TaxProf Blog

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

Wednesday, November 22, 2017

Dimick: Better Than Basic Income? Liberty, Equality, And The Regulation Of Working Time

Matthew Dimick (SUNY-Buffalo), Better than Basic Income? Liberty, Equality, and the Regulation of Working Time, 50 Ind. L. Rev. 473 (2017):

Basic income has attracted the attention of academics, policy makers, and politicians around the globe. Basic income — a no-strings-attached cash transfer made to all citizens of a country, rich or poor — has been lauded as a plan to eliminate poverty, reduce income inequality, redress imbalances in the labor market, remedy the impending problem of mass technology-induced unemployment — the “robot apocalypse” — and make possible meaningful lives for those otherwise dependent on menial work in the labor market. It has also been proposed as an efficient, nonpaternalistic, and stigma-free alternative to existing welfare state policies. This Article compares basic income to an alternative policy proposal: the regulation of maximum working hours in the labor market.

This Article contends that on nearly all of these virtues, working-time regulation does better than, or at least as well as, basic income. In particular, working-time regulation makes “free time” available to a broader array of individuals, also addresses technological unemployment, and is much more conducive to pro-environmental policies. Most importantly, it is more deeply egalitarian than basic income, not only addressing income inequality but social inequality, as well. Although basic income and working-time regulation are not necessarily incompatible — indeed some have advocated the adoption of both policies — there may be other factors that effectively render them policy substitutes. Specifically, not only is working-time regulation more complementary to existing welfare-state policy than is basic income, but — already in existence in the U.S. and most other developed countries — it also does not face the challenges of political and economic feasibility that confront basic income. Thus the choice and comparison is a compelling one, of which legal, policy, and tax scholars should take note.

November 22, 2017 in Scholarship, Tax | Permalink | Comments (0)

Tuesday, November 21, 2017

Williamson Presents Why Americans Are Proud To Pay Taxes Today at Columbia

Read My LipsVanessa S. Williamson (Brookings Institution) presents Read My Lips: Why Americans Are Proud to Pay Taxes (Princeton University Press 2017) at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium Series hosted by Alex Raskolnikov and Wojciech Kopczuk:

Conventional wisdom holds that Americans hate taxes. But the conventional wisdom is wrong. Bringing together national survey data with in-depth interviews, Read My Lips presents a surprising picture of tax attitudes in the United States. Vanessa Williamson demonstrates that Americans view taxpaying as a civic responsibility and a moral obligation. But they worry that others are shirking their duties, in part because the experience of taxpaying misleads Americans about who pays taxes and how much. Perceived "loopholes" convince many income tax filers that a flat tax might actually raise taxes on the rich, and the relative invisibility of the sales and payroll taxes encourages many to underestimate the sizable tax contributions made by poor and working people.

Americans see being a taxpayer as a role worthy of pride and respect, a sign that one is a contributing member of the community and the nation. For this reason, the belief that many Americans are not paying their share is deeply corrosive to the social fabric. The widespread misperception that immigrants, the poor, and working-class families pay little or no taxes substantially reduces public support for progressive spending programs and undercuts the political standing of low-income people. At the same time, the belief that the wealthy pay less than their share diminishes confidence that the political process represents most people.

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November 21, 2017 in Book Club, Colloquia, Scholarship, Tax | Permalink | Comments (0)

NYU Tax Law Review Publishes Symposium Issue: Tax Policy And Upward Mobility

NYUUCLAThe Tax Law Review has published a new issue (Vol. 70, No. 3 (Spring 2017)) on the NYU/UCLA Tax Policy Symposium, Tax Policy and Upward Mobility, 70 Tax L. Rev. 409-543 (2017):

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November 21, 2017 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1657: Lois Lerner Fears Retaliation If Her Tea Party Targeting Deposition Is Made Public 

IRS Logo 2Wall Street Journal, Lois Lerner Doesn’t Trust You: “You Can’t Handle the Truth,” the Former IRS Official Tells the American People:

In his courtroom apologia in the film “A Few Good Men,” Jack Nicholson’s Col. Nathan Jessup made the words famous. Now, in her bid to keep her testimony in a recently settled tea-party lawsuit against the IRS secret, Lois Lerner has picked up the Jessup argument: “You can’t handle the truth!”

They used different words but the meaning is the same. Here’s how lawyers for Ms. Lerner and her former IRS deputy, Holly Paz, put it in a filing aimed at persuading a judge to keep their testimony from becoming public: “Public dissemination of their deposition testimony would expose them and their families to harassment and a credible risk of violence and physical harm.” They’re not just thinking of themselves, they add. Young children, family members, might be hurt too.

That’s quite an argument. So enraged would the American public become upon learning what Ms. Lerner and Ms. Paz said that they and those around them would be in physical peril. Which probably makes most people wonder what the heck must the two have said that would get everyone so agitated? ...

[W]hat a crippling precedent it would be if government officials from powerful agencies such as the IRS were permitted to keep their abuses secret on grounds they fear that the people whom they are supposed to serve might be upset if they found out.

There can be good reasons to keep a deposition sealed, from ensuring the privacy of the innocent to protecting the life of a mafia informant. But Ms. Lerner is no innocent. Indeed, given all the falsehoods that have been spread in an effort to whitewash what the IRS had done, the case for transparency becomes even more compelling here. ...

[I]n this case the plaintiffs, the government and a newspaper all say they are for disclosure. Is a judge really going to buy Ms. Lerner’s argument that the American people can’t handle the truth?

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November 21, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Monday, November 20, 2017

Eyal-Cohen Presents The Cost Of Inexperience Today At Loyola-L.A.

Eyal-Cohen (2017)Mirit Eyal-Cohen (Alabama) presents The Cost of Inexperience at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Katie Pratt and Ted Seto:

Free market entry is vital in preventing concentration of market power and eliminating large deadweight losses. Yet, in recent years, studies show that newcomers are less successful than existing firms that have diversifies their products in the market. What might explain this phenomenon?

This Article unveils a regulatory catch 22. It reveals that although a regulation may be efficient in correcting a certain market failure, its distributional effects may create another. It exposes the degree to which “economies of experience” in regulation create significant disadvantages to newcomers and provide substantial advantages to oldtimers. Being well-versed in their marketplace, old-timers possess knowledge, familiarity, and influence over the rulemaking process. New or “green” entities entering regulated market or dealing with a new rule face proportionally larger costs to obtain regulatory insight. Consequently, an anomaly exists when government choice may de facto hamper innovation and survival of newcomers, the same goals it seeks to promote.

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November 20, 2017 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Colinvaux: The House Tax Bill Could Be The End Of Charities As We Know Them

Chronicle of Philanthropy op-ed:  The House Tax Bill Could Be the End of Charities as We Know Them, by  Roger Colinvaux (Catholic):

If the tax bill passed by the House of Representatives becomes law, partisan politics would overtake the nonprofit world, casting institutions designed to promote the public good into the depraved den of identity politics and selfish motives. Charities would use tax-subsidized contributions to favor or oppose political candidates at the behest of wealthy, anonymous donors with devastating results for charities and democracy.

This is a seismic moment for the conduct of politics in America. The House bill must be changed.

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November 20, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Wells: International Tax Reform By Means Of Corporate Integration

Florida Tax Review  (2015)Bret Wells (Houston), International Tax Reform By Means of Corporate Integration, 20 Fla. Tax Rev. 70 (2016):

This Article focuses on a single organizing question, namely how should a dividend paid deduction regime be designed so that it achieves acceptable international tax outcomes. By focusing on the international tax implications attendant with a dividend paid deduction regime, the author is not attempting to minimize the broader benefits of achieving shareholder-corporate integration. The dividend paid deduction proposal, as to distributed earnings, would equate the tax treatment of debt and equity, and in so doing it would reduce distortions that current law creates with respect to debt and equity in the corporate context. Furthermore, recent economic works suggest that the incidence of the corporate income tax burden is partially shifted to labor and away from shareholders whereas a properly designed integration proposal puts the incidence of business taxation squarely on shareholders. Furthermore, shareholder-corporate integration for C corporations harmonizes the divergent tax treatment that currently exists between C corporations and pass-through entities. Thus, a corporate integration proposal provides a broad spectrum of potential benefits, and so not surprisingly significant scholarship has been dedicated towards how to best achieve shareholder-corporate integration. But, in today’s era, the overwhelming tax policy problem that must be solved rests on finding a solution to the systemic international tax challenges that face the country, and so that is where this Article will focus.

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November 20, 2017 in Scholarship, Tax | Permalink | Comments (0)

ABA Tax Section Publishes New Issue Of Tax Times

ABA Tax Times (2016)The ABA Tax Section has published 37 Tax Times No. 1 (Nov. 2017):

So Much To Do, So Little Time
By Karen L. Hawkins (Hawkins Law, Yachats, OR)
Notwithstanding the challenges of going forward with a meeting in Austin, Texas, in the midst of one of the worst hurricane seasons in recent history, the committees did their usual stellar jobs in providing top-notch continuing education presentations and materials for the attendees.

Gaylor v. Mnuchin - A Step Toward Greater Clarity on Clergy Tax Exemptions?
By Adam Chodorow (Arizona State)
On October 6, 2017, the U.S. District Court for the Western District of Wisconsin declared section 107(2) of the Internal Revenue Code unconstitutional. The provision permits "ministers of the gospel" to exclude from income compensation designated as a housing allowance, thus giving churches and other religious organizations the ability to provide tax-free housing to their ordained ministers. The government foregoes around $800 million in revenue per year as a result of this provision, and, if the decision stands, it could have a significant impact on churches and other religious institutions.

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November 20, 2017 in ABA Tax Section, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, November 19, 2017

Overlooked Passage In GOP Tax Bill Would Gouge Gig Economy Workers

Salon, Overlooked Passage in GOP Tax Bill Would Gouge Gig Economy Workers:

The Republican tax bill now in Congress would imperil many of the last century’s hardest-won labor rights for workers by building a new legal wall between businesses and so-called gig economy workers that absolves management of many obligations owed to employees, according to law school professors tracking the bill.

“There is an important battle going on right now in labor and employment law over the appropriate classification of workers in the gig/platform/sharing economy,” wrote Boston College’s Shu-Yi Oei and Diane M. Ring for TaxProf Blog from Pepperdine University School of Law. “At stake in the fight are the rights of workers to collectively bargain, and to overtime pay, minimum wage, child labor laws, and family and medical leave. The battle also holds implications for application of health and safety regulations and anti-discrimination laws. Employee classification confers many of these protections. Independent contractor classification does not.”

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November 19, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

The Top Five New Tax Papers

SSRN LogoThis week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list:

  1. [402 Downloads]  Background and Current Status of FATCA and CRS, by William Byrnes (Texas A&M)
  2. [295 Downloads]  Rejecting Charity: Why the IRS Denies Tax Exemption to 501(C)(3) Applicants, by Terri Lynn Helge (Texas A&M)
  3. [294 Downloads]  The Rise of Trust Decanting in the United States, by Robert Sitkoff (Harvard)
  4. [201 Downloads]  Slicing and Dicing: The Structural Problems of the Tax Reform Framework, by Reuven Avi-Yonah (Michigan)
  5. [182 Downloads]  Exploiting the Medicare Tax Loophole (review here), by Karen C. Burke (Florida)

November 19, 2017 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, November 18, 2017

This Week's Ten Most Popular TaxProf Blog Posts

Colon: ETFs And In-Kind Redemptions

Jeffrey M. Colon (Fordham), The Great ETF Tax Swindle: The Taxation of In-Kind Redemptions, 122 Penn St. L. Rev. ___ (2017):

Since the repeal of the General Utilities doctrine over 30 years ago, corporations must recognize gain when distributing appreciated property to their shareholders. Regulated investment companies (RICs), which generally must be organized as domestic corporations, are exempt from this rule when distributing property in kind to a redeeming shareholder.

In-kind redemptions, while rare for mutual funds, are a fundamental feature of exchange-traded funds (ETFs). Because fund managers decide which securities to distribute, they distribute assets with unrealized gains and thereby significantly reduce the future tax burdens of their current and future shareholders. Many ETFs have morphed into investment vehicles that offer better after-tax returns than IRAs funded with after-tax contributions.

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November 18, 2017 in Scholarship, Tax | Permalink | Comments (0)

Friday, November 17, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Sloan Speck (Colorado) reviews a new work by Kitty Richards, An Expressive Theory of Tax, 27 Cornell J.L. & Pub. Pol’y ___ (2018).

Speck (2017)In the early twentieth century, Joseph Schumpeter wrote that “[t]he spirit of a people, its cultural level, its social structure, the deeds its policy may prepare—all this and more is written in its fiscal history.” Following the money tells us more than just who has what; it yields insights into who we are, and what we want to be. Kitty Richard’s interesting and provocative article, An Expressive Theory of Tax, gives a framework for understanding these types of connections between tax law and society, as well as a number of examples “where what the tax code says is explicitly preferenced over what the code does.”

A significant accomplishment of Richards’s project is positive: thick description of “the values and desires that animate policy debates and legal opinions” in taxation. Richards analyzes the expressive aspects of public debates over the taxation of legal brothels in Nevada, the marriage penalties and bonuses doled out by the federal income tax, and the public policy exception for the deductibility of certain expenses. Furthermore, Richards claims that “cheap” talk of (frequently ineffective) incentives obscures the expressive inflection of debates over tax benefits for retirement savings, among other areas.

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November 17, 2017 in Scholarship, Sloan Speck, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

Geier: Principled Tax Reform

GeierTaxProf Blog op-ed: Principled Tax Reform, by Deborah A. Geier (Cleveland-Marshall)

Republicans often say that their proposed tax reform is the first in 30 years, implicitly invoking the Tax Reform Act of 1986, but the efforts could not be more different in overarching philosophy and context.

First the context. In 1986, President Reagan said that he would not sign a tax bill that was not revenue neutral, at a time when the national debt was $2.1 trillion, the debt-to-GDP ratio was 46%, and the baby boomers were not near retirement. The effort was truly bipartisan with public hearings and significant changes made by both sides of the aisle so that the House passed its bill by voice vote and the Senate passed its bill by 97-3. The final bill reconciling the two versions passed by 292-136 in the House and 74-23 in the Senate.

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November 17, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

ATPI Hosts Conference Today On Tax Incentives For State, Local, And International Economic Development

ATPI Logo (2015)The American Tax Policy Institute hosts its Annual Fall Conference today on Tax Incentives for State, Local, and International Economic Development at Skadden in Washington, D.C.:

US states and localities spend $45 billion annually on tax incentives and other programs intended to spur economic development. Countries around the world similarly offer tax holidays, investment credits, and other preferential tax treatments in a bid to promote investment and create jobs. Do these policies work? At what cost? Are there better and worse ways to spur local economic growth and productivity gains? What might international practitioners learn from their state and local counterparts and vice versa? This one-day conference co-sponsored by the American Tax Policy Institute and the Murphy Institute at Tulane University will explore these questions from a variety of perspectives in international and state and local taxation as well as regional and economic growth. Researchers in law, economics, and accounting will join practitioners at all government levels to identify best practices and how to encourage policies that benefit all taxpayers.

Panel #1:  State & Local Tax Incentives in the United States: Overview and Assessment
Steven Sheffrin (Tulane) (moderator)
Timothy Bartik (W.E. Upjohn Institute)
Patrick Button (Tulane)
Carlianne Patrick (Georgia State)

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November 17, 2017 in Conferences, Tax | Permalink | Comments (0)

Avi-Yonah: Altera, The Arm’s Length Standard, And Customary International Tax Law

Reuven S. Avi-Yonah (Michigan), Altera, the Arm’s Length Standard, and Customary International Tax Law, 38 Mich. J. Int'l L. Opinio Juris 1 (2017):

The recent Altera case in the US Tax Court (on appeal to the Ninth Circuit) raises interesting issues in regard to the much-debated topic of whether customary international tax law (CITL) exists. Altera involved the question whether the cost of employee stock options should be included in the pool of costs that must be shared under a cost sharing agreement. In Xilinx, the Ninth Circuit held under a previous version of the regulations that these costs should not be included because unrelated parties operating at arm’s length would not have agreed to include them. Treasury then amended the regulation to state specifically that “all” costs includes the cost of stock options but did not carve out an exception from the arm’s length standard. In Altera, the Tax Court sitting en banc invalidated the new regulation on the ground that it was inconsistent with the arm’s length standard (ALS).

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November 17, 2017 in Scholarship, Tax | Permalink | Comments (0)

National Taxpayer Advocate Blog: Caring About “Sharing” — The IRS Should Do More For Participants In The Gig Economy

Taxpayer Advocate (2016)NTA Blog, Caring about “Sharing” – The IRS Should Do More for Participants in the Gig Economy:

In this blog post, I will discuss how the IRS has been dealing with a growing sector of our economy called the “sharing” economy (also known as the gig economy). Proponents of the sharing economy believe it promotes marketplace efficiency by enabling individuals to generate revenue from assets while the assets are not being used personally. For example, a vacation home owner may rent out her home while she is not using it. Airbnb (short-term home rentals) and Uber (shared car services) are two of the more prominent companies that facilitate a sharing economy.

Nearly a quarter of the U.S. population earns money from the sharing economy. Although it may be growing at a healthy rate, I want to make clear that not all sharing economy participants are finding it to be a very lucrative endeavor. On the contrary, data show that the vast majority – 85 percent – earn less than $500 per month from their gigs.

Furthermore, many of the service providers are simply unfamiliar with the tax filing and recordkeeping requirements. Service providers in the sharing economy may not fit the mold of the traditional employee who works “9 to 5” and receives a Form W-2 from one employer. Rather, a service provider in the sharing economy may have to take on multiple gigs to help make ends meet, making it difficult to track and allocate expenses among the various gigs. The majority of them do not receive any tax information from the sharing economy platform they use to earn their income. This demonstrates both the need for guidance from the IRS and the opportunity to create a culture of tax compliance among participants in the sharing economy from the outset. Establishing the tax compliance norms for this emerging industry in its infancy will assist the IRS as this segment of taxpayers grows. 

This leads us to the question, “What can the IRS do to help sharing economy participants comply with their tax obligations?” First, when looking at noncompliance, it is important to distinguish between the various types of noncompliance the IRS encounters. Not all noncompliant taxpayers are willfully noncompliant; many of them are tripped up by “unknowing” or “lazy” noncompliance. That is, some taxpayers are simply unaware of their tax compliance obligations. Many sharing-economy entrepreneurs and merchants have never operated a small business and need to understand certain basic tax obligations (i.e., making required quarterly estimated payments throughout the year to avoid penalties).

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November 17, 2017 in Gov't Reports, IRS News, News, Shuyi Oei, Tax | Permalink | Comments (0)

Thursday, November 16, 2017

Goldin Presents Complexity and Take-up of the Earned Income Tax Credit At Northwestern

Goldin (2017)Jacob Goldin (Stanford) presented Complexity and Take-up of the Earned Income Tax Credit at Northwestern yesterday as part of its Advanced Topics in Taxation Workshop Series hosted by Sarah Lawsky:

Tax benefits like the Earned Income Tax Credit (EITC) represent an important source of income to their recipients, but millions of those who are eligible to claim tax benefits fail to do so. One possible explanation is that the rules governing most tax benefits are extraordinarily complex. I consider efforts to increase tax benefit take-up in light of this complexity. A key fact in thinking about this issue is that the vast majority of tax filers today prepare their taxes with assisted preparation methods (APMs) like software or professional assistance. Because APMs eliminate most of the barriers to claiming tax benefits for which one is eligible, I ague that efforts to increase benefit take-up should focus on inducing benefit-eligible individuals to file a tax return using an APM. In contrast, efforts aimed at increasing awareness of a benefit (of the type widely employed by governments and nonprofits) are less likely to be successful, except to the extent they themselves induce an increase in tax filing.

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November 16, 2017 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Knoll: The Disparate Federal Income Tax Treatment Of Business And Non-Business State And Local Taxes

Michael S. Knoll (Pennsylvania), Not Too SALT-y: The Disparate Federal Income Tax Treatment of Business and Non-Business State and Local Taxes:

The Tax Cuts and Jobs Act, H.R. 1, would eliminate the federal income tax deduction for nonbusiness state and local taxes while maintaining the deduction for business state and local taxes. That disparate treatment has generated a storm of negative commentary. In this short essay, I consider whether the federal tax law should allow a deduction for business state and local taxes assuming that there is no deduction for nonbusiness state and local taxes. I argue that investors and businesses, including pass-through businesses, should be allowed to deduct state and local property and sales taxes, but not general income taxes. 

November 16, 2017 in Scholarship, Tax | Permalink | Comments (0)

NY Times: She Took On Colombia’s Soda Industry. Then She Was Silenced.

New York Times, She Took On Colombia’s Soda Industry. Then She Was Silenced.

BOGOTÁ, Colombia — It began with menacing phone calls, strange malfunctions of the office computers, and men in parked cars photographing the entrance to the small consumer advocacy group’s offices.

Then at dusk one day last December, Dr. Esperanza Cerón, the head of the organization, said she noticed two strange men on motorcycles trailing her Chevy sedan as she headed home from work. She tried to lose them in Bogotá’s rush-hour traffic, but they edged up to her car and pounded on the windows.

“If you don’t keep your mouth shut,” one man shouted, she recalled in a recent interview, “you know what the consequences will be.”

The episode, which Dr. Cerón reported to federal investigators, was reminiscent of the intimidation often used against those who challenged the drug cartels that once dominated Colombia. But the narcotics trade was not the target of Dr. Cerón and her colleagues. Their work had upset a different multibillion-dollar industry: the makers of soda and other sugar-sweetened beverages.

Their organization, Educar Consumidores, was the most visible proponent of a proposed 20 percent tax on sugary drinks that was heading for a vote that month in Colombia’s Legislature. The group had raised money, rallied allies to the cause and produced a provocative television ad that warned consumers how sugar-laden beverages can lead to obesity and diet-related illnesses like diabetes.

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November 16, 2017 in News, Shuyi Oei, Tax | Permalink | Comments (0)

Senate GOP Tax Bill Includes A 'Harvey Weinstein Tax'

WeinsteinUSA Today, Beer, Booze and a Harvey Weinstein Tax Make It Into the Latest Senate Tax Overhaul Plan:

Sex and booze made it into the congressional battle over taxes in a late-night revision.

The latest changes to a Senate Republican tax plan, released at 10:30 p.m. on Tuesday, include tax cuts for producers of beer, wine and liquor, and a new provision that might be called the Harvey Weinstein tax: An end to corporations' ability to deduct attorney fees and settlement payments in sexual harassment or abuse cases if there is a nondisclosure agreement. ...

The change dealing with lawsuit settlements was proposed by Sen. Bob Menendez, D-N.J., and spokesman Juan Pachon said it was motivated by publicity about settlements over harassment by Hollywood producer Weinstein and former Fox News commentator Bill O'Reilly.

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November 16, 2017 in Congressional News, Tax | Permalink | Comments (3)

Herzfeld: A History Of The ABA Tax Section

ABA Tax Section (2017)Mindy Herzfeld (Florida), How Lawyers Dominate: A History of the ABA Tax Section:

The story of how tax attorneys came to dominate the fields of tax policy and sophisticated tax practice is the success story of an organized professional association. The prominence of the role of attorneys in the development and practice of the tax law was not a foregone prerequisite of the U.S. federal income tax system. Rather, the professional organization of attorneys into a specialized group within bar associations has played a significant role in making lawyers the central players in tax policy and tax practice in the U.S.

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November 16, 2017 in ABA Tax Section, Scholarship, Tax | Permalink | Comments (0)

Wednesday, November 15, 2017

Lockwood Presents Regressive Sin Taxes Today At Penn

LockwoodBenjamin B. Lockwood (Pennsylvania) presents Regressive Sin Taxes (with Dmitry Taubinsky (UC-Berkeley)) at Pennsylvania today as part of its Tax Policy Workshop Series hosted by Chris Sanchirico and Reed Shuldiner:

A common objection to “sin taxes” — corrective taxes on goods like cigarettes, alcohol, and sugary drinks, which are believed to be over-consumed — is that they fall disproportionately on low-income consumers. This paper studies the interaction between corrective and redistributive motives in a general optimal taxation framework. On the one hand, redistributive concerns amplify the corrective benefits of a sin tax when sin good consumption is concentrated on the poor, even when bias and demand elasticities are constant across incomes. On the other hand, a sin tax can generate regressivity costs, raising more revenue from the poor than from the rich.

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November 15, 2017 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Ring Reviews Hatfield's Cybersecurity And Tax Reform

Jotwell (Tax) (2016)Diane Ring (Boston College), Cybersecurity and Tax Information: A Vicious Cycle? (JOTWELL) (reviewing Michael Hatfield (University of Washington), Cybersecurity and Tax Reform, 93 Ind. L.J. ___ (2018)):

The international tax arena is awash with calls for tax transparency, and a variety of reforms are underway at the national, regional and global level to bring such transparency to fruition. See, e.g., Joshua Blank’s recent article The Timing of Tax Transparency [90 S. Cal. L. Rev. 449 (2017)], reviewed by Omri Marian earlier this year. Of course, with great caches of information comes great potential for security breaches of all types. Michael Hatfield, in his forthcoming article, Cybersecurity and Tax Reform, draws attention to the immensely important cybersecurity risks and challenges of a tax system founded on government collection and use of significant quantities of information. Quoting a former FBI Assistant Director, Hatfield describes IRS taxpayer information as “the gold standard” for being a “treasure trove of information” from the perspective of cyber criminals—large quantities of very valuable data housed in one agency. Is the IRS ready? Maybe not.

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November 15, 2017 in Scholarship, Tax | Permalink | Comments (0)

Harvard: A Tax-Free Hedge Fund That Happens To Have A University

Harvard 1Wall Street Journal op-ed:  A Hedge Fund That Has a University, by Thomas Gilbert (University of Washington) & Christopher Hrdlicka (University of Washington):

Whatever you may hear, the Republican tax-reform proposal isn’t an assault on higher education. The House and Senate plans include a new 1.4% excise tax on the net investment income of university endowments, but the levy applies only to private colleges with at least 500 students and endowments of more than $250,000 a student. Schools like Harvard, Yale, Stanford and Princeton—which together hold over $100 billion—are predicting doom. Yet this long-overdue tax will benefit higher education in the end.

Over the past 30 years universities have chased higher returns on their endowments, leading them to take greater risks. Our research shows that more than 75% of the assets in university endowments are now in risky investments: equities, hedge funds and private equity. Think of Harvard as a tax-free hedge fund that happens to have a university.

The proposed levy on investment income—dividends, interest and capital gains—is fundamentally a tax on this risk-taking, not on the endowments themselves. By taxing risk-driven income, the GOP plan doesn’t target higher education. It goes after hedge funds masquerading as university endowments. ...

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November 15, 2017 in Legal Education, Tax | Permalink | Comments (7)

Tuesday, November 14, 2017

Call For Papers: International Tax Law And Policy

Call For Papers: International Tax Law And Policy:

Media reports of tax avoidance scandals have drawn unprecedented attention to the importance of robust international tax law and policy. Although without the same level of media fanfare, the OECD’s base erosion and profit shifting (BEPS) program has similarly commanded substantial attention over the last five years.

For many tax scholars, the draw of these twin pillars — tax avoidance scandals and BEPS — has been irresistible and much international tax scholarship has focused on engaging with the details of those issues. However, the pervasive and critical challenges of appropriate international tax system design remain.

This Special Issue asks scholars to look beyond the dominant conversations and to survey the changing landscape of international tax law and policy.

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November 14, 2017 in Scholarship, Tax | Permalink | Comments (0)

19 Tax Profs Weigh In On The House And Senate Tax Bills

Judge Kozinski On The 'Timeless And Tiresome' Debt/Equity Distinction

Hewlett-Packard v. Commissioner, Nos. 14-73047 &  14-73048 (9th Cir. Nov. 14, 2017) (Kozinski, J.):

Summary:  The panel affirmed the Tax Court’s decision on a petition for redetermination of federal income tax deficiencies that turned on whether an investment by taxpayer Hewlett-Packard (HP) could be treated as equity for which HP could claim foreign tax credits.

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November 14, 2017 in New Cases, Tax | Permalink | Comments (0)

Chorvat: Anti-Inversion Regulation Invalidated In Federal Court

Elizabeth Chorvat (Illinois), Anti-Inversion Regulation Invalidated in Federal Court, 157 Tax Notes 401 (Oct. 16, 2017):

Under the Supreme Court’s Mayo decision, legislative and interpretive regulations are accorded Chevron deference if they comply with the Administrative Procedure Act (APA) notice and comment requirements. In Chamber of Commerce v. IRS on September 29, the U.S. District Court for the Western District of Texas extended the rule to temporary regulations, invalidating reg. section 1.7874-8T, the so-called multiple acquisition rule, for failure to comply with the notice and comment procedures under the APA. Reg. section 1.7874-8T was issued as part of the 2016 temporary regulations designed to limit the U.S. tax benefits following an inversion.

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November 14, 2017 in Scholarship, Tax | Permalink | Comments (0)

Monday, November 13, 2017

Herzig Presents Structural Inequities Of Exchange Traded Funds Today At Loyola-L.A.

Herzig (2018)David Herzig (Valparaiso) presents Structural Inequities of Exchange Traded Funds at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Katie Pratt and Ted Seto:

Exchange Trade Funds (ETFs) have almost as many assets under management as Mutual Funds. ETFs are often compared to Mutual Funds as a more efficient version of the same structure. The popular narrative espouses that these tax efficiencies account for the growth of the sector. This narrative is incomplete and misleading. These two structures have key differences other than tax efficiency. These structural differences have created an environment where aggressive bets against their performance, e.g. shorts, and high levels of internal leverage of the fund take place. Because of the vulnerabilities caused by the structural differences between ETFs and Mutual Funds, ETFs may not be the better structure but, rather, be the canary in the coal mine for the next market crash. This article proposes both tax and regulatory rules to rein in ETFs.


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November 13, 2017 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Applications To Attend 2018 Tax Court Judicial Conference At Northwestern Are Due Nov. 17

Northwestern Tax Court
The 2018 Tax Court Judicial Conference will be held at Northwestern Law School on March 26-28, 2018 (press release; FAQ):

The purpose of the judicial conference is to provide attendees with the opportunity to (1) review and discuss issues of material interest regarding the tax litigation process, (2) discuss ways in which the tax litigation process in the Court may be improved, and (3) network with fellow Tax Court practitioners. In addition to the Judges of the United States Tax Court, the Court intends to invite representatives from the Internal Revenue Service, the Department of Justice, private practice, low-income taxpayer clinics, academia, Capitol Hill, and other courts. A variety of plenary and breakout sessions will address issues relevant to practice before the Court.

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November 13, 2017 in Conferences, Scholarship, Tax | Permalink | Comments (0)

An Expressive Theory of Tax

Kitty Richards, An Expressive Theory of Tax, 26 Cornell J.L. & Pub. Pol'y ___ (2017):

The tax code is full of ineffective, inefficient, inequitable, or otherwise problematic provisions that make little sense when evaluated through the lens of traditional tax policy analysis, yet remain popular with citizens and legislators alike. The tax literature is equally full of carefully-researched, technically precise, and theoretically sound proposals for reform that nonetheless fail to get traction in the public debate. Why?

What tax scholarship is missing is the importance of social meaning: what do our tax laws say about our society’s values, and how is taxation being used to construct cultural ideals in contested spaces?

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November 13, 2017 in Scholarship, Tax | Permalink | Comments (0)

Lesson From The Tax Court: The Power Of Fact-Finding

Tax Court (2017)In the old Dragnet series, Jack Webb’s character was famous for declaring that “all we want are the facts, ma’am.”  As if “the facts” are pristine jigsaw pieces that, if you find enough, give you an objective truth.  Lawyers know better.  Every “fact” comes from a point of view.  Even police body cams are viewpoint-dependent, as seen this this nifty experiment.  The lawyer’s job is to assemble together facts which, if believed, tell the story from the point of view most favorable to the client’s interest.  They promote “a” truth.  The fact-finder has to decide on “the” truth.

Most courses in law school are not structured to teach this lesson.  We tend to focus our students on appellate opinions where the facts are a given, not a mystery.  Still, in both my Civil Procedure course and my Tax course I take what opportunities I can find to show how the finders of fact have huge power in deciding how a case resolves. 

In Tax Court, most facts are usually stipulated by the parties.  But sometimes the Tax Court judge is called upon to decide the “facts” from witness testimony.  A pair of opinions issued last week illustrate the power of fact-finding.  One came out well for the taxpayer.  The other did not.  More below the fold.

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November 13, 2017 in Bryan Camp, New Cases, Tax | Permalink | Comments (12)

Frances Regan Receives Award For Her Work In Leadership Training In IRS Office Of Chief Counsel

ReganFederal News Radio, Would-be Pharmacist Turned IRS Lawyer Honored For Her Leadership Skills:

Growing up in a family of pharmacists, there was no question Frances Regan would end up working in healthcare, but as fate would have it, law school was the right prescription for Regan.

Three decades after graduating from St. John’s University School of Law, Regan works as the area counsel for the IRS’ Small Business Self Employed Division for Office of Chief Counsel, and her work hasn’t gone unnoticed.

Regan was one of two federal employees honored with the Roger W. Jones Award from the American University School of Public Affairs, for her leadership and “commitment to effective continuity of government.”

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November 13, 2017 in IRS News, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, November 12, 2017

Facebook Sues IRS Seeking Access To Internal Agency Appeal

Facebook (2016), Facebook Sues IRS Seeking Access to Internal Agency Appeal:

Facebook Inc. has sued the Internal Revenue Service seeking access to an internal IRS appeal process regarding a decision related to the social media giant’s tax bill.

In a 12-page complaint filed in U.S. District Court for the Northern District of California on Wednesday, Facebook claims that IRS counsel have stymied the company’s request to pursue an internal IRS appeal by citing a new and so far seldom-used rule that allows IRS exam teams to deny access to internal appeals when they determine such an appeal would not be in the interest of “sound tax administration.”

Facebook wants a finding that the IRS violated the Administrative Procedure Act by issuing the new rule — Revenue Procedure 2016-22, 2016-15 I.R.B. 1 — and by denying Facebook’s request for an internal appeal.

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November 12, 2017 in IRS News, Tax | Permalink | Comments (4)

Johnson Posts Tax Papers On SSRN

SSRN LogoCalvin H. Johnson (Texas) has posted several tax papers on SSRN:

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November 12, 2017 in Scholarship, Tax | Permalink | Comments (0)

The Top Five New Tax Papers

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

  1. [370 Downloads]  Background and Current Status of FATCA and CRS, by William Byrnes (Texas A&M)
  2. [292 Downloads]  Rejecting Charity: Why the IRS Denies Tax Exemption to 501(C)(3) Applicants, by Terri Lynn Helge (Texas A&M)
  3. [285 Downloads]  The Rise of Trust Decanting in the United States, by Robert Sitkoff (Harvard)
  4. [186 Downloads]  Slicing and Dicing: The Structural Problems of the Tax Reform Framework, by Reuven Avi-Yonah (Michigan)
  5. [163 Downloads]  Exploiting the Medicare Tax Loophole (review here), by Karen C. Burke (Florida)

November 12, 2017 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, November 11, 2017

This Week's Ten Most Popular TaxProf Blog Posts

NTA 110th Annual Conference On Taxation

National Tax Association (2016)The three-day National Tax Association 110th Annual Conference on Taxation concludes today in Philadelphia.  Today's highlights include:

Session #70: Capital Gains and Wealth Taxation

Session Organizer:  David Kamin (NYU)
Session Chair:  Jon Bakija (Williams College)

Tim Dowd (Joint Committee on Taxation), Robert McClelland (Urban Institute) & Jacob Mortenson (Joint Committee on Taxation), Do Tax Elasticities Change Over the Business Cycle? Evidence From the Sale of Capital Assets
Discussant:  Jon Bakija (Williams College)

Ari Glogower (Ohio State), Taxing Income and Wealth
Discussant:  William Gentry (Williams College)

David Kamin (NYU) & Jason Oh (UCLA), The Effects of Capital Gains Rate Uncertainty on Realization
Discussant:  Jon Bakija (Williams College)

David Miller (Proskauer Rose, New York), A Comprehensive Mark-to-Market Tax
Discussant:  William Gentry (Williams College)

Session #78:  Tax Law and Finance

Session Organizer:  David Kamin (NYU) 
Session Chair & Discussant:  Brian Galle (Georgetown)

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November 11, 2017 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Oei & Ring: The Senate Tax Bill And The Battles Over Worker Classification

Shu-Yi Oei (Boston College) & Diane M. Ring (Boston College), The Senate Tax Bill and the Battles over Worker Classification:

Senate Republicans released their version of tax reform legislation on Thursday, November 9. The legislative language is not available yet, but the Description of the Chairman’s Mark (prepared by the Joint Committee on Taxation) suggests that one of the key provisions in the bill will clarify the treatment of workers as independent contractors by providing a safe harbor that guarantees such treatment. The JCT-prepared description tracks the contents of the so-called “NEW GIG Act” proposed legislations introduced by Congressman Tom Rice (R-S.C.) in the House and Senator John Thune (R-S.D.) in the Senate in October and July 2017, respectively. “NEW GIG” is short for the “New Economy Works to Guarantee Independence and Growth (NEW GIG) Act.” But notably, and as we further discuss below, the legislation is not limited in its application to gig or sharing economy workers.

Assuming the Senate Bill adopts the basic parameters of the NEW GIG proposed legislation — which looks to be the case based on the JCT-prepared description — we have some concerns. In brief, this legislation purports to simply “clarify” the treatment of workers as independent contractors and to make life easier for workers by introducing a new 1099 reporting threshold and a new withholding obligation. But the legislation carries potentially important ramifications for broader fights over worker classification that are raging in the labor and employment law area. Despite possibly alleviating tax-related confusion and reducing the likelihood of under-withholding, we worry that there are quite a few underappreciated non-tax hazards for workers if these provisions go through.

Summary of the Legislation

The legislation (assuming the Senate Bill more or less tracks the NEW GIG Act language) purports to achieve such “clarification” of worker classification status by doing the following:

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November 11, 2017 in Congressional News, News, Political News, Shuyi Oei, Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Friday, November 10, 2017

Weekly SSRN Tax Article Review And Roundup

This week, Orly Mazur (SMU) reviews a new work by Anthony Polito (Suffolk), Mandatory Passthrough Taxation for Non-Publicly Traded Businesses?, 36 Va. Tax Rev. 449 (2017).

Mazur (2017-2)Anthony Polito’s timely new work considers whether passthrough taxation should be made available to all non-publicly traded businesses, without regard to form of business entity, and whether such tax treatment should be mandatory. 

Currently, most closely held businesses (except for those organized in the corporate form) may elect to benefit from a single level of taxation, whereas corporate business entities and most publicly traded entities are taxed as C corporations and subject to double taxation. As a result, newly-formed, non-publicly traded entities are only subject to subchapter C by choice. So when would an entity voluntarily subject itself to the double taxation regime? As the Article explains, a business would elect corporate taxation over passthrough taxation when an “insider shelter” tax strategy is available: namely, when the tax burden on a taxable corporate entity is less than on a passthrough entity. 

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November 10, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

NTA 110th Annual Conference On Taxation

National Tax Association (2016)The three-day National Tax Association 110th Annual Conference on Taxation continues today in Philadelphia.  Today's highlights include:

Session 45:  Taxing the Future

Session Organizer:  David Kamin (NYU)
Session Chair & Discussant:  David Herzig (Valparaiso)

Other Tax Prof presentations today include:

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November 10, 2017 in Conferences, Scholarship, Tax | Permalink | Comments (0)

NY Times: Columbia, Dartmouth, Duke, Stanford, Texas & USC Are Among Colleges Using 'Blocker Corporations' To Avoid Taxes On Endowment Income

New York Times, Endowments Boom as Colleges Bury Earnings Overseas: American Universities Are Using Offshore Strategies to Swell Their Coffers, Skirt Taxes and Obscure Investments That Could Spark Campus Protests:

A trove of millions of leaked documents from a Bermuda-based law firm, Appleby, reflects some of the tax wizardry used by American colleges and universities. Schools have increasingly turned to secretive offshore investments, the files show, which let them swell their endowments with blocker corporations, and avoid scrutiny of ventures involving fossil fuels or other issues that could set off campus controversy.

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November 10, 2017 in Legal Education, Tax | Permalink | Comments (8)

Jim Hines Receives 2017 Holland Medal

Hines (2017)James R. Hines Jr., Richard A. Musgrave Collegiate Professor of Economics and L. Hart Wright Collegiate Professor of Law at the University of Michigan, receives the 2017 Holland Medal for lifetime achievement in the study of the theory and practice of public finance today at the National Tax Association 110th Annual Conference on Taxation in Philadelphia.  He is the second youngest person ever to receive the Holland Medal (Jim Poterba (MIT) was the youngest).

The Holland Medal was created in 1993 in the memory of Dan Holland (MIT).  Recent winners include:

  • 2016  Alvin C. Warren, Jr. (Harvard)
  • 2015  William D. Andrews (Harvard)
  • 2014  James Poterba (MIT)
  • 2013  Michael Graetz (Columbia)
  • 2012  Joel Slemrod (Michigan)
  • 2011  Alan Auerbach (UC-Berkeley)
  • 2010  Henry Aaron (Brookings)

Session Organizer & Chair:  Rosanne Altshuler (Rutgers)

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November 10, 2017 in Legal Education, Tax | Permalink | Comments (0)

Thursday, November 9, 2017

NTA 110th Annual Conference On Taxation

National Tax Association (2016)The three-day National Tax Association 110th Annual Conference on Taxation kicks off today in Philadelphia.  Today's highlights include:

Session #5:  Redistribution

Session Organizer: David Kamin (NYU)
Session Chair & Discussant: Jeremy Bearer-Friend (NYU)

Session #14:  Tax Expenditures

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November 9, 2017 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Barry Presents Collusion In Markets With Syndication Today At Pepperdine

Barry (2017)Jordan Barry presents Collusion in Markets With Syndication (with John Hatfield (Texas), Scott Kominers (Harvard) & Richard Lowery (Texas)) at Pepperdine today as part of our Faculty Workshop Series hosted by Babette Boliek:

Many markets, including the markets for IPOs and debt issuances, are syndicated, in that a bidder who wins a contract will often invite competitors to join a syndicate that will fulfill the contract. We model syndicated markets as a repeated extensive form game, and show that standard intuitions from industrial organization can be reversed: Collusion may become easier as market concentration falls, and market entry may in fact facilitate collusion. In particular, price collusion can be sustained by a strategy in which firms refuse to join the syndicate of any firm that deviates from the collusive price, thereby raising total production costs. Our results can thus rationalize the apparently contradictory empirical facts that the market for IPO underwriting exhibits seemingly collusive pricing despite its low level of market concentration.

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November 9, 2017 in Colloquia, Scholarship, Tax | Permalink | Comments (0)