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Tuesday, October 21, 2014

Johnson: Repatriation Tax -- Are We Churchill or Chamberlain?

Tax Analysys Logo (2013)Calvin H. Johnson (Texas), Repatriation Tax: Are We Churchill or Chamberlain?, 144 Tax Notes 1459 (Sept. 22, 2014):

Under current law, earnings of a foreign subsidiary are not subject to tax until they are repatriated. At repatriation, the U.S. parent pays 35% corporate tax, less foreign tax credits. A tax on repatriation has no effect on repatriations, by mathematical law, if the tax remains. If the United States reduces or forgives the tax in the foreseeable future, U.S. corporations will delay repatriation to take advantage of the reduction. This project proposes an increase in tax on repatriation after a short window during which the 35% tax, less foreign tax credits, will remain. The increase will induce corporations to repatriate their foreign earnings within the window to take advantage of the relatively generous 35% rate.

October 21, 2014 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 530

IRS Logo 2Wall Street Journal editorial:  Defining Dismissal Down: The VA Gives Officials an Opening to Retire Before They’re Fired:

The common theme in the many failures of President Obama’s second term is government incompetence, and a corollary is lack of accountability. Both themes came together in the news late last week that the Veterans Affairs department can’t even successfully fire officials it wants to dismiss.

President Obama and Congress agreed this summer on a bill that made it easier for the VA to fire incompetent officials in return for $16 billion in additional spending to address long patient waiting lines caused by the agency’s incompetence. That looked like another case of government rewarding government failure, and now we learn that two officials targeted for dismissal as part of the VA investigation are retiring instead.

The law gave new secretary Robert McDonald the ability to fire immediately, but the VA says it gave the targeted employees a five-day period to respond so the dismissals would hold up in court. Two of the targets took the opening to retire, including Susan Taylor, the VA’s deputy chief procurement officer in Washington who was the subject of an inspector general report alleging years of misconduct for personal gain. Ms. Taylor declined to comment to a Journal query.

The VA retirees follow the example set by Lois Lerner, who retired from the IRS before she could be dismissed for her role in targeting conservative groups seeking tax-exempt status. They will all presumably suffer no reduction in federal retirement benefits.

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October 21, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, October 20, 2014

Sanchirico Presents International Tax and Ownership Nationality Today at Northwestern

SanchiricoChris Sanchirico (Pennsylvania) presents As American as Apple, Inc.: International Tax and Ownership Nationality, 68 Tax L. Rev. ___ (2014), at Northwestern today as part of its Law and Economics Workshop Series organized by Bernard Black:

The ownership nationality of large US multinational companies plays an implicit but important role in the current debate over how such companies should be taxed. This paper identifies that role and investigates what is actually known about where these companies’ shareholders reside.

October 20, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Heath Presents Taxation as Collective Consumption Today at McGill

HeathJoseph Heath (Toronto) presents Taxation as Collective Consumption? at McGill today as part of its Spiegel Sohmer Tax Policy Colloquium Series hosted by Allison Christians and Daniel Weinstock:

Individuals express a surprisingly pervasive error that I refer to as the “government as consumer” fallacy. The picture underlying this fallacy is relatively straightforward. Government services, such as health care, education, national defense, and so on, “cost” us as a society. We are able to pay for them only because of all the wealth that we generate in the private sector, which we transfer to the government in the form of taxes. A government that taxes the economy too heavily stands accused of “killing the goose that lays the golden eggs” by disrupting the mechanism that generates the wealth that it itself relies upon in order to provides its services.

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October 20, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Dharmapala Presents Interest Deductions in a Multijurisdictional World Today at Loyola-L.A.

DharmapalaDhammika Dharmapala (Chicago) presents ​Interest Deductions in a Multijurisdictional World at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

The tax treatment of interest expenses in a multijurisdictional setting raises numerous complexities. This paper catalogs these difficulties and highlights the particular problems associated with efforts to achieve ownership neutrality among multinational corporations (MNCs) when debt financing is available. We argue that the differential deductibility of debt entailed by various current tax law provisions leads in general to potential distortions in the patterns of asset ownership across MNCs, and that various proposed solutions have significant limitations. We suggest several alternative regimes to address both the ownership distortions that we highlight, as well as other well-established problems of income-shifting through debt. These alternative regimes are extensions to a multinational setting of two general approaches to the neutral treatment of interest expenses - the CBIT (comprehensive business income tax) and ACC (allowance for corporate capital). These regimes – a worldwide debt cap (WDC) and a net financing deduction (NFD) – provide solutions to income-shifting and ownership distortions. However, they have the potential disadvantage of restricting other policy parameters.

Alexander Wu (UCLA) is the commentator.

October 20, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

TIGTA: IRS Is Not Complying With Homeland Security Laws on Information Security Management and Employee ID Cards

TIGTA The Treasury Inspector General for Tax Administration today released:

Federal Information Security Management Act Report for Fiscal Year 2014 (2014-20-090):

The Federal Information Security Management Act of 2002 (FISMA) was enacted to strengthen the security of information and systems within Federal Government agencies. The IRS collects and maintains a significant amount of personal and financial information on each taxpayer. As custodians of taxpayer information, the IRS has an obligation to protect the confidentiality of this sensitive information against unauthorized access or loss.

As part of the FISMA legislation, the Offices of Inspectors General are required to perform an annual independent evaluation of each Federal agency’s information security programs and practices. This report presents the results of TIGTA’s FISMA evaluation of the IRS for Fiscal Year 2014.

Based on this year’s FISMA evaluation, five of the 11 security program areas met the performance metrics specified by the Department of Homeland Security’s Fiscal Year 2014 Inspector General Federal Information Security Management Act Reporting Metrics. ... Four security program areas were not fully effective due to one or more program attributes that were not met. ... Two security program areas did not meet the level of performance specified due to the majority of the attributes not being met.

Progress Has Been Made; However, Significant Work Re mains to Achieve Full Implementation of Homeland Security Presidential Directive 1 (2014-20-069):

Issued in August 2004, the Homeland Security Presidential Directive 12 (HSPD-12), Policy for a Common Identification Standard for Federal Employees and Contractors, requires Federal agencies to issue identity credentials that meet the HSPD-12 standard and use them for gaining physical access to Federally controlled facilities and logical access to Federally controlled information systems.  Without full implementation of HSPD-12 compliant authentication, IRS facilities, networks, and information systems are at an increased risk of unauthorized access.

This audit was initiated to determine the IRS’s progress in implementing HSPD-12 requirements for accessing IRS facilities and information systems.  The U.S. Department of the Treasury has set a goal for its bureaus to achieve 100-percent HSPD-12 compliance by Fiscal Year 2015.  In Fiscal Year 2012, the Administration identified HSPD-12 as a Cross-Agency Priority initiative needed to improve the security of Federal data.

The majority of the IRS workforce (85%) has been issued HSPD-12 compliant Personal Identity Verification (PIV) cards.  However, full implementation of PIV card electronic authentication for accessing IRS facilities is not scheduled until at least Fiscal Year 2018, and only if funding is available.  In addition, significant challenges remain in the area of implementing PIV card electronic authentication for accessing IRS networks and information systems.  These challenges include many legacy systems and technologies in use at the IRS that are incompatible with PIV cards, and limited HSPD-12 staffing and funding for resolving these conflicts.

October 20, 2014 in Gov't Reports, IRS News, Tax | Permalink | Comments (0)

Frye: Crowdfunding as a Solution to the Inefficiency of the Charitable Deduction

Brian L. Frye (Kentucky), Solving Charity Failures, 93 Or. L. Rev. 155 (2014):

Kickstarter Logo“Crowdfunding” is a way of using the Internet to raise money by asking the public to contribute to a project. This Article argues that crowdfunding has succeeded, at least in part, because it makes charitable giving more efficient by solving certain “charity failures,” or inefficiencies created by the inability of the charitable contribution deduction to subsidize the charitable giving from low-income donors. The economic subsidy theory of the charitable contribution deduction explains that the deduction is justified because it solves market failures and government failures in charitable goods. According to this theory, free riding causes market failures in charitable goods, and majoritarianism causes government failures in charitable goods. The charitable contribution deduction solves these market and government failures by indirectly subsidizing charitable contributions, thereby compensating for free riding and avoiding majoritarianism. Crowdfunding is successful because it provides a technological solution to some of those charity failures. While the charitable contribution deduction causes charity failures because the deduction cannot subsidize contributions from low-income donors, crowdfunding can subsidize those contributions by offering rewards instead. As a result, crowdfunding should solve at least some of the charity failures caused by the deduction through providing an incentive for low-income donors to contribute. The remarkable success of crowdfunding suggests that the inefficiency associated with charity failures is quite large.

October 20, 2014 in Scholarship, Tax | Permalink | Comments (0)

Gupta: Will eBay's Spinoff of PayPal Result in an Inversion?

Tax Analysys Logo (2013)Ajay Gupta (Tax Analysts), Will PayPal's Spinoff End in an Inversion -- or Two?, 76 Tax Notes Int'l 188 (Oct. 20, 2014):

Ajay Gupta discusses how Treasury's anti-inversion guidance [Notice 2014-52] could affect PayPal's announced spinoff from parent company eBay.

October 20, 2014 in Tax, Tax Analysts | Permalink | Comments (0)

Washington & Lee Seeks to Hire Tax Clinic Visitor for Fall 2015

W&L Logo (2014)The Washington and Lee University School of Law invites applications for a Visiting Professor and Interim Director of its Tax Clinic for the Fall 2015 semester:

The visitor would supervise and manage the school’s Low-Income Taxpayer Clinic.  Applicants must be an active member of a state bar or the District of Columbia bar.  The position would begin on July 1, 2015 and end on December 31, 2015.  For additional details or to apply, contact Associate Dean Samuel Calhoun. Applications are due by December 1, 2014.

October 20, 2014 in Tax, Tax Prof Jobs | Permalink | Comments (0)

The IRS Scandal, Day 529

IRS Logo 2Forbes:  UnFair: Exposing The IRS -- Does Not Make Strong Case Or Decent Documentary, by Peter C. Reilly:

[H]ere is my report on UnFair: Exposing the IRS.  I am reacting to both the film and the companion book, which pretty much cover the same ground in the same order. The bottom line is that Craig Bergman's argument does not make a lot of sense.

He discusses IRS abuses in the last several years and proposes that we repeal the income tax, abolish the IRS and enact the Fair Tax. A lmost all the abuses he discusses concern the qualification of organizations for exempt status. It turns out that the same issues exist under the Fair Tax.

The filmmaker I brought along did not think that it was much of a documentary. His biggest issue was that he was expecting an expose` and instead experienced a reiteration of a political and cultural platform. If this review is any indication, he is not alone in his judgement. ...

It is not an exaggeration to say that the film is seeking to make the case that the IRS is a criminal organization . The tip off is the clip of 1930s gangsters with guns. A significant portion of time is spent on Teapartygate. We get brief clips from news programs hearing from George Will, Governor Mike Huckabee, Congressman John Linder, and Bill O’Reilly among others. Craig Bergman, the narrator, then tells us that he put together a crew of talented filmakers to travel across America to talk one-on-one with those affected by the abuses. Craig starts at the Tea Party “Audit The IRS” rally, has an extensive treatment of Lois Lerner including her campaign against the Christian Coalition while working for the Federal Election Commission and moves on to an interview with Jim Jess of the Georgia Tea Party. There is a lot of network footage, most of it from Fox News. There is r eally nothing new in this part if you have been following the scandal. The treatment is entirely one sided. ...

Jonathan Schwartz did not think that UnFair cut it as a documentary. He did not even think that it was very effective propaganda.  It was more of a rally the troops type of piece that would only work on those who were already convinced of the viewpoints expressed.

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October 20, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

TaxProf Blog Weekend Roundup

Sunday, October 19, 2014

L.A. Times: Ed Kleinbard's We Are Better Than This Is 'Moral and Farsighted'

Los Angeles Times:  On Fiscal Policy, USC Professor's Viewpoint is Moral and Farsighted, by Michael Hiltzik:

We Are Better Than This (2014)The left sees me as a Wall Street Journal Satanist, and the right as a stealth Marxian bent on destroying free enterprise," Edward D. Kleinbard was saying.

The USC law professor was referring to the reactions elicited by his recent op-ed in the New York Times, in which he asserted that the solution to economic inequality in the U.S. was not to make the tax system more progressive — it's already "the most progressive in the developed world," he wrote — but to make it bigger.

As he explained when we met last week at USC's Gould School of Law, where he has taught tax law since 2009, that would render the entire fiscal system more progressive, because it would fund more spending. Government spending is always progressive, benefiting middle- and lower-income people more than the wealthy. So: If you want to reduce inequality, expanding government is more effective than merely increasing the relative burden on the rich.

One can see why left and right alike felt that their shibboleths were being skewered.

But Kleinbard's viewpoint is both moral and farsighted. It's also an important theme of his newly published book, We Are Better Than This: How Government Should Spend Our Money.

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October 19, 2014 in Book Club, Scholarship, Tax | Permalink | Comments (1)

Linda Beale to Return to Tax Blogging Following the Death of Her Husband

Beale (2014)Tax Prof Linda Beale (Wayne State) has announced that she is returning to blogging after an eight month hiatus following the death of her husband:

To make a long and difficult story short--my husband died in January, and I have gone through an intense personal struggle to cope with life without my soulmate.  The hard winter and too-short summer added their own tribulations, in the form of electrical outages, some basement water, and all those unexpected expenses that go along with weather-related problems, all of which must now be handled by me.

I plan to resume regular postings now.

October 19, 2014 in Tax | Permalink | Comments (1)

Top 5 Tax Paper Downloads

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

  1. [338 Downloads]  2013 Developments in Connecticut Estate and Probate Law, by Jeffrey A. Cooper (Quinnipiac) & John R. Ivimey (Reid and Riege, Hartford)
  2. [236 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)
  3. [139 Downloads]  Rights Without Remedies, by Matthew L. M. Fletcher (Michigan State)
  4. [138 Downloads]  Home-Country Effects of Corporate Inversions, by Omri Y. Marian (Florida)
  5. [136 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)

October 19, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 528

IRS Logo 2The Hollywood Reporter:  'Unfair: Exposing the IRS': Film Review:

Delivering an attack against the Internal Revenue Service is like shooting fish in a barrel. You'd be hard-pressed to find anyone, whatever their political affiliation, who has anything good to say about this much-reviled government agency. So it seems a bit of a waste that Judd Saul's documentary Unfair: Exposing the IRS, shown as a one-night event in some 680 screens around the country, should have resorted to such relentless overkill.

Before your angry online comments come pouring in accusing this reviewer of being a godless, unpatriotic communist, please be advised that this is a film review, not a political tract. Any criticisms to follow are meant to address the film on cinematic terms, and in that regard it falls woefully short of being convincing to anyone who isn't already fully aligned with its impassioned message. Devoid of thoughtful analysis or divergent opinions, it's little more than agitprop … which is not to say that many of the films emanating from the other side of the political spectrum are any better. ...

Beginning with the usual barrage of inflammatory news clips, it naturally spotlights the recent uproar over the IRS' alleged targeted persecution of Tea Party organizations — President Obama is repeatedly seen denouncing it as a "phony scandal" — and the subsequent embarrassing spectacle of its leaders haplessly testifying before Congress that they had somehow managed to lose over two years' worth of relevant emails. Couple that with evidence of the agency's wild overspending, such as video clips of their bizarre comic sketches performed at lavish getaways, and it's certainly hard not to get one's dander up. ...

Featuring commentary by such usual suspects as Mike Huckabee, Ted Cruz, Glenn Beck, Michele Bachmann and, of course, Grover Norquist, Unfair: Exposing the IRS is not so much an expose as predictable preaching to the choir.

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October 19, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Saturday, October 18, 2014

Red States Are More Generous Than Blue States

2012Chronicle of Philanthropy, How America Gives:

Using the IRS data, The Chronicle was able to track gifts to charity at the state, county, metropolitan-area, and ZIP code levels. The data were for gifts to charity among taxpayers who itemize deductions on their tax forms. It captured $180-billion that was given to charity in 2012, or about 80 percent of the total amount given to charity as tabulated by "Giving USA."

In How States Compare and How They Voted in the 2012 Election, the Chronicle of Philanthropy ranked the states by giving as a percentage of adjusted gross income.  The 17 states that gave the most to charity all voted for Mitt Romney in 2012, while 15 of the 17 states that gave the least to charity voted for President Obama:


Red

Blue

October 18, 2014 in Tax | Permalink | Comments (21)

How to Audit the President

Bloomberg, How to Audit the President, by Richard Rubin:

Obama 2013

The presidency is laden with perks: the jet, the mansion, the personal chef. 

But there's some nastiness, too, awaiting the winner of the 2016 election, namely: mandatory audits from the Internal Revenue Service. The tax returns of the commander-in-chief and the vice president get automatic annual scrutiny from the IRS. Compare that to the 1 in 49 audit rate for everyone else in the $200,000 to $500,000 income bracket. 

What got us poking around on this question was a set of documents released from Bill Clinton's presidential library last week, showing White House lawyers preparing for his second consecutive audit amid questions about the Whitewater real estate deal in Arkansas. The audit requirement is so obscure that one former, very senior IRS official didn't even recall it when we started asking questions.

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October 18, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

AbbVie Can Deduct $1.64 Billion Termination Fee From Inversion Cancellation

ShireWall Street Journal, Dept. of Irony: AbbVie Can Take Tax Write-Off for Fees:

Breaking up hurts, but a tax write-off can help ease the sting.

The $1.64 billion termination fee AbbVie would owe Shire for nixing their takeover deal is tax-deductible, experts say. Other transaction expenses, including fees paid to its advisers that are likely to reach into the millions, may also be deductible.

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October 18, 2014 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 527

IRS Logo 2American Center for Law and Justice: Finally: IRS Approves Two More Tea Party Groups:

It’s taken years, but IRS approvals are still slowly—very slowly—rolling in.

The ACLJ first sounded the alarm against the Obama Administration’s unlawful targeting of grassroots conservative groups in the spring of 2012. It was not until the following year, in May of 2013, when Lois Lerner admitted that the IRS had in fact singled out and targeted hundreds of tea party and conservative groups. Shortly afterwards, the ACLJ filed suit against the IRS on behalf of 41 groups in 22 states.

Some of those groups are still being targeted and delayed, even today.

Yet we’re still winning victories, even while the case is ongoing.

Today, two more conservative groups received approval of their tax-exempt applications. Laurens County Tea Party of Laurens, South Carolina and Allen Area Patriots from Frisco, TX, both seeking 501(c)(4) status, were just approved.

Laurens County Tea Party and Allen Area Patriots both applied for tax-exemption in July of 2010. It took the IRS more than four years to review their applications and approve these groups.

Of our 41 clients, 28 have now been approved, and seven groups are still awaiting approval. One of these seven groups, Albuquerque Tea Party is less than two months away from “celebrating” five years since they originally applied for tax-exemption. To date, they have still not been approved.

While the mainstream media gave the Administration the benefit of the doubt and ignored, if not completely dismissed the targeting as nothing more sour grapes from angry conservatives, vindication of these groups has come time and time again as the public learns more information from Congressional investigators of how wide scale this scandal really was.

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October 18, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Friday, October 17, 2014

Weekly Tax Roundup

October 17, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

October 17, 2014 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Student Tax Note Roundup

October 17, 2014 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

ATPI Hosts Conference Today on Taxation and Migration

ATPI Logo (2015)The American Tax Policy Institute hosts a conference today on Taxation and Migration organized by Reuven Avi-Yonah (Michigan) and Joel Slemrod (Michigan) in Washington, D.C.:

The conference assesses the effects of taxation on the migration across national and state boundaries of individuals at various stages of their lives. It will also evaluate whether corporate migrations (such as "inversions") involve migration of individuals, and what are the tax policy implications for the US and other jurisdictions. 

October 17, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

62nd Annual Montana Tax Institute

62The 62nd Annual Montana Tax Institute kicks off today:

  • Jonathan Blattmachr (ILS Management), Asset Protection and Related Tax Consequences
  • Jessica Browde (Montana), Professional Responsibility in Tax Practice: Circular 230 Update
  • Martin Burke (Montana) & Michael Friel (Florida), Income in Respect of a Decedent: Section 691
  • Sam Donaldson (Georgia State), Annual Federal Income Tax Update
  • Elaine Gagliardi (Montana), Annual Wealth Transfer Tax Update
  • Kristen Juras (Montana), Limitations of Activities of Nonprofit Organizations
  • Roberta Mann (Oregon), Earth, Wind and Fire: Comparing the Taxation of Energy Sources
  • Nancy McLaughlin (Utah), Conservation Easements: Contemporary Issues and Challenges
  • Martin McMahon (Florida), Corporate and Partnership Tax Recent Developments
  • Daniel Simmons (UC-Davis), Impact of Partner and Partnership Liabilities under Subchapter K
  • Chris Treharne, (Gibraltar Business Appraisals), Justifying Discounts for Farm and Ranch Minority Ownership Interests

October 17, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 526

IRS Logo 2Statesman Journal:  Wehby Attempts to Tie Sen. Jeff Merkley to IRS Scandal:

Republican Senate candidate Monica Wehby released a web video Thursday with the goal of tying Sen. Jeff Merkley to the scandal surrounding the Internal Revenue Service targeting tax-exempt groups for their political leanings.

The 35-second video entitled "Corrupt" explains that Merkley was one of several Democratic Senators who wrote a letter to the IRS in 2012 requesting the agency "immediately change the administrative framework for enforcement of the tax code as it applies to groups designated as 'social welfare' organizations." ... The ad lays that targeting of conservative groups at Merkley's feet and asks whether voters can trust him.

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October 17, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, October 16, 2014

Virginia Tax Review Publishes New Issue

Virginia Tax Review (2014)The Virginia Tax Review has published Vol. 33, No. 4 (Spring 2014):

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

Cauble: Relying on the IRS

Emily Cauble (DePaul), Relying on the IRS:

The IRS issues different types of guidance to taxpayers, and the extent to which taxpayers can rely on IRS guidance depends on the form in which it was offered. For instance, taxpayers generally cannot rely on oral advice provided over the phone but can rely on more formal types of advice. The current state of the law harms unsophisticated taxpayers who disproportionately obtain informal advice -- the least reliable type of IRS guidance.

Existing literature lacks a thorough discussion of why, as a policy matter, we allow taxpayers to rely on some forms of IRS guidance more than others. This Article fills that gap by suggesting and critically evaluating potential justifications for this practice.

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

A Case for Simpler Gain Bifurcation for Real Estate Developers

Florida Tax ReviewBradley T. Borden (Brooklyn), Nathan Brown (Proskauer Rose, Boca Raton) & John Wagner II (Williams Parker Harrison Dietz & Getzen, Sarasota), A Case for Simpler Gain Bifurcation for Real Estate Developers, 15 Fla Tax Rev. 279 (2014):

This Article examines the judicially-sanctioned bifurcation of real estate developers’ gain. The Article recognizes that even though some commentators oppose granting favorable tax treatment to capital gains, the law most likely will not change. With that in mind, the Article examines the all-or-nothing approach of characterizing gain from the sale of real estate as either capital gain or ordinary income. The Article rejects the all-or-nothing approach of characterizing income under the current statutory system. Instead, it embraces gain bifurcation in the second-best setting that taxes capital gains and ordinary income differently. Illustrating the policy justification for gain bifurcation and judicially-sanctioned bifurcation structures, the Article recommends that lawmakers should more fully embrace gain bifurcation for real estate developers by creating a simple statutory election for bifurcating gain that would enhance equity, accuracy, and transparency of gain bifurcation. Although the Article limits its analysis to real estate developers, the idea of gain bifurcation, once improved in this area, could be a catalyst for exploring bifurcation in other areas.

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

Dharmapala: Base Erosion and Profit Shifting -- A Simple Conceptual Framework

Dhammika Dharmapala (Chicago), Base Erosion and Profit Shifting: A Simple Conceptual Framework:

BEPSThe issue of tax-motivated income shifting within multinational firms – or “base erosion and profit shifting” (BEPS) – has attracted increasing global attention and has become the subject of an ongoing OECD initiative. This paper provides a simple conceptual framework that helps to clarify aspects of governments’ responses to the BEPS phenomenon and the potential role of the OECD initiative. An important implication of this framework is that multilateral cooperation of the type envisaged in the BEPS initiative has the potential to reduce the deadweight costs of MNCs’ tax planning and compliance activities, thereby enhancing global welfare. 

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

Penalizing Tax Petitions: Why the Erroneous Refund Penalty in § 6676 Violates Taxpayers’ First Amendment Rights

Derek T. Ho & Christopher Klimmek (both of Kellogg, Huber, Hansen, Todd, Evans & Figel, Washington, D.C.), Penalizing Tax Petitions: Why the Erroneous Refund Penalty in Code § 6676 Violates Taxpayers’ First Amendment Rights, 68 Tax Law. ___ (2015):

In 2007, Congress enacted the so-called “erroneous refund penalty,” which imposes a 20% penalty on any taxpayer who submits a claim for tax refund that the IRS deems “inaccurate,” even if the taxpayer’s position is legally non-frivolous and asserted in good faith. In part because the IRS has rarely imposed the penalty since its enactment, the statute has thus far not been analyzed extensively by legal scholars or policymakers. However, the penalty continues to impose a significant chilling effect on tax refund claims, and the Treasury Department has now signaled the possibility of more aggressive application in the future. This article argues that the erroneous refund penalty is unconstitutional under the Petition Clause of the First Amendment. Penalizing taxpayers financially for asking their government to return money they believe is legally theirs strikes at the heart of the Petition Clause’s protections. Indeed, protecting citizens’ right to complain about abusive taxation by the national Government was one of the Framers’ core motivations for enacting the First Amendment. The article draws on the history of the First Amendment, the Supreme Court’s Petition Clause jurisprudence, and recent lower court decisions in exposing the constitutional infirmity of the penalty. The article also explains that the erroneous refund penalty is unjustified as a matter of tax policy, because it fails to promote voluntary compliance, is irrationally harsh and unfair to taxpayers, and is not necessary to solve the narrow, targeted problems that Congress intended to address in enacting the statute. Finally, the article suggests ways in which the penalty could be amended, if it is not repealed altogether, to avoid infringing on taxpayers’ First Amendment rights and ensure that refund claims are treated fairly.

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

Afield: A Market for Tax Compliance

W. Edward Afield III (Ave Maria), A Market for Tax Compliance, 62 Clev. St. L. Rev. 315 (2014):

It is becoming increasingly clear that, due to political realities and budgetary constraints, the IRS is going to have to attempt to enforce the tax laws by doing more with less. Current enforcement efforts have yielded a tax gap (i.e., the difference between the amount of taxes that should be paid and the amount that are collected) of roughly $450 billion annually. Faced with this task, one of the steps that the IRS has recently taken is to try to improve the quality in services performed by paid tax preparers, a group that historically has been subject to little IRS regulation or monitoring but that continues to play an increasingly important role in the tax system.

Although the IRS’s recent efforts to better regulate paid preparers is a good step in improving the quality of tax services, its current structure as a mandatory regulatory regime causes it to miss a number of compliance oriented advantages that could be achieved through a voluntary system of tax preparer regulation in which tax preparers could choose to seek certifications indicating whether they had a positive track record of compliance.

This paper explores in detail for the first time in the literature how preparer regulation could achieve significantly more compliance gains if it were structured as a voluntary system designed to create a market that rewards tax compliance.

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

The IRS Scandal, Day 525

Wednesday, October 15, 2014

Borden Presents REIT Stuff at Florida

BordenBradley T. Borden (Brooklyn) presented REIT Stuff at Florida as part of its Graduate Tax Program Colloquium Series:

Real estate investment trusts (REITs) have made headlines recently because they provide favorable tax treatment to corporations that primarily own real estate, which contrasts with the typical double-tax that generally applies to corporations. The media appears to be particularly concerned that existing corporations are spinning off their real estate holdings into REITs, eroding the corporate tax base. It is also concerned that the IRS has extended REIT classification to entities that hold property, such as telecommunications equipment, billboards, mortgages, oil and gas pipeline systems, timber, casinos, and data centers, which do not fit within the traditional definition of real estate. Such extension broadens the scope of favorable REIT tax treatment to property that was not held in real estate trusts when Congress enacted the REIT regime. Despite all of this attention, the effect of REIT spinoffs and the formation of REITs with non-traditional real estate assets may not have a very significant effect on federal tax revenues. This Article will closely examine the revenue effect of REIT spinoffs and the extension of REIT treatment to non-traditional real estate assets. Early work in this are suggests that the revenue effect appears to be nominal, and it is a result of dual, overlapping tax policies—favorable tax treatment of real estate and tax-exempt status for retirement plans. The analysis will set the stage for discussing potential action in this area by recounting the history of REITs and the important events that have directed the course of REIT legislation to its current status. The early analysis appears to suggest that lawmakers should either reconsider the preference for real estate and pensions or consider relaxing the law to provide more efficient ways for corporations to bifurcate real-estate income from operating income and more easily obtain the benefits available under current law.

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

The Need for a Patent Box Tax Regime to Encourage Domestic Manufacturing

Bernard Knight (Partner, McDermott, Will & Emery, Washington, D.C.) & Goud Maragani (Senior Counsel, USPTO), It Is Time for the United States to Implement a Patent Box Tax Regime to Encourage Domestic Manufacturing, 19 Stan. J.L. Bus. & Fin. 39 (2013):

In order to curb the outsourcing of industries and jobs, the United States must provide better incentives to encourage manufacturers to operate domestically. The United States is at a strategic disadvantage vis-à-vis many other industrialized nations that attract industry and jobs by taxing income from intellectual property sourced in those countries at a lower tax rate. This Article suggests that the United States should consider a patent box regime and outlines the benefits that such a regime should produce in terms of additional domestic manufacturing and job creation. The Article begins by discussing scholarly work that explores the link between domestic manufacturing and research and development, and explains why domestic manufacturing is critical to innovation. In turn, innovation leads to more productivity, higher paying jobs and lower unemployment. The next Section summarizes the significant features of the existing patent box tax regimes in certain European Union nations and China. Taking into account the positive attributes and deficiencies of the existing patent box regimes, the Article concludes by suggesting features that should be considered for inclusion in a U.S. patent box regime.

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

Deadline Today: Call for Tax Papers and Panels for 2015 Law & Society Annual Meeting

SeattleToday is the deadline for Neil Buchanan's call for tax papers and panels for next year's annual meeting of the Law & Society Association in Seattle (May 28-31, 2015):

For the eleventh consecutive year, I will organize sessions for the the Law, Society, and Taxation group (Collaborative Research Network 31).

Although there is an official call for papers, please remember that you are not bound by the official theme of the conference.  I will give full consideration to proposals in any area of tax law, tax policy, distributive justice, interdisciplinary approaches to tax issues, and so on.

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October 15, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

SSRN Tax Professor Rankings

SSRN LogoSSRN has updated its monthly rankings of 944 American and international law school faculties and 3,000 law professors by (among other things) the number of paper downloads from the SSRN database.  Here is the new list (through October 1, 2014) of the Top 25 U.S. Tax Professors in two of the SSRN categories: all-time downloads and recent downloads (within the past 12 months):

 

 

All-Time

 

Recent

1

Reuven Avi-Yonah (Mich.)

40,434

Reuven Avi-Yonah (Mich.)

6677

2

Paul Caron (Pepperdine)

26,751

Ed Kleinbard (USC)

5005

3

Louis Kaplow (Harvard)

23,022

Richard Ainsworth (BU)

2688

4

D. Dharmapala (Chicago)

20,615

D. Dharmapala (Chicago) 

2630

5

Vic Fleischer (San Diego)

20,156

Paul Caron (Pepperdine)

2624

6

James Hines (Michigan)

19,969

Robert Sitkoff (Harvard)

2051

7

Ted Seto (Loyola-L.A.)

19,266

Omri Marian (Florida)

1986

8

Richard Kaplan (Illinois)

19.122

Richard Kaplan (Illinois)

1901

9

Ed Kleinbard (USC)

16,472

Katie Pratt (Loyola-L.A.)

1824

10

Katie Pratt (Loyola-L.A.)

16,334

Bridget Crawford (Pace)

1626

11

Dennis Ventry (UC-Davis)

15,417

Jen Kowal (Loyola-L.A.)

1583

12

Carter Bishop (Suffolk)

15,230

Brad Borden (Brooklyn.)

1578

13

Jen Kowal (Loyola-L.A.)

14,568

David Gamage (UCBerkeley)

1509

14

David Weisbach (Chicago)

14,483

Jeff Kwall (Loyola-Chicago)

1502

15

Chris Sanchirico (Penn)

14,317

Louis Kaplow (Harvard)

1457

16

Richard Ainsworth (BU)

14,260

James Hines (Michigan)

1421

17

Robert Sitkoff (Harvard)

14,168

Francine Lipman (UNLV)

1390

18

Francine Lipman (UNLV)

14,009

Dan Shaviro (NYU)

1376

19

Brad Borden (Brooklyn)

13.974

Dick Harvey (Villanova)

1343

20

David Walker (Boston Univ.)

13,965

Vic Fleischer (San Diego)

1308

21

Bridget Crawford (Pace)

13,955

Ted Seto (Loyola-L.A.)

1292

22

Herwig Schlunk (Vanderbilt)

12,527

Carter Bishop (Suffolk)

1252

23

Dan Shaviro (NYU)

12,171

David Weisbach (Chicago)

1176

24

Ed McCaffery (USC)

11,771

Gregg Polsky (North Carolina)

1156

25

Wendy Gerzog (Baltimore)

11,759

Chris Sanchirico (Penn)

1151

Note that this ranking includes full-time tax professors with at least one tax paper on SSRN, and all papers (including non-tax papers) by these tax professors are included in the SSRN data.

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October 15, 2014 in Scholarship, Tax, Tax Prof Rankings | Permalink | Comments (0)

Ireland Pulls Curtain on 'Double Irish' Tax Break

Rich States, Poor States

RSPS_7th_EditionArthur B. Laffer, Stephen Moore & Jonathan Williams, Rich States, Poor States (7th ed. 2014):

In this seventh edition of Rich States, Poor States, Arthur B. Laffer, Stephen Moore, and Jonathan Williams highlight specific policy choices throughout the 50 states that have led some states to economic prosperity and others to lackluster growth. The authors provide the 2014 ALEC-Laffer State Economic Competitiveness Index, based on the economic policies of the states. Through the empirical evidence and analysis contained in this edition of Rich States, Poor States, the policies for economic growth are clear.

In chapter one, the authors provide updates on important policy developments that occurred throughout 2013 and the first half of 2014 in an in-depth, state-of-the-states analysis. ... Chapter two chronicles the movement of both people and income throughout the states. ... In chapter three, the authors provide a detailed explanation of not just which policies are conducive to economic growth and which ones are not, but also why this is the case. ... Finally, chapter four is this year’s comprehensive ALEC-Laffer State Economic Competitiveness Index.

Table 2

  Table 1

October 15, 2014 in Tax | Permalink | Comments (3)

The IRS Scandal, Day 524

IRS Logo 2Forbes:  President Obama, Audit Threats, And Rogue IRS Employees, by Robert W. Wood:

The fallout from the IRS targeting flap isn’t over. The key lost emails could be the result of bona fide, unanticipated, and irreversible computer crashes. Yet some still see finger-prints of a cover-up. It provides fodder for the online equivalent of jawing around the water-cooler. Either way, conservative groups are outraged.

More broadly, there is a general malaise about the IRS and our tax system. It is not enough for the IRS to do a good job of enforcing the tax laws in a fair and non-discriminatory way. As important, the IRS needs to be perceived as fair. If profiling is a dirty word, it should be equally dirty when the IRS does it. Truly, audit targeting is scary. ...

Don’t forget President Obama’s audit quip in 2009 in a commencement speech. The President joked about Arizona State University’s decision not to award him an honorary degree:

“I really thought this was much ado about nothing, but I do think we all learned an important lesson. I learned never again to pick another team over the Sun Devils in my NCAA brackets. . . . President [Michael] Crowe and the Board of Regents will soon learn all about being audited by the IRS.”

It was an innocent remark, but some pundits didn’t see any humor. Comedians joke about such things, not Presidents, especially not with the history this charged issue has had. It would only be a few years before the ‘rogue employees’ excuse could be used about IRS targeting. In the meantime, a clever remark can go a long way.

‘Gee, I thought you wanted me to ice that guy,’ a mafia button man might say. With plausible deniability, the don might get off scot free. Presumably, though, we can’t see what Ms. Lerner told her exempt organization subordinates in Cincinnati. If there were truly rogue employees, might they have misunderstood their mission and gotten overzealous?

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October 15, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Tuesday, October 14, 2014

Fleischer Presents Curb Your Enthusiasm for Pigouvian Taxes Today at Columbia

Fleischer Vic (2013)Victor Fleischer (San Diego) presents Curb Your Enthusiasm for Pigouvian Taxes at Columbia today as part of its Tax Policy Colloquium Series hosted by Alex RaskolnikovDavid Schizer, and Wojciech Kopczuk:

Pigouvian (or "corrective") taxes have been proposed or enacted on dozens of products and activities that may be harmful in excess: carbon, gasoline, fat, sugar, guns, cigarettes, alcohol, traffic, zoning, executive pay, and financial transactions, among others. Academics of all political stripes are mystified by the public’s inability to see the merits of using Pigouvian taxes more frequently to address serious social harms.

This enthusiasm for Pigouvian taxes should be tempered. A Pigouvian tax is easy to design — as a uniform excise tax — if one assumes that each individual causes the same amount of harm with each incremental increase in activity on the margin. This assumption of uniform marginal social cost pairs well with the limited information and enforcement capacity of tax institutions. But when marginal social cost varies significantly, a Pigouvian tax will not lead to an optimal allocation of economic resources. Focusing on carbon emissions, where the assumption of uniform marginal social cost happens to be reasonable, obscures this common design flaw.

Broadly speaking, Pigouvian taxes should be employed only when (1) the harm is (or is properly analogized to) global pollution, and where the harm does not vary based on the source, or (2) the variation in marginal social cost is easily observed and categorized, as with traffic congestion charges.

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October 14, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Fleischer: Charitable Giving and Utilitarianism

Miranda Perry Fleischer (San Diego), Charitable Giving and Utilitarianism: Problems and Priorities, 89 Ind. L.J. 1484 (2014):

Charitable giving is redistributive at heart. It is thus surprising that scholarship on the charitable tax subsidies focuses on the efficient and pluralistic production of public goods while largely ignoring distributive justice concerns. Existing scholarship and current law leave crucial questions unanswered: How should we prioritize among charities? Should subsidized groups be required to help the poor? Are criticisms that charities do too little to help the poor valid? This Article is part of a series that examines how each common theory of distributive justice would answer these questions.

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

Law Faculty Rankings Should Focus More on Non-Academic Influence

Patrick Arthur Woods, Stop Counting (Or At Least Count Better):

For American legal scholarship to fulfill its purpose, it must have an impact on the development of the actual law as it is enacted and interpreted in the United States. However, legal scholarship broadly — and law review articles in particular — has become less influential on judges and members of the practicing bar over time. This short essay argues that the decline is partly attributable to the open reliance on metrics that primarily represent influence within the legal academy when measuring the value of a scholar’s work. In particular, I argue that a focus on metrics with only a tenuous connection to non-academic usage of a new scholar’s work, such as download counts, law journal citation count-based rankings methodologies, and article placement, incentivizes new legal writers to write for other academics rather than for judges, attorneys in practice, or policy-makers.

October 14, 2014 in Law School Rankings, Scholarship, Tax | Permalink | Comments (3)

Epstein: We Need a Real Flat Tax, Not Kleinbard's Version

Hoover Institution:  We Need a Real Flat Tax, by Richard A. Epstein (NYU):

I was heartened recently to see Edward Kleinbard’s op-ed in the New York Times, with its alluring title, “Don’t Soak the Rich.” But as I read the piece by Kleinbard, a law school professor at the University of Southern California, it became clear that his proposed solution was a classic bait-and-switch operation. Kleinbard’s so-called flat tax soaks the rich by a different route. He proposes a tax hike on everyone evenly and then suggests that the government spend most of the extra revenues on the poor, either by direct grants or public expenditures from which they derive the lion’s share of the benefit.

The flat tax deserves a better send-off. Historically, the tax was championed by such notables as Aristotle, Locke, and Hayek as a device to reduce the government’s role in the lives of its citizens. Even a limited government must do many things—provide national defense, preserve internal order, and supply the infrastructure on which a well-organized private sector markets run. Accomplishing these daunting tasks requires public revenues. The challenge for the defender of limited government is to find that set of taxes that minimizes the distortions of a market economy while generating revenue to accomplish government’s necessary and proper goals. ...

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October 14, 2014 in Tax | Permalink | Comments (1)

Call for Papers: University of North Carolina Tax Symposium

North Carolina Tax SymposiumThe University of North Carolina Kenan-Flagler School of Business has issued a call for papers for its Eighteenth Annual Tax Symposium to be held April 10-11, 2015. The symposium "is designed to bring together leading tax scholars from economics, accounting, finance, law, political science, and related fields." The deadline for the call for papers is January 1, 2015:

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

Thimmesch: The Tax Hangover -- Trailing Nexus

Tax Analysys Logo (2013)Adam B. Thimmesch (Nebraska), Evaluating the Tax Hangover: Trailing Nexus, 74 State Tax Notes 83 (Oct. 13, 2014):

In this article, which is adapted from a longer law review article [The Tax Hangover: Trailing Nexus, 33 Va. Tax Rev. 497 (2014)], Thimmesch examines the concept of trailing nexus. He argues that the concept is consistent with the physical presence standard and proposes an economic latency approach, which he asserts is consistent with both constitutional principles and economic reality.

October 14, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

Boston College Seeks to Hire a Tax Clinician

BC LogoBoston College Law School seeks to hire a full-time tax clinician:

Boston College Law School seeks a full-time faculty member interested in establishing and teaching in a transactional clinic that emphasizes entrepreneurship, technology, and the innovation economy.

JOB DESCRIPTION: The successful applicant will be expected to expand the offerings of one of our existing clinics or develop a new program, which may include hybrid arrangements with outside institutions such as incubators, corporations or law firms, and may include simulation as a method of instruction. The focus of teaching should be business formation, business transactions, taxation, or intellectual property. The successful applicant will play a major role in determining the clinic's specific emphasis and operation.

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

The IRS Scandal, Day 523

IRS Logo 2Town Hall:  The White House Dogs, by Erick Erickson:

There are two dogs living in the White House other than the Obamas' pet dog. The first of the two dogs is the one that eats all the homework. It has been let loose across government agencies.

The Internal Revenue Service had an encounter with the dog. Lois Lerner, in charge of the division accused of harassing conservative groups, suddenly had her hard drive crash. All her emails were gone. Then six other employees mysteriously had their emails vanish. All seven were relevant to the congressional probe of the IRS.

The emails appear not to be on any servers. They do not seem to have been backed up, or the back ups were destroyed too. The emails have simply vanished. It is just awfully convenient that they were emails involved in a congressional probe.

Once the dog finished eating emails at the IRS, it moved over to the Environmental Protection Agency. The Competitive Enterprise Institute filed a request for certain emails and text messages from or to EPA administrator Gina McCarthy. According to the Washington Times last Wednesday, the EPA now says thousands of text messages related to Ms. McCarthy have simply disappeared. Her emails too are gone. The Competitive Enterprise Institute and the EPA are involved in a lawsuit, making the disappearance of the emails even more serious.

Now it is not just congressional Republicans looking at disappearing data. A federal judge is involved, too. Congressional Republicans can be dismissed far more easily than a federal judge in a black robe with a gavel.

It seems the IRS and EPA are not the only government agencies visited by this hungry dog. The Securities and Exchange Commission has lost hundreds of computers with information on them that could be used for insider trading purposes. ...

That leads us to the other dog living in the Obama White House. In "Silver Blaze," a short story about Sherlock Holmes by Sir Arthur Conan Doyle, a prized racehorse went missing the night before a major race. Holmes, investigating the disappearance and the related death of the horse's trainer, refers "to the curious incident of the dog in the nighttime." The curious incident was that the dog did not bark. The dog at the stables made no sound as the thief stole the horse because the dog knew the thief.

The Obama administration has not barked in these cases. Internal Revenue Service emails from employees under investigation by Congress have been deleted. The Obama administration's best guess is that there was just an unfortunate coincidence of timing with an obligatory reference to "partisan witch hunts." The same holds for the EPA and now the SEC.

The Obama administration has expressed little concern, mostly taking the opportunity to blame Republicans. Government data has been deleted, and no one in the White House seems concerned. The dog is not barking. ...

The matters on which the White House dogs are willing to bark and be quiet should direct the attention of an objective press. The silence on the IRS and EPA is very telling.

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

Monday, October 13, 2014

Sanchirico Presents International Tax and Ownership Nationality Today at Florida

SanchiricoChris Sanchirico (Pennsylvania) presents As American as Apple, Inc.: International Tax and Ownership Nationality, 68 Tax L. Rev. ___ (2014), at Florida today as part of its Graduate Tax Program Colloquium Series:

The ownership nationality of large US multinational companies plays an implicit but important role in the current debate over how such companies should be taxed. This paper identifies that role and investigates what is actually known about where these companies’ shareholders reside.

October 13, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Mayer Presents Taxing Politics Today at Loyola-L.A.

MayerLloyd Hitoshi Mayer (Notre Dame) presents Taxing Politics at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

This draft Article addresses two key questions relating to the interaction between federal tax law and political activity. First, is it advisable as a policy matter for Congress to use the tax law to regulate the flows of money in politics in furtherance of non-tax goals such as combatting corruption, promoting equality, and encouraging democratic participation? I answer this first question generally no, in significant part because the tax law and the IRS are poorly suited for this role and suffer significant collateral damage when their poor fit becomes evident, as the ongoing controversy over the IRS’ handling of exemption applications filed by Tea Party and other conservative groups reveals. Second, does tax law in its current form treat political activity properly based on longstanding tax policies relating to what constitutes income, what expenses should be deductible, what constitutes a taxable gift, and what characteristics organizations should have in order to qualify for tax exemption? I answer this second question generally yes, but identify several areas where the tax law needs to be changed to achieve greater consistency with such policies, including with respect to reducing the amount of political activity that is deemed permissible for most types of tax-exempt organizations.

Ellen Aprill (Loyola-L.A.) and Justin Levitt (Loyola-L.A.) are the commentators.

October 13, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Does the USA Really Soak the Rich?

Next New Deal (Blog of the Roosevelt Institute), Does the USA Really Soak the Rich?:

There's a new argument about taxes: the United States is already far too progressive with taxation, it says, and if we want to build a better, eglitarian future we can't do it through a "soak the rich" agenda. It's the argument of this recent New York Times editorial by Edward D. Kleinbard, and a longer piece by political scientists Cathie Jo Martin and Alexander Hertel-Fernandez at Vox. I'm going to focus on the Vox piece because it is clearer on what they are arguing.

There, the researchers note that the countries “that have made the biggest strides in reducing economic inequality do not fund their governments through soak-the-rich, steeply progressive taxes.” They put up this graphic, based on OECD data, to make this point:

You can quickly see that the concept of "progressivity" is doing all the work here, and I believe the way they are going to use that word will be problematic. What does it mean for Sweden to be one of the least progressive tax state, and the United States the most? ... 

When average people usually talk about soaking the rich, they are talking about the marginal tax rates the highest income earners pay. But as we can see, in Sweden the rich pay a much higher marginal tax rate [56% v. 39%]. ... 

[Jo Martin and Hertel-Fernandez] are measuring how much of tax revenue comes from the top decile ...  and calling that the progressivity of taxation. ...  The fact that the United States gets so much more of its tax revenue from the rich when compared to Sweden means we have a much more progressive tax policy, one of the most progressive in the world. Congratulations?

The problem is, of course, that we get so much of our tax revenue from the rich because we have one of the highest rates of inequality across peer nations. How unequal a country is will be just as much of a driver of the progressivity of taxation as the actual tax polices. In order to understand how absurd this is, even flat taxes on a very unequal income distribution will mean that taxes are “progressive” as more income will come from the top of the income distribution, just because that’s where all the money is. Yet how would that be progressive taxation?

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October 13, 2014 in Tax | Permalink | Comments (0)