TaxProf Blog

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

Sunday, January 14, 2018

Zelinsky: Taxation And Religion In 2018 — The Parsonage Allowance And The Johnson Amendment

Edward A. Zelinsky (Cardozo), Taxation and Religion in 2018:

2018 will be an interesting year for those concerned about the intersection of taxation and religion. Two important issues – the constitutionality of the parsonage allowance and the future of the Johnson Amendment – are primed for further controversy in the year ahead.

Continue reading

January 14, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Friday, January 12, 2018

Tax Policy In The Trump Administration

Tax Profs:

Other:

Continue reading

January 12, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Apple Could Get A $4 Billion Boost From Tax-Law Quirk

Apple LogoBloomberg, Apple Could Get a $4 Billion Boost From Tax-Law Quirk:

Companies that stockpiled trillions of dollars offshore free of U.S. income tax may get one last break before paying up -- provided their fiscal years don’t follow the calendar year.

A timing quirk in the tax overhaul that President Donald Trump signed last month may be good news for companies such as Apple Inc., Microsoft Corp. and Cisco Systems Inc., all of which began their fiscal years before Jan. 1. Firms including Alphabet Inc., Amgen Inc. and General Electric Co. -- with fiscal years that began on Jan. 1 -- appear to be shut out of the benefit.

Apple alone, which disclosed an offshore cash hoard of $252 billion as of Sept. 30, may be able to lop more than $4 billion off a future tax bill, according to Stephen Shay, a tax and business law professor at Harvard Law School who wrote about what he called the “potential loophole” last month [Will Treasury Close Loophole In Treatment Of Deferred Foreign Income In The Tax Cuts And Jobs Act?]. He characterized the boon as a side effect of the speed with which congressional Republicans passed their tax bill.

Continue reading

January 12, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Thursday, January 11, 2018

Donaldson: Understanding The New Tax Law

Samuel A. Donaldson (Georgia State), Understanding the Tax Cuts and Jobs Act:

This manuscript summarizes key provisions of the so-called "Tax Cuts and Jobs Act" affecting United States individuals, small businesses, estates, and trusts. It does not cover changes made to pension and retirement accounts, provisions applicable only to certain industries, rules applicable to tax-exempt organizations, international tax reform, or repeal of the individual mandate under the Patient Protection and Affordable Care Act.

Continue reading

January 11, 2018 in Scholarship, Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Trump Administration Opts For Speed Over Accuracy In Implementing New Tax Law

Washington Post, Trump Administration Opts For Speed Over Accuracy in Implementing New Tax Law:

The Trump administration is pushing American businesses to withhold less in taxes from paychecks by February, aiming to quickly deliver the boost in take-home pay that Republicans promised their tax law would bring.

But the rush could expose millions of workers to the risk of underpaying taxes to the government now, which means they might owe more than they are expecting when they file tax returns in April 2019.

Business and taxpayers looking for clarity will be appealing to an Internal Revenue Service that, according to an internal watchdog report Wednesday, is underfunded and ill-prepared to answer basic questions. ...

Continue reading

January 11, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Tuesday, January 9, 2018

'America-Last Tax Policy': New Law May Drive Factories And Jobs Abroad

New York Times, Tax Law May Send Factories and Jobs Abroad, Critics Say:

In Indiana, Missouri and Pennsylvania, President Trump used the same promise to sell the tax bill: It would bring jobs streaming back to struggling cities and towns. “Factories will be pouring into this country,” Mr. Trump told a crowd in St. Charles, Mo., in November. “The tax cut will mean more companies moving to America, staying in America and hiring American workers right here.”

The bill that Mr. Trump signed, however, could actually make it attractive for companies to put more assembly lines on foreign soil.

Under the new law, income made by American companies’ overseas subsidiaries will face United States taxes that are half the rate applied to their domestic income, 10.5 percent compared with the new top corporate rate of 21 percent.

“It’s sort of an America-last tax policy,” said Kimberly Clausing, an economist at Reed College in Portland, Ore., who studies tax policy. “We are basically saying that if you earn in the U.S., you pay X, and if you earn abroad, you pay X divided by two.”

Continue reading

January 9, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Monday, January 8, 2018

8 Tax Profs: Full Deduction For Charitable Contributions Resulting In State Tax Credit

Joseph Bankman (Stanford), David Gamage (Indiana), Jacob Goldin (Stanford), Daniel Hemel (Chicago), Darien Shanske (UC-Davis), Kirk Stark (UCLA), Dennis Ventry (UC-Davis) & Manoj Viswanathan (UC-Hastings), Federal Income Tax Treatment of Charitable Contributions Entitling the Donor to a State Tax Credit:

This paper summarizes the current federal income tax treatment of charitable contributions where the gift entitles the donor to a state tax credit. Such credits are very common and are used by the states to encourage private donations to a wide range of activities, including natural resource preservation through conservation easements, private school tuition scholarship programs, financial aid for college-bound children from low-income households, shelters for victims of domestic violence, and numerous other state-supported programs. Under these programs, taxpayers receive tax credits for donations to governments, government-created funds, and nonprofits.

Continue reading

January 8, 2018 in Scholarship, Tax, Tax Policy in the Trump Administration | Permalink | Comments (5)

Saturday, January 6, 2018

Polsky: The New Libel Tax

Gregg Polsky (Georgia), The Libel Tax: The New Law Taxes People for Winning Defamation Claims:

President Donald Trump’s new tax law has been roundly criticized for spending $1.5 trillion largely for the benefit of big corporations and extremely wealthy individuals, for further complicating the tax code, and for lacking intellectual or policy coherence. Lost in all of this valid criticism has been scrutiny of the large number of technical flaws in the law that will haunt innocent and unsuspecting taxpayers for years to come while simultaneously providing windfalls for more sophisticated taxpayers and their advisors.

One ironic example of such a technical flaw is a change that will punish people like Summer Zervos. The former Apprentice contestant has sued Trump for defamation, based on his claim that she was lying when she accused him of making unwanted sexual advances.

The new tax bill denies defamation plaintiffs like Zervos any deductions for their attorney’s fees and costs, even when their claims succeed. The result is likely to be extremely high tax rates on defamation awards. In fact, this new tax burden on defamation plaintiffs would in some cases make it more expensive to sue someone who has defamed you than to just ignore them. ...

Continue reading

January 6, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Friday, January 5, 2018

More On State Resistance To The New Federal Tax Law

Tax Policy In The Trump Administration

Wednesday, January 3, 2018

Goldman Sachs Takes $5 Billion Hit From New Tax Law

Goldman (2017)Bloomberg, Goldman Takes One-Time $5 Billion Hit From New U.S. Tax Law:

Goldman Sachs Group said the U.S. tax reform will cut profit this year by about $5 billion, mainly because of a tax targeting earnings held abroad.

About two-thirds of the hit comes from the repatriation tax, while writing down U.S. deferred tax assets also contributed, the company said in a filing on Friday. The bank also accelerated the delivery of previously granted stock awards to many of its top executives to lower its taxable profit subject to this year’s higher rates.

While bank stocks have rallied on the tax bill’s lower corporate rates, the new law requires charges in the near-term as foreign earnings face taxation and the value of deferred tax assets declines. Citigroup Inc. said it expects a hit of as much as $20 billion, while Bank of America Corp. will take a $3 billion charge and Credit Suisse Group AG is at risk of posting a third consecutive annual loss.

Wall Street Journal, Goldman to Take a Big Charge Related to U.S. Tax Overhaul:

Continue reading

January 3, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

NY Times: Democrats In High-Tax States Plot To Blunt Impact Of New Tax Law

New York Times, Democrats in High-Tax States Plot to Blunt Impact of New Tax Law:

Democrats in high-cost, high-tax states are plotting ways to do what their states’ representatives in Congress could not: blunt the impact of the newly passed Republican tax overhaul.

Governors and legislative leaders in New York, California and other states are considering legal challenges to elements of the law that they say unfairly single out parts of the country. They are looking at ways of raising revenue that aren’t penalized by the new law. And they are considering changing their state tax codes to allow residents to take advantage of other federal tax breaks — in effect, restoring deductions that the tax law scaled back.

One proposal would replace state income taxes, which are no longer fully deductible under the new law, with payroll taxes on employers, which are deductible. Another idea would be to allow residents to replace their state income tax payments with tax-deductible charitable contributions to their state governments.

Continue reading

January 3, 2018 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (8)

Tax Profs Weigh In On Potential State Lawsuits To Block Repeal Of The State & Local Tax Deduction

Reuters, U.S. Tax Bill May Face Lawsuits With Long Odds But Political Payoffs:

Democratic-leaning states may take legal action to challenge the cap on deductions of state and local taxes under the sweeping overhaul of the U.S. tax code, and even though such lawsuits would face long odds they could help galvanize Democrats for next year’s mid-term election. ...

Law professors said legal challenges would likely rest on arguing that the provision interferes with the protection of states’ rights under the U.S. Constitution. ...

Continue reading

January 3, 2018 in Tax Policy in the Trump Administration | Permalink | Comments (5)

Saturday, December 30, 2017

Almost Everything Is Wrong With the New Tax Law

Wall Street Journal op-ed:  Almost Everything Is Wrong With the New Tax Law, by Alan S. Blinder (Princeton):

Dec. 20, 2017, should go down in political history as a day of infamy or absurdity, probably both. After passing a massive tax bill without a single Democratic vote—something highly unusual in itself—congressional Republicans gathered with President Trump on the White House steps that day to engage in an orgy of self-congratulation.

The president patted himself on the back so vigorously that he might have required physical therapy. One after another, Republican senators and representatives competed for the honor of offering the most unctuous praise for their Maximum Leader. But Sen. Orrin Hatch of Utah, who was previously thought to be level-headed, set a new standard for fawning by declaring that Mr. Trump may be the greatest president ever. Ever? Not Lincoln? Not Washington?

Was this love-fest because Republicans had just passed an economically sound and wildly popular tax bill that was winning praise from tax experts and scoring marvelously in public opinion polls? Not quite. Polls show that Americans hate this bill.

Continue reading

December 30, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (5)

Friday, December 29, 2017

President Trump: 'I Know The Details Of Taxes Better Than Anybody. Better Than The Greatest CPA.'

From the New York Times thirty minute interview with President Trump:

"I know the details of taxes better than anybody. Better than the greatest C.P.A."

December 29, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Thursday, December 28, 2017

Tax Reform’s Growth Whisperer

ToomeyWall Street Journal, Tax Reform’s Growth Whisperer:

President Trump signed tax reform into law Friday, but in late November it almost had a heart attack in committee. Sens. Ron Johnson of Wisconsin and Bob Corker of Tennessee were balking, the former over the details of business taxation and the latter over the deficit. The GOP has a bare 12-11 majority on the Senate Budget Committee, and Democrats were united in opposition, so a single Republican dissenter would have stalled the bill. But Messrs. Corker and Johnson voted aye, and it advanced.

Much of the behind-the-scenes credit for tax reform belongs to Sen. Pat Toomey of Pennsylvania, who as a member of both the Budget and Finance committees helped persuade a rotating cast of Republican critics. When the GOP celebrated its victory at the White House this week, Nevada’s Dean Heller mugged for the cameras toward the front. Mr. Toomey stood less conspicuously a row back. He’s the player who doesn’t dance in the end zone but stays up watching game film.

Continue reading

December 28, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Harvard Business Review: Breaking Down The New U.S. Corporate Tax Law

Harvard Business Review LogoHarvard Business Review, Breaking Down the New U.S. Corporate Tax Law:

Mihir Desai, a professor of finance at Harvard Business School, breaks down the brand-new U.S. tax law. He says it will affect everything from how corporate assets are financed to how business are structured. He predicts many individuals will lower their tax burdens by setting themselves up as corporations. And he discusses how the law shifts U.S. tax policy toward a territorial system of corporate taxes, one that will affect multinationals and national competitiveness. Finally, Desai explains what he would have done differently with the $1.5 trillion the tax cut is projected to cost. ...

Continue reading

December 28, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Wednesday, December 27, 2017

New Tax Law May Give Big Edge To Pro Sports Teams In Florida, Nevada, Texas, And Washington

Washington Post, Florida, Texas May Attract Athletes After Tax Law Change:

Teams in Texas, Florida, Nevada and Washington state may have become more attractive destinations for free agents following the enactment of tax law changes.

Deductions for state and local taxes are capped at $10,000 in the year starting Jan. 1 for married couples filing jointly. That has a huge impact for athletes with seven- and eight-figure salaries.

“Obviously, the zero income-tax states have now more of an advantage than before,” said baseball agent Scott Boras, who is negotiating big-money deals this offseason for free agents J.D. Martinez, Eric Hosmer, Mike Moustakas, Jake Arrieta and Greg Holland. ...

Continue reading

December 27, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Waiting Until Jan. 3 To Sign Tax Reform Would Not Have Delayed A PAYGO Sequestration

Yale Notice & CommentFollowing up on my previous posts:

Sam Wice, Waiting Until January 3 to Sign Tax Reform Would Not Have Delayed a PAYGO Sequestration, Yale J. on Reg.: Notice & Comment (2017):

In an earlier post, I suggested that Republicans should wait until January 2018 to pass tax reform so that they can delay a Pay-As-You-Go (PAYGO) sequestration.  President Trump appears to have taken this idea to heart and decided that if Congress did not waive the PAYGO sequestration, he would wait until January 3, 2018 to sign tax reform into law.  Although in a Festivus miracle Congress waived the PAYGO sequestration, for future reference I explain here why President Trump could not have delayed a PAYGO sequestration by merely waiting until 2018 to sign tax reform into law.  The plain meaning of PAYGO and prior Office of Management and Budget (OMB) practice indicated that no matter when President Trump signed tax reform, it must still have been included in the 2017 PAYGO annual report, which would have triggered an immediate sequestration. ...

Continue reading

December 27, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Tuesday, December 26, 2017

More On AT&T's $1,000 Tax Cut Bonus To Workers

AT&T LogoFollowing up on last week's post, AT&T's Tax Cut Bonus Isn't Just A Gimmick:

Wall Street Journal, Timing Is Vital as Companies Set Bonuses, Spending Before New Tax Law:

The timing of AT&T Inc.’s pledge this week to give $1,000 bonuses to more than 200,000 workers once President Donald Trump signs the tax overhaul may have saved it $28 million.

That is because committing to making the payment now could let it record the expense in 2017 for tax purposes. In AT&T’s case, that would mean a $70 million deduction under the existing 35% tax rate. By contrast, recording the bonus expense in 2018, when the new 21% corporate rate is in effect, would mean a $42 million deduction.

Similar calculations may be under way for other businesses that have also promised tax-bill bonuses or are considering charitable contributions or other year-end expenses ahead of the tax-law changes.

Wall Street Journal editorial, The Corporate Tax-Cut Dividend:

Continue reading

December 26, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Saturday, December 23, 2017

The New Tax Law Is 'Manna From Heaven' For Tax Lawyers, Especially Young Tax Lawyers

Law 360, Tax Bill Like ‘Manna From Heaven’ For Work-Hungry Firms
National Law Journal, Brew a Pot of Coffee, This Big Law Tax Attorney Is Burning the Midnight Oil:

[T]ax attorneys have already been hard at work ever since the bill started down the fast track in Congress, according to corporate tax lawyer David Miller, a partner at Proskauer Rose in New York. ... We asked Miller about how the tax bill has already impacted his work life, and the legal business that tax lawyers expect to see once Congress passes the new law. ...

On a scale of one to five, with five being the busiest, what’s your prediction for your practice next year?
For me and tax lawyers generally, definitely a five. The tax bill represents the most significant change in the federal tax laws in the last 30 years, and businesses will seek advice on how to restructure to take advantage of the new regime, and help implement the changes. ...

Continue reading

December 23, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Friday, December 22, 2017

Tax Policy In The Trump Administration

Tax (And Other) Profs:

Other:

Continue reading

December 22, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

The Farmer, The Pickup, And The Elephant: A Post-Modern Fable

Once upon a time in West Texas there lived a farmer. In addition to raising crops, he kept a collection of interesting animals as a hobby. Always keen to make some money, however, he used the output of the animals for compost and sold the excess to surrounding farms. More about that below the fold. But first I need to tell you about the farmer’s pickup truck, “Iris.”

The farmer’s dad had bought a fine Ford F250 in the early 2000’s. His dad was very fond of the truck and called it “Iris.” But the farmer did not like Iris and so he used it exclusively to haul the animal product to market. Of course that meant Iris stank. The stink offended people, who thought Iris was to blame for payload the farmer asked Iris to carry.

When the farmer took over farming operations from his dad in 2008 he began neglecting Iris by not putting in the money to make needed upkeep and repairs. For example, he used a really cheap motor oil because he liked its name “Liberty,” and he liked the pennies he saved. But that oil actually did the exact opposite of what oils are supposed to do: it exacerbated the wear on the engine Then the farmer started using an even cheaper lubricant: chicken grease. When the once proud 5.2L Voodoo V8 engine failed, the farmer replaced it with an 4-cylinder engine taken from a Ford Fiesta, ‘cause that was cheap. More pennies saved! As parts failed, Iris became increasingly unreliable.  Still, the farmer kept relying on Iris to carry the load for him.

And now, for the Elephant part, below the fold.

Continue reading

December 22, 2017 in Bryan Camp, IRS News, Tax, Tax Policy in the Trump Administration, Tax Practice And Procedure | Permalink | Comments (3)

Thursday, December 21, 2017

The Tax Bill Will Not Help The GOP In 2018

FiveThirtyEight, Will Passing The Tax Bill Help The GOP In 2018? Probably Not.:

President Trump’s first year has been marked by an almost complete lack of major policy wins. But that could come to an end this week. [The tax bill] would be the first major legislative victory for Trump and the Republicans. And it would accomplish a long-held GOP goal: cutting the corporate tax rate.

But policy wins and political wins don’t always go hand in hand. Republicans who believe that failing to pass this tax bill will be a disaster for them in the 2018 midterm elections, like Trump and Sen. Lindsey Graham, are likely to be disappointed.

This tax bill remains historically unpopular. According to an average of nine surveys taken this month, 33 percent of Americans are in favor of it, and 52 percent are opposed. That -19 percentage point split between support and opposition makes it the least popular major tax bill since at least the Ronald Reagan tax cuts in 1981.

538

Continue reading

December 21, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (4)

AT&T's Tax Cut Bonus Isn't Just A Gimmick

AT&T LogoBloomberg View:  AT&T's Tax Cut Bonus Isn't Just a Gimmick, by Justin Fox:

Yes, AT&T chief executive Randall Stephenson's announcement that his company will be paying out $1,000 bonuses to 200,000 workers in the wake of the passage of a big corporate tax cut is probably to some extent a lobbying ploy. AT&T, as many, many people have noted this afternoon, has a giant acquisition (of Time Warner) currently being held up by antitrust regulators. It has every reason, then, to want to curry favor with the man for whom the tax bill represents a first major legislative victory, President Donald Trump.

But Stephenson's move is also a simple representation of what a lot of economists think is the natural result of a cut in corporate taxes. Corporations themselves don't ultimately pay taxes.

Continue reading

December 21, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Wednesday, December 20, 2017

Kysar & Sugin: The Built-In Instability Of The GOP’s Tax Bill

New York Times op-ed:  The Built-In Instability of the G.O.P.’s Tax Bill, by Rebecca Kysar (Brooklyn) & Linda Sugin (Fordham):

Republicans are on the verge of achieving their decades-long goal: an overhaul of the tax code. But the system they have built will not last.

The plan’s instability is partly a result of the process Republican Party leaders chose to make it happen. Reconciliation, which allows escape from the Senate filibuster, means that Republicans did not have to reach across the aisle. Not a single Democrat supported the legislation.

Continue reading

December 20, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Tuesday, December 19, 2017

The Games They Will Play: An Update On The Conference Committee Tax Bill

Reuven Avi-Yonah (Michigan), Lily Batchelder (NYU), Cliff Fleming (BYU), David Gamage (Indiana), Ari Glogower (Ohio State), Daniel Hemel (Chicago), David Kamin (NYU), Mitchell Kane (NYU), Rebecca Kysar (Brooklyn), David Miller (Proskauer), Darien Shanske (UC-Davis), Dan Shaviro (NYU) & Manoj Viswanathan (UC-Hastings), The Games They Will Play: An Update on the Conference Committee Tax Bill:

Earlier this month, we posted a report identifying key weaknesses in the Senate and House tax legislation, titled the Tax Cuts and Jobs Act (TCJA). Based on the conference bill released last week, this report updates our analysis describing some of the major games, legal roadblocks, and glitches in the legislation. This represents the continued work of a group of legal experts from across the country.

Continue reading

December 19, 2017 in Scholarship, Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

GOP Could Use Treasury Gimmick To Avoid PAYGO Sequestration From Tax Bill

Following up on my previous post, Why the End of This Year Is the Worst Possible Time to Pass Tax Reform:  Sam Wice, The Gimmick Republicans Could Use to Avoid a PAYGO Sequestration, Yale J. on Reg.: Notice & Comment (2017):

Republicans plan to pass a deficit increasing tax-reform proposal, but the Pay-As-You-Go Act (PAYGO) would require a sequestration, an automatic reduction in spending, if tax reform increased the deficit.  Republicans could avoid a sequestration by convincing Senate Democrats to support legislation lifting the sequestration.  Democrats, however, might not be willing to compromise on an issue that they believe that Republicans caused.  Nevertheless, Republicans have a gimmick they could unilaterally use to avoid a sequestration.  Specifically, Republicans could use the Treasury Department’s estimate, which claims that the economic growth from tax reform would pay for its costs.

Continue reading

December 19, 2017 in Congressional News, Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Trump, Corker, And Other Real Estate Investors Get Last-Minute Perk in Tax Bill

Bloomberg, Trump, Real Estate Investors Get Last-Minute Perk in Tax Bill:

Lawmakers scrambling to lock up Republican support for the tax reform bill added a complicated provision late in the process — one that would provide a multimillion-dollar windfall to real estate investors such as President Donald Trump.

The change, which would allow real estate businesses to take advantage of a new tax break that’s planned for partnerships, limited liability companies and other so-called “pass-through” businesses, combined elements of House and Senate legislation in a new way. Its beneficiaries are clear, tax experts say, and they include a president who’s said that the tax legislation wouldn’t help him financially. ,,,

James Repetti, a tax law professor at Boston College Law School, said: “This is a windfall for real estate developers like Trump.”

Continue reading

December 19, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Monday, December 18, 2017

The Impact Of The GOP Tax Bill On Higher Education: Taxes On Large Endowments, $1 Million Compensation Are In; Taxes On Tuition Remission And Logo Licensing, Private Activity Bond Restrictions Are Out

Chronicle of Higher Education, Final Tax Bill Would Spare Some Higher-Ed Worries, but Could Lead to State Budget Cuts:

The Republican-backed tax overhaul is headed for final floor votes in Congress without some of the measures that would directly target higher education. Notably, a proposed tax on tuition waivers for graduate students and other college employees is no longer in the compromise legislation. But a high-profile tax on the investment earnings of some of the largest college endowments stayed in the bill. ...

Continue reading

December 18, 2017 in Congressional News, Tax, Tax Policy in the Trump Administration | Permalink | Comments (2)

New York Times, Wall Street Journal On The GOP Tax Bill

New York Times editorial, The Tax Bill That Inequality Created:

Most Americans know that the Republican tax bill will widen economic inequality by lavishing breaks on corporations and the wealthy while taking benefits away from the poor and the middle class. What many may not realize is that growing inequality helped create the bill in the first place.

As a smaller and smaller group of people cornered an ever-larger share of the nation’s wealth, so too did they gain an ever-larger share of political power. They became, in effect, kingmakers; the tax bill is a natural consequence of their long effort to bend American politics to serve their interests.

As things stand now, the top 1 percent of the population by wealth — the group that would primarily benefit from the tax bill — controls nearly 40 percent of the country’s wealth. The bottom 90 percent has just 27 percent, according to the economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman. Just three decades ago these numbers were almost exactly the reverse: The bottom 90 percent owned nearly 40 percent of all wealth. To find a time when such a tiny minority was so dominant, you have to go back to the Great Depression. ...

NYT 1

Continue reading

December 18, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (2)

Davis Polk's Tax Cuts And Jobs Act Navigator

Davis PolkFollowing up on my weekend posts:

Davis Polk, Tax Cuts and Jobs Act Navigator:

We are pleased to release our first “TCJA Navigator,” a hyperlinked version of the Conference Committee’s tax reform bill released on December 15th.

Continue reading

December 18, 2017 in Congressional News, Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Saturday, December 16, 2017

GOP Finalizes Tax Bill, House And Senate Expected To Approve Conference Agreement Next Week

Friday, December 15, 2017

Tax Policy In The Trump Administration

The GOP’s Corporate Tax Cut May Not Be As Big As It Looks

FiveThirtyEight, The GOP’s Corporate Tax Cut May Not Be As Big As It Looks:

Cohn and others in the Trump administration might have oversold the potential benefits of their tax plan. One big reason that the legislation won’t supercharge the economy is that the tax cut isn’t as big as it looks on paper.

Under the latest version of the bill — a compromise worked out between negotiators from the House and Senate — the federal corporate rate would reportedly drop from 35 percent to 21 percent, according to the Washington Post and several other news outlets. (When state levies are included, the U.S. statutory corporate tax rate averages to 39 percent, the highest in the Group of 20.) But thanks to a bevy of deductions, few American corporations actually pay 39 or even 35 percent. Estimates vary, but Kent Smetters, the Wharton School professor who runs the Penn Wharton Budget Model, said in an interview that he reckons the average effective rate that U.S. corporations pay is around 22 percent. That could explain the lack of enthusiasm that Cohn saw at the Journal event.

And how much a corporation’s effective tax rate strays from the 39 percent mark varies tremendously by industry. The average rate paid by money-making, publicly traded companies at the start of the year was about 26 percent, according to calculations by Aswath Damodaran, a finance professor at New York University’s Stern business school. Most of the rates ranged from about 7 percent for software companies to just under 39 percent for the retail sector.

538

Continue reading

December 15, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Wednesday, December 13, 2017

WSJ: For Pass-Through Businesses, Let The (Tax) Games Begin

Wall Street Journal, For Pass-Through Businesses, Let the (Tax) Games Begin:

Republican lawmakers hope to reach compromise this week on a tax overhaul, with final votes in the House and Senate next week and delivery to President Donald Trump’s desk before Christmas. The new rules could take effect in January, encouraging business owners to move quickly to take advantage of them.

The core of the plan is a vast reordering of U.S. business taxation, not only for big corporations like Apple Inc. and Walmart Stores Inc. but also for millions of partnerships, limited-liability companies and other so-called pass-through companies that pay tax through individual rather than corporate returns.

The tax bill would lower corporate tax rates to near 20% from 35% while leaving top individual rates just below 40%. It would also create a new system for pass-through firms that would exist in a gray area—part business and part individual. The Senate and House both want to lower these entities’ taxes, too, but have different ways of doing it. 

WSJ 2

The new pecking order of business and individual taxation could lead to a new era of business reorganization and tax-code gamesmanship with unknown consequences for the economy and federal revenue collection. ...

Continue reading

December 13, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Paul Ryan: 'Twas The Night Before Taxmas

The House-Senate Tax Conference: A Byrd's Eye View

Ellen Aprill (Loyola-Los Angeles) and I have posted a primer on the Senate's Byrd Rule, focusing specifically on the requirement that provisions in a budget reconciliation bill must have more than a "merely incidental" effect on revenue. As we write:

The Byrd rule applies in the Senate to all measures that are passed through the budget reconciliation process, including to the House-Senate conference report. It is the source of the requirement — familiar to many in the tax world — that a bill passed through reconciliation cannot add to the deficit outside the budget window (which in this case is 10 years). It is also the source of a little-understood requirement that every provision in a reconciliation bill must produce revenue effects that are more than “merely incidental” to the non-budgetary consequences.

While the primary focus of news coverage and commentary on the Byrd rule in recent weeks has been on the deficit limitations, the Byrd rule’s “merely incidental” proviso is likely to play an increasingly important role as House and Senate negotiators hash out a conference report. The intricacies of the Byrd rule may determine the fate of provisions affecting the political activities of charitable organizations, the tax treatment of confidential sexual harassment settlements like the ones used by Harvey Weinstein, and many more. And if the conference report runs afoul of the Byrd rule, that could delay passage of the final bill until early 2018.

Continue reading

December 13, 2017 in Daniel Hemel, Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Monday, December 11, 2017

WSJ: Senate Tax Bill Contains 100% Marginal Rate For Some Business Owners

100%Wall Street Journal, The Taxman Cometh: Senate Bill’s Marginal Rates Could Top 100% for Some:

Some high-income business owners could face marginal tax rates exceeding 100% under the Senate’s tax bill, far beyond the listed rates in the Republican plan.

That means a business owner’s next $100 in earnings, under certain circumstances, would require paying more than $100 in additional federal and state taxes.

As lawmakers rush to write the final tax bill over the next week, they already are looking at changes to prevent this from happening. Broadly, House and Senate Republicans are trying to reconcile their bills, looking for ways to pay for eliminating the most contentious proposals. The formal House-Senate conference committee will meet on Wednesday, and GOP lawmakers may unveil an agreement by week’s end.

The possible marginal tax rate of more than 100% results from the combination of tax policies designed to provide benefits to businesses and families but then deny them to the richest people. As income climbs and those breaks phase out, each dollar of income faces regular tax rates and a hidden marginal rate on top of that, in the form of vanishing tax breaks. That structure, if maintained in a final law, would create some of the disincentives to working and to earning business profit that Republicans have long complained about, while opening lucrative avenues for tax avoidance.

Continue reading

December 11, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Shaviro: 23% Pass-Through Rate Is 'Single Worst Proposal Ever Made In The History Of The Income Tax'

New York Times, Same Income, But Not Taxes, in GOP Plans:

In most places, a dollar is a dollar. But in the tax code envisioned by Republicans, the amount you make may be less important than how you make it. ...

[For] the first time since the United States adopted an income tax, a higher rate would be applied to employee wages and salaries than to income earned by proprietors, partnerships and closely held corporations.

Continue reading

December 11, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Sunday, December 10, 2017

Zelinsky: What the House-Senate Conference Committee Should Do About The Johnson Amendment

Edward A. Zelinsky (Cardozo), What the House-Senate Conference Committee should do about the Johnson Amendment:

The Johnson Amendment is the part of Internal Revenue Code Section 501(c)(3) which bans tax-exempt institutions from participating in political campaigns. The US House of Representatives has passed H.R.1, the Tax Cuts and Jobs Act, to revise the Code. Section 5201 of H.R. 1 would modify the Johnson Amendment. In contrast, the tax bill pending in the US Senate does not address the Johnson Amendment.

H.R. 1 gets three things right and wrong about the Johnson Amendment. The Conference Committee charged with reconciling the House and Senate tax bills should craft a true safe harbor from the Johnson Amendment limited to internal church communications. This safe harbor should protect internal church communications from government interference while keeping intact Section 501(c)(3)’s general prohibitions on the use of tax-exempt institutions (including churches) for political campaigning and legislative advocacy. ...

Continue reading

December 10, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Saturday, December 9, 2017

Joint Tax Committee: Comparison Of The House And Senate Tax Bills

Joint Tax CommitteeJoint Committee on Taxation,  Comparison of the House- and Senate-Passed Versions of the Tax Cuts and Jobs Act (JCX-64-17) (Dec. 7, 2017) (51 pages):

This document ... compares the provisions of the House- and Senate-passed versions of the Tax Cuts and Jobs Act (“TCJA”).

Largely following the organization of the House bill, the document is divided into four sections, individual tax reform, business tax reform, taxation of foreign income and foreign persons, and exempt organizations. Within each section of the document, provisions of the legislation are divided into three categories: (1) provisions for which there are no differences between the House bill and the Senate amendment; (2) provisions for which there are differences between the House bill and the Senate amendment; and (3) provisions that are in only the House bill or the Senate amendment. Except for provisions that are only in the Senate amendment, within each category provisions are generally listed in the order in which they appear in the House bill.

Continue reading

December 9, 2017 in Congressional News, Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Schmalbech: The AMT Has Metastasized. It Is Time To Rip It Out Of The Tax Code.

Wall Street Journal op-ed:  End the Alternative Minimum Tax, Don’t Mend It, by Richard Schmalbech (Duke):

There are many unfortunate provisions in the tax-reform bills recently passed by the House and Senate, but at least one good one: The House bill would repeal the Alternative Minimum Tax. The Senate bill, in an effort to find a little revenue, would preserve the AMT but somewhat reduce its bite.

Continue reading

December 9, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Friday, December 8, 2017

Weekly SSRN Tax Article Review And Roundup: 12 Tax Profs Highlight Flaws Of GOP Tax Plan

This week, David Gamage (Indiana) discusses a new report, The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the New Legislation

Gamage (2019)The House and Senate Republicans’ tax bills are now headed to conference.  This may well turn out to be the most substantial new tax legislation since 1986. It threatens to be overwhelming to even list the ways in which these bills might transform important aspects of the U.S. economy. 

Given the massive scale and importance of this legislative effort, it is imperative that the new legislation be considered carefully and deliberately. Unfortunately, Republican leadership is currently rushing to meet a self-imposed deadline of passing this legislation before December 22nd.

I agree with some of the policy goals underlying these bills, and disagree with others. Yet whatever one thinks of these broad policy goals, draftsmanship is also important. Without careful drafting, tax law provisions can easily have numerous unintentional harmful effects.

Led by the primary drafters of Ari Glogower (Ohio State), David Kamin (NYU), Rebecca Kysar (Brooklyn), and Darien Shanske (UC-Davis), this new report explains some of the “games, roadblocks, and glitches” in these bills.  Nine other signatories also joined as signatories and secondary drafters of this report, and—full disclosure—I am one of these additional co-drafter/signatories.

Continue reading

December 8, 2017 in Scholarship, Tax, Tax Policy in the Trump Administration, Weekly SSRN Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

Tax Profs:

Continue reading

December 8, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Why the End of This Year Is the Worst Possible Time to Pass Tax Reform

Sam Wice, Why the End of This Year Is the Worst Possible Time to Pass Tax Reform, Yale J. on Reg.: Notice & Comment (2017):

Republicans hope to pass tax reform before Christmas so that they can go back to their constituents over the Winter Holidays and talk about their accomplishments.  However, because of the Pay-As-You-Go Act (PAYGO), passing tax reform at the end of the year would be the worst possible time to pass tax reform as it would lead to an immediate sequestration.

Continue reading

December 8, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Thursday, December 7, 2017

Thompson: Taxing Trump And Curry Under The Republican Plan

Following up on my previous post, The Only Person Mentioned In The Republican Tax Bill Is ... Steph Curry:  Samuel C. Thompson, Jr. (Penn State), Taxing Trump and Curry under the Republican Plan, 157 Tax Notes 1149 (Nov. 20, 2017):

It looks like the Republicans will be successful in enacting the Tax Cut and Jobs Act (TCAJA). The House Republican version of the TCAJA would adopt a maximum 25% rate on certain business income of pass-through entities. In attempting to sell this provision, the House Republicans have compared Stephen Curry, a star professional basketball player, who would not qualify for the 25% rate, to Steve of “Steve’s Bike Shop,” who would be entitled to the 25% rate. Apparently, the House Republicans used Curry because he got into a fight with President Trump over Curry’s decision not to visit the White House in connection with a celebration of his team’s NBA championship. ...

Continue reading

December 7, 2017 in Scholarship, Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

 'Holy Crap': Experts Find Tax Plan Riddled With Glitches

CrapPolitico, 'Holy Crap': Experts Find Tax Plan Riddled With Glitches:

Republicans’ tax-rewrite plans are riddled with bugs, loopholes and other potential problems that could plague lawmakers long after their legislation is signed into law.

Some of the provisions could be easily gamed, tax lawyers say. Their plans to cut taxes on “pass-through” businesses in particular could open broad avenues for tax avoidance.

Others would have unintended results, like a last-minute decision by the Senate to keep the alternative minimum tax, which was designed to make sure wealthy people and corporations don't escape taxes altogether. For many businesses, that would nullify the value of a hugely popular break for research and development expenses.

Continue reading

December 7, 2017 in Congressional News, Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Wednesday, December 6, 2017

Volokh: With State Income Taxes No Longer Deductible, Will States Switch To Payroll Taxes?

Eugene Volokh (UCLA), Now That State Income Taxes Aren’t Going to be Deductible, Will States Switch to Payroll Taxes?:

[S]ay California replaces the state income tax (at least for employment income) with a state payroll tax that’s paid by the employer, and that it comes in at the same amount per employee. As I understand it, the payroll tax — like most other business expenses, such as salaries paid to employees — is deductible by the employer; and it’s not taxable income for the employee, because it’s not the employee’s income. ...

That’s how I understand the thinking of University of Chicago professor Dan Hemel, who wrote about this last month: ...

Continue reading

December 6, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (7)

Sunday, December 3, 2017

Senate GOP Tax Bill Excludes House Provision Extending 529 College Savings Plans To Include 'Unborn Children'

Following up on my article, When Does Life Begin for Tax Purposes?, 68 Tax Notes 320 (1995):

Quartz, 'Unborn Child':  With Two Words, the Tax Bill Quietly Threatens Abortion Rights:

Hidden among the tax cuts [in the House GOP tax bill] ... is a short passage that could threaten women’s reproductive rights.

The bill lists “unborn children” among the allowed beneficiaries of 529 plans for college savings, breaking down the legal definition of an “unborn child” as follows:

Nothing shall prevent an unborn child from being treated as a designated beneficiary or an individual under this section. The term ‘unborn child’ means a child in utero. The term ‘child in utero’ means a member of the species homo sapiens, at any stage of development, who is carried in the womb.

Quartz

New York Times, Tax Overhaul Bears Gifts for Conservatives, Including Rights for 'Unborn':

Continue reading

December 3, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (2)