TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Thursday, June 30, 2016

The End Of Summer (Tax)

As Pepperdine's summer session winds down, my wife and I hosted our third and final lunch today with my small but plucky tax class.  This summer has marked several firsts for me:  my first summer teaching at Pepperdine (after 11 summers teaching at San Diego); my first time teaching such a small (7 students) class; and my first time switching to a new casebook in 25 years of law teaching. 

Lunch

June 30, 2016 in Legal Education, Tax | Permalink | Comments (0)

Faulhaber:  Patent Boxes And The Limits Of International Cooperation

Patent Box (2015)Lilian V. Faulhaber (Georgetown), The Luxembourg Effect: Patent Boxes and the Limits of International Cooperation:

This article uses patent boxes, which reduce taxes on income from patents and other IP assets, to illustrate the fact that the jurisprudence of the European Court of Justice has a longer reach than has previously been recognized. This article argues that, along with having effects within the European Union, the ECJ’s decisions can also have effects on countries outside of the EU. In the direct tax context, the ECJ’s jurisprudence has hampered the ability of both EU and non-EU countries to police international tax avoidance.

Continue reading

June 30, 2016 in Scholarship, Tax | Permalink | Comments (0)

The Tax Lawyer Publishes New Issue

The Tax Lawyer (2013)The Tax Lawyer has published Vol. 69, No. 3 (Spring 2016):

2016 Erwin N. Griswold Lecture Before the American College of Tax Counsel

Selected Papers From the Inaugural International Taxpayer Rights Conference

Continue reading

June 30, 2016 in ABA Tax Section, Scholarship, Tax | Permalink | Comments (0)

Johnston:  Barack Obama's Astonishing Tax Policy Legacy

Democracy Logo (2017)Democracy: A Journal of Ideas, Taxes: Fund the IRS!, by David Cay Johnston:

Will anyone remember the dramatic turnabout in tax policy that began when Barack Obama took office? Considering the awful economic conditions that prevailed, and the announced intention of Republican Congressional leaders to make his presidency fail, Obama’s successes in tax policy are nothing short of astonishing. They are also little known because of the generally poor quality of mainstream news coverage about his actions as well as Obama’s failure to toot his own horn.

Continue reading

June 30, 2016 in Tax | Permalink | Comments (0)

Oxford 10th Annual Academic Tax Symposium

OxfordThe 10th Annual Academic Tax Symposium continues today at the Oxford University Centre for Business Taxation:

Annette Alstadsæter (NMBU), Accounting for Business Income in Measuring Top Income Shares: Integrated Accrual Approach Using Individual and Firm Data from Norway
Discussant:  Brian Bell (University of Oxford)

Jennifer Blouin (University of Pennsylvania), Investment and Tax Uncertainty: Evidence from Fin 48
Discussant:  TBA

Continue reading

June 30, 2016 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Kleinbard:  Searching For Our Fiscal Soul

Ted 2Edward D. Kleinbard (USC), Searching for Our Fiscal Soul (Presentation Slides):

This is an extended version of a presentation made at TEDx Livermore 2016, the theme of which was The Economics of Empathy. Searching for Our Fiscal Soul argues that democracy is an exercise in empathy towards fellow citizens we do not know, and, if we did, might not like. We express that empathy through government spending, because that is how we actualize values that are important enough that we are willing to pay for them. This is our fiscal soul in action. Whether measured against the values we all routinely recite, or against the social environments achieved by peer countries, the fiscal soul of the United States is in peril. The remedy lies in understanding the value of a complementary economy, in which government spending is properly reframed as purchasing investments and insurance that private markets do not, and cannot, reach.

Continue reading

June 30, 2016 in Scholarship, Tax | Permalink | Comments (1)

The IRS Scandal, Day 1148

IRS Logo 2National Review:  New Documents Suggest IRS’s Lerner Likely Broke the Law, by Eliana Johnson:

Recently obtained documents raise new questions about Lois Lerner’s role in sending confidential tax returns to the Justice Department.

It is likely the largest unauthorized disclosure of tax-return information in history: the transfer of some 1.25 million pages of confidential tax returns from the IRS to the Department of Justice in October of 2010. And it was almost certainly illegal.

The documents, which consisted chiefly of non-profit tax returns, were transferred to the DOJ’s criminal division from the IRS at the request of Lois Lerner, who wanted to get the information to the DOJ in advance of a meeting where she and several of the attorneys in the public integrity section of the department’s criminal division discussed their concerns about the increasing political activity of non-profit groups. ...

“It took an organization over 50 months of investigation and multiple lawsuits to get clarity on the IRS’s own compliance with the rules it enforces against others,” says Dan Epstein, the executive director of the Cause of Action Institute and a former attorney for the House Committee on Oversight and Government Reform. “The IRS, in the midst of its political targeting of groups engaged in policy advocacy, was engaging in the disclosure of millions of records aimed at ginning up prosecutions of these groups without going through the legally required channels.”

Federal law prohibits the IRS from sharing tax returns filed with the agency, with very limited exceptions. “The IRS has a special obligation to keep information confidential, that’s how our tax system works,” says Eileen O’Connor, who served as assistant attorney general for the tax division of the DOJ in the George W. Bush administration.

Documents suggest that Lerner’s massive document transfer to the DOJ didn’t meet any of those exceptions, including one that allows the agency to disclose returns for use in criminal investigations — if they’ve been requested in relation to “an actual investigation about a person to whom the investigation is related,” says O’Connor. Both Lerner and the DOJ were interested in figuring out how to prosecute non-profit groups they believed were engaging in improper political activity, and Lerner sent the documents over to the department days before an October 8 meeting with several of her IRS colleagues, an FBI agent, and attorneys from the DOJ’s public-integrity section. There they discussed their mounting “concern that certain 501(c) organizations are actually political committees ‘posing’ as if they are not subject to FEC law, and therefore may be subject to criminal liability,” according to a DOJ summary of the meeting. ...

It looks increasingly likely that the file sharing was part of a broader effort on the part of bureaucrats to push back against the Supreme Court’s ruling, an effort that not only almost certainly violated the law but undermined the spirit of the law and the purpose for which it was written in the first place.

Continue reading

June 30, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Wednesday, June 29, 2016

CBO:  The 2016 Budget Outlook

Congressional Budget Office, The 2016 Budget Outlook (June 29, 2016):

CBO2

CBO

June 29, 2016 in Congressional News, Gov't Reports, Tax | Permalink | Comments (1)

Floyd 'Money' Mayweather Sends Form 1099 To Strip Club After Making It Rain $20,000

FloydLarry Brown Sports, Floyd Mayweather Sends Strip Club $20,000 Tax Bill After Making It Rain:

Floyd Mayweather Jr. made it rain so hard at a Las Vegas strip club a couple years back that he thinks he deserves a tax break for it.

Tax documents obtained by the Daily Mail show that Mayweather’s company, Mayweather Promotions LLC, has sent Larry Flint’s Hustler Club a 1099 IRS form for more than $20,000 he spent on strippers on May 25, 2014. Apparently The Money Team believes the Hustler Club is responsible for paying taxes on the $15,000 in singles and additional $5,000 cash Floyd and his crew spent that night.

Not surprisingly, club owner Jason Mohney is furious. He says the Hustler Club didn’t receive a dime of the $20,323.18 and that it all went to the dancers, who are independent contractors.

Continue reading

June 29, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

Kamin:  Legislating For Good Times And Bad

David Kamin (NYU), Legislating for Good Times and Bad, 53 Harv. J. on Legis. ___ (2016):

Congress tends to move in fits and starts. Major policy changes are often followed by periods of legislative stasis. This means that, even as circumstances change and policies may no longer be appropriate in the new conditions, Congress may not respond. This is the problem of “policy drift.”

The academic literature has recognized this challenge and largely focused on one particular type of solution employed by Congress: empowerment of other institutions that can move more quickly, in particular administrative agencies or the courts. However, this view is far too limited. Congress can keep such authority in its hands and still address policy drift, sometimes even more effectively.

This article is the first to comprehensively consider the tools available to Congress to address such drift.

Continue reading

June 29, 2016 in Scholarship, Tax | Permalink | Comments (0)

Oxford 10th Annual Academic Tax Symposium

OxfordThe 10th Annual Academic Tax Symposium continues today at the Oxford University Centre for Business Taxation:

Lily Batchelder (NYU), Accounting for Behavioral Biases in Business Tax Reform: The Case of Expensing
Discussant:  Michael Devereux (Oxford University)

Jan-Emmanuel De Neve (University of Oxford), Eliciting Taxpayer Preferences Increases Tax Compliance
Discussant:  Nadine Riedel (University of Bochum)

Continue reading

June 29, 2016 in Conferences, Scholarship, Tax | Permalink | Comments (0)

WSJ:  Judge Hands Entrepreneur Sam Wyly $1.1 Billion Tax Bill

WylyWall Street Journal, Judge Hands Entrepreneur Sam Wyly a $1.1 Billion Tax Bill:

A federal judge has ordered Texas entrepreneur Sam Wyly to pay $1.1 billion in taxes and penalties for committing tax fraud using offshore accounts, even though the former billionaire’s net worth has fallen to a fraction of that amount.

The payment demand from Judge Barbara Houser on Monday was made for federal taxes due as far back as 1992. In a court opinion filed last month, she admitted that the money “may now be more difficult for the government to collect given the passage of time and the dissipation of Sam’s wealth.”

Continue reading

June 29, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (2)

The IRS Scandal, Day 1147

IRS Logo 2Politico Morning Tax: What's Next For John Koskinen?, by Bernie Becker:

The good news for Republicans seeking to remove the IRS commissioner: A group of legal scholars all agreed that providing false testimony to Congress rises to the level of impeachable offense. But as our Katy O’Donnell noted, there wasn’t a groundswell of support for the case that Republicans like House Oversight Chairman Jason Chaffetz and Rep. Jim Jordan were pushing — that Koskinen only needed to commit a bad act, not have bad intent, to borrow the phrasing of one of the witnesses. “The House has never impeached anyone for gross negligence or I think anything akin to it, and I think opening the door to that is going to present all sorts of serious problems,” said Michael Gerhardt, a law professor at the University of North Carolina.

In any event, the House Freedom Caucus wants a floor vote on Koskinen’s impeachment for his handling of the investigation into the IRS’s improper scrutiny of tea party groups, as The Hill’s Naomi Jagoda reports.

At the same time, Chaffetz’s measure to censure Koskinen has already passed the Oversight Committee. The last time Congress censured a sub-Cabinet official was back during the Teapot Dome scandal of the Roaring '20s, according to the Congressional Research Service. (Apparently, Teapot Dome was once a plot point on “Downton Abbey.”)

Speaking of the IRS (and the Constitution):  Those GOP efforts to strip Koskinen of his salary via the appropriations process might not be standing on the most solid constitutional footing, according to Richard Rubin of The Wall Street Journal. In fact, it could be a bill of attainder — just like the GOP efforts to take away Koskinen’s pension through the censure process. “This does sound a lot like imposing a punishment without a trial,” said Richard Briffault of Columbia Law School.

Continue reading

June 29, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Tuesday, June 28, 2016

Herzig:  Tax Lawyers Kill $38 Billion Energy Transfer/Williams Merger

Williams EnergyThe Surly Subgroup:  Tax Lawyers Kill $38 Billion Merger, by David J. Herzig (Valparaiso):

I remember one of my first days at GT [Greenberg Traurig] we were advising on a corporate merger.  At the end of the process (of course), the M&A group asked tax to sign off on the deal.  Everything was done and this was supposed to be a rubber stamp.  Well, as you can guess by now, the tax consequences of the deal as structure were disastrous and the whole deal had to be restructured.  I remember vividly the corporate lawyers saying as they walked out the door, this is why we never ask tax anything!

Today, a judge killed the proposed $38 billion merger between Energy Transfer Equity (“ETE”) and the Williams Companies. Chancery Court Vice Chancellor Sam Glasscock ruled that ETE could back out of the deal because of taxes.  Latham & Watkins, actually, tax lawyers at three top firms (L&W, Gibson Dunn and Morgan Lewis and one law professor [Ethan Yale (Virginia)]) could not opine that the deal was tax neutral under 721 despite one law professor [Howard Abrams (San Diego)] and Cravath saying the deal worked.  This opinion is a rather big deal for M&A lawyers.  Usually, conditions precedent like this won’t allow one side to back out of a transaction. ...

I would love to hear others opinions here.  But some off the cuff reactions I had were:

Continue reading

June 28, 2016 in New Cases, Tax | Permalink | Comments (0)

Why Won't Donald Trump Release His Tax Returns?

Vanity FairVanity Fair: The Great Trump Tax Mysteries: Is He Hiding Loopholes, Errors, or Something More Serious?, by Nicholas Shaxson:

Why won’t Donald Trump release his taxes? An investigation into the G.O.P. candidate’s finances—the extensive deductions he could claim, the F.E.C. filings from his Scottish and Irish golf resorts, and his declarations to the British government—reveals a disturbing pattern of mistakes, hype, and contradictions.

Continue reading

June 28, 2016 in Political News, Tax | Permalink | Comments (5)

Kamin:  Legislating Crisis

David Kamin (NYU), Legislating Crisis:

For the last several years, the congressional budget process has jumped from self-created crisis to self-created crisis. Debt limit, shutdown, sequester, potential withholding of congressional pay, and others beyond that — all of these crises coming in quick succession and requiring Congress to take action to avert a problem. There is a common element to each of these crises. In particular, Congress sets an undesirable event to occur at a later time — hence, prompting the possible crisis. This chapter represents an exploration of these devices, and a modest defense of some of them, despite the recent chaos in Washington.

Continue reading

June 28, 2016 in Scholarship, Tax | Permalink | Comments (0)

Oxford 10th Annual Academic Tax Symposium

OxfordThe 10th Annual Academic Tax Symposium kicks off today at the Oxford University Centre for Business Taxation:

Reuven Avi-Yonah (University of Michigan), Evaluating BEPS
Discussant:  Henk Vording (Leiden University)

Niels Johannesen (University of Copenhagen), The Role of Tax Havens in International Trade With Services
Discussant:  Katarzyna Habu (Oxford University)

Continue reading

June 28, 2016 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Feld:  Federal Taxation Of State Tax Credits

Alan Feld (Boston University), Federal Taxation of State Tax Credits, 151 Tax Notes 1243 (May 30, 2016):

This article analyzes the Federal income tax treatment of state incentive tax credits. It considers whether and when refundable credits should be included in income and discusses their appropriate character as capital gain or as ordinary income.

Continue reading

June 28, 2016 in Scholarship, Tax | Permalink | Comments (0)

NY Times:  Tax Dodging On The High Seas

CruisingNew York Times:  Tax Dodging on the High Seas, by Gail Collins:

While many of the biggest cruise lines appear to be headquartered in Florida, they are, for tax purposes, actually proud residents of … elsewhere. “Carnival is a Panamanian corporation; Royal Caribbean is Liberian,” said Ross Klein, who tracks the industry through his Cruise Junkie website.

Although, of course, if one of the ships needs help, it will often be the American taxpayer-funded Coast Guard that comes to the rescue. The Coast Guard doesn’t charge for its services, a spokesman said, because “we don’t want people to hesitate” to summon help when passengers are in danger. This attitude is commendable. But the no-taxes part is not.

Continue reading

June 28, 2016 in Tax | Permalink | Comments (4)

The IRS Scandal, Day 1146

IRS Logo 2Politico Morning Tax: How Strong Is That Koskinen Case?, by Bernie Becker:

Koskinen, Round Two: The House Judiciary Committee’s exploration of the potential impeachment of IRS Commissioner John Koskinen plods forward today, with a hearing examining the standards for impeachment.

From the looks of things, the proceedings will turn on the question of bad faith. Michael Gerhardt, a law professor at UNC, is expected to testify that ill intent has always been a prerequisite for impeachment in the United States. But some of Koskinen’s biggest detractors have argued that “gross incompetence” is more than sufficient. Rep. Jim Jordan (R-Ohio), chairman of the House Freedom Caucus — which forced the Judiciary hearings on impeachment — said last month that impeachment should follow “gross negligence, dereliction of duty and breach of public trust.”

Jordan told POLITICO on Tuesday that he “was very pleased to see that the Judiciary Committee asked Andrew McCarthy to serve as a witness" and is looking forward to the hearing. No wonder — McCarthy’s written testimony suggests the 2013 nonprofit scandal is worse than former President Richard Nixon’s “largely unsuccessful” “endeavor” to abuse IRS powers. But even McCarthy, a former assistant U.S. attorney and a contributor at the conservative magazine National Review, notes the framers of the Constitution rejected “maladministration” as an impeachable offense. So it may fall to Republicans to prove Koskinen intended to obstruct Congress’ investigation of the targeting controversy — something they’ve failed to do so far. ...

Rep. Elijah Cummings of Maryland, the top Democrat on the House Oversight Committee, called out GOP efforts to impeach and/or censure Koskinen as “either pointless or unconstitutional.” Cummings cites several legal experts who said that House Oversight Chairman Jason Chaffetz (R-Utah) overstepped his bounds in saying that his censure resolution required that Koskinen forfeit his pension — because that would be an unconstitutional bill of attainder. Katy made a similar point last week and even Chaffetz acknowledged to reporters that the censure resolution can’t actually force Koskinen to lose his pension.

Continue reading

June 28, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Monday, June 27, 2016

NY Times:  The United States Of Inequality

New York Times:  The United States of Inequality, by Teresa Tritch:

It will come as little surprise that income inequality in the United States is greatest in New York and Connecticut. Those states are home base for Wall Street, where the income gains of the few have been amplified by outsized growth in the financial sector and protected by taxpayer-provided bailouts.

But forces of rising inequality are operating throughout the United States, as a new study by researchers at the Economic Policy Institute makes clear [Income inequality in the U.S. by State, Metropolitan Area, and County].

The study, which measures income inequality by state, metro area and county, shows that inequality has risen in every state since the 1970s. It also shows that rising inequality is entrenched. Recessions in recent decades have temporarily slowed income growth among the top 1 percent, but they have not altered the basic pattern in which the rich have gotten much richer while nearly everyone else has seen income stagnate or decline.

Between 2009 and 2013, for example — a period that encompasses most of the post-Great Recession era – the top 1 percent captured all of the income growth in 15 states (Connecticut, Florida, Georgia, Louisiana, Maryland, Mississippi, Missouri, Nevada, New Jersey, New York, North Carolina, South Carolina, Virginia, Washington and Wyoming). In another 9 states (Arizona, California, Illinois, Kansas, Massachusetts, Michigan, Oregon, Pennsylvania and Texas), the top 1 percent captured half to nearly all of the income growth.

Figure A

Continue reading

June 27, 2016 in Tax | Permalink | Comments (5)

Skyrocketing Housing Costs, 'Endless' Taxes Prompt Exodus Of Californians; Inequality Worsens As Middle Class Jobs Are 'Vaporized'

California GoodbyeSan Jose Mercury News, California's Skyrocketing Housing Costs, Taxes Prompt Exodus of Residents:

A growing number of Bay Area residents -- besieged by home prices, worsening traffic, high taxes and a generally more expensive cost of living -- believe life would be better just about anywhere else but here.

During the 12 months ending June 30, the number of people leaving California for another state exceeded by 61,100 the number who moved here from elsewhere in the U.S., according to state Finance Department statistics. The so-called "net outward migration" was the largest since 2011, when 63,300 more people fled California than entered. ... "California has seen negative outward migration to other states for 22 of the last 25 years."

Continue reading

June 27, 2016 in Tax | Permalink | Comments (3)

NY Times:  A Noah’s Ark in Kentucky, Dinosaurs Included — But No Taxes

ArkNew York Times: A Noah’s Ark in Kentucky, Dinosaurs Included, by Laurie Goodstein:

In the beginning, Ken Ham made the Creation Museum in northern Kentucky. And he saw that it was good at spreading his belief that the Bible is a book of history, the universe is only 6,000 years old, and evolution is wrong and is leading to our moral downfall.

And Mr. Ham said, let us build a gargantuan Noah’s ark only 45 minutes away to draw millions more visitors. And let it be constructed by Amish woodworkers, and financed with donations, junk bonds and tax rebates from the state of Kentucky. And let it hold an animatronic Noah and lifelike models of some of the creatures that came on board two-by-two, such as bears, short-necked giraffes — and juvenile Tyrannosaurus rexes.

And it was so.

Continue reading

June 27, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (3)

The IRS Scandal, Day 1145

IRS Logo 2Forbes:  IRS Targeting Scandal: Citizens United, Lois Lerner And The $20M Tax Saga That Won't Go Away, by Kelly Phillips Erb:

It was the question heard round the tax world. But it was the answer that made waves. In 2013, then Acting Director of Exempt Organizations at IRS, Lois Lerner, apologized to a room of tax lawyers for the IRS’s inappropriate targeting of conservative political groups. Her comments set off a chain of events that would slash IRS funds, fire officials and consider impeachment proceedings for IRS Commissioner Koskinen’s actions. But the scandal didn’t begin or end there.

July 2008:  In the run-up to the presidential election, Citizens United, a conservative lobbying group, wants to air a series of commercials promoting a film targeting Hillary Clinton, who was seeking the 2008 Democratic presidential nomination. The United States District Court for the District of Columbia ruled that they couldn’t, finding that it was a violation of the Bipartisan Campaign Reform Act of 2002 (also known as the McCain–Feingold Act). The group appealed. ...

June 22, 2016: ”We’re moving into uncharted waters,” Michael J. Gerhardt, a UNC Chapel Hall constitutional law professor, tells the Judiciary House Committee. Testifing about potential impeachment charges against IRS Commissioner Koskinen, Gerhardt said, “The House has never impeached a sub-Cabinet official. I would urge everyone here to look at alternatives.” He testified “the Founders did not want high-ranking officials in the executive or judicial branches to be subject to impeachment for their mistakes in office,” suggesting impeachment be reserved for more serious offenses.

Koskinen did not attend the hearing, and the IRS did not release an official comment on the proceedings.

Continue reading

June 27, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, June 26, 2016

The Top 5 Tax Paper Downloads

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

  1. [448 Downloads]  Google's 'Alphabet Soup' in Delaware, by Bret Bogenschneider (Vienna) & Ruth Heilmeier (Cologne)
  2. [321 Downloads]  Following the Money: Lessons from the Panama Papers, Part 1: Tip of the Iceberg, by Lawrence Trautman (American)
  3. [258 Downloads]  Why Does Inequality Matter? Reflections on the Political Morality of Piketty's Capital in the Twenty-First Century, by Liam Murphy (NYU)
  4. [197 Downloads]  'Death Tax' Politics, by Michael J. Graetz (Columbia)
  5. [166 Downloads]  The Problem of Intra-Personal Cost, by Brian D. Galle (Georgetown)

June 26, 2016 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 1144

IRS Logo 2Huffington Post:  The IRS And The Self-Minimization Of Congressman Jason Chaffetz, by Ralph Nader:

Politicians who limit the effectiveness of government agencies for short-term political advantages cheat taxpayers and short-change the government. ...

[Jason] Chaffetz chairs the House Oversight and Government Reform Committee - a body with powerful tools to investigate government waste, corruption and defiance of the laws. And he has vaulting ambitions, almost running for Speaker of the House last year with only seven years of seniority. ...

[W]hat is self-minimizing Congressman Chaffetz’s principal passion? Trying to impeach, censure or cause the resignation of the head of the IRS, the renowned turnaround specialist John Koskinen. The Utah Roman candle has accused Koskinen of interfering with a congressional investigation, not preserving pertinent records and lying to a congressional committee.

Koskinen repeatedly provided the committee with documentation for his denial of the charges that he was engaged in a cover-up of alleged IRS harassment of Tea Party and other conservative 501(c)(4) organizations applying for tax-exempt status. Ranking minority member Elijah Cummings (D-MD) laid out his own rebuttals, citing the Department of Justice investigation finding that “no evidence that any IRS official acted in a way that would support criminal prosecution” or that any official, including Mr. Koskinen, an Obama appointee, attempted to obstruct justice.

More telling was the exhaustive, multi-year, $2 million investigation by the Republican Inspector General of the IRS, Russell George, who cleared the IRS Commissioner of the Chaffetz Committee’s charges. Mr. George, a Bush appointee, found no politically motivated targeting of these conservative 501(c)(4) applications, no obstruction of justice and no concealing of information from Congress. Some bureaucratic sloppiness, sure, but that was all.

A more cutting judgement came from Law Professor Richard Painter, former Chief Ethics Lawyer for President George W. Bush, who said “this is essentially a dispute between the IRS and Members of Congress about the 501(c)(4) organizations that further the objectives of political campaigns, including campaigns for Members of Congress.”

Legal observers say Chaffetz’s resolution is not legally binding and is going nowhere. So what’s going on here is the Chaffetz caper is part of an overwhelming attack on the IRS by the Congressional Republicans-an attack that has turned them into major aiders and abettors of those who are sitting on $300 billion in annual uncollected taxes.

Washington Post:  Why the GOP Is Targeting the IRS, by Sen. Sheldon Whitehouse (D-WA):

If, as the editorial board suggested in its June 20 editorial, Unfairly Targeting the IRS, the GOP is unfairly targeting the Internal Revenue Service commissioner, what could be its reason for doing so? Follow the money. The IRS controls the “dark money” spigot that fills GOP coffers. If the IRS enforced its rules, or fixed its rules where they could not be enforced, or referred what appear to be self-evident false statements by dark-money groups to the Justice Department for investigation, the river of dark money flowing to the GOP might dry up. Keeping the IRS battered, cowed and on its heels makes strategic sense for the GOP.

Continue reading

June 26, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Saturday, June 25, 2016

This Week's Ten Most Popular TaxProf Blog Posts

The Tax Consequences Of Brexit

Continue reading

June 25, 2016 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 1143

IRS Logo 2Kay Bell (Don't Mess With Taxes), IRS Commissioner Impeachment Effort Inches Along at Second, Largely Ignored Judiciary Committee Hearing:

Internal Revenue Service Commissioner John Koskinen probably was the happiest person in Washington, D.C., today. On a day when the House Judiciary Committee's second hearing on his possible impeachment might otherwise have garnered much attention, the Capitol Hill session was upstaged by two other events. ...

[W]hat did all normal, nontax nerds who took a pass miss on the Koskinen front? Not much.

Same old, same old: The wagons were circled along party lines, with Judiciary Committee Chairman Rep. Bob Goodlatte spelling out the "serious allegations of misconduct" against Koskinen in his opening statement. ...

Giving false testimony to Congress about how the Internal Revenue Service [mis]handled intra-agency emails is an impeachable offense, but House [Republican] action sans Senate support would be a mistake. That was the assessment of Andrew McCarthy, a former assistant U.S. attorney for the Southern District of New York, at part 2 of the House Judiciary Committee's hearing to consider the impeachment of IRS Commissioner John Koskinen. ...

Michael Gerhardt, however, told Judiciary members that, "In my opinion, I think gross negligence doesn't qualify" as one of the constitutional requirements -- treason, bribery or other high crimes and misdemeanors -- for impeachment. Gerhardt, a constitutional law professor at the University of North Carolina Law School, said in his view, impeachable conduct would have to involve "bad intent."

The conflicting opinions of legal experts, which also included George Washington University law professor Jonathan Turley and Todd Garvey, legislative attorney with the Library of Congress, mirrored the disputes among the committee members themselves. ...

So far, Chaffetz has been able to get his GOP colleagues on Government Reform to agree to censure Koskinen. But his chances of impeachment the IRS chief are smaller. Neither House nor Senate Republican leaders have expressed support for the effort.

Continue reading

June 25, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Friday, June 24, 2016

Paul Ryan Unveils A Better Way To Do Tax Reform

Better Way

A Better Way for Tax Reform:

Our Principle
In a Confident America, the tax code and the IRS work for us, not against us.

Our Challenge
Our tax code is a mess, and that’s putting it lightly. Multiple brackets. High rates. Special interest breaks everywhere. Rules and regulations that are too complicated to understand. It costs more and more each year just to do your taxes, let alone pay them. All of this drags people down and leaves businesses buried in paperwork and compliance problems. So instead of promoting growth, our tax code is pushing jobs overseas. And the agency charged with overseeing all of this—the IRS—has repeatedly violated the trust of the American taxpayer.

Our Vision
We need a new tax code. It needs to be fair and simple for everyone. It should be so simple that most Americans can do their taxes on a form as simple as a postcard. Our tax code should be built for growth. It should help make the United States the best place in the world to hire and invest. And if we’re going to have a better tax code, we need a better IRS, one that puts the taxpayers first.

This blueprint offers a better way to dramatic reform—without increasing the deficit. It does so by promoting growth—of American jobs, wages, and ultimately the entire economy.

Our Ideas

Continue reading

June 24, 2016 in Tax | Permalink | Comments (12)

Tax Panel At Today's National Business Law Scholars Conference At University Chicago

Chicago LogoTax panel at today's National Business Law Scholars Conference at the University of Chicago Law School:

The Intersection of Business and Tax Law:

  • Ilya Beylin (Columbia), Taxing Fictive Orders: How an Information Forcing Tax Can Reduce Manipulation and Distortion in Financial Product Markets
  • Limor Riza (Carmel Academic Center), Charitable Contributions and Dependent Care Expenses in a Coherent System
  • Sloan G. Speck (Colorado), Competitiveness as a Rationale for International Tax Reform 
  • Eric C. Chaffee (Toledo), Moderator

June 24, 2016 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Weekly Tax Roundup

Weekly SSRN Tax Roundup

Continue reading

June 24, 2016 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Law Professor Sees Bitcoin As Tax Haven For Gig Economy

BitcoinCCN.LA, UC Law Professor Sees Bitcoin Becoming a Tax Haven for the Gig Economy:

Bitcoin is especially attractive to workers in the gig economy who exchange skills for money. So far there is no effective enforcement method for tracking bitcoin.

Omri Marian, a law professor at the University of California Irvine, notes that even as governments have started to cooperate on nabbing tax cheats, bitcoin wallets could become “super tax havens.”

Continue reading

June 24, 2016 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 1142

IRS Logo 2PJ Media, Impeachment and the IRS Scandal: Should John Koskinen Face the Music?:

[T]he instant matter involving Internal Revenue Service Commissioner John Koskinen, pertains to an investigation into not a mere “endeavor” (largely unsuccessful in the Nixon case) to abuse IRS powers but actual, concrete abuse, of those powers, including “income tax audits or other income tax investigations to be initiated or conducted in a discriminatory manner.” I further understand that the instant matter involves the provision of false statements and withholding of evidence from Congress.

I do not purport to have knowledge of the facts of Congress’s investigation. I note however that misconduct that was merely potential and coupled with blatantly obstructive actions was deemed sufficient to impeach (and would clearly have been sufficient to remove) a twice-elected president of the United States who had recently been reelected in one of the largest landslides in American history. It seems patent, then, that if established, actual misconduct in conjunction with blatantly obstructive actions would be sufficient to justify impeaching an unelected subordinate executive official responsible for administering the Internal Revenue Service.

Continue reading

June 24, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, June 23, 2016

WSJ:  Treasury's Inversion Scythe

InversionWall Street Journal editorial, Treasury's Inversion Scythe (online title: The Obama-Lew Business Tax Raid: Treasury’s New Rules Give More Power to the IRS):

Is Treasury Secretary Jack Lew trying to impose a new tax burden on all businesses in the United States? Or is he merely unable to shoot at politically disfavored companies without hitting the rest of the economy? These questions arise because businesses across the U.S. are learning they’ll have to change how they manage their cash to satisfy Mr. Lew’s latest regulatory diktat.

Continue reading

June 23, 2016 in Tax | Permalink | Comments (0)

Denning:  Five Takes On Wynne And Direct Marketing Association

Brannon P. Denning (Samford), The Dormant Commerce Clause Wynnes Won Wins One: Five Takes on Wynne and Direct Marketing Association, 100 Minn. L. Rev. Headnotes 103 (2016):

October Term 2014 featured what is to date the most important state and local tax case since 1992’s Quill Corp. v. North Dakota. In Comptroller v. Wynne, the U.S. Supreme Court affirmed a state court decision holding unconstitutional Maryland’s refusal to grant a credit for taxes paid by a resident taxpayer to other states on income earned by the taxpayer in those states. This essay offers summary of the case, as well as five takes on Wynne and another state and local tax case from the 2014-2015 term, Direct Marketing Association v. Brohl.

Continue reading

June 23, 2016 in Scholarship, Tax | Permalink | Comments (0)

Galle: Philly’s Soda Tax Isn’t Racist (Or Regressive)

CokeFollowing up on yesterday's TaxProf Blog op-ed, Is the Philadelphia Soda Tax Racist?, by Andre Smith (Delaware):  Brian Galle (Georgetown), Philly’s Soda Tax Isn’t Racist, and It Isn’t Regressive, Either:

Some recent commentary labels the soda tax regressive, and one generally thoughtful tax prof posted an op-ed on the TaxProf blog suggesting that the tax’s disparate impact on the African-american population of Philly makes it essentially racist, as well. I don’t want to defend all aspects of Philly’s policy. It has too many exceptions, and probably isn’t as attractive a policy as many alternatives (for instance, I might’ve gone big on portion-size limits). But I don’t think either of these critiques is persuasive.

Continue reading

June 23, 2016 in Tax | Permalink | Comments (3)

The IRS Scandal, Day 1141

IRS Logo 2Wall Street Journal, House Republicans Seek to Eliminate IRS Chief’s Paycheck:

Republicans have a new idea for attacking IRS Commissioner John Koskinen: Stop paying him.

Mr. Koskinen’s salary of about $165,000 a year would be cut to zero until the next president takes office Jan. 20, under an amendment the House of Representatives is considering this week. ...

The idea is to prevent Mr. Koskinen from coming to work, as federal law generally bars people from working for free, said Kyle Huwa, a spokesman for Mr. Buck. ...

[L]osing a few months of pay near the end of his career wouldn’t permanently damage Mr. Koskinen. According to his most recent financial disclosure, he is a multimillionaire.

Bloomberg, Push to Impeach IRS Chief Koskinen Stirs Scholars’ Disagreement:

Internal Revenue Service Commissioner John A. Koskinen committed an impeachable offense by giving false testimony to Congress about his agency’s preservation of e-mails, a conservative lawyer told the House Judiciary Committee.

Nonetheless, it would be “a mistake” for House Republicans to move forward with a drive to impeach Koskinen unless the Senate is also on board, said Andrew McCarthy, a former assistant U.S. attorney for the Southern District of New York who has written extensively on impeachment. Although the judiciary panel has conducted two hearings related to a possible impeachment of Koskinen, neither House nor Senate leaders have said they support it.

If it succeeded, it would be the first impeachment of an appointed executive-branch official in 140 years.

Koskinen, who took office in December 2013, was almost immediately mired in the agency’s response to a scandal that predated his tenure; IRS officials acknowledged that they had given extra scrutiny to conservative groups that sought tax-exempt status beginning in 2010. He didn’t attend Wednesday’s hearing, but he has said the allegations against him -- that he misled Congress and failed to ensure that the agency preserved all relevant e-mails -- are meritless.

“Every time I testified, I testified truthfully on what I knew,” Koskinen told reporters last month.

During the hearing, which was marked by partisan exchanges from both Republicans and Democrats, legal scholars disagreed on whether Koskinen’s conduct would constitute grounds for impeachment under constitutional language that specifies “treason, bribery or other high crimes and misdemeanors.”

“In my opinion, I think gross negligence doesn’t qualify,” said Michael Gerhardt, a professor of constitutional law at the University of North Carolina Law School. In his view, impeachable conduct would have to involve “bad intent,” he said.

Yet other witnesses, including Jonathan Turley, a law professor at George Washington University, said the standard is broader. “It doesn’t have to be an indictable offense,” he said. The constitution’s framers also discussed citing “maladministration” as grounds for impeachment, he said. “This is a standard that has room at the elbows,” he said.

Despite pending congressional subpoenas for “all communications sent or received by Lois Lerner,” in March 2014, IRS employees in West Virginia magnetically erased 422 backup tapes, which eliminated as many as 24,000 of her e-mails. Subsequent investigations by the Justice Department and the Treasury Department’s inspector general found that the destruction was accidental.

Continue reading

June 23, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Wednesday, June 22, 2016

The End Of Accounting

EndBaruch Lev (NYU) & Feng Gu (SUNY-Buffalo), The End of Accounting (Wiley, June 27, 2016) (WSJ excerpt):

The problem with reported earnings, and financial statements in general, is that they no longer reflect the realities of businesses. Instead, they follow an arcane set of accounting rules and regulations. An alternate reality which fails to illuminate essential factors that make an enterprise rise or fall, where, for example:

  • The most important, value-creating investments in patents, brands, IT and other intangibles are considered regular expenses, like salaries or rent, without future benefits.
  • Reported earnings are a mixed bag of long-term items (indicating sustained growth) and one-time, transitory gains/losses (restructuring costs, for example), having negligible effect on corporate value. ...
  • Nontraded assets/liabilities, like privately placed bonds, which have no market values are nevertheless required to be marked-to-market in the financial reports. This, of course, is an oxymoron. ...

Continue reading

June 22, 2016 in Book Club, Scholarship, Tax | Permalink | Comments (3)

Smith:  Is The Philadelphia Soda Tax Racist?

Smith (2015)TaxProf Blog op-ed:  Is the Philadelphia Soda Tax Racist?, by Andre Smith (Delaware):

The Philadelphia “soda tax” is an example of how racism works without racists. It is an example of institutional racism, phenomena that tends to exacerbate racial wealth inequality but which is maintained by “well-meaning” people, whites and blacks included.

Let’s concede from the outset that many who support the soda tax have noble intentions. Sin taxes, like cigarette taxes and ante-bellum taxes on slavery and now soda taxes, are attractive because they raise necessary revenue while discouraging otherwise harmful behavior. That’s pretty efficient.

In the case of a soda tax, public health advocates seek to reduce sugar consumption, hopefully reducing the looming financial consequences of a national diabetes epidemic, thereby. Moreover, the proceeds from the soda tax will be dedicated to pre-k education, the benefits of which inure to employers, children and working parents. That which is raised above what is necessary for pre-k education will be used to close budget deficits.

How could such a noble idea be racist especially when quite a few black people support the soda tax?

Continue reading

June 22, 2016 in Tax | Permalink | Comments (5)

Schizer:  Taxing Corporations Or Shareholders (or Both)

David M. Schizer (Columbia), Between Scylla and Charybdis: Taxing Corporations or Shareholders (or Both):

The US taxes both corporations and shareholders on corporate profits. In principle, the U.S. could rely on only one of these taxes, as many commentators have suggested. Although choosing to tax the corporation or its owners may seem like taking money from one pocket or the other, this Essay emphasizes a key difference: corporate and shareholder taxes prompt different tax planning. Relying on one or the other mitigates some distortions and leaks, while exacerbating others. As a result, choosing which tax to impose is like navigating between Scylla and Charybdis.

In response to these dualing distortions, this Essay recommends using both taxes. Some tax should be collected from corporations, and some from investors. The two rates should be coordinated, so they aggregate to the combined rate Congress wants, which ideally would be the rate for pass-through businesses. The main goal of this Essay is to defend the use of both taxes, and to analyze what the balance should be between them. Using both taxes has three advantages. First, if one of these partially overlapping instruments is avoided, the other still raises some revenue. Second, if the goal is to deter a planning strategy, cutting the rate to zero is an overreaction. If the rate is low enough, paying a tax is cheaper than avoiding it, since tax planning is not free. Third, if one tax is cut instead of repealed, the other can be correspondingly lower, and thus induces less planning.

Continue reading

June 22, 2016 in Scholarship, Tax | Permalink | Comments (3)

Shaviro:  The U.S. Response To OECD-BEPS And The EU State Aid Cases

Daniel Shaviro (NYU), The U.S. Response to OECD-BEPS and the EU State Aid Cases:

This is the slightly expanded text of a talk that the author gave on June 1, 2016, at a conference in Amsterdam that was cosponsored by NYU Law School and the Amsterdam Centre for Tax Law. The conference concerned anti-BEPS implementation in the EU, and the talk concerned the U.S. response to such efforts.

June 22, 2016 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1140

IRS Logo 2The House Judiciary Committee holds a hearing today on Examining the Allegations of Misconduct Against IRS Commissioner John Koskinen, Part II:

  • Todd Garvey (Legislative Attorney, Library of Congress) (testimony)
  • Michael Gerhardt (Professor, North Carolina) (testimony)
  • Andrew McCarthy (Former Assistant U.S. Attorney, Southern District of New York) (testimony)
  • Jonathan Turley (Professor, George Washington) (testimony)

Bloomberg, IRS Chief Koskinen Fights First Appointee Impeachment Since 1876, by Lynnley Browning:

Impeachment is “the wrong symbol, the wrong act,” said Fred Goldberg, who served as IRS commissioner under Republican President George H.W. Bush. “‘It is both destructive and counterproductive.”

On Wednesday, the House Judiciary Committee is scheduled to hear from legal scholars and a former prosecutor on whether impeachment-drive leaders can meet legal standards for impeaching Koskinen. The panel is not expected to vote on an actual impeachment resolution, and neither House nor Senate leaders have endorsed the impeachment push. ...

If it succeeded, Koskinen would be the first appointed executive-branch official impeached since 1876, the year Alexander Graham Bell patented the telephone. And he’d be the only such official below the level of cabinet secretary to receive that dubious distinction. ...

The U.S. constitution says the president, vice president “and all civil officers of the United States shall be removed from office on impeachment for, and conviction of, treason, bribery or other high crimes and misdemeanors.” Witnesses set to testify at Wednesday’s hearing disagree on how that might apply to Koskinen’s case.

Jonathan Turley, a professor at George Washington University Law School, said impeachment is possible even without a finding of criminal conduct -- though he said he takes “a broader view on impeachment than some of my colleagues.”

Michael Gerhardt, a constitutional law professor at the University of North Carolina School of Law, said he doesn’t believe “gross negligence” constitutes grounds for impeachment. “My concern is that the impeachment resolution would be lowering the constitutional standard,” Gerhardt said. “It’s lower than what the framers of the constitution had in mind.”

A series of federal investigations into the IRS scandal faulted the agency for ineptness, but cleared it of criminal wrongdoing. In January 2014, the Federal Bureau of Investigation said it had found no evidence of bias that would warrant criminal charges. The Justice Department in October ended its own probe, which found “substantial evidence of mismanagement, poor judgment and institutional inertia,” but resulted in no charges.

“There wasn’t control of the document retention process,” said Mark Everson, who served as IRS commissioner from 2003 to 2007 under President George W. Bush. Complying with the congressional subpoenas “wasn’t handled correctly, and you can’t get out of that,” said Everson, who said he does not think impeachment is warranted.

IRS commissioners weren’t always the most disliked bureaucrats at the most-hated agency. There used to be “greater mutual respect between the IRS and congressional committees,” said Mortimer Caplin, 99, who headed the agency during President John F. Kennedy’s administration.

Now, the rancor evident in the impeachment push makes it difficult for the administration and Congress to work together on important legislation -- including efforts to overhaul and streamline the federal tax code, said Sheldon Cohen, a former IRS commissioner under President Lyndon Johnson. “The adversarial relationship makes tax reform almost impossible,” he said.

USA Today editorial, IRS Impeachment Overkill:

Commissioner Koskinen doesn't deserve this.

With their customary lack of subtlety, House Republicans are trying to unleash a nuclear bomb to swat the proverbial fly. The fly is IRS Commissioner John Koskinen. The bomb is impeachment, which has been used against an executive-branch official only three times in the nation’s history.

The allegations against Koskinen, while serious, do not rise anywhere near the level of becoming a fourth historic case. An impeachment resolution — which the House Judiciary Committee is scheduled to hear testimony on Wednesday — would diminish what's supposed to be a last-resort option for removing a corrupt official for alleged “high crimes and misdemeanors.” The IRS scandal does not qualify; for one thing, Koskinen, 76, wasn't even at the IRS when the underlying scandal occurred.

By overplaying their hand, the Republicans are obscuring serious questions about IRS misuse of its immense power. Koskinen was brought in to clean up the agency after revelations in 2013 that its tax-exempt division had targeted conservative organizations, including Tea Party groups, because of their political beliefs. The IRS sent the groups burdensome inquiries and delayed their applications for tax exemption, stopped some from participating in the 2012 presidential election.

While the IRS has a legitimate role in preventing blatantly political groups from exploiting tax-exempt status, targeting groups based on their politics is reminiscent of Richard Nixon using the IRS to harass his "enemies." Even President Obama acknowledged that such actions were “intolerable and inexcusable.” The scandal spurred congressional hearings, high-level resignations from the IRS and an FBI investigation, which found no criminal wrongdoing.

When Koskinen took over the agency, there was a need for openness and disclosure to get to the bottom of what happened. Instead, Koskinen presided over a “clean-up” marked by disappearing emails, bungled searches for backups, and a penchant for secrecy so strong that the IRS has resisted federal court orders to disclose documents to the groups targeted. ...

Republicans have good reason to press for release of relevant IRS documents, such as lists of the 426 targeted groups and emails by retired IRS official Lois Lerner, who was at the center of the controversy. But an official censure of Koskinen last week on a party-line vote of the House Oversight and Government Reform Committee, and the looming impeachment threat, are as misplaced as Republicans’ draconian cuts to the IRS budget. As the agency has struggled to do more with less, customer service has withered, identity theft has run rampant and reduced enforcement has allowed tax cheats to get away with more cheating.

If Congress wants to be helpful, it should simplify the absurdly complex tax code and give the IRS enough money to do its job, not waste time on overblown impeachment threats.

Fox News op-ed: Congress, Impeach IRS Chief and Hold Him Accountable for Targeting Scandal Coverup, by Jenny Beth Martin (Co-founder, Tea Party Patriots):

Three years after President Obama said wrongdoers involved in the IRS political persecution scandal should be held "fully accountable," no one has been held accountable.  Aside from Lois Lerner -- whom Obama's Department of Justice refuses to prosecute -- no one exemplifies the wrongdoing at the IRS more than its current commissioner, John Koskinen.

The House Judiciary Committee will vote this week on whether or not to impeach Koskinen; they should do so and the full House should follow and then the Senate should convict him, if there's any rule of law left in America. ...

Far from being chastened after getting caught red-handed in the first targeting scandal, the IRS seems almost emboldened to continue the targeting after getting away with flouting the law. During the initial phase of targeting, the IRS went to great lengths to cover its tracks. Records were purged, files were deleted, emails were mysteriously lost, and, incredibly, computer servers allegedly vanished into thin air. ...

Impeachment is, of course, an extraordinary measure and should be reserved only for the most egregious misconduct. In Federalist No. 65, Alexander Hamilton explained that impeachment is appropriate to address “those offenses which proceed from the misconduct of public men, or, in other words, from the abuse or violation of some public trust.”

Mr. Koskinen’s disregard for the rule of law meets Hamilton’s exacting requirements for impeachment. In fact, Koskinen’s misconduct demandsimpeachment if we are to restore the public trust and move past the IRS’s wholesale disregard for the Constitution.

The Hill, Bush Lawyer Rips GOP for Trying to 'Intimidate' IRS:

George W. Bush's former chief ethics lawyer is slamming congressional Republicans for trying to “intimidate” the Internal Revenue Service (IRS).

Richard Painter, who is now a professor at the University of Minnesota Law School, said the House should not pass a resolution to censure IRS Commissioner John Koskinen. The House Oversight and Government Reform Committee approved the measure last week on a party-line vote.

“This is essentially a dispute between the IRS and Members of Congress about the 501c4 organizations that further the objectives of political campaigns, including campaigns of Members of Congress,” Painter said in a letter to Oversight Committee members.

“The IRS is charged with determining whether the activities of these organizations comply with the Internal Revenue Code and it is not proper for Congress to seek to intimidate the IRS in the discharge of its duties,” he added.

Continue reading

June 22, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Tuesday, June 21, 2016

Dorothy Brown's Radical Idea: Deny The Mortgage Interest Deduction To Homeowners In Neighborhoods With < 10% Blacks

Washington Post Wonkblog:  A Radical Idea to Compensate Black Homeowners Harmed by Racial Bias, by Emily Badger:

MortgageHomes in black middle-class neighborhoods, like the one where Natalie Y. Moore grew up on the South Side of Chicago, typically don't gain value over time the same way homes in mostly white middle-class neighborhoods do.

The people who live there are penalized for biases built into the housing market. White home buyers seldom consider neighborhoods with even a modest black population, and so housing demand is much lower in those communities. That drives down prices and muzzles appreciation. It means that homeownership simply isn't as good of a deal in neighborhoods that are even slightly black.

Moore, a public radio reporter writing in her new book, The South Side: A Portrait of Chicago and American Segregation, quotes an idea from Emory University law professor Dorothy Brown on how to partially remedy this: "Why don't we say no one gets a mortgage interest deduction unless they live in an integrated neighborhood?" Brown told her. "We realize you're taking a penalty in the market, and we want to compensate you by lowering your taxes." And Brown's radical proposal to implement the idea: Let's extend the mortgage interest deduction only to homeowners who live in neighborhoods that are at least 10 percent black. [Shades of the American Dream, 87 Wash. U.L. Rev. 329 (2010).] ...

Continue reading

June 21, 2016 in Scholarship, Tax | Permalink | Comments (12)

Mankiw:  One Economic Sickness, Five Diagnoses

New York Times:  One Economic Sickness, Five Diagnoses, by N. Gregory Mankiw (Harvard):

Economists, like physicians, sometimes confront a patient with an obvious problem but no obvious diagnosis. That is precisely the situation we face right now.

Let’s start with the problem.

There is no simple way to gauge an economy’s health. But if you had to choose just one statistic, it would be gross domestic product. Real G.D.P. measures the total income produced within an economy, adjusted for the overall level of prices.

Here is the sad fact: Over the last decade, the growth rate of real G.D.P. per person has averaged just 0.44 percent per year, compared with the historical norm of 2.0 percent. At a rate of 2.0 percent, incomes double every 35 years. At a rate of 0.44 percent, it takes about 160 years to double. ...

[W]hat’s wrong with the economy? No one knows for sure. But numerous theories are being bandied about. Here are five of them: ...

Continue reading

June 21, 2016 in Tax | Permalink | Comments (7)

Marriage Penalty Relief After Obergefell

Mitchell Engler (Cardozo) & Edward Stein (Cardozo), Not Too Separate or Unequal: Marriage Penalty Relief after Obergefell, 91 Wash. L. Rev. ___ (2016):

Joint tax returns have generated controversy for many years. Married couples with the same joint income pay the same tax under our current system regardless of the earnings distribution between the spouses. This approach primarily rests on the idea that married couples share resources and operate as a single economic unit. Critics typically challenge this assumption and lament how marriage might significantly change a couple’s taxes. Depending on their earnings breakdown, a couple’s taxes could be reduced (a marital bonus for uneven earners) or increased (a marital penalty for even earners). These possibilities exist because the joint brackets are typically larger – but not twice as large – as the unmarried brackets.

Continue reading

June 21, 2016 in Scholarship, Tax | Permalink | Comments (0)

Columbia Journal Of Tax Law Publishes New Tax Matters: Obergefell v. Hodges

Columbia Journal of Tax Law LogoThe Columbia Journal of Tax Law has published a new issue of its Tax Matters feature, with three short pieces by tax practitioners responding to a specific cutting-edge tax law issue posed by a tax academic. Lawrence Zelenak (Duke), Prompt on the Obergefell v. Hodges Case, 7 Colum. J. Tax L. Tax Matters 1 (2016):

In the oral argument before the Supreme Court in Obergefell v. Hodges, Justice Alito asked Solicitor General Verrilli about the tax implications if the Court were to hold that the Constitution guaranteed a right to same-sex marriage: “Well, in the Bob Jones case, the Court held that a college was not entitled to tax exempt status if it opposed interracial marriage or interracial dating. So would the same apply to a university or college if it opposed same-sex marriage?” The Solicitor General replied, “You know, I don’t think I can answer that question without knowing more specifics, but it’s certainly going to be an issue. I don’t deny that. I don’t deny that, Justice Alito. It is—it is going to be an issue.” In his dissent in Obergefell, Chief Justice Roberts expressed the same concern:

Continue reading

June 21, 2016 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1139

IRS Logo 2The Surly Subgroup:  IRS Scrutinized Mostly Conservative Nonprofits: Evidence of Targeting?, by Philip Hackney (LSU):

Documents recently released in a court case demonstrate that 282 of 426 organizations caught in the IRS political advocacy, “Tea Party,” nonprofit organization net that caused such a hullabaloo three years ago, were in fact conservative. This comes three years after Lois Lerner apologized to Tea Party groups on behalf of the the IRS because, she said, it “inappropriate(ly)” selected these conservative groups’ applications for tax exemption for scrutiny based on name alone rather than legal cause.

An NPR report by Peter Overby concludes about the new information: “Whatever the IRS meant to do, this hodgepodge of a list illustrates how the agency bollixed the nonprofit application process.” In this post, I examine this seemingly “common-sense” claim and find it wanting. Additionally, because I have written publicly about this matter both at the time and more recently. I re-examine my conclusions in those writings in light of this new information.

Early on, I assumed that only about 1/3rd of the organizations caught in the IRS net were conservative. I made this assumption based on the TIGTA report because it noted that 96 of 298 applications, or 1/3rd of the organizations, were Tea Party, Patriot or 9/11 groups. I left wiggle room in my writing, but in the back of my mind, this was my assumption. I assumed TIGTA would have reported every conservative group that was in the lot. But, it turns out that about 2/3rds of the organizations  were conservative. Thus, my assumption was wrong. The vast majority of the organizations caught in the net were conservative. Nevertheless, I don’t think this new information demonstrates some additional level of bungling by the IRS that was hitherto unknown. And, frankly, a list like this with little context does nothing to tell us about whether the IRS was fair or not.

The most significant indictment of the IRS in this Tea Party matter has always been that the IRS “targeted” conservative organizations. No one has ever quite given any content to what this exactly means. Presumably it means that the IRS intentionally scrutinized conservative organizations in the application process in order to harm those conservative organizations and did not do the same to liberal organizations. The Inspector General reviewed whether the IRS “targeted” conservative organizations and found that the IRS used “inappropriate criteria” in selecting the Tea Party cases and that this could lead to impartial results. He found no evidence of some animus on the part of the IRS to support a targeting claim.

The targeting assertion, and the Inspector General’s assessment, give us a couple claims that new information could go towards proving: 1) the IRS scrutinized conservative nonprofits more than liberal nonprofits in its application process, and (2) either (a) the IRS did this intentionally, or (b) the IRS did this negligently.  ...

What does this information say about my prior conclusions? In my first quick analysis after the TIGTA report came out I argued that the IRS failed to adopt a careful selection process, asked too many intrusive questions, and subjected them to too great of delays. However, I suggested the IRS was set up for this failure because it had too many complex applications and not enough staff to review all applications with care.

It has to pick and choose organizations to focus upon and it is likely to miss applying appropriate scrutiny to many applications that should have received greater scrutiny while applying that scrutiny to a few organizations in a similar position, and to apply too much scrutiny to applications that should have received little or none. I argued that because of application volume and IRS staffing, the IRS was set up for the type of failure identified in the Tea Party affair.  I still think this is about right, and the new information says nothing new about that conclusion.

Later in Should the IRS Never Target Taxpayers I argued that  TIGTA wrongly took a position that the IRS is prohibited from using names as a means for selecting organizations for audit or for scrutiny of particular applications. It had no firm legal basis for making this claim. TIGTA based it on the principal that the IRS should be unbiased in its work. While certainly true, it seemed to be asserting that there was a duty of consistency as to every application that comes before the IRS. With the quantity of applications and staff, this is not even close to possible. And yet, TIGTA’s claim of “no using names” has become the measuring stick with which the public and commentators review this matter. ...

In the Tea Party cases the IRS had many reasons to believe these organizations might be violating the law by engaging in too much political activity for a section 501(c)(4) social welfare organization. In fact their names alone were evidence of such a potential intent. Additionally, given the substantial numbers of these cookie-cutter-like organizations, the IRS had good reasons to review all of the Tea Party and Patriot groups to ensure uniformity of treatment and a proper understanding of all of the relevant facts. However, because the IRS was enforcing a legal provision that impacted political speech it should have exercised greater care in its selection process. This new information tells us nothing about these basic conclusions.

Overby seems to suggest that this new information further damns the IRS’s behavior in the Tea Party matter. I find the evidence does not support this conclusion.

Continue reading

June 21, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)