TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

A Member of the Law Professor Blogs Network

Friday, August 8, 2014

Weekly Student Tax Note Roundup

August 8, 2014 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

94% of Academic Economists Admit to Unacceptable Research Practices, Including Sex for Co-authorship and Promotion

Inside Higher Ed, Sex, Lies, Economists:

SLVA small proportion of European economists have confessed to “acceptance or offering of sex” in exchange for co-authorship or promotion, as well as owning up to fabricating or manipulating data.

A survey of about 400 economists, conducted among members of the European Economic Association on an anonymous basis, is analyzed in the article Scientific Misbehavior in Economics, currently in press for the journal Research Policy.

Ninety-four percent of respondents reported having engaged in at least one “unaccepted research practice,” the paper says.

London School of Economics, Scientific Misbehavior in Economics: Unacceptable Research Practice Linked to Perceived Pressure to Publish:

Almost every economist reports having engaged in at least one practice considered unacceptable by peers. For example, one third of the participants admit to having cherry-picked results – the selective presentation of empirical results that confirm one’s argument is rejected by 84%. Even though 64% consider it unacceptable to divide one’s work into small units to maximize the number of publications, 20% confess salami slicing. Strategic behavior in the publication process is considered unjustifiable by two thirds. However, 39% admit that they have taken into account suggestions of referees or editors even though they thought that they were wrong. Even 60% report that they have cited strategically to raise publication prospects.

research practice

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

Thursday, August 7, 2014

Kleinbard: 'Competitiveness' Has Nothing to Do With Inversions

Edward D. Kleinbard (USC), 'Competitiveness' Has Nothing to Do With It:

The recent wave of corporate tax inversions has triggered interest in what motivates these tax-driven transactions now. Corporate executives have argued that inversions are explained by an "anti-competitive" U.S. tax environment, as evidenced by the federal corporate tax statutory rate, which is high by international standards, and by its "worldwide" tax base. This paper explains why this competitiveness narrative is largely fact-free, in part by using one recent articulation of that narrative (by Emerson Electric Co.’s former vice-chairman) as a case study.

Continue reading

August 7, 2014 in Scholarship, Tax | Permalink | Comments (2)

Oei & Ring: Human Equity? Regulating the New Income Share Agreements

Shu-Yi Oei (Tulane) & Diane M. Ring (Boston College), Human Equity? Regulating the New Income Share Agreements:

A controversial new financing phenomenon has recently emerged. New “income share agreements” (“ISAs”) enable an individual to raise funds by pledging a percentage of her future earnings to investors for a certain number of years. These contracts, which are offered by entities such as Fantex, Upstart, Pave, and Lumni, raise important questions for the legal system: Are they a form of modern-day indentured servitude or an innovative breakthrough in human financing? How should they be treated under the law?

Continue reading

August 7, 2014 in Scholarship, Tax | Permalink | Comments (0)

Desai: Tax Withholding, Statutes and Constitutional Law

Anuj C. Desai (Wisconsin), What a History of Tax Withholding Tells Us About the Relationship between Statutes and Constitutional Law, 108 Nw. U. L. Rev. 859 (2014):

In this Article, I explain what a seemingly obscure statute, the Current Tax Payment Act of 1943, can tell us about the relationship between statutes and constitutional law. I use William Eskridge and John Ferejohn’s notion of a “superstatute” as a lens through which to view this relationship. A “superstatute,” in Eskridge and Ferejohn’s conception, is a statute that has small “c” constitutional emanations, emanations that both affect interpretations of the large “C” Constitution and are entrenched against subsequent legislative change. To better understand the precise contours of the notion of a superstatute, I look at the Current Tax Payment Act of 1943, which instituted the system of federal tax withholding for wage income. I describe the history of federal income tax withholding leading up to the passage of that Act, explaining in turn how that history sheds light on the underlying notion of a superstatute.

August 7, 2014 in Scholarship, Tax | Permalink | Comments (0)

Taylor: Closing the Gap Between Private Letter Rulings and Regulations

Tax Analysys Logo (2013)Willard Taylor (Sullivan & Cromwell & NYU), Closing the Gap Between Private Letter Rulings and Regulations, 144 Tax Notes 597 (Aug. 4, 2014):

In this article, Taylor summarizes and comments on proposed regulations that would redefine real property for real estate investment trusts, and he argues that there should be more (and earlier) guidance on these and similar issues to close the gap between private letter rulings and published guidance affecting REITs and publicly traded partnerships in the natural resources sector.

August 7, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Seto Reviews Tahk's Public Choice Theory & Earmarked Taxes

JotwellTheodore P. Seto (Loyola-L.A.), An Empirical Test of Public Choice Theory (Jotwell) (reviewing Susannah Camic Tahk (Wisconsin), Public Choice Theory & Earmarked Taxes, 68 Tax L. Rev. ___ (2015)):

In 1980, James Q. Wilson, in The Politics of Regulation, predicted that laws with diffuse costs and concentrated benefits would be relatively easy to enact, but that laws with concentrated costs and diffuse benefits would be relatively hard to enact and, once enacted, hard to maintain. This hypothesis, one of the pillars of public choice theory, has long been asserted without empirical verification. ...  In Public Choice Theory & Earmarked Taxes, Susannah Camic Tahk provides the first rigorous empirical support for Wilson’s hypothesis.

Her study explores the histories of 1497 state-level earmarked taxes between 1997 and 2005. Earmarked taxes, in general, produce more concentrated benefits than taxes the proceeds of which flow into a state’s general fund. Thus, we would expect earmarked taxes to perform strongly as revenue generators. And, indeed, Tahk finds that the earmarked taxes in her sample raised 58.39% more revenue in 2005 than in 1997—a larger percentage increase than any major federal tax over the same period. ...

It is hard to overstate the importance of this accomplishment.

Continue reading

August 7, 2014 in Scholarship, Tax | Permalink | Comments (1)

Cooper & Ivimey: 2013 Developments in Connecticut Trusts & Estates Law

Jeffrey A. Cooper (Quinnipiac) & John R. Ivimey (Reid and Riege, Hartford), 2013 Developments in Connecticut Estate and Probate Law, 88 Conn. Bar J. ___ (2014):

This Article provides a summary of recent developments impacting Connecticut estate planning and probate practice. Part I discusses 2013 legislative developments. Part II surveys selected 2013 case law relevant to the field.

August 7, 2014 in Scholarship, Tax | Permalink | Comments (0)

Wednesday, August 6, 2014

Pittsburgh Tax Review Publishes New Issue

Pittsburgh Tax Review The Pittsburgh Tax Review has published Vol. 11, No. 2 (Spring 2014):

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

Infanti: The House of Windsor: Accentuating the Heteronormativity in the Tax Incentives for Procreation

Anthony C. Infanti (Pittsburgh), The House of Windsor: Accentuating the Heteronormativity in the Tax Incentives for Procreation, 89 Wash. L. Rev. ___ (2014):

Following the Supreme Court’s decision in United States v. Windsor, many seem to believe that the fight for marriage equality at the federal level is over and that any remaining work in this area is at the state level. Belying this conventional wisdom, this essay continues my work plumbing the gap between the promise of Windsor and the reality that heteronormativity has been one of the core building blocks of our federal tax system. Eradicating embedded heteronormativity will take far more than a single court decision (or even revenue ruling); it will take years of work uncovering the subtle ways in which heteronormativity pervades our federal tax laws and of identifying means of eliminating that heteronormativity. To further this work and in keeping with the theme of this symposium issue, “Compensated Surrogacy After Windsor,” this essay explores the unremitting heteronormativity of the federal tax incentives for procreation as they apply to compensated surrogacy, which is the only practical option for gay couples wishing to procreate.

Continue reading

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

A Field Study of a Fat Tax and its Unintended Consequences

Brian Wansink, Andrew S. Hanks, John Cawley & David Just (all of Cornell), From Coke to Coors: A Field Study of a Fat Tax and its Unintended Consequences:

Fat TaxCould taxation of calorie-dense foods such as soft drinks be used to reduce obesity? To address this question, a six-month field experiment was conducted in an American city of 62,000 where half of the 113 households recruited into the study faced a 10% tax on calorie-dense foods and beverages and half did not. The tax resulted in a short-term (1-month) decrease in soft drink purchases, but no decrease over a 3-month or 6-month period. Moreover, in beer-purchasing households, this tax led to increased purchases of beer. To behavior scholars, this underscores the importance of investigating unexpected substitutions. To public health officials and policy makers, this presents an important empirical result and more generally points toward wide ranging contributions that marketing scholarship can make in their decisions.

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

Christians: Regulating Return Preparers -- A Global Problem for the IRS

Tax Analysys Logo (2013)Allison Christians (McGill), Regulating Return Preparers: A Global Problem for the IRS, 75 Tax Notes Int'l 391 (Aug. 4, 2014):

The IRS is in charge of a juggernaut of a tax system, the likes of which there truly is no equal in the world. And as all too often appears to be the case, in the enthusiasm to improve the functioning of this regime, its authors and enforcers appear to have forgotten that this unique system is perfectly global in reach, thanks to its unique inclusion of citizens and others with legal residence status no matter where in the world they live.

Continue reading

August 6, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Tahk: Public Choice Theory and Earmarked Taxes

Susannah Camic Tahk (Wisconsin), Public Choice Theory & Earmarked Taxes, 68 Tax L. Rev. ___ (2015):

The Article draws on public choice theory to argue that the manner in which the federal income tax distributes its costs and its benefits undergirds the massive fiscal crises that the federal government is now experiencing. Then, this Article offers recent historical evidence on 1500 state-level taxes to develop a way out of the current tax lawmaking paralysis at the federal level. At present, the federal income tax spreads its benefits widely among large yet diffuse groups, which makes the income tax easy to undermine and difficult to improve. The Article proposes, however, that restructuring the manner in which the federal income tax allocates its costs and benefits can circumvent its self-destructive shortcomings. For this purpose, state-level tax laws offer useful templates. In particular, states "earmark" tax revenues for specific purposes. That arrangement gives rise to fundamentally different tax lawmaking dynamics than those operating at the federal level. To understand how and why these dynamics succeed, the Article presents evidence on the cost-benefit structure of all state-level earmarked taxes from the 1997-2005 historical period. Analysis of this evidence demonstrates that how state-level earmarked taxes laws assign their costs and benefits relates to how revenue-productive and durable these tax laws are. This conclusion furnishes federal tax policymakers with a promising way of revising the federal income tax code to overcome its current defects. The analysis also opens new lines of research at the neglected intersection of public choice theory and scholarship on legal reform.

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

How UC-Berkeley and UCLA Law Schools Responded to Ban on Affirmative Action

Inside Higher Ed, How Berkeley and UCLA Law Schools Responded to Ban on Affirmative Action:

UCA new study from the National Bureau of Economic Research [Danny Yagan (UC-Berkeley), Affirmative Action Bans and Black Admission Outcomes: Selection-Corrected Estimates from UC Law Schools] explores the impact of California's ban on consideration of race in admissions on admissions rates for black students to the law schools at the University of California at Berkeley and UCLA. The study finds a significant drop in the black admit rate -- from 61 to 31 percent, controlling for various factors. The 31 percent figure, the study finds, is still significantly higher than it would have been had the law schools focused largely on traditional admissions criteria such as test scores and grades, and the advantage for black applicants is greatest among the share of the applicant pool that is on the line between admission and rejection. The study suggests that the UC law schools have minimized the loss of black students by placing greater emphasis in admissions on race-neutral factors (such as economic disadvantage) that apply to many black applicants. Officials of the two law schools said that they were studying the report and could not comment on it Monday.

Table 1

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

August 6, 2014 in Legal Education, Scholarship | Permalink | Comments (1)

Tuesday, August 5, 2014

Hawley: The Jurisdictional Question in Hobby Lobby

Erin Morrow Hawley (Missouri), The Jurisdictional Question in Hobby Lobby, 123 Yale L.J. Forum ___ (2014):

Hobby LobbyBurwell v. Hobby Lobby Stores may well be the biggest case of the term. And by its own rules, the Supreme Court lacked jurisdiction. An obscure statute, the Anti-Injunction Act of 1867 (“the AIA”), imposes a pay-first requirement for federal tax challenges. The deeply held conventional wisdom is that the AIA is a jurisdictional statute, and there is a good argument that the AIA applies to the contraception mandate. As we learned from National Federation of Independent Business v. Sebelius, 132 S.Ct. 2566 (2012), the best evidence of whether Congress intended the AIA to apply is the text. The mandate at issue in Hobby Lobby, 26 U.S.C. § 4980D, expressly refers to the employer assessment as a tax—24 times. In light of NFIB, the Supreme Court’s failure to address the AIA was a serious mistake.

(Hat Tip: Josh Blackman.)

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

Sunday, August 3, 2014

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. [329 Downloads]  What Would Yale Do If It Were Taxable?, by Patrick Geddes (Aperio Group), Lisa Goldberg (UC-Berkeley) & Stephen Bianchi (UC-Berkeley)
  2. [289 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. [249 Downloads]  Sales Suppression as a Service (SSaaS) & the Apple Store Solution, by Richard Ainsworth (Boston University)
  4. [214 Downloads]  Desperate Retirees: The Perplexing Challenge of Covering Retirement Health Care Costs in a YOYO World, by Richard L. Kaplan (Illinois)
  5. [155 Downloads]  Unconstitutional Perpetual Trusts, by Steven Horowitz (Sidley Austin, Chicago) & Robert Sitkoff (Harvard)

August 3, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Friday, August 1, 2014

Weekly SSRN Tax Roundup

August 1, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Student Tax Note Roundup

August 1, 2014 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

Professors With Last Names Beginning With ABCs Get More Citations Than XYZs

ABCInside Higher Ed, 'Do ABCs Get More Citations Than XYZs?':

Want to up your citation stats? Try changing your name – but make sure it starts with an “A,” “B,” or “C.” That’s what a new paper in Economic Inquiry suggests [Do ABCs Get More Citations Than XYZs?]. The study, by Wei Huang, a Ph.D. candidate in economics at Harvard University, says that researchers whose last names begin with A, B, or C who are listed first as authors in articles in a variety of science journals receive, on average, one to two more citations than their peers whose names start with X, Y, or Z.

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

Thursday, July 31, 2014

Oei: Taxing Bankrupts

Shu-Yi Oei (Tulane), Taxing Bankrupts, 55 B.C. L. Rev. 375 (2014):

When a debtor goes bankrupt and limited assets have to be divided between competing creditors, should unpaid taxes owed to the government be paid before the debts owed to other creditors? While the contemporary trend has been towards a reduction of such "priority" for tax debts in bankruptcy, this Article defends the award of tax priority. Insofar as bankruptcy protection transfers the risk of financial distress from a debtor to her creditors, the tax priority debate should be understood as a fight about how much debtor default risk the government should have to assume relative to other creditors. This Article argues that the government’s share of debtor default risk should be limited through the grant of tax priority because, contrary to the claims of priority’s critics, the government is constrained in its ability to diversify against such risk, via either substantive tax policy or changes in tax administration. Therefore, greater bankruptcy risk exposure can compromise the government’s ability to perform other important functions. In sum, tax priority serves as an important structural limit on the government’s bankruptcy risk burden and safeguards the myriad important functions of government.

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

The Research Productivity of New PhDs in Economics

John P. Conley (Vanderbilt University) & Ali Sina Önder (University of Bayreuth), The Research Productivity of New PhDs in Economics: The Surprisingly High Non-Success of the Successful:

Our evidence shows that only the top 10–20 percent of a typical graduating class of economics PhD students are likely to accumulate a research record that might lead to tenure at a medium-level research university. Perhaps the most striking finding from our data is that graduating from a top department is neither necessary nor sufficient for becoming a successful research economist. Top researchers come from across the ranks of PhD-granting institutions, and lower-ranked departments produce stars with some regularity, although with lower frequency than the higher-ranked departments. Most of the graduates of even the very highest-ranked departments produce little, if any, published research. Indeed, we find that PhD graduates of equal percentile rank from certain lower-ranked departments have stronger publication records than their counterparts at higher-ranked departments. In our data, for example, Carnegie Mellon’s graduates at the 85th percentile of year-six research productivity outperform 85th percentile graduates of the University of Chicago, the University of Pennsylvania, Stanford, and Berkeley.

Econ

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

Wednesday, July 30, 2014

Grewal: Petaluma and the Limits of Treasury's Authority

Tax Analysys Logo (2013)Andy Grewal (Iowa), Petaluma and the Limits of Treasury's Authority, 144 Tax Notes 479 (July 28, 2014):

In a prior article, I explained how taxpayers could make arguments that would potentially avoid the Supreme Court's adverse holdings in United States v. Woods. The Court deliberately left one issue open, citing a brief that I had submitted, and another issue went unacknowledged but can still be presented by taxpayers.

In Petaluma v. United States, currently pending in the D.C. Circuit, the taxpayer has adopted the regulatory arguments I presented in the earlier article. Consequently, what was once a mind-numbing case about partnership audit procedure has become a case about fundamental tax and administrative law doctrines.

Continue reading

July 30, 2014 in Scholarship, Tax | Permalink | Comments (1)

Tuesday, July 29, 2014

Rostain & Regan: The IRS Under Siege

ConfidenceTanina Rostain (Georgetown) & Milton C. Regan, Jr. (Georgetown), Confidence Games: Lawyers, Accountants, and the Tax Shelter Crisis (MIT Press, 2014):

Confidence Games provides an account of the wave of tax shelters that occurred at the turn of the twenty-first century. During this period, some of America’s most prominent law and accounting firms created and marketed products that enabled the very rich — including newly minted dot-com millionaires — to avoid paying their share of taxes by claiming benefits not recognized by law. These abusive tax shelters bore names like BOSS, BLIPS, and COBRA and were developed by such prestigious firms as KPMG, Ernst & Young, BDO Seidman, the now defunct Jenkens & Gilchrist and Brown & Wood, now merged into Sidley Austin. These shelters brought in hundreds of millions of dollars in fees from clients and deprived the U.S. Treasury of billions in revenue before the IRS and Justice Department stepped in with civil penalties and criminal prosecutions targeting the professionals and firms involved. As we suggest, the decade of tax shelter activity between the mid-1990s and mid-2000s is the most serious episode of professional misconduct in the history of the American bar.

Chapter 1, The IRS Under Siege, describes how an overstretched and under-resourced IRS came under attack in the late 1990’s by anti-tax and anti-government members of Congress.

Continue reading

July 29, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (0)

Jost: IRS Releases Premium Tax Credit Rules and Draft Forms

Timothy Jost (Washington & Lee), Implementing Health Reform: IRS Releases Premium Tax Credit Rules and Draft Forms:

Although the focus of activity the week of July 21 was in the courts, the agencies were not totally silent. On July 24, 2014 the Internal Revenue Service released final and temporary  and proposed regulations addressing issues that are presented by the premium tax credit program. The IRS also released drafts of the forms that individuals, insurers, and employers will use for reporting information to the IRS necessary for reconciliation of premium tax credits and for the enforcement of the individual and employer mandate programs. Finally, the IRS set the maximum individual mandate penalty for individuals whose income is high enough that they pay the penalty as a percentage of income rather than a flat dollar amount. This amount is established by the statute as the average cost of a bronze level plan for the applicable family size for 2014 and was set by the IRS at $2,448 per individual annually, up to $12,240 for families of five or more.

Continue reading

July 29, 2014 in IRS News, Scholarship, Tax | Permalink | Comments (0)

Foster: Partisan Politics and Income Tax Rates

William E. Foster (Washburn), Partisan Politics and Income Tax Rates, 2013 Mich. St. L. Rev. 703:

With income tax reform dominating so much of the current political discourse, now is an optimal time for tax scholars to reflect on the lessons and trends from a century of legislative tinkering with the primary revenue-generating device in the United States. Tax rate changes do not occur in a vacuum, and this article explores one increasingly prominent and often overlooked ingredient in the mixture of variables that can produce or inhibit tax reform ― partisan politics. It does so by comparing individual income tax rates with partisan control of federal political bodies. This article reviews majority party status in the House of Representatives and the Senate, and control of the presidency at times of revisions to top marginal tax rates applicable to various income groups, and notes larger rate trends in the parties’ respective eras of most significant influence. Despite the limitations inherent in isolating a single influential factor, the data analyzed in this article provides strong support for the following trends: higher income earners are the tax rate battleground for party policy implementation; a vast political mandate represented by control of the House, Senate, and presidency is usually necessary to accomplish significant rate revisions; when a sufficient political mandate is achieved, the parties’ implementation of rate changes follows their respective rhetorical associations; and in the end, absent armed conflict or economic crisis, sizeable rate changes are exceptionally rare. These extractions from a century of legislative maneuvers bring scholars closer to unearthing the political recipe for tax rate reform, and accordingly, to a fuller understanding of the necessary components of tax policy implementation.

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

Washington University Symposium: A New Framework for International Taxation

Wash U.Symposium, Conceptualizing a New Institutional Framework for International Taxation, 44 Wash. U. J.L. & Pol'y 1-101 (2014):

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

Polsky: Private Equity Monitoring Fees as Disguised Dividends

Tax Analysys Logo (2013)Gregg D. Polsky (North Carolina), Private Equity Monitoring Fees as Disguised Dividends: Collateral Impact, 143 Tax Notes 1053 (June 2, 2014):

In an earlier article (The Untold Story of Sun Capital: Disguised Dividends, 142 Tax Notes 556 (2014)), I argued that in many cases monitoring fees paid by private-equity controlled companies should be recharacterized as nondeductible dividends. This recharacterization would increase the tax liability of portfolio companies because they deduct monitoring fees as compensation. In response, some have argued that the recharacterization of monitoring fees as dividends would also reduce the tax liability of private equity managers. This article argues that there would in fact be no tax benefit to the manager or to the vast majority of private equity fund investors. The recharacterization could in some cases provide a tax advantage to the small minority of private equity investors who are U.S. individuals but the advantage would be constrained by the overall limitation on miscellaneous itemized deductions and, in any event, would typically pale in comparison to the additional taxes due from the portfolio company.

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

Paleveda: Optimal Marginal Tax Rates -- A Solution to Wealth Disparity

Nicholas A. Paleveda (Northeastern), Optimal Marginal Tax Rates -- A Solution to Wealth Disparity:

Optimal Marginal Tax rates may be used to lower the potential for wealth disparity and increase productivity at the same time. The author reviews the correlation of the optimal marginal tax rates by historical data.

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

Monday, July 28, 2014

Morrow: Rethinking Valuation Discounts for Built–In Gains

Rebecca N. Morrow (Wake Forest), Valuation in Light of Uncertainty: How Stock Option Pricing Models Can Inform More Accurate Valuation Discounts for Built–In Gains, 102 Ky. L.J. 653 (2014):

What is the value of a closely-held corporation that does not engage in ongoing service activities but owns $100 million worth of assets that it initially purchased for $20 million? When a corporation does not engage in ongoing service activities but owns property, its value depends on the value of its property. Accordingly, some might say that the corporation is worth $100 million since it could sell its assets for $100 million and liquidate. Others might say that the corporation is worth $72 million since it could sell its assets for $100 million but would be required to pay a $28 million tax bill (representing a 35% tax rate applied to the $80 million built-in gain it would recognize upon sale of its assets) before liquidating. Courts and scholars have come to both conclusions, most recently favoring the latter. However, a rational purchaser would not buy the corporation for $100 million and a rational owner would not sell it for $72 million. The value of the corporation falls between these amounts. This is because, in addition to the option of selling its appreciated assets immediately, the corporation also has the option of selling its assets in five, ten, or more years. By delaying the sale of the appreciated assets, the corporation delays incurring tax and, in present value terms, pays less tax. This Article proposes a new valuation method to calculate the present value of a future tax liability when it is uncertain when that future tax liability will be incurred. Instead of ignoring uncertainties about when a tax liability will be incurred and what tax rate will apply at the time it is incurred, this method accounts for these uncertainties by using weighted probabilities of multiple likely outcomes. This Article's key insight is to adapt the binomial method (a stock option valuation technique that accounts for similar uncertainties) to this problem.

July 28, 2014 in Scholarship, Tax | Permalink | Comments (0)

Shay: Take the Tax Juice Out of Corporate Expatriations

Tax Analysys Logo (2013)Stephen E. Shay (Harvard), Mr. Secretary, Take the Tax Juice Out of Corporate Expatriations, 144 Tax Notes 473 (July 28, 2014):

Shay describes the principal tax benefits companies seek from expatriating, and he outlines regulatory actions that can be taken without legislative action to materially reduce the tax incentive to expatriate.

Bloomberg, Lew Can Use Tax Rule to Slow Inversions, Ex-Official Says:

The U.S. Treasury Department should use immediate stopgap regulations to make offshore transactions known as corporate inversions less lucrative, said the department’s former top international tax lawyer.

The administration can unilaterally limit inverted companies from taking interest deductions in the U.S. or from accessing their foreign cash without paying U.S. taxes, Stephen Shay said in an interview and in an article published today in Tax Notes.

July 28, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Sunday, July 27, 2014

Top 5 Tax Paper Downloads

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

  1. [291 Downloads]  What Would Yale Do If It Were Taxable?, by Patrick Geddes (Aperio Group), Lisa Goldberg (UC-Berkeley) & Stephen Bianchi (UC-Berkeley)
  2. [240 Downloads]  Sales Suppression as a Service (SSaaS) & the Apple Store Solution, by Richard Ainsworth (Boston University)
  3. [227 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
  4. [213 Downloads]  A State Tax Approach to Regulating Greenhouse Gases Under the Clean Air Act, by Samuel Eisenberg (Stanford), Michael Wara (Stanford), Adele Morris (Brookings Institution), Marta Darby (Stanford) & Joel Minor (Stanford)
  5. [203 Downloads]  Desperate Retirees: The Perplexing Challenge of Covering Retirement Health Care Costs in a YOYO World, by Richard L. Kaplan (Illinois)

July 27, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Friday, July 25, 2014

Weekly SSRN Tax Roundup

July 25, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Student Tax Note Roundup

Pittsburgh Tax Review Publishes New Issue

Pittsburgh Tax Review The Pittsburgh Tax Review has published Vol. 11, No. 1 (Fall 2013):

July 25, 2014 in Scholarship, Tax | Permalink | Comments (0)

Schrag: MOOCs: The Final Nail in Legal Education's Coffin?

MOOCPhilip G. Schrag (Georgetown), MOOCs and Legal Education: Valuable Innovation or Looming Disaster?, 59 Vill. L. Rev. 83 (2014):

Massive open online courses (MOOCs) have spread across the landscape of higher education like an invasive plant species. Although few people had heard of MOOCs before 2012, these internet-based courses, taught by university professors, are now routinely offered simultaneously to tens of thousands or in some cases, hundreds of thousands of people. Most MOOCs are still provided free of charge, but the two companies and one non-profit entity that promote MOOCs and provide the software have recently created partnerships with institutions of higher education in order to realize substantial revenues by offering MOOCs for academic credit to tuition-paying students at colleges and universities. Despite resistance from professors at some institutions, MOOCs for credit are proliferating rapidly. This development has great significance for the future of legal education, because most law schools are experiencing an economic crisis and are searching for ways to cut costs and lower tuition so that they can fill their classes and remain viable. Already, some law schools are offering academic credit for distance learning, within limits permitted by the Section of Legal Education of the American Bar Association—limits that may soon be relaxed. Within ten years, MOOCs could replace traditional law school classes altogether, except at a few elite law schools that produce lawyers to serve large corporations and wealthy individuals. However, most law schools might survive by embracing rather than resisting internet-based learning. They could cut costs by reducing faculty and staff positions, using MOOCs for the delivery of most of the legal information that students need, hiring part-time lawyers to help students with exercises to supplement the MOOCs, and concentrating the remaining full-time faculty on first-semester offerings, writing seminars, and clinics. Sadly, the result will be a watered-down form of legal education compared to the three years of interactive experiences that law schools have offered students for the last century. But it may be the only way in which most law schools can survive.

July 25, 2014 in Legal Education, Scholarship | Permalink | Comments (0)

Thursday, July 24, 2014

Washington & Lee Hosts Tax Roundtable

W&LWashington & Lee Law School hosted a roundtable discussion of works-in-progress by tax professors from mid-Atlantic law schools on July 22-23:

  • Eric Chason (William & Mary), Taxing Losers
  • Michael Doran (Virginia), Tax Legislation in the Contemporary U.S. Congress
  • Michelle Drumbl (Washington & Lee), Enhancing Taxpayer Compliance with the EITC
  • Brant Hellwig (Washington & Lee), The Constitutional Nature of the United States Tax Court
  • Ruth Mason (Virginia), Taxing Citizenship
  • Gregg Polsky (North Carolina), Taxing Partnership Allocations Among Related Parties
  • Ethan Yale (Virginia), Antibasis  

July 24, 2014 in Colloquia, Conferences, Scholarship, Tax | Permalink | Comments (0)

Kysar: The 'Shell Bill' Game: Avoidance and the Origination Clause

Rebecca M. Kysar (Brooklyn), The 'Shell Bill' Game: Avoidance and the Origination Clause, 91 Wash. U. L. Rev. 659 (2014):

With increasing frequency, many important revenue laws, such as the Affordable Care Act and the American Taxpayer Relief Act of 2012, begin as “shell bills". The Origination Clause of the Constitution aims to place decisions over tax policy closer to the people by requiring that bills raising revenue begin in the House of Representatives, but the Clause also allows the Senate to amend such bills. The Senate has interpreted its amendment power broadly, striking the language of a bill passed by the House (the shell bill) and replacing it entirely with its own unrelated revenue proposal. According to a new challenge against the Affordable Care Act, this shell bill game is an unconstitutional sleight of hand because it obfuscates the bill’s true origins in the Senate.

The constitutional fate of the Affordable Care Act and myriad other revenue laws, as well as the intra-congressional balance of power over revenue policy, turns on the interpretation of the Senate’s power to amend revenue legislation, an analysis heretofore unexplored in the academic literature.

Continue reading

July 24, 2014 in Scholarship, Tax | Permalink | Comments (1)

Shaviro: Multiple Myopias, Multiple Selves, and the Under-Saving Problem

Daniel Shaviro (NYU), Multiple Myopias, Multiple Selves, and the Under-Saving Problem:

In both public policy debate and the academic literature, there is widespread, though not universal, agreement that millions of Americans are saving too little for their own retirements. If this is true, we could potentially increase such individuals’ welfare through the adoption of policies that resulted in their saving more. A key dilemma, however, is that, unless one understands why people are under-saving, it is hard to evaluate the likely responses to or merits of a given policy.

Continue reading

July 24, 2014 in Scholarship, Tax | Permalink | Comments (0)

Enduring Hierarchies in Legal Education

HierarchyOlufunmilayo Arewa (UC-Irvine), Andrew P. Morriss (Dean, Texas A&M) & William D. Henderson (Indiana), Enduring Hierarchies in American Legal Education, 89 Ind. L.J. 941 (2014):

Although much attention has been paid to U.S. News & World Report’s rankings of U.S. law schools, the hierarchy it describes is a long-standing one rather than a recent innovation. In this Article, we show the presence of a consistent hierarchy of U.S. law schools from the 1930s to the present, provide a categorization of law schools for use in research on trends in legal education, and examine the impact of U.S. News’s introduction of a national, ordinal ranking on this established hierarchy. The Article examines the impact of such hierarchies for a range of decision-making in law school contexts, including the role of hierarchies in promotion, tenure, publication, and admissions, for employers in hiring, and for prospective law students in choosing a law school. This Article concludes with suggestions for ways the legal academy can move beyond existing hierarchies and at the same time address issues of pressing concern in the legal education sector. Finally, the Article provides a categorization of law schools across time that can serve as a basis for future empirical work on trends in legal education and scholarship.

July 24, 2014 in Legal Education, Scholarship | Permalink | Comments (1)

District Court Guts Work Product Protection for Tax Opinions

Tax Analysys Logo (2013)Robin L. Greenhouse, Michael Kelleher & Randy Herndon (all of McDermott Will & Emery, Washington, D.C.),  District Court Opinion Guts Work Product Protection for Tax Opinions, 144 Tax Notes 329 (July 21, 2014):

With implications that should alarm tax controversy practitioners and their clients, in Schaeffler v. United States the U.S. District Court for the Southern District of New York denied a taxpayer’s petition to quash an IRS summons for a tax opinion issued by an accounting firm. The court’s finding that the tax opinion was not entitled to work product protection significantly undermines the application of that doctrine. Although the court denied the petition to quash, it later granted the taxpayer’s motion to stay enforcement of the summons pending appeal to the Second Circuit.

July 24, 2014 in Scholarship, Tax | Permalink | Comments (1)

Wednesday, July 23, 2014

Tahk: Crossing the Tax Code's For-Profit/Nonprofit Border

Susannah Camic Tahk (Wisconsin), Crossing the Tax Code's For-Profit/Nonprofit Border, 118 Penn St. L. Rev. 489 (2014):

The federal tax code erects and enforces a firm border between for-profit and nonprofit organizations. Multiple provisions of the code monitor the boundaries of the tax-exempt, or nonprofit, sector to ensure that no nonprofit organization slips over the border to become a for-profit organization. Other code provisions restrict entry into the tax-exempt sector by for-profit organizations. Despite serious legal impediments, however, organizations on both sides of the boundary have increasingly found means by which they can cross the border. Arrangements such as corporate social responsibility, for-profit philanthropy, and social enterprise illustrate this recent trend. Through these arrangements, for-profit organizations are beginning to embrace social goals, while nonprofit organizations have started to use methods more traditionally associated with efficient business organizations. Research in organizational sociology provides tools by which to understand these new cross-border developments. This body of research has shown that organizational sectors, or fields, evolve according to well-understood patterns, whose significance tax scholars have overlooked. Then, federal tax law has failed to recognize and to make productive use of these organizational trends. This Article proposes that tax law should acknowledge the cross-sector movements of for-profit and nonprofit organizations, as well as the major advantages that these movements can produce. Tax law could then harness border-crossing activity to create social benefits. To achieve this result, federal tax law needs significantly to loosen the for-profit/nonprofit boundary. This change would enable the tax code to encourage cross-sector “collaborations” between for-profit and nonprofit organizations. This change to the tax law is one that Congress and the IRS could now accomplish through several basic measures. These measures would make it possible for federal tax law to realize the large potential for social good that lies at the changing for-profit/nonprofit border.

July 23, 2014 in Scholarship, Tax | Permalink | Comments (0)

Camp: Preliminary Thoughts on Habig and King

TaxProf Blog op-ed:  Preliminary Thoughts on Habig and King, by Bryan Camp (Texas Tech):

CampYesterday two different U.S. Courts of Appeal disagreed on the validity of a tax regulation.  It is not a rare event for two federal courts of appeals to disagree on the same issue of law.  What made yesterday’s rulings a rare event was that the disagreement arose within a matter of hours and involved a key provision of the Affordable Care Act (ACA).  At issue was the validity of a Treasury regulation on how certain ACA tax credits are to be calculated.  At trial, both the district court for the District of Columbia and the district court for the Eastern District of Virginia had upheld the regulation.  On appeal, the D.C. Circuit struck down the regulation in Halbig v. Burwell but, hours later, the 4th Circuit upheld the same regulation in King v. Burwell.

The two panels of three judges produced five written opinions.  The D.C. Circuit panel found the Treasury regulation an invalid interpretation of the statute by a 2-1 vote.  Each judge wrote an opinion.  The majority opinion was penned by Judge Griffith, with Senior Judge Randolph joining and writing a short concurrence to emphasize his view that the government’s arguments really sucked wind.  Senior Judge Edwards wrote an impassioned dissent.  The 4th Cir. vote was 3-0, with two opinions.  Judge Gregory, joined by Judge Thacker and Senior Judge Davis, penned the opinion for the Court.  Senior Judge Davis added a short concurrence to emphasize his view that the plaintiff’s arguments really sucked wind. 

This post will summarize the arguments and the opinions, then make three brief observations about (1) a non-barking dog, (2) plain language pizza, and (3) what these cases might teach  about who---as between courts, Congress, or agencies---ought to be cleaning up statutory messes created by poor drafting. 

Continue reading

July 23, 2014 in Scholarship, Tax | Permalink | Comments (5)

Tuesday, July 22, 2014

Crawford: Occupy Wall Street, Income Inequality and Tax Scholarship

Patrick B. Crawford (People's College of Law), Occupy Wall Street, Income Inequality and Tax Scholarship: An Ideology Critique of the Consumption Tax Debate, 12 U.N.H. L. Rev. 137 (2014):

This is the first article to address the question: “What does Occupy Wall Street (“OWS”) have to say about American legal scholarship on income inequality (distributive justice) and tax policy?” The article shows, in the example of the leading tax scholarship on distributive justice and the consumption tax, how legal scholarship on economic regulation more generally systematically obscures rather that illuminates the important most important social welfare issue of our time. That is, the form and framing of analysis in the consumption tax literature preempts from serious analysis OWS major beef with our economic regulations: the fact that over the past 30-odd years big-business and big capital has dramatically increased its rent seeking and capture of the regulatory system.

Continue reading

July 22, 2014 in Scholarship, Tax | Permalink | Comments (1)

Monday, July 21, 2014

Marian: The Function of Corporate Tax-Residence in Territorial Systems

Omri Y. Marian (Florida), The Function of Corporate Tax-Residence in Territorial Systems, 18 Chapman L. Rev. ___ (2014):

In this symposium Essay, I explore the instrumentality of corporate tax-residence determination in territorial tax systems. Using the United States as a case study, I show that tax-residence determination had a historic “positive functionality”. Namely, tax-residence positively pointed to the source of income earned, and distributed by, a corporation. However, in current economic environment the positive functionality is obsolete. Instead, the modern functionality of corporate tax residence is a “negative” one. That is, to assure that income is not sourced at a jurisdiction in which income could not have possibly been produced. Under such a view, corporate tax-residence should be constructed as an anti-income-shifting mechanism. One way to achieve such result is to base corporate tax-residence determination on formulary apportionment that takes into account the corporation's real economic attributes, as well as the proportional part of corporation’s contribution to the control-group earnings. The functionality of formulary apportionment in this a context is not to allocate tax jurisdiction (the traditional use of formulary apportionment), but rather to assure that a corporation is not resident where is has no economic existence. Current territorial reform proposals in the United States ignore the important function of tax-residence in supporting source-taxation. I therefore conclude with a call to incorporate a reform of corporate-tax residence determination in any territorial reform legislation.

July 21, 2014 in Scholarship, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, July 20, 2014

Top 5 Tax Paper Downloads

Saturday, July 19, 2014

Blair-Stanek: Intellectual Property Law Solutions to Transfer Pricing Abuse

Tax Analysys Logo (2013)Andrew Blair-Stanek (Maryland), IP Law Solutions to Transfer Pricing Abuse, 143 Tax Notes 175 (June 30, 2014):

The article discusses a new way to attack transfer-pricing abuse: change intellectual property (IP) law.

July 19, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Friday, July 18, 2014

Weekly SSRN Tax Roundup

July 18, 2014 in Scholarship, Tax | Permalink | Comments (0)

Weekly Student Tax Note Roundup

July 18, 2014 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

Johnson: Reflections on Ridgely v. Lew

Johnson (Steve)TaxProf Blog op-ed:  Reflections on Ridgely v. Lew, by Steve R. Johnson (Florida State):

On July 16, the D.C. district court decided Ridgely v. Lew, Civ. No. 1:12-cv-00565 (CRC). It invalidated part of 31 C.F.R. sec. 10.27, restricting the ability of practitioners to charge contingent fees for services in connection with original returns, amended returns, and refund claims. The purported statutory authority for section 10.27 is 31 U.S.C. sec. 330(a), allowing Treasury to “regulate the practice of representatives of persons before the Department of the Treasury.”

In Loving v. IRS, 742 F.3d 1013 (D.C. Cir. 2014), a panel of the circuit invalidated regulations set out in 31 C.F.R. secs. 10.3 to 10.6 regulating return preparers. Affirming the Loving district court, the panel held that preparers are not “representatives” engaged in “practice” before the IRS, thus that Treasury lacked statutory authority to promulgate the regulations. The government chose not to seek Supreme Court review.

Loving, of course, has been quite controversial and has occasioned much commentary. My view, developed in Loving and Legitimacy: IRS Regulation of Tax Return Preparation forthcoming in the next issue of the Villanova Law Review, is that Loving was correctly decided. The “practice” rationale is not strong, but the “representative” rationale is sound, in my estimation. Cf. All Party Parliamentary Group on Extraordinary Rendition v. United States Dep’t of Defense, 2104 WL 2721381 (D.C. Cir. June 17, 2014) (FOIA case in which the court followed and applied Loving’s definition of “representative”).

The Ridgely plaintiff is a CPA. He brought suit under the Administrative Procedure Act and the Declaratory Judgment Act, arguing that the sec. 10.27 restrictions exceed Treasury’s statutory authority insofar as they apply to the preparation and filing of “Ordinary Refund Claims.” The Ridgely court followed Loving, finding that CPAs who advise as to and prepare Ordinary Refund Claims are not representatives practicing before the IRS. The result is not a big surprise. The government’s half-hearted attempts to distinguish Ridgely from Loving were easily brushed aside, and the district court obviously wasn’t going to disagree with its circuit court. If one believes Loving was correctly decided, then Ridgely too was correctly decided.

As to Ridgely’s aftermath, four thoughts.

Continue reading

July 18, 2014 in Scholarship, Tax | Permalink | Comments (3)