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Friday, November 14, 2014

Class Crits VII Conference Kicks Off Today at UC-Davis

Class CritsThe two-day Class Crits VII Conference on Poverty, Precarity, & Work: Struggle & Solidarity in an Era of Permanent(?) Crisis kicks off today at UC-Davis.  Tax Prof speakers include:

Debt & Taxes:

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November 14, 2014 in Conferences, Legal Education, Scholarship, Tax | Permalink | Comments (2)

NTA 107th Annual Conference on Taxation

NTA CoverThe National Tax Association 107th Annual Conference on Taxation continues today in Santa Fe. Tax Prof speakers include:

Conceptualizing the Social and Regulatory Nature of Taxation:

Session Chair:  David Gamage (UC-Berkeley)
Papers:

  • David Hasen (Colorado), Income Taxation and Risk-Taking
  • Tracey Roberts (UC-Hastings), Law,  The Taxing Power as a Check on Private Property Rights and a Source of Regulatory Authority
  • Theodore Seto (Loyola-L.A.), Some Implications of Preference-Shifting for Optimal Tax Theory

Discussants: David Gamage (UC-Berkeley), Leandra Lederman (Indiana)

Hitting the Target: Public and Private Savings:
Session Chair:  Travis St. Clair (Maryland)
Papers:

Discussants:  Elizabeth Chorvat (Illinois), Jason Seligman (Ohio State), Travis St. Clair (Maryland)

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

Buffett to Buy Duracell from P&G in Cash-Rich Split-Off, Save $1 Billion in Taxes

Bloomberg, Buffett Set to Save More Than $1 Billion on Taxes in Swap:

DuracellWarren Buffett is again showing how to use the U.S. tax code to his advantage. For the third time in a year, the billionaire chairman of Berkshire Hathaway has structured a deal in which he buys businesses in exchange for stock that has appreciated. The transactions, called cash-rich split-offs, allow him to avoid capital gains taxes that would be incurred if he sold the shares in the open market.

Berkshire announced today that it would turn over about $4.7 billion in Procter & Gamble stock in exchange for P&G’s Duracell battery business, which will be infused with about $1.7 billion in cash. Since Buffett’s cost basis on the shares was about $336 million, and corporate capital gains are typically taxed at 35 percent, structuring the deal in this way could save Berkshire more than $1 billion. P&G also stands to reduce its tax liability on the sale. ...

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November 14, 2014 in Celebrity Tax Lore, Tax | Permalink | Comments (0)

The IRS Scandal, Day 554

IRS Logo 2Breitbart, The IRS-Benghazi Congress:

Benghazi and the IRS dominated the news this year thanks to Judicial Watch’s work in exposing smoking gun documents in both scandals – work that left Congress and much of the other media looking feeble. JW’s work can change history. Our intent is to get the truth, and we spared neither party from criticism. But voters were outraged at our findings and the scandals were a major factor in the election. 

Almost half, 49 percent, said the results of the 2012 presidential election would have been different if the public knew the facts then that it knows now about the Obama administration’s initial, misleading story about what happened in Benghazi and the targeting of conservative groups through the IRS. 

In no small way, this new Congress is the Benghazi-IRS Congress. The expanded House majority, which has a historic number of Republican members, and the massive wave that led to the Republican takeover of the Senate were the result of voter concerns about Obama’s IRS abuse and the Benghazi deaths and cover-up. 48 percent of voters said the IRS scandal influenced their vote, and of those concerned Americans, 71 percent voted for Republicans to take over the Senate. The numbers are similar for Benghazi; 39 percent said the scandal influenced their vote and 64 percent who were concerned about the terrorist attack this president lied about to get reelected say they voted for Republicans in the Senate. ...

The new Congress has a strong mandate to pursue Obama’s abuse of power in the IRS scandal, hold him accountable for the Benghazi lies, protect our borders, close the door on amnesty, end Obamacare, confront government secrecy, and ensure the integrity of our elections. Judicial Watch has been happy to do the job of Congress, the establishment media, and the Justice Department for six years. Again, this election shows that Americans want Congress to follow our lead and get Washington back under the rule of law.

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November 14, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Thursday, November 13, 2014

7th Circuit Rejects Constitutional Challenge to § 107 Housing Allowance for 'Ministers of the Gospel' on Standing Grounds

Freedom From Religion Foundation v. Lew, No. 14-1152 (7th Cir. Nov. 13, 2014):

Housing AllowanceThe Freedom from Religion Foundation and its two co-presidents (collectively “the plaintiffs”) filed this suit to challenge the constitutionality of § 107 of the Internal Revenue Code, also known as the parsonage exemption. The exemption excludes the value of employer-provided housing benefits from the gross income of any “minister of the gospel.” 26 U.S.C. § 107. The plaintiffs conceded in the district court that they did not have standing to challenge § 107(1), which applies to in-kind housing provided to a minister, but argued that they did have standing to challenge § 107(2), which applies to rental allowances paid to ministers. The district court agreed that the plaintiffs had standing to challenge § 107(2), and held that the subsection is an unconstitutional establishment of religion under the First Amendment.

We conclude that the plaintiffs lack standing to challenge § 107(2). We therefore do not reach the issue of the constitutionality of the parsonage exemption. ...

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

Forget the 1%: It Is the 0.01% Who Are Really Getting Ahead in America

The Economist, Forget the 1%: It Is the 0.01% Who Are Really Getting Ahead in America:

Among the most controversial of Thomas Piketty’s arguments in his bestselling analysis of inequality, Capital in the Twenty-First Century, is that wealth is increasingly concentrated in the hands of the very rich. Rising wealth inequality could presage the return of an 18th century inheritance society, in which marrying an heir is a surer route to riches than starting a company. Critics question the premise: Chris Giles, the economics editor of the Financial Times, argued earlier this year that Mr Piketty’s data were both thin and faulty. Yet a new paper suggests that, in America at least, inequality in wealth is approaching record levels.

Earlier studies of American wealth have tended to show only small increases in inequality in recent decades. A 2004 study of estate-tax data by Wojciech Kopczuk of Columbia University and Emmanuel Saez of the University of California, Berkeley, found an almost imperceptible rise in the share of wealth held by the top 1% of families, from about 19% in 1976 to 21% in 2000 [Top Wealth Shares in the United States, 1916-2000: Evidence From Estate Tax Returns]. A more recent investigation of the Federal Reserve’s data on consumer finances, by Edward Wolff of New York University showed a continued but gentle increase in inequality into the 2000s [Recent Trends in Household Wealth in the United States: Rising Debt and the Middle Class Squeeze — An Update to 2007]. Mr Piketty’s book, which drew on this previous work, showed similarly modest rises in wealth inequality in America.

A new paper by [Emmanuel Saez & Gabriel Zucman, Wealth Inequality in the United States Since 1913: Evidence From Capitalized Income Tax Data] reckons past estimates badly underestimated the share of wealth belonging to the very rich. ... The results are enough to make Mr Piketty blush.

Economist

The outsize fortunes of the few would not be too worrying were they largely the product of entrepreneurial activity: riches amassed by hardworking billionaires who are as likely as not to give their bounty away through philanthropy. Messrs Saez and Zucman find some evidence for this dynamic. Wealthy families are younger than they were a generation or two ago, and they earn a larger share of the country’s income from labour: 3.1% in 2012 versus less than 0.5% prior to 1970.

Yet one should not yet rule out the return of Mr Piketty’s “patrimonial capitalism”. The club of young rich includes not only Mark Zuckerbergs, the authors argue, but also Paris Hiltons: young heirs to previously accumulated fortunes. What’s more, the share of labour income earned by the top 0.1% appears to have peaked in 2000. In recent years the proportion of the wealth of the very rich held in the form of shares has levelled off, while that held in bonds has risen. Since the fortunes of most entrepreneurs are tied up in the stock of the firms that they found, these shifts hint that America’s biggest fortunes may be starting to have less to do with building businesses, just as Mr Piketty warned.

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

Fleming & Peroni: A Hitchhiker's Guide to International Tax Reform

J. Clifton Fleming Jr. (BYU) & Robert J. Peroni (Texas), A Hitchhiker's Guide to Outbound International Tax Reform, 18 Chapman L. Rev. 133 (2014):

In this article, we argue that although some U.S. international income tax reforms, such as limitations on earnings stripping, can be handled by targeted legislative action, broad reform of the U.S. international income tax system should take place only as part of a general revision of the U.S. corporate income tax. We further argue that U.S. international income tax reform should not lose revenue, should take fairness issues into account, and should discount the competitiveness and complexity arguments. We also explain that broad U.S. international income tax restructuring should eschew both an explicit territorial system and formulary apportionment (although either would be better than the current U.S. regime) and, instead, should revise the current, badly flawed, U.S. worldwide system into a real worldwide system by abolishing deferral and severely limiting cross-crediting. We recommend strengthening this real worldwide system by correcting flaws in the source rules, limiting earnings stripping, repealing the Section 911 exclusion, and expanding the Section 904(j) de minimis rule and making it mandatory.

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

GAO: IRS Lacks Adequate Internal Controls

GAOGovernment Accountability Office, IRS's Fiscal Years 2014 and 2013 Financial Statements (GAO-15-173):

In GAO's opinion, the Internal Revenue Service's (IRS) fiscal years 2014 and 2013 financial statements are fairly presented in all material respects. However, in GAO's opinion, IRS did not maintain effective internal control over financial reporting as of September 30, 2014, because of a continuing material weakness in internal control over unpaid tax assessments. ...

During fiscal year 2014, IRS continued to make important progress in addressing deficiencies in internal control over its financial reporting systems. However, GAO identified new and continuing deficiencies in internal control over information security, including missing security updates, insufficient monitoring of financial reporting systems and mainframe security, and ineffective maintenance of key application security, that constituted a significant deficiency in IRS's internal control over financial reporting systems. Until IRS fully addresses existing control deficiencies over its financial reporting systems, there is an increased risk that its financial and taxpayer data will remain vulnerable to inappropriate and undetected use, modification, or disclosure.

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November 13, 2014 in Gov't Reports, IRS News, Tax | Permalink | Comments (0)

NTA 107th Annual Conference on Taxation

NTA CoverThe National Tax Association 107th Annual Conference on Taxation kicks off today in Santa Fe. Tax Prof speakers include:

Tax Enforcement and Collections Discretion:
Session Chair:  Leigh Osofsky (Miami)
Papers:

  • Joshua Blank (NYU), Reconsidering Corporate Tax Privacy
  • Andrew Hayashi (Virginia), An Economic Analysis of Taxpayer Liquidity
  • Shu-Yi Oei (Tulane), What is Fair Tax Administration?
  • Leigh Osofsky (Miami),  Announcing Enforcement Priorities

Discussants:  Leandra Lederman (Indiana), Diane Ring (Boston College)

Municipal, Local, and Global Tax Incentives:
Session Chair:  Neil Buchanan (George Washington)
Papers:

  • Mirit Eyal-Cohen (Alabama), Urban Mavericks
  • Omri Marian (Florida), Corporate Inversions, Tax Residence, and Real Economic Effects: A Case Study Approach
  • Agustin Leon-Moreta (New Mexico), Tax-Expenditure Limitations and Special District Finance in the United States
  • Erin Scharff (Arizona State), Powerful Cities, Efficient Revenues: Limits on Municipal Taxing Authority and What to do About it

Discussant:  Neil Buchanan (George Washington)

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November 13, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

40th Annual Notre Dame Tax and Estate Planning Institute

ND_TaxEstate_booklet coverThe 40th Annual Notre Dame Tax and Estate Planning Institute kicks off today:

The 40th Annual Institute will present topics relevant for all individuals, even those not exposed to the estate tax because of the high exemptions. Several sessions are designed to evaluate financial products and planning techniques so that one can better understand and evaluate these products and proposals in determining not only the tax and financial advantages they offer, but also their limitations. In addition, the Institute offers topics not found in most estate planning CLE programs such as protecting the elderly from scams and exploitation. As part of the objective of refreshing areas that can expand one’s practice, a session will review the income tax consequences of debt cancellation, foreclosures, and debt restructuring. Recognizing the importance of the income tax, the Institute will continue to devote sessions to income tax planning techniques clients can use immediately.

Tax Profs with speaking roles include:

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November 13, 2014 in Conferences, Tax | Permalink | Comments (0)

Johnston: A Ray of Sunlight on Secretive Corporate Welfare

Al Jazeera:  A Ray of Sunlight on Secretive Corporate Welfare, by David Cay Johnston (Syracuse):

Each year billions of your state and local tax dollars get diverted from public coffers for corporate subsidies. Just how much you are forced to pay for corporate welfare could soon move from the darkness of official secrecy into the light — but only if you act now.

A proposed rule requiring state and local governments to disclose the total amount of property tax and some other abatements in any year is being considered by the little-known private rule-making body known as the Government Accounting Standards Board (GASB).

In 44 states, laws let county, city and other local officials grant tax reductions or exemptions to companies, often with little disclosure and no accountability. Exemptions from taxes benefit thousands of companies, from online retailer Amazon to shampoo maker Zotos International.

The proposal is tepid and narrow, but far better to let in a ray of light than to allow these deals the cover of total darkness in which they are typically carried out.

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

The IRS Scandal, Day 553

(Click on YouTube button on bottom right to view video directly on YouTube to avoid interruption caused by blog's refresh rate.)

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November 13, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Wednesday, November 12, 2014

CBO: The Distribution of Household Income and Federal Taxes, 2011

Congressional Budget Office, The Distribution of Household Income and Federal Taxes, 2011:

Overall, federal taxes are progressive, meaning that average tax rates generally rise as income increases. Households in the lowest income quintile paid about $500 in federal taxes in 2011, on average, which amounted to an average federal tax rate of about 2 percent, CBO estimates. Households in the middle quintile paid about $7,000 in federal taxes, and households in the highest quintile paid about $58,000 in federal taxes, which results in average federal tax rates of approximately 11 percent and 23 percent, respectively.

As a result of the progressive federal tax structure, households in the highest quintile of before-tax income paid a greater share of federal taxes in 2011 than they received in before-tax income, while households in each of the other quintiles paid a smaller share of federal taxes than they received in before-tax income (see figure below). Households in the highest income quintile received a little more than half of total before-tax income and paid more than two-thirds of all federal taxes in 2011. In contrast, households in the lowest income quintile received approximately 5 percent of total before-tax income in 2011 and paid less than 1 percent of all federal taxes, CBO estimates.

Chart 1A

CBO estimates that average federal tax rates under 2013 law would be higher—relative to tax rates in 2011—across the income spectrum. The estimated rates under 2013 law would still be well below the average rates from 1979 through 2011 for the bottom four income quintiles, slightly below the average rate over that period for households in the 81st through 99th percentiles, and well above the average rate over that period for households in the top 1 percent of the income distribution.

Chart 2A

Government transfers and federal taxes lessen income inequality because federal taxes are progressive and payments from government transfer programs generally decline as a share of income as income rises. Between 1979 and 2011, government transfers reduced income inequality to a greater extent than federal taxes, based on a standard measure of inequality known as the Gini index. In 2011, government transfers accounted for approximately two-thirds of the reduction in income inequality observed between market income and after-tax income.

Chart 18

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November 12, 2014 in Congressional News, Tax | Permalink | Comments (0)

Kleinbard: Invisible Man -- Losing Sight of the Real Adam Smith

Commonweal:   Invisible Man:  Losing Sight of the Real Adam Smith, by Edward D. Kleinbard (USC):

Adam SmithIf contemporary economists fielded a football team, it would no doubt be named the Smiths, in honor of the illustrious eighteenth-century Scot who is rightly regarded as the founder of modern economic theory. But the team mascot as presented by those economists would have as much in common with the real Adam Smith the as the Washington Redskins’ mascot has in common with a real Native American. Few thinkers of Smith’s stature have been so routinely misrepresented and misappropriated. 

George Stigler, a Nobel laureate economist, wrote that Adam Smith’s great work The Wealth of Nations demonstrated that “the efficiency property of competition” was “the crucial argument for unfettered individual choice in public policy.” Politicians and pundits alike regularly invoke Smith’s name to contrast the efficiency of markets in allocating goods and services with what they see as the damage done by government when it constrains “unfettered individual choice.” And in doing so, they regularly misapply Smith’s most famous metaphor, turning the “invisible hand” into an embodiment of the virtues of an unfettered market.

But all this is the Adam Smith of legend. The real Adam Smith was a sophisticated thinker about moral virtues as well as efficient markets, not a cartoon spokesperson for laissez-faire economic policy. Smith never intended his metaphor of the invisible hand to become synonymous with an omniscient and efficient Mr. Marketplace. Specialists have known this all along, but the caricature version of Smith continues to distort our policy discourse.

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November 12, 2014 in Tax | Permalink | Comments (3)

Death of Ginny Chung

Chung 2Ginny Chung, Acting Deputy International Tax Counsel at the Treasury Department, died of colon cancer last Saturday at the age of 43.  From her Washington Post obituary:

She earned her undergraduate degree from Wellesley College, her JD from Emory University, and a Master of Laws in Taxation from Georgetown University. Ginny spent all of her professional life working for the United States Government, first for the IRS and most recently serving as the Acting Deputy International Tax Counsel for the Department of the Treasury. ...

Ginny is survived by her husband Aaron King; two children [ages 5 and 10]; her parents George and Grace Chung of New Jersey; and sister Christine Chung of London.

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November 12, 2014 in IRS News, Obituaries, Tax | Permalink | Comments (1)

Vanderbilt Roundtable on Comptroller v. Wynne

Vandy 2The Vanderbilt Law Review En Banc Roundtable takes up Maryland State Comptroller of the Treasury v. Wynne, to be argued today in the Supreme Court:

In Wynne, the Court considers whether the Constitution bans a state from taxing its residents’ income, wherever earned, by requiring a credit for taxes paid on income taxed in other states. The Court could answer many questions: How far is the reach of the dormant Commerce Clause in the context of income taxation? What is the extent of a state’s power to enforce personal income taxes on its residents? What kinds of residents are subject to double taxation and why? .

November 12, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Unlike Brits, Americans Don't Think Tax Is Morally Right

YouGov, Unlike Brits, Americans Don't Think Tax Is Morally Right:

Most Americans think that their moral right to keep the money they earn trumps their duty to contribute towards public services, the exact opposite of attitudes in Britain.

Yg

(Hat Tip: Bruce Bartlett.)

November 12, 2014 in Tax | Permalink | Comments (2)

The IRS Scandal, Day 552

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November 12, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, November 11, 2014

Steuerle Presents How to Restore Fiscal Freedom and Rescue Our Future Today at Columbia

DeadC. Eugene Steuerle (Urban Institute) presents Dead Men Ruling: How to Restore Fiscal Freedom and Rescue Our Future at Columbia today as part of its Tax Policy Colloquium Series hosted by Alex RaskolnikovDavid Schizer, and Wojciech Kopczuk:

Eugene Steuerle argues that these seemingly separable economic and political problems are actually symptoms of a common disease, one unique to our time. Unless that disease and the history of how it spread over time is understood, Steuerle says, it is easy for politicians and voters alike to fall prey to believing in simple but ineffective nostrums, hoping that a cure lies merely in switching political parties or reducing the deficit or protecting and expanding our favorite program.

Despite the despairing claims of many, Steuerle points out that we no more live in an age of austerity than did Americans at the turn into the twentieth century with the demise of the frontier. Conditions are ripe to advance opportunity in ways never before possible, including doing for children and the young in this century what the twentieth did for senior citizens, yet without abandoning those earlier gains. Recognizing this extraordinary but checked potential is also the secret to breaking the political logjam that —as Steuerle points out —was created largely by now dead (or retired) men.

November 11, 2014 in Book Club, Colloquia, Scholarship, Tax | Permalink | Comments (0)

Buchanan: Legal Scholarship Makes the World a Better Place

WorldNeil H. Buchanan (George Washington), Legal Scholarship Makes the World a Better Place:

This article responds to claims that law professors are engaged in scholarly pursuits that fail to serve important social functions. I argue that legal scholarship “matters” in important ways, and in particular that the legal academy has improved its service to society by embracing interdisciplinary approaches to studying the law.

November 11, 2014 in Legal Education, Scholarship, Tax | Permalink | Comments (3)

France To Investigate ‘The Invisible Women’s Tax’

Think Progress, France To Investigate ‘The Invisible Women’s Tax’:

France’s finance ministry will investigate why products that are targeted to women cost more than ones targeted to men, following a petition that gathered over 30,000 signatures.

A campaign organized by the women’s group Georgette Sand found that products such as shampoo and razors that are advertised as “female” cost more than identical products marketed to men. They have called on stores, such as the chain Monoprix, where many examples of the gendered pricing was found, to get rid of what they call “invisible woman’s tax.” Monoprix has argued that the gap exists because there are additional manufacturing costs involved in women’s products.

The Local, Women in France Forced to Pay Hidden 'Pink Tax'

(Hat Tip: Francine Lipman.)

November 11, 2014 in Tax | Permalink | Comments (0)

Harvey: Corporate Inversions -- Background, Causes, and Policy Options

J. Richard Harvey (Villanova), Corporate Inversions -- Background, Causes, and Policy Options:

Corporate inversions have been front page news during most of 2014. In addition to providing background on inversions, this presentation discusses why inversions are occurring and various policy options.

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November 11, 2014 in Scholarship, Tax | Permalink | Comments (0)

SSRN Tax Professor Rankings

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

 

 

All-Time

 

Recent

1

Reuven Avi-Yonah (Mich.)

41,073

Reuven Avi-Yonah (Mich.)

6743

2

Paul Caron (Pepperdine)

26,895

Ed Kleinbard (USC)

5136

3

Louis Kaplow (Harvard)

23,155

D. Dharmapala (Chicago)

2787

4

D. Dharmapala (Chicago)

20,980

Richard Ainsworth (BU) 

2603

5

Vic Fleischer (San Diego)

20,248

Paul Caron (Pepperdine)

2552

6

James Hines (Michigan)

20,069

Omri Marian (Florida)

1990

7

Ted Seto (Loyola-L.A.)

19,350

Robert Sitkoff (Harvard)

1979

8

Richard Kaplan (Illinois)

19.183

Katie Pratt (Loyola-L.A.)

1803

9

Ed Kleinbard (USC)

16,778

Jen Kowal (Loyola-L.A.)

1552

10

Katie Pratt (Loyola-L.A.)

16,486

David Gamage (UCBerkeley)

1551

11

Dennis Ventry (UC-Davis)

15,449

Bridget Crawford (Pace)

1550

12

Carter Bishop (Suffolk)

15,332

Brad Borden (Brooklyn)

1535

13

Jen Kowal (Loyola-L.A.)

14,690

Jeff Kwall (Loyola-Chicago)

1502

14

David Weisbach (Chicago)

14,581

Louis Kaplow (Harvard)

1483

15

Chris Sanchirico (Penn)

14,459

Dan Shaviro (NYU)

1376

16

Richard Ainsworth (BU)

14,437

Francine Lipman (UNLV)

1371

17

Robert Sitkoff (Harvard)

14,244

James Hines (Michigan)

1370

18

Brad Borden (Brooklyn)

14,123

Dick Harvey (Villanova)

1316

19

Francine Lipman (UNLV)

14,075

Vic Fleischer (San Diego)

1314

20

Bridget Crawford (Pace)

14,030

Richard Kaplan (Illinois)

1266

21

David Walker (Boston Univ.)

14,007

Ted Seto (Loyola-L.A.)

1240

22

Herwig Schlunk (Vanderbilt)

12,550

Carter Bishop (Suffolk)

1235

23

Dan Shaviro (NYU)

12,250

Chris Sanchirico (Penn)

1224

24

Wendy Gerzog (Baltimore)

11,799

Gregg Polsky (North Carolina)

1158

25

Ed McCaffery (USC)

11,820

David Weisbach (Chicago)

1105

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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November 11, 2014 in Scholarship, Tax, Tax Prof Rankings | Permalink | Comments (0)

The IRS Scandal, Day 551

IRS Logo 2Wall Street Journal:  At Last, a Chance to Get to the Bottom of the IRS Mess, by Cleta Mitchell (Foley & Lardner, Washington, D.C.):

The day after Republicans won solid majorities in the House and Senate, House Speaker John Boehner and Senate Majority Leader-to-be Mitch McConnell outlined priorities for the newly elected Congress. High on the list is fundamental tax reform. In addition to overhauling the federal tax code, however, Congress should rein in the Internal Revenue Service.

Much has already been learned about the arrogance of the IRS from the House investigations of the agency’s targeting of conservatives. The revelations emerged despite strenuous efforts by Democrats in Washington and by the IRS itself to block inquiries and deny the existence of political targeting—targeting that the former head of the IRS Exempt Organizations Unit, Lois Lerner, eventually acknowledged and apologized for in May 2013.

Bringing the IRS to heel can start with re-energizing and expanding congressional investigations and holding accountable those responsible for the targeting and other abuses. To serve notice that the IRS’s thumbing of its nose at Congress by ignoring multiple congressional subpoenas will no longer be tolerated, the House GOP Steering Committee should elect Rep. Jim Jordan as the new chairman of the House Oversight and Government Reform Committee (where current chairman Darrell Issa is term-limited). ...

Since 2012, House investigators have been subjected to an IRS rope-a-dope game by the refusal of the agency and various officials to respond to subpoenas or to answer questions fully and forthrightly. The House should now reissue the subpoenas that will expire at the end of this Congress and proceed to federal court to enforce all outstanding subpoenas previously issued to the IRS and its personnel during the course of the investigations.

More important, the House should ask the federal courts to enforce its May 2014 contempt resolution against Ms. Lerner for refusing to answer questions from Congress about her role in the targeting of conservatives. It is clear that the Obama Justice Department has willfully failed to file an enforcement proceeding in federal court. There also are strong separation-of-powers arguments against allowing the executive branch to unilaterally disregard congressional disciplinary actions taken against an executive-branch official like Ms. Lerner for refusing to testify before Congress.

Beyond all this, Republicans now have the opportunity to expand their inquiries into other areas of IRS misconduct. ... As Congress shines a light on these and other unacceptable IRS practices, public support for fundamental tax reform will only increase. The new Republican-controlled Congress will thus have a rare opportunity to overhaul a tax policy and a tax-collecting agency that both desperately need it.

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November 11, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (7)

Monday, November 10, 2014

Logue Presents Delegating Tax Today at Loyola-L.A.

Logue 2Kyle D. Logue (Michigan) presents Delegating Tax (with James R. Hines, Jr. (Michigan)) at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

Congress delegates extensive and growing lawmaking authority to federal administrative agencies in areas other than taxation, but tightly limits the scope of IRS and Treasury regulatory discretion in the tax area, specifically not permitting these agencies to select or adjust tax rates. This Article questions why tax policy does and should differ from other policy areas in this respect, noting some of the potential policy benefits of delegation. Greater delegation of tax lawmaking authority would permit policies to benefit from the expertise of administrative agencies, and afford timely adjustment to changing economic circumstances. Furthermore, delegation of the tax reform process to an independent commission or agency offers the prospect of Congress committing itself to rational reform and long-run budget sustainability in a way that is more apt to succeed than are piecemeal legislative efforts. The Article concludes with an analysis of the constitutionality of tax delegation, noting the applicability of recent Supreme Court interpretations that Congress has broad discretion to delegate rulemaking authority to federal agencies, and that tax policy is of a kind with other federal policies.

Jason Oh (UCLA) is the commentator.

November 10, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (1)

Dwenger Presents Improving Tax Collection by Public Shaming Today at UC-Berkeley

Dwenger 2Nadja Dwenger (Max Planck) presents Improving Tax Collection by Public Shaming: Evidence from Slovenia, at UC-Berkeley today as part of the Robert D. Burch Center for Tax Policy and Public Finance Seminar:

Do the public spotlight and social-image concerns provide an effective measure for facilitating tax compliance and tax collection? This question is at the heart of an ongoing debate in the tax compliance literature asking whether tax compliance decisions are co-determined by social incentives. If social incentives such as social-image concerns are at play in taxpayers’ tax compliance decisions it might be attractive for tax authorities to revert to an instrument which has been widely used in our societies in other contexts: public shaming.

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November 10, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

O'Neill Presents Corporations, Conventionalism, Taxation, and Social Justice Today at McGill

OneilMartin O’Neill (York University) presents Corporations, Conventionalism, Taxation and Social Justice at McGill today as part of its Spiegel Sohmer Tax Policy Colloquium Series hosted by Allison Christians and Daniel Weinstock:

A failure to take seriously the conventionality of corporations has led to an unimaginative view of corporate taxation as being structurally analogous to the taxation of individuals. There are, in fact, many disanalogies between the two: corporate profit should not be treated as analogous to individual income; low-profit corporations should not be treated advantageously by a tax system in the same way as it should treat low-income individuals; and, most significantly, corporations are not owed the same level of care and determinacy as individuals with regard to the tax rules that they face. Breaking the perceived link between individual taxation and corporate taxation makes room for a reassessment of the structure and purpose of corporate taxation.

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November 10, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Former IRS Agent Settles Religious Discrimination Claim Over Firing for Wearing Ceremonial Dagger to Work

Following up on my prior posts (links below):  Houston Chronicle, Former IRS Worker, U.S. Reach Agreement in Ritual Dagger Case:

TagoreIn what her lawyers called a "historic settlement," former Houston IRS worker Kawaljeet Tagore and the U.S. government this week reached an agreement in a lawsuit stemming from the Sikh woman's dismissal for insisting on wearing a 3-inch ceremonial dagger sacred to her faith to work.

The settlement announced Thursday expunges Tagore's firing from her record, allows her to enter federal buildings with the blade for a period of three years and awards her lawyers $400,000 for fees and expenses. Tagore, 41, will be barred from seeking re-employment with the IRS, but may seek work with other federal agencies.

Tagore, 41, who currently works as a self-employed tax consultant, filed the lawsuit in 2009.

Houston lawyer Scott Newar, who worked with attorneys from the Becket Fund for Religious Liberty, said the case prompted Federal Protective Services to acknowledge for the first time that wearing the blade, known as a "kirpan," is protected under the Religious Freedom Restoration Act.

Prior TaxProf Blog coverage:

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November 10, 2014 in IRS News, Tax | Permalink | Comments (0)

Graetz & Warren: Unlocking Business Tax Reform

Tax Analysys Logo (2013)Michael J. Graetz (Columbia) & Alvin C. Warren Jr. (Harvard), Unlocking Business Tax Reform, 145 Tax Notes 707 (Nov. 10, 2014):

In this article, Graetz and Warren explain why integration should be on today’s tax reform agenda and discuss how that change could be structured.

In conjunction with this article, Tax Analysts is republishing as an eBook, now available on Amazon, the 1998 volume of Integration of the U.S. Corporate and Individual Income Taxes: The Treasury Department and American Law Institute Reports:

Integration 2Business tax reform now seems stymied despite important proposals from prominent political leaders in both parties, including the president and the chairs of the House and Senate tax writing committees. Each represents a serious effort to reform business taxation. But those proposals have failed to advance in either the House or Senate.

Integration of corporate and shareholder taxes offers a straightforward approach that could help resolve many of the most difficult issues and provide the key to unlocking business tax reform. The general idea is to convert at least part of the corporate tax into a withholding tax that would be credited against individual shareholder taxes due on dividends.

The United States has long had what is called a classical income tax system, under which income is taxed to corporations and shareholders as distinct taxpayers. As a result, taxable income earned by a corporation and then distributed as a dividend may be taxed twice, once to the corporation and once to the shareholder on receipt of a dividend. In contrast, earnings on corporate debt are not taxed at the corporate level because, unlike dividends, interest is deductible. And businesses taxed as partnerships can benefit from lower total taxes than those taxed as corporations. This incoherent combination of results creates undesirable distortions in corporate and investor behavior.

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November 10, 2014 in Scholarship, Tax, Tax Analysts | Permalink | Comments (0)

The IRS Scandal, Day 550

IRS Logo 2Washington Examiner:  Congress' To-do List: Major Unsolved Scandals Top the List for New U.S. Congress:

The pending 114th Congress needs to dig into some serioius issues without delay because they are concerns that the Democratic Senate led by Sen. Harry Reid refused to investigate during the most recent Senate. ...

The IRS scandal that still leaves many stones unturned. While persons in the Obama administration have been investigating to a small degree, there is obvious a need to conduct more of an investigation into this concern. The assertions of lost emails by persons involved, such as Lois Lerner, is still unsettled. ...

Needless to say, the IRS scandal remains and has not settled well with Americans who want to know the truth. After all, targeting conservative groups prior to the 2010 election when the Democrats fared well, wasn’t right. Naturally, the whole truth needs come out, and those who were involved need to be held accountable – and punished as need be.

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November 10, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

TaxProf Blog Weekend Roundup

Sunday, November 9, 2014

Top 5 Tax Paper Downloads

The IRS Scandal, Day 549

IRS Logo 2Wall Street Journal editorial:  Overseeing Obama:

Election Day is over. But if Americans ever hope to get to the bottom of the IRS scandal, they’ll be hoping for victory in a more obscure campaign. The House Republican leadership will soon select the next chairman of the Oversight and Government Reform Committee. In a crowded field, Rep. Jim Jordan (R., Ohio) is the candidate best equipped to conduct thorough and credible investigations of federal waste, fraud and abuse. ...

Current Oversight Chairman Darrell Issa is stepping down due to GOP term limits for committee heads. Mr. Jordan has done as much as anyone to shine a light on IRS abuse of the President’s philosophical opponents, both in hearings and behind the scenes.

More than a year before the public learned the name of Lois Lerner, Mr. Jordan was seeking answers from the IRS’s tax-exempt organizations chief on political targeting allegations. He then requested an inspector general’s audit at the Treasury Department. Cleta Mitchell, a lawyer representing various IRS targeting victims, tells us that if not for Mr. Jordan there would have been no Treasury investigation “and no public admission that, indeed, conservative groups were being subjected to unprecedented scrutiny and mistreatment.” ...

Speaker John Boehner and other members of the elected GOP House leadership should elevate Mr. Jordan and send a clear message of reform and accountability.

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November 9, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Saturday, November 8, 2014

WSJ: Steps to Take by Dec. 31 to Cut Your 2014 Tax Bill

WSJ ChartWall Street Journal Tax Report:  Act Now to Lower Your 2014 Taxes; Many Tax-Saving Strategies Require Action by Year-End, by Laura Saunders:

If you want to lower your 2014 income taxes, you need to act now to limit Uncle Sam’s reach next April.

The number of tax-cutting opportunities shrinks significantly after Dec. 31. Too often taxpayers let this deadline slip, says Ellen Minkow, an accountant at the firm MS 1040 in New York. She often finds herself asking clients, “Where were you in November?”  ...

Here are key areas to focus on before year-end.

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November 8, 2014 in Tax | Permalink | Comments (0)

Supreme Court Grants Cert. to Hear Challenge to IRS's Expansion of Affordable Care Act Tax Credit

Supreme Court (2014)The Volokh Conspiracy:  Supreme Court to Hear King v. Burwell Challenge to IRS Tax Credit Rule, by Jonathan H. Adler (Case Western):

Friday the Supreme Court granted certiorari in King v. Burwell, one of four pending challenges to the IRS rule authorizing tax credits and cost-sharing subsidies for the purchase of health insurance in federally established exchanges. ...

With this grant, the Court has the opportunity to reaffirm the principle that the law is what Congress enacts, not what the administration or others wish Congress had enacted with the benefit of hindsight. Granting tax credits to those who need help purchasing health insurance may be a good idea, and may have bipartisan support, but the IRS lacks the authority to authorize such tax credits where Congress failed to do so. The PPACA only authorizes tax credits for the purchase of insurance  on exchanges “established by the State.”

Prior TaxProf Blog coverage:

(Hat Tip: Greg McNeal.)

November 8, 2014 in New Cases, Tax | Permalink | Comments (3)

The IRS Scandal, Day 548

IRS Logo 2Forbes:  What If Lois Lerner Was Right About The Tea Party?, by Peter J. Reilly:

The e-mails I have been getting from Jenny Beth Martin, Chairman of the Tea Party Patriots Citizens Fund, have me thinking about Lois Lerner and  Teapartygate.  I went back and took another look at a report prepared by the staff of Darrell Issa’s Committee on Oversight and Government.  The report is titled Lois Lerner’s Involvement in the IRS Targeting of Tax-Exempt Organizations.  It is well worth reading the whole report and I recommend it.  I still don’t think it adds up to some sort of crusade against conservatives, but that’s just me. You can read it yourself. It seems that Lerner was strongly against money in politics and sensitive to the criticism that IRS was letting 501(c)(4) organizations get away with too much political activity.  And along comes the Tea Party, which Lerner sees as “very dangerous”.

One GD thing after another and now we are on Day 542 of the IRS Scandal, by TaxProf count, with no end in sight. Here is the question that is troubling me right now thanks to the e-mails I have been getting from Jenny Beth Martin.  If there is a pretty compelling case that Tea Party Patriots Inc was intended from day 1 to be a political organization, rather than a social welfare organization, would that make any difference in how we view Lois Lerner? ...

The IRS has to collect over two trillion dollars, which is a pretty big job, so it would be better if it did not get caught up in side issues.  Still Lois Lerner was in charge of exempt organizations and there are rules that the IRS was accused of ignoring.  There is a lot of diversity in the grassroots Tea Party groups, but I have a hard time seeing the self proclaimed flagship as anything but a political organization based on how it has been behaving lately.  Does that make the scandal any more or less scandalous?  What do you think?

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November 8, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Friday, November 7, 2014

NY Times: Will 'Purposeful Planning' Replace Estate Planning?

PPNew York Times, Focusing on the Human Element of Estate Planning:

[E]every trust and estate lawyer has stories about trust-fund beneficiaries who embody all the worst traits of spoiled rich kids. But this particular call got Mr. Warnick, then a lawyer at a large law firm in Denver, thinking about how estate planning was missing the human component. The emphasis was on transferring the most money to heirs free of estate tax and then insulating that money from creditors. “I said, ‘There has to be a better way to do planning so all this tax-efficient, elegant trust planning doesn’t hurt people,'  ” he said. “I saw well-intentioned, technically precise plans reap negative unintended consequences.”

Alas, this is not a story about a eureka moment that led immediately to change. It took Mr. Warnick another decade of toiling away at the law firm before he crystallized his goals and created the Purposeful Planning Institute. ...

So how does purposeful planning differ from traditional estate planning? “What we stand for is making sure the planning has a deeper purpose and meaning to it than just being driven by taxes,” Mr. Warnick said. “The challenge is to get those core planning disciplines — lawyers, C.P.A.s, wealth managers — to start with ‘why’ instead of immediately march into ‘how.'  ” To accomplish this, Mr. Warnick has come up with seven keys of purposeful trusts. ...

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November 7, 2014 in Tax | Permalink | Comments (0)

Weekly Tax Roundup

November 7, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

Weekly Student Tax Note Roundup

Today is Deadline for ABA Law Student Tax Challenge

Lstc-14thToday is the deadline for student submissions in the 14th Annual Law Student Tax Challenge (J.D. Problem (rules; entry form); LL.M. Problem (rules; entry form))

An alternative to traditional moot court competitions, the Law Student Tax Challenge asks two-person teams of students to solve a cutting-edge and complex business problem that might arise in everyday tax practice. Teams are initially evaluated on two criteria: a memorandum to a senior partner and a letter to a client explaining the result. Based on the written work product, six teams from the J.D. Division and four teams from the LL.M. Division receive a free trip (including airfare and accommodations for two nights) to the Section of Taxation 2015 Midyear Meeting, January 29-31 in Houston, TX, where each team will defend its submission before a panel of judges consisting of the country’s top tax practitioners and government officials, including tax court judges. The competition is a great way for law students to showcase their knowledge in a real-world setting and gain valuable exposure to the tax law community. On average, more than 60 teams compete in the J.D. Division and more than 40 teams compete in the LL .M. Division. For examples of the "Best Written" winners from past competitions, please click here.

IMPORTANT DATES

  1. Submission Deadline: November 7, 2014
  2. Notification of Semifinalists and Finalists: December 19, 2014
  3. Semifinal and Final Oral Defense Rounds: January 30, 2015 in Houston, TX

November 7, 2014 in ABA Tax Section, Tax | Permalink | Comments (0)

The IRS Scandal, Day 547

IRS Logo 2Legal Insurrection:  Judicial Watch:  IRS “Did Not Undertake Any Significant Efforts to Obtain” Missing Lerner Emails:

Democrats who had hoped for at least a week to sleep off their election night hangovers are getting no rest after the latest disclosure of court documents by advocacy group Judicial Watch.

Judicial Watch has spent a great deal of time and resources seeking information about the IRS targeting of conservative groups.

In September, Judicial Watch asked the court for permission to conduct discovery into how “lost and/or destroyed” records might be recovered; the IRS is fighting transparency efforts, but their latest response to the discovery request contains inconsistencies that could pull the rug out from under IRS officials responsible for the cover up.

Via Judicial Watch:

Judicial Watch lawyers reviewed the IRS court filings and concluded that the agency “did not undertake any significant efforts to obtain the emails.”

IRS attorneys conceded that they had failed to search the agency’s servers for missing emails because they decided that “the servers would not result in the recovery of any information.” They admitted they had failed to search the agency’s disaster recovery tapes because they had “no reason to believe that the tapes are a potential source of recovering” the missing emails. And they conceded that they had not searched the government-wide back-up system because they had “no reason to believe such a system … even exists.”

But what’s this? The inconvenient truth, documented for all time courtesy of court filings? [Emphasis in bold mine:]

The IRS admitted to Judge Sullivan that the agency failed to “submit declarations about any of the foregoing items because it had no reason to believe that they were sources from which to recover information lost as a result of Lerner’s hard drive failure.” [Emphasis added] Department of Justice attorneys for the IRS had previously told Judicial Watch that Lois Lerner’s emails, indeed all government computer records, are backed up by the federal government in case of a government-wide catastrophe. The Obama administration attorneys said that this back-up system would be too onerous to search. In the October federal court filing, the IRS does not deny that the government-wide back-up system exists, and acknowledges to the court that 760 other email “servers” have been discovered but had not been searched.

The IRS also refuses to disclose the names of the IRS officials who may have information about the IRS scandal, citing unspecified threats. The IRS says it pulled documents about the scandal from various employees into a “Congressional database” and that it has only searched this one “database” for missing records. Incredibly, the IRS has not searched any of the IRS’s regular computer systems for any missing records and admits that it has only searched a “database” that it knows does not contain the missing records being sought by the court, Judicial Watch, and Congress.

After two years of fighting, it has become clear to the attorneys at Judicial Watch and to the public that this administration is not interested in transparency as to the IRS targeting of conservatives.

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November 7, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Thursday, November 6, 2014

Leaked Documents Expose Global Companies’ Secret Tax Deals in Luxembourg

International Consortium of Investigative Journalists, Leaked Documents Expose Global Companies’ Secret Tax Deals in Luxembourg:

Pepsi, IKEA, FedEx and 340 other international companies have secured secret deals from Luxembourg, allowing many of them to slash their global tax bills while maintaining little presence in the tiny European duchy, leaked documents show.

These companies appear to have channeled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes, according to a review of nearly 28,000 pages of confidential documents conducted by the International Consortium of Investigative Journalists and a team of more than 80 journalists from 26 countries.

Big companies can book big tax savings by creating complicated accounting and legal structures that move profits to low-tax Luxembourg from higher-tax countries where they’re headquartered or do lots of business. In some instances, the leaked records indicate, companies have enjoyed effective tax rates of less than 1 percent on the profits they’ve shuffled into Luxembourg.

The leaked documents reviewed by ICIJ journalists include hundreds of private tax rulings – sometimes known as “comfort letters” – that Luxembourg provides to corporations seeking favorable tax treatment.

(Hat Tip: Bruce Bartlett, Mike Talbert.)

November 6, 2014 in Tax | Permalink | Comments (0)

Hayashi: Property Taxes and Their Limits: Evidence from New York City

Andrew T. Hayashi (Virginia), Property Taxes and Their Limits: Evidence from New York City, 26 Stan. L. & Pol'y Rev. 33 (2014):

I report evidence from New York City that property assessment caps on small residential properties represent a significant tax benefit that accrues to the most valuable properties and the wealthiest neighborhoods. Moreover, rather than benefiting the long-time homeowners on fixed incomes who are their putative targets, the largest benefits go to the properties that are most likely to have been recently sold and to be located in neighborhoods where cash incomes have increased the most.

November 6, 2014 in Scholarship, Tax | Permalink | Comments (0)

The Earned Income Tax Credit and the Well-Being of American Families

Hilary W. Hoynes (UC-Berkeley), A Revolution in Poverty Policy: The Earned Income Tax Credit and the Well-Being of American Families, in Pathways: A Magazine on Poverty, Inequality, and Social Policy (Summer 2014):

EITC Cover 2Over the past 20 years, the safety net for families with children in the United States has been fundamentally transformed. The 1996 welfare reform led to a dramatic reduction in the amount of state cash assistance and to the elimination of the Aid to Families with Dependent Children (AFDC) program. At the same time, the amount of cash assistance given through the U.S. tax system increased substantially with the Earned Income Tax Credit (EITC).

The net result is an almost complete shift in the U.S. safety net for low-income families with children from out-of-work assistance to in-work assistance. In the midst of the slow recovery from the Great Recession, the EITC is now the largest cash transfer program for low-income families with children. The EITC cost roughly $59 billion in 2009, as compared with the $9 billion in Temporary Assistance to Needy Families (TANF) cash payments from the program that replaced AFDC.

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November 6, 2014 in Scholarship, Tax | Permalink | Comments (1)

TIGTA: Inadequate Inventory Controls Over Employee Mobile Devices Cost IRS Millions

TIGTA The Treasury Inspector General for Tax Administration yesterday released Wireless Telecommunication Device Inventory Control Weaknesses Resulted in Inaccurate Inventory Records and Unsupported Service Fees (2014-10-075):

In Fiscal Year 2013, the IRS spent more than $13.7 million on wireless telecommunication devices and maintained an inventory of more than 49,000 devices reported as being in use. Effective controls over the assignment of and inventory accounting for these devices is important to ensure proper stewardship of Government funds.

TIGTA’s previous work found that IRS processes for assigning and monitoring the use of devices were not adequate to ensure that employees have a business need for the devices. In addition, prior work found that the IRS paid for thousands of devices that were unused. The overall objective of this review was to assess the efficiency and effectiveness of the IRS’s inventory control for wireless aircards, cellular phones, and BlackBerry® smartphone devices.

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November 6, 2014 in Gov't Reports, IRS News, Tax | Permalink | Comments (0)

Bloomberg BNA & KPMG Host Free Webcast Today on The Elections: What’s Next for U.S. Tax Policy?

CaptureBloomberg BNA and KPMG hoast a free webcast today (9:00 am- 12:30 pm EST) on The Elections: What’s Next for U.S. Tax?:

Tax extenders have languished for months and tax reform even longer. The discussion on corporate inversions persists. The OECD continues to move forward with the BEPS project. And ever-present budgetary matters, including the looming debt ceiling debate await action. You need to know what’s next after November 4. 

  • John Buckley (Former Chief of Staff, Joint Committee on Taxation)
  • George Callas (Majority Staff Director, Ways & Means Subcommittee on Select Revenue Measures)
  • Aruna Kalyanam (Democratic Tax Counsel, Ways & Means Subcommittee on Select Revenue Measures)
  • Kenneth Kies (Former Staff Director, Joint Committee on Taxation)
  • Cathy Koch (Chief Advisor to the Majority Leader, Tax and Economic Policy Committee)
  • Jim Lyons (Republican Tax Counsel, Senate Finance Committee)
  • Karen McAfee (Democratic Chief Tax Counsel, Ways & Means Committee)
  • Todd Metcalf (Democratic Chief Tax Counsel, Senate Finance Committee)
  • Warren Payne (Majority Policy Director, Ways & Means Committee)
  • Mark Prater (Deputy Staff Director, Republican Chief Tax Counsel, Senate Finance Committee)
  • Robert Stack (Deputy Assistant Secretary for Tax Policy, U.S. Treasury Department)
  • Russell Sullivan (Former Staff Director, Senate Finance Committee)

November 6, 2014 in Conferences, Tax | Permalink | Comments (0)

The IRS Scandal, Day 546

IRS Logo 2Forbes, IRS Memo Claims Forbes Story Influenced Tax Exempt Decision Involving Billionaire, by Janet Novack:

A newly uncovered Internal Revenue Service memo lends support to billionaire investor Peter R. Kellogg’s claim that the IRS tax exempt division may have improperly taken press coverage –and specifically a Forbes cover story–into account before making a decision that cost him a bundle.

Kellogg K +0.22% and IAT Reinsurance Co. Ltd, the Bermuda-based insurance company his family owns, are suing the IRS for refunds of $186 million in taxes and interest they paid after the IRS revoked IAT’s qualification as a tax exempt 501(c)(15) insurance company retroactively. The lead of a March 2001 Forbes cover story on the proliferation of edgy tax shelters exposed Kellogg’s use of IAT to shield hundreds of millions in capital gains from tax. At that time, promoters were pushing the 501(c)(15) ploy to small business owners, particularly car dealers, as a tax shelter. After the Forbes story appeared, the IRS listed the Producer Owned Reinsurance Company (PORC) as a potentially abusive tax shelter and began an enforcement project.

The surprising IRS memo is disclosed in filings in the U.S. Court of Federal Claims where Kellogg and the government are battling over whether internal IRS documents and IRS officials’ thought processes and motivations are subject to discovery and can be used as evidence in his refund suits. The memo, a January 2010 Appeals Case Memorandum (ACM) from three IRS appeals officers, argues the IRS should reconsider the Technical Advice Memoranda (TAMs) that retroactively revoked IAT’s tax exemption and that of another Kellogg owned insurance company.

The ACM asserts that originally the TAMs were favorable to Kellogg and that then Tax Exempt Commissioner Steven Miller was persuaded “to go adverse because of the ramifications” to the PORC project “to no-change the very taxpayer (Kellogg) that started this project because of the Forbes article.” The memo adds: “We believe a `fresh-look’ is needed as to the facts of these cases in applying the laws as is without regard to the outside publicity.’’

Miller went on to become Acting IRS Commissioner and resigned from the agency in May 2013 amid the ongoing controversy over IRS targeting of Tea Party and certain other groups for extra scrutiny in the tax exemption process. Internal IRS documents suggest that Tea Party groups were first flagged because of media attention to political groups’ use of the 501(c)(4) exemption. Lois Lerner, a central figure in the exempt scandal who has been held in contempt of Congress by the Republican controlled House, was particularly sensitive to criticism that the IRS was letting 501(c)(4) organizations get away with too much political activity.

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November 6, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Wednesday, November 5, 2014

Tax Reform After the Midterm Election

Brookings Institution:  Tax Reform: One Shining Moment or “Blah, Blah, Blah”, by William G. Gale:

Given that prospects for tax reform were virtually nil before the election, the Republican recapture of the Senate has to have made prospects for tax reform better. But I still have the strong sense that tax reform will be a tough slog in the next Congress. ...

Rather than actually enacting tax reform, it seems much more likely that the sides will fight about whether to use dynamic scoring methods that account for macro economic feedback in response to tax changes. While it may seem obvious that the Republicans can implement such changes, given they will control both houses of Congress, it is nowhere near a slam dunk, as there appear to be a number of procedural obstacles that have to be dealt with. And dynamic scoring raises as many economic issues as it resolves.

It is a good bet that the new Republican Congress will continue to talk about tax reform. That is safe ground for Republicans generally. And, of course, seemingly impossible things do sometimes happen. But I wouldn’t bet on tax reform. 

November 5, 2014 in Tax | Permalink | Comments (0)

WSJ: Ireland to Ramp Up Corporate Tax Avoidance by Replacing 'Double Irish' With 100% Amortization of IP on Way to 'Knowledge-Development Box'

DOuble IrishWall Street Journal, Ireland Moves to Close One Tax Break and Opens Another; Bill to End “Double Irish” Also Offers Corporate Tax Cuts on Intellectual Property:

As the Irish government moves to close one door to corporate tax avoidance, it is opening another.

Tucked into legislation to eliminate a much criticized tax structure known as the “Double Irish” is a separate provision that would allow companies to pay no corporate tax on profits earned from patents, licenses and other intellectual property.

The legislation, which would expand a current tax break that allows companies to shield 80% of that income, also proposes to add customer lists to the types of intellectual property that can be covered.

The expanded tax provision proposed in the Irish budget would give companies an incentive to make Ireland the home for their intellectual property—some of it now tied up in Double Irish structures—as well as give them a simpler means to shield some of the same income from taxes. ...

Last month, Ireland touted how the legislation would eliminate the Double Irish, a tax avoidance measure that uses a twist in Irish law to send royalty payments for intellectual property from one Irish-registered subsidiary to another that resides for tax purposes in a country with no corporate income taxes. While the total number of companies that use the structure isn’t publicly disclosed, hundreds have funneled tens of billions of dollars a year in profit to tax havens via Ireland, including many practitioners in the technology and pharmaceutical sectors, tax experts say.

The tax break could in theory benefit technology companies like Google Inc. or pharmaceutical firms like Gilead Sciences Inc., which have moved intellectual property into Irish corporate structures.

At least 249 companies used the provision in 2012, according to figures from Ireland’s tax office, the Revenue Commissioners, providing tax relief valued at €108 million ($135 million). But that total may understate the expanded provision’s potential scope. Companies have had little need to reduce the bite from Irish taxes for their intellectual property income when they could use structures like the Double Irish to escape such taxes altogether. ...

The expanded tax break is seen by proponents as a way to keep Ireland competitive as a destination for intellectual property as it prepares a longer-term package of regulations governing how such assets would be taxed. That package, referred to as the “knowledge development box,” has yet to be formalized.

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November 5, 2014 in Tax | Permalink | Comments (0)