TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Monday, September 26, 2016

Husband Of Retired Tax Court Judge Pleads Guilty To Taking $1 Million In Fraudulent Deductions

TCKFollowing up on my previous posts:

Minneapolis Star Tribune, Twin Cities Husband of Ex-Tax Judge Admits Duping IRS; Charges Against Her Pending:

The husband of a former U.S. Tax Court judge has pleaded guilty to making nearly $1 million in fraudulent deductions on tax returns over much of her tenure on the bench and making several lavish purchases in that time through his consulting firm.

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September 26, 2016 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 1236

IRS Logo 2Wall Street Journal, Reputation Under Fire, the IRS Pulls a Gun—Al Capone’s:

The Internal Revenue Service doesn’t enjoy an abundance of favorable press. At present, it finds itself mired in controversy as its director, John Koskinen, hauled before Congress last week, tries to fend off an impeachment attempt.

On Tuesday, however, the IRS will participate in an unveiling ceremony it hopes will remind people of the positive things its agents have done. At least, one positive thing.

The agency is playing on the great American story of how Chicago mob boss Al Capone ended up in prison 85 years ago. It wasn’t the FBI’s “G-men” who put him in Alcatraz, nor Elliot Ness’s Prohibition-era agents. It wasn’t on account of gangland murders such as the 1929 Chicago Valentine’s Day Massacre, either.

Capone was undone by an undercover operation of the “T-men,” members of the Treasury Department’s IRS investigative division. He was pinched for cheating on his taxes.

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September 26, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, September 25, 2016

The 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, with a new #1 paper and new papers debuting on the list at #4 and #5:

  1. [387 Downloads]  Property Is Another Name for Monopoly Facilitating Efficient Bargaining with Partial Common Ownership of Spectrum, Corporations, and Land, by Eric A. Posner (Chicago) & E. Glen Weyl (Yale)
  2. [178 Downloads]  Transfer Pricing Money: The Chevron Case, by Richard J. Vann (Sydney) & Graeme S. Cooper (Sydney)
  3. [170 Downloads]  Financial Advisers Can't Overlook the Prudent Investor Rule, by Max M. Schanzenbach (Northwestern) & Robert H. Sitkoff (Harvard)
  4. [119 Downloads]  Taxation and Human Rights: A Delicate Balance, by Reuven Avi-Yonah (Michigan) & Gianluca Mazzoni (S.J.D. 2017, Michigan)
  5. [105 Downloads]  Law and Macroeconomics: The Law and Economics of Recessions, by Yair Listokin (Yale)

September 25, 2016 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 1235

IRS Logo 2Wall Street Journal op-ed: A Dangerous Rush to Impeach John Koskinen, by John Conyers (D-MI; Ranking Member, House Judiciary Committee):

The power of impeachment is a responsibility entrusted to the House of Representatives by the Constitution and to the House Judiciary Committee by our peers. I take this charge very seriously—and, for the most part, so do my colleagues in the majority.

I have served on the House Judiciary Committee long enough now to see impeachment done right and to see impeachment done wrong. I have participated in six of the 19 impeachments approved by the House since its inception. I voted in favor of five of them. In the early 1970s I helped to draft articles of impeachment against President Richard Nixon. I joined with 20 Democrats and six Republicans to send three of those articles to the House floor.

But I have never seen anything quite like the obsession of a few House members determined to impeach IRS Commissioner John Koskinen—without much evidence to back their claims, without an independent investigation by the House Judiciary Committee, and without even basic due process for the accused. ...

In the past few days, the actions of a small group of conservative House members threaten to break from this precedent and to lead us down a dangerous path. ...

On the merits, Mr. Koskinen’s critics have simply failed to make their case. They have been unable to produce evidence that the commissioner acted in bad faith at any point in his tenure. The Senate Finance Committee, the Justice Department and the Treasury Inspector General for Tax Administration have all concluded that there is “no evidence” of intentional misconduct of any kind.

But even if there were some evidence of Mr. Koskinen’s wrongdoing, the push to impeach him without due process in the House Judiciary Committee is dangerously misguided. Never, in the history of this body, have we impeached a government official without first proving he has acted in deliberate bad faith. ...

If the commissioner’s critics have their way, I fear we will have a new rule going forward: The House may impeach any government official, for any reason, without supplying evidence of deliberate wrongdoing, without an independent investigation, and without regard to basic fairness toward the accused.

Forcing a vote on impeachment in this manner will certainly not result in the removal of Commissioner Koskinen. Even if his critics succeed in the House, Senators of both parties have already stated their intent to bury the matter. So for all their efforts they will have profited nothing. And in the process they will have turned impeachment from a constitutional check of last resort into a tool of political convenience.

Washington Post op-ed:  Republicans’ Kangaroo Court, by Dana Milbank:

Impeachment is among the most severe and solemn powers Congress has, right up there with declaring war. Not since 1876 has an executive-branch appointee been impeached, and not in the history of the republic has Congress impeached an executive-branch official below the Cabinet level.

Now, Republicans in Congress would change that. On Wednesday, they wheeled out the sacred tool of impeachment — weeks before an election — for the purpose of smearing an honorable public servant, IRS Commissioner John Koskinen, in service of a lie. ...

There are just a few wee problems with the Republicans’ logic. The targeting of conservative groups ended in 2013. The Treasury Department’s inspector general, originally a Republican appointee, reported no evidence of political motivation in the targeting. The Justice Department, too, found “no evidence that any IRS official acted based on political, discriminatory, corrupt, or other inappropriate motives” and “no evidence that any official attempted to obstruct justice.” The official responsible for the targeting resigned before Koskinen came to the IRS at the end of 2013. And the same IG said last year that “no evidence was uncovered that any IRS employees had been directed to destroy or hide information from Congress, the DOJ, or [the IG].”

House Speaker Paul Ryan, eager to avoid the spectacle of the House voting to impeach an innocent man based on false charges without a proper hearing, got impeachment advocates to settle for Wednesday’s hearing in which Koskinen testified before the House Judiciary Committee. But that hardly improved matters: To say this impeachment inquiry is a kangaroo court would be an insult to marsupials. ...

There’s no dispute that Koskinen misinformed lawmakers in 2014 when he said that all evidence had been preserved relevant to the targeting. In fact, IRS workers a few months earlier had destroyed backup tapes that contained relevant emails. Koskinen says he didn’t know that at the time. The IG spent a year investigating the matter and attributed the erasure to bureaucratic errors, finding “no evidence that the IRS and its employees purposely erased the tapes in order to conceal responsive e-mails from the Congress.”

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September 25, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Saturday, September 24, 2016

This Week's Ten Most Popular TaxProf Blog Posts

Obama Has Redistributed More Wealth To The Bottom 99% Through The Tax Code Than Any Administration Since At Least 1960

White HouseWall Street Journal, The White House Says Its Policies Slashed the Income Gap:

One of the big criticisms of the current economic expansion—and also the one that ran from 2001 through 2007—is that most of the gains accrued to the best off, unleashing a populist groundswell in the presidential election campaign.

The White House lays out the case in a new report that the Obama administration’s policies have done more than any administration in the last half-century to reduce inequality [The Economic Record of the Obama Administration: Progress Reducing Inequality] ...

The upshot is these changes in tax and health-care policy will increase the share of after-tax income by the poorest fifth of households by 0.6 percentage point while reducing the share of the wealthiest 1% of households by 1.2 percentage points.

Taken together, the administration says that it has done more to redistribute wealth to the bottom 99% of families through tax-code changes than any administration since at least 1960. The share of after-tax income from the poorest fifth of households fell by nearly 25% from 1979 to 2007, and the White House says its tax and health-care changes have reversed one-third of that decline.

WSJ

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September 24, 2016 in Gov't Reports, Tax | Permalink | Comments (1)

The IRS Scandal, Day 1234

IRS Logo 2Hot Air, The IRS Chief’s Meeting With the Judiciary Committee Didn’t Go Particularly Well:

You may recall that only a week ago the House decided to postpone an impeachment vote for IRS commissioner John Koskinen in favor of holding hearings instead. This clearly distressed a number of conservatives who feel that the mismanagement of the agency and its various scandals were more than sufficient grounds to give the man his walking papers. Still, the hearings were bound to produce some fireworks and the first round certainly didn’t disappoint. Today I wanted to hit a few of the highlights.

Right out of the gate, Koskinen was asked about previous statements he’d made under oath regarding the preservation and recovery of emails and other documents from the entire Lois Lerner affair. When pressed on the subject, the commissioner didn’t exactly say that he’d lied about it, but did admit that some of the things he said turned out not to be true. ...

I suppose that comes down to the age old question of whether you lied or you were simply wrong about something. That’s a question which the committee (and the public) will have to answer for themselves.

There was another question raised concerning the IRS employees who were found to have deleted all of those Lois Lerner emails. Surely these are the culprits we’re looking for here. I imagine they must be cooling their heels in jail by now or at least awaiting trial, right? Nope. Turns out that they are both still on the IRS payroll… just in a different department....

Don’t even get me started on that entire saga again. We’ve written about it here extensively and the idea that someone in that department could have been “unaware” of the maelstrom surrounding their office is beyond the pale. But as long as the stonewall continues, there doesn’t seem to be much that anyone can do about it… short of impeaching the boss. Yet when he was asked about the rather, er… suspicious timing of all those records being destroyed, Koskinen didn’t have much of an answer.

 

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September 24, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Friday, September 23, 2016

Weekly SSRN Tax Article Review And Roundup

This week, Ari Glogower (Ohio State) reviews a new paper by Edward Kleinbard (USC), Capital Taxation in an Age of Inequality, the first installment of a two-part project proposing a new tax instrument, the Dual Business Enterprise Income Tax (BEIT).  Kleinbard’s current article explores the theory behind the Dual BEIT, while a subsequent follow up article will describe its technical operation.  

Glogower (2016)In brief, the Dual BEIT, which builds on Kleinbard’s prior proposals, operates as a single flat-rate tax on capital income, divided between an investor-level tax on normal returns, and a business-level tax on profits.  The investor-level tax is implemented through a tax on deemed normal returns to investments.  Businesses deduct a cost of capital allowance of the same normal return (regardless of whether the business is financed by debt or equity), resulting in a business-level tax on profits.

The article begins with a series of arguments justifying capital income taxation in general:  First, the classic optimal tax theory result that normal returns to saving should not be taxed has “no practical lessons to teach” in a world with inherited capital and gratuitous transfers.  Second, capital income taxation addresses increasing concerns with wealth and income concentration.  Third, taxing capital income taxes is necessary to raise revenue for public investment and social insurance programs.  Fourth, recent studies, including by the IMF and the OECD, suggest that reducing inequality may increase economic growth.

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September 23, 2016 in Legal Education, Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Hillary Clinton Proposes Raising Estate Tax Rate From 40% To 65%

Clinton KaineWall Street Journal, Hillary Clinton Proposes 65% Top Rate for Estate Tax:

Democratic presidential candidate Hillary Clinton would levy a 65% tax on the largest estates and make it harder for wealthy people to pass appreciated assets to their heirs without paying taxes, expanding the list of tax increases she would impose on the top sliver of America’s affluent.

The estate-tax increase and other new proposals that Mrs. Clinton detailed on Thursday would generate $260 billion over the next decade, enough to pay for her plans to simplify small business taxes and expand the child tax credit, according to the nonpartisan Committee for a Responsible Federal Budget [more here], which advocates fiscal restraint.

In all, Mrs. Clinton would increase taxes by about $1.5 trillion over the next decade, increasing federal revenue by about 4%, though that new burden would be concentrated on relatively few households. There is at least a $6 trillion gap between her plan and the tax cuts proposed by her Republican rival Donald Trump.

The Clinton campaign changed its previous plan—which called for a 45% top rate—by adding three new tax brackets and adopting the structure proposed by Sen. Bernie Sanders of Vermont during the Democratic primaries. She would impose a 50% rate that would apply to estates over $10 million a person, a 55% rate that starts at $50 million a person, and the top rate of 65%, which would affect only those with assets exceeding $500 million for a single person and $1 billion for married couples.

CRFB

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September 23, 2016 in Political News, Scholarship, Tax | Permalink | Comments (6)

28 Florida Graduate Tax Alumni Academics Respond To Robert Rhee's Critique Of The Program

Florida Logo (GIF)Florida Graduate Tax Program Alumni Academics Letter:

Dear Ladies and Gentlemen:

We the undersigned graduates of the UF Tax Program have read the various blog posts and other public information that have emerged regarding the Tax Program at the University of Florida Frederic G. Levin College of Law. As alumni in academia, we write to express gratitude to Tax Program faculty, appreciation for its in-residence structure, and stress the importance of preserving (and even enhancing) one of the truly great programs in legal education. The UF Tax Program represents much of what is good in legal education.

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September 23, 2016 in Legal Education, Tax | Permalink | Comments (2)

Omri Marian Responds To Robert Rhee's Critique Of Florida's Graduate Tax Program

Marian (2016)Following up on my previous posts (links below) on the controversy surrounding the Florida Graduate Tax Program: Omri Marian, who started his academic career at Florida before joining the UC-Irvine faculty in 2015, has written a withering 28-page letter responding to Robert Rhee's 24-page critique of Florida's graduate tax program. Here are the introduction and conclusion to the letter:

Dear community of tax students, tax professionals, and tax academics,

As I am sure you are aware, over the past few months, the Graduate Tax Program (the “Program”) at the University of Florida (“UF”) has been embroiled in a heated controversy. This controversy started after the arrival of a new Dean, Laura Rosenbury, and significantly escalated with the publication of a letter criticizing the Program, written by Robert Rhee, a non-tax law faculty member at UF.

Rhee’s letter was not written in a vacuum. It is a result of a toxic organizational environment full of anger and distrust. I do not know who is responsible for breeding such an environment, as I have little firsthand knowledge of the events leading to Rhee’s letter. My best guess is that many individuals, of all parties involved, share the blame.

The purpose of this response letter is to make three arguments:

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September 23, 2016 in Legal Education, Tax | Permalink | Comments (4)

Brian Leiter Weighs In On 'The Turmoil At The University Of Florida Over Its Tax Program'

Florida Logo (GIF)Brian Leiter (Chicago), The Turmoil at the University of Florida Over Its Tax Program:

One peculiarity of the critical analysis of the tax program by UF faculty member Robert Rhee is that, in discussing the Sisk data on faculty citations, he fails to note (at least not that I saw) that tax is a low-citation field compared to corporate or constitutional law or just about every other field!  That does lead me to wonder about the reliability of other parts of his analysis. ...

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September 23, 2016 in Legal Education, Tax | Permalink | Comments (4)

NYU Symposium:  Human Rights And Tax In An Unequal World

HRThe two-day symposium on Human Rights and Tax in an Unequal World concludes today at NYU:

Session #3:   Beyond “Spillover”: North-South Dimensions of Tax and Tax Abuse

This panel will situate the discussion of tax abuse and human rights in its geopolitical context, addressing the differentiated responsibilities of the Global North and South for the causes and consequences of tax abuse, and the relationship between cross-border tax abuse and inter-State inequalities. Experts from the fields of tax and human rights will discuss the methodological challenges of assessing the extraterritorial impacts of tax policies and secrecy regimes, some of which were laid bare in recent attempts to conduct “spillover analyses” of laws and regulations in the Global North. How can studies capture the human rights consequences of the policies that enable cross-border tax abuse, including the gendered impacts? Panelists will explore options for enforcing global tax rules and holding actors accountable for tax abuses that affect human rights, including the potential role for domestic courts, as well as regional and international human rights bodies.

Session #4:  Private Actors and the Public Purse: The Roles of Corporations, Lawyers, and Accountants in Tax Abuse

Consumers and regulators are increasingly scrutinizing the practices of corporations that hide assets to avoid or minimize taxes paid on the benefits they reap from operating in various jurisdictions, and the responsibilities of the law firms (like Mossack Fonseca of Panama Papers fame) and accountants that facilitate such practices. Recent high-profile tax scandals have underscored the reputational risks of tax abuses and have made tax planning an issue of corporate social responsibility and business ethics. Some of the questions panelists will explore include: How realistic is it to expect serious reform of tax practices to come from private actors? Are efforts to encourage ‘good corporate tax behavior’ delaying compulsory measures by suggesting there is voluntary progress? How do human rights principles and policies bear on the ethical obligations of accountants and lawyers who work in the area of taxation? In what ways, if any, should considerations of human rights law affect the ethics of accountants and lawyers in this field?

Session #5:  The Responsibilities of Governments: The Case of Transparency

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September 23, 2016 in Conferences, Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1233

Thursday, September 22, 2016

Kahng Presents Who Owns Human Capital? At Emory

Kahng (2017)Lily Kahng (Seattle) presented Who Owns Human Capital?, 93 Wash. U. L. Rev. ___ (2017), at Emory yesterday as part of its Faculty Colloquium Series:

This Article analyzes the tax law’s capital income preference through the lens of intellectual capital, an increasingly important driver of economic productivity whose value derives primarily from workers’ knowledge, experience and skills. The Article discusses how business owners increasingly are able to “propertize” labor into intellectual capital — to control their workers and appropriate the returns on their labor through the expansive use of intellectual property laws, contract and employment laws, and other legal mechanisms. The Article then shows how the tax law provides significant subsidies to the process of propertization and thereby contributes to the inequitable distribution of returns between business owners and workers. The Article’s analysis further reveals the tax law’s fundamental capital-labor distinction to be questionable, perhaps even illusory, an insight which has profound implications for the tax law.

September 22, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Kleinbard Delivers Keynote Address Today On The End Of Transfer Pricing At Transfer Pricing Conference

Kleinbard (2015)Edward Kleinbard delivers the keynote address on The End of Transfer Pricing to the 16th Annual Global Transfer Pricing Forum in New York City: 

Apple and Stateless Income:

  • Forget the noise around the EU State Aid case, and focus on the facts:
  • On (roughly) $115 billion of income over 10yrs:
  •      Apple Ireland paid Irish tax as low as 0.05% per year ($50 per $1 million of net income)
  •      Apple Ireland paid tax to the rest of the EU = roughly $385 million in aggregate over 10 yrs
  • 3.2% ETR on Apple’s $91.5 billion PRE
  • Apple facts cut legs out from ALP precepts

The Dumb Bunnies Have Been Schooled:

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September 22, 2016 in Conferences, Tax | Permalink | Comments (0)

Joshua Blank Named Vice Dean At NYU

Blank (2016)Press Release:

Professor of Tax Law Joshua Blank LLM ’07, faculty director of the Graduate Tax Program, has been named NYU Law’s vice dean for technology-enhanced education.

In his new vice deanship, Blank will focus initially on four areas: working with faculty to introduce and enhance the use of technology in their teaching; overseeing the current online degree programs, the Executive LLM in Taxation and the Master of Studies in Law in Taxation, and helping to launch new degree programs with significant online components; leading the Law School’s efforts in developing open education content; and representing NYU Law on University-level technology committees. While continuing work on current technology-based initiatives, he will also actively seek new and forward-thinking opportunities for the Law School to evolve technologically.

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September 22, 2016 in Legal Education, Tax | Permalink | Comments (2)

Second Circuit Affirms Paul Daugerdas' Conviction And Sentence For Tax Shelter Fraud

Helter ShelterUnited States v. Daugerdas, No. 14-2437 (2d Cir. Sept. 21, 2016):

Paul M. Daugerdas was a Certified Public Accountant (“CPA”) and tax attorney at Arthur Andersen through August of 9 1994; the law firm Altheimer & Gray from the end of 1994 through 1998; and the Chicago office of the law firm Jenkens & Gilchrist (“J&G”) from 1999 through April 2004. Throughout his career, Daugerdas developed, sold, and implemented a variety of tax‐reduction strategies for wealthy clients: the so‐called Short Sale Shelter, Short Option Shelter, Swaps Shelter, and HOMER Shelter. Besides Daugerdas’s employers, two other entities had significant involvement in this undertaking.    The accounting firm BDO Seidman (“BDO”) referred its clients to J&G and helped to sell the shelters, and the investment bank Deutsche Bank. Alex Brown (“DB”) assisted J&G in the design of the shelters, held informational meetings with clients, and implemented the transactions that composed the shelters.

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September 22, 2016 in New Cases, Tax | Permalink | Comments (0)

NYU Symposium:  Human Rights And Tax In An Unequal World

HRThe two-day symposium on Human Rights and Tax in an Unequal World kicks off today at NYU:

Session #1:  Are Human Rights Really Relevant to Tax?

This panel will ask a range of leading tax scholars and practitioners what relevance human rights law has or could have to the field of tax law. Do human rights matter to tax policy and practice? Are human rights laws and institutions relevant to understanding and regulating the global tax system? How do the core principles of the human rights regime—non-discrimination, equality, and dignity— inform thinking on the power to tax, the design of tax policies, and the implementation and enforcement of tax laws? Can human rights law help trace the line between permissible tax competition and impermissible interference with other States’ tax sovereignty? Panelists will discuss how tax experts are, or whether they should be, grappling with concepts of human rights and corresponding duties as they chart reforms of domestic and global tax policies, and what they need from the human rights community to do so.

Session #2:  The Human Rights Dimensions of Tax and Tax Abuse

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September 22, 2016 in Conferences, Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1232

IRS Logo 2New York Times, I.R.S. Chief Calls Efforts to Oust Him ‘Improper’:

The commissioner of the Internal Revenue Service, John A. Koskinen, expressed regret Wednesday for management mistakes, but called the attempt by House Republicans to impeach him “improper,” warning that such threats would discourage people from government service. ...

He also rejected Republican calls for him to resign, but said he would leave office if the next president so wishes. Otherwise, Mr. Koskinen’s term ends in November 2017. ...

At the Judiciary hearing on Wednesday, Mr. Koskinen again testified that the destruction of emails was inadvertent, and that his testimony in 2014 was based on what he thought was factual at the time. But he expressed regrets.

“The truth is, we did not succeed in preserving all of the information requested. And some of my testimony later proved mistaken,” Mr. Koskinen said. He added, “Even closer communication with Congress would have been advisable.” ...

Several Democrats denounced the hearings as a “sham,” and many changed the subject, instead asking Mr. Koskinen leading questions in reference to the Republican presidential nominee, Donald J. Trump.

While Mr. Koskinen said he could not talk about any specific taxpayer, he said the I.R.S. would not object to someone releasing tax returns under audit — as Mr. Trump has suggested the I.R.S. would do in refusing to release his own returns. Mr. Koskinen also described violations of tax law by charitable foundations in hypothetical terms, much like critics have alleged against Mr. Trump’s foundation.

“I appreciate your being here to clear some of that up,” said Representative Ted Deutch, Democrat of Florida.

Wall Street Journal, IRS Commissioner Pushes Back on Impeachment Attempt:

Internal Revenue Service Commissioner John Koskinen defended himself Wednesday against an impeachment attempt, labeling Republicans’ push to remove him from office as “improper” and warning that such a move would deter qualified people from serving in government.

House GOP hard-liners say impeachment is warranted because of the destruction of evidence sought by congressional investigators and because Mr. Koskinen failed to promptly inform Congress when he learned of the destruction. They also pressed him on the thoroughness of the agency’s search for records, which Congress demanded as part of inquiries into the IRS treatment of conservative groups under Mr. Koskinen’s predecessors.

“Your overall record is one of gross incompetence and extreme negligence,” Rep. Raul Labrador (R., Idaho) told Mr. Koskinen during a House Judiciary Committee hearing on Wednesday, urging the commissioner to resign.

Although he expressed regret for the agency’s shortcomings in protecting evidence and the fact that some of his statements later proved mistaken, Mr. Koskinen said he wouldn’t quit and said he hadn’t done anything to deserve impeachment.

“There is no evidence anywhere that I knew something I didn’t tell people about, that I falsified or misrepresented or lied,” he told reporters after the hearing, adding that it would set a “terrible precedent” if he were pressured out of office.

National Review: The IRS Commissioner Belongs in Prison, by Kevin D. Williamson:

I do not usually go out of my way to publicly disagree with National Review editorials, but I respectfully dissent from our piece calling for the impeachment of IRS commissioner John Koskinen.

He shouldn’t be impeached. He should be imprisoned.

When the feds couldn’t make ordinary criminal charges stick to the organized-crime syndicate that turned 1920s Chicago into a free-fire zone, they went after the boss, Al Capone, on tax charges. Under Barack Obama, the weaponized IRS has been transformed into a crime syndicate far worse than anything dreamt of by pinstriped Model-T gangsters — because Al Capone and Meyer Lansky did not have the full force of the federal government behind them. 

Koskinen was called before the House on Tuesday to explain a few things. One of those things is: Why is the IRS destroying evidence under subpoena in this case? Another was: Why is the IRS commissioner lying to Congress?

Koskinen is fluent in the mustelid dialect of Washington: “We did not succeed in preserving all of the information requested, and some of my testimony later proved mistaken.” There is a term for failing to “succeed in preserving information requested” during an official investigation: obstruction of justice.

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September 22, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Wednesday, September 21, 2016

Duff Presents Dworkinian Equality And Redistributive Taxation Today At Toronto

Duff (2016)David Duff (British Columbia) presents Tax Policy and the Virtuous Sovereign: Dworkinian Equality and Redistributive Taxation at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

Among the purposes of a tax system, it is generally accepted that one role is to implement a society’s conception of distributive justice. Indeed, if justice is, as John Rawls famously declared, “the first virtue of social institutions,” distributive justice may properly be regarded as the first or sovereign virtue of a society’s tax system – to which a virtuous sovereign should properly attend.

This article reviews Ronald Dworkin’s theory of distributive justice as equality of resources and its implications for redistributive taxation. Part II examines the theory itself in contrast to other prominent theories of distributive justice, arguing that Dworkin’s approach provides a more compelling conception of distributive justice than welfare-based theories that do not take rights and responsibilities seriously, Rawlsian theory which is insufficiently attentive to individual rights and responsibilities, and classical libertarianism which fails to take equality seriously.

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September 21, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (3)

Buchanan Presents Social Security, Inequality, And Younger Generations Today At Northwestern

BuchananNeil Buchanan (George Washington) presents Social Security, Inequality, and Younger Generations at Northwestern today as part of its Advanced Topics in Taxation Workshop Series hosted by Sarah Lawsky:

Are older generations of Americans using Social Security to enrich themselves at the expense of their children and grandchildren? To listen to the public debate in the United States, one could be forgiven for thinking so. Derogatory labels for older people, such as “greedy geezers,” have become common in the American political debate, with news commentators, politicians, and even the popular culture chiming in with claims that older Americans are the cause of otherwise-solvable budget problems, and more generally that they are a cohort of selfish retirees and near-retirees who refuse to give up their excessive government-provided benefits, which will inevitably lead to disastrous outcomes for the generations to follow.

September 21, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

The SEC Should Demand More Tax Disclosure From Public Companies

New York Times op-ed: How Companies Like Apple Dodge Taxes and Their Own Investors, by Morris Pearl (former Managing Director, BlackRock; Chairman, Patriotic Millionaires):

As an investor, one who has been entrusted with helping to safeguard other people’s money over many years, I value the high degree of disclosure required from American public companies. Corporations and the world in which they operate change every day, so investors need to know the risks their money faces.

No area of business demonstrates the need for full disclosure as much as one that has been in the news a lot lately: large American companies’ shifting profits overseas to minimize tax bills, or to avoid taxes altogether. These schemes are starting to attract the attention of regulators and governments who view them more as tax dodges than as legitimate financial arrangements.

Given the risks, the last thing investors need is less disclosure. But the Securities and Exchange Commission, the agency responsible to ensure that companies are being open and honest, is considering exactly that: scaling back the information available to the public. ... This is the wrong direction. We need more information, not less.

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September 21, 2016 in Tax | Permalink | Comments (0)

IRS Maps Same-Sex Marriages By City, State

Robin Fisher, Geof Gee & Adam Looney (U.S. Treasury Department, Office of Tax Analysis), Joint Filing by Same-Sex Couples after Windsor: Characteristics of Married Tax Filers in 2013 and 2014:

In June 2013, the Supreme Court invalidated a key provision of the 1996 Defense of Marriage Act (Windsor v. United States), allowing same-sex spouses to be treated as married for all federal tax purposes. Treasury and the Internal Revenue Service (IRS) subsequently ruled that same-sex spouses legally married in jurisdictions that recognize their marriages will be treated as married for federal tax purposes. This paper provides estimates of the population of same-sex tax filers in the first two years affected by the decision drawn from the population of returns filed and using methods developed by the Census to address measurement error in gender classification. In 2014, we estimate that about 0.35 percent of all joint filers were same-sex couples or about 183,280 couples.

New York Times, The Most Detailed Map of Gay Marriage in America:

NY Times

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September 21, 2016 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 1231

IRS Logo 2The Daily Signal, Judiciary Committee Set to Audit Top IRS Tax Agent:

A last-minute deal between House conservatives and Republican leadership delayed a floor vote to impeach the head of the IRS last week. But the top taxman isn’t in the clear just yet.

For the first time, IRS Commissioner John Koskinen will come under oath to plead his case, appearing before the House Judiciary Committee on Wednesday. A product of compromise, that impeachment hearing means different things to different factions of Congress.

Freedom Caucus members, who have been demanding Koskinen’s early retirement for months, see the hearing as a formality necessary to fire Koskinen. Others see it as a prerequisite to a longer impeachment process and an opportunity to afford the taxman his right to due process.

It’s undisputed that Koskinen will face an unfriendly jury Wednesday, though.

Fourteen of the 23 Republican Judiciary Committee members have said already that the taxman is guilty of wrongdoing, including Oversight Committee Chairman Jason Chaffetz, R-Utah, who first filed articles of impeachment last October.

Making matters worse for the IRS chief, seven Freedom Caucus members sit on the committee, including Chairman Jim Jordan, R-Ohio, who has helped quarterback the effort to send Koskinen into early retirement.

Conservatives argue that Koskinen is unfit to lead the IRS because he obstructed a congressional investigation into the agency’s unfair treatment of tea party groups applying for tax-exempt status before the 2012 elections.

The White House has been unwavering in their support of Koskinen. Speaking at a Democrat fundraiser last week, President Barack Obama said the impeachment effort “is crazy.” And Koskinen, who has hired a personal defense attorney, maintains that those allegations “lack merit.”

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September 21, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, September 20, 2016

Zidar Presents Business In The United States: Who Owns It And How Much Tax Do They Pay? Today At Columbia

ZidarOwen Zidar (Chicago) presents Business in the United States: Who Owns It and How Much Tax Do They Pay? (with Michael Cooper, John McClelland, James Pearce, Richard Prisinzano, Joseph Sullivan (all of the U.S. Treasury Department, Office of Tax Analysis), Danny Yagan (UC-Berkeley), & Eric Zwick (Chicago)) at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium Series hosted by Alex Raskolnikov and Wojciech Kopczuk:

"Pass-through" businesses like partnerships and S-corporations now generate over half of U.S. business income and account for much of the post-1980 rise in the top-1% income share. We use administrative tax data from 2011 to identify pass-through business owners and estimate how much tax they pay. We present three findings. (1) Relative to traditional business income, pass-through business income is substantially more concentrated among high-earners. (2) Partnership ownership is opaque: 20% of the income goes to unclassifiable partners, and 15% of the income is earned in circularly owned partnerships. (3) The average federal income tax rate on U.S. pass-through business income is 19%--much lower than the average rate on traditional corporations. If pass-through activity had remained at 1980's low level, strong but straightforward assumptions imply that the 2011 average U.S. tax rate on total U.S. business income would have been 28% rather than 24%, and tax revenue would have been approximately $100 billion higher.

Owen Zidar (Chicago), Pass-Through Income and The Top 1%:

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September 20, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Trump Violated Tax Law In Using $258,000 From His Charity to Settle Legal Problems

Trump (2016-2)Washington Post, Trump Used $258,000 From His Charity to Settle Legal Problems:

Donald Trump spent more than a quarter-million dollars from his charitable foundation to settle lawsuits that involved the billionaire’s for-profit businesses, according to interviews and a review of legal documents.

Those cases, which together used $258,000 from Trump’s charity, were among four newly documented expenditures in which Trump may have violated laws against “self-dealing” — which prohibit nonprofit leaders from using charity money to benefit themselves or their businesses.

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September 20, 2016 in Political News, Tax | Permalink | Comments (6)

Starstruck States Squander $10 Billion In Film Tax Incentives Producing Minimal Economic Returns

Starstruck States Squander Millions of Tax Dollars on Film Productions, USC Study Finds; Tax Incentives Handed to Filmmakers Offer Minimal Return in Terms of Job or Wage Growth Yet Some States Opt to Outbid Each Other for Films:

Nearly all 50 states have lured Hollywood productions with millions of dollars in special tax incentives for filmmaking, but new USC research shows the incentives fail to deliver the long-term economic benefits promised by industry lobbyists and lawmakers.

“The incentives are a bad investment. States pour millions of tax dollars into a program that offers little return,” said lead author Michael Thom, an assistant professor at the USC Price School of Public Policy who specializes in public finance. “We looked at job growth, wage growth, states’ share of the motion picture industry and the industry’s output in each state. On average, the only benefits were short-term wage gains, mostly to people who already work in the industry. Job growth was almost nonexistent. Market share and industry output didn’t budge.” ...

USC 1

The five states with the greatest cumulative investment in the motion picture tax credits:

  1. New York, $2.6 billion (enacted 2004)
  2. Louisiana, $1.5 billion (enacted 2002)
  3. Connecticut, $614 million (enacted 2006)
  4. California, $582 million (enacted 2009)
  5. Georgia, $529 million (enacted 2005)

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September 20, 2016 in Scholarship, Tax | Permalink | Comments (2)

Gamage & Shanske:  The Federal Government's Power To Restrict State Taxation

David Gamage (UC-Berkeley) & Darien Shanske (UC-Davis), The Federal Government's Power to Restrict State Taxation, 81 State Tax Notes 547 (Aug. 15, 2016):

This essay evaluates the limits on the U.S. federal government’s powers to restrict the taxing powers of state governments. The essay revisits earlier debates on this question to consider the implications of the Supreme Court’s decision in National Federation of Independent Business v. Sebelius and also academic research on the problem of tax cannibalization.

September 20, 2016 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1230

IRS Logo 2Americans for Tax Reform, Koskinen's IRS Failed to Search Five of Six Locations for Lois Lerner Emails:

IRS Commissioner John Koskinen will appear before the House Judiciary Committee to defend himself against impeachment charges following his role in the Lois Lerner targeting scandal.

Koskinen was appointed to lead the IRS after promising to bring transparency and openness to the embattled agency. He has failed.

The IRS failed to search five of six possible sources of electronic media for Lois Lerner’s emails, according to documentation released by the House Oversight Committee in July 2015.

Over the course of investigations into the Lois Lerner targeting scandal, Commissioner John Koskinen repeatedly assured Congress that he would provide all of Lois Lerner’s emails. But based on testimony from the Treasury Inspector General for Tax Administration (TIGTA), this did not occur. The agency’s ineptness -- or corruption -- resulted in 24,000 Lerner emails being lost when they were “accidently” destroyed. 

According to TIGTA official Timothy Camus, the IRS had six possible sources to search for Lois Lerner’s emails:

“The hard drive would have been a source, Blackberry source, backup tapes a source, the backup tapes for the server drives and then finally the loaner lap tops.”

When asked how many of these sources the IRS searched, Camus was unable to say for certain whether the IRS had searched for any. ...

Commissioner Koskinen stated that the IRS took “extraordinary efforts” to recover any emails, but this is clearly not the case. Years after the investigations into the Lois Lerner targeting scandal began, the agency’s unprecedented obstruction has meant Americans are no closer to the truth.

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September 20, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (8)

Monday, September 19, 2016

Alstott Presents A New Deal For Old Age: Toward A Progressive Retirement Today At Loyola-L.A.

AAAnne Alstott (Yale) presents A New Deal for Old Age: Toward a Progressive Retirement at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Ellen Aprill and Katherine Pratt:

A growing chorus of policy analysts is calling for an increase in the Social Security retirement age. Even staunch defenders of Social Security have begun to concede that the retirement age of 66 is too low, in light of the increasing longevity, improving health, and expanding work options of older Americans. Still, some progressives worry that the only way to protect disadvantaged workers is to leave the early and full retirement ages as they are. The result is a debate that pits intergenerational fairness against intragenerational fairness: either we shortchange the young (by paying unneeded benefits to the old) or else we shortchange the disadvantaged (by raising the retirement age to levels that are unrealistic for low-earners).

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September 19, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

IRS Cracks Down On Foreign Tax Credit Splitters Amidst EU Tax Probes

My Take On Robert Rhee's Critique Of Florida's Graduate Tax Program

Florida Logo (GIF)I read with great interest Robert Rhee's 24-page critique of Florida's graduate tax program, the reaction by Florida Law Profs Marty McMahon and Jeff Harrison and a reader of this blog, and Rhee's defense of his letter (as well as the 35 comments, including by Florida Prof Michelle Jacobs; Tax Profs Linda Beale, Erik Jensen, and Mike Livingson; and Law Profs Orin Kerr and Jason Yackee).  Although I was a visiting professor at Florida many years ago and have many friends on the Florida tax faculty, I have no first-hand knowledge of the state of affairs in Gainesville.  I disagree with several aspects of Rhee's letter (e.g., Rhee claims that Florida is the most expensive high quality graduate tax program in the country because "NYU and Georgetown are 100% online" — like several programs, NYU and Georgetown offer both residential and online tax LL.M.s (NYU and Georgetown dub their online degrees "Executive LL.M.s" to distinguish them from their residential LL.M. degrees); Alabama is the only school to offer an exclusively online tax LL.M.).

I want to focus here on Rhee's criticism of the Florida tax faculty's scholarly bona fides.  I have served as associate dean for research at two law schools and have thought quite a bit about the role of law faculty in today's legal education landscape and expressed those views in multiple blog posts, as well as in several law review articles and presentations (listed below).  Rhee's discussion of the Florida tax faculty's scholarly performance considers only one of the several metrics for measuring law faculty scholarship and ignores other aspects of faculty contributions to law school success.

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September 19, 2016 in Legal Education, Scholarship, Tax | Permalink | Comments (6)

The IRS Scandal, Day 1229

IRS Logo 2Newsmax, Christie Backs Trump Tax Release Delay Given US Mistrust of IRS:

Donald Trump is being wisely advised to keep his tax forms under wraps during an audit "given the history of the Obama administration" to use IRS In "as a weapon" against conservatives, New Jersey GOP Gov. Chris Christie said Sunday.

In an interview on CNN's "State of the Union," Christie, a former primary presidential candidate who is now one of Trump's top advisers and surrogates, said most Americans' don't trust the IRS.

"Given the history of the Obama administration and IRS to use the IRS as a weapon against conservative groups and candidates, I don't blame the accountants for saying better safe than sorry," he said, in reference to the agency's tea party targeting scandal.

"I bet your listeners and viewers out there don't trust the IRS as far as they could throw them," he added. "I don't blame his lawyers and accountants for telling him until the book is closed, and the IRS can't go after you, you shouldn't release your tax returns."

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September 19, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (7)

TaxProf Blog Weekend Roundup

Sunday, September 18, 2016

Robert Rhee Defends His Critique Of Florida's Graduate Tax Program

RheeFollowing up on my prior posts (links below) on Florida's graduate tax program:  TaxProf Blog op-ed: Response to Professor Martin McMahon, by Robert J. Rhee (John H. and Marylou Dasburg Professor of Law, Florida):

I really hoped that I would not have to say anything more beyond my letter itself. But Professor Martin McMahon’s comment needs a response. To be clear, I still respect him for the incredible scholar that he is.

Professor McMahon suggests that my motivation was personal arising from last year’s appointments process. Absolutely not. He is wrong. The appointments committee made decisions that the tax faculty strongly disagreed with. That is no secret in the hallways. I simply say that schools at Florida’s level, premier research institutions, do not hire tenure-track faculty without strong evidence of academic scholarship, the best evidence of which is the existence and presentation of a significant job talk paper to faculty. The central obligation of tenure-track faculty is academic research and writing. This standard applies to tenure-track tax hires as well, though some members of the tax faculty believe that hiring a tenure-track faculty without a job talk paper or any record of law review or other substantial academic scholarship was proper for a research university. The appointments process can sometimes lead to real disagreements, reasonable or not. My disagreement with the tax faculty pertaining to appointments had nothing to do with my letter.

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September 18, 2016 in Legal Education, Tax | Permalink | Comments (6)

Trump Tax Plan 3.0

The 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, with new papers debuting on the list at #4 and #5:

  1. [414 Downloads]  The True Economic Effects of Corporate Inversions, by Doron Narotzki (Akron)
  2. [370 Downloads]  Property Is Another Name for Monopoly Facilitating Efficient Bargaining with Partial Common Ownership of Spectrum, Corporations, and Land, by Eric A. Posner (Chicago) & E. Glen Weyl (Yale)
  3. [342 Downloads]  Executive Pay: What Worked? , by Steven A. Bank (UCLA), Brian R. Cheffins (Cambridge) & Harwell Wells (Temple)
  4. [146 Downloads]  Financial Advisers Can't Overlook the Prudent Investor Rule, by Max M. Schanzenbach (Northwestern) & Robert H. Sitkoff (Harvard)
  5. [141 Downloads]  Transfer Pricing Money: The Chevron Case, by Richard J. Vann (Sydney) & Graeme S. Cooper (Sydney)

September 18, 2016 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Harrison:  The Trumpian Discourse About Florida's Graduate Tax Program

Florida Logo (GIF)Following up on my prior posts (links below) on Florida's graduate tax program:  Jeff Harrison (Florida), The Trumpian Approach to Discourse at Florida:

A few days ago Rob Rhee wrote AND SIGNED a report that was highly critical of Florida's LLM in tax program. ... There are two reasonable responses to a report like Rob's. You can disagree with the numbers. ... Or you can claim that his assumption that the tax program should generate a profit is wrong. Since I do not understand why taxpayers should subsidize a program that trains people to assist people and businesses with money to avoid paying taxes, I personally think it needs to generate a significant profit. But we could debate that and I already know some good counter-arguments.

Privately several members of the tax faculty concede that it needs to modernize. A starting point was to assign it to classrooms that fit the number of people enrolled and to find a director to ensure the program flourished. These changes and others were unacceptable to some and the Trumpian name calling and accusations of distortions started. Those most terrified by change and most willing to sacrifice the program to suit their personal desires revved up alums many of whom did not need to hear both sides of the story because, like Trump, their heroes could do no wrong. They had joined the ranks of true believers for whom truth was irrelevant.

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September 18, 2016 in Legal Education, Tax | Permalink | Comments (18)

The IRS Scandal, Day 1228

IRS Logo 2Forbes: Congress To IRS: The Beatings Will Continue Until Morale Improves, by Stuart Gibson:

A subset of House Republicans often disagrees with the priorities of their leaders. And the rules allow them to force a floor vote. Their most recent override of leadership’s priorities involves bringing to the House floor a resolution to impeach John Koskinen, who has served as commissioner of internal revenue for the past 33 months – perhaps the longest 33 months of his life. And here I side with leadership.

Koskinen was brought in to help the IRS recover from a 2013 scandal over its handling of applications for tax-exempt status by both right- and left-leaning groups. He took charge of the agency, bringing a can-do attitude and expertise from his experience in private industry. He cleaned house in the offending office and changed the way the IRS processes applications for tax exemption.

Koskinen’s problem was that he took office before congressional Republicans had extracted their pound of flesh from the agency that everyone loves to hate. Having decided upfront that the Obama administration had used the IRS to target its political opponents – a conclusion, unlike President Nixon’s well-documented enemies list, wholly unsupported by the evidence – Republicans began investigations to prove their predetermined conclusion. When they found no proof, they attacked Koskinen for failing to produce evidence confirming their view of what happened.

And it wasn’t just Koskinen. Viewing his alleged non-responsiveness as indicative of the agency’s overall unwillingness to perform sufficient penance for the sins committed by a few employees in one small corner of the agency, Congress placed a tourniquet on the IRS budget. And when that failed to elicit the desired outcome – whatever that might be – Congress tightened the tourniquet.

Here’s the problem: In an effort to punish the IRS institutionally, Congress has punished 90,000-plus dedicated employees who did nothing wrong, along with millions of American taxpayers. The best and brightest IRS employees are leaving – and they are not being replaced. Constituents endure unbearable wait times to get IRS assistance and receive poor service when they manage to reach a human being.

What is Congress’s goal? If it expects to improve taxpayer service by starving the IRS budget, impeaching its leader, and berating its employees, Congress will be disappointed. The longer the beatings continue, the harder it will be for the IRS to attract great – or even competent – leaders and employees, and the longer it will take for Americans actually to receive the service they deserve from the IRS.

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September 18, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (7)

Saturday, September 17, 2016

This Week's Ten Most Popular TaxProf Blog Posts

The IRS Scandal, Day 1227

IRS Logo 2Letter From Reginald J. Brown (WilmerHale, Washington, D.C.) on Behalf of John Koskinen to House Judiciary Committee (Sept. 16, 2016):

As you know, Commissioner Koskinen deeply respects the work and authority of the Committee and has agreed to testify under oath on Wednesday, September 21, as requested. He hopes to address some of the confusion regarding basic facts and to explain the reforms that the IRS has implemented during his tenure to address unacceptable practices that took place before he arrived at the agency. We appreciate the professionalism and substantive nature of the Committee's inquiry to date under your leadership and hope that you will find the substance and tone of Commissioner Koskinen's testimony constructive and respectful as well.

We are concerned, however, that some may believe that Commissioner Koskinen's voluntary appearance at this hearing is an appropriate substitute for regular order and the traditional approach to addressing impeachment proceedings. As you know, the scheduled hearing, with an opening statement and timed rounds of Member-directed questions on any topic of their choosing, does not reflect the full range of deliberate and balanced procedures that this Committee has developed to ensure fairness and legitimacy in an actual impeachment inquiry.  Those procedures include the right to make opening and closing statements, the right to call and cross-examine witnesses, the right to present evidence, the right to examine all evidence obtained by the Committee, the right to make evidentiary objections for the record, the right to be formally and directly represented in proceedings by counsel, and the right to respond to all evidence cited by the Committee.

Should the Committee proceed to a formal impeachment inquiry, we would expect to be allowed to exercise those rights to present a robust legal and factual defense to the many false allegations that have been lodged against Commissioner Koskinen. Testimony under oath from a single witness-before he has even been allowed to see any evidence against him and with no right to present corroborating evidence to address false or mistaken allegations-is no substitute. Indeed a process of testimony followed immediately by a floor vote, with no established standards, validated evidence, or findings of fact would be more akin to a foreign show trial than the solemn process contemplated by the Framers and generations of Congressional leaders, including Members of this Committee. ...

We hope that, following Wednesday's hearing, this Committee will decide against reporting to the House floor a resolution authorizing a formal impeachment proceeding. However, should the Committee take that step, we are fully prepared to assist the Committee in developing a solid and vetted factual and legal record on which Members can rely in exercising their constitutional responsibility. After reviewing whatever documentary evidence the Committee gathers, we would expect to be allowed to make objections, cross-examine each witness that the resolution's proponents put forward, and call our own witnesses to expose what we believe are blatant factual errors in the resolution. We would also identify the proposed standards for impeachment in the resolution that are inconsistent with the Constitution's commands. We are confident that a complete record would show that the impeachment of Commissioner Koskinen is wholly unwarranted.

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September 17, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Friday, September 16, 2016

Polsky Presents Elite Tax Professionals And The Sordid Management Fee Waiver Saga Today at Florida

Polsky (2015)Gregg Polsky (Georgia) presents Elite Tax Professionals Behaving Badly: The Sad and Sordid Management Fee Waiver Saga at Florida today as part of its Tax Policy Colloquium Series hosted by Yariv Brauner:

For at least the past 15 years, many private equity fund managers have used a technique—known as a management fee waiver—to try to claim their salaries as capital gains. Recently, the Treasury and IRS explained that, at least in the government’s view, the vast majority of fee waivers do not actually provide the claimed tax result. Reports of recent audit activity relating to fee waivers suggest that the fee waiver saga may finally be coming to an end, but not before billions of dollars of tax revenues have been permanently lost.

While much has been written on the substantive legal issues surrounding fee waivers, there has been no discussion of the prominent role that leading tax professionals have played in drafting, justifying, and defending fee waivers. This article discusses this sad and sordid aspect of the fee waiver saga. It is not a pretty picture.

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September 16, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Weekly SSRN Tax Article Review And Roundup

This week, Daniel Hemel (Chicago) discusses two articles recently posted to SSRN—one by Yair Listokin (Yale), the other by Thomas Brennan (Harvard) and Alvin Warren (Harvard)—which offer illuminating (and divergent) perspectives on the role of realization and deferral in a low interest rate environment.

HemelListokin’s contribution, How To Think About Income Tax When Interest Rates Are Zero, 151 Tax Notes 959 (May 16, 2016), begins with the observation that “[t]he significance of many of income tax law’s core concepts depends on the interest rate.” One example is the realization requirement: Listokin writes that “[w]ith interest rates at zero, the government is indifferent as to whether a taxpayer realizes income now or in the future—as long as the taxpayer’s tax rate is constant across years.” As a result, Listokin says, the tax curriculum and tax law scholarship should focus less on doctrines like the realization requirement that affect the timing of tax payments, and more on doctrines like stepped-up basis that affect the rate at which (and amount on which) tax is paid.

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September 16, 2016 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Marty McMahon Responds To Critique Of Florida's Graduate Tax Program

McMahonFollowing up on this morning's post, Florida Law Prof Writes 24-Page Critique Of Graduate Tax Program: Go Online Or Shut Down — 'Hiring More Tax Faculty Is Like Hiring More Sailors To Man The Titanic Once It Has Hit The Iceberg':  TaxProf Blog op-ed: Dear TaxProf Community, by Martin J. McMahon, Jr. (James J. Freeland Eminent Scholar and Director, Graduate Tax Program, Florida):

As the Director of the University of Florida College of Law Graduate Tax Program, I can assure the TaxProf Community that the UF Graduate Tax Program is and will continue to be as strong as is has been for decades.  Once again this year, we have an excellent group of 85 full-time students and last year’s graduates have had success in seeking post-graduation employment as tax lawyers.  Our students, as they always have been, are being taught principally by a highly dedicated and knowledgeable full-time faculty that has produced many tax textbooks, treatises, and articles. We have, and will continue to have, a robust curriculum, including our specialized LL.M. in international tax, which currently enrolls twenty-two students from all around the globe. We have hired a respected consultant who is on-site as an interim director of Graduate Tax Admissions to modernize our application process and expand our outreach to prospective graduate tax students. Some recent retirements by long-time tax faculty members, who are continuing to teach as adjuncts courses in which they had a particular expertise, have opened up three faculty slots which we are seeking to fill this year, as was recently announced on Tax Prof Blog.

Professor Robert Rhee’s highly inaccurate and distorted memorandum critiquing the University of Florida Graduate Tax Program was prepared by him as an individual, not in any official capacity. He did not consult with any member of the tax faculty or directly ask any tax faculty member for any information regarding the long-standing success of the program before preparing and publishing his memorandum. Thus, his memorandum reflects very limited knowledge regarding the long-standing success of the Graduate Tax Program in educating young tax lawyers and helping them to find employment upon graduation.

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September 16, 2016 in Legal Education, Tax | Permalink | Comments (16)

NY Times:  Tax Lawyers — The Big Winners In Hillary Clinton’s 'Fiendishly Complicated' Tax Plan

Clinton KaineNew York Times: One Beneficiary of Clinton’s Complex Tax Plan: Tax Lawyers, by James B. Stewart:

It’s hard to imagine a tax code more complicated than the one we already have.

Hillary Clinton has come up with one.

“This isn’t tax reform,” said Douglas Holtz-Eakin, an economist who served as director of the Congressional Budget Office and is now president of the American Action Forum, a conservative, pro-growth advocacy group. “It’s anti-reform. She’s layering on even more complexity.”

His views were echoed by a number of tax experts I spoke to this week about Mrs. Clinton’s tax plans, as I did earlier about Donald J. Trump’s.

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September 16, 2016 in Political News, Tax | Permalink | Comments (3)

Florida Law Prof Writes 24-Page Critique Of Graduate Tax Program: Go Online Or Shut Down — 'Hiring More Tax Faculty Is Like Hiring More Sailors To Man The Titanic Once It Has Hit The Iceberg'

Florida Logo (GIF)Following up on my previous posts on the turmoil surrounding Florida's graduate tax program (here, here, here, and here), I received this remarkable 24-page hard-hitting letter about the program by Robert J. Rhee, John H. and Marylou Dasburg Professor of Law.  The letter arrived in an email directly from "Faculty Copier #2" along with an anonymous note stating that "the law school has never been in more disarray."  The sender claimed that he/she obtained the letter through the Florida sunshine law (the Rhee letter concludes "[p]lease note that since this letter is written for the benefit and in furtherance of law school business, it is subject to the Florida 'sunshine' and record law").  Here are some excerpts from the letter, followed by a response I received from Dean Laura Rosenbury for publication on TaxProf Blog:

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September 16, 2016 in Legal Education, Tax | Permalink | Comments (16)

Harvard Business School:  Problems Unsolved And A Nation Divided — The State Of U.S. Competitiveness 2016

ProblemsHarvard Business School:  Problems Unsolved and a Nation Divided: The State of U.S. Competitiveness 2016, by Michael E. Porter, Jan W. Rivkin & Mihir A. Desai (with Manjari Raman):

Harvard Business School (HBS) launched the U.S. Competitiveness Project in 2011 as a multi-year, fact-based effort to understand the disappointing performance of the American economy, its causes, and the steps needed by business and government to restore economic growth and prosperity shared across all Americans. We draw on surveys of HBS alumni and the general public to solicit views about the state of U.S. competitiveness as well as the steps needed to restore it.

This report provides an overview of our findings on the evolution of the U.S. economy, the state of U.S. competitiveness in 2016, and priorities for the next President and Congress, drawing on our research and the May–June 2016 surveys of alumni and the general public.

While a slow recovery is underway, fundamentally weak U.S. economic performance continues and is leaving many Americans behind. The federal government has made no meaningful progress on the critical policy steps to restore U.S. competitiveness in the last decade or more. ...

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September 16, 2016 in Scholarship, Tax | Permalink | Comments (1)

The IRS Scandal, Day 1226

IRS Logo 2Wall Street Journal editorial, The Impeachment Distraction: Koskinen and the IRS Deserve Rebuke, but Not If It Costs the Senate:

House Speaker Paul Ryan has managed to unite his fractious GOP caucus around some common campaign goals. So it’s a pity that two months from an election some House Members are driving an issue that could cost Republicans control of the Senate.

Louisiana Rep. John Fleming on Tuesday moved on a privileged resolution to force the House to vote as soon as Thursday to impeach IRS Commissioner John Koskinen. The IRS chief has earned public opprobrium, but the timing of this effort could boomerang and end up making the IRS less accountable.

These columns have been out front in documenting Mr. Koskinen’s failures after he promised to clean up the IRS following its political targeting of conservative nonprofits. Mr. Koskinen has failed to be candid with Congress and defied subpoenas. Documents requested by Congress were destroyed on his watch. He’s done nothing to reform the agency and he has supported a new draft regulation, now in temporary abeyance, that would reinforce the agency’s political vetting.

The question is whether impeachment is the right remedy at the current political moment. The case for it is that Congress needs to reassert its own powers against a runaway executive branch. President Obama has diminished the power of the purse and won’t prosecute contempt citations against witnesses who refuse to testify on Capitol Hill. Impeachment is about all Congress has left.

The problem is that a trial is doomed to fail in the Senate, where a two-thirds vote is required to convict. There are differing views on whether a House impeachment vote triggers an automatic Senate trial, but if it does this could require vulnerable GOP incumbents to stay in Washington at the height of the campaign. This would be a gift to Democrats trying to regain the majority. ...

No doubt many House Members genuinely believe Mr. Koskinen deserves impeachment, but other Republicans have legitimate doubts that his offenses rise to the level of “high crimes and misdemeanors” mentioned in the Constitution. An impeachment trial now will divide Republicans while uniting Democrats. Why take the risk when Mr. Koskinen is leaving office in a mere four months?

Congress needs to think seriously about how to reassert its powers no matter who wins the White House. But the reality is that a Senate Democratic majority would make that task impossible. Republicans should focus on re-electing their majorities in Congress as a check on the next President, instead of making self-defeating political gestures.

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September 16, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)