TaxProf Blog

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

Tuesday, September 25, 2018

Dependence On Income Tax Revenue Leaves California Vulnerable; Budget Experts Call For 'Political Unicorn' Of Real Tax Reform

L.A. Times, Dependence on Income Tax Revenue Leaves State Vulnerable:

While Democrat Gavin Newsom and Republican John Cox campaign on their visions for the state’s next chapter, it’s the financial success of residents in Palo Alto’s 94301 and a handful of other affluent ZIP Codes that will determine whether promises to build more houses, overhaul healthcare or invest in schools can actually be kept.

The state scooped up just under $1 billion from nearly 9,000 tax returns filed in 94301 in 2016 — more revenue than from any other ZIP Code in California.

CA1

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September 25, 2018 in Tax | Permalink | Comments (2)

Death Of David Laro (Tax Court Judge)

LaroDavid Laro, Senior Judge of the U.S. Tax Court, died on Friday, September 21, at the age of 76.  From the family:

We are planning a celebration of David’s life at the Sixth & I Historic Synagogue in Washington, D.C. on Thursday, September 27th at 2:30 p.m. We will be sitting shiva at Marlene and Andrew's house (8203 Hampton Oak Court, McLean, VA) after the service until 9:00 p.m.

In lieu of flowers, memorial donations may be made to the Judge David Laro Scholarship in Taxes at NYU School of Law and the Judge David Laro Tax Law Scholarship at USD School of Law.

From David's Tax Court biography:

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September 25, 2018 in Legal Education, Obituaries, Tax | Permalink | Comments (0)

Monday, September 24, 2018

Clausing Presents Profit Shifting Before And After The TCJA Today At UC-Irvine

Clausing (2017)Kimberly Clausing (Reed College) presents Profit Shifting Before and After the TCJA at UC-Irvine as part of its Tax Policy Colloquium Series:

In recent years, estimates of profit shifting by multinational companies have indicated substantial revenue costs to the U.S. government, likely in excess of $100 billion per year. The TCJA has changed the climate for profit shifting in several important ways: the lower U.S. corporate rate should lower the incentive to shift profits away from the United States, the adoption of a territorial tax system should raise the incentive to shift profits abroad, and several novel base protection measures, in particular the GILTI and BEAT provisions, are aimed directly at profit shifting. This paper evaluates these changes, discussing their likely effect on the magnitude of profit shifting.

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September 24, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Fennel Presents Money Matters Today At Loyola-L.A.

Fennell (2015)Lee Anne Fennel (Chicago) presents Money Matters at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Ellen Aprill and Katie Pratt:

This chapter from my forthcoming book, Slices and Lumps: Configuring Choice in Law, Markets, and Life (University of Chicago Press 2019), examines questions of lumpiness and granularity that arise in household budgeting and public finance contexts. People often have difficulty assembling the lumps of cash required to pay for indivisible goods like cars or down payments on homes. These difficulties can explain preferences that might otherwise seem puzzling, such as for lump sums rather than fragmented payment streams of higher present value. Seeming anomalies like the prevalence of income tax refunds and lottery play can be explained by the desire for lumpy consumption that would otherwise be difficult or impossible to finance. At the same time, better segmentation can help households achieve their goals, as studies showing the power of partitioning savings suggest.

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September 24, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Lesson From The Tax Court: The Substantial Substantiation Rules In §170

Tax Court (2017)The great philosopher George Carlin understands the problem of stuff.  My wife and I have too much stuff.  My wife, however, hates yard sales.  And we cannot afford a bigger house.  So we give a lot of stuff away. 

When Congress ratcheted up the substantiation requirements for deducting non-cash charitable contributions in 1993, we stopped giving to Goodwill.  That is because Goodwill did not change their pre-printed receipt form to say the now-required magic language “no goods or services were given in exchange for this donation.”  While some of our donations were below the $250 threshold, the aggregate value of our donations of similar items regularly exceeded that amount.  I remember one year I had to go up several layers of management to even get a letter with that language sent to me before I could file my taxes.  So we now favor other charities.

I was not just being picky in wanting a proper contemporaneous receipt, as the recent case of Estelle C. Grainger v. Commissioner, T.C. Memo. 2018-117 (July 30, 2018) demonstrates.  The taxpayer there was massively confused about the basic valuation rules for donations of property.  That’s one lesson here.  But I think another important lesson in this case is just how difficult the substantiation rules in §170 can be for substantial amounts of non-cash charitable contributions.  It was certainly an eye-opener for me, particularly the lesson about Form 8283.

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September 24, 2018 in Bryan Camp, New Cases, Scholarship, Tax, Tax Practice And Procedure | Permalink | Comments (7)

TaxProf Blog Weekend Roundup

Sunday, September 23, 2018

Zelinsky: GOP Tax Law Properly Taxes Churches On Free Parking/Mass Transit Provided To Their Employees

Edward Zelinsky (Cardozo), Does TCJA Tax Churches? Should It?:

Does the new federal tax law, commonly known as the Tax Cut and Jobs Act (TCJA), tax churches as some have argued? If so, is this tax appropriate?

The answers are “yes” and “yes.” The TCJA provisions taxing qualified transportation fringes treat secular and religious employers alike, including houses of worship. In a world of imperfect choices, the TCJA reasonably treats all employers fairly without entangling church and state inordinately.

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September 23, 2018 in Tax | Permalink | Comments (1)

The Top Five New Tax Papers

SSRN Logo (2018)This week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list:

  1. [449 Downloads]  Compelled Subsidies and the First Amendment, by William Baude (Chicago) & Eugene Volokh (UCLA)
  2. [306 Downloads]  The New Non-Territorial U.S. International Tax System, Part 1, by Daniel Shaviro (NYU) (reviewed by David Elkins (Netanya) here)
  3. [220 Downloads]  The Charitable Contribution Strategy: An Ineffective SALT Substitute, by Andy Grewal (Iowa)
  4. [181 Downloads]   The Death of the Income Tax (or, the Rise of America's Universal Wage Tax), by Edward McCaffery (USC)
  5. [157 Downloads]  Taxing the Robots, by Orly Mazur (SMU)

September 23, 2018 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, September 22, 2018

This Week's Ten Most Popular TaxProf Blog Posts

Marian: Trump Tax Reform Promised A Deluge, Delivered A Drip Of Foreign Earnings

The Hill op-ed:  Tax Reform Promised a Deluge, Delivered a Drip of Foreign Earnings, by Omri Marian (UC-Irvine):

One of the main pitches Republicans made in support of last year’s tax overhaul was that it will encourage U.S. multinationals to repatriate their massive piles of foreign profits.

The new law is “going to free up a lot of money to come back and build factories here and so on," White House Council of Economic Advisers Chairman Kevin Hassett said shortly before passage of the law.

Last month, President Trump said, “[We] think it’s going to be close to $5 trillion. Over $4 [trillion], but close to $5 trillion, will be brought back into our country."

Nine months after the passage of the law, these promises have failed to materialize. A report by the Wall Street Journal found that the rate of repatriations proved sluggish.

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September 22, 2018 in Tax | Permalink | Comments (0)

Colinvaux: Defending Place-Based Philanthropy By Defining The Community Foundation

Roger Colinvaux (Catholic), Defending Place-Based Philanthropy by Defining the Community Foundation, 2018 BYU L. Rev. 1:

The article is about the changing role of the community foundation in conducting philanthropy in the United States. The historic place-based mission of the community foundation is under threat, in part because of competition with national charities that, like community foundations, sponsor donor advised funds (DAFs). The mass-market success of national DAFs is putting pressure on community foundations to conform to a national, passive, individual-based model of advised giving. Community foundations also have become caught up in a legal and policy debate that is directed primarily at national, commercially affiliated DAF sponsors. As a result, community foundations risk becoming subject to rules and regulations devised for others.

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September 22, 2018 in Scholarship, Tax | Permalink | Comments (0)

Friday, September 21, 2018

Weekly SSRN Tax Article Review And Roundup: Layser Reviews Crawford's Tax Talk And Reproductive Technology

This week, Michelle Layser (Illinois) reviews Bridget Crawford (Pace), Tax Talk and Reproductive Technology, 100 B.U. L. Rev. ___ (2019).

Layser (2018)As the U.S. fertility industry explodes, there is plenty of talk about surrogate miscarriages, freezer failures, unwieldy donor family trees, problems with privacy and anonymity, and the physical and emotional tolls of egg and sperm donation. What’s missing from the conversation? According to Professor Bridget Crawford, the answer is “tax talk.” Crawford’s article, which focuses on how egg donors talk about taxes with each other and their fertility clinics, is an empirically grounded exploration into the ways that talking about tax (or failing to do so) reflects and reinforces cultural norms.

The article begins by recounting the facts of a 2015 tax court case called Perez v. Commissioner. In that case, the taxpayer Nichelle Perez had received fees for her “time, effort, inconvenience, pain, and suffering in donating her eggs.” Perez earned her fees. She underwent a series of painful hormone injections that resulted in pain, bruising and burning. She submitted to general anesthesia and an invasive egg removal procedure that left her cramped, bloated, nauseous, fatigued and moody.

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September 21, 2018 in Michelle Layser, Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

Wells: Reform Of § 355

Bret Wells (Houston), Reform of § 355, 68 Am. U. L. Rev. ___ (2018):

Section 355 is one of the most important provisions in the US corporate tax laws because, after the 1986 Tax Reform Act, it remains the principle means of allowing for a tax-free spin-off and disposition of businesses in the publicly traded corporate context. Yet, the provision has received very limited scholarly attention. The article addresses a gap in the existing literature by addressing the normative goals of this provision and its deficiencies. Section 355 has had a curious and troubled history.

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September 21, 2018 in Scholarship, Tax | Permalink | Comments (0)

Morrow: Noncompetes As Tax Evasion

Rebecca Morrow (Wake Forest), Noncompetes as Tax Evasion, 96 Wash. U. L. Rev. ___ (2018):

Al Capone famously boasted of his criminal empire: “Some call it bootlegging. Some call it racketeering. I call it a business.” Treasury Agent Frank Wilson and Prosecutor George Johnson put Capone behind bars not by disputing his characterization and pursuing murder or assault or RICO charges, but by accepting it and enforcing its tax implications. Irrespective of their legality, Capone’s businesses were profitable, and Capone had not reported their profits for tax purposes. A simple application of bedrock tax law achieved what other legal routes failed to achieve and sent Capone to Alcatraz. The trick was to see the tax argument.

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September 21, 2018 in Scholarship, Tax | Permalink | Comments (4)

Engler: Goodwill Hunting Gone Bad — Tax Law's Outmoded Treatment Of Goodwill

Goodwill HuntingMitchell L. Engler (Cardozo), Goodwill Hunting Gone Bad: Tax Law's Outmoded Treatment of Goodwill, 96 Neb. L. Rev. 883 (2018):

Goodwill reflects the positive consumer association with a business. Goodwill thus overlaps with trademarks and other related assets. This close association impedes the separation of goodwill value from such related assets. Difficulties thus arise when the tax law treats goodwill more (or less) favorably than related intangible assets.

For instance, the tax law previously denied any depreciation deductions for goodwill. Business buyers thus often allocated their costs away from goodwill and towards related assets like depreciable customer lists. The IRS responded with the initial “goodwill hunting” wave, challenging taxpayers’ low goodwill valuations. Congress addressed this litigious area in 1993 with new, matching depreciation rules for purchased goodwill and related intangible assets.

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September 21, 2018 in Scholarship, Tax | Permalink | Comments (0)

Thursday, September 20, 2018

Viswanathan Presents A Worker-Centric Model For Sharing Economy Providers Today At Northwestern

Viswanathan (2017)Manoj Viswanathan (UC-Hastings) presents A Worker-Centric Model for Sharing Economy Providers at Northwestern today as part of its Advanced Topics in Taxation Workshop Series hosted by Sarah Lawsky:

In light of ambiguities in the December 2017 tax legislation, this Article integrates tax, corporate, employment, and labor law to propose how sharing economy workers—and rideshare drivers in particular—might optimally structure their working lives. These workers already face challenging questions about employment conditions, collective bargaining, and their classification as employees or independent contractors. The new tax legislation has only created more questions about how this growing class of income earners should most efficiently structure their working arrangements for tax purposes.

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September 20, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Zolt: Tax Treaties And Developing Countries

Eric M. Zolt (UCLA), Tax Treaties and Developing Countries, 72 Tax L. Rev. ___ (2018):

Academics and others over the last 50 years have called for developing countries to hesitate or refrain from entering into bilateral tax treaties with developed countries. Tax treaties seek to facilitate cross-border transactions and investments by reducing tax barriers and providing greater certainty to foreign investors. But treaty provisions invariably result in countries yielding taxing rights. Since at least the 1920s, treaties have arguably provided greater taxing rights to the country where the investors reside (generally, capital-exporting developed countries) rather than the country where the economic activity takes place (often, capital-importing developing countries). Where capital flows are roughly equal between countries, rules that skew taxing rights towards residence-based taxation away from source-based taxation result in little or no revenue shifting. But where capital flows are less even, the tax revenue consequences may be substantial.

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September 20, 2018 in Scholarship, Tax | Permalink | Comments (0)

Bridging The Red-Blue Divide: A Proposal For U.S. Regional Tax Relief

Reuven S. Avi-Yonah, Nir Fishbien & Haiyan Xu (Michigan), Bridging the Red-Blue Divide: A Proposal for the U.S. Regional Tax Relief:

Most large federal countries have explicit ways to reduce the economic disparities between more and less developed regions. In Germany, for example, federal revenues are distributed by a formula that takes into account the relative level of wealth of each state (the so-called Finanzausgleich, or fiscal equalization). Similar mechanisms are found in Australia, Canada, India, and other large federal countries. The United States, on the other hand, has no such explicit redistribution. Each state is generally considered equal and sovereign and the federal government does not distribute revenues to equalize their spending capacity. While the overall impact of the federal tax and transfer system may be to shift revenues from richer to poorer states, this is not acknowledged and to the extent it is discussed in the literature it is generally condemned as unfair to the states that send more revenues to Washington than they get back in federal transfer payments. Nor is it politically likely that the US will adopt a formal fiscal equalization mechanism.

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September 20, 2018 in Scholarship, Tax | Permalink | Comments (0)

Grewal: When IRS Guidance Backfires

Andy Grewal (Iowa), When IRS Guidance Backfires, 36 Yale J. on Reg.: Notice & Comment (Sept. 7, 2018):

This week, the IRS tried to clarify how proposed regulations on state tax credit programs apply to Section 162(a) business deductions. But its attempted clarification has created only more problems.

Under the proposed regulations, a taxpayer who makes a transfer to a Section 170(c) organization must reduce her charitable contribution deduction by the amount of any state tax credits received. See Prop. Reg. § 1.170A-1(h)(3)(i). Some businesses contacted the IRS and presumably expressed concerns that transferred amounts might not be deductible at all. That is, if Section 170 deductions were denied for creditable transfers, then Section 162 deductions might be denied too.

In IR-2018-178 (Sept. 5, 2018), the IRS cryptically announced that “taxpayers who make business-related payments to charities or government entities for which the taxpayers receive state or local tax credits can generally deduct the payments as business expenses.” See also IRS State and Local Income Tax FAQ. The IRS did not provide any further guidance on when a transfer to a state tax credit program will qualify as “business related.”

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September 20, 2018 in IRS News, Scholarship, Tax | Permalink | Comments (0)

Borden: Rolling Real Estate Gain Into A Qualified Opportunity Fund — Comparison With § 1031

Bradley T. Borden (Brooklyn), Rolling Real Estate Gain into a Qualified Opportunity Fund: Comparison with § 1031, 34 Tax Mgmt. Real Est. J. 155 (Sep. 5, 2018):

As part of the 2017 Tax Cuts and Jobs Act, Congress enacted Section 1400Z-2, which allows property owners to reinvest gain from the disposition of property in qualified opportunity funds (QOFs) tax free. This article illustrates how this new provision is different from the most popular commercial real estate disposition nonrecognition provision—Section 1031. Section 1400Z-2 is attractive because it not only defers gain recognition, it allows property owners to exclude any post-acquisition gain that accrues by holding the property for at least 10 years. Section 1031 now only applies to real property, so property owners have greater re-investment alternatives in QOFs. The article also recognizes that Section 1400Z-2 does not appear to have been fully vetted, so it comes with some mistakes and many open issues. Looking past those shortcomings, the article presents a numerical example comparing a hypothetical Section 1031 exchange into real property to a reinvestment of gain into a QOF.

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September 20, 2018 in Scholarship, Tax | Permalink | Comments (0)

Wednesday, September 19, 2018

Zelenak & Schmalbeck: The NCAA And The IRS — The Intersection Of College Sports And The Federal Income Tax

Lawrence Zelenak (Duke) & Richard Schmalbeck (Duke), The NCAA and the IRS: Life at the Intersection of College Sports and the Federal Income Tax, 91 S. Cal. L. Rev. ___ (2018):

Few organizational acronyms are more familiar to Americans than those of the National Collegiate Athletic Association (NCAA) and the Internal Revenue Service (IRS). Although neither organization is particularly popular, both loom large in American life and popular culture. Because there is a tax aspect to just about everything, it should come as no surprise that the domains of the NCAA and the IRS overlap in a number of ways. For many decades, the strong tendency in those areas has been for college athletics to enjoy unreasonably generous tax treatment—sometimes because of the failure of the IRS to enforce the tax laws enacted by Congress, sometimes because Congress itself has conferred dubious tax benefits on college sports. In just the past year, however, there have been signs of what may be a major attitudinal shift on the part of Congress—although so far there have been no signs of a corresponding change at the IRS. This article offers an in-depth look at the history and current status of four areas of intersection between the federal tax laws and college sports.

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September 19, 2018 in Scholarship, Tax | Permalink | Comments (0)

Viswanathan: Tax Compliance In A Decentralizing Economy

Manoj Viswanathan (UC-Hastings), Tax Compliance in a Decentralizing Economy, 34 Ga. St. U. L. Rev. 283 (2018):

Tax compliance in the United States has long relied on information from centralized intermediaries — the financial institutions, employers, and brokers that help ensure income is reported and taxes are paid. Yet while the IRS remains tied to these centralized entities, consumers and businesses are not. New technologies, such as the “sharing” economy (companies such as Airbnb, Uber, and Instacart) and the blockchain (the platform on which Bitcoin is based) are providing new, decentralized options for exchanging goods and services. Without legislative and agency intervention, these technologies pose a critical threat to the reporting system underlying domestic and international tax compliance.

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September 19, 2018 in Scholarship, Tax | Permalink | Comments (0)

Avi-Yonah: The International Provisions Of The TCJA: Six Results After Six Months

Reuven S. Avi-Yonah (Michigan), The International Provisions of the TCJA: Six Results after Six Months:

Over six months have passed since the enactment of the TCJA, so it is now possible to reach some preliminary conclusions on its impact. The main ones are:

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September 19, 2018 in Scholarship, Tax | Permalink | Comments (0)

Zelenak: Comments On The New SALT Proposed Regulations

Lawrence Zelenak (Duke), Comments on Proposed Regulations, "Contributions in Exchange for State or Local Tax Credits" (Reg-112176-18):

These comments offer three recommendations, of which only the first involves a change in the proposed regulations themselves. First, rather than treating state tax credits as an exception to the general rule that a charitable deduction is not reduced by benefits a donor receives from third parties, the final regulations should set forth a general rule that the amount of a charitable deduction is reduced by benefits a donor receives from any source on account of the donation.

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September 19, 2018 in IRS News, Tax | Permalink | Comments (1)

WSJ: Trump Promised A Rush Of Repatriated Cash, But Company Responses Are Modest

Wall Street Journal, Trump Promised a Rush of Repatriated Cash, But Company Responses Are Modest:

U.S. companies have moved cautiously in repatriating profits stockpiled overseas in response to last year’s tax-law rewrite, after the Trump administration’s assertions that trillions of dollars would come home quickly and supercharge the domestic economy.

The tax-law revamp ended the practice of taxing U.S. companies when they bring home foreign profits. Companies long complained that profit earned abroad was trapped and held it in foreign subsidiaries to avoid additional taxes.

The new law imposes a one-time tax on those old earnings—whether or not money is repatriated. It also removes federal taxes on subsequent repatriations and makes future foreign profits generally free from U.S. taxes.

“We expect to have in excess of $4 trillion brought back very shortly,” President Trump told executives assembled at his golf course in Bedminster, N.J., in August. “Over $4 [trillion], but close to $5 trillion, will be brought back into our country. This is money that would never, ever be seen again by the workers and the people of our country.”

The Wall Street Journal reviewed securities filings from 108 publicly traded companies accounting for the vast majority of an estimated $2.7 trillion in profits parked abroad, and asked each company what it was doing with the funds. In their filings and responses, they said they have repatriated about $143 billion so far this year.

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September 19, 2018 in Tax | Permalink | Comments (0)

Tuesday, September 18, 2018

Shaviro Reviews Zucman Et Al.'s The Missing Profits Of Nations

Jotwell (Tax) (2016)Daniel Shaviro (NYU), How Inevitable Is Corporate Tax Competition? (JOTWELL) (reviewing Thomas Tørsløv (University of Copenhagen), Ludvig Wier (University of Copenhagen) & Gabriel Zucman (UC-Berkeley), The Missing Profits of Nations (2018)):

How much profit-shifting, from high-tax to low-tax countries, do multinational companies (MNCs) engage in? The question is hard to answer, for both theoretical and empirical reasons. The “true” geographical source of profits earned by MNCs on their global production and sales activities would often be theoretically ambiguous even if their actions and decisions were completely transparent. In addition, however, not only is there a large gulf between what they know and what we (or the tax authorities) know, but relevant economic data may either be unavailable or reflect formalistic reporting conventions.

A recent literature review by Dhammika Dharmapala reports that, in the “more recent empirical literature, which uses new and richer sources of data, the estimated magnitude of [profit-shifting] is typically much smaller than that found in earlier studies.” James R. Hines goes further, asserting that profit-shifting is “notably small in magnitude,” and that any public (or even scholarly) impressions to the contrary merely reflect journalistically-driven over-excitement in response to a few “distasteful anecdotes of crass tax avoidance.”

But what if such conclusions—which are not, however, universal 3 —reflect data limitations? An important new National Bureau of Research Working Paper by Thomas Tørsløv, Ludvig Wier, and Gabriel Zucman (“Zucman et al”) makes novel use of macroeconomic data, comparing the wages and profits of MNCs’ foreign affiliates to those of local companies, both in tax havens and high-tax countries, to reach very different conclusions. Zucman et al find that forty percent of MNC profits are shifted to low-tax countries in a typical year, and that this estimate is conservative given the likely impact of statistical gaps. (P. 26.) ...

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September 18, 2018 in Scholarship, Tax | Permalink | Comments (0)

Glogower: Requiring Reasonable Comp From A Corp

Ari D. Glogower (Ohio State), Requiring Reasonable Comp from a Corp, 160 Tax Notes 961 (Aug. 13, 2018):

This Article considers whether a reasonable compensation requirement can be applied when a corporation makes no payment in any form to the shareholder-employee, and the implications of this question for changes under the 2017 Tax Legislation.

September 18, 2018 in Scholarship, Tax | Permalink | Comments (0)

WSJ: The IRS Is Still Going After Offshore Tax Cheats

Wall Street Journal Tax Report, The IRS Is Still Coming for You, Offshore Tax Cheats:

On Sept. 28, the Internal Revenue Service will end its program allowing American tax cheats with secret offshore accounts to confess them and avoid prison. In a statement, the IRS said it’s closing the program because of declining demand.

But the agency vowed to keep pursuing people hiding money offshore and said it will offer them another route to compliance.

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September 18, 2018 in IRS News, Tax | Permalink | Comments (0)

Corporate America 'In Limbo' As IRS Punts On Foreign Tax Issue

Bloomberg, Corporate America `in Limbo' as IRS Punts on Foreign Tax Issue:

U.S. companies anxiously awaiting guidance on how hard they’ll be hit by a new foreign levy in the tax overhaul will have to stay tuned for at least another two months.

The Internal Revenue Service proposed regulations on Thursday spanning 157 pages that provide some details on which assets are subject to the tax on Gilti, or global intangible low-tax income, and how to calculate it. But one of the most pressing questions — to what extent multinational companies can use foreign tax credits and business expenses to offset the levy — remained unanswered.

“It’s a very big deal that the FTC and expense allocation issues have been left out,” said Andrew Silverman, a Bloomberg Intelligence analyst who focuses on tax policy. The regulations are “not a great answer for companies who are essentially left in limbo.”

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September 18, 2018 in Tax | Permalink | Comments (0)

Shanske & Ventry: Blue-State Republicans Fret Over 'Tax Reform 2.0' — Rightly So

The Hill op-ed:  Blue-State Republicans Fret Over 'Tax Reform 2.0' — Rightly So, by Darien Shanske & Dennis Ventry (UC-Davis):

The new tax bill, “Tax Reform 2.0,” is here, and it makes permanent the $10,000 cap on the state and local tax deduction (SALT) created by the Tax Cut and Jobs Act (TCJA) in December 2017.

Meanwhile, Republican politicians from districts where high percentages of taxpayers will be affected by the cap are wary of making the cap permanent. A deeper dive into theories of taxpayer psychology and tax policy indicates these politicians are right to be concerned. ...

Research indicates that dismay at this tax change might be quite politically salient to the taxpayer when making voting decisions [Three Essays on Tax Salience: Market Salience and Political Salience, 65 Tax L. Rev. 19 (2011)]. Compare the large — and explicit — jump in tax liability described above to an increase in withholding taxes from periodic paychecks.

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September 18, 2018 in Tax | Permalink | Comments (0)

Monday, September 17, 2018

Hemel Presents Beyond The Marriage Tax Trilemma Today At Loyola-L.A.

Hemel (2018)Daniel Hemel (Chicago) presents Beyond the Marriage Tax Trilemma at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Ellen Aprill and Katie Pratt:

For decades, the famous “marriage tax trilemma” has played a central role in discussions of the tax treatment of the family unit. The “trilemma” refers to the mathematical impossibility of constructing a tax system that imposes the same tax liability across all married couples with the same income (couples neutrality), neither encourages nor penalizes marriage (marriage neutrality), and taxes higher income individuals at higher rates (progressivity). Numerous articles have proposed responses to the trilemma that choose two of the legs over a third or that seek to split the difference among the competing neutrality norms that the trilemma casts as desirable. Most casebooks, meanwhile, use the trilemma to introduce students to the policy debate over the taxation of marriage and the household.

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September 17, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Guillot Presents Who Paid The 75% Tax On Millionaires? Today At UC-Berkeley

GuillotMalka Guillot (Ph.D. 2018, Paris School of Economics) presents Who Paid the 75% Tax on Millionaires? Optimization of Salary Incomes and Incidence in France at UC-Berkeley today as part of its Robert D. Burch Center for Tax Policy and Public Finance Seminar Series:

Using several administrative datasets, I study the impact of temporary tax on top wage income earners, implemented for 2013 and 2014 only and known as the "75% tax above 1m euro''. The tax is nominally paid by the firms. The tax base is gross annual salary income above one million euros and the top marginal tax rate on wage earners increased from 64% to 74% because of the tax. About 400 employers paid the tax each year and about 1000 employees were concerned. I document that the tax was largely borne by employers, who paid 80% of the tax.

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September 17, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Call For Tax Papers And Panels: SEALS 2019 (Boca Raton, Florida)

SEALs Logo (2013)It's already time to think about SEALS 2019!  The conference will be held July 28-August 3, 2019 in Boca Raton, Florida.  The conference submission tool is now open, and I am eager to coordinate people who are interested in presenting tax work at the SEALS conference into relevant panel groups.  In addition, we have also had very successful Tax Policy Discussion Groups in recent years.  Panels are generally composed of 4 to 5 people speaking for 15 to 20 minutes each.  I will attempt to group papers so that panels include papers on similar topics.  The Discussion Group includes about 10 people, each speaking for 5-8 minutes on a topic related to tax policy, broadly interpreted.  This has often included topics that are not necessarily fully formed paper ideas, but are thoughts the presenter has had on something he or she would like to discuss with a group of smart, informed people in an informal setting.  Both types of presentation have been very successful in the past.  Each presenter may participate in one Panel AND one Discussion Group.

So, if you are interested in submitting to SEALS and would like me to include you in a group of other tax profs, please email jbirdpollan@uky.edu with the following information:

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September 17, 2018 in Conferences, Legal Education, Tax | Permalink | Comments (0)

Lesson From The Tax Court: Distinguishing Property Settlement From (Indirect) Alimony

Tax Court (2017)Congress eliminated the deduction for alimony in the December 2017 Reconciliation Act (informally called the Tax Cuts and Jobs Act).  But the legislation grandfathered in alimony payments made pursuant to divorce or separation instruments executed on or before December 31, 2018. The question of whether a payment qualifies as alimony will thus still be important for many taxpayers for years to come.  The short lesson from the recent decision in Jeremy Adam Vanderhal v. Commissioner, T.C. Sum. Op. 2018-41 (Sept. 5, 2018) is thus worth blogging about.  Plus, it's nice to blog about one of those very rare wins for a pro se taxpayer.

This is mainly a drafting lesson: the tax effect of language in a divorce or separation instrument turns on what the language does more than what the language says it does. Here, Judge Carluzzo gives a very nice lesson on how not to be distracted by what the language says it is doing.

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September 17, 2018 in Bryan Camp, New Cases, Scholarship, Tax | Permalink | Comments (2)

Tax Policy Center: GOP Tax Reform 2.0 Would Add $3.8 Trillion To Deficit

Washington Post, New Estimate: GOP’s Second Tax Cuts Would Add $3.8 Trillion to Deficit:

A second round of Republican tax cuts would add an additional $3.2 trillion to the federal deficit over a decade, according to a new report released by a centrist think-tank.

The package was taken up by a House committee on Thursday and is expected to head to a vote on the floor later this month.

The GOP’s “tax reform 2.0” would make permanent many of the individual and estate tax provisions in the tax law Republicans passed last fall, which the Congressional Budget Office said would already add about $1.9 trillion to the deficit, factoring for interest costs.

The second round of cuts would cost $631 billion before 2028 and an additional $3.15 trillion in the decade after that, according to the Tax Policy Center.

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September 17, 2018 in Tax | Permalink | Comments (3)

NY Governor Cuomo Calls For Inspector General To Investigate Politicization Of The U.S. Tax System

Governor Cuomo Calls for Inspector General to Investigate Politicization of the U.S. Tax System:

Call for Investigation Comes After Last Week's Egregious IRS Regulation "Clarification" Aimed at Benefitting Red States

Governor Andrew M. Cuomo today sent a letter to the Treasury Department's Office of Inspector General, calling for an investigation into the politicization of the U.S. tax system after the federal government's continued attempts to block New York's efforts to provide relief to middle class taxpayers while continuing to support programs in states that voted for President Trump. 

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September 17, 2018 in IRS News, Tax | Permalink | Comments (4)

TaxProf Blog Weekend Roundup

Sunday, September 16, 2018

Morse: Seeking Comparables In Patent And Tax

Susan C. Morse (Texas), Seeking Comparable Transactions in Patent and Tax, 37 Rev. Litig. Brief 1 (2018):

Most business firms do not go around licensing their crown jewel intellectual property to unrelated third parties. This presents a problem for both patent law and tax law. In patent litigation, setting damages for a reasonable royalty under Georgia Pacific invites the use of a benchmark royalty rate that would have been agreed to had the litigating parties negotiated a market rate in advance. This counterfactual analysis repeats in tax law when firms allocate taxable income among affiliates located in different tax jurisdictions. Transfer pricing rules similarly seek a price, such as a royalty, that would have been agreed to had the related affiliates negotiated a market rate as adverse, or “arm’s length,” parties.

In their Article, Tax Solutions to Patent Damages, Jennifer Blouin and Melissa Wasserman argue that tax transfer prices can provide some of the data needed to set patent litigation damages. One could also ask the converse, which is whether patent litigation outcomes can provide some data that tax transfer pricing needs. If patent law looks to tax transfer prices, it sees the advantage that the tax transfer prices are set ex ante when IP developed by one affiliate was first used by another affiliate. This roughly aligns with patent law’s touchstone of a “hypothetical negotiation” that produces an “ex ante” license. If tax law looks to patent law, it sees the advantage that patent damages emerge from an adversarial process. Patent damages may be set ex post, but their validity is bolstered by the fact that they are contested.

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September 16, 2018 in Scholarship, Tax | Permalink | Comments (0)

NY Times: Is California A Good Role Model For The Nation?

California (2016)New York Times op-ed:  Is California a Good Role Model?, by Thomas B. Edsall:

Conservatives argue that California’s liberal politics have failed. They point out that by one key measure the state now has the highest poverty rate in the nation and they argue that its liberal minimum wage and restrictive housing codes have more than a hundred thousand people homeless, more than a million unemployed and millions more stuck on the bottom rungs of the socioeconomic ladder.

Liberals see a dynamic California where wealth generated by Hollywood and an immigrant-rich high tech industry, in concert with a top university system, has fueled a politically dominant Democratic coalition of Hispanics, Asians, blacks and whites steadily moving millions of people up from where they started.

“This is a topsy-turvy debate,” Jonathan Rodden, a political scientist at Stanford, told me by email. “The left celebrates California’s rapid growth while turning a blind eye to its inequality. The right decries poverty and inequality while discounting rapid economic growth.”

The dispute raises three basic questions.

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September 16, 2018 in Tax | Permalink | Comments (3)

The Top Five New Tax Papers

SSRN Logo (2018)SSRN has updated its list of the Top 5 Recent Tax Paper Downloads for the first time in a month:

  1. [440 Downloads]  Compelled Subsidies and the First Amendment, by William Baude (Chicago) & Eugene Volokh (UCLA)
  2. [276 Downloads]  The New Non-Territorial U.S. International Tax System, Part 1, by Daniel Shaviro (NYU) (reviewed by David Elkins (Netanya) here)
  3. [209 Downloads]  The Charitable Contribution Strategy: An Ineffective SALT Substitute, by Andy Grewal (Iowa)
  4. [145 Downloads]   The Death of the Income Tax (or, the Rise of America's Universal Wage Tax), by Edward McCaffery (USC)
  5. [142 Downloads]  Taxing the Robots, by Orly Mazur (SMU)

September 16, 2018 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, September 15, 2018

This Week's Ten Most Popular TaxProf Blog Posts

Lawyers Spar Over Trump Tax Return FOIA Suit At D.C. Circuit

Trump Tax ReturnsNational Law Journal, Lawyers Spar Over Trump Tax Return FOIA Suit at DC Circuit:

A U.S. Department of Justice lawyer told a D.C. appeals court Thursday that an advocacy group seeking President Donald Trump’s tax returns hadn’t “perfected” its open records request, but at least one judge on the panel appeared skeptical.

Attorneys for the advocacy group Electronic Privacy Information Center and the DOJ sparred before the three-judge panel on the U.S. Court of Appeals for the D.C. Circuit, as part of EPIC’s continued bid to force the IRS to hand over Trump’s tax returns. U.S. District Judge James Boasberg of the District of Columbia tossed its Freedom of Information Act lawsuit last year, a ruling Epic appealed.

Michael Murray, a DOJ lawyer who argued on behalf of the IRS, urged the panel to keep the lower court ruling intact, insisting EPIC had not exhausted all remedies when it sought Trump’s tax returns through a Freedom of Information Act request.

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September 15, 2018 in Tax | Permalink | Comments (3)

Friday, September 14, 2018

Weekly SSRN Tax Article Review And Roundup: Kleiman Reviews Shakow's Taxing Entities That Live On A Blockchain

This week, Ariel Jurow Kleiman (San Diego) reviews a new work by David J. Shakow (Penn), The Tao of The DAO: Taxing an Entity that Lives on a Blockchain, 160 Tax Notes 929 (Aug. 13, 2018).

StevensonMuch as governments have struggled for centuries to harness income flows transcending national borders, today governments face the novel challenge of taxing income flows that transcend the boundaries of the tangible world.  Specifically, blockchain technology has enabled cyberspace-based financial arrangements that trigger seemingly endless tax and regulatory quandaries. (See, e.g., here and here.)  David Shakow tackles one such quandary in his recent Tax Notes article, considering the tax treatment of income earned through a blockchain entity known as a decentralized autonomous organization (DAO).

Shakow’s article begins with a mercifully clear explanation of the formation, structure, and eventual demise of a specific DAO, called “The DAO.”  Formed in 2016 on the Ethereum blockchain platform, The DAO collected $150 million to invest in startup enterprises.  Under The DAO’s terms, anonymous investors would vote on which enterprises to invest in and would share in the profits.  All transactions occurred without the need for human involvement via the operation of “smart contracts” recorded in the Ethereum blockchain.  Human interveners were only necessary to confirm the identities of startup companies that submitted proposals for investment by The DAO.

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September 14, 2018 in Ariel Stevenson, Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

Even Conservative Economists Question White House Claim That Corporate Tax Cuts Have Already Paid For Themselves

Bloomberg, Conservative Economists Question White House’s Corporate Tax Cut Claim:

Several conservative economists, including one of President Donald Trump’s campaign advisers, disputed the White House’s claim that a corporate tax cut Trump signed into law last year has already paid for itself.

Trump’s top economic adviser, Kevin Hassett, highlighted economic stimulus from the tax cuts as part of a presentation to reporters on Monday [America’s Economy is Booming Thanks to President Donald J. Trump] intended to strengthen Trump’s claim that U.S. economic growth is due to his policies. “I think that the notion that the corporate tax side has about paid for itself is clearly in the data,” Hassett said.

Some of his colleagues disagree. Stephen Moore, an economist at the conservative Heritage Foundation who advised Trump’s campaign, said Hassett’s claim is “a little premature, because we don’t know how long this boom will last.” Kyle Pomerleau, an economist at the conservative Tax Foundation, and Peter Morici, a conservative economist at the University of Maryland, also said Hassett’s claim went too far.

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September 14, 2018 in Tax | Permalink | Comments (0)

Gonzaga Seeks To Hire A Tax Clinician

Gonzaga LogoGonzaga University School of Law seeks applicants for a three-quarter-time Lecturer in its Federal Tax Clinic, with flexibility to serve in other areas as needed by the clinical program. This position is dependent on a Low Income Taxpayer Clinic (LITC) grant awarded from the IRS. Gonzaga Law School has been receiving the LITC grant for over 15 years.

The teaching responsibilities of this 12-month-position include the supervision of students in all aspects of client representation, case selection, and client communication along with some administrative duties related to managing cases and record keeping associated with grants. This grant dependent position is a year-to-year, non-tenure track position.

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September 14, 2018 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)

Thursday, September 13, 2018

Hemel Presents Beyond The Marriage Tax Trilemma Today At Northwestern

Hemel (2018)Daniel Hemel (Chicago) presents Beyond the Marriage Tax Trilemma at Northwestern today as part of its Advanced Topics in Taxation Workshop Series hosted by Sarah Lawsky:

For decades, the famous “marriage tax trilemma” has played a central role in discussions of the tax treatment of the family unit. The “trilemma” refers to the mathematical impossibility of constructing a tax system that imposes the same tax liability across all married couples with the same income (couples neutrality), neither encourages nor penalizes marriage (marriage neutrality), and taxes higher income individuals at higher rates (progressivity). Numerous articles have proposed responses to the trilemma that choose two of the legs over a third or that seek to split the difference among the competing neutrality norms that the trilemma casts as desirable. Most casebooks, meanwhile, use the trilemma to introduce students to the policy debate over the taxation of marriage and the household.

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September 13, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Mehrotra Presents A Comparative History Of U.S. Resistance To The VAT Today At Boston College

Mehrotra (2017)Ajay K. Mehrotra (American Bar Foundation & Northwestern) presents The VAT Laggard: A Comparative History of U.S. Resistance to the Value-added Tax at Boston College today as part of its Tax Policy Workshop Series hosted by Jim Repetti, Diane Ring, and Shu-Yi Oei:

This project explores how and why the United States has historically rejected national consumption taxes. Nearly all developed countries, and many in the developing world, have some type of a national consumption tax, frequently in the form of a value-added tax (VAT). The United States is an exception. This project focuses on the fundamental question: why no VAT in the United States? To address this overall research question, this project explores three key historical periods.

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September 13, 2018 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Oei & Ring: Leak-Driven Tax Law

Shu-Yi Oei (Tulane) & Diane M. Ring (Boston College), Leak Driven Law, 65 UCLA L. Rev. 532 (2018):

Over the past decade, a number of well-publicized data leaks have revealed the secret offshore holdings of high-net-worth individuals and multinational taxpayers, leading to a sea change in cross-border tax enforcement. Spurred by leaked data, tax authorities have prosecuted offshore tax cheats, attempted to recoup lost revenues, enacted new laws, and signed international agreements that promote “sunshine” and exchange of financial information between countries.

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September 13, 2018 in Scholarship, Tax | Permalink | Comments (0)