and her partner and love of her life, Juan Reinoso, and their household: dogs Valencia, Mocha, Nala, Smokey, and cats Tuxedo, Misu, and Lolita.

Services will be Wednesday, Sept. 3, at 10 a.m. at Ahearn Funeral Home at 783 Bridge Road in Northampton. Flowers can be sent to the funeral home. In lieu of flowers, donations can be sent to Louie's Legacy Animal Rescue.

September 3, 2014 in Legal Education, Obituaries | Permalink | Comments (0)

UNLV Law School Faces $3 Million Budget Shortfall Due to 25% Enrollment Decline

Las Vegas Review-Journal, Financial Stresses Challenge UNLV Law School:

UNLV LogoIn a state with few higher education bragging rights, UNLV’s law school stands out. The law school is ranked among the top 100 by U.S. News and World Report and its graduates are in demand locally, with students doing well on the state bar exam.

But the school’s success could plummet quickly if something isn’t done about the gap in its budget. ... The school once saw 150 students enrolling every year; the new norm is 110-115. The result: A $3 million shortfall.

The University of Nevada Board of Regents is asking for $1.5 million in state funds to help the law school adjust to the economic reality. The rest of the loss likely will be absorbed through cost cutting, a tuition hike, philanthropy and new programs.

Boyd is looking to add a new signature program — a master’s in gaming law and regulation — as well as offer more educational opportunities for business professionals. The faculty already has approved the new gaming law master’s program. The regents will vote Friday on whether or not to approve the program, which would be the first of its kind in the nation. If approved, Boyd will recruit internationally, targeting Macau and Singapore for students, [Dean Daniel] Hamilton said. ...

The other solutions Boyd is implementing to weather its financial predicament are less palatable to students and faculty. Tuition for Boyd students will gradually go up, 4 percent next academic year and 4 percent the following year. ... Boyd has implemented a hiring freeze, planned phased-out retirements of faculty and is exploring the idea of voluntary buyouts for faculty, Hamilton told regents when advocating for additional state funds Aug. 22.

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September 3, 2014 in Legal Education | Permalink | Comments (1)

The IRS Scandal, Day 482

Tuesday, September 2, 2014

WSJ: IRS to Tax Free Employee Meals in Silicon Valley

Wall Street Journal:  Silicon Valley Cafeterias Whet Appetite of IRS; Free, Employer-Provided Meals Are Viewed as a Taxable Fringe Benefit, by Mark Maremont:

TwitterThere is a grumpy new face in line at Silicon Valley's lavish freebie cafeterias: the Internal Revenue Service.

Staffers at technology companies such as Google, Facebook and Twitter long have enjoyed free gourmet meals, courtesy of their employers. The groaning buffets, in-house pizza joints, and kitchens stocked with organic produce are an intrinsic part of the culture in much of Silicon Valley, encouraging both collaboration and longer work hours.

The IRS, arguing that these freebies are a taxable fringe benefit, has given new attention to the issue in recent months during routine audits of some companies, tax lawyers said. When employers haven't been withholding taxes related to the meals, the IRS increasingly has sought back taxes that can amount to 30% of the meals' fair-market value, the lawyers said. ...

In another sign of a new focus on the issue, the IRS and U.S. Treasury Department last week included taxation of "employer-provided meals" in their annual list of top tax priorities for the fiscal year ending next June. The agencies said they intend to issue new "guidance" on the matter, but gave no specifics about timing or what the guidance would say.

Tax lawyers expect some employers will fight the IRS over the matter, and said the issue is likely to be decided in the courts. Any broad IRS crackdown could spur complaints about petty government interference with the culture of a crucial industry. But allowing free meals to go untaxed, critics say, distorts the economy and gives some employers an unfair edge. ...

IRS interest in the free-meals issue ticked up last year, after The Wall Street Journal published an article focusing on whether the food should be considered a taxable benefit. ...

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

Symposium: Teaching Trusts & Estates

T&ESymposium, Teaching Trusts and Estates, 58 St. Louis U. L.J. 643-846 (2014):

September 2, 2014 in Legal Education, Scholarship, Tax, Teaching | Permalink | Comments (1)

The Top 10 Law Schools for Hispanic Students

HispanicHispanic Business Magazine has published its annual ranking of the Top 10 Law Schools for Hispanics:

  1. Florida International
  2. Florida State
  3. Miami
  4. American
  5. Nova
  6. Texas
  7. USC
  8. San Francisco
  9. UCLA
  10. New Mexico

(Hat Tip: Francine Lipman.)

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

Businesses Are Winning Cat-and-Mouse Tax Game: 'Self-Help Tax Reform'

New York Times Deal Book:  Businesses Are Winning Cat-and-Mouse Tax Game, by David Gelles:

NY Times Dealbook (2013)A pharmaceutical company moved its headquarters to Ireland, sharply reducing its tax rate. A billboard company reclassified itself as a real estate concern, meaning it will no longer pay corporate taxes. And a big oil producer split itself in two, cleaving off a multibillion-dollar division that now operates tax-free.

Across corporate America, companies large and small are finding new ways to address one of the business world’s oldest irritations: paying taxes.

By exploiting existing loopholes and devising new ones, some of the country’s best-known companies are making it harder than ever for the federal government to replenish its already depleted coffers.

As a result, business income tax revenue remains stagnant at about 2 percent of gross domestic product even as corporate profits hit records.

Business taxes now make up less than 10 percent of federal revenue, and in some years as little as 6.6 percent. That is sharply down from the years after World War II, when about 30 percent of federal revenue came from corporate taxes.

The decline is the result of the rise of untraditional business structures, the effects of a more globalized economy and a labyrinth of subsidies and tax credits. And though the erosion has happened gradually over decades, the surging popularity of inversions — acquisitions of overseas companies that allow American corporations to reincorporate abroad — is raising concerns that an already precarious situation is growing untenable.

“There’s been a long, slow, steady decline,” said William G. Gale, co-director of the Urban-Brookings Tax Policy Center and an economic adviser to President George H. W. Bush. “It’s a confluence of a bunch of things, and it’s increasingly difficult to figure out how to effectively tax corporations.” ...

“It’s self-help tax reform,” said Kyle E. Pomerleau, an economist at the Tax Foundation. “If Congress is not willing to reform the corporate tax code, companies are going to do it for themselves.” ...

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

Harrison: Faculty Jobs for Spouses Reduce Opportunities for Others

Gainesville Sun op-ed:  Faculty Jobs for Spouses Can Reduce Opportunities for Others, by Jeffrey L. Harrison (Florida):

Trailing SPouse 2A front-page story in The Sun on Aug. 23 described efforts to accommodate the trailing spouses of highly desirable faculty candidates. It tells the sunnier side of the story, but not the things fair-minded people should consider. That is, if “fair” means equal opportunity, no cutting in line and hiring the best people.

When a trailing spouse is involved, there typically is no public notice that a job is open. Oftentimes a job paying tens of thousands of taxpayer dollars is manufactured. No other person may apply for that job or is likely to even know about the job regardless of his or her qualifications.

In the modern version of the “ol' boy” and “who do you know” systems, it adds the “who are you sleeping with” system. ...

Marriages and partnerships unfortunately fall apart. When they do, UF is stuck with an employee that it would never have hired (and perhaps a position it never would have created) but for the relationship. Since “trailing” was a requirement of being hired, shouldn't there be a re-evaluation when the relationship ends in which all job seekers are finally given a chance for the position?

Does anyone really believe that a trailing spouse is held to the same standard as others? Put differently, do you want to be the dean who says no to someone when the outcome is the loss of an eminent faculty member in another department who the dean there and the president of the university, on whom your position and greatly enhanced salary depend, desperately want to keep?

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September 2, 2014 in Legal Education | Permalink | Comments (5)