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Pepperdine University School of Law

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Wednesday, April 16, 2014

Roin Presents Planning Past Pensions Today at Duke

RoinJulie Roin (Chicago) presents Planning Past Pensions at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

Evidence of state and local government dysfunction surfaces in many areas. One is the operation of their employee pension plans. Free from the strictures of ERISA, some governments failed to fund their pension promises and with the imminent retirement of the baby boom generation, are facing what appear to be insurmountable pension debts. The state of Illinois is one of the worst-hit states, with grossly underfunded pension plans, a state constitutional prohibition on reducing pension benefits, and a sizeable non-pension related budget deficit. Recently passed pension “reforms” likely will be struck down by its courts. There are no easy solutions to its pension woes, but this article seeks to lay out a few steps that Illinois can take now, under current law, and suggests more long-term policy and legal changes that it should consider for the future. Ultimately, though, the same dysfunctions that led to the current crisis might make these suggestions impractical.

April 16, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

The Fluctuating Math Errors in Americans’ Tax Returns

538FiveThirtyEight:  The Fluctuating Math Errors in Americans’ Tax Returns:

Seeing as Tuesday night is the deadline for filing tax returns, and seeing as data is FiveThirtyEight’s raison d’être, I was excited to find a set of statistics titled “Math Errors on Individual Income Tax Returns, by Type of Error.” Even better, that data has been published for tax years from 2001 to 2012.

It’s unsurprising that some Americans make mistakes on their taxes; the 1040 form (the primary tax form) has 77 line items, as well as a 189-page appendix of instructions. But Internal Revenue Service data shows that math mistakes — potentially an indication of how confusing that form is — have changed a lot over time.

chalabi-math-errors

Why does the number of errors fluctuate so much? ...

Moving from facts to theory, the decrease in errors since 2009 might also partly be explained by the increase in use of TaxACT, TaxSlayer, TurboTax and other online filing services. That assumes that such providers are less prone to mistakes than alternative solutions, such as Americans calculating their own taxes or using traditional accountants. The National Taxpayers Union has claimed that is not a safe assumption.

(Hat Tip: David Herzig.)

April 16, 2014 in IRS News, Tax | Permalink | Comments (1)

Sugin: Payroll Taxes, Mythology, and Fairness

Linda Sugin (Fordham), Payroll Taxes, Mythology, and Fairness, 51 Harv. J. on Legis.___ (2014):

As the 2012 fiscal cliff approached, Congress and President Obama bickered over the top marginal income tax rate that would apply to a tiny sliver of the population, while allowing payroll taxes to quietly rise for all working Americans. Though most Americans pay more payroll tax than income tax, academic and public debates rarely mention it. The combined effect of the payroll tax and the income tax produce dramatically heavier tax liabilities on labor compared to capital, producing substantial horizontal and vertical inequity in the tax system. This article argues that a fair tax system demands just overall burdens, and that the current combination of income taxes and payroll taxes imposes too heavy a relative burden on wage earners. It scrutinizes the payroll tax to debunk myths that artificially link payroll taxes to retirement security, and argues that these myths have lulled workers into accepting substantial and regressive tax burdens. Freed from the analytical limitations of an insurance label and a private-savings paradigm, policymakers can be better guided by fundamental principles of fairness. By refuting justifications for taxing capital income more lightly than labor income, and offering fairness arguments for taxing work less than investment, the article makes a case for equalizing the tax burdens on labor and capital income. Social Security’s outlays constitute one-fifth of total federal spending, and this article maintains that it should be financed by a fair tax.

April 16, 2014 in Scholarship, Tax | Permalink | Comments (0)

IRS Considers Taxing Silicon Valley Work Perks

Following up on my previous posts (links below):  Fox News,  IRS Considers Taxing Work Perks Like Food, Gym Memberships:

PerksIn competitive job markets like Silicon Valley, companies are doing everything they can to entice the best and brightest -- offering freebies that have become the stuff of legend. Employee perks like free food at lavish cafeterias, laundry and even yoga are not unheard of.

But the taxman could soon crack down. The IRS reportedly is looking at these perks and seeing if these companies need to start paying up for the free stuff they offer employees.

David Gamage, a tax expert and professor at the University of California, Berkeley, said it would really boil down to who benefits from these perks. "To what extent is this intended as a perk, a form of compensation, for the benefit of the employee, or to what extent is this just another way the employer gets the employee to work harder and longer and do things for the benefit of the employer?" he said.

If it's the latter, then it's harder for the IRS to tax it.

Prior TaxProf Blog coverage:

April 16, 2014 in Tax | Permalink | Comments (0)

Peroni Presents Formulary Apportionment in the U.S. at UNLV

PeroniRobert J. Peroni (Texas) presented Formulary Apportionment in the U.S. International Income Tax System: Putting Lipstick on a Pig? (with J. Clifton Fleming (BYU) & Stephen E. Shay (Harvard)) at UNLV yesterday as part of its Faculty Enrichment Series:

[T]he authors argue that formulary apportionment and the current standard, arm's length transfer pricing, are just two shades of lipstick on the pig that is the US international tax system, with its twin features of deferral and cross-crediting. They conclude that formulary apportionment might be the less offensive shade, but in effect the whole discussion is a diversion from a broad reform that is sorely needed on the pig itself.

April 16, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Donald Rumsfeld's Letter to the IRS: My Taxes Are a Known Unknown

The IRS Scandal, Day 342

Tuesday, April 15, 2014

Rao Presents The Tax Policy Implications of State Facilitated Collusion in the Alcohol Market Today at NYU

RaoNirupama Rao (NYU) presents The Price of Liquor is Too Damn High: State Facilitated Collusion and the Implications for Taxes (with Christopher T. Conlon (Columbia) at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Alan Auerbach:

Alcohol markets are subject to both heavy regulation as well as excise taxes at the federal and state level. We examine the impact of particular state regulations on the structure of the alcohol market and the consequences for tax eciency. We show that post and hold and meet but not beat pricing regulations at the wholesale level facilitate non-competitive pricing by wholesalers. Wholesalers will tend to mark up premium brands relative to call or well products. The distortion of premium brands generally exceeds the distortions resulting from optimally set taxes, particularly when states attempt to address any negative externality of alcohol consumption. Regression results and tabulations indicate that that states featuring post and hold regulations consume 4% to 10% less alcohol than other states, that premium products comprise a smaller share of consumption and that wholesaler pricing is consistent with non-competitive behavior. We use new monthly data describing prices and quantity for hundreds of products to estimate alcoholic beverage demand and use these estimates to assess the impact of replacing these regulations with higher taxes. Our ndings suggest that the state of Connecticut could raise three to six times their current alcohol tax revenue by eliminating these regulations and increasing taxes such that total alcohol consumption was unchanged. In addition to redirecting surplus from wholesalers to the taxing authority, these alternative policies increase consumer surplus by reducing distortions in consumer product choices. The state can e ectively raise much more revenue and improve consumer welfare by replacing alcohol regulations with taxation

April 15, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Kahng Presents The Taxation of Intellectual Capital Today at Washington

KahngLily Kahng (Seattle) presents The Taxation of Intellectual Capital, 66 Fla. L. Rev. ___ (2014), at The University of Washington today as part of its Graduate Tax Program Colloquium Series:

Intellectual capital — broadly defined to include nonphysical sources of value such as patents and copyrights, computer software, organizational processes and know-how — has a long history of being undervalued and excluded from measures of economic productivity and wealth. In recent years, however, intellectual capital has finally gained wide recognition as a central driver of economic productivity and growth. Scholars in fields such as knowledge management, financial accounting and national accounting have produced a wealth of research that significantly advances our conceptual understanding of intellectual capital and introduces new methodologies for identifying and measuring its economic value.

This Article is the first to analyze and assess the taxation of intellectual capital within this broader interdisciplinary landscape. Informed by the recent research and reform efforts in knowledge management, financial accounting and national accounting, the Article finds that the tax law, which allows most investments in intellectual capital to be deducted, is fundamentally flawed. This results in the loss of hundreds of billions of dollars in tax revenues, costly misallocations of resources and a grave deviation from the accurate measure of income. The Article argues that, consistent with the prevailing view in other fields, investments in intellectual capital ought to be capitalized under the tax law. Drawing upon the work of reform proponents in other fields as well as their critics, the Article considers whether and to what extent the advances in other disciplines can be adapted to the tax system. Based on this analysis, it proposes the tax law be reformed to require businesses to capitalize and amortize over five years a broad array of intellectual capital investments including research and development, advertising, worker training and strategic planning.

April 15, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Happy (Tax Day Edition)

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April 15, 2014 in Tax | Permalink | Comments (0)

Ten-Year Anniversary of TaxProf Blog

Happy 10Today marks the ten-year anniversary of TaxProf Blog (and the nineteen-year anniversary of the TaxProf Email Discussion Group).  I hope the blog has at least partially succeeded in its mission (announced in my very first post) to provide daily news and information of interest to law school tax professors and students; tax lawyers in private practice, government, nonprofits, for-profit corporations, and think tanks; accountants; and others in the tax community. 

Since acquiring 100% control of the Law Professor Blogs Network in May 2013 and undertaking a top-to-bottom re-design in July (details here), the network's traffic and advertising revenues are up nearly 100%. The network now consists of over 50 blogs, with over a over a dozen new blogs launched and existing blogs like Brian Leiter's Law School Reports and Law School Rankings joining the network.

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

TurboTax Maker Linked to ‘Grassroots’ Campaign Against Free, Simple Tax Filing

Pro PublicaPro Publica: TurboTax Maker Linked to ‘Grassroots’ Campaign Against Free, Simple Tax Filing:

Over the last year, a rabbi, a state NAACP official, a small town mayor and other community leaders wrote op-eds and letters to Congress with remarkably similar language on a remarkably obscure topic.

Each railed against a long-standing proposal that would give taxpayers the option to use pre-filled tax returns. They warned that the program would be a conflict of interest for the IRS and would especially hurt low-income people, who wouldn't have the resources to fight inaccurate returns. Rabbi Elliot Dorff wrote in a Jewish Journal op-ed that he "shudder[s] at the impact this program will have on the most vulnerable people in American society."

"It's alarming and offensive" that the IRS would target the "the most vulnerable Americans," two other letters said. The concept, known as return-free filing, is a government "experiment" that would mean higher taxes for the poor, two op-eds argued.

The letters and op-eds don't mention that, as ProPublica laid out last year, return-free filing might allow tens of millions of Americans to file their taxes for free and in minutes. Or that, under proposals authored by several federal lawmakers, it would be voluntary, using information the government already receives from banks and employers and that taxpayers could adjust. Or that the concept has been endorsed by Presidents Obama and Reagan and is already a reality in some parts of Europe.

So, where did the letters and op-eds come from?

April 15, 2014 in Tax | Permalink | Comments (0)

Lawyer for Bin Laden's Son-in-Law Pleads Guilty to Tax Charges

The IRS Scandal, Day 341

Monday, April 14, 2014

Donald Tobin Named Dean at Maryland

Tax Prof Donald P. Tobin (Ohio State) has been named Dean at Maryland:

Tobin (2014)Tobin comes to UMB from Ohio State University where he was the John C. Elam/Vorys Sater Professor of Law at the Michael E. Moritz College of Law. During his 13 years at the Moritz College of Law, Tobin held numerous academic appointments that include: Founding Co-Director of the Program on Law and Leadership, Associate Dean for Faculty, and Associate Dean for Academic Affairs.

Professor Tobin’s' scholarly work has earned him national recognition as a leading expert on the intersection of tax and campaign finance laws. His publications include law texts on federal income taxation and tax ethics, along with articles on campaign finance disclosure and taxation of political organizations [including, most recently, The 2013 IRS Crisis: Where Do We Go From Here?, 142 Tax Notes 1120 (Mar. 10, 2014)]. ...

Tobin has strong Maryland ties. A native of Columbia, Md., and a graduate of Oakland Mills High School, Tobin received his JD degree from the Georgetown University Law Center. He served as a legislative aide for U.S. Senator Paul Sarbanes (D-Md.), and was a staff member of the Senate Committee on the Budget specializing in tax and budget issues. He also served as an appellate staff attorney for the U.S. Department of Justice Tax Division. Tobin is a member of the Maryland Bar, as well as the bars of the Maryland Court of Appeals, U.S. District Court for Maryland, and the U.S. Supreme Court.

(Hat Tip: Francine Lipman.)

April 14, 2014 in Legal Education, Tax, Tax Prof Moves | Permalink | Comments (0)

NYU Tax Law Review Publishes Symposium Issue: The Income Tax at 100


NYU 100The Tax Law Review has published a new issue (Vol. 66, No. 4 (Summer 2013)), NYU/UCLA Tax Policy Symposium: The Income Tax at 100, 66 Tax L. Rev. 357-879 (2013):

Deborah H. Schenk (NYU), Foreword: The Income Tax at 100, 66 Tax L. Rev. 357 (2013)

Panel #1:  The Role of the Corporate Tax:

Panel #2:  International Taxation:

Panel #3:  Taxes and Inequality:

Panel #4:  Taxes and Politics:

April 14, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Papers From the American Taxation Association's 2014 Midyear Meeting

ATA LogoThe American Taxation Association has posted on SSRN the 21 papers from its 2014 Midyear Meeting.

April 14, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

The Political Economy of Policy Transitions

OxfordMichael J. Trebilcock (Toronto), Dealing with Losers: The Political Economy of Policy Transitions (Oxford University Press 2014):

Whenever governments change policies—tax, expenditure, or regulatory policies, among others—there will typically be losers: people or groups who relied upon and invested in physical, financial, or human capital predicated on, or even deliberately induced by the pre-reform set of policies. The issue of whether and when to mitigate the costs associated with policy changes, either through explicit government compensation, grandfathering, phased or postponed implementation, is ubiquitous across the policy landscape. Much of the existing literature covers government takings, yet compensation for expropriation comprises merely a tiny part of the universe of such strategies.

Continue reading

April 14, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (0)

Law Prof Blog Traffic Rankings

Below are the updated quarterly traffic rankings by page views of the Top 50 blogs edited by law professors for 2013 (Jan. 1, 2013 - Dec. 31, 2013), as well as the percentage change in traffic from the prior 12-month period.  As I previously announced, in response to several requests and in light of the continued degrading of Site Meter, I am now including the more accurate, stable Google Analytics data in these quarterly traffic rankings (marked with an asterisk).

Rank

Blog

2013 Page Views

Change From 2012

1

InstaPundit*

145,305,741

n/a

2

Althouse

15,809,760

-18.8%

3

Legal Insurrection*

15,630,309

+22.4%

4

Volokh Conspiracy*

11,461,210

-6.4%

5

TaxProf Blog*

8,862,872

+169.8%

6

Leiter Reports: Philosophy

5,277,589

-8.5%

7

Hugh Hewitt

3,805,156

-49.4%

8

PrawfsBlawg

1,975,522

+5.5%

9

Lawfare*

1,767,565

+68.7%

10

The Incidental Economist*

1,611,466

+38.9%

11

Faculty Lounge

1,457,008

+18.4%

12

Harvard Law Corp Governance

1,336,770

+23.0%

13

Sentencing Law & Policy

1,319,699

+1.9%

14

Jack Bog's Blog

1,161,184

-64.8%

15

Opinio Juris*

1,008,157

-0.4%

16

Wills, Trusts & Estates Prof Blog

917,721

+47.7%

17

College Insurrection*

861,276

n/a

18

Leiter's Law School Reports

757,467

-25.8%

19

Balkinization

716,709

-24.2%

20

Constitutional Law Prof Blog

684,743

+122.4%

21

Concurring Opinions

655,491

-38.8%

22

Election Law Blog

569,388

-43.3%

23

Conglomerate

547,145

+37.1%

24

Turtle Talk

528,634

-2.1%

25

Antitrust & Comp. Policy Blog

495,058

+80.5%

26

ImmigrationProf Blog

462,063

+49.2%

27

Legal Skills Prof Blog

388,377

+100.3%

28

Workplace Prof Blog

385,131

+44.9%

29

Mirror of Justice

372,038

-15.7%

30

Religion Clause

294,955

-8.5%

31

Legal Whiteboard

280,768

+108.4%

32

Legal Profession Blog

277,018

+39.2%

33

Josh Blackman Blog*

274,219

+155.5%

34

Legal History Blog

265,754

-26.2%

35

ContractsProf Blog

265,464

+79.9%

36

White Collar Crime Prof Blog

251,506

+16.7%

37

Legal Ethics Forum

236,175

+32.0%

38

EvidenceProf Blog

230,884

+89.2%

39

Dorf on Law

214,611

n/a

40

CrimProf Blog

211,554

+44.7%

41

Sports Law Blog

198,685

-34.3%

42

M&A Prof Blog

197,012

+46.6%

43

Witnesseth

179,862

n/a

44

PropertyProf Blog

174,786

+50.7%

45

Legal Writing Prof Blog

164,161

+7.5%

46

Nonprofit Law Prof Blog

156,804

+116.3%

47

IntLawGrrls

155,768

-62.2%

48

Law School Academic Support

138,287

+92.8%

49

Discourse.net

131,757

-27.4%

50

Adjunct Law Prof Blog

130,975

+7.1%

  • The rankings include all blogs edited by law professors -- both law-related and non law-related.
  • The rankings include all blogs that have publicly available Site Meters or that have emailed me a screenshot of their Google Analytics data (or granted me read-only access to their data).
  • Please email me the names of any Law Prof Blogs with traffic in 2013 that would qualify for inclusion on the list (130,795 page views). If necessary, I will re-publish the list to include all qualifying blogs.
  • Several popular Law Prof Blogs do not have publicly available Site Meters and have not sent me Google Analytics data and thus are not included on the list:  e.g., California Appellate Report, Credit Slips, The Deal Professor, Feminist Law Professors, Legal Theory, PatentlyO, Point of Law, ProfessorBainbridge.com.
  • These rankings cover only those blogs edited by law professors. Other law-related blogs edited by practitioners, librarians, non-law school academics, and journalists are not included on this list:  e.g., Above the Law, How Appealing, Wall Street Journal Law Blog.
  • Members of my Law Professor Blogs Network comprise 6 of the Top 25 blogs and 21 of the Top 50 blogs.

April 14, 2014 in Blog Rankings, Legal Education, Tax | Permalink | Comments (3)

NY Times: Buyers Evade State Taxes by Loaning Purchased Art to Museums in Non-Tax States

New York Times:  Buyers Find Tax Break on Art: Let It Hang Awhile in Oregon:

Collectors who buy art in one state but live in another can owe thousands, tens of thousands, even millions of dollars in state “use taxes”: taxes often incurred when someone ships an out-of-state purchase home. But if they lend the recently purchased work first to museums ..., located in a handful of tax-friendly states, the transaction is often tax-free.

Beyond the benefit to museums, this lucrative, little-known tax maneuver has produced a startling pipeline of art moving across the United States as collectors cleverly — and legally — exploit the tax codes. ... [L]oans — which rarely extend beyond a few months — also flow into other museums in Oregon, and occasionally New Hampshire and Delaware, all states that have neither a sales nor a use tax. ...

ArtPortland officials say collectors lend art for a variety of reasons, not just for the tax break. But only a few weeks after the painting [Three Studies of Lucian Freud] sold for a stunning $142 million last fall at Christie’s in New York, it landed, to the surprise of many, in the Portland museum, where it drew large crowds for 15 weeks. By shipping the painting first to Oregon, instead of her home in Las Vegas, the new owner, Elaine Wynn, may be eligible to avoid as much as $11 million in Nevada use taxes, though it is not clear whether she intends to take advantage of the break.

Continue reading

April 14, 2014 in Tax | Permalink | Comments (3)

Daddy's Home!

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April 14, 2014 in Legal Education, Tax | Permalink | Comments (0)

The IRS Scandal, Day 340

IRS Logo 2National Review:  Woodward on IRS Scandal: ‘There’s Obviously Something Here’:

The Washington Post’s Bob Woodward knows a thing or two about investigating Washington scandals, and he believes the Internal Revenue Service’s targeting of conservative groups merits a deeper look.

“We should dig in to it — there should be answers,” he said on Fox News Sunday. “For the president to take that position is very, very unusual and say there’s not a ’smidgen of evidence here.’”

Woodward raised questions about the Republican House committees’ ability to properly and effectively carry out such an investigation. He laid out what his approach would be to dealing with stonewalling from Lois Lerner, as well as the administration, including speaking with others close to the situation rather than just the major players. But Woodward also warned of congressional Republicans’ crossing the line in their accusations of Lerner and others involved.

“There’s obviously something here,” he explained. “The question is, does this committee know how to investigate.”

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April 14, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, April 13, 2014

Top 5 Tax Paper Downloads

The IRS Scandal, Day 339

Saturday, April 12, 2014

Korb Presents Forty Years in Tax at Case Western

Korb (2014)Donald L. Korb (Partner, Sullivan & Cromwell; former IRS Chief Counsel) delivered the Norman A. Sugarman Memorial Lecture on 40 Years in Tax: A Look Backward (As Well As a Look Forward) at Case Western last week:

Don Korb has been involved in the practice of tax law for over 40 years, both as a private practitioner and as a tax administrator. His talk will be about how the U.S. federal income tax system has changed over his career and how the role of tax advisors/practitioners has evolved over that same time period. He will speak from the standpoint of someone who has moved back and forth between the private and public sectors and not only has sat on “both sides of the table” but has also occupied leadership positions at the IRS (Assistant to the Commissioner of Internal Revenue in the mid-1980’s and Chief Counsel for the Internal Revenue Service from April 2004 through December 2008) which allowed him to play a significant role in some of the changes to the tax system and the evolution of the role of tax advisors/practitioners which have occurred since he began practicing law in 1974.

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April 12, 2014 in Tax | Permalink | Comments (0)

IRS Debunks Tax Protester Arguments

IRS Logo 2The IRS yesterday released (IR-2014-51) its annual update of The Truth about Frivolous Tax Arguments:

This document describes and responds to some of the common frivolous arguments made by individuals and groups who oppose compliance with the federal tax laws. The first section groups these arguments under five general categories, with variations within each category. Each contention is briefly explained, followed by a discussion of the legal authority that rejects the contention.

A. The Voluntary Nature of the Federal Income Tax System

  1. Contention: The filing of a tax return is voluntary
  2. Contention: Payment of tax is voluntary
  3. Contention: Taxpayers can reduce their federal income tax liability by filing a “zero return”
  4. Contention: The IRS must prepare federal tax returns for a person who fails to file
  5. Contention: Compliance with an administrative summons issued by the IRS is voluntary

B. The Meaning of Income: Taxable Income and Gross Income

  1. Contention: Wages, tips, and other compensation received for personal services are not income
  2. Contention: Only foreign-source income is taxable
  3. Contention: Federal Reserve Notes are not income
  4. Contention: Military retirement pay does not constitute income

C. The Meaning of Certain Terms Used in the Internal Revenue Code

  1. Contention: Taxpayer is not a “citizen” of the United States, thus not subject to the federal income tax laws
  2. Contention: The “United States” consists only of the District of Columbia, federal territories, and federal enclaves
  3. Contention: Taxpayer is not a “person” as defined by the Internal Revenue Code, thus is not subject to the federal income tax laws
  4. Contention: The only “employees” subject to federal income tax are employees of the federal government

D. Constitutional Amendment Claims

  1. Contention: Taxpayers can refuse to pay income taxes on religious or moral grounds by invoking the First Amendment
  2. Contention: Federal income taxes constitute a “taking” of property without due process of law, violating the Fifth Amendment
  3. Contention: Taxpayers do not have to file returns or provide financial information because of the protection against self-incrimination found in the Fifth Amendment
  4. Contention: Compelled compliance with the federal income tax laws is a form of servitude in violation of the Thirteenth Amendment
  5. Contention: The Sixteenth Amendment to the United States Constitution was not properly ratified, thus the federal income tax laws are unconstitutional
  6. Contention: The Sixteenth Amendment does not authorize a direct nonapportioned federal income tax on United States citizens

E. Fictional Legal Bases

  1. Contention: The Internal Revenue Service is not an agency of the United States
  2. Contention: Taxpayers are not required to file a federal income tax return, because the instructions and regulations associated with the Form 1040 do not display an OMB control number as required by the Paperwork Reduction Act
  3. Contention: African Americans can claim a special tax credit as reparations for slavery and other oppressive treatment
  4. Contention: Taxpayers are entitled to a refund of the Social Security taxes paid over their lifetime
  5. Contention: An “untaxing” package or trust provides a way of legally and permanently avoiding the obligation to file federal income tax returns and pay federal income taxes
  6. Contention: A “corporation sole” can be established and used for the purpose of avoiding federal income taxes
  7. Contention: Taxpayers who did not purchase and use fuel for an off-highway business can claim the fuels tax credit
  8. Contention: A Form 1099-OID can be used as a debt payment option or the form or a purported financial instrument may be used to obtain money from the Treasury

The second section responds to some of the common frivolous arguments made in collection due process cases brought pursuant to sections 6320 and 6330. These arguments are grouped under ten general categories and contain a brief description of each contention followed by a discussion of the correct legal authority. A final section explains the penalties that the courts may impose on those who pursue tax cases on frivolous grounds. The court opinions cited as relevant legal authority illustrate how these arguments are treated by the IRS and the courts. Note that courts often decline “to refute [frivolous] arguments with somber reasoning and copious citation of precedent” for a variety of reasons. Wnuck v. Commissioner, 136 T.C. 498 (2011) (quoting Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984)).

This document, including the relevant legal authorities cited, is not intended to provide an exhaustive list of frivolous tax arguments. Merely because a frivolous argument is not included in this document does not mean that it is not frivolous. Taxpayers may not rely on frivolous arguments to avoid or evade federal taxes. The government and courts are not precluded from penalizing taxpayers who raise a frivolous argument not addressed in this document.

April 12, 2014 in IRS News, Tax | Permalink | Comments (1)

The IRS Scandal, Day 338

IRS Logo 2Tax Analysts Blog: The Gift That Is Lois Lerner, by Christopher Bergin:

[W]hen you see all of what the Ways and Means Committee compiled about Lerner, it hardly paints a pretty picture of her. To me, it certainly shows that she did many stupid things and that she probably abused her power as a high-ranking IRS official. Did she break the law? I don’t know, but that is why I agree with Ways and Means Republicans that there should be a Justice Department investigation – although I thought one was already going on. ...

The bad behavior going on at the IRS – whether it is politically motivated or not – does not stop with Lerner. It has to go higher than that. How much higher, I do not know, but that’s yet another reason why we need an investigation – a real one.

And that is why I think the Ways and Means Republicans are doing the IRS – and, perhaps, the Obama administration – a huge favor. Making Lerner the scapegoat changes the conversation. It makes it about her. It’s not about her. It’s about the IRS. Something bad happened here. And however bad her behavior, the problem isn’t Lerner. The problem is a culture that allows what she did to continue and that probably allows behavior that’s much, much worse. That is what new IRS Commissioner John Koskinen must deal with.

And here is where I agree to some degree with Ways and Means Democrats. The GOP committee members have become so obsessed with the political dimensions of this scandal that they are forgetting their job -- a job they actually explain at the top of the letter to the DOJ. Their job is not to fix blame; it’s to fix the problem. Their job is not to destroy the IRS; it is to protect the rights of ALL American taxpayers. This scandal isn’t about Lerner; it’s about our tax system. If all of this goes to the White House, so be it. But it’s about getting to the truth, not getting to the president of the United States. You’d think the GOP would have learned that from Monica Lewinsky. Think what you want about that so-called scandal, but I think this so-called scandal poses a far bigger threat to the country.

Continue reading

April 12, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Friday, April 11, 2014

Obama and Biden Release Their 2013 Tax Returns

Obama 2013 Tax Return

President Obama and Vice-President Biden today released their 2013 tax returns. Here are charts putting the 2013 returns in context with their earlier returns:

Obama:

Year

AGI

Tax

Charitable Gifts

Gifts/AGI

2013

$481,098

$98,169

$59,251

12.3%

2012

$608,611

$112,214

$150,034

24.7%

2011

$789,674

$162,074

$172,130

21.8%

2010

$1,728,096

$453,770

$245,075

14.2%

2009

$5,505,409

$1,792,414

$329,100

6.0%

2008

$2,656,902

$855,323

$172,050

6.5%

2007

$4,139,965

$1,396,772

$240,370

5.8%

2006

$983,826

$277,481

$60,307

6.1%

2005

$1,655,106

$545,614

$77,315

4.7%

2004

$207,647

$40,426

$2,500

1.2%

2003

$238,327

$51,856

$3,400

1.4%

2002

$259,394

$68,958

$1,050

0.4%

2001

$272,759

$86,072

$1,470

0.5%

2000

$240,505

$63,732

$2,350

1.0%

Biden:

Year

AGI

Tax

Charitable Gifts

Gifts/AGI

2013

$407,009

$96,378

$20,523

5.00%

2012

$385,072

$87,851

$7,190

1.90%

2011

$379,035

$87,900

$5,540

1.46%

2010

$379,178

$86,626

$5,350

1.41%

2009

$333,182

$71,147

$4,820

1.45%

2008

$269,256

$47,464

$1,885

0.70%

2007

$319,853

$66,273

$995

0.31%

2006

$248,859

$42,832

$380

0.15%

2005

$321,379

$70,473

$380

0.12%

2004

$234,271

$41,845

$380

0.16%

2003

$231,375

$38,393

$260

0.11%

2002

$227,811

$41,756

$260

0.11%

2001

$220,712

$40,728

$360

0.16%

2000

$219,953

$42,313

$360

0.16%

1999

$210,797

$40,309

$120

0.06%

1998

$215,432

$35,131

$195

0.09%

April 11, 2014 in Tax | Permalink | Comments (8)

Tax Salience Panel at Law & Econ Conference Today at Duke

TriangleThere is a tax panel at today's 5th Annual Triangle Law & Econ Conference on Rethinking Regulation and Reform: Behavioral Economics and the Regulatory State at Duke:

Tax Salience

  • Peter Barnes (Caplin & Drysdale, Washington, D.C.)
  • Jasper Cummings (Alston & Bird, Washington, D.C. & Raleigh, NC)
  • David Gamage (UC-Berkeley)
  • Kathleen Thomas (North Carolina)
  • Larry Zelenak (Duke) (facilitator) 

April 11, 2014 in Conferences, Tax | Permalink | Comments (0)

Weekly Tax Roundup

 Weekly Roundup

April 11, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

April 11, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Student Tax Note Roundup

Crawford & Blattmachr: Planning With Portability Do-Overs

Tax Analysys Logo (2013)Bridget J. Crawford (Pace) & Jonathan G. Blattmachr (Interactive Legal Systems), Planning With Portability Do-Overs (But Only for a Limited Time), 143 Tax Notes 117 (Apr. 7, 2014):

In this article, the authors discuss Rev. Proc. 2014-18, in which the IRS provides some estates with a simplified method for making a portability election and having that election treated as timely even though the statutory deadline may have passed. The authors suggest that once the estate tax exemption of a first spouse to die has been preserved under Rev. Proc. 2014-18, an effective estate plan for the surviving spouse may include creating and funding a lifetime trust structured as a grantor trust.

April 11, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Bank: Historical Perspective on the Corporate Interest Deduction

Steven A. Bank (UCLA), Historical Perspective on the Corporate Interest Deduction, 18 Chapman L. Rev. ___ (2014):

One of the so-called “pillars of sand” in the American business tax structure is the differential treatment of debt and equity. Corporations may deduct interest payments on their debt, but may not deduct dividend payments on their equity. This “ancient and pernicious” feature is criticized because it distorts corporate financing choices and inevitably leads to line drawing problems as the government engages in a futile chase to catch up with the latest financial innovation. Both the Obama administration and new Senate Finance Committee Chairman Ron Wyden have proposed capping the deductibility of corporate interest to mitigate these concerns. This has led commentators to come to the defense of the full corporate interest deduction, relying in part on a historical justification based on the origins of the corporate income tax as a proxy for reaching shareholder income. According to this argument, an entity-level tax was necessary to reach income that might be distributed as a dividend, since it could otherwise be avoided by deferring the dividend, but an entity-level tax was not necessary to reach income that might be paid out as interest, since interest payments were fixed and regular and non-deferrable. Therefore, interest payments were made deductible, but dividend payments were not.

This Essay, prepared in connection with a Chapman Law Review symposium on Business Tax Reform, contends that although there may be appropriate arguments in favor of maintaining a full corporate interest deduction, the historical premise for the origins of the corporate income tax system is not one of them. Corporate interest was deductible and dividend payments were not both in 1894, when deferral was not a concern because corporations routinely distributed all of their profits each year, and in 1909, when there was no individual income tax and therefore no tax incentive to retain earnings.

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April 11, 2014 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 337

CNN:  Should Lois Lerner Be Held In Contempt?:

CNN Crossfire

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April 11, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Wiedenbeck: Recovering the Tax Shelter Limitation Aspect of ERISA

Peter J. Wiedenbeck (Washington University), 'Ninety-Five Percent of Them Will Not Be Missed': Recovering the Tax Shelter Limitation Aspect of ERISA, 6 Drexel L. Rev. ___ (2014):

ERISA is justly hailed as a paramount achievement in labor and social welfare legislation. The worker-protective elements of ERISA get most of the attention. Yet Congress also emphasized that employee benefit plans “substantially affect the revenue of the United States because they are afforded preferential Federal tax treatment” which justified a coordinate declaration of policy, “to protect...the Federal taxing power”. ERISA § 2(a), (c), 29 U.S.C. § 1001(a), (c). The tax-subsidized but largely unregulated regime that preceded ERISA facilitated widespread tax abuse. Reducing wasted revenue by focusing preferential tax treatment on plans providing retirement savings to a broad cross-section of the workforce — not just to the business owners — is the often-overlooked dual objective of ERISA. This article seeks to recover the tax shelter limitation aspect of ERISA. Part II briefly explains the origins of ERISA’s tax controls. Part III surveys ERISA’s accomplishments and limitations in suppressing pension tax shelters. Part IV describes later momentous developments to which ERISA pointed the way.

April 11, 2014 in Scholarship, Tax | Permalink | Comments (0)

Tax Increment Financing Districts and Taxable Properties

Randall K. Johnson, How Tax Increment Financing (TIF) Districts Correlate With Taxable Properties, 34 N. Ill. U. L. Rev. 39 (2013):

This article deals with Tax Increment Financing (TIF), which is a popular economic development tool. TIF borrows against future tax revenues to subsidize current development projects. In Illinois, this economic development tool is justified by its promise to expand the local tax base: by increasing tax revenues, increasing the number of tax payers or increasing the number of taxable properties in the area. However, it is not clear that TIF delivers on its promise. A new dataset, which is introduced in this article, helps to clarify the issue. It does so by providing information about the number of TIF Districts in suburban Cook County, Illinois, the number of taxable properties therein and the nature of the relationship between these variables. If these variables move together, which would indicate that TIF Districts positively correlate with taxable properties, this article will find that TIF delivers on its promise.

April 11, 2014 in Scholarship, Tax | Permalink | Comments (0)

Thursday, April 10, 2014

Blank Presents Reconsidering Corporate Tax Privacy at Harvard

BlankJoshua D. Blank (NYU) presented Reconsidering Corporate Tax Privacy, 11 N.Y.U. J. L. & Bus. ___ (2014), at Harvard yesterday as part of its Current Issues in Tax Law, Policy, and Practice Seminar hosted by Daniel Halperin and Stephen Shay:

For over a century, politicians, government officials and scholars in the United States have debated whether corporate tax returns, which are currently subject to broad tax privacy rules, should be made publicly accessible. Throughout this age-old debate, participants have speculated about how corporate managers and the IRS might behave differently if they knew that the public could observe corporations’ tax returns and how investors and the general public would respond if they had access to this information. There is, however, another, unexplored perspective: how could seeing other corporations’ tax returns affect how corporate managers engage in tax planning and tax return preparation for their own corporations?

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April 10, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

New Yorker: A Four-Decade Tax War

The New Yorker:  A Four-Decade Tax War, by Jeffrey Frank:

New YorkerThe nearness of April 15th is enough to remind us of the words of Jimmy Carter, who, when he accepted the Democratic Party’s nomination for President, in 1976, said, “It is time for a complete overhaul of our income-tax system … It is a disgrace to the human race.” Perhaps that was a bit hyperbolic in a world with so many people and events in the running to represent disgraces to humanity. But, in spirit, Carter was not wrong. The tax system is disgraceful, and what amazes is that, despite wide agreement on that point, and despite so many good intentions, so little has been done to fix it.

The problem begins with its innate unfairness, which can’t be separated from a tax code that is so complex and illogical that it’s routine to hire professionals simply to interpret and fill out basic forms. Sometimes, the professionals need to consult more professionals—more accountants and lawyers, or a team of them. That’s not restricted to any income group; if you’re renting out a spare room to help pay the mortgage, you’ve got forms to fill out and arithmetic to do, and very likely some explaining to do, too. We’re so used to this that, when April 15th (or its requested extension) arrives, it barely registers beyond the time-consuming, receipt-gathering, costly, baffling, headache-inducing inconvenience of it all.

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April 10, 2014 in Tax | Permalink | Comments (2)

Call for Papers: McGill Symposium on Tax Justice and Human Rights

McGillMcGill Faculty of Law, Call for Papers:  Tax Justice and Human Rights Research Collaboration Symposium:

We invite paper proposals for a Tax Justice and Human Rights Research Collaboration Symposium, to be held at the McGill Faculty of Law, Montreal, Quebec, from Wednesday to Friday, 18-20 June, 2014. 

The symposium will explore the fundamental connections between taxation and human rights by providing a forum for collaboration among emerging scholars, established academics, civil society organization representatives, tax justice advocacy groups, tax policy makers, and researchers from around the world. The symposium seeks especially to bring developing-world perspectives into the discourse and to foster scholarly work for dissemination both within and beyond the academic setting.

The plurality of experience, in terms of training, background, country of origin, and area of expertise, will ensure that discussions and activities at the conference will have real-world impact. Indeed, there is a need within the tax-policy world for more cross-pollination between academic researchers and on-the-ground decision-makers. The connections and networking that we envision will take place at this conference should allow for meaningful discussions for years to come.

Paper proposals must be between 300-500 words in length and should be accompanied by a short résumé.

Please submit your proposal to the conference convener Professor Allison Christians, at allison.christians@mcgill.ca.

Deadline for submissions: 30 April 2014. Successful applicants will be notified in early May 2014.

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April 10, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Critiquing the 'Gladiator Ethos' of Student-Edited Law Reviews

GladiatorEvelyn A. Grosenick (Public Defender, Nevada), In Defense of the Law Review, 45 McGeorge L. Rev. 305 (2013) (a response to Megan S. Knize (Editor-in-Chief, UC Davis Law Review, 2007-08), The Pen Is Mightier: Rethinking the "Gladiator" Ethos of Student-Edited Law Reviews, 44 McGeorge L. Rev. 309 (2013)):

I recognize that experiences vary greatly among law reviews and individuals. Despite individual differences among law review cultures, the need to publish issues influences the definition of success on all law reviews, which creates a common experience in some respects. Furthermore, this need to publish differentiates the definition of success in the law review context from the definition of success in the legal field and legal education. The main weakness of the gladiator model as an analytical tool for criticizing the law review is that it fails to take into account the full definition of success on the law review. Whereas the definition of success as winning drives the gladiator culture at law schools under Professor Sturm’s gladiator theory, the definition of success on the law review also includes producing a publication, which requires the members to work as a team. Publication cannot be accomplished without many of the aspects of the law review that Knize criticizes. In addition, the publication requirement encourages teamwork and creates an environment that celebrates prioritizing the needs of the team over the desires of the individual.

I am not arguing that the law review as an institution is perfect, nor do I believe that it is insulated from gender inequality. Rather, I am suggesting in response to Knize’s article that the necessity for teamwork on the law review counteracts the potential effect of the gladiator ethos and makes the law review more female-friendly than the typical law school classroom. Further, the hierarchical structure, rules, and deadlines serve essential gender-neutral purposes on law review and beyond.

April 10, 2014 in Scholarship, Tax | Permalink | Comments (0)

Oei: The Uneasy Case Against Tax Lien Subordination

Shu-Yi Oei (Tulane), The Uneasy Case Against Tax Lien Subordination, 11 Pitt. Tax Rev. ___ (2014):

I.R.C. § 6323, which governs how the federal tax lien ranks against the interests of the taxpayer’s other creditors, subordinates the tax lien to the claims of other creditors in various ways. Tax lien subordination is commonly justified on the grounds that it enhances taxpayer asset value, facilitates commercial transactions, and reduces monitoring costs for private creditors. This short symposium essay argues, however, that these benefits may be illusory. Tax lien subordination may, in fact, be unnecessarily costly and distortive and may lead to unfair distributive results. This essay suggests that the tax lien priority scheme might be made less costly by reducing its multiple levels of subordination. This could be accomplished in two ways: First, by reducing the magnitude or number of the superpriorities and other prioritized interests; and second, by eliminating the priority of the four horsemen over the un-noticed federal tax lien, or, alternatively, by moving away from a system of pure public notice and toward a semi-private inquiry-based system.

April 10, 2014 in Scholarship, Tax | Permalink | Comments (0)

Shanske: Revitalizing Local Political Economy Through Modernizing the Property Tax

Darien Shanske (UC-Davis), Revitalizing Local Political Economy Through Modernizing the Property Tax, 68 Tax L. Rev. ___ (2014):

As the Great Recession dramatically illustrated, state and local governments need a more stable revenue source. Accordingly, states and localities as diverse as Texas and San Francisco, are experimenting with new kinds of taxes. However, there has been essentially no experimentation with the oldest and most traditional local tax, namely the tax on real property.

This blindness to the property tax is unfortunate for many reasons, including that the property tax is both relatively efficient and stable compared to the other taxes available to states and localities. Of course, it is possible that the property tax has been ignored because, despite its merits, it has structural weaknesses that cannot be reformed. For instance, property tax liability is based on the value of the property and not on the income of the owner, which means that property taxes can impose great burdens on taxpayers on a fixed income. Furthermore, property taxes are typically collected once or twice a year, which imposes a significant obligation on taxpayers to budget correctly.

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April 10, 2014 in Scholarship, Tax | Permalink | Comments (0)

Templin: The Politics of Social Security Tax Reform

Benjamin A. Templin (Thomas Jefferson), Social Security Reform: The Politics of the Payroll Tax, 32 Quinnipiac L. Rev. 1 (2013):

This Article examines the principal reform proposals that would increase tax revenue for the Social Security trust fund--weighing the pros and cons of each. [FN13] The Article also considers the prospects for political agreement on a reform proposal given the past efforts and the looming crisis. Part I of the Article recounts the latest data on insolvency projections and discusses the methods by which the Office of the Chief Actuary measures the effect of proposed reforms. Part II provides an overview of the payroll tax and benefit calculations. The factors used in calculating both tax and benefits are key components used in many reform proposals. The Article groups tax reform proposals in two types: (1) proposals that increase the tax rate, which is the subject of Part III; and (2) proposals that increase the maximum taxable income, which is discussed in Part IV. Part V examines the political realities of reform proposals and suggests ways in which political bargaining can be structured to maximize the chances of success.

April 10, 2014 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 336

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April 10, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Wednesday, April 9, 2014

Rostain Presents Lawyers, Accountants, and the Tax Shelter Crisis Today at Duke

Tanina Rostain (Georgetown) presents Confidence Games: Lawyers, Accountants, and the Tax Shelter Crisis (MIT Press, 2014) (with Milton C. Regan, Jr. (Georgetown)) at Duke today as part of its Tax Policy Seminar hosted by Lawrence Zelenak:

ConfidenceFor ten boom-powered years at the turn of the twenty-first century, some of America’s most prominent law and accounting firms created and marketed products that enabled the very rich—including newly minted dot-com millionaires—to avoid paying their fair share of taxes by claiming benefits not recognized by law. These abusive domestic tax shelters bore such exotic names as BOSS, BLIPS, and COBRA and were developed by such prestigious firms as KPMG and Ernst & Young. They brought in hundreds of millions of dollars in fees from clients and bilked the U.S. Treasury of billions in revenues before the IRS and Justice Department stepped in with civil penalties and criminal prosecutions. In Confidence Games, Tanina Rostain and Milton Regan describe the rise and fall of the tax shelter industry during this period, offering a riveting account of the most serious episode of professional misconduct in the history of the American bar.

Rostain and Regan describe a beleaguered IRS preoccupied by attacks from antitax and antigovernment politicians; heightened competition for professional services; the relaxation of tax practitioner norms against aggressive advice; and the creation of complex financial instruments that made abusive shelters harder to detect. By 2004, the tax shelter boom was over, leaving failed firms, disgraced professionals, and prison sentences in its wake. Rostain and Regan’s cautionary tale remains highly relevant today, as lawyers and accountants continue to face intense competitive pressure and regulators still struggle to keep pace with accelerating financial risk and innovation.

April 9, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Wells Presents Tax Base Erosion and Section 482 at Northwestern

WellsBret Wells (Houston) presented Tax Base Erosion: Reformation of Section 482's Arm’s Length Standard, 15 Fla. Tax Rev. ___ (2014), at Northwestern last week as part of its Tax Colloquium Series hosted by by Herbert Beller, Charlotte CraneDavid Cameron, Philip Postlewaite, Jeffrey Sheffield, and Robert Wootton:

The United States has repeatedly attempted to stop tax base erosion for almost the entire post-World War I era, and yet the same problems exist today. The need for fundamental tax reform is front-page material in the major newspapers with the US transfer pricing rules and US multinationals portrayed as public enemy #1. This year, the OECD issued a report entitled “Addressing Base Erosion and Profit Shifting” and last month it issued a “Action Plan” for how it plans to proceed to address base erosion and profit-shifting. In a competing fashion, several important developing countries have initiated their own pact to develop cooperative strategies on these issues outside of the framework of the OECD and UN. It is fair to say that a solution to the base erosion and profit-shifting practices of multinational corporations is the “holy grail” of international tax policy.

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April 9, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Harvey Presents FATCA and the Taxation of U.S. Citizens Living Abroad Today at Penn

HarveyJ. Richard "Dick" Harvey, Jr. (Villanova) presents Offshore Accounts: Insider's Summary of FATCA and Its Potential Future, 57 Vill. L. Rev. 472 (2012), and Worldwide Taxation of U.S. Citizens Living Abroad: Impact of FATCA and Two Proposals, 5 Geo. Mason J. Int'l Comm. L. ___ (2013), at Pennsylvania today as part of its Center for Tax Law & Policy Seminar Series hosted by Michael Knoll, Chris Sanchirico, and Reed Shuldiner:

When FATCA was unilaterally enacted in March 2010 it was far from clear whether it would ultimately be successful. The major issue was whether the US would need multilateral action in order for FATCA to be a success. Currently the US has signed 25 intergovernmental agreements with many more in the final stages of negotiation. When coupled with the OECD's recent issuance of a Common Reporting Standard, it appears that FATCA or some version is here to stay. However, there will be growing pains, and some of those pains could be significant.

April 9, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Wealthy New Yorkers Face 164% Estate Tax Rate

CNBC, New York Rich Face Tax Surprise When They Die:

If you're a New York multimillionaire, you now have another incentive to stay alive.

A change this month in New York's estate tax, which was billed as tax relief for the wealthy, contains a hidden wrinkle that could leave some multimillionaires with a much bigger surprise tax upon their death. Certain estates could even wind up with a tax rate of 164 percent on portions of their estates, according to one tax expert.

April 9, 2014 in Tax | Permalink | Comments (6)