TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Wednesday, June 15, 2016

Tax Foundation:  Modeling The Estate Tax Proposals Of 2016

Tax Foundation:  Modeling the Estate Tax Proposals of 2016, by Alan Cole:

Tax Foundation

Key Findings:

  • Several lawmakers and presidential candidates in 2016 have proposed changes to the federal estate tax. These changes are a worthwhile case study in economic modeling of tax proposals.
  • The estate tax’s marginal rate greatly exceeds its average rate, which makes its disincentives to save relatively strong for the small amount of revenue collected.

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June 15, 2016 in Tax, Think Tank Reports | Permalink | Comments (0)

The IRS Scandal, Day 1133

IRS Logo 2Nonprofit Quarterly: After a 3-Year Wait, IRS Releases List of Groups Targeted in Scandal, by Michael Wyland:

In response to a class action lawsuit, the IRS released a list of 426 organizations it says were singled out for special scrutiny beginning in 2010 in what became known as the IRS scandal. The list is larger than the 298 overwhelmingly conservative groups identified by U.S. Treasury Inspector J. Russell George in his May 2013 report that first brought the scandal to public attention. ...

Most people have lost track of the IRS scandal, and some even deny to this day that there ever was a scandal. Paul Caron, a law Professor at Pepperdine University, is continuing to keep count of the days. (June 7, 2016 is Day 1125.) The House Judiciary Committee is considering the impeachment of IRS Commissioner John Koskinen, but this is widely seen as a partisan exercise by Republicans—even by those who believe others, especially former Exempt Organizations Director Lois Lerner, should be held accountable for their actions in the IRS targeting scandal.

One observation NPQ has made in the past bears restating as the political and judicial processes continue: The public disclosure of much of what we have learned over the past year or more has come as the result of nonprofit advocacy and the access of nonprofit advocates to support from federal courts. Groups such as Judicial Watch and Cause of Action have peppered executive agencies with Freedom of Information Act (FOIA) requests and sued in court when their requests were refused or ignored.  The class action lawsuit is led by the NorCal Tea Party Patriots, a 501(c)(4) social welfare nonprofit and one of the groups targeted by the IRS. Judicial Watch and Cause of Action are also aggressively pursuing other issues associated with political conservatives, including Hillary Clinton’s State Department emails and the Obama administration’s enforcement of immigration laws. There is a developing appearance that nonprofit advocacy groups, with judicial support, are having better success than Congress in investigating the executive branch of the federal government and securing the release of documentary evidence.

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June 15, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, June 14, 2016

Avi-Yonah:  Reflections On 'Google Taxes', BEPS, And The DBCT

Reuven Avi-Yonah (Michigan), Three Steps Forward, One Step Back? Reflections on 'Google Taxes', BEPS, and the DBCT:

Since the market is less subject to tax competition pressures than the location of headquarters or production facilities, reducing the PE threshold makes it easier to prevent BEPS. This has recently led some jurisdictions to enact new taxes aimed specifically at structures that seek to exploit the domestic market while avoiding a PE. This article will discuss these taxes in the UK, Australia and India, explore their relationship to the BEPS project, and then consider whether further steps can be taken toward a destination-based corporate tax (DBCT) that will be a permanent cure for BEPS.

June 14, 2016 in Scholarship, Tax | Permalink | Comments (0)

Ryan:  Marital Sharing Of Transfer Tax Exemptions

Kerry A. Ryan (Saint Louis), Marital Sharing of Transfer Tax Exemptions, 57 B.C. L. Rev. ___ (2016):

This Article analyzes portability and its antecedents in order to distill a positive account of marital sharing of transfer tax exemption amounts. Prior to 2010, the estate and gift tax exemption equivalent was a nontransferable, separate tax attribute of each spouse. A spouse could only access his or her spouse’s effective exemption by shifting property into the other spouse’s tax base. With the enactment of portability, Congress decoupled tax-free availability of a spouse’s unified credit from the necessity of a prior intra-spousal transfer. All that is required is an election by the decedent spouse, via the executor, to share the decedent’s unused exemption equivalent with the surviving spouse.

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June 14, 2016 in Scholarship, Tax | Permalink | Comments (0)

Christians & Ezenagu:  Kill-Switches In The New U.S. Model Tax Treaty

KillAllison Christians (McGill) & Alexander Ezenagu (Ph.D. Candidate, McGill), Kill-Switches in the New U.S. Model Tax Treaty, 41 Brook. J. Int'l L. ___ (2016):

The new US model income tax treaty contains an unusual addition: mechanisms for the parties to unilaterally override the negotiated treaty rates in specified circumstances. Previewed last year in proposed form — a first for Treasury — these new mechanisms work as kill-switches, partially terminating the treaty as to one or both treaty partners. The idea is to forestall a more problematic outcome, such as an enduring breach of one of the parties’ expectations, or the opposite, a complete termination of all the treaty terms in the face of such a breach. Yet embedding a kill-switch in a treaty creates distinct legal, procedural, and political pressures in the tax-treaty relationship that implicate treaty negotiation, ratification, interpretation, and dispute resolution. Kill-switches also communicate a defensive tenor in the tax treaty relationships among many countries. This Article analyzes the new kill-switch provisions and concludes that their introduction in the U.S. Model reflects the steady deterioration of tax treaties from essentially diplomatic documents premised on the good faith of the parties to detailed contracts drafted in anticipation of the opposite.

June 14, 2016 in Scholarship, Tax | Permalink | Comments (0)

Why Microsoft, With $100 Billion Of Cash, Wants To Borrow $26 Billion To Purchase LinkedIn

MLIBloomberg:  Why Microsoft, With $100 Billion, Wants a Loan for LinkedIn, by David Kocieniewski:

Microsoft Corp. has enough cash to buy LinkedIn Corp. four times over. So why is it taking out a big loan to pay for its latest purchase?

Maybe because it’ll lower the technology giant’s tax bill.

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June 14, 2016 in Tax | Permalink | Comments (3)

SSRN Tax Professor Rankings

SSRN LogoSSRN has updated its monthly rankings of 750 American and international law school faculties and 3,000 law professors by (among other things) the number of paper downloads from the SSRN database.  Here is the new list (through June 1, 2016) of the Top 25 U.S. Tax Professors in two of the SSRN categories: all-time downloads and recent downloads (within the past 12 months):

 

 

All-Time

 

Recent

1

Reuven Avi-Yonah (Mich.)

56,816

Reuven Avi-Yonah (Mich.)

10,444

2

Michael Simkovic (S. Hall)

32,439

Michael Simkovic (S. Hall)

4594

3

Paul Caron (Pepperdine)

31,397

D. Dharmapala (Chicago)

3327

4

D. Dharmapala (Chicago)

26,921

Paul Caron (Pepperdine)

2639

5

Louis Kaplow (Harvard)

26,006

Richard Ainsworth (BU)

2413

6

Vic Fleischer (San Diego)

22,410

Jeff Kwall (Loyola-Chicago)

1942

7

James Hines (Michigan)

21,820

Nancy McLaughlin (Utah)

1907

8

Richard Kaplan (Illinois)

21,119

Robert Sitkoff (Harvard)

1761

9

Ted Seto (Loyola-L.A.)

21,044

Louis Kaplan (Harvard)

1756

10

Ed Kleinbard (USC)

19,843

Chris Hoyt (UMKC)

1736

11

Katie Pratt (Loyola-L.A.)

18,905

David Weisbach (Chicago)

1718

12

Richard Ainsworth (BU)

18,018

Omri Marian (UC-Irvine)

1670

13

Robert Sitkoff (Harvard)

17,045

William Byrnes (Texas A&M)

1668

14

Carter Bishop (Suffolk)

17,005

Brad Borden (Brooklyn)

1588

15

Brad Borden (Brooklyn)

16,939

Dan Shaviro (NYU)

1578

16

David Weisbach (Chicago)

16,877

Ed Kleinbard (USC)

1500

17

Jen Kowal (Loyola-L.A.)

16,598

Vic Fleischer (San Diego)

1488

18

Chris Sanchirico (Penn)

16,450

Jack Manhire (Texas A&M)

1472

19

Dennis Ventry (UC-Davis)

16,075

Katie Pratt (Loyola-L.A.)

1421

20

Francine Lipman (UNLV)

16,010

Yariv Brauner (Florida)

1412

21

Bridget Crawford (Pace)

15,673

Richard Kaplan (Illinois)

1367

22

David Walker (BU)

15,028

Steven Bank (UCLA)

1311

23

Dan Shaviro (NYU)

14,887

Chris Sanchirico (Penn)

1280

24

Steven Bank (UCLA)

13,368

Gregg Polsky (N. Carolina)

1275

25

Herwig Schlunk (Vanderbilt)

13,198

Francine Lipman (UNLV)

1270

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

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June 14, 2016 in Scholarship, Tax, Tax Prof Rankings | Permalink | Comments (0)

Senate Holds Hearing Today On Energy Tax Policy

Senate Finance LogoThe Senate Finance Committee holds a hearing today on Energy Tax Policy in 2016 and Beyond:

  • Karen Alderman Harbert (U.S. Chamber of Commerce, Washington, D.C.)
  • Susan Kennedy (Advanced Microgrid Solutions, San Francisco)
  • Steve Miller (Bulk Handling Systems, Eugene, OR)
  • Benjamin Zycher (American Enterprise Institute, Washington, D.C.)

In connection with the hearing, the Joint Committee on Taxation has released Present Law And Analysis Of Energy-Related Tax Expenditures (JCX-46-16):

Since 2004, the Congress has been active in enacting legislation related to energy production (including oil and gas and renewables) and conservation. Part I of this document ... provides tables that summarize current energy-related Federal tax incentives.

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June 14, 2016 in Congressional News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1132

IRS Logo 2The Hill, Oversight Panel to Vote on Resolution to Censure IRS Chief:

The House Oversight and Government Reform Committee is set to vote Wednesday on a resolution to censure Internal Revenue Service Commissioner John Koskinen.

The vote is part of a larger effort by House Republicans against Koskinen. Many GOP lawmakers have accused him of engaging in misconduct while Congress was investigating findings that the IRS subjected conservative groups' applications for tax-exempt status to extra scrutiny. 

The House Judiciary Committee is also weighing whether Koskinen should be impeached and is holding its second hearing on the matter next week.

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June 14, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Monday, June 13, 2016

Former Qwest CEO Nacchio Denied Tax Deduction For $45 Million Forfeiture Of Insider Trading Profits

Insider TradingNacchio v. United States, Nos. 2015-5114 & 2015-5115 (Fed. Cir. June 10, 2016):

This is a tax case arising out of a criminal conviction for insider trading. Joseph P. Nacchio and Anne M. Esker (“Nacchio”) filed this action in the Court of Federal Claims seeking an income tax credit of $17,974,832 for taxes paid on trading profits of $44,632,464.38, which Nacchio was later ordered to forfeit to the United States following his conviction for insider trading with respect to those profits. The government opposed Nacchio’s request, contending that his forfeiture payment was a nondeductible penalty or fine and that he was estopped from seeking tax relief because of his criminal conviction. The parties filed cross-motions for summary judgment.

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June 13, 2016 in Celebrity Tax Lore, New Cases, Tax | Permalink | Comments (0)

Bentley University Seeks To Hire A Tenure-Track Tax Prof

BentleyBentley University (Waltham, MA) is seeking to hire a tenure-track Assistant Professor of Law in its Law, Tax & Financial Planning Department:

The Law Taxation and Financial Planning Department at Bentley University, located in the suburbs of Boston, Massachusetts, is seeking a full-time tenure-track Assistant Professor of Law to start in July 2017. With a strong faculty of teacher-scholars, Bentley strives to lead higher education in the integration of global business with the arts and sciences, information technology, and corporate ethics and social responsibility. Providing an intellectually stimulating academic community for both faculty and students, Bentley supports its faculty as they pursue high quality and impactful cutting-edge research and bring their expertise and real world experiences into the classroom. We seek individuals who represent different backgrounds, interests and talents and who share a commitment to the fusion of business and arts & sciences education, information technology, and business ethics.

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June 13, 2016 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)

Trump 2.0 Tax Plan Under Discussion

Trump Tax Plan

Bloomberg:  Less Costly ‘Trump 2.0’ Tax Plan Urged by Reagan-Era Economists, by Lynnley Browning:

Donald Trump has said his main tax-policy goal is a cut for the middle class, yet his guest list for a series of policy presentations at Trump Tower included a Reagan-era economist who has suggested revamping that plan.

Lobbyists and business leaders, including oil billionaire and Trump ally Harold Hamm, gathered June 9 at the presumptive Republican nominee’s New York headquarters to present their policy wish lists. Among them: economist Stephen Moore, who has been offering Trump advice on tax policy -- particularly suggestions for cutting his plan’s estimated cost of $10 trillion over 10 years.

But Moore and fellow conservative economist Lawrence Kudlow have recommended changes that would “all but erase” the middle-class benefits Trump favors, according to Kyle Pomerleau, a senior policy specialist at the right-leaning Tax Foundation in Washington. The foundation, a non-profit research group, reviewed the revisions at the request of Moore and Kudlow. 

Trump hasn’t committed to any of their suggestions, and spokeswoman Hope Hicks told the New York Times last month that Moore and Kudlow don’t speak for the campaign. Nonetheless, Moore’s appearance at Thursday’s Trump Tower conclave -- where he said he was one of the presenters -- suggests that the final contours of Trump’s tax plan remain under discussion.

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June 13, 2016 in Tax | Permalink | Comments (1)

Brooks:  Using Facts Of Tax Cases To Reveal Something About Who We Are

Kim Brooks (Dalhousie), The High Cost of Transferring the Dream:

This paper is part of a larger project where I use the facts in tax decisions to reveal something about who we are. It looks through a small window into the lives of the people who find themselves caught between our collective and their individual expenditure aspirations. More specifically, it explores the circumstances in which individuals find that their outstanding tax debts pose a threat to their ability to maintain ownership of their home.

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June 13, 2016 in New Cases, Scholarship, Tax | Permalink | Comments (0)

WaPo:  How An Obscure Nonprofit In Washington Protects Tax Havens For The Rich

Center for Freedom & ProsperityWashington Post, How An Obscure Nonprofit In Washington Protects Tax Havens For The Rich:

In May 2007, during a global crackdown on offshore tax havens, an obscure nonprofit lobbying group in Northern Virginia sent a fundraising pitch to a law firm in one of the biggest tax havens in the world — Panama.

The Center for Freedom and Prosperity promised to persuade Congress, members of the George W. Bush administration and key policymakers to protect the players of the offshore world, where hundreds of thousands of shell companies had been created, often to hide money and evade taxes.

To reach out to American officials and fund its U.S. operations, the center said it needed an infusion of cash for an eight-month campaign: at least $247,000. ...

In the eight-page fundraising document discovered by The Post, the Center for Freedom and Prosperity in Alexandria, Va., said that it had already persuaded the Bush administration to thwart an international effort to require more transparency from tax havens. Now the center was promising to derail similar reforms in legislation before Congress.  ...

“It’s sort of like fishing, you have to keep casting your lure,” said Daniel Mitchell, one of the directors of the center, in a recent interview with The Post. ...

Former senator Carl Levin (D-Mich.), once one of the leading voices in Congress on tax haven abuses, said in a recent interview that the center’s activities run counter to America’s values and undermine the nation’s ability to raise revenue.

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June 13, 2016 in Tax | Permalink | Comments (0)

Medtronic Wins $2 Billion Transfer Pricing Tax Court Case

MedtronicBloomberg BNA, Tax Court Slams IRS ‘Medtronic'Analysis, Says $2B Too Much:

The IRS grossly underrated the contributions of Medtronic Inc.'s Puerto Rican affiliate to the quality of the company's products, the U.S. Tax Court ruled, finding for the medical device maker in its $2 billion transfer pricing dispute (Medtronic v. Commissioner, T.C. Memo. 2016-112 (June 9, 2016)).

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June 13, 2016 in New Cases, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1131

House LogoH.R. Rep. No. 612, 114th Cong., 2d Sess.:

I. SUMMARY AND BACKGROUND

A. PURPOSE AND SUMMARY

H.R. 5053, as reported by the Committee on Ways and Means, would prohibit the Internal Revenue Service (IRS) from collecting the identity of donors who contribute to tax-exempt organizations. Under this legislation, a tax-exempt organization would be required to report only information on donors who contribute $5,000 or more during a single tax year and who are either an officer or director of the organization or one of its five highest paid employees. This information would be excluded from public disclosure.

B. BACKGROUND AND NEED FOR LEGISLATION

Current law requires section 501(c)(3) tax-exempt organizations to report information on substantial donors. The IRS defines a substantial donor as a contributor who gives $5,000 or more to an organization in a calendar year. This information is reported on the Schedule B of the Form 990. The requirement to file a Form 990 applies to tax-exempt organizations generally, not just to section 501(c)(3) tax-exempt organizations. Thus, the IRS has expanded the substantial donor reporting requirements to more than section 501(c)(3) tax-exempt organizations. While the IRS does not make this information public, there have been instances where IRS employees have improperly accessed and released the Schedule B donor list. A notable example is the National Organization for Marriage, which had information from its Schedule B leaked in 2012 and the IRS subsequently paid $50,000 to settle a lawsuit with the organization claiming that the IRS improperly accessed the information. Certain states, including California, have moved to make Schedule B information public. The move to publicize Schedule B information was the subject of a recent lawsuit, Americans for Prosperity Foundation v. Kamala Harris, Attorney General for California. The Attorney General of California wanted to require that the Americans for Prosperity Foundation disclose its Schedule B to the California State Registry. In April 2016, the U.S. District Court ruled that requiring the organization to disclose its Schedule B was unconstitutional.

In recent years it was also revealed that the IRS used inappropriate criteria to target organizations applying for tax-exempt status. Additionally, the IRS is considering eliminating Schedule B entirely. H.R. 5053 would protect taxpayers from improper disclosure of Schedule B information, as well as limit the IRS’s ability to target organizations improperly. The legislation also eliminates a burdensome reporting requirement for tax-exempt organizations. ...

II. EXPLANATION OF THE BILL

A. PROHIBITION ON REQUIRING THAT IDENTITY OF CERTAIN CONTRIBUTORS TO SECTION 501(c) ORGANIZATIONS BE INCLUDED ON ANNUAL RETURNS (SEC. 32 OF THE BILL AND SEC. 6033 OF THE CODE)

PRESENT LAW

In general, organizations exempt from taxation under section 501(a) are required to file an annual return (Form 990 series), stating specifically the items of gross income, receipts, disbursements, and such other information as the Secretary may prescribe. An organization that is required to file an information return, but that has gross receipts of less than $200,000 during its taxable year, and total assets of less than $500,000 at the end of its taxable year, may file Form 990–EZ. Section 501(c)(3) private foundations are required to file Form 990–PF rather than Form 990. An organization that has not received a determination of its tax-exempt status, but that claims tax-exempt status under section 501(a), is subject to the same annual reporting requirements and exceptions as organizations that have received a tax-exemption determination.

On the applicable annual information return, organizations are required to report their gross income, information on their finances, functional expenses, compensation, activities, and other information required by the IRS in order to review the organization’s activities and operations during the previous taxable year and to review whether the organization continues to meet the statutory requirements for exemption. Examples of the information required by Form 990 include: (1) a statement of program accomplishments; (2) a description of the relationship of the organization’s activities to the accomplishment of the organization’s exempt purposes; (3) a description of payments to individuals, including compensation to officers and directors, highly paid employees and contractors, grants, and certain insider transactions and loans; and (4) disclosure of certain activities, such as expenses of conferences and conventions, political expenditures, compliance with public inspection requirements, and lobbying activities.

Form 990–PF requires, among other things, reporting of: the foundation’s gross income for the year; expenses attributable to such income; disbursements for exempt purposes; total contributions and gifts received and the names of all substantial contributors; names, addresses, and compensation of officers and directors; an itemized statement of securities and other assets held at the close of the year; an itemized statement of all grants made or approved; and information about whether the organization has complied with the restrictions applicable to private foundations (secs. 4941 through 4945).

An organization that files Form 990, Form 990–EZ, or Form 990– PF and receives during the year $5,000 or more (in money or property) from any one contributor generally must report such contributions on Schedule B (‘‘Schedule of Contributors’’). The Schedule B is open to public inspection for an organization that files Form 990–PF (private foundations) or a section 527 political organization that files Form 990 or Form 990–EZ. For all other Form 990 and Form 990–EZ filers, the names and addresses of contributors are not required to be made available for public inspection. All other information, including the amount of contributions, the description of noncash contributions, and any other information, is required to be made available for public inspection unless it clearly identifies the contributor. As a matter of practice, the IRS does not include Schedule B on the CD sets or any other form of media made available to the public. Instead, on a case-by-case basis, when an individual makes a request for a specific organization’s Schedule B, the IRS reviews and redacts the schedule in an effort to avoid divulging information that would identify any contributor. 

The requirement that an exempt organization file an annual information return (Form 990 or Form 990–EZ) does not apply to certain exempt organizations, including organizations (other than private foundations) the gross receipts of which in each taxable year normally are not more than $50,000. Organizations that are excused from filing an information return by reason of normally having gross receipts below such amount must furnish to the Secretary an annual notice (Form 990–N), in electronic form, containing certain basic information about the organization.

Other organizations exempt from the annual information return requirement include: churches, their integrated auxiliaries, and conventions or associations of churches; the exclusively religious activities of any religious order; certain State institutions whose income is excluded from gross income under section 115; an interchurch organization of local units of a church; certain mission societies; certain church-affiliated elementary and high schools; and certain other organizations, including some that the IRS has relieved from the filing requirement pursuant to its statutory discretionary authority.6

REASONS FOR CHANGE

The Committee is concerned that the IRS is collecting sensitive information about donors who contribute to tax-exempt organizations. Although the IRS is required by law to maintain the confidentiality this information, the Committee is aware of instances in which the information was released to third parties. Furthermore, the Committee is concerned that the IRS might use donor information to penalize tax-exempt organizations or donors based on their political beliefs. By limiting the contribution information taxexempt organizations report to the IRS, the provision will protect taxpayers’ identities and help prevent inappropriate political targeting by the IRS. In addition, the Committee believes the Schedule B provides little administrative benefit to the IRS. In fact, senior leadership of the IRS’s Exempt Organizations Division has stated recently that the IRS is considering eliminating the Schedule B filing requirement.

EXPLANATION OF PROVISION

The provision limits the contributor information that must be reported by an organization described in section 501(c) on its annual information return. Under the provision, except as described below, the Secretary may not require an organization to report the name, address, or other identifying information of any contributor to the organization with respect to any contribution, grant, bequest, devise, or gift of money or property, regardless of amount.

The provision provides two exceptions to this prohibition. First, the Secretary is not prohibited from requiring the information described in section 6033(a)(2) relating to prohibited tax shelter transactions. Second, the Secretary is not prohibited from continuing to require reporting of contributions, grants, bequests, devises, or gifts of money or property in excess of $5,000 made by an officer or director of the organization (or an individual having powers to responsibilities similar to those of officers or directors) or by a covered employee. Covered employee means any employee (including any former employee) of the organization if the employee is one of the five highest compensated employees of the organization for the taxable year. For this purpose, an employee’s compensation includes compensation from the organization as well as any compensation paid with respect to the employment of such employee by any related person or governmental entity. A person or governmental entity is treated as related to the organization if it: (1) controls or is controlled by the organization; (2) is controlled by one or more persons that control the organization; (3) is a supported organization (as defined in section 509(f)(3)) during the taxable year with respect to the organization; (4) is a supporting organization described in section 509(a)(3) with respect to the organization; or (5) in the case of an organization that is a voluntary employees’ beneficiary association described in section 501(c)(9), establishes, maintains, or makes contributions to such voluntary employees’ beneficiary association.

The provision makes a conforming amendment to section 6033(b), which describes certain information that a section 501(c)(3) organization must include on its annual information return. ...

VII. DISSENTING VIEWS

We oppose H.R. 5053, which would prohibit the Secretary of the Treasury from collecting the name, address, or other identifying information of contributors to any tax-exempt, 501(c) organization except in limited circumstances. This bill would open the floodgates for unlimited, anonymous, unaccountable money to pour into U.S. elections—including possibly from foreign sources.

Under present law, certain 501(c) organizations must attach to their annual information returns (IRS Forms 990) a list (Schedule B) of donors who contribute $5,000 or more during the year (‘‘substantial contributors’’). The Schedule B is kept confidential by the Internal Revenue Service (IRS) and is not made public.

Certain 501(c) organizations, such as social welfare organizations, are permitted to engage in political activity. These politically active 501(c)(4) organizations are required to disclose their substantial contributors to the IRS but are not required to disclose them to the public.

There has been a sharp rise in undisclosed money being spent by tax-exempt groups in federal elections since the Supreme Court issued its 2010 Citizens United decision. This bill would make it even easier for donors to anonymously funnel money in support of political candidates. Already in this election cycle, according to the Center for Responsive Politics, political spending by tax-exempt groups is five times the amount spent at this point during the 2012 election cycle.

It is no secret as to why Republicans are working to keep donors a secret: the three largest spenders from 2012—representing fully 51% of the total—include Karl Rove’s Crossroads GPS (that spent $71 million); the Koch Brothers’ Americans for Prosperity (that spent $36 million); and the Koch Brothers’ American Future Fund (that spent $25 million). It is no surprise the Koch Companies Public Sector, LLC sent a letter to Republican Members on the day of the markup urging them to support the bill. Simply put, H.R. 5053 does nothing more than solidify the secrecy around the Republicans’ big campaign efforts.

The bill also potentially opens the door for unlimited, secret money from foreign governments or individuals to be funneled into our elections. Currently, foreign money cannot be given or spent in our elections. The only real protection we have against the use of foreign money by politically active social welfare organizations is that they must disclose their substantial contributors to the IRS. This requirement means that tax-exempt, 501(c)(4) groups know they can be held accountable if they illegally spend foreign money in federal elections. Campaign finance reform groups opposing this bill warned that, if donor disclosure to the IRS is eliminated, no one will know whether a social welfare organization has received foreign funds and is illegally spending them in our elections.

We should not support efforts to reduce transparency and make it easier for donors to pour unlimited funds into political campaigns. For these reasons, we oppose this bill.

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June 13, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

TaxProf Blog Weekend Roundup

Sunday, June 12, 2016

The Story Of Tonight:  With Billion-Dollar Hamilton Poised To Sweep Tony Awards, Broadway Pushes For Tax Break Extension

Hamilton 2Bloomberg, As ‘Hamilton’ Enriches Backers, Broadway Wants Tax Break Extended:

Alexander Hamilton introduced the idea of federal taxes. Broadway producers enjoying a record season buoyed by his namesake musical are lobbying Congress to limit what they owe.

The industry, which will celebrate its success tonight at the Tony Awards, is fighting to keep a provision that allows live-theater backers deductions in a show’s first year. That means they’d pay tax on income only after turning a profit. The provision passed in 2015, yet needs to be extended by Congress this year to survive.

In an industry where four of five performances close without recouping startup costs, producers say such a sweetener will keep the hits coming. While the provision was tacked onto a list of tax breaks last year at the behest of Sen. Chuck Schumer, D-N.Y., there’s no guarantee it will be continued, producers and their lobbyists say. Some lawmakers don’t like the idea. Nor do advocates of tax cuts, who say such breaks make it more difficult to reduce the burden on everyone else. ...

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June 12, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

The Top 5 Tax Paper Downloads

SSRN LogoThere is quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new #1 paper and a new paper debuting on the list at #4:

  1. [412 Downloads]  Google's 'Alphabet Soup' in Delaware, by Bret Bogenschneider (Vienna) & Ruth Heilmeier (Cologne)
  2. [328 Downloads]  New Prominence Of Tax Basis In Estate Planning, by Paul L. Caron (Pepperdine) & Jay A. Soled (Rutgers)
  3. [241 Downloads]  Following the Money: Lessons from the Panama Papers, Part 1: Tip of the Iceberg, by Lawrence Trautman (American)
  4. [194 Downloads]  Why Does Inequality Matter? Reflections on the Political Morality of Piketty's Capital in the Twenty-First Century, by Liam Murphy (NYU)
  5. [187 Downloads]  'Death Tax' Politics, by Michael J. Graetz (Columbia)

June 12, 2016 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

WSJ:  How To Cheat Your Fitbit And Win Fitness Challenges

SurgeI am a Fitbit fanatic, assiduously tracking my exercise and sleep on my Surge (right).  The Wall Street Journal opened my eyes on how I can jack up my numbers in our intra-family fitness wars in a front page article,  Want to Cheat Your Fitbit? Try a Puppy or a Power Drill:

Workplace "step challenges" are big with companies aiming to encourage employee fitness. In pursuit of victory, some workers are using power tools, pets and household appliances to fool digital fitness trackers and boost their step totals without lifting a foot.

During a step challenge at an electronics-manufacturing firm in Texas, suspiciously high activity on one employee’s fitness tracker prompted a call from Sonic Boom Wellness, the Carlsbad, Calif.-based company running the challenge. After a brief interrogation, the man came clean: He had clipped his tracker to a hamster wheel.

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June 12, 2016 in Legal Education, Tax | Permalink | Comments (1)

The IRS Scandal, Day 1130

IRS ChurchThe Surly Subgroup:  Tying the IRS’s Hands. Even Tighter, by Sam Brunson (Loyola-Chicago):

Yesterday, the House Committee on Appropriations reported H.R. 2995 to the House of Representatives. H.R. 2995, the Financial Services and General Government Oversight Appropriations Bill  for FY 2017, if passed, would continue the trend of reducing the IRS’s budget, this time by $236 million. ...

I’m interested in an amendment added yesterday by Rep. John Culberson (R-TX). Section 135 of the bill would make it even harder than it already is for the IRS to audit churches. 

The IRS already faces significant limitations on its ability to audit churches. ... The result? Churches are rarely audited, and even more rarely lose their exemptions. While the IRS doesn’t disclose the number of church audits it performs, the ECFA suggests that there may be 100 church audits a year. And how many churches are there in the U.S.? Again, hard to say, but the U.S. Religion Census finds about 345,000 congregations in the U.S. That would be a 0.03% audit rate; even assuming the number of churches is off by a factor of 10, we’re talking a 0.3% audit rate. And I can only find one report of a church losing its exemption for violating the campaigning prohibition (even though thousands of churches have deliberately and explicitly violated it).

That, though, is apparently insufficient for Rep. Culberson, who claims he added his amendment to “protect churches from being bullied by the Internal Revenue Service (IRS) and left-wing activists whenever a church engages in educational political activity.”

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June 12, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Saturday, June 11, 2016

This Week's Ten Most Popular TaxProf Blog Posts

11th Annual Junior Tax Scholars Workshop Concludes Today At UC-Irvine

UC Irvine Logo (2016)Panel #5:  Exempt Organizations/Individual Planning

Manoj Viswanathan (UC-Hastings), Tax Compliance in a Decentralizing Economy
Commentators:  Philip Hackney (LSU), Khrista Johnson (Pepperdine)

Philip Hackney (LSU), Subsidizing the Heavenly(?) Chorus
Commentators:  Manoj Viswanathan (UC-Hastings), Lilian Faulhaber (Georgetown)

Tessa Davis (South Carolina), Reconsidering Alimony and Tax
Commentators:  Khrista Johnson (Pepperdine), Sloan Speck (Denver)

Panel #6:  Grab Bag

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June 11, 2016 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Taxes Could Wipe Out Half Of Prince's $250 Million Estate

Following up on my previous posts (links below) on the estate planning aspects of Prince's death: People Magazine, Taxes Could Wipe Out Half of Prince's $250 Million Estate and Force Early Sale of His Unreleased Songs, Trustee Says:

Prince's estate is getting hit with a hefty tax bill that could end up taking half of his estimated $250 million fortune – and force the early sale of some of the vast troves of unreleased music that the Purple One had locked up in his vault, the trustee for the estate revealed.

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June 11, 2016 in Celebrity Tax Lore, Tax | Permalink | Comments (1)

The IRS Scandal, Day 1129

IRS Logo 2Omaha World-Herald editorial, IRS Stonewalling:

The Internal Revenue Service has, at long last, made public a list of 426 politically conservative organizations targeted by its tax-exempt division.

It took a lawsuit and three long years to pry all of the information into public view. That’s outrageous. But then, foot-dragging and obfuscation have been the agency’s tactics from the start of this sorry affair.

The official at its center, Lois Lerner, took refuge behind the Fifth Amendment when called to answer questions from Congress. Then the IRS claimed that a crash of Lerner’s computer made it “impossible” to produce her emails — until 30,000 were recovered by a Treasury Department inspector general.

All of this does nothing to reassure taxpayers of the agency’s needed fairness. ...

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June 11, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Friday, June 10, 2016

Disney CEO:  U.S. Tax Law Is Mickey Mouse

Mickey MouseCNN, Disney CEO: U.S. Taxes Are 'Too High' and 'Ridiculously Complex':

Disney CEO Bob Iger thinks companies -- including his -- are simply paying too much in tax to Uncle Sam.

Iger told CNNMoney on Thursday that high corporate tax rates in the U.S. are "anti-competitive," and described the country's tax system as "ridiculously complex."

"It doesn't mean that a company shouldn't pay taxes, but I think the structure is off ... the tax base should be lowered, and the loopholes should be closed," Iger said, without elaborating on potential reforms.

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June 10, 2016 in Tax | Permalink | Comments (7)

IRS Announces Winners Of Tax Design Crowdsourcing Challenge

IRSThe IRS today announced (IR-2016-86) announced the winners of its first Tax Design Crowdsourcing Challenge:

The Internal Revenue Service today announced the winners of its first crowdsourcing competition, called the Tax Design Challenge, that encouraged innovative ideas for the taxpayer experience of the future.

Out of 48 submissions, winners from California, Minnesota and Washington, D.C., were among those selected in categories covering overall design, taxpayer usefulness and best financial capability.

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June 10, 2016 in IRS News, Tax | Permalink | Comments (2)

Weekly Tax Roundup

Weekly SSRN Tax Roundup

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June 10, 2016 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

11th Annual Junior Tax Scholars Workshop Kicks Off Today At UC-Irvine

UC Irvine Logo (2016)Panel #1:  Tax Bases

Erin Scharff (Arizona State), Pigouvian User Fees
Commentators:  Goldburn Maynard (Louisville), Tessa Davis (South Carolina)

Goldburn Maynard (Louisville), A Plea for Courts to Abolish the Judicially Created Right of the Wealthy to Avoid Estate Taxes
Commentators:  Erin Scharff (Arizona State), Philip Hackney (LSU)

Emily Satterthwaite (Toronto), Chain Effects and the Small Supplier Election
Commentators:  Ari Glogower (Ohio State), Omri Marian (UC-Irvine)

Ari Glogower (Ohio State), Wealth Integration
Commentators:  Emily Satterthwaite (Toronto), Andrew Hayashi (Virginia)

Panel #2:  Compliance

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June 10, 2016 in Conferences, Scholarship, Tax | Permalink | Comments (0)

CBO:  The Distribution Of Household Income And Federal Taxes, 2013

Congressional Budget Office, The Distribution of Household Income and Federal Taxes, 2013:

In 2013, according to the Congressional Budget Office’s estimates, average household market income— a comprehensive income measure that consists of labor income, business income, capital income (including capital gains), and retirement income—was approximately $86,000. Government transfers, which include benefits from programs such as Social Security, Medicare, and unemployment insurance, averaged approximately $14,000 per household. The sum of those two amounts, which equals before-tax income, was about $100,000, on average. In this report, CBO analyzed the distribution of four types of federal taxes: individual income taxes, payroll (or social insurance) taxes, corporate income taxes, and excise taxes. Taken together, those taxes amounted to about $20,000 per household, on average, in 2013.1 Thus, average after-tax income—which equals market income plus government transfers minus federal taxes— was about $80,000, and the average federal tax rate (federal taxes divided by before-tax income) was about 20 percent.

CBO

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June 10, 2016 in Congressional News, Gov't Reports, Tax | Permalink | Comments (1)

Crawford:  Valuation, Values, Norms — Proposals For Estate And Gift Tax Reform

Bridget Crawford (Pace), Valuation, Values, Norms: Proposals for Estate and Gift Tax Reform, 57 B.C. L. Rev. 979 (2016):

In their contributions to the Symposium on The Centennial of the Estate and Gift Tax, Professor Joseph Dodge, Professor Wendy Gerzog, and Professor Kerry Ryan offer concrete proposals for improving the existing estate and gift tax system.

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June 10, 2016 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1128

IRS Logo 2The Hill, House Panel Votes to Cut IRS Funding:

The House Appropriations Committee on Thursday approved a spending bill that would reduce funding for the Internal Revenue Service (IRS).

The bill would give the IRS $10.9 billion for fiscal 2017, which is $236 million less than the enacted level for this year.

The IRS budget under the bill would be lower than its 2008 level and $1.3 billion less than President Obama requested in his budget. The bill also includes provisions to stop the IRS from further implementing ObamaCare and to increase oversight of the IRS in the wake of its political-targeting scandal.

Republicans supported the bill’s treatment of the IRS.

Rep. Ander Crenshaw (R-Fla.), chairman of the subcommittee with jurisdiction over the bill, said that instead of turning over a new leaf after the targeting scandal came to light, “the IRS made a series of embarrassing management mistakes at the expense of customer service.”

But Democrats expressed concerns about the cuts to the IRS. Rep. José Serrano (D-N.Y.), the top Democrat on the subcommittee, said that “by continually cutting the IRS, we are simply empowering tax cheats and confusing honest taxpayers.”

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June 10, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, June 9, 2016

Logue Responds To Galle's In Praise Of Ex Ante Regulation

Kyle Logue (Michigan), In Praise of (Some) Ex Post Regulation: A Response to Professor Galle, 69 Vand. L. Rev. En Banc 97 (2016):

Professor Brian Galle recently argued [In Praise of Ex Ante Regulation, 68 Vand. L. Rev. 1715 (2015)] that the growing consensus that ex post regulation is superior to ex ante regulation on efficiency grounds has been overstated by scholars, including me, and that ex ante regulation has advantages that have been ignored or underemphasized.

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

Graetz & Greenhouse:  The Burger Court And The Rise Of The Judicial Right

Burger CourtMichael J. Graetz (Columbia) & Linda Greenhouse (New York Times), The Burger Court and the Rise of the Judicial Right (June 7, 2016).  From Columbia Law School:

Early reviews are extolling the insights of The Burger Court and the Rise of the Judicial Right, the new book by Columbia Law School Professor Michael J. Graetz and Pulitzer Prize-winning journalist Linda Greenhouse. Graetz—the author of seven books, an eminent scholar and teacher, and a former official in the U.S. Treasury Department—is the Columbia Alumni Professor of Tax Law. He has argued before the Supreme Court. For nearly 30 years, Greenhouse covered the Supreme Court for The New York Times

The Burger Court and the Rise of the Judicial Right, published today by Simon & Schuster, challenges the accepted portrayal of the Supreme Court from 1969 to 1986 as pragmatic and accommodating, a moderate or transitional period when “nothing much happened.” On the contrary, explain Graetz and Greenhouse, American law moved to the right with President Richard Nixon’s four appointments to the Supreme Court, including Chief Justice Warren Burger. A new conservative majority reacted to the previously liberal Court under Chief Justice Earl Warren, curbing and rolling back landmark rulings on civil rights and civil liberties, while granting a First Amendment right to “commercial speech,” which would enable businesses to invoke the Constitution in opposition to government regulation. The Burger Court and the Rise of the Judicial Right shows how the Court reached its most lasting decisions, laying a legal foundation for the conservative Rehnquist and Roberts Courts. ...

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June 9, 2016 in Book Club, Legal Education, Scholarship, Tax | Permalink | Comments (1)

NY Times:  Two Williams & Connolly Tax Lawyers Ordered To Testify In Client’s Tax Evasion Case Under Crime Fraud Exception To Attorney-Client Privilege

WilliamsNew York Times Deal Book, Lawyers Ordered to Testify on Client’s Tax Evasion Case:

It is not every day that two prominent lawyers are brought before a federal grand jury and directed to provide documents and testimony about conversations they had with a wealthy client.

But that is what happened with two partners at Williams & Connolly, the prestigious Washington law firm, who are representing Morris E. Zukerman, a former Morgan Stanley banker and oil investor. Last month, Mr. Zukerman was accused of failing to pay $45 million in income and sales taxes on works of art and profits from the sale of an oil company.

A series of court filings in Mr. Zukerman’s pending criminal case in Federal District Court in Manhattan shines a light on the often-unseen role lawyers can play in nonpublic tax investigations by the Internal Revenue Service and federal prosecutors. In the filings, federal prosecutors in Manhattan raised the prospect of potential conflict of interest for the two lawyers, who are trying to negotiate a plea deal for Mr. Zukerman.

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June 9, 2016 in Tax | Permalink | Comments (0)

House Holds Hearing Today On The Need To Control Automatic Spending And Unauthorized Programs

HouseThe House Budget Committee holds a hearing today at 9:30 a.m. EST on The Need to Control Automatic Spending and Unauthorized Programs with these witnesses:

  • Lily Batchelder (NYU)
  • Stuart Butler (Brookings Institution)
  • David Walker (Former Comptroller General of the United States)

June 9, 2016 in Congressional News, Tax | Permalink | Comments (0)

Tax Foundation:  Options For Reforming America’s Tax Code

TF_Options_for_Reforming_Americas_Tax_CodeTax Foundation, Options For Reforming America’s Tax Code:

There is a widespread consensus among Americans across the political spectrum that the U.S. tax system is overly complex, inefficient, uncompetitive, and due for an overhaul. However, Congress has not passed a comprehensive tax reform bill in three decades. As a result, many lawmakers have set their sights on the 2017 legislative session as an opportunity to hammer out a tax reform deal.

Because so many parts of the U.S. tax code are in need of change, any tax reform bill considered by Congress is likely to be hundreds of pages long and contain dozens of distinct provisions. As a result, lawmakers and voters may be unsure of the effects of each separate tax change on federal revenue collections, the tax burden borne by different groups of Americans, and the growth of the U.S. economy.

To assist lawmakers in assembling tax reform bills over the coming months, and to help the American public in understanding the tax changes being proposed, we have assembled this book: Options for Reforming America’s Tax Code.

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June 9, 2016 in Tax, Think Tank Reports | Permalink | Comments (4)

Thimmesch:  State Taxing Power After Direct Marketing Association v. Brohl

Adam B. Thimmesch (Nebraska), State Taxing Power after Direct Marketing Association v. Brohl, 80 State Tax Notes 299 (Apr. 25, 2016):

The Tenth Circuit Court of Appeals’ recent decision in Direct Marketing Association v. Brohl marked another entry into the ongoing saga regarding the scope of state taxing power over remote vendors. That decision, along with the U.S. Supreme Court’s decision in an earlier iteration of the litigation, has predictably increased the debates regarding the meaning and validity of the Court’s long-standing physical presence rule and the merits of congressional intervention.

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

The IRS Scandal, Day 1127

Wednesday, June 8, 2016

Johnston:  Who's Getting Richer? Hardly Anyone.

David Cay Johnston (Syracuse), Who's Getting Richer? Hardly Anyone:

The latest federal income data show what looks on the surface like robust economic gains, with Americans reporting 4.6% more income in 2014 than 2013. But that’s misleading.

My analysis of the official data reveals that just beneath the shiny surface lies an ugly picture. A few Americans are seeing their incomes soar, and the top 15% or so are doing well overall. Meanwhile, the vast majority tread water or slowly sink, an economic reality that has fueled support for both Donald Trump and Senator Bernie Sanders.

This disparity, which I have been documenting for more than two decades, reflects government policies that subtly take from the many and redistribute upward to the already very rich few; the downward pressure on wages due to globalization; and the decline of unions, which had given workers bargaining power so they enjoyed a larger share of business revenues.

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June 8, 2016 in Tax | Permalink | Comments (1)

AEI Hosts Panel Discussion On U.S. Corporate Tax Reform in 2017

AEI (2016)American Enterprise Institute, U.S. Corporate Tax Reform in 2017: Exploring the Options:

On June 7 at AEI, two expert panels discussed business- and shareholder-level taxation in pursuit of solving current problems with corporate taxation.

The Senate Finance Committee’s Christopher H. Hanna remarked that tax reform efforts almost exclusively promote efficiency and economic growth and that the US tax system is largely obsolete.

On the first panel, Columbia University’s David M. Schizer voiced the popular sentiment that the corporate tax rate must be reduced. Columbia Business School’s R. Glenn Hubbard argued that one type of tax could not alone address the income shifting problem. The University of Southern California’s Edward D. Kleinbard encouraged focusing on the effective tax rate rather than statutory rates, while Alan J. Auerbach of the University of California, Berkeley, suggested removing incentives for companies to go offshore rather than cutting the corporate rate.

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June 8, 2016 in Conferences, Tax | Permalink | Comments (0)

Caron:  The One Hundredth Anniversary Of The Federal Estate Tax — It's Time To Renew Our Vows

Paul L. Caron (Pepperdine), The One Hundredth Anniversary of the Federal Estate Tax: It's Time to Renew Our Vows, 57 B.C. L. Rev. 823 (2016):

September 8, 2016 will mark the one hundredth anniversary of the federal estate tax. As with many longstanding marriages, America’s commitment to the estate tax has waxed and waned through the years. Our ardor built slowly, growing from the honeymoon years (impacting less than 1% of decedents with an inflation-adjusted exemption of around $1 million and a 10% top rate on estates over $100 million, raising less than 1% of all federal tax revenues) to a mid-marriage peak (impacting more than 7% of decedents with a $350,000 exemption and a 77% top rate on estates over $160 million, raising nearly 10% of federal tax revenues). But our passion has steadily cooled since then, culminating in a one year trial separation in 2010 and today’s withered estate tax (impacting less than 0.2% of decedents with a $5.4 million exemption and a 40% top rate on estates over $6.4 million, raising less than 0.6% of federal tax revenues).

Yet the initial reasons for our commitment to the estate tax – to raise revenue during a time of war, enhance the progressivity of the tax system, and curb concentrations of wealth – are even more compelling today than they were in 1916. This Article argues that we should rededicate ourselves to the vibrant estate tax of our youth.

June 8, 2016 in Scholarship, Tax | Permalink | Comments (3)

IRS Closes Door On REIT Spin-Offs

REITWall Street Journal, IRS Shuts Down Remaining Channels for REIT Spinoffs:

The Internal Revenue Service shut down an apparent gap in a tax law that otherwise could have allowed companies across industries to continue spinning off their property holdings into tax-advantaged real-estate investment trusts.

The December law was written in response to a wave of deals by retailers, hotels and others that sought the tax-beneficial status of being a real-estate investment trust, or REIT. The law banned companies created in tax-free spinoffs from electing REIT status for 10 years after the transaction. But the law didn’t prevent spun-off companies from merging into an existing REIT, among other possible workarounds.

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

Most Stock Buybacks Should Be Taxed As Dividends

Wanling Su (Yale) & Rahul K. Goravara (Yale), What Is a Dividend?:

What is a dividend? It is a trillion dollar question. One on which the Internal Revenue Service (IRS) and the courts profoundly disagree.

The Tax Code defines a dividend as “any distribution of property made by a corporation to its shareholders.” Corporations found a way around this definition and thus the dividend tax. It involves buying back their own stock. A buyback can act like a dividend in substance, distributing cash to shareholders without changing anyone’s stake in the corporation.

This reading has been taken for granted by scholars. We argue the Tax Code provisions are not simple. In fact, the IRS misinterprets them. Most buybacks should actually be taxed as dividends.

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

The IRS Scandal, Day 1126

IRS Logo 2Wall Street Journal:  The IRS’s Ugly Business as Usual, by Kimberly A. Strassel:

‘How much has really changed?’ a judge asks. Answer: not much. The scandal goes on.

Amid the drama that is today’s presidential race, serious subjects are getting short shrift. No one is happier about this than Barack Obama. And no agency within that president’s administration is more ecstatic than the Internal Revenue Service.

That tax authority’s targeting of conservative nonprofits ranks as one of the worst federal scandals in modern history. It is topped only by the outrage that no one has been held to account. Or perhaps by the news that the targeting continues to this day.

That detail became clear in an extraordinary recent court hearing, in front of a panel of judges for the D.C. Circuit Court of Appeals. The paired cases in the hearing were Linchpins of Liberty, et al. v. United States of America, et al. and True the Vote Inc. v. Internal Revenue Service, et al. They involve several conservative nonprofits—there are 41 in Linchpin—that were, as they said, rounded up and “branded” by the IRS. The groups are still suffering harm, and they want justice. 

A lower-court judge had blithely accepted the IRS’s claim that the targeting had stopped, that applications for nonprofit status had been approved, and that the matter was therefore moot.

The federal judges hearing the appeal, among them David B. Sentelle and Douglas H. Ginsburg, weren’t so easily rolled. In a series of probing questions the judges ascertained that at least two of the groups that are party to the lawsuit have still not received their nonprofit approvals. The judges determined that those two groups are 501(c)(4) social-welfare groups, which are subject to far less scrutiny than 501(c)(3) charities, yet are still being harassed by the IRS five years later. The judges were told that not only are the groups still on ice, but that their actions are still being “monitored” by the federal government.

The hearing also showed the degree to which the IRS has doubled down on its outrageous revisionist history, and its excuses. IRS lawyers again claimed that the whole targeting affair came down to bad “training” and bad “guidance.” They blew off a Government Accountability Office report that last year found the IRS still had procedures that would allow it to unfairly select organizations for examinations based on religious or political viewpoint. The lawyers’ argument: We wouldn’t do such a thing. Again. Trust us.

More incredibly, the IRS team claimed that the fault for some of the scandal rests with the conservative groups, for not pushing back hard enough during the targeting. ...

At one point, an incredulous Judge Sentelle noted that the IRS might be more believable if it had ever shown “a bit more contrition.” He said: “The Court would have to be awfully ignorant not to recognize that there has likely been an egregious violation of the First Amendment rights of American citizens by the IRS, and the IRS to this day seems very resistant to acknowledgment of that.”

An IRS lawyer rolled out the defense used by former agency official Lois Lerner that the targeting was just the unfortunate use of “inappropriate” criteria, but Judge Sentelle reminded the lawyer of the IRS’s vindictiveness. He noted that on one occasion the IRS simply shelved the application of an organization that had sued it. The agency “came to Court not having done anything to eliminate” the problem, he said, so “It’s just hard to find the IRS to be an agency we can trust, isn’t it?”

Judge Sentelle said there is a “pretty good case” that “egregious violations of the Constitution” had been committed, and he dared an IRS lawyer to “stand there with a straight face” and say otherwise. Judge Ginsburg, who spent the hearing catching out the IRS’s conflicting statements, at one point simply asked: “How much has really changed?”

Answer: not much. It was good news, then, that the House Judiciary Committee recently announced it will hold two hearings to examine the conduct of IRS Commissioner John Koskinen in this matter. Donald Trump, as the presumptive GOP nominee, could do worse than to use his megaphone to draw attention to the hearings. The IRS scandal needs to remain a story.

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

Tuesday, June 7, 2016

Harvard Seeks To Hire A Tax Clinician

Harvard Law School (2016)Attorney Fellow, Harvard Law School Federal Tax Clinic:

Duties & Responsibilities. The Legal Services Center of Harvard Law School (LSC) seeks to hire a Clinical Fellow in the Federal Tax Clinic. The Clinic—through which Harvard Law students receive hands-on lawyering opportunities—provides direct legal representation in tax controversies to low-income taxpayers. The Clinic’s docket includes cases before the IRS, in Federal Tax Court, and in the U.S. Circuit Courts of Appeal. Many of the Clinic’s cases raise cutting-edge issues regarding tax procedure and tax law. The Fellow will work closely with Visiting Clinical Professor of Law T. Keith Fogg, who directs the Clinic. The Fellow’s responsibilities will include screening cases for merit and law reform opportunities, representing clients, helping to manage the Clinic’s docket, contributing to community outreach and engagement efforts, and supporting the Clinic’s teaching mission. The position represents a unique opportunity to join Harvard Law School’s clinical program, to work in a dynamic public interest and clinical teaching law office, and to develop lawyering and clinical teaching skills. Salary is commensurate with experience. The position is for an initial one-year appointment. The possibility of reappointment depends on the availability of funding and Law School and project requirements.

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June 7, 2016 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)

Christians:  Tax Treaty Practice in Canada

Allison Christians (McGill), While Parliament Sleeps: Tax Treaty Practice in Canada, 10 J. Parl. & Political L. 15 (2016):

Canada’s Parliament plays little but a perfunctory role in the adoption of tax treaties, even though these agreements have significant impact on Parliamentary autonomy over core national budgetary matters as well as core legal and administrative functions. This article argues that Canada’s tax treaty process reflects a studied and intentional preference against public engagement in international fiscal policy, and that this stance has a negative impact on the rule of law.

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June 7, 2016 in Scholarship, Tax | Permalink | Comments (0)

IRS:  Fines Paid To FINRA Are Not Tax Deductible

FinraWall Street Journal, IRS Says Fines Paid to Finra Aren’t Tax-Deductible:

The Internal Revenue Service has ruled that fines and penalties paid to the securities industry’s self-regulatory organization shouldn’t be considered tax-deductible, a stance that could cost financial firms that settle matters with the regulator. [C.C.A. 2016-23-006 (May 2, 2016)]

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June 7, 2016 in IRS News, Tax | Permalink | Comments (0)

Washington University Seeks To Hire A Tax Clinician

Washington U. Law School Logo (2014)Washington University School of Law seeks to hire a Staff Attorney for its Low Income Taxpayer Clinic:

The Low Income Taxpayer Clinic, through its second- and third-year law students, provides free legal assistance to low income taxpayers on income tax disputes with the Internal Revenue Service. The Staff Attorney is expected to assist the clinic’s co-directors in supervising and monitoring the work of the students, handle matters relating to the day-to-day administration of the clinic law office and its cases, and assume primary responsibility for clinic cases that begin or are not concluded during the academic year.

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June 7, 2016 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)