TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Tuesday, February 9, 2016

Seto:  A Forced Labor Theory Of Property And Taxation

Theodore P. Seto (Loyola-L.A.), A Forced Labor Theory of Property and Taxation, in The Philosophy of Tax Law (Oxford University Press 2016):

One of the great accomplishments of civilization is to force its members to work and save more than they otherwise might. It does this, first and foremost, through property law, which restricts the access of ordinary members to the necessities of life unless they work. In exchange, civilization facilitates the accumulation of social capital, making work more productive and life ultimately more pleasant. Property deprives humans of their natural liberty to hunt and gather. Taxation permits civilization to make payment for this deprivation and justify the resulting forced labor. This is civilization’s grand bargain.

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February 9, 2016 in Scholarship, Tax | Permalink | Comments (0)

Libson:  The Tax Treatment Of Mixed Business And Personal Expenses

Adi Libson (Bar-Ilan), Taxing Status: Tax Treatment of Mixed Business and Personal Expenses, 17 U. Pa. J. Bus. L. 1139 (2015):

What is the proper tax treatment of mixed business and personal expenses? This question has much baffled legislators, courts and legal academics. This Article proposes a new approach to this question that justifies the strict elimination of any deduction for mixed expenditures.

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February 9, 2016 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1006

IRS Logo 2USA Today op-ed:  Washington's Culture of Corruption Rots On, by Glenn Reynolds (Tennessee):

Last week saw the passage of a grim milestone in government corruption: Pepperdine University Law Professor Paul Caron’s TaxProf blog marked the 1000th day of the scandal involving the IRS’s deliberate political targeting of conservative “Tea Party” groups. There are some lessons in this, and they’re mostly bad news.

The first sad lesson is that the notion of an impartial, professional civil service is a fiction. The big government designs of Democrats and the federal bureaucracy are aligned, and the bureaucracy often deploys its powers in ways calculated to frustrate Republican presidents and to protect Democratic ones. ...

[W]hat happened in the IRS scandal wasn’t a case of bureaucrats slow-walking ideas they think are dumb. It was, instead, a case of bureaucrats targeting people because of their political views. ...

weaponized in an effort to neutralize Obama’s Tea Party opposition. It’s that ordinary Americans can look at this and conclude that there’s no reason to follow the law if they can get away with breaking it since the people in charge of enforcing the law clearly regard it with contempt.

In an influential essay several years back, Gonzalo Lira warned of the coming middle-class anarchy, when ordinary Americans decide to be no more lawful than they have to be.

There are plenty of nations that work that way — where both the ruling class and the ruled view the law with contempt and obey it only when forced to. Such places are, generally, not as nice as places where the rule of law pertains. But avoiding that kind of outcome requires principles and self-discipline on the part of the ruling class, something that contemporary America conspicuously lacks. Welcome to the era of hope and change.

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February 9, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, February 8, 2016

Chodorow Presents Bitcoin, Foreign Currency, And The Case For Basis Pooling Today At Pepperdine

Chodorow (2014)Adam Chodorow (Arizona State) presents Bitcoin, Foreign Currency, and the Case for Basis Pooling at Pepperdine today as part of our Tax Policy Workshop Series.  The Pepperdine Tax Policy Workshop Series funded in part by a generous gift from Scott Racine:

The IRS recently dealt a blow to bitcoin enthusiasts by ruling that Bitcoin and other similar currencies should be treated as property – and not foreign currency – for income tax purposes. As a result, those who use bitcoin to purchase goods or services must report gain or loss on each transaction if the bitcoin has changed value between the time it was acquired and spent. The IRS’s decision seems correct as a matter of positive law, but laws can always be changed.

In this Article I consider whether bitcoin should be treated as a foreign currency for income tax purposes, which would permit bitcoin users to take advantage of the personal use exemption that applies to such currency. I conclude that it should not because the rationale for extending the personal use exemption to bitcoin is weak, at least from the government’s perspective. Moreover, expanding the definition of foreign currency could create significant line-drawing problems.

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February 8, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Satterthwaite:  Random Tax Audits Cause Participants To Cheat More In The Future

Audit (2016)Emily Ann Satterthwaite (Toronto), The Dynamic Effects of Audits: An Experimental Assessment:

Governments and tax administrators around the world rely on the premise that random audits can be used to reduce tax evasion through two channels of deterrence: first, the ex ante indirect threat of audit will induce taxpayers to truthfully report their income and, second, that the lived experience of audit will deter audited taxpayers from cheating in the future (“direct deterrence,” Alm et al. 2009). This paper provides original experimental evidence of the failure of the direct deterrence channel. Contrary to the predictions of the standard economic model of tax compliance, I find that random audits are ineffective in fostering higher post-audit levels of compliance. Surprisingly, they induce experiment participants to cheat more in the tax periods after the audit (the “bomb crater” effect).

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February 8, 2016 in IRS News, Scholarship, Tax | Permalink | Comments (0)

Allison Christians Named One Of The 50 Most Influential People In International Taxation

Global 50International Tax Review, The Global Tax 50 2015: The Leaders Creating An Impact Around the World:

Now in its fifth year, International Tax Review’s Global Tax 50 provides a rundown of the who’s who of the tax world. One way or another, these individuals and organisations have had an impact or influence on taxation that will be felt beyond the 12 month period covered by this list. ...

Global Tax 50 2015: Allison Christians:

Associate professor, H Heward Stikeman chairwoman in the law of taxation at the McGill University faculty of law; ICRICT expert; blogger

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February 8, 2016 in Legal Education, Tax | Permalink | Comments (0)

NY Times:  Revaluing Family Treasures For The Taxman

1957New York Times: Revaluing Family Treasures for the Taxman, by Robert Frank:

On Friday, a bright red 1957 Ferrari rolled onto a stage in Paris and sold for 32 million euros, or about $35.8 million, making it, by some measures, the most expensive car ever sold at auction.

The celebrated racing car captured the attention of wealthy car collectors around the world — as well as the interest of the French tax authorities.

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February 8, 2016 in Tax | Permalink | Comments (0)

Call for Contributions — Feminist Judgments: Rewritten Tax Opinions

FeministThe U.S. Feminist Judgments Project seeks contributors of rewritten judicial opinions and commentary on those opinions for an edited collection entitled Feminist Judgments: Rewritten Tax Opinions. This edited volume, to be published by Cambridge University Press, is part of a collaborative project among law professors and others to rewrite, from a feminist perspective, key judicial decisions. The initial volume, Feminist Judgments: Rewritten Opinions of the United States Supreme Court, edited by Kathryn M. Stanchi, Linda L. Berger, and Bridget J. Crawford, will be published in 2016 by Cambridge University Press. (That book’s Introduction and Table of Contents are available here.) Subsequent volumes in the series will focus on different courts or different subject matters. This call is for contributions to a volume of tax decisions rewritten from a feminist perspective. 

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February 8, 2016 in Book Club, Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1005

IRS Logo 2The Hill, GOP Seeks to Block IRS From Rehiring Fired Workers:

A group of Republican senators on Tuesday introduced a bill that would bar the Internal Revenue Service commissioner from rehiring employees fired for misconduct [Ensuring Integrity in the IRS Workforce Act of 2016].

The legislation — rolled out by GOP Sens. Richard Burr (N.C.), Johnny Isakson (Ga.), Dean Heller (Nev.) and Mike Enzi (Wyo.) — comes after the Treasury Inspector General for Tax Administration found in late 2014 that the IRS had rehired hundreds of former employees with conduct or performance issues. ...

The senators' bill is a counterpart to a bill introduced in the House in October by GOP Reps. Kristi Noem (S.D.) and Peter Roskam (Ill.).

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February 8, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

TaxProf Blog Weekend Roundup

Sunday, February 7, 2016

The Big Winner In Today's Super Bowl: The California Tax Man

SuperBowlForbes, California Taxes Will Eat Up All Of Cam Newton's Super Bowl Earnings:

Remember when Peyton Manning paid New Jersey nearly $47,000 in taxes two years ago on his Super Bowl earnings of $46,000? Manning has nothing on the state taxes facing Carolina Panthers quarterback Cam Newton for Super Bowl 50 in Santa Clara, Calif. Newton is looking at a tax bill more than twice as much, which will swallow up his entire Super Bowl paycheck, win or lose, thanks to California’s tops-in-the-nation tax rate of 13.3%. ...

If the Panthers win the Super Bowl, Newton will earn another $102,000 in playoff bonuses, but if they lose he will only net another $51,000. ... Win on Sunday, and Newton will pay California a total of $159,560 in taxes in 2016. Lose, and he will pay $159,200, based on an income reduction of $51,000.

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February 7, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (3)

The Top 5 Tax Paper Downloads

SSRN LogoThis week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's, with some minor reshuffling within the Top 5:

  1. [346 Downloads]  Conservation Easements and the Valuation Conundrum, by Nancy McLaughlin (Utah)
  2. [268 Downloads]  Uncle Sam Wants … Who? A Global Perspective on Citizenship Taxation, by Allison Christians (McGill)
  3. [194 Downloads]  Are Corporate Inversions Good for Shareholders?, by Anton Babkin (Wisconsin), Brent Glover (Carnegie Mellon) & Oliver Levine (Wisconsin)
  4. [190 Downloads]  Profit Shifting Of U.S. Multinationals, by Tim Dowd (Joint Committee on Taxation), Paul Landefeld (Joint Committee on Taxation) & Anne Moore (Joint Committee on Taxation)
  5. [158 Downloads]  Crummey Delivers Another Knockout Punch To The IRS, by Phyllis C. Taite (Florida A&M)

February 7, 2016 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, February 6, 2016

This Week's Ten Most Popular TaxProf Blog Posts

Walmart Sues Puerto Rico Over 91.5% Tax Rate Applicable Only To Walmart

Walmart Logo (2013)New York Times, Walmart Sues Puerto Rico, Claiming an Unfair and Onerous Tax Burden:

The last thing Puerto Rico would seem to need is another fight about money.

But the island’s government, already facing multiple battles over billions of dollars in debt, was in yet another courtroom on Wednesday, locked in a legal dispute with its biggest sales-tax collector and its biggest private employer — the mighty retailer Walmart.

This time the dispute is not about bond payments, but taxes: the taxes that Puerto Rico is charging Walmart for the goods it brings from its distributors off the island — including in the United States — to sell in its stores in Puerto Rico.

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February 6, 2016 in Tax | Permalink | Comments (13)

The IRS Scandal, Day 1003

IRS Logo 2Joe  Kristan (Tax Update Blog), 1000 Days of TaxProf Scandal Coverage:

Thanks to Paul Caron for his persistence in paying attention to the past and continuing IRS abuse of power. 

Peter J. Reilly (Forbes), IRS And The Tea Party — Scandal Enters A New Millennium:

Big milestone over at the Tax Prof yesterday.  The IRS Scandal, a day by day chronicle, has hit 1,000.  The event is marked by a an article in The College Fix titled — “The IRS Scandal, Day 1000: Every single day for nearly three years prof chronicles IRS scandal”-. ...

My objections to the day by day scandal narrative is that the string has often been maintained by stories that barely have a tenuous relationship to what I call the “core scandal” – delays and excessive questioning in the handling of tax-exempt applications of Tea Party and similar groups.  ...

What the scandal true believers really yearn for is absolute proof of President Obama ordering his IRS hit squad to go after conservatives. ... Instead they are left with a tone at the top argument in which the President’s statements about Citizens United and untraced money flooding into politics was a kind of dog whistle signal to go after conservatives. ...

Two lines of litigation that keep churning out new material for the day by day IRS scandal are NorCal Tea Party Patriots v IRS, which seeks damages for the delays and abusive inquiries, and FOIA requests by Judicial Watch.  The NorCal litigation is being funded by Citizens for Self Governance, which appears to have Koch connections.  If you look at the 2014 Form 990 of the Sarah Scaife Foundation, to which Richard Scaife gave $364 million in 2014, you will find $225,000 being given to Judicial Watch for general operating support. ...

Much of the coverage of the Tea Party scandal is taking snippets from the vast document dumps and making a big deal out of them – things like Lois Lerner wondering if somebody should investigate Bristol Palin.  If you really dig into the stuff, you can understand how there is material there to construct a variety of narratives.

In one of the narratives. you could write Lois Lerner as a tragic flawed hero, who saw great wrong being done, but was unable to get anyone to act.  She tried to get Justice interested in prosecuting people for lying on their exempt applications and got nowhere.  The gift tax initiative went nowhere (although I’m not sure she was that involved in that one).  And then there is this batch of exempt applications.  She knows they are up to no good and here she has leverage.  She can slow them down by not doing something, which is a lot easier than doing something. Instead of accomplishing something in stemming the flow of dark money, Lois Lerner ends up crippling the IRS, which is fine with libertarian billionaires.  They don’t want the IRS to do its job at all.

The narrative that seems most plausible to me is Lois Lerner as the Agent From Hell.  AFH is my term for a certain type of IRS agent that I have thankfully only encountered a couple of times in my career.  AFH is not that technically astute, but AFH is dogged.  And AFH is certain that your client is up to no good.  AFH just hasn’t quite figured out what that no good is.  That was Lois Lerner and the Tea Party applications, only she had to do her work through minions.  Lois Lerner was passionate about the dark money issue and nobody else seemed to care. So she tortured her line agents to get them to torture bewildered applicants who were already pumped up on conspiracy theories. A perfect storm of bureaucratic bumbling coming across as brilliantly subtle conspiracy.

On To The Next Millenium

And of course the brilliantly subtle conspiracy is the narrative that works best for those still interested in the scandal, so that is what will tend to predominate in the day by day as we move along.

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February 6, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Friday, February 5, 2016

Number Of Americans Renouncing Their U.S. Citizenship Hits All-Time High: Up 25% From 2014, 560% From Bush Administration High

International Tax Blog, New Expatriate Record for 2015 – Nearly 4,300 Expatriations:

Today the Treasury Department published the names of individuals who renounced their U.S. citizenship or terminated their long-term U.S. residency (“expatriated”) during the fourth quarter of 2015.

The number of published expatriates for the quarter was 1,058, bringing the total number of published expatriates in 2015 to 4,279.  The total for the year breaks last year’s record number of 3,415 published expatriates. The number of expatriates for 2015 is a 25% increase over 2014 and a 42% increase over 2013 (2,999).

Expat 2

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February 5, 2016 in Tax | Permalink | Comments (10)

Weekly Tax Roundup

Weekly SSRN Tax Roundup

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February 5, 2016 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Weekly Student Tax Note Roundup

The Taxation Of Crowdfunding

CrowdfundingPaul Battista (Law Office of Paul Battista, Manhattan Beach, CA), The Taxation of Crowdfunding: Income Tax Uncertainties and a Safe Harbor Test to Claim Gift Tax Exclusion, 64 U. Kan. L. Rev. ___ (2016):

Crowdfunding is the process of asking a large number of separate third parties for relatively small amounts of money to fund an endeavor. Although the concept of asking for financial “contributions” is not new, seeking funds from others via websites on the internet is relatively new. As with any distinctly new financing vehicle, there are many legal issues raised by crowdfunding that have not been explored or answered. One such issue is the income tax consequences associated with crowdfunding. The academy has not yet widely addressed the issues and the Internal Revenue Service (IRS) has yet to provide any formal guidance which has created a lack of clarity that needs to be addressed.

This article provides an overview of the most popular types of crowdfunding models and addresses the tax aspects of crowdfunding models that raise funds through a tax-exempt entity and that provide loans or equity investments through crowdfunding. The article also explores the tax uncertainties that arise under current income and gift tax laws and shows that the current tax laws do not provide bright-line answers to whether or not a crowdfunding transaction is taxable income or excluded from tax as a “gift.

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February 5, 2016 in Scholarship, Tax | Permalink | Comments (0)

Job Opportunity For Estate Planning Attorney With 1-2 Years Experience: Pepperdine University

Pepperdine Law School (2016)Pepperdine University has a wonderful opportunity for an estate planning attorney with 1-2 years experience in its planned giving office:

The Planned Giving Officer and Legal Counsel works with internal and external constituents to strengthen the fundraising work of the University, specifically the planned giving efforts of CEGP. By raising funds for, and increasing awareness of, the University's programs, schools, initiatives, needs and opportunities (as identified in the strategic plan and mission statement).

Duties:

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February 5, 2016 in Tax, Tax Prof Jobs | Permalink | Comments (0)

The IRS Scandal, Day 1002

IRS Logo 2Letter From John Koskinen to Orrin Hatch (Feb. 3, 2016)

Politico, The IRS’s No Good Day:

A once lost hard drive was suddenly found — sort of. In fact, the agency did junk former official Samuel Maruca’s hard drive, which it was supposed to preserve for the IRS’s court battle with Microsoft over an audit of the computer giant. But Koskinen told Senate Finance leaders on Wednesday that the agency actually copied the hard drive before it was wiped clean. "This event reflected a shortcoming in our document controls,” Koskinen wrote, adding that he’s ordered the agency to stop recycling employee devices while the IRS examines its preservation standards.

On those points at least, Senate Finance Chairman Orrin Hatch seemed to agree with Koskinen. Both Hatch and the committee’s top Democrat, Sen. Ron Wyden, had expressed concern about the IRS’s document retention efforts in the wake of the latest hard drive issue. "Through sheer coincidence, the IRS's mishandling of critical information caused less damage than initially stated by the Justice Department,” Hatch said, while insisting “these seemingly routine disappearing acts make clear that the agency's recordkeeping practices have fallen woefully short.”

Washington Times, IRS Admits to Mistake For Court Case, Promises to Stop Erasing Hard Drives:

The IRS has put an emergency stay on deleting its computer hard drives and devices such as BlackBerrys, with the commissioner saying in a letter to Congress on Wednesday that the agency goofed in deleting a key hard drive last year that was supposed to be preserved as part of a court case.

Commissioner John Koskinen also said the agency has discovered a backup for that hard drive and may be able to find records critical to the court case. But he said that was a “fortunate” occurrence and vowed to try to reform the tax agency’s practices.

“I have ordered a halt to the erasure and recycling of all employee devices, including hard drives and mobile devices, for all current and departing employees,” he said in a letter to Senate Finance Committee Chairman Orrin G. Hatch, Utah Republican.

He also said the IRS is changing its procedures for when it is required to hold documents for court cases: It will preserve the records not only of the person in question, but his or her supervisor’s records as well.

In the longer term, the IRS is trying to ditch computer hard drives for storage altogether and to require that records be saved on the agency’s main network.

“It has long been our view — validated, unfortunately, by the events of recent years — that the service’s reliance on employee hard drives as an archival records store is suboptimal, not least because they are vulnerable to equipment failure resulting in data loss,” he wrote.

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February 5, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Thursday, February 4, 2016

Hines Presents High Tax Heresy Today At Colorado

Hines (2016)James Hines, Jr. (Michigan) presents High Tax Heresy at Colorado today as part of its Tax Policy Colloquium Series hosted by David Hasen and Sloan Speck:

An efficient and equitable income tax offers exclusions, deductions and credits that narrow the tax base and thereby require higher tax rates than would be necessary with a broad based income tax. Base narrowing features can make the tax system more efficient by focusing collection on revenue sources that are little affected by taxation, and they can promote equity by tailoring tax obligations to individual circumstances and supporting tax rate progressivity. Economic theory does not say that an efficient and equitable income tax system has a broad base and a low rate, and in fact the theory has never said that. Experience with efforts to reduce tax rates and broaden tax bases is that reforms can easily become focused on low statutory tax rates, to the detriment of efficiency and equity.

February 4, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Gould Presents Tax Reform, Congress, And Politics Today At UCLA

GouldJames C. Gould (Ogilvy Government Relations, Washington, D.C.) presents Tax Reform, Congress, and Politics, 146 Tax Notes 983 (Feb. 23, 2015), at UCLA today as part of its Tax Policy and Public Finance Colloquium Series hosted by Jason Oh and Eric Zolt:

If anything is clear from both 1986 and the last quarter-century, it is that tax reform is little different from entitlement reform, military base closing, or any other legislation that would take federal benefits away from average voters or Main Street businesses. The country’s political system is not designed to curtail popular benefits, whether spending or tax benefits. The successful tax reform effort will be one designed to overcome the demosclerosis identified by Rauch two decades ago.

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February 4, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Mayer Presents Taxing Politics Today At Indiana

MayerLloyd Hitoshi Mayer (Notre Dame) presents Taxing Politics at Indiana today as part of its Tax Policy Colloquium hosted by Leandra Lederman:

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

I answer this second question generally yes, but identify several areas where the tax law needs to be changed to achieve greater consistency with such policies, including with respect to reducing the amount of political activity that is deemed permissible for most types of tax-exempt organizations.

February 4, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Viard Presents Fundamental Tax Reform: A Comparison Of Three Options Today At Duke

Viard (2016)Alan Viard (American Enterprise Institute) presents Fundamental Tax Reform: A Comparison of Three Options at Duke today as part of its Tax Policy Workshop Series hosted by Lawrence Zelenak:

Three prominent tax reform options can significantly reduce the tax penalty on saving and investment while maintaining a progressive federal tax system: partially replacing the income tax system with a value added tax, fully replacing the income tax system with a Bradford X tax, or fully replacing it with a personal expenditure tax. This paper compares the options’ implications for economic growth, progressivity, transitional wealth effects, business taxation, public and private transfer payments, international transactions, and the non-business sector and the options’ political viability. The paper also outlines a hybrid option.

February 4, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

The Tax Lawyer Publishes New Issue

The Tax Lawyer (2013)The Tax Lawyer has published Vol. 69, No. 1 (Fall 2015):

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February 4, 2016 in ABA Tax Section, Scholarship, Tax | Permalink | Comments (0)

Johnston:  Was Involvement Of Private Foundation In Trump Event Illegal?

TrumpDavid Cay Johnston (Syracuse), Was Involvement of Private Foundation in Trump Event Illegal?:

Did Donald Trump violate the law January 28 by involving his private foundation in his campaign for the Republican presidential nomination?

Maybe -- and maybe not, according to three practitioners specializing in the nexus of tax and nonprofit law. But all agreed that Trump's actions put front and center why Congress needs to take a serious look at the growing connections between the charitable world and partisan politics, with a focus on what will make for sound policy.

Trump clearly used the charitable foundation under his control to further his campaign for the White House. But that may not be illegal.

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February 4, 2016 in Political News, Tax | Permalink | Comments (3)

Christians:  A Global Perspective On Citizenship Taxation

Allison Christians (McGill), Uncle Sam Wants … Who? A Global Perspective on Citizenship Taxation:

Across the globe, banks are flagging accounts with indicia indicating their owners may be "US Persons", making it possible for the United States to enforce its taxation of nonresident citizens extraterritorially for the first time in history. The indicia method constitutes a mining expedition for US citizens carried out by foreign banks and governments. Establishing a tax jurisdiction in this manner is unprecedented and has significant practical and normative consequences.

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February 4, 2016 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1001

IRS Logo 2U.S. Department of justice Status Report, Judicial Watch Inc. v. IRS, No. 1:13-cv-01559m (D.C. D.C. Feb. 1, 2016):

On February 1, 2016, the Internal Revenue Service (“Service”) released to Judicial Watch, Inc., a CD containing documents responsive to the portion of Judicial Watch’s final Freedom of Information Act (“FOIA”) request for documents regarding the preparation of development letters.

The Service has now released to Judicial Watch over 32,600 pages of documents responsive to the FOIA requests at issue in this case. Those pages have been redacted for exemptions in accordance with 5 U.S.C. § 552(b) as appropriate.

IRS Chief Counsel attorneys have represented to the undersigned attorneys that the Treasury Inspector General for Tax Administration (“TIGTA”) has not provided any forensically-recovered emails to the Service since the Service submitted its Status Report on January 22, 2016. On January 29, 2016, TIGTA turned over to Chief Counsel 13 Lois Lerner emails (without any associated attachments) and one handwritten note. TIGTA has communicated to Chief Counsel that it believes that these documents have not been previously produced to Congress in prior document productions. These 14 documents were found in papers that TIGTA retrieved from Lois Lerner’s office in August of 2013. The 14 documents are being loaded in Clearwell, Chief Counsel’s document review platform, and will be searched to determine if any of the documents are responsive to the FOIA requests at issue in this case. The Service has agreed to prioritize its review of the 14 documents and the Service will provide a date by which it will expect to turnover any non-exempt, responsive documents in its weekly status report due February 8, 2016.

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February 4, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Wednesday, February 3, 2016

Rees-Jones Presents Attention Variation And Welfare: A Tax Salience Experiment Today At Penn

Rees-JonesAlex Rees-Jones (Wharton) presents Attention Variation and Welfare: Theory and Evidence from a Tax Salience Experiment at Pennsylvania today as part of its Center for Tax Law and Policy Seminar Series hosted by Chris Sanchirico and Reed Shuldiner:

A rapidly growing literature shows that consumers can be inattentive to complex or notfully-salient financial incentives. This literature typically estimates “the average mistake,” and uses representative agent models to analyze the economic implications. This paper shows, theoretically and empirically, that accounting for heterogeneity in mistakes is crucial in positive and normative analysis. Focusing on consumer underreaction to not-fully-salient sales taxes, we show theoretically that 1) individual differences in underreaction generate inefficiency in the resulting allocation of the taxed good, 2) the variation of underreaction across the income distribution affects the regressivity of the tax burden, and 3) the variation of underreaction across different tax rates affects the distortions to demand resulting from tax changes. To empirically assess the importance of these issues, we implement an online shopping experiment in which 3000 consumers—matching the U.S. adult population on key demographics—purchase common household products, facing tax rates that vary in size and salience.

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February 3, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Phillips Presents A Performative Theory Of Tax Policy Today At Toronto

Phillips 2Lisa Phillips (Osgoode Hall) presents Registered Savings Plans and the Making of Middle Class Canada: A Performative Theory of Tax Policy at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

Campaigning politicians and elected governments of all parties strive to position themselves as defenders of the middle class. This is to be expected given the large proportion of the Canadian population that self-­‐identifies as middle class.2 Since the term itself lacks precision, it is a claim that can accommodate a wide range of policy proposals. Tax policy serves as a prime vehicle for making this appeal to middle class voters. Undoubtedly, any tax reform proposal can be critically examined to evaluate its likely distributional impacts and how well these map onto specific definitions of the middle class. However this paper attempts a different project. Drawing on the ideas of Judith Butler I analyze instead how tax policy produces middle class identity, through the very process of claiming to advance middle class interests. My case study for this purpose is the rise of tax-­‐assisted savings plans as a prominent feature of Canadian personal tax policy over the two decades from 1995 to 2015. I suggest that the presentation, design and language of registered savings plans have shaped the content of middle class identity, including the behaviours, expectations and aspirations that condition membership in this identity group.

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February 3, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

NY Times:  Despite Pledges, Tax Reform Remains An Elusive Goal

Tax Reform LogoNew York Times, Despite Pledges, Tax Reform Remains an Elusive Goal:

From a distance, tax reform reflects the shimmering frontier of American economic policy: bold plans from Republican presidential candidates, hints of interest from the White House and Hillary Clinton, bipartisan whispers in Congress.

Up close, however, the picture dims. For reasons both economic and political, the idea of a fundamental overhaul that closes loopholes, lowers rates and simplifies the tax code faces a deeply uncertain future regardless of who controls the White House and Congress in 2017.

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February 3, 2016 in Tax | Permalink | Comments (0)

Kahng:  The Taxation Of Women In Same-Sex Marriages

Lily Kahng (Seattle), The Not-So-Merry Wives of Windsor: The Taxation of Women in Same-Sex Marriages, 101 Cornell L. Rev.325 (2015):

In United States v. Windsor, the Supreme Court invalidated the Defense of Marriage Act definition of marriage as “between one man and one woman,” heralding its subsequent recognition, in Obergefell v. Hodges, of a constitutional right to same-sex marriage. Windsor cleared the way for same-sex couples to be treated as married under federal tax laws, and the Obama administration promptly announced that it would recognize same-sex marriages for tax purposes. Academics, policymakers, and activists lauded these developments as finally achieving tax equality between same- and different-sex married couples. This Article argues that the claimed tax equality of Windsor is illusory and that the only way to achieve actual equality is to eliminate taxation on the basis of marital status.

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February 3, 2016 in Scholarship, Tax | Permalink | Comments (1)

Mitt Romney As IRS Commissioner?

RomneyPolitico, Kasich :Romney or Bloomberg Could Fix IRS:

Spit-balling about how to fix the IRS, Ohio Gov. John Kasich said an audience member’s suggestion to tap Mitt Romney to do it would be a “really interesting suggestion.”

“A Mitt Romney or a Michael Bloomberg would be great,” he said, musing about a one-year appointment to turn it around.

“He went out and took care of the Olympics and he did that for free,” Kasich added, recalling Romney’s highly praised effort to turn around the struggling Salt Lake City Winter Olympics in 1999. “I’m going to send him an email tonight.”

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February 3, 2016 in IRS News, Political News, Tax | Permalink | Comments (10)

WSJ Wealth Management Report

Kane:  A Defense Of Source Rules In International Taxation, And Shaviro's Response

Mitchell Kane (NYU), A Defense of Source Rules in International Taxation, 32 Yale J. on Reg. 311 (2015):

The concept of "source" is central to the functioning of the current international tax system. To the extent the "source" of income is meant to reflect the spatial location of income; however, many academic commentators have come to regard the concept as completely incoherent. Further, that incoherence is viewed as a partial explanation of the perceived artificiality and frailties of current instantiations of source rules. In this Paper I make three basic claims. First, it is in fact coherent to conceive of the source concept in terms of the spatial location of income. Second, most of the problems with current instantiations of source rules can be understood as reflections of fundamental complications in designing an income tax in a closed economy and thus have nothing to do with spatial indeterminacy. This observation allows for incremental improvement to source rules in the same fashion as one can make incremental improvement to a closed economy income tax. Third, from an efficiency perspective, a novel and ambitious way to approach source rules would be to use such rules to segregate rents from non-rents and mobile income from non-mobile income. Traditionally, scholars have viewed the efficiency characteristics of a rents-only tax as an affirmative argument for cash flow taxes over income taxes. Holding the existence of the income tax constant, however, source rules could theoretically achieve an efficient result on this dimension. The practical implementation hurdles, though, are substantial.

Daniel N. Shaviro (NYU), Mitchell Kane's A Defense of Source Rules in International Taxation:

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February 3, 2016 in Scholarship, Tax | Permalink | Comments (0)

Weisbach:  Capital Gains Taxation And Corporate Investment

David A. Weisbach (Chicago), Capital Gains Taxation and Corporate Investment:

This study examines the interaction of dividend taxes and capital gains taxes on the sale of stock. Using a model of the new view of dividend taxation modified to incorporate realization-based capital gains and losses on stock, it shows that there are two interactions that effect the timing of dividend payments.

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February 3, 2016 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1000

1000 Days

The College Fix, The IRS Scandal, Day 1,000: Every Single Day For Nearly Three Years Prof Chronicles IRS Scandal:

A Pepperdine University School of Law professor has chronicled all the developments in the IRS scandal since Day One through a blog he tirelessly updates every day.

Every. Single. Day.

And today — Wednesday, Feb. 3 — marks Day 1,000 in tax law Professor Paul Caron’s apparently never-ending quest to keep tabs on the latest in the IRS scandal on his “TaxProf Blog.”

The feat itself is impressive in its size and scope, and something Caron said he could have never predicted when revelations that the agency targeted conservative groups came to light in May 2013.

“My goal for TaxProf Blog is to comprehensively cover the major tax and legal education issues of the day,” Caron said in an email to The College Fix. “So when the IRS scandal broke, I naturally covered it on the blog. After a week, it was clear that this would be a major, long-running story, so I decided to do a daily roundup of news of the IRS Scandal each day. I never dreamt it would still be going strong 1,000 days later.”

Caron’s dedication to the effort is evidenced by the fact that he posts updates to his blog on the scandal every day, including weekends and holidays: “There has always been something new to cover,” he said.

Over the years, Caron said perhaps one of the most troublesome aspects of the scandal is “the arrogance of IRS Commissioner John Koskinen and President Obama, and … the ineptitude of the House Republicans.”

“I set out my views in a USA Today op-ed on Day 369 and still think I pretty much nailed it,” Caron said. In that op-ed, he details the scandal’s major developments and calls for better media scrutiny and Congressional oversight.

Today, as the IRS scandal wanes from the public eye — especially in light of the 2016 presidential elections — questions on whether anyone will ever be held accountable for the unlawful actions remain. But it’s clear Americans are still upset over what went down.

When Caron polled his regular readers last year on whether he should continue the IRS news round up, he said the answer was overwhelmingly in the affirmative.

“Almost 1,000 of my readers voted in the poll, and 90 percent asked me to continue the daily coverage,” he said. “Several academics and practitioners have praised my coverage and stated that it will provide an important permanent resource when historians write about the scandal.” ...

The effort has not been without controversy in and of itself.

“I will say that I have received more professional flak about this than anything I have done in my 25 years as a tax professor,” Caron said in his email to The College Fix. “My goal throughout the 1,000 days has been to link to every single press report about the scandal – from both the right and the left. Because the right covers the scandal much more than the left, I have linked to many more stories from the right than from the left. Check out Day 883.”

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February 3, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

The IRS Scandal, Days 901-1000

February 3, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, February 2, 2016

Martin Presents The Structure Of American Income Tax Policy Preferences Today At NYU

MartinLucy Martin (North Carolina) presents The Structure of American Income Tax Policy Preferences (with Cameron Ballard-Rosa (North Carolina) & Kenneth F. Scheve (Stanford)) at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Chris Sanchirico:

In recent decades inequality in the United States has increased dramatically but policy responses in terms of redistribution have been limited. This is not easily explained by standard political economy theory, which predicts a positive relationship between inequality and redistribution. One set of explanations for this puzzle focuses on whether and why redistributive preferences are muted in the presence of high inequality. While much recent research has focused on citizens’ preferences over government spending, we argue that preferences over taxation are a central piece of this puzzle.

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February 2, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Viard Presents Fundamental Tax Reform: A Comparison Of Three Options Today At Georgetown

Viard (2016)Alan Viard (American Enterprise Institute) presents Fundamental Tax Reform: A Comparison of Three Options at Georgetown today as part of its Tax Law and Public Finance Workshop Series hosted by John Brooks and Itai Grinberg:

Three prominent tax reform options can significantly reduce the tax penalty on saving and investment while maintaining a progressive federal tax system: partially replacing the income tax system with a value added tax, fully replacing the income tax system with a Bradford X tax, or fully replacing it with a personal expenditure tax. This paper compares the options’ implications for economic growth, progressivity, transitional wealth effects, business taxation, public and private transfer payments, international transactions, and the non-business sector and the options’ political viability. The paper also outlines a hybrid option.

February 2, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Dimick:  Should The Law Do Anything About Economic Inequality?

Matthew Dimick (SUNY-Buffalo), Should the Law Do Anything About Economic Inequality?:

What should be done about rising income and wealth inequality? Should the design and adoption of legal rules take into account their effects on the distribution of income and wealth? Or should the tax-and-transfer system be the exclusive means to address concerns about inequality? A widely-held view argues for the latter: only the tax system, and not the legal system, should be used to redistribute income. While this argument comes in a variety of normative arguments and has support across the political spectrum, there is also a well-known law-and-economics version. This argument, known as the “double-distortion” argument, is simply stated. Legal rules that redistribute income only add to the economic distortions that are already present in the tax system. It would therefore be better for everyone, and especially the poor, to instead adopt an efficient, nonredistributive legal rule, and increase redistribution through the tax system.

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February 2, 2016 in Scholarship, Tax | Permalink | Comments (1)

Obama, Ryan See Potential For Tax Policy Compromise

EITC Logo (2014)Wall Street Journal, Obama, Ryan See Potential for a Tax-Policy Compromise:

President Barack Obama and House Speaker Paul Ryan have the rare makings of a tax-policy compromise: Both want to expand a poverty-fighting tool some analysts say could draw millions of Americans into the workforce.

Set to meet formally Tuesday for the first time since Mr. Ryan became speaker, the two hold widely divergent views on taxes, spending and government’s role in American life. But both support a plan to increase the earned income tax credit, or EITC, to include childless workers.

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February 2, 2016 in Tax | Permalink | Comments (1)

When Will Donald Trump Release His Tax Returns?

TrumpFollowing up on last week's post, Mitt Romney Calls On Presidential Candidates To Release Tax Returns: Wonder Whose Yuuuge Tax Returns He Has in Mind:  Wall Street Journal, When Will Donald Trump’s Tax Returns Be Public?:

Most of the 2016 candidates have made their tax returns public. When will the GOP front-runner, Donald Trump, release his?

Mr. Trump has said for months that he intends to release his returns. He is cagey, however, about a firm date. In October, he told ABC’s George Stephanopoulos that he would release them “when we find out the true story on Hillary’s e-mails.”

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February 2, 2016 in Political News, Tax | Permalink | Comments (0)

GOP Candidates Seek Repeal Of State & Local Tax Deduction That Benefits Blue States Most

WSJWall Street Journal, GOP Candidates Seek End to a Federal Tax Break That Benefits Blue States Most:

The major tax break that Republican presidential candidates are most eager to ax happens to be one that disproportionately benefits Democratic states.

Repealing the federal deduction for state and local taxes would make 23.6% of U.S. households pay an average of $2,348 more to the Internal Revenue Service for 2016. But those costs—almost $1.3 trillion over a decade—aren’t evenly spread, according to new estimates from two researchers at the Urban Institute, a think tank.

Ranked by the average potential tax increase, the top 13 states (including Washington, D.C.), as well as 16 of the top 17, voted twice for President Barack Obama. None of the four early-voting states that will winnow the Republican primary field—Iowa, New Hampshire, Nevada and South Carolina—is higher than 26th. And nearly one-third of the cost would be paid by residents of California and New York, two solidly Democratic states. ...

“After you’re told that your tax plan will increase the deficit by trillions of dollars, you need something to be on the chopping block,” said the Urban Institute’s Kim Rueben, who analyzed the deduction in a draft research paper with Frank Sammartino. “And the fact that more of the [tax] benefits go to blue states rather than red states, I think, feeds into this.” ...

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February 2, 2016 in Political News, Tax | Permalink | Comments (14)

House Holds Hearing Today On Delivering Growth And Opportunity For All Americans

House LogoThe House Ways & Means Committee holds a hearing today on Reaching America’s Potential: Delivering Growth and Opportunity for All Americans:

February 2, 2016 in Congressional News, Tax | Permalink | Comments (0)

Tax Prof Tour And Dinner At ABA Tax Section Midyear Meeting In Los Angeles

Here is a photo of Tax Profs at the Frank Gehry Tour of Loyola-L.A. Law School and Dinner on January 29 (during the  ABA Tax Section Midyear meeting in Los Angeles):

LLS_TaxProfs_012916
(Photo credit: Brian Costello)

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February 2, 2016 in ABA Tax Section, Tax | Permalink | Comments (0)

The IRS Scandal, Day 999

IRS Logo 2Albuquerque Journal op-ed: IRS Continues to Target Conservative Groups, by Rick Harbaugh (Albuquerque Tea Party):

Lois Lerner, the former head of the IRS, was forced into early retirement because of this issue. Holly Paz also disappeared off the rolls of the IRS over this issue.

The current head of the IRS is under fire for lying that this issue has been resolved.

Why am I bringing up ancient history about the IRS targeting of conservative groups several years ago? After all, those issues have been resolved. Right?

Not hardly!

This month marks the sixth anniversary of the Albuquerque Tea Party’s application to the IRS for a 501c4 tax exempt status. To date, the IRS has still not responded to that application – even though the current head of the IRS has said that the issue has been resolved. Not so. ...

It is way past time for this issue to be addressed. The IRS needs to give a thumbs up or a thumbs down on our request.

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February 2, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Monday, February 1, 2016

Kleinbard Presents The New Political Economy Of Capital Income Taxation Today At UC-Irvine

Kleinbard (2015)Edward Kleinbard (USC) presents The New Political Economy of Capital Income Taxation at UC-Irvine today as part of its Tax Law and Policy Colloquium Series hosted by Omri Marian:

The standard view in the U.S. tax law academy remains that capital income taxation is both a poor idea in theory and completely infeasible in practice. But this ignores the first-order importance of political economy issues in the design of tax instruments. Taxing capital income is responsive to important political economy exigencies confronting the United States, including substantial tax revenue shortfalls relative to realistic government spending targets, increasing income and wealth inequality at the top end of distributions, and the surprising persistence of dynastic wealth.

More surprisingly, a flat-rate (proportional) income tax on capital has attractive theoretical and political economy properties that can be harnessed in actual tax instrument design.

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February 1, 2016 in Colloquia, Scholarship, Tax | Permalink | Comments (1)