TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Tuesday, January 10, 2017

White:  Cost Sharing Agreements And The Arm's Length Standard

Florida Tax Review  (2015)Sienna Carly White (Jones Day, Cleveland), Cost Sharing Agreements & The Arm's Length Standard: A Matter of Statutory Interpretation?, 19 Fla. Tax Rev. 191 (2016):

The arm’s length standard has been the touchstone of international transfer pricing and Internal Revenue Code Section 482 for the better part of a century, but its relevance is under scrutiny. A growing consensus among the international community suggests the arm’s length standard is no longer adequate to accurately and fairly tax the multinational enterprises that make up the modern global economy. In this paper, I examine the implications of the Xilinx saga and conclude that both the Ninth Circuit and the IRS were incorrect: the arm’s length standard should function as a legal principle, with explicit exceptions, rather than as a legal rule.

Continue reading

January 10, 2017 in Scholarship, Tax | Permalink | Comments (0)

Brooks:  Quasi-Public Spending

John R. Brooks (Georgetown), Quasi-Public Spending, 104 Geo. L.J. 1057 (2016):

The United States has increasingly designed certain public spending programs not as traditional tax-financed programs, but rather as mixtures of private expenditures, subsidies, and limited taxes. Thus part of what could have gone to the government as a tax is instead used to purchase the good or service directly, with only incremental taxes and subsidies to manage distributional goals. This Article terms this “quasi-public spending,” and argues that it is descriptive of our evolving approaches to both health care and higher education.

Continue reading

January 10, 2017 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1342:  New Chair of House Oversight Committee Pledges To Increase IRS Accountability

IRS Logo 2

The Hill, Oversight Panel Will Focus on IRS, Medicare, New Chairman Says:

Rep. Vern Buchanan (R-Fla.), the new chairman of the House Ways and Means Committee's oversight panel, said the subcommittee's priorities in the 115th Congress will include combating fraud in Medicare and Social Security, increasing IRS accountability, and protecting people from identity theft.

Continue reading

January 10, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, January 9, 2017

Law Prof Objects To Vilification Of Nancy Shurtz, But Concedes 'Her Social Skills May Need Work': Tax Faculty 'Tend To Be A Bit 'Different''

Shurtz

David Barnhizer (Cleveland State), The Vilification of Nancy [Shurtz]:

I don’t know Oregon law professor Nancy Shurtz. But I do know that no American law professor at this point in time would knowingly or intentionally use racist language or dress up in “blackface” as a demonstration of personal racial bias against Americans of African ancestry. I believe her when she says what she was doing was intended as the opposite of racial disparagement and that it represented her intention to bring out to colleagues at a social gathering the continuing discrimination and denial of opportunity that blacks in America still disproportionately suffer. Professor Shurtz’s attempted message about the continuing effects of racial discrimination obviously fell flat.

Perhaps, unlike most law professors, Shurtz’s social skills need work. After all, she teaches tax and we know that many tax faculty members tend to be a bit “different”. One thing I have no difficulty concluding, however, is that while her execution wasn’t the smartest thing to do, her intentions were good (and perhaps even noble). I also have no doubt that given the attacks on her professional and personal character by some extremely vocal and hyper-sensitive law students, by the “usual suspects” who feed on accusations of racial bias, and by “trusted colleagues” at the law school and in the University of Oregon’s administration bleating about “sensitivity”, “inclusiveness”, “offensiveness” and the like that Nancy Shurtz has been dehumanized and objectified to such a degree that she must feel she is traveling the “road to Hell” regardless of her intentions.

Continue reading

January 9, 2017 in Legal Education, Tax | Permalink | Comments (0)

The Intersection Of EU State Aid And U.S. Tax Deferral

Florida Tax Review  (2015)Romero Tavares, Bret Bogenschneider & Marta Pankiv (Vienna University), The Intersection of EU State Aid and U.S. Tax Deferral: A Spectacle of Fireworks, Smoke, and Mirrors, 19 Fla. Tax Rev. 121 (2016):

The Advance Pricing Agreements or transfer pricing rulings granted to U.S. multinationals by Ireland, the Netherlands, and Luxembourg were principally designed to achieve U.S. tax deferral and not EU tax avoidance. Adverse BEPS effects within the European Union would be immaterial in comparison to the deferral of U.S. tax on residual IP related profits, and would have occurred primarily in countries other than those charged with the granting of unlawful State aid. The Irish, Dutch, and Luxembourgish treasuries have not foregone tax revenues in favor of the U.S. multinationals they allegedly aided, which is a requirement for a finding of prohibited State aid.

Continue reading

January 9, 2017 in Scholarship, Tax | Permalink | Comments (0)

The Most Downloaded Tax Professors Of 2016

SSRN Logo

1

Reuven Avi-Yonah (Michigan)

10,604

2

Lily Batchelder (NYU)

6851

3

Michael Simkovic (Seton Hall)

5016

4

D. Dharmapala (Chicago)

4069

5

Ed Kleinbard (USC)

2585

6

Richard Ainsworth (BU)

2539

7

Paul Caron (Pepperdine)

2464

8

Dan Shaviro (NYU)

2372

9

William Byrnes (Texas A&M)

2234

10

Robert Sitkoff (Harvard)

2205

11

Louis Kaplow (Harvard)

2155

12

Omri Marian (UC-Irvine)

1854

13

David Weisbach (Chicago)

1823

14

Jeff Kwall (Loyola-Chicago)

1808

15

Steven Bank (UCLA)

1775

16

Yariv Brauner (Florida)

1636

17

Brad Borden (Brooklyn)

1626

18

Brian Galle (Georgetown)

1517

19

Christopher Hoyt (UMKC)

1507

20

Vic Fleischer (San Diego)

1490

21

Bridget Crawford (Pace)

1484

22

Richard Kaplan (Illinois)

1471

23

Michael Graetz (Columbia)

1469

24

Francine Lipman (UNLV)

1450

25

Jordan Barry (San Diego)

1442

Continue reading

January 9, 2017 in Scholarship, Tax, Tax Prof Rankings | Permalink | Comments (0)

The IRS Scandal, Day 1341:  Another View Of The Republicans' Reactivation Of The Holman Rule And Lois Lerner

IRS Logo 2

The Moderate Voice: Preventing the Upcoming Barbarian Apocalypse, by Hart Williams:

House Republicans this week reinstated an arcane procedural rule that enables lawmakers to reach deep into the budget and slash the pay of an individual federal worker — down to a $1 — a move that threatens to upend the 130-year-old civil service. The Holman Rule, named after an Indiana congressman who devised it in 1876, empowers any member of Congress to offer an amendment to an appropriations bill that targets a specific government employee or program. ...

[W]hat does this mean? Well it means that any congressman or senator (almost exclusively GOP) can, in essence, terminate/eliminate almost any civil service employee who incites their wrath. ...

This is a de facto prescription to overturn ALL regulatory enforcement that the “Free Market” pirates of the House GOP deem “bad for business.” And, for a year, the Republicans in Congress can PURGE the Civil Service of all those “obstructionist” employees who insist on doing their jobs as prescribed by law. Think of what they did to Lois Lerner of the IRS, for example, who only attempted to enforce the charitable regulations of the IRS code. In a little-noted move thereafter, the GOP congress essentially gutted all 501(c)4 provisions, making it perfectly legal to launder dark money with zero accountability for political purposes — a complete overturning of the original intent of Congress in CREATING the section 501 provisions prohibiting charitable activities from being partisan POLITICAL activities, or, in essence, allowing the rich to engage in politics on your dime, Mr. and Mrs. US Taxpayer.

The implications of this “rule” are staggering when you apply the “if this goes on” test to it. And recall that you don’t really need to go after ALL civil service employees to create a chilling effect. Just make a few examples of “uppity” civil servants.

Continue reading

January 9, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (13)

TaxProf Blog Weekend Roundup

Sunday, January 8, 2017

This Week's Ten Most Popular TaxProf Blog Posts

The Top 5 Tax Paper Downloads

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

  1. [489 Downloads]  Problems with Destination-Based Corporate Taxes and the Ryan Blueprint, by Reuven S. Avi-Yonah (Michigan; moving to UC-Irvine) & Kimberly A. Clausing (Reed College)
  2. [322 Downloads]  IRS Issues Final and Temporary Debt-Equity Regulations Under Section 385, by David S. Miller (Proskauer, New York) & Janicelynn Asamoto Park (Proskauer, New York)
  3. [195 Downloads]  Is Something Rotten in the Grand Duchy of Luxembourg?, by Omri Marian (UC-Irvine)
  4. [136 Downloads]  Protecting Trump's $916 Million of NOLs, by Steve Rosenthal (Tax Policy Center)
  5. [135 Downloads]  The Right Tax at the Right Time, by Edward Kleinbard (USC)

January 8, 2017 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 1340:  Tax Professors Discuss The Future Of Tax Administration And Enforcement After 'What The Media Often Refer To As The 'IRS Targeting Scandal''

IRS Logo 2

Association of American Law Schools Annual Meeting Discussion Group, The Future of Tax Administration and Enforcement (Jan. 7, 2016):

AALS Discussion Groups provide an in-depth discussion of a topic by a small group of invited discussants selected in advance by the Annual Meeting Program Committee. In addition to the invited discussants, additional discussants were selected through a Call for Participation. There will be limited seating for audience members to observe the discussion groups on a first-come, firstserved basis.

Enforcement and effective administration of tax laws pose challenges for every country, developed and developing. Moreover, how the tax law is administered determines the substantive effects of the laws on the books.

In the United States, the agency responsible for helping taxpayers voluntarily comply with federal tax laws and for coercing the recalcitrant into complying—the Internal Revenue Service (IRS)—is not only underfunded, its image was badly damaged by what the media often refer to as the “IRS targeting scandal.” The IRS is thus in crisis. Over the last couple of years, it has reduced service to taxpayers, reduced enforcement efforts, experienced hacks of its confidential taxpayer information, and sent out billions of dollars in fraudulent refunds claimed by identity thieves. Other tax collection agencies, both in U.S. and abroad, also struggle with resource and cybersecurity issues.

Continue reading

January 8, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Saturday, January 7, 2017

Today's AALS Annual Meeting Highlight

AALS (2018)Today's highlight at the 2017 AALS Annual Meeting in San Francisco:

AALS Discussion Group, The Future of Tax Administration and Enforcement:

Enforcement and effective administration of tax laws pose challenges for every country, developed and developing. Moreover, how the tax law is administered determines the substantive effects of the laws on the books.

In the United States, the agency responsible for helping taxpayers voluntarily comply with federal tax laws and for coercing the recalcitrant into complying—the Internal Revenue Service (IRS)—is not only underfunded, its image was badly damaged by what the media often refer to as the “IRS targeting scandal.” The IRS is thus in crisis. Over the last couple of years, it has reduced service to taxpayers, reduced enforcement efforts, experienced hacks of its confidential taxpayer information, and sent out billions of dollars in fraudulent refunds claimed by identity thieves. Other tax collection agencies, both in U.S. and abroad, also struggle with resource and cybersecurity issues.

Discussion Group Participants:

Continue reading

January 7, 2017 in Conferences, IRS News, Tax | Permalink | Comments (0)

Penis-Proud Former Energy CEO With Ties To Platinum Partners Pleads Guilty To Tax Fraud

PlatinumDealbreaker, Penis-Proud Former Energy CEO With Ties To Platinum Partners Pleads Guilty To Tax Fraud:

Remember Gary Mole?

Well, the the wacky Aussie with a proclivity for pulling his pecker out at the dinner table and a very intriguing link to Platinum Partners seems to have found himself in another pickle.

Continue reading

January 7, 2017 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 1339:  House GOP Reactivates 'Holman Rule,' Would Have Permitted Reducing Lois Lerner's Pay To $1

IRS Logo 2Washington Post, House Republicans Revive Obscure Rule That Allows Them to Slash the Pay of Individual Federal Workers to $1:

House Republicans this week reinstated an arcane procedural rule that enables lawmakers to reach deep into the budget and slash the pay of an individual federal worker — down to $1 — a move that threatens to upend the 130-year-old civil service.

The Holman Rule, named after an Indiana congressman who devised it in 1876, empowers any member of Congress to propose amending an appropriations bill to single out a government employee or cut a specific program.

The use of the rule would not be simple; a majority of the House and the Senate would still have to approve any such amendment. At the same time, opponents and supporters agree that the work of 2.1 million civil servants, designed to be insulated from politics, is now vulnerable to the whims of elected officials. ...

Democrats and federal employee unions say the provision, which one called the “Armageddon Rule,” could prove alarming to the federal workforce because it comes in combination with President-elect Donald Trump’s criticism of the Washington bureaucracy, his call for a freeze on government hiring and his nomination of Cabinet secretaries who in some cases seem to be at odds with the mission of the agencies they would lead.

Weekly Standard, House GOP Revives Rule Allowing Them To Slash Salaries of Corrupt Federal Workers:

[T]here can be no question that federal workers have far too many civil service protections. After the IRS held a press conference admitting that they had improperly targeted conservative groups, Lois Lerner, the IRS official deemed most responsible, didn't face any meaningful consequences. Instead it was revealed that she recently received $129,000 in bonuses and retired with an annual pension that could possibly exceed $100,000.

Even after Lerner left, John Koskinen, the new interim head of the IRS, ignored congressional subpoenas as the IRS destroyed evidence relating to the investigation of Lerner and engaged in egregious stonewalling. It's pretty clear that the IRS was in no way fearful of suffering any consequences for persecuting thousands of ordinary Americans and flouting Congress.

Western Journalism, GOP House Revives 140-Year-Old Rule That Has Swamp-Dwelling Bureaucrats Sweating Bullets:

The rule would let lawmakers target civil servants who abuse their posts but still have union protections. The rule could, for instance, have been used on former Internal Revenue Service official Lois Lerner, locus of the IRS’ intimidation scandal.

While Lerner faced minimal consequences for her wide-ranging role in the scandal — she refused to reveal much of anything to congressional investigators — The Weekly Standard pointed out that she received $129,000 in bonuses and a yearly pension that could top $100,000.

Continue reading

January 7, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (12)

Friday, January 6, 2017

Weekly Tax Highlight And Roundup

This week, Joe Kristan (CPA & Shareholder, Roth & Company (Des Moines, Iowa); Editor, Tax Update Blog) uses a recent IRS ruling to discuss how the accumulated earnings tax on C corporations may take on increased importance in a reformed tax code emerging from the Trump Administration and the 115th Congress. 

KristanLiving fossil tax bites cashless C corporation

The accumulated earnings tax on C corporations is one of the more obscure items in the tax law. Designed to force corporations to distribute earnings as taxable dividends, it rarely comes up even in tax nerd get-togethers. A few years ago some populist politicians talked of strengthening it to force corporations to pay more dividends as a perverse form of economic stimulus, but interest soon faded.

The new administration may make C corporations much more attractive and more popular. If so, this living fossil may again rise from obscurity to bite taxpayers and their advisors. That makes a legal memorandum recently released by the IRS timely.

Continue reading

January 6, 2017 in IRS News, Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly SSRN Tax Article Review And Roundup

This week, Erin Scharff (ASU) reviews a new paper by Jeffrey L. Hoopes (UNC), Leslie A. Robinson (Dartmouth), and Joel B. Slemrod (Michigan), Public Tax-Return Disclosure.

Scharff (2017)Calls for corporations to pay their fair share of taxes assume that corporations aren’t ponying up the way they should. But when it comes to individual companies, it can be hard to know what they are paying at all.

As a step toward reforming the system, reformers have called for increasing the public disclosure of corporate tax-return information. Jeffrey Hoopes, Leslie Robinson, and Joel Slemrod suggest reformers hope disclosure will achieve two goals. First, making this information public might limit tax evasion. Second, such disclosures might also provide information useful to investors.

As a result of reforms enacted in 2013, the Australian Tax Office (ATO) began releasing tax-return data (total income, taxable income, and tax payable) for about two thousand of Australia’s largest firms, as defined by income in 2015. The initial disclosures were all released on two specific dates. For large multinational corporations and Austrialian-owned public corporations, the ATO released tax information on December 17, 2015.

Continue reading

January 6, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

Today's AALS Annual Meeting Highlight

AALS (2018)Today's highlight at the 2017 AALS Annual Meeting in San Francisco:

Section on Taxation, Fiscal Federalism: Balancing Tax Policies at the Federal, State, and Local Levels:

A new administration signals the prospect of a host of tax reform proposals. Accomplishing tax reform at the federal level is challenging enough and rarely are the effects of those reforms on state and local governments taken into account. That remains true even though federal tax policies have ripple effects at the state and local levels that often are not felt uniformly among the states.

Continue reading

January 6, 2017 in Conferences, Tax | Permalink | Comments (0)

Kysar:  Republicans’ Dangerous Tax Reform Plan

Slate op-ed:   Republicans’ Dangerous Tax Reform Plan, by Rebecca Kysar (Brooklyn):

Fundamental tax reform has always been a bipartisan undertaking. Until now.

All eyes are on Congress this week, as its Republican majorities seek to make good on long-standing promises to repeal the Affordable Care Act. They may finally get the job done, using a contentious legislative tool, known as reconciliation—the same tool the Obama administration used to pass elements of the law. Less discussed is the Republican plan to use reconciliation to overhaul the tax code as well, which would allow the party to pass its sweeping tax reforms without a single Democratic vote. Unlike in the health care reform context, however, the move would be unprecedented. It would also produce extreme and unstable tax policy.

Continue reading

January 6, 2017 in Tax | Permalink | Comments (3)

The IRS Scandal, Day 1338:  Commissioner Koskinen Says Trump Transition Team Has No 'Axes To Grind' Against IRS

IRS Logo 2The Hill, IRS Chief: Agency's Discussions With Trump Team 'Very Positive':

IRS Commissioner John Koskinen said Thursday that his agency has had “very positive discussions” with the Trump transition team.

“They’ve been very straight-forward, very factual ... productive discussions,” Koskinen told reporters.

Republicans have frequently criticized the IRS, particularly in the wake of 2013 revelations that the agency had subjected conservative groups’ applications for tax-exempt status to extra scrutiny.

But Koskinen said there’s been no indication that transition officials have “any axes to grind” or any focus other than learning about how the IRS operates.

Continue reading

January 6, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, January 5, 2017

Chicago-Kent Symposium:  Nonprofit Oversight Under Siege

Chicago-KentSymposium, Nonprofit Oversight Under Siege, 91 Chi.-Kent. L. Rev. 843-1114 (2016) (table of contents and abstracts):

Dana Brakman Reiser (Brooklyn), Introduction, 91 Chi.-Kent. L. Rev. 843 (2016)

The View from the U.S.:

Continue reading

January 5, 2017 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Tax Profs Join Over 1,300 Law Profs In Opposing Jeff Sessions For Attorney General

DOJ Logo (2016)Statement From Law School Faculty Opposing Nomination of Jeff Sessions for the Position of Attorney General:

We are 1330 faculty members from 177 different law schools in 49 states across the country. We urge you to reject the nomination of Senator Jeff Sessions for the position of Attorney General of the United States.

In 1986, the Republican-controlled Senate Judiciary Committee, in a bipartisan vote, rejected President Ronald Reagan’s nomination of then-U.S. Attorney Sessions for a federal judgeship, due to statements Sessions had made that reflected prejudice against African Americans. Nothing in Senator Sessions’ public life since 1986 has convinced us that he is a different man than the 39-year-old attorney who was deemed too racially insensitive to be a federal district court judge.

Some of us have concerns about his misguided prosecution of three civil rights activists for voter fraud in Alabama in 1985, and his consistent promotion of the myth of voter-impersonation fraud. Some of us have concerns about his support for building a wall along our country’s southern border. Some of us have concerns about his robust support for regressive drug policies that have fueled mass incarceration. Some of us have concerns about his questioning of the relationship between fossil fuels and climate change. Some of us have concerns about his repeated opposition to legislative efforts to promote the rights of women and members of the LGBTQ community. Some of us share all of these concerns.

All of us believe it is unacceptable for someone with Senator Sessions’ record to lead the Department of Justice.

The Attorney General is the top law enforcement officer in the United States, with broad jurisdiction and prosecutorial discretion, which means that, if confirmed, Jeff Sessions would be responsible for the enforcement of the nation’s civil rights, voting, immigration, environmental, employment, national security, surveillance, antitrust, and housing laws.

As law faculty who work every day to better understand the law and teach it to our students, we are convinced that Jeff Sessions will not fairly enforce our nation’s laws and promote justice and equality in the United States. We urge you to reject his nomination.

Tax Prof signatories include:

Continue reading

January 5, 2017 in Legal Education, Tax | Permalink | Comments (10)

Jones:  The University of Oregon, Nancy Shurtz, And The Racial Rules That Keep Us Apart

JonesFollowing up on my previous posts (links below): TaxProf Blog op-ed: The Racial Rules That Keep Us Apart, by Darryll K. Jones (Florida A&M):

What are Nancy Shurtz’ colleagues of color, particularly her African American colleagues, to think about (1) her having dressed up as a “Black Man in a White Coat,” and (2) the reaction to what she did?  She has a friendly smile with genuine eyes, and she teaches Tax.  But I only know that from picture and her bio.  If we ever met I don’t remember.  But I accept, as has her University and even her colleagues who want her out, that she intended no offense and indeed is a strong supporter of diversity and other issues generally thought to involve restorative justice for America’s racism. 

Somehow, I am made to feel defensive by calls for her punishment.  It just makes me very uncomfortable and I don’t want her stoned in the public square for my vindication.  If I were on the faculty at Oregon I would feel compelled to protest the crowd’s outrage ostensibly expressed in recognition of my heritage and feelings.  But I might just sit, quietly grinding my teeth and hoping that the whole thing would just die down.  It is the punishment, the demand for this poor woman’s head on a platter that makes me uncomfortable.  There are clear dangers in an African American saying so.  I imagine that some colleagues might shake their heads in disgust at my own lack of outrage.  There is always the danger of being labeled an “uncle tom” or an apologist for racists if one doesn’t adopt the hot tone of indignation.  Or just plain ignorant. 

Continue reading

January 5, 2017 in Legal Education, Tax | Permalink | Comments (8)

Tax Profs Lily Batchelder, Ed Kleinbard Are 2016 Tax Person Of The Year Honorees

BKDonald Trump is Tax Analysts' 2016 Tax Person of the Year. Tax Prof Lily Batchelder (NYU) is one of nine other honorees:

Seeing that then-candidate Donald Trump's tax plan seemed to raise taxes on many families, New York University School of Law professor and former Senate Finance Committee and White House tax counsel Lily Batchelder conducted research to predict the size of the impact [Trump Plan Raises Taxes For Millions Of Low- And Middle-Income Families].

Continue reading

January 5, 2017 in Tax | Permalink | Comments (3)

Today's AALS Annual Meeting Highlight

AALS (2018)Today's highlight at the 2017 AALS Annual Meeting in San Francisco:

Section on Trusts & Estates, Sex, Death, and Taxes: The Unruly Nature of the Laws of Trusts and Estates:

Trusts and Estates is a broad-based discipline that impacts private citizens’ decisions about sex, death, and taxes. In individuals’ lives, this field is like an operating system that quietly runs in the background, but in reality organizes and informs the end user’s experience, often without the end user’s full awareness. In practice, the field sits at the crossroads of other legal disciplines such as family law, property law, elder law, and tax law. In the academy, it is caught between the practical and theoretical—a microcosm of the questions at the heart of debates about the value and normative objectives of a legal education. Yet, T&E seems to be under–theorized and marginalized in the academy. Therefore, this panel will interrogate T&E’s unruly nature, entertaining inquiries about the intersectionality of gender, race, sexual orientation, and class; the pervasiveness of succession law in aligned fields; its history of adaptation to changing social norms; and the development and evolution of law reform in this area. The panel will explore new visions for the field and frameworks that disrupt and reimagine the field.

Continue reading

January 5, 2017 in Conferences, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1337:  The IRS Is The Third Biggest 'Tax Offender Of 2016'

IRS Logo 2Taxable Talk: The 2016 Tax Offender of the Year, by Russ Fox:

Every year I hope that I won’t find any deserving individuals of the Tax Offender of the Year Award. To win this award, you need to do more than cheat on your taxes; it has to be a Bozo-like action or actions. As usual, we had plenty of nominees.

Coming in third this year is the Internal Revenue Service. What did the IRS do to deserve this award? Well, we have the IRS Scandal; it’s still unresolved. If we were to believe the IRS nothing untoward happened! I’m sure that’s why Commissioner Koskinen faced an impeachment resolution. And remember the data breaches? It wasn’t 104,000 people who were victimized back in 2015 (the “Get Transcript Hack) nor was it 334,000 taxpayers. There were over 700,000 people impacted (and over 500,000 unsuccessful attempts)! As Joe Kristan says, “The IRS: Protecting your identity since 1913.” Or not.

Continue reading

January 5, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Wednesday, January 4, 2017

9th Circuit Affirms Tax Court's Denial Of California Law Firm's Claimed $3.4 Million Travel Expense Deduction For 24-Hour Standby Use Of Private Jets

Gulfstream IVNational Law Journal, Plaintiffs Firm Stuck With $1M Tax Bill After Trying to Deduct Private Jet Travel:

California plaintiffs firm Engstrom, Lipscomb & Lack owes more than $1 million in federal corporate taxes and penalties relating to business expenses from two personal aircraft, according to a federal appeals court’s ruling this week.

The U.S. Court of Appeals for the Ninth Circuit on Wednesday upheld a finding by a U.S. Tax Court judge that Los Angeles-based Engstrom owed $1.12 million after claiming unsubstantiated travel expense deductions relating to 119 flights taken from 2008 to 2010 [Engstrom, Lipscomb & Lack v. Commissioner, No. 15-70591 (9th Cir. Dec. 28, 2016), aff'g T.C. Memo. 2014-221].

Engstrom founding partner Walter Lack and Thomas Girardi, of Los Angeles plaintiffs firm Girardi Keese, made payments to a corporation they set up called G&L Aviation in order to split the cost of a Gulfstream IV and a Beechcraft King Air 350 turboprop. Lack and Girardi have partnered on several cases including the litigation portrayed in the 2000 film “Erin Brockovich.”

Continue reading

January 4, 2017 in New Cases, Tax | Permalink | Comments (1)

NY Times:  Tax Cuts Designed For People Like Trump

New York Times op-ed: 2016 in Charts. (And Can Trump Deliver in 2017?), by Steven Rattner:

NYT 1
NYT 2

Continue reading

January 4, 2017 in Tax | Permalink | Comments (2)

The IRS Scandal, Day 1336:  Fragmented Oversight Of Nonprofits In The United States

IRS Logo 2Lloyd Hitoshi Mayer (Notre Dame), Fragmented Oversight of Nonprofits in the United States: Does It Work? Can It Work?, 91 Chi.-Kent. L. Rev. 937 (2016):

The United States is well known for its distinctive, although not unique, division of political authority between the federal government and the various states. This division is particularly evident when it comes to oversight of nonprofit organizations. The historical focus of federal government oversight has been limited primarily to qualification for tax exemption and other tax benefits, with more plenary power resting with state authorities. Over time, however, the federal government’s role has come to overlap significantly with that of the states, and many nonprofits have become subject to regulation by multiple states as their operations and donor bases expand across state lines.

This Article draws on the growing literature addressing fragmentation of oversight in other contexts to identify possible advantages and disadvantages of such fragmentation with respect to nonprofits. It concludes that the current allocation of responsibilities between the states and the federal government, including the limited areas of overlap, results in relatively effective oversight given the resource and other constraints under which these governments operate. It further concludes, however, that there are certain areas where improvement is possible. More specifically, it recommends federal consolidation of information gathering and financing of oversight, increased coordination between the federal government and the states with respect to enforcement actions, and increased coordination among states with respect to regulation of charitable solicitations. It also recommends that the federal government should both halt and consider rolling back its encroachment into the legal requirements for governance of nonprofits as they relate to the primarily state law fiduciary duty of

Continue reading

January 4, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, January 3, 2017

Weisbach:  A Guide To The GOP Tax Plan — The Way To A Better Way

House Better WayDavid Weisbach (Chicago), A Guide to the GOP Tax Plan – the Way to a Better Way:

The tax reform plan — A Better Way — put forward by the chairman of the House Ways and Means Committee Kevin Brady and the Speaker of the House, Paul Ryan would be the most substantial tax reform in the United States since the enactment of the income tax in 1913. At the corporate level, the reform would allow immediate expensing of investments, deny deductions for net interest expense, and eliminate the taxation of income from sales in foreign countries while taxing the full value of imports (together shifting the tax base to a destination basis). At the individual level, the system would tax capital income including interest, dividends, and capital gains at half the rate that wages and salaries are taxed. It would also repeal the estate and generation skipping taxes. These changes would go a long way toward shifting the tax system to taxing consumption rather than income.

This paper considers the implementation of the House GOP tax plan and addresses issues that will need to be resolved if the plan is to work as intended. The plan is based on, and builds off of, a long history of thinking about consumption taxes. To understand the basic choices made in the plan, it is helpful to understand this history and how consumption taxes work in general.

Continue reading

January 3, 2017 in Congressional News, Scholarship, Tax | Permalink | Comments (0)

Kysar:  Trump’s Tariff Plan Is Unconstitutional — Tariffs (Like Taxes) Must Originate In The House

New York Times op-ed: Is Trump’s Tariff Plan Constitutional?, by Rebecca Kysar (Brooklyn):

Among the first steps being floated by the incoming Trump administration is a 5 to 10 percent tariff on imports, implemented through an executive order. It’s the sort of shoot-first, ask-questions-later action that President-elect Donald J. Trump promised during the campaign. It’s also unconstitutional.

That’s because the path to imposing tariffs — along with taxes and other revenue-generating measures — clearly begins with Congress, and in particular the House, through the Origination Clause. When presidents have raised (or lowered) tariffs in the past, they have tended to do so using explicit, if sometimes wide-ranging, authority from Congress.

Continue reading

January 3, 2017 in Congressional News, Tax | Permalink | Comments (3)

Volokh:  University Of Oregon's Punishment Of Tax Prof Nancy Shurtz May Signal The End Of Free Speech For All Professors At All Universities

Shurtz

Following up on last week's post, Volokh: Punishment Of Tax Prof Nancy Shurtz Means The End Of Free Speech At The University of Oregon: Washington Post (The Volokh Conspiracy): Silencing Professor Speech to Prevent Students From Being Offended — Or From Fearing Discrimination by the Professors, by Eugene Volokh (UCLA):

People often support disciplining and even firing professors who say things that are perceived as racist on the grounds that 1) those professors can’t be trusted to evaluate minority students fairly, 2) students will be afraid that they won’t be judged fairly, or 3) students will more broadly lose confidence in the professors (or just couldn’t stand to be in the room with them) or even in the institution, and won’t learn as effectively. I’ve seen these arguments made often, most recently as to the University of Oregon controversy. ...

I appreciate the force of these arguments, and indeed, if all you care about is maximum teaching effectiveness and reliability, you might take such a view. But, if accepted, these arguments really will be the end of freedom of expression — both casual and more formally academic — on university professors’ part, because they reach far beyond black makeup in Halloween costumes.

Continue reading

January 3, 2017 in Legal Education, Tax | Permalink | Comments (4)

Grinberg:  The New International Tax Diplomacy

Itai Grinberg (Georgetown), The New International Tax Diplomacy, 104 Geo. L.J. 1137 (2016):

International tax avoidance by multinational corporations is now frontpage news. At its core, the issue is simple: the tax regimes of different countries allow multinational corporations to book much of their income in low-tax or no-tax jurisdictions, and many of their expenses in high-tax jurisdictions, thereby significantly reducing their tax liabilities. In a time of public austerity, citizens and legislators around the world have been more focused on the resulting erosion of the corporate income tax base than ever before. In response, in 2012, the G-20—the gathering of the leaders of the world’s twenty largest economies—launched the Base Erosion and Profit Shifting (BEPS) project, the most extensive attempt to change international tax norms since the 1920s.

Continue reading

January 3, 2017 in Scholarship, Tax | Permalink | Comments (0)

Hemel & Herzig:  ‘Reconciliation’ Could Roll Back Obamacare But Roil Senate

Wall Street Journal op-ed: ‘Reconciliation’ Could Roll Back Obamacare but Roil Senate, by Daniel J. Hemel (Chicago) & David J. Herzig (Valparaiso):

The effort by the GOP to peel away parts of the Affordable Care Act could also lead to a showdown over how the Senate runs, due to Republicans’ use of a special Senate rule that allows certain legislation to move through with a simple majority, rather than the 60-vote supermajority typically required.

Continue reading

January 3, 2017 in Tax | Permalink | Comments (3)

The IRS Scandal, Day 1335:  Politics, Disclosure, And State Law Solutions For 501(c)(4) Organizations

IRS Logo 2Linda Sugin (Fordham), Politics, Disclosure, and State Law Solutions for 501(c)(4) Organizations, 91 Chi.-Kent. L. Rev. 895 (2016):

In 2013, the Internal Revenue Service (IRS) suffered its worst scandal in a generation over its treatment of tea-party related organizations. Some of the facts are undisputed: Following the Supreme Court's 2010 Citizens United decision, people rushed to organize section 501(c)(4) organizations that would be active in politics. The IRS was overwhelmed by applications, and the regulatory standard provided little guidance. The agents, who were not lawyers, used a shorthand to identify organizations that might not meet the standard of being “operated exclusively for the promotion of social welfare.” The Treasury watchdog found that “[t]he IRS used inappropriate criteria that identified for review Tea Party and other organizations applying for tax-exempt status based upon their names or policy positions.” Instead of identifying possible ineligible organizations by their names (including “Patriots” and “9/12”), the IRS should have determined eligibility for exemption by analyzing whether the organizations satisfied the regulatory requirements concerning political activity. Since that time, the IRS has been paralyzed in this area, and the Federal Election Commission has been deadlocked.

The post-Citizens United explosion of (c)(4) political activity—and the federal government's dysfunction—did not go unnoticed by the states. While the federal government was at an impasse, some states attempted to bridge the gap. Federal law determines tax exemption, but state law defines charitable and noncharitable nonprofit organizations and regulates their governance. If nonprofit organizations are operated to the detriment of the public interest, state attorneys general have the power to investigate and discipline them. New York and California have both attempted to address the same concerns about secret money in politics that led to the IRS scandal and proposed regulations.

This article asks whether the states can (and should) use state nonprofits law to solve the problem of dark money spent by nonprofit non-charitable organizations. Since the problem of (c)(4) politicking is not a revenue issue, the Internal Revenue Service is clearly not the ideal regulator. Dark money may be solely an election law problem, in which case it would be exclusively in the domain of the FEC and state election regulators, and not in the purview of state nonprofits law. However, if there are concerns about nonprofit organizations in politics that implicate the policies relating to nonprofits, there might be something beyond election law at issue that state nonprofit law might address. There are three reasons why state charity regulators might intervene in this area: (1) to protect charities, (2) to protect voters, and (3) to protect donors to nonprofit organizations. If dark money is damaging the reputation and integrity of the nonprofit sector as a whole, states may legitimately regulate noncharitable nonprofits to protect charities from negative consequences. The general public seems to confuse 501(c)(3) with 501(c)(4) organizations, failing to appreciate their legal distinction. Consequently, states have an interest in preventing reputational damage to charitable organizations on account of bad behavior by noncharitable nonprofit organizations. In addition, states may be justified in regulating politicking nonprofits to protect the public itself, either as donors or as voter. Much of state nonprofit law is designed to protect donors, so if regulating political speech is designed to protect donors who might unwittingly support political activity, then state nonprofits regulators are in a familiar institutional role. Donor confusion is understandable since 501(c)(4) organizations are categorized as “social welfare” organizations; donors may reasonably expect that their donations support social welfare activities, rather than politicking.

The final state policy, protecting the public as voters, veers away from nonprofits law into clear election law territory. Nevertheless, state attorneys general have an interest in preventing the public from being misled. State nonprofits law is already concerned with preventing fraud perpetrated by bogus charities and unscrupulous solicitors. If it is fraudulent to pretend to be someone else or to speak anonymously in a political communication, then nonprofit regulators might approach the problem as analogous to charitable solicitation. Both political campaign activity and charitable solicitations raise First Amendment issues. The Supreme Court has repeatedly struck down statutory limits on charitable solicitation under the First Amendment, but it has allowed states to prosecute charitable fundraisers for misleading potential donors.

This article proceeds as follows: The next Part provides a brief background to the current situation and explains why federal tax law is not the appropriate locus of regulation. After that, I describe the steps that California and New York have taken to reduce the influence of dark money in their elections. Both states were motivated by specific incidents involving out-of-state interests, and both states faced substantial pressures from constituencies opposed to regulation. Part IV considers possible state law policies for regulating dark money, and Part V considers the regulatory solutions that correspond to those policies. Part VI steps back to assess the desirability of state nonprofit law regulation, considering the legal and practical problems with states undertaking this regulation. Although the states can achieve some important goals, the conclusion in Part VII expresses skepticism at the states' ability to solve the (c)(4) politicking mess.

Continue reading

January 3, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

TaxProf Blog Holiday Weekend Roundup

Monday, January 2, 2017

Brunson:  More On Hate Groups And Tax Exemptions

Following up on Saturday's post, Volokh: The IRS May Not Deny Tax Exemptions To ‘Hate Groups’:  Sam Brunson (Loyola-Chicago), More on Hate Groups and Tax Exemptions:

Over at the Volokh Conspiracy, Eugene Volokh asserts that the IRS cannot constitutionally deny tax exemptions to “hate groups” based on their views, abhorrent that they may be. ... Since he name-checks me and fellow Surly blogger Phil Hackney, I figured it was worth responding to his piece. ... I don’t intend to be comprehensive here, but I want to make five main points: ...

Continue reading

January 2, 2017 in Tax | Permalink | Comments (1)

Tom Arnold Calls On 'Gamers' To Get Trump's Taxes

The IRS Scandal, Day 1334:  The IRS’s Diminished Role In Overseeing Tax-Exempt Organizations

IRS Logo 2Evelyn Brody (Chicago-Kent) & Marcus Owens (Loeb & Loeb, Washington, D.C.), Exile to Main Street: The I.R.S.’s Diminished Role in Overseeing Tax-Exempt Organizations, 91 Chi.-Kent. L. Rev. 859 (2016):

The Chicago-Kent conference on charity oversight took place on Day 924 of the TaxProf blog's “IRS Scandal”—Day 1 being the Friday two-and-a-half years ago that the Internal Revenue Service's Lois Lerner apologized for inappropriate use of Tea Party and other names in selecting applicants for Internal Revenue Code § 501(c)(4) status for further review. This article examines the IRS's role in administering the regime for federally tax-exempt organizations. Our focus, however, should not obscure the very real corrosive impact, whether deserved or pretextual, that the IRS's exempt-organization imbroglio has had on the health of the entire agency, and thus to the revenue needs of the federal government.

The IRS—an agency which in the best of times suffers from a siege—is now starved for resources both financial and political. The IRS has predictably and understandably responded to the “scandal” by retreating into a shell of bureaucratic reshuffling, management mumbo-jumbo, and paper moving. There has never been a better time to apply for tax-exempt status or push the boundaries of permissible activities.

Will the IRS's decision to exile the Exempt Organization Division from Washington, D.C. to Cincinnati save the agency as well as the exempt-organization function by removing its operations from the glare of Washington's perpetual partisan politics? Or will this attempt to jettison the albatross from the sinking ship instead stifle the effectiveness of the IRS's role in charity and nonprofit oversight, suggesting—as co-author Marcus Owens has written about at length—the need for a new and independent agency to carry out that role?

This article proceeds in three parts. Part I describes the framework for federally tax-exempt organizations engaged in advocacy and political activity, and recites the sorry saga of the recent unpleasantness. Part II summarizes the IRS's managerial reaction. Part III focuses on the IRS's new procedure for granting speedy recognition of tax-exemption to new small charities—perhaps setting the agency up for the next debacle. Our conclusion sets out the not-so-great choices, mindful that the goal is to avoid making the wrong mistake. ...

On July 21, 2015, President Barack Obama commented to Jon Stewart, host of The Daily Show on Comedy Central: “When there was that problem with the IRS, everyone jumped . . ., saying, ‘Look, you've got this back office, and they're going after the Tea Party.’ Well, it turned out, no, Congress had passed a crummy law that didn't give people guidance in terms of what it was they were trying to do. They did it poorly and stupidly.” The president added: “The truth of the matter is that there was not some big conspiracy there. They [(the IRS)] were trying to sort out these conflicting demands. You don't want all this money pouring through not-for-profits, but you also want to make sure everybody is being treated fairly.” Alluding to the bigger problem, he emphasized: “Now, the real scandal around the IRS right now is that it has been so poorly funded that they cannot go after these folks who are deliberately avoiding tax payments . . . .”

Jon Stewart, of course, did not point out to the president that ambiguous concepts—such as “unrelated business activity” and “educational”—are the hallmark of the federal tax rules applicable to tax—exempt organizations, and have defied specific definition since their enactment.

The IRS has taken a series of major organizational and procedural steps, clearly moving as quickly as it can to address the May 2013 TIGTA Report's recommendations and to align the Exempt Organizations Division (and the Employee Plans Division) with the organizational structures of the rest of the IRS National Office. These changes, though, are being developed by an entirely new cadre of senior management, virtually all of whom lack significant experience in the function or with the tasks required to administer the relevant substantive sections of the Internal Revenue Code.

In addition, the agency is proceeding piecemeal, focusing initially on the exemption-application processing function, to be followed at some point by a review of the examination function. In view of the huge amounts of funds flowing into the nonprofit sector, particularly to social welfare organizations exempt under section 501(c)(4), the IRS's sense of urgency is understandable. However, this emphasis on granting recognition of exemptions now and (possibly) asking questions later does not seem sustainable. The nonprfit sector and practitioners should be alert to developments to target noncompliance, as they are likely to occur quickly, and without an opportunity for public comment and discussion. In addition, the decoupling of the enforcement function from the interpretative function, now located in a different organization unit (the Office of Chief Counsel), suggests that there may be a greater risk for inconsistent or incorrect positions being taken in IRS audits.

As for small charities, regardless of whether Congress or the IRS adopts the five-year provisional-exemption proposal described in Part III, the agency should expand information collection. Importantly, a charity that grows sufficiently—which could happen even before five years pass—will have to file a Form 990-EZ or even a Form 990. Thus, the IRS should require a successful Form 1023-EZ applicant, when it first files one of those information returns, to submit the organizational documents and certain other information (notably, about activities and related party transactions and relationships) that would have been required on a full Form 1023 application. In addition, the IRS should continue sampling to ensure the eligibility of 1023-EZ applicants.

The bigger question—should the IRS be the locus of federal regulation of charities?—might more usefully be narrowed to “should the IRS be the locus of regulation for political activity by tax-exempt organizations?” If significant abuse arises, particularly if due even in part to the reduction in scrutiny of applications for tax-exempt status and in audit enforcement, one of us has proposed that it might be appropriate to move the entire regulatory function over tax-exempt organizations to a different governmental or quasi-governmental structure.

Continue reading

January 2, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Sunday, January 1, 2017

NY Times:  The Evangelical Scion Who Stopped Believing — The Son Of A Famous Pastor, Bart Campolo Is Now A Rising Star Of Atheism As Humanist Chaplain At USC

BartNew York Times: The Evangelical Scion Who Stopped Believing: The Son of a Famous Pastor, Bart Campolo Is Now a Rising Star of Atheism — Using the Skills He Learned in the World He Left Behind:

For most of his life, [Bart] Campolo had gone from success to success. His father, Tony, was one of the most important evangelical Christian preachers of the last 50 years, a prolific author and an erstwhile spiritual adviser to Bill Clinton. The younger Campolo had developed a reputation of his own, running successful inner-city missions in Philadelphia and Ohio and traveling widely as a guest preacher. An extreme extrovert, he was brilliant before a crowd and also at ease in private conversations, connecting with everyone from country-club suburbanites to the destitute souls he often fed in his own house. He was a role model for younger Christians looking to move beyond the culture wars over abortion or homosexuality and get back to Jesus’ original teachings. ...

Though Marty, his wife, had long entertained doubts about Christianity, Campolo had always done his job and, in his words, “brought her back.” But the truth was, he had been breaking up with God for a long time. ... It had been years since he made God or Jesus or the resurrection the centerpiece of the frequent fellowship dinners he and Marty hosted. Talk instead was always about love and friendship. In 2004, he performed a wedding for two close lesbian friends, and in 2006, he began teaching that everybody could be saved, that nobody would go to hell. To evangelicals, he already sounded more like a Unitarian Universalist than like any of them.

Now, after his near-death experience, his wife told him — more bluntly than she ever had — what she thought was going on. “You know,” Marty said, “I think you ought to stop being a professional Christian, since you don’t believe in God, and you don’t believe in heaven, and you don’t believe Jesus rose from the dead three days after dying — and neither do I.” He knew that she was right, and he began telling friends that he was a “post-Christian.” They treated him like an obviously gay man coming out of the closet. “People were like, ‘Yeah, we’ve known this a long time,’ ” he says. “ ‘Why did it take you so long to figure it out?’ ”

For Campolo, admitting that he had totally lost his faith was oddly comforting — he could stop living a lie — but also confusing. He loved talking to people, caring for them, helping them. He loved everything about Christian ministry except the Christianity. Now that he had crossed the bridge to apostasy, he needed a new vocation.

Continue reading

January 1, 2017 in Legal Education, Tax | Permalink | Comments (5)

The Top 10 TaxProf Blog Tax Posts Of 2016

The Top 5 Tax Paper Downloads

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

  1. [361 Downloads]  Problems with Destination-Based Corporate Taxes and the Ryan Blueprint, by Reuven S. Avi-Yonah (Michigan; moving to UC-Irvine) & Kimberly A. Clausing (Reed College)
  2. [313 Downloads]  IRS Issues Final and Temporary Debt-Equity Regulations Under Section 385, by David S. Miller (Proskauer, New York) & Janicelynn Asamoto Park (Proskauer, New York)
  3. [209 Downloads]  Apple State Aid Ruling: A Wrong Way to Enforce the Benefits Principle?, by Reuven S. Avi-Yonah (Michigan; moving to UC-Irvine) & Gianluca Mazzoni (S.J.D. 2017, Michigan)
  4. [187 Downloads]  Is Something Rotten in the Grand Duchy of Luxembourg?, by Omri Marian (UC-Irvine)
  5. [129 Downloads]  Protecting Trump's $916 Million of NOLs, by Steve Rosenthal (Tax Policy Center)

January 1, 2017 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 1333:  Republicans Weasel Out Of Impeaching IRS Commissioner John Koskinen

IRS Logo 2Canada Free Pass, Republicans Weasel Out of Impeaching IRS Boss John Koskinen:

Republican leaders managed to derail a measure to impeach IRS Commissioner John Koskinen ..., sending the debate back to a committee for more study, where it will die when the Congress adjourns at the end of this year.

Conservatives had pushed for impeaching Mr. Koskinen, saying he cannot be allowed to get away with having misled Congress on the investigation into the IRS’s tea party targeting.

But GOP leaders, eager to clean up business and shut down for the year, ahead of a busy 2017, led the push to shunt the impeachment aside. Joined by Democrats, the House voted 342-72 to send the debate back to the Judiciary Committee.

“Members have different opinions about what to do,” said Rep. Bob Goodlatte, Virginia Republican and committee chairman, as he asked lawmakers to give him a chance to sort things out. But with lawmakers looking to clear out of town this week, the move essentially kills the impeachment drive in this Congress. Democrats had tried to expunge the impeachment resolution altogether, but lost a test vote on a near party-line tally.

Continue reading

January 1, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

Saturday, December 31, 2016

This Week's Ten Most Popular TaxProf Blog Posts

IRS Cracks Down On Syndicated Conservation Easements

IRS Logo 2Notice 2017-10, 2017-4 I.R.B. 1 (Dec 23, 2016):

The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) are aware that some promoters are syndicating conservation easement transactions that purport to give investors the opportunity to obtain charitable contribution deductions in amounts that significantly exceed the amount invested. This notice alerts taxpayers and their representatives that the transaction described in section 2 of this notice is a tax avoidance transaction and identifies this transaction, and substantially similar transactions, as listed transactions for purposes of § 1.6011-4(b)(2) of the Income Tax Regulations (Regulations) and §§ 6111 and 6112 of the Internal Revenue Code (Code). This notice also alerts persons involved with these transactions that certain responsibilities may arise from their involvement.

Continue reading

December 31, 2016 in IRS News, Tax | Permalink | Comments (0)

The IRS Scandal, Day 1332:  The House GOP's Ridiculous Impeachment Crusade

IRS Logo 2MSNBC The MaddowBlog, Congress Holds IRS Impeachment Vote as Trump Eyes New Commissioner:

The 114th Congress is, mercifully, nearly over, but as we saw yesterday, lawmakers aren’t quite done considering ridiculous ideas. The Wall Street Journal reported:

The House of Representatives turned aside an attempt by conservative hard-liners to impeach IRS Commissioner John Koskinen for his handling of congressional investigations into the tax agency.

Instead, in a 342-72 vote, the House sent the issue back to the Judiciary Committee, which hasn’t held a formal impeachment hearing or voted on the matter.

The vote effectively ends the impeachment crusade, at least for a while. The House’s GOP majority could start the process anew next year, but there wouldn’t be any point. The fact that this even reached the House floor yesterday is something of an embarrassment. Circling back to our previous coverage, the IRS “scandal” was discredited years ago — Koskinen wasn’t even at the tax agency when the imaginary controversy unfolded — and as Rep. Elijah Cummings (D-Md.) documented in May, charges that Koskinen was part of some kind of after-the-fact cover-up don’t make any sense.

Koskinen took on the job of improving the IRS out of a sense of duty — the president asked this veteran public official to tackle a thankless task, and Koskinen reluctantly agreed. For his trouble, a sizable group of far-right House Republicans have tried to impeach him, for reasons even they have struggled to explain.

Of course, whether or not Congress approves, Koskinen won’t lead the IRS much longer. As the Journal’s article added, Koskinen, who’s now 77, “serves a fixed term that ends in November 2017. [Donald Trump] could force him out or could wait until the end of Mr. Koskinen’s term and appoint his successor, who must be confirmed by the Senate.”

And that raises some interesting possibilities. Politico reported a couple of weeks ago that Trump will be in a position to nominate Koskinen’s successor, and there’s nothing to stop the Republican president “from appointing an IRS chief who will go easy on him.” ...

Trump may soon name the head of an agency that’s examining whether Trump broke the law. What could possibly go wrong?

Postscript: One more relevant tidbit from the Politico piece: “The IRS also reviews the president’s and vice president’s returns each year, but those audits aren’t required by law, and Trump could stop them.”

Continue reading

December 31, 2016 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Friday, December 30, 2016

Weekly Tax Highlight And Roundup

This week, Joe Kristan (CPA & Shareholder, Roth & Company (Des Moines, Iowa); Editor, Tax Update Blog) discusses how deductions of a zombie corporations eventually die. 

KristanCorporations may have an indefinite life, but not their deductions.

I’ll just keep that company around in case I need it for something. Sometimes clients who sell a business want to preserve the corporation that held the business. While there are occasionally reasons to do so — for example, to deal with potential liabilities — more often such zombie corporations become an annoyance, and clients dissolve them when they realize they have to pay annual state charter fees and tax return fees.

Other taxpayers have other ideas. A human relations consultant who lost his primary client kept his S corporation around for years after the revenue stopped coming in. While there was no revenue, there was no shortage of expenses. The taxpayer claimed a 2009 loss on his K-1 of $5,795 on revenue of zero. Without revenue, what kind of expenses would there be? This kind, according to Tax Court Judge Morrison:

Continue reading

December 30, 2016 in New Cases, Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly SSRN Tax Article Review And Roundup

This week, Daniel Hemel (Chicago) reviews a new paper by Eric J. Allen (Southern California) and Susan C. Morse (Texas), The Effective Income Tax Experience of U.S. and Non-U.S. Multinationals.

HemelAs our incoming President likes to remind us, the United States has the highest corporate tax rate in the world. Well, not quite the highest—the United Arab Emirates beats us with a 55% rate. But according to data from the Organisation for Economic Co-operation and Development, the U.S. corporate income tax rate is approximately 15 percentage points above the average among other OECD member countries.

Yet as readers of this blog no doubt know, statutory rates can be misleading measures of true tax burdens. In a newly posted paper, Eric Allen and Susan Morse seek to determine whether U.S. multinational corporations actually pay more than their foreign counterparts—and if so, how much more. Allen and Morse focus on multinational firms that have a “material U.S. presence” (e.g., more than a quarter of sales in the United States). Allen and Morse ask: Controlling for the location of sales (among other factors), what is the effect of having a non-U.S. parent on the multinational firm’s effective tax rate? They separately analyze firms in profit years and firms in loss years.

Continue reading

December 30, 2016 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

Hoopes, Robinson & Slemrod:  The Impact Of Public Tax-Return Disclosure

Jeffrey L. Hoopes (North Carolina), Leslie Robinson (Dartmouth) & Joel Slemrod (Michigan), The Impact of Public Tax-Return Disclosure:

We investigate the effect of public disclosure of information from corporate tax returns filed in Australia on consumers, investors, and the corporations themselves that were subject to disclosure. Supporters of more disclosure argue that increased transparency will improve tax compliance, while opponents argue that it will divulge sensitive information that is, in many cases, misunderstood. Our results show that large private companies are likely to experience consumer backlash and are also, perhaps as a consequence, more likely to act to avoid disclosure. We also fail to detect any material increase in tax payments, one objective of legislating the disclosure regime. Finally, we find that investors react negatively to anticipated and actual disclosure of tax information, most likely due to anticipated policy backlash than the revelation of negative tax information.

Continue reading

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