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Friday, October 31, 2014

Weekly Tax Roundup

October 31, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

October 31, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Student Tax Note Roundup

Weekly RoundupConor Clarke (J.D. 2015, Yale) & Edward Fox (J.D. 2015, Yale), Note, Perceptions of Tax Expenditures and Direct Spending: A Survey Experiment, 124 Yale L.J. ___ (2015):

This paper presents the results of an original survey experiment on whether the public prefers “tax expenditures” to “direct outlays” — that is, whether members of the public are more likely to support government spending that takes the form of a tax credit rather than a check or cash. Using a survey that spans a wide variety of policy areas — and with important variations in wording and information — we show that the public strongly prefers tax expenditures even when the “economic substance” of the proposed policies is identical. We also show that the public views tax expenditures as less costly than equivalent direct outlays. These results support a longstanding but largely unstudied hypothesis that tax expenditures “hide” the costs of government spending, and have implications for why tax expenditures have continued to grow in size and complexity.

October 31, 2014 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

Kyl & Moore: Obama's Soak the Rich 60% Tax Hike on Investment Income Is Drowning the Middle Class

Wall Street Journal op-ed:  Obama Soaks the Rich, Drowns the Middle Class; The Ripple Effect of the President’s Tax Hikes Is Swamping Take-Home Pay, by Jon Kyl (American Enterprise Institute) & Stephen Moore (Heritage Foundation):

The curse of the U.S. economy today is the downward trend in “take-home pay.” This is the most crucial economic indicator for most Americans. ... Most workers’ pay has not kept up with inflation for at least six years. ...

Why aren’t wages rising? There are several reasons, including that many jobs today don’t pay as well as the ones lost during the recession. ObamaCare has made health insurance more expensive for businesses—as the nation’s biggest employer, Wal-Mart , recently reported—and that takes a bite out of take-home pay. Yet one factor is often overlooked: the tax increase on “the rich” at the beginning of 2013.

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October 31, 2014 in Tax | Permalink | Comments (0)

Florida Hosts 10th Annual International Tax Symposium Today

Florida Logo (GIF)The University of Florida Graduate Tax Program hosts its  Tenth Annual International Taxation Symposium today (live webcast here):

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

Gerzog: A Simplified Verifiable Gift Tax

Wendy Gerzog (Baltimore), A Simplified Verifiable Gift Tax:

The purpose of this article is to create a simpler and more accountable federal gift tax. The proposed tax would simplify gift completion rules, adopt a hard-to-complete rule of transfer taxation, reduce the annual exclusion while expanding the consumption exclusion, and, by replicating the portability reporting rules, employ gift tax preference inducements to increase gift tax compliance. The proposed gift tax reaffirms basic principles of transfer taxes, encourages simple, outright gifts, and eliminates some of the major valuation abuses in the current gift tax regime.

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

The IRS Scandal, Day 540

IRS Logo 2Legal Times:  IRS Official Fights Video Depo, Citing Fear of Harassment:

An Internal Revenue Service employee caught up in the controversy over tax-exempt groups wants a federal judge to block a subpoena for her videotaped testimony. The official, Holly Paz, cites privacy and safety fears.

A group that applied for tax-exempt status in 2012, Citizen Awareness Project Inc., sued the agency in Colorado federal district court, claiming officials wrongfully released its application to the media. Federal officials admitted there was an “unauthorized disclosure,” but they disagreed it was willful or that the group was entitled to damages.

In a 2013 report, the Treasury Inspector General for Tax Administration found that IRS officials had improperly flagged organizations perceived to have conservative or Tea Party ties for additional scrutiny when they applied for tax-exempt status. The Colorado lawsuit is focused on the disclosure issue, not the broader scandal. However, the plaintiff claimed that because of a media report about its application, the group may have been subjected to additional scrutiny by the IRS—an allegation the government denied.

Paz served as the agency’s director of exempt organizations rulings and agreements. She isn’t a defendant in the Colorado case, but lawyers for Citizen Awareness Project subpoenaed her to provide videotaped deposition testimony on Oct. 28.

In court papers filed on Oct. 23 in the U.S. District Court for the District of Columbia, Paz’s lawyers at Steptoe & Johnson LLP asked for an order barring the deposition from being videotaped. Alternatively, they've asked for an order that would keep any videotaped deposition confidential.

Steptoe partner Brigida Benitez wrote that after Paz’s name became publicly associated with the larger IRS scandal, she faced “continued harassment, oppression and intimidation, including threats of bodily harm to her and her family, including her young children.”

Paz didn’t object to testifying, Benitez wrote, but she feared that a video of her speaking, if publicly disclosed, could be used “as another means of harassment and intimidation.”

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October 31, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Thursday, October 30, 2014

Cornell's Free Online Tax Code Now Offers Links to IRS Letter Rulings

LIIThe wonderful, free online Internal Revenue Code from Cornell's Legal Information Institute ("LII") now contains links to private letter rulings for each Code section (just click on the "IRS Rulings" tab above the statutory language (e.g., here)). Over 58,000 rulings are linked to across the Code's 850 section. From LII Director Tom Bruce:

A few caveats:  the feature is still in beta test, and we're going to need a month or so to be completely sure that updates are running smoothly. According to the IRS, updates run "every Friday morning" at their end, so we're running ours early on Saturday morning (it appears from this week's events that they don't actually appear on the site until late Friday night). They take about an hour to process once they're available.  As you will see in the explanatory text that comes along with the listing inside the tab,  there are some problems in the data as we receive it, mostly in the date fields.

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October 30, 2014 in Legal Education, Tax | Permalink | Comments (0)

Pomp Receives Excellence in State Taxation Award

PompRichard D. Pomp (Connecticut) is the recipient of the 6th Annual Council on State Taxation/Paul Frankel Excellence in State Taxation Award:

Richard Pomp, a graduate of Harvard Law School, has dedicated his academic career to the teaching and study of tax law. An internationally known expert on state and local taxation, he is the author of State and Local Taxation, a casebook used in more than 100 law schools and translated into several languages. Pomp has also taught tax law at Harvard, New York University, the University of Texas and Boston College. As author of more than 100 articles, his views on tax law are regularly solicited by local, state and national and international media. He has been described by State Tax Notes as “the most knowledgeable person on state corporate income taxation in the country.”

"Professor Pomp has earned the respect and admiration of both the business community and state tax administrators,” said Doug Lindholm, President & Executive Director of COST. “That is quite an accomplishment in an area often defined by continuing and often contentious litigation. We are pleased to present the Award to such a deserving recipient.”

October 30, 2014 in Legal Education, Tax | Permalink | Comments (0)

Does Credit-Card Information Reporting Improve Small-Business Tax Compliance?

Joel Slemrod (Michigan), Brett Collins (IRS), Jeffrey Hoopes (Ohio State), Daniel Reck (Michigan) & Michael Sebastiani (IRS), Does Credit-Card Information Reporting Improve Small-Business Tax Compliance?:

1099-KThird-party information has greatly decreased tax underreporting, but substantial underreporting persists where third-party information is not present. We investigate the preliminary response of businesses filing a Schedule C to the introduction in 2011 of Form 1099-K, which provides the Internal Revenue Service (IRS) and taxpayers with information about small businesses’ sales done by payment card and other electronic means. We find evidence that taxpayers with high prior noncompliance and/or sufficient use of electronic payment methods did adjust their behavior in response to the new information returns. Theory and distributional analysis isolate a subset of taxpayers who respond to information reporting by reporting receipts equal to or slightly exceeding the amount of receipts reported on 1099-K. Information reporting made these taxpayers much more likely to file Schedule C and, conditional on filing a Schedule C, increased their reported receipts by up to 24 percent. However, firms largely offset this change with increased reported expenses (an area not subject to information reporting), so that the overall effect on reported net taxable income was significantly smaller than would otherwise be expected without the increase in expenses.

October 30, 2014 in Scholarship, Tax | Permalink | Comments (0)

IRS Releases 2015 Inflation Adjustments

IRS Logo 2The IRS has released various inflation-adjustments for 2015 (IR 2014-104 & Rev. Proc. 2014-61; IR 2014-99), including:

  • Gift Tax Exemption:  $14,000 (same as 2014)
  • Unified Credit:  $5,430,000 (up $90,000 from 2014)
  • Top 39.6% Income Tax Rate:  $413,200 single/$464,850 joint (up $6,450/$7,250 from 2014)
  • Standard Deduction:  $6,300 single/$12,600 joint (up $100/$200  from 2014)
  • Personal Exemption:  $4,000 (up $50 from 2014)
  • AMT Exemption:  $53,600 single/$83,400 joint (up $800/$1,300 from 2014)
  • Contribution Limit for 401(k)/403(b)/457 Plans:  $18,000 (up $500 from 2014)
  • Catch-Up Contribution Limit (Age 50+) for 401(k)/403(b)/457 Plans:  $6,000 (up $500 from 2014)
  • Income Limit for Full IRA Deduction:  $61,000 single/$98,000 joint (up $1,000/$2,000 from 2014)
  • Income Limit for Full Roth IRA Contribution:  $116,000 single/$183,000 joint (up $2,000 from 2014)
  • Defined Benefit Plan Annual Benefit Limit:  $215,000 (up $5,000 from 2014)

October 30, 2014 in IRS News, Tax | Permalink | Comments (0)

Iowa Is Seeking One-Week Visitors in 2015-16 Academic Year

Iowa LogoThe University of Iowa College of Law Library welcomes applications for its newly-created Bonfield Fellowship for a visiting researcher:

The aim of the Bonfield Fellowship is to bring a faculty member at another institution to the University of Iowa, to spend a brief time in residence conducting research in the Law Library’s world-class collections. The fellowship is named in honor of Professor Arthur Bonfield, who directed the Law Library from 1985 to 2014. The University of Iowa Law Library is among the three largest law school libraries in the United States. ... 

The Bonfield Fellowship will provide:

  • Round-trip economy airfare for the Fellow between the Fellow’s home city and the Cedar Rapids/Iowa City airport;
  • Hotel accommodation for the Fellow in Iowa City for up to one week;
  • A student research assistant during the Fellow’s period of residence; and
  • A lockable faculty carrel in the Law Library equipped with a desktop computer.

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October 30, 2014 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (3)

Mirkay: State Tax Law in a Post-Windsor World

Nicholas A. Mirkay III (Creighton), Equality or Dysfunction? State Tax Law in a Post-Windsor World, 47 Creighton L. Rev. ___ (2014):

Depending on one’s religious and political proclivities, the United States Supreme Court’s decision in United States v. Windsor can either been seen as a progressive step towards equality or a troublesome departure from traditional marriage norms. Notwithstanding, from a federal tax perspective, the Windsor decision clearly raised a myriad of issues that spanned virtually the entire Internal Revenue Code (the “Code”), including but not limited to income taxes (including filing status), estate and gift taxes, payroll taxes, and the tax treatment of retirement account contributions and social security benefits. In the aftermath of Windsor, the IRS was left with a quandary in administering marital-status-dependent Code provisions: should it base its administration of the Code on the taxpayer’s valid marriage in the state in which it was performed (commonly referred to as the “state of celebration” test) or the taxpayer’s state of residence or domicile (commonly referred to as the “state of residence” test)? The IRS resolved most of the federal tax issues raised by Windsor in its issuance of Revenue Ruling 2013-17, which chiefly adopted a state of celebration test for income and other tax purposes. However, the ruling did not extend to quasi-marital statuses, such as domestic partnerships and civil unions, resulting in federal tax non-recognition and complexities for couples in those legally recognized relationships.

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October 30, 2014 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 539

IRS Logo 2Investor's Business Daily editorial:  IRS Is A Unique Troublemaker Among Federal Agencies:

It's also been used as a political weapon. President Obama may owe his 2012 re-election to the IRS, which blocked the formation of groups that opposed him.

The IRS-Tea Party scandal entered Day 536 on Monday by the TaxProf blog's count, and it appears that the scandal will go on much longer without resolution.

Bob Woodward suggests that the media investigate it as it did Watergate. We laud his bravery. He's opened himself up to attacks from two vicious and unaccountable adversaries: the IRS and the mainstream media.

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October 30, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Wednesday, October 29, 2014

Mawani Presents Payout Policies of Canadian REITs Today at Toronto

MawaniAmin Mawani (York University) presents Payout Policies of Canadian REITs at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

This study examines whether Canadian REITs that distribute relatively more of the tax-favoured returns (i.e., return of capital) do so by offering lower pre-tax returns in an efficient securities market. In other words, do Canadian REITs that offer significant amounts of tax-favoured return of capital bear an implicit tax in the form of lower pre-tax return? The study also examines whether higher proportions of returns of capital are statistically associated with more volatile distributions, higher growth opportunities, lower agency costs, stronger trust governance and / or higher management ownership of trust units.

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

IRS: Ebola Is a Qualified Disaster

EbolaIR-2014-102, IRS Announces Tax Guidance Related to Ebola Outbreak in Guinea, Liberia and Sierra Leone:

The Internal Revenue Service today issued two items of guidance in response to the need for charitable and other relief due to the Ebola outbreak in Guinea, Liberia and Sierra Leone. One provides special relief intended to support leave-based donation programs to aid victims who have suffered from the Ebola outbreak in those countries. The other designates the Ebola outbreak in those countries as a qualified disaster for federal tax purposes.

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

Big-Money Untaxed Gifts Quadrupled in 2012

Bloomberg:  Big-Money Untaxed Gifts Quadrupled as Rich Raced Congress, by Richard Rubin & Margaret Collins:

The wealthiest Americans poured $335 billion into tax-free gifts amid worries in 2012 that Congress would clamp down on the practice, according to data released today by the Internal Revenue Service.

The data cover tax returns filed in 2013 and thus mostly include gifts made in 2012. That’s more than four times the amount reported on returns filed in 2012.

The gifts were made when the U.S. Congress was approaching the so-called fiscal cliff and debating whether to extend rules that let married couples pass about $10 million onto their heirs without paying estate or gift taxes.

Congress eventually extended the rules indefinitely, though that didn’t happen until January 2013. In the meantime, wealth advisers were urging their clients to take advantage of what they portrayed as a once-in-a-lifetime opportunity to move assets to children without giving the IRS a cut. ...

The money moved in response to incentives dangled by Congress. In 2010, the estate tax was temporarily repealed and the gift tax exemption was set at $1 million per person.

After Democrats lost the majority in the House of Representatives in the 2010 election, Republicans and President Barack Obama reached a deal that put the combined estate and gift tax exemption at $5 million per person and set it to expire at the end of 2012.

October 29, 2014 in Tax | Permalink | Comments (0)

Rosenzweig: Revisiting the Law of Moses' Rod -- The Case of Inversions

Tax Analysys Logo (2013)Adam Rosenzweig (Washington University), Revisiting the Law of Moses' Rod: The Case of Inversions, 145 Tax Notes 429 (Oct. 27, 2014):

This article revisits Marty Ginsburg’s law of Moses’ rod in the context of inversions, in particular how proposed revisions to the antiinversion rules could be used to justify new, or even more aggressive, expatriation strategies. While not advocating that any taxpayer or other party pursue specific strategies or that they are ‘‘good’’ from a tax policy standpoint, the goal in examining potential inversion strategies even in the face of anti-inversion rules is to help find ways to incorporate antiabuse provisions into the larger structural goals of the income tax.

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

2015 Business Tax Climate: Chilliest in Blue States

Tax Foundation logoThe Tax Foundation yesterday released the 2015 State Business Tax Climate Index, which ranks the fifty states according to five indices: corporate tax, individual income tax, sales tax, unemployment insurance tax, and property tax. Here are the ten states with the best and worst business tax climates:

1

Wyoming

41

Iowa

2

South Dakota

42

Connecticut

3

Nevada

43

Wisconsin

4

Alaska

44

Ohio

5

Florida

45

Rhode Island

6

Montana

46

Vermont

7

New Hampshire

47

Minnesota

8

Indiana

48

California

9

Utah

49

New York

10

Texas

50

New Jersey

Interestingly, all ten of the states with the worst business tax climates voted for Barack Obama in the 2012 presidential election, and seven of the ten states with the best business tax climates voted for Mitt Romney.

Tax Foundation

October 29, 2014 in Tax, Think Tank Reports | Permalink | Comments (6)

Ohio Northern Seeks to Hire Tax Prof and Estate Planning Prof

ONU LawOhio Northern University College of Law is seeking to hire five new faculty this year, including a tenure-track position with a focus on tax and a tenure-track position with a focus on estate planning.  For more information or to apply, go to the Ohio Northern University Human Resources website.

October 29, 2014 in Tax, Tax Prof Jobs | Permalink | Comments (0)

Tuesday, October 28, 2014

Saez & Zucman: Exploding Wealth Inequality in the United States

Emmanuel Saez (UC-Berkeley) & Gabriel Zucman (London School of Economics), Exploding Wealth Inequality in the United States:

This column discusses new evidence on the concentration of wealth in the US. Growing wealth disparity is fuelled by increases in both income and saving rate inequalities between the haves and the have nots. ...

Wealth inequality ... has followed a spectacular U-shaped evolution over the past 100 years. From the Great Depression in the 1930s through the late 1970s there was a substantial democratisation of wealth. The trend then inverted, with the share of total household wealth owned by the top 0.1% increasing to 22% in 2012 from 7% in the late 1970s (see Figure 1). The top 0.1% includes 160,000 families with total net assets of more than $20 million in 2012.

 Figure 1

Figure 1 shows that wealth inequality has exploded in the US over the past four decades. The share of wealth held by the top 0.1% of families is now almost as high as in the late 1920s, when The Great Gatsby defined an era that rested on the inherited fortunes of the robber barons of the Gilded Age.

In recent decades, only a tiny fraction of the population saw its wealth share grow. While the wealth share of the top 0.1% increased a lot in recent decades, that of the next 0.9% (families between the top 1% and the top 0.1%) did not. And the share of total wealth of the “merely rich” – families who fall in the top 10% but are not wealthy enough to be counted among the top 1% – actually decreased slightly over the past four decades. In other words, family fortunes of $20 million or more grew much faster than those of only a few millions.

The flip side of these trends at the top of the wealth ladder is the erosion of wealth among the middle class and the poor. There is a widespread public view across American society that a key structural change in the US economy since the 1920s is the rise of middle-class wealth, in particular because of the development of pensions and the rise in home ownership rates. But our results show that while the share of wealth of the bottom 90% of families did gradually increase from 15% in the 1920s to a peak of 36% in the mid-1980s, it then dramatically declined. By 2012, the bottom 90% collectively owns only 23% of total US wealth, about as much as in 1940 (see Figure 2).

Figure 2

Emmanuel Saez (UC-Berkeley) & Gabriel Zucman (London School of Economics), Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data:

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October 28, 2014 in Tax | Permalink | Comments (0)

Kleinbard Presents We Are Better Than This: How Government Should Spend Our Money Today at Columbia

We Are Better Than This (2014)Edward Kleinbard (USC) presents We Are Better Than This: How Government Should Spend Our Money (Oxford University Press, 2014) at Columbia today as part of its Tax Policy Colloquium Series hosted by Alex RaskolnikovDavid Schizer, and Wojciech Kopczuk:

We Are Better Than This fundamentally reframes budget debates in the United States. Author Edward D. Kleinbard explains how the public's preoccupation with tax policy alone has obscured any understanding of government's ability to complement the private sector through investment and insurance programs that enhance the general welfare and prosperity of our society at large.

He argues that when we choose how government should spend and tax, we open a window into our "fiscal soul," because those choices are the means by which we express the values we cherish and the regard in which we hold our fellow citizens. Though these values are being diminished by short-sighted decisions to starve government, strategic government spending can directly make citizens happier, healthier, and even wealthier.

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October 28, 2014 in Book Club, Colloquia, Scholarship, Tax | Permalink | Comments (0)

District Court Dismisses AICPA's Challenge to IRS's Voluntary Tax Return Preparer Program for Lack of Standing

RTRPThe Washington, D.C. District Court yesterday dismissed the American Institute of CPAs' challenge to the IRS's Voluntary Tax Return Preparer Program on standing grounds.  American Institute of Certified Public Accountants v. IRS, No. 14-1190 (D.C. D.C. Oct. 27, 2014).  For more, see Accounting Today, Fuller Tax Blog and Law 360.

Prior TaxProf Blog coverage:

(Hat Tip: John Treu.)

October 28, 2014 in IRS News, Tax | Permalink | Comments (0)

Why Does DOJ Allow Banks to Deduct Settlements? Inflating the Gross Amount Gets Better PR, Jacks Up the 3% Rake for its 'Slush Fund'

Newsweek:  Giant Penalties Are Giant Tax Write-Offs for Wall Street, by Lynnley Browning:

NewsweekAt the Justice Department, senior officials like to congratulate themselves on the headline-making, big bucks settlements they have imposed upon banks and lenders for their part in causing the 2008 mortgage meltdown that sparked the biggest American financial crisis since the Great Depression.

But wait a moment. Those settlement figures are not quite what they seem. Buried deep in the announcements of the astronomical sums that Wall Street banks are being forced to pay is a dirty secret: A big chunk of the hundreds of billions of dollars banks have paid in settlements to various federal agencies and regulators since 2010 is deductible from the taxes banks and lenders pay. ...

Deep in the legalese weeds of the settlement documents lies buried treasure. Big banks such as Bank of America and JPMorgan Chase will receive deductions against the corporate tax that will amount to between half and nearly three-quarters of their multibillion-dollar settlements, at least. Meanwhile, midsized banks and nonbank lenders generally get to deduct the whole shebang. ...

Federal tax rules allow companies to deduct from their tax returns as an ordinary cost of doing business any settlement payments that are construed, explicitly or not, as restitution or compensation. Payments flagged as penalties or fines, typically outlined in criminal cases, are generally not deductible, as opposed to the civil settlements with banks. ...

“I would have thought that the DOJ would have had every reason to stipulate that these settlements are punitive and do not qualify for deductibility,” says Peter Enrich, a professor at Northeastern University School of Law. “It’s out of keeping with what the legal framework is meant to reflect.” ...

There is plainly a disconnect between what regulators say they are levying on miscreant banks and bankers and what eventually is paid. And some say that disconnect makes for a poor system of justice. “It is very troubling when prosecutors announce blockbuster fines that are tax-deductible and potentially misleading to the public in terms of what the bottom line punishment actually is to the company,” Brandon Garrett, a professor at the University of Virginia School of Law who focuses on corporate settlements, tells Newsweek. “DOJ has never given a good explanation for why it has allowed tax-deductible settlements in those cases.”

Tax lawyers have an idea:

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October 28, 2014 in Tax | Permalink | Comments (0)

California Bar Hosts Discussion Today With Tax Court Judge Joseph Nega

State_barThe Young Tax Lawyers of the Taxation Section of the State Bar of California hosts An Informal Discussion with Tax Court Judge Joseph Nega today at San Diego:

United States Tax Court Judge Joseph Nega will discuss his background on the Joint Committee on Taxation of the United States Congress and his experiences on the United States Tax Court. He will also provide the attendees with a unique opportunity to ask questions about his experiences and the Tax Court.

October 28, 2014 in Tax | Permalink | Comments (0)

Tax Revolving Door Enriches Former IRS Officials Who Cash in by Navigating Inversions Through Rules They Wrote

Bloomberg:  Tax Inversions Succeed When Government Lawyers Go Private, by Zachary R. Mider:

Revolving DoorHal Hicks cleared his throat and addressed a roomful of peers in a midtown Manhattan auditorium. The topic: the tax-avoidance technique called inversion, in which a U.S. company claims a foreign legal address.

Waving his hands back and forth as if tracing a pendulum’s swing, Hicks explained how four government attacks over three decades had failed to stop the practice. “There’s been lots of law thrown at these transactions,” he said at the January session.

Hicks ought to know. He was the one doing the throwing, during four years as a top government tax lawyer. Then, he returned to private practice and helped set in motion a spree of inversions that a congressional panel estimates will cost at least $19.5 billion in lost tax revenue over the next decade.

Hicks epitomizes the world of high-level Washington lawyers who have played a behind-the-scenes role in helping these tax-driven address changes proliferate. Top federal tax officials, many of them career corporate lawyers, have sometimes closed loopholes only after companies slipped through them. And former officials like Hicks use skills and contacts honed in office to help companies legally outmaneuver the government.  

Until this year, when address-shifting by more than a dozen companies worth $100 billion caught policy makers’ attention and President Barack Obama clamped down again, inversion rules had for a decade attracted little notice outside the small community of international tax lawyers in Washington.

At the Treasury Department and Internal Revenue Service, officials, many on hiatus from private practice, crafted the rules in dialogue with top corporate law and accounting firms.

While some European nations have historically relied on career civil servants, the top ranks of the U.S. tax administration have swapped staff with industry for decades.

It’s a low-cost way to provide government with the best legal talent, said Gregory Jenner, a former acting assistant Treasury secretary, who calls it an “incredibly beneficial tradition.”

“Putting rookies into these jobs -- they would be overwhelmed,” Jenner said. “It’s too high-level, too sophisticated, too complicated.”

The risk, critics say, is that some government lawyers may continue to sympathize with corporate interests, or be swayed by former colleagues. ...

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October 28, 2014 in IRS News, Tax | Permalink | Comments (1)

The IRS Scandal, Day 537

IRS Logo 2Biz Pac Review:  IRS Scandal Is This Generation’s Watergate, Woodward Says; So Why Knock Fox News?:

As the 40th anniversary year of President Nixon’s resignation draws to an end, one of the newspapermen who helped bring it about said the Obama administration’s IRS scandal — which has faded from the headlines in recent weeks — should be this generation’s answer to Watergate.

In fact, Washington Post associate editor Bob Woodward told Fox News’ Howard Kurtz in an interview, it would be just the kind of job a much younger Woodward might tackle himself, along with Watergate investigative partner Carl Bernstein.

“The reality now in my view is that in the Obama administration, there are lots of unanswered questions about the IRS, particularly,” Woodward said in an interview broadcast Sunday.

“If I were young, I would take Carl Bernstein and move to Cincinnati where that IRS office is and set up headquarters and go talk to everyone.”

House Committee on Oversight and Government Reform:  Time for the Truth and an End to IRS Targeting Once and For All:

House Oversight and Government Reform Committee Chairman Darrell Issa (R-CA) said: “We have stopped an IRS targeting effort that treated conservatives differently and we have put the brakes on a new Administration effort to target political participation through regulation. But we have not fixed the IRS or finished our investigation of targeting that started under Lois Lerner. This IRS, this Treasury Department, and this White House have not given Congress the cooperation they promised – they have attempted to stonewall us. This new presentation should remind Americans that this is not over: the House of Representatives continues our investigation, our demand for a credible criminal probe, and to protect the rights of all Americans to participate freely and openly in the political process.”

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October 28, 2014 in IRS Scandal, Tax | Permalink | Comments (4)

Monday, October 27, 2014

Turmel Presents The Reasons of Taxation: Efficiency, Freedom, Equality Today at McGill

TurmelPatrick Turmel (Laval University, Department of Philosophy) presents The Reasons of Taxation: Efficiency, Freedom, Equality (with David Robichaud (University of Ottawa, Department of Philosophy)) at McGill today as part of its Spiegel Sohmer Tax Policy Colloquium Series hosted by Allison Christians and Daniel Weinstock:

In Capital in the 21st Century, Thomas Piketty argues for a series of controversial policy recommendations, such as a substantial increase in tax rates on higher incomes and a global tax on capital whose explicit aim is to halt the current spiral of inequality. Piketty’s main argument for these recommendations is not moral, but economic. Indeed, higher tax rates on top revenues and a progressive global tax on capital have not much to do with social justice or equality per se. According to Piketty, they are mostly needed in order to correct the market and maximize efficiency. But Piketty also put forth democratic reasons in favour of fighting inequalities, since they not only threaten the market, but also the very foundations of political freedom. These two types of reasons – reasons of efficiency and reasons of freedom - certainly go a long way to justify fighting the current dynamics of inequality and thus resisting the return of the Belle Époque’s patrimonial capitalism. But they remain somehow weak, when looked at from the perspective of most theories of social justice. They certainly don’t have much normative force when it comes to justifying important redistribution of wealth, as social justice seems to call for. At the very least, they fall short of creating a complete argument. The aim of this paper is to contribute to filling this gap by showing that alongside reasons of efficiency and freedom, a third type of reasons should play a central role in our understanding and justification of taxation, namely: reasons of equality.

October 27, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Crane Presents What Should Be the Criteria for Tax-base Design? Today at Loyola-L.A.

CraneCharlotte Crane (Northwestern) presents What Should Be the Criteria for Tax-base Design? at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

The legal academic discussions about the choice of tax base have paid little attention to the interactive effects of tax base choices with political and social institutions. Some work has been done by sociologists, political scientists and economic historians that connects the choice of tax base to the cultures and institutions that chose them that demonstrates the importance of taxes to the possibility of stable political institutions. Very little thought is given to the effect of the choice of tax base on the institutions that will evolve in response to this choice. These byproducts of taxation can be as obvious as a new cadre of tax collectors loyal to the government (but likely to insist that the tax remain in place) or as subtle as a population that learns to keep its accounts under a uniform methods or that develops uniform modes of doing business so as to avoid complications in tax compliance. This paper will explore several episodes in the history of taxes in the United States in which those making the choice were keenly aware of the political institutions that would result not just from the provision of a stable revenue source, but from the tax base chosen to provide that revenue.

Edward McCaffery (USC) is the commentator.

October 27, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Vanguard Seeks to Dismiss Whistleblower Suit by its Former Tax Lawyer

VanguardFollowing up on my previous posts (links below) on the whistleblower suit brought by a former Vanguard tax lawyer alleging that the mutual fund giant evaded over $1 billion in taxes:  the Philadelphia Inquirer reports that Vanguard has filed a motion to dismiss the law suit:

Vanguard Group, the Malvern mutual fund giant, has responded to a New York whistleblower lawsuit by former Vanguard tax lawyer David Danon with accusations of betrayal, theft and ethics violations the company says should bar him or his lawyers from bringing the complaint.

The company also offers a defense of Vanguard's "unique" legal structure, noting company officials have testified about its practices before Congress, and widely publicized its arrangements since its founding by John C. Bogle 40 years ago.

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October 27, 2014 in Tax | Permalink | Comments (0)

Call for Papers: IFA International Tax Symposium

IFAThe International Fiscal Association has issued a Call for Papers for the Second International Tax Research Symposium in Basel, Switzerland:

We are pleased to announce the call for papers for the Second International Tax Research Symposium held in conjunction with the 69th Congress of the International Fiscal Association in Basel, Switzerland (August 30 to September 3, 2015). After the success of the first International Tax Research Symposium held during the IFA Congress in Boston in 2012 we are delighted to invite you for the Second International Tax Research Symposium in Basel. The International Tax Research Symposium aims to provide a platform for international scholars in international taxation. The Second IFA International Tax Symposium will be held on Sunday, August 30, 2015 (afternoon) in Basel and is supported by the International Fiscal Association. 

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October 27, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Brooks: Income-Based Repayment and the Public Financing of Higher Education

John R. Brooks II (Georgetown), Income-Based Repayment and the Public Financing of Higher Education:

IBR 2The growth in higher education costs has outrun inflation for decades, in part for reasons outside of an institution’s control. This has serious distributional consequences, given that higher education is a quasi-public good that should be consumed widely. Full public financing is a possible answer to the distributional and spillover problems, but the budgetary impact of doing so makes that close to politically impossible in the United States.

Except that the federal government has, to a first approximation, already created a system of public financing of higher education, paid for with progressive taxation: The Income-Based Repayment student loan program. As of 2010, the federal government provides essentially all student loans, and as of 2012, students may pay no more than 10% of discretionary income to service those loans. After a maximum of 20 years, the remaining debt is forgiven — for any borrower, regardless of degree, career, or debt load. Thus higher education tuition is paid by the government and funded with something that looks very much like a tax on income.

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October 27, 2014 in Legal Education, Scholarship, Tax | Permalink | Comments (1)

Avi-Yonah Reviews Kleinbard's We Are Better Than This

We Are Better Than ThisReuven S. Avi-Yonah (Michigan), Why Not Tax the Rich? (reviewing Edward D. Kleinbard (USC), We Are Better Than This: How Government Should Spend Our Money (Oxford University Press, 2014)):

Ed Kleinbard’s new book, We Are Better Than This: How Government SHould Spend Our Money (Oxford University Press, 2014), is a well-balanced and important contribution to the tax literature. Kleinbard convincingly sets out the case for addressing inequality not through taxation but rather through spending. While the emphasis on treating both sides of the federal budget ledger with equal respect is not new (Michael Graetz, for one, said it in the 1980s), Kleinbard updates the analysis and addresses it to a wider audience. Kleinbard’s book is also well positioned as an antidote to Thomas Piketty’s obsession with taxing the rich [Capital in the Twenty-First Century].

The problem with the book, however, is that its proposed solutions [restore the pre-2001 tax rates on the middle class and lift the cap on social security] are much too narrow. These have the virtue of being (perhaps) sellable on Capitol Hill, despite the bipartisan promise not to increase taxes on the middle class. But as a solution to our inequality problem they are woefully inadequate.

Update:  Dan Shaviro (NYU), Avi-Yonah Reviews Kleinbard

October 27, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (0)

NY Times: Law Lets IRS Seize Accounts on Suspicion, No Crime Required

New York Times, Law Lets I.R.S. Seize Accounts on Suspicion, No Crime Required:

For almost 40 years, Carole Hinders has dished out Mexican specialties at her modest cash-only restaurant. For just as long, she deposited the earnings at a small bank branch a block away — until last year, when two tax agents knocked on her door and informed her that they had seized her checking account, almost $33,000.

The Internal Revenue Service agents did not accuse Ms. Hinders of money laundering or cheating on her taxes — in fact, she has not been charged with any crime. Instead, the money was seized solely because she had deposited less than $10,000 at a time, which they viewed as an attempt to avoid triggering a required government report.

“How can this happen?” Ms. Hinders said in a recent interview. “Who takes your money before they prove that you’ve done anything wrong with it?”

The federal government does.

Using a law designed to catch drug traffickers, racketeers and terrorists by tracking their cash, the government has gone after run-of-the-mill business owners and wage earners without so much as an allegation that they have committed serious crimes. The government can take the money without ever filing a criminal complaint, and the owners are left to prove they are innocent. Many give up.

“They’re going after people who are really not criminals,” said David Smith, a former federal prosecutor who is now a forfeiture expert and lawyer in Virginia. “They’re middle-class citizens who have never had any trouble with the law.”

On Thursday, in response to questions from The New York Times, the I.R.S. announced that it would curtail the practice, focusing instead on cases where the money is believed to have been acquired illegally or seizure is deemed justified by “exceptional circumstances.” ...

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October 27, 2014 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 536

IRS Logo 2The Atlantic:  The House GOP's New War on Incompetence: The Republicans Want to Overhaul Scandal-Plagued Federal Agencies in 2015, the Majority Leader Says:

House Republicans haven't officially locked down their majority for next year, but they're already sketching out a legislative agenda for when they do.

In a memo to lawmakers on Wednesday, Majority Leader Kevin McCarthy said the party would target the federal bureaucracy with an eye toward restoring "competence" across a range of scandal-plagued departments and agencies. He cited the well-documented problems at the Veterans Administration, the Secret Service, the IRS, last year's launch of the federal health insurance exchanges, and the more recent response to Ebola, along with several other missteps that haven't garnered as much attention.

Real Time with Bill Maher Blog:  Tax the Charities:

Obama’s IRS "scandal” comes down to whether Tea Party groups should pay taxes or not, and the angels-dancing-on-the-head-of-a-pin distinction between an organization that raises money for politicians and one that “promotes social welfare.” (… by raising money for politicians.) One has to pay taxes and one doesn’t. ...

The simple solution is to stop asking the IRS to make value judgments about what’s a legitimate charity called “Patriots for the Violent Overthrow of the Negro Usurper” and what’s just a family sex party, like the kind the Palins would crash. Make them all pay taxes.

Washington Post:  Obama, The Bewildered Bystander, by Charles Krauthammer:

The president is upset. Very upset. Frustrated and angry. Seething about the government's handling of Ebola, said the front-page headline in The New York Times last Saturday.

There's only one problem with this pose, so obligingly transcribed for him by the Times. It's his government. He's president. Has been for six years. Yet Barack Obama reflexively insists on playing the shocked outsider when something goes wrong within his own administration.

IRS? “It's inexcusable, and Americans are right to be angry about it, and I am angry about it,” he thundered in May 2013 when the story broke of the agency targeting conservative groups. “I will not tolerate this kind of behavior in any agency, but especially in the IRS.”

Except that within nine months, Obama had grown far more tolerant, retroactively declaring this to be a phony scandal without “a smidgen of corruption.”

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October 27, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, October 26, 2014

2014 on Pace for Record Number of Americans to Renounce Their U.S. Citizenship; 73% of Americans Living Abroad May Do So in the Future

International Tax Blog, 2014 Third Quarter Published Expatriates – Third Highest Ever:

Today the Treasury Department published the names of individuals who renounced their U.S. citizenship or terminated their long-term U.S. residency (“expatriated”) during the third quarter of 2014.

The number of published expatriates for the quarter was 776, which is the third highest quarterly number of published expatriates ever. The number of published expatriates for the first three quarters of 2014 has been 2,353 (1,001 + 576 + 776). Last year there was a record-breaking number of published expatriates (2,999). This year (2014) will break last year's record if there are at least 647 published expatriates in the fourth quarter.

Chart

Value Walk, 73% Of Americans Abroad Consider Giving up Passport Due To FATCA:

73 per cent of Americans who live outside the U.S. are tempted to give up their U.S. passports in response to the introduction of FATCA (Foreign Account Tax Compliance Act), reveals a new survey by one of the world’s largest independent financial advisory organizations.The findings come as Federal Register data shows that the number of Americans renouncing U.S. citizenship increased by 39 per cent in the three months to September after the new global tax law came into force.

In the global poll, deVere Group recently asked more than 400 of its American expatriate clients: ‘Would you consider voluntarily relinquishing your U.S. citizenship due to the impact of FATCA?’

Cumulatively, 73 per cent of respondents answered that they had ‘actively considered it’, ‘are thinking about it,’ or ‘have explored the options of it.’

October 26, 2014 in Tax | Permalink | Comments (12)

WSJ: The New Rules of Estate Planning: Focus Shifts From Estate Tax to Capital Gains, State Death Taxes

Wall Street Journal Tax Report:  The New Rules of Estate Planning: For Many Families, the Focus Is Now on Minimizing Capital-Gains Taxes and State Levies, by Laura Saunders:

WSJ ChartThe federal estate tax is no longer the biggest concern for most affluent people who want to avoid taxes on wealth they leave to heirs. ...

[L]ast year, Congress set the top estate-and-gift-tax rate at 40% and raised the exemption to $5 million per person, adjusted for inflation. It now stands at $5.34 million and is expected to rise to $5.43 million next year. Lawmakers also changed the rules so that couples don’t need trusts to get their full break from Uncle Sam.

These changes have freed hundreds of thousands of affluent Americans from worrying about federal estate tax, and they may never have to.

Many experts think that Congress, scarred by years of turmoil over the estate levy, is averse to making more big changes. Michael Graetz, a former Treasury Department official who teaches at Columbia University’s law school, says lawmakers would sooner repeal the tax than lower the exemption.

The new rules present tax-saving opportunities that many people planning estates remain unaware of—and that could contradict past advice. “The conventional wisdom has been turned on its head because of changes in both the income tax and the estate tax,” says Suzanne Shier, chief tax strategist at Northern Trust in Chicago.

In the past, for example, avoiding the estate tax often meant forgoing efforts to minimize long-term capital-gains taxes, which had a much-lower top rate of 15%, Ms. Shier says.

But now many people who won’t owe estate tax can reap substantial tax savings on capital gains by choosing carefully which assets to hold until death. This strategy is especially useful now that the top federal rate on long-term gains is nearly 24%, two-thirds higher than in 2012.

The high exemption also is prompting changes in gift strategies and trusts, says John O. McManus, an estate lawyer in New York. In other cases, say experts, state estate and inheritance taxes are looming larger because the federal estate tax now affects so few people.

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October 26, 2014 in Tax | Permalink | Comments (0)

Top 5 Tax Paper Downloads

SSRN LogoThere is a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads on SSRN, with a new #1 paper and a new paper debuting on the list at #2:

  1. [266 Downloads]  Trying Times 2014: Important Lessons to Be Learned from Recent Federal Tax Cases, by Nancy A. McLaughlin (Utah) & Steven J. Small (Law Office of Stephen J. Small, Newton, MA)
  2. [235 Downloads]  Obama Care Fails the Origination Clause: Why Sissel and Hotze Should Be Reversed, by Steven J. WIllis (Florida) & Hans G. Tanzler (Florida)
  3. [158 Downloads]  'Show Me the Money!' -- Analyzing the Potential State Tax Implications of Paying Student-Athletes, by Kathryn Kisska-Schulze (North Carolina A&T) & Adam Epstein (Central Michigan)
  4. [153 Downloads]  Home-Country Effects of Corporate Inversions, by Omri Y. Marian (Florida)
  5. [152 Downloads]  Rights Without Remedies, by Matthew L. M. Fletcher (Michigan State)

October 26, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 535

IRS Logo 2The Hill:  GOP: Majority Would ‘Get to Truth’ on IRS:

Republicans vow to put the clamps on the IRS if they sweep to power in November.

GOP lawmakers and aides believe that House-passed legislation to limit the IRS’s reach would have a better shot at making it to President Obama’s desk if Republicans win control of the Senate on Nov. 4.

Full Republican control of Congress would give the GOP added leverage over the IRS, doubling the panel’s oversight of an agency that drew conservative ire by improperly scrutinizing Tea Party groups seeking tax-exempt status.

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October 26, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Saturday, October 25, 2014

Wilkins Presents How IRS Lawyers Contribute to Sound Tax Enforcement at Florida

WilkinsWilliam Wilkins, Chief Counsel for the Internal Revenue Service and Assistant General Counsel in the Department of the Treasury, presented How IRS Lawyers Contribute to Sound Tax Enforcement at Florida yesterday as part of its Graduate Tax Program Enrichment Speaker Series:

Wilkins characterized the IRS as the largest tax firm in the United States and addressed the challenges of administering federal tax laws in an era of increasing budgetary pressures and expanding demands for providing interpretive guidance and assistance to taxpayers.

Mr. Wilkins is a former partner of the Tax Practice Group of Wilmer Cutler Pickering Hale and Dorr, LLP. Prior to joining Wilmer, Mr. Wilkins was Staff Director and Chief Counsel of the United States Senate Committee on Finance and an associate with King & Spalding in Atlanta, Ga. Mr. Wilkins is also Past Chair of the Section of Taxation of the American Bar Association. He previously served on the governing boards of the American College of Tax Counsel and the American Tax Policy Institute. Mr. Wilkins is a graduate of Yale University and Harvard Law School.

October 25, 2014 in Tax | Permalink | Comments (1)

The IRS Scandal, Day 534

IRS Logo 2Letter From Dave Camp (Chair, House Ways & Means Committee) to Jacob Lew (Secretary, U.S. Treasury Department) (Oct. 22, 2014):

Some of the key questions remaining in the investigation into the IRS' targeting of conservatives groups are: who at the White House knew what was going on; when did they know it; and, what action did they take upon learning about it? Your office is now refusing to make available until after the election the very person that could unlock that mystery. This is completely unacceptable , especially for an Administration that once pledged to be the most open and transparent ever.

On September 16, 20 14, five weeks ago, I first requested that you make available for an interview Hannah Stott-Bumstead, a Treasury Department counsel, who, based on transcribed interviews ofIRS perso1mel, appears to be the first person at Treasmy to be told by the IRS that it had lost Lois Lerner's emails. Notwithstanding President Obama 's pledge to "work with Congress as it performs its oversight role ...[a]nd...make sure that we are working hand in hand with Congress to get this thing fixed," to date your Department has refused to allow the Committee to directly question Ms. Stott-Bumstead. 1 In addition to reiterating my request to interview Ms. Stott-Bumstead without delay, I am requesting additional information about what Ms. Stott-Bumstead and others at Treasury did with this information, including how the White House was informed, and why the decision was made to not infonn Congress until months later.

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October 25, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Friday, October 24, 2014

Hoffer, Lederman & Walker Debate Tax Court Exceptionalism Today at Kentucky

HLWStephanie Hoffer (Ohio State), Leandra Lederman (Indiana), and Christopher Walker (Ohio State) debate Tax Court exceptionalism at Kentucky today as part of its Faculty Workshop Series (blogged here):

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

Talley Presents Corporate Inversions and the Unbundling of Regulatory Competition Today at Virginia

Talley 2Eric Talley (UC-Berkeley) presents Corporate Inversions and the Unbundling of Regulatory Competition at Virginia today as part of its Faculty Workshop Series:

A sizable number of US public companies have recently executed “tax inversions” – acquisitions that move a corporation’s residency abroad while maintaining its listing in domestic securities markets. When appropriately structured, inversions replace American with foreign tax treatment of extraterritorial earnings, often at far lower effective rates. Regulators and politicians have reacted with alarm to the “inversionitis” pandemic, with many championing radical tax reforms. This paper questions the prudence of such extreme reactions, both on practical and on conceptual grounds. Practically, I argue that inversions are simply not a viable strategy for many firms, and thus the ongoing wave may abate naturally (or with only modest tax reforms). Conceptually, I assess the inversion trend through the lens of regulatory competition theory, in which jurisdictions compete not only in tax policy, but also along other dimensions, such as the quality of their corporate law and governance rules. I argue that just as US companies have a strong aversion to high tax rates, they have a strong affinity for strong corporate governance rules, a traditional strength of American corporate law. This affinity has historically given the US enough market power to keep taxes high without chasing off incorporations, because US law specifically bundles tax residency and state corporate law into a conjoined regulatory package. To the extent this market power remains durable, radical tax overhauls would be unhelpful (and even counterproductive). A more blameworthy culprit for inversionitis, I argue, can be found in an unlikely source: Securities Law. Over the last fifteen years, financial regulators have progressively suffused US securities regulations with mandates relating to internal corporate governance matters – traditionally the domain of state law. Those federal mandates, in turn, have displaced and/or preempted state law as a primary source of governance regulation for US-traded issuers. And, because US securities law applies to all listed issuers (regardless of tax residence), this displacement has gradually “unbundled” domestic tax law from corporate governance, eroding the US’s market power in regulatory competition. The most effective elixir for this erosion, then, may also lie in securities regulation. I propose two alternative reform paths: either (a) domestic exchanges should charge listed foreign issuers for their consumption of federal corporate governance policies; or (b) federal law should cede corporate governance back to the states by rolling back many of the governance mandates promulgated over the last fifteen years.

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

Weekly Tax Roundup

October 24, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

October 24, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Hickman Reviews Blank's Collateral Compliance

JotwellKristin Hickman (Minnesota), Evaluating the Efficacy of Nonmonetary Penalties (Jotwell) (reviewing Joshua D Blank (NYU), Collateral Compliance, 162 U. Pa. L. Rev. 719 (2014)):

Monetary penalties for noncompliance are a routine feature of the tax laws. The tax literature includes extensive debate over different ways of structuring those penalties to improve tax compliance and eliminate the tax gap. In Collateral Compliance, Josh Blank shifts his gaze beyond that debate to examine what he labels “collateral tax sanctions”—nonmonetary penalties that federal and state governments impose, in addition to the monetary ones, for failing to comply with the tax laws. ...

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

Cauble: Redefining Qualifying Income for Publicly Traded Partnerships

Tax Analysys Logo (2013)Emily Cauble (DePaul), Redefining Qualifying Income for Publicly Traded Partnerships, 145 Tax Notes 107 (Oct. 6, 2014):

In general, business entities are subject to the section 11 corporate tax if they are publicly traded. Corporate tax is justified under the rationale that entities will pay tax in exchange for access to an established market because liquidity has value. It allows owners of large enterprises to easily exit by selling their shares. Publicly traded partnerships can avoid being subject to corporate tax under current law if they earn primarily qualifying income. The best rationale for this exemption from corporate tax is that the partners could have access to the income of the publicly traded partnership by buying the assets of the partnership directly. Congress should redefine qualifying income to make the definition better fit that rationale by classifying income as qualifying only if it is earned by holding publicly traded stock or other publicly traded assets.

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

American University Symposium Today on The Taxation of the Digital Economy

AmericanAmerican University, Kogod School of Business, hosts a symposium today on The Taxation of the Digital Economy. Robert Stack, Assistant Deputy Secretary for International Tax at the U.S. Treasury Department, will deliver the keynote address.

Panel 1: Cross-Border Taxation Considerations for the Digital Economy
The digital economy often involves the massive use of personal data and multi-sided business models. This can often lead to difficulties in quantifying costs and benefits generated by free products and user created intangibles including the determination of where value creation occurs. Defining a permanent establishment in the context of the digital economy has been difficult since companies often do not require a physical presence in a jurisdiction in order to conduct business. This panel will discuss the tax issues faced by the broader digital economy, proposals currently under consideration by the OECD, and planning considerations in light of the OECD report.  

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October 24, 2014 in Conferences, Tax | Permalink | Comments (1)

The IRS Scandal, Day 533

IRS Logo 2USA Today:  Tea Party Loses Court Battle Over Targeting to IRS:

A federal court dismissed two lawsuits against the Internal Revenue Service Thursday, ruling that the tax agency is no longer targeting conservative tax-exempt groups for greater scrutiny.

True the Vote v. IRS Ruling

Linchpins of Liberty v. IRS

"Unless an actual, ongoing controversy exists in this case, this court is without power to decide it," U.S. District Court Judge Reggie Walton ruled, dismissing one lawsuit brought by True the Vote, a conservative vote-monitoring organization.

True the Vote, an offshoot of the Tea Party-affiliated King Street Patriots, had its application as a social welfare group help up because the IRS suspected it was engaging in direct political election campaigning, which is forbidden under section 501(c)(4) of the tax code. IRS agents found that its web site contained "Democratic attacks and Republican/conservative response," according to confidential IRS documents obtained by USA TODAY. 

Walton said the IRS has assured the public that they're no longer screening applications for tax exemptions based on its political leanings, a practice that led to the dismissal of several top IRS officials when it was disclosed by Treasury inspectors last year.

"Thus, the allegedly unconstitutional governmental conduct, which had delayed the processing of the plaintiffs' tax-exempt applications and spawned this litigation, is no longer impacting the plaintiffs," Walton said in a second opinion dismissing a lawsuit brought by Linchpins of Liberty and 40 other groups in 22 states. ...

In a footnote, the judge did leave open the possibility that two groups -- Patriots Educating Concerned Americans Now of Redding, Calif. and the suburban Cincinnati Liberty Township Tea Party -- could still sue because the IRS failed to rule on their tax exemption application within 270 days. The judge gave the IRS 14 days to argue why that element of the lawsuit cannot go forward.

Because he dismissed the lawsuits on procedural grounds, Walton did not rule on the merits of the case. He wrote in a footnote: "The court's opinion should not be interpreted as an assessment of the propriety of the alleged conduct by the defendants."

True the Vote:  Press Release:

"The Court today correctly acknowledged that the IRS targeted True the Vote because of its perceived political beliefs," True the Vote President Catherine Engelbrecht said. “Such conduct is reprehensible and should never be acceptable in a free society. Despite this critical finding, we are stunned and disappointed in the court’s ruling which nevertheless dismisses our case. We will be evaluating our legal options and will announce our intent in that regard soon.”

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October 24, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)