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Tuesday, October 14, 2014

Boston College Seeks to Hire a Tax Clinician

BC LogoBoston College Law School seeks to hire a full-time tax clinician:

Boston College Law School seeks a full-time faculty member interested in establishing and teaching in a transactional clinic that emphasizes entrepreneurship, technology, and the innovation economy.

JOB DESCRIPTION: The successful applicant will be expected to expand the offerings of one of our existing clinics or develop a new program, which may include hybrid arrangements with outside institutions such as incubators, corporations or law firms, and may include simulation as a method of instruction. The focus of teaching should be business formation, business transactions, taxation, or intellectual property. The successful applicant will play a major role in determining the clinic's specific emphasis and operation.

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October 14, 2014 in Legal Education, Tax | Permalink | Comments (0)

The IRS Scandal, Day 523

IRS Logo 2Town Hall:  The White House Dogs, by Erick Erickson:

There are two dogs living in the White House other than the Obamas' pet dog. The first of the two dogs is the one that eats all the homework. It has been let loose across government agencies.

The Internal Revenue Service had an encounter with the dog. Lois Lerner, in charge of the division accused of harassing conservative groups, suddenly had her hard drive crash. All her emails were gone. Then six other employees mysteriously had their emails vanish. All seven were relevant to the congressional probe of the IRS.

The emails appear not to be on any servers. They do not seem to have been backed up, or the back ups were destroyed too. The emails have simply vanished. It is just awfully convenient that they were emails involved in a congressional probe.

Once the dog finished eating emails at the IRS, it moved over to the Environmental Protection Agency. The Competitive Enterprise Institute filed a request for certain emails and text messages from or to EPA administrator Gina McCarthy. According to the Washington Times last Wednesday, the EPA now says thousands of text messages related to Ms. McCarthy have simply disappeared. Her emails too are gone. The Competitive Enterprise Institute and the EPA are involved in a lawsuit, making the disappearance of the emails even more serious.

Now it is not just congressional Republicans looking at disappearing data. A federal judge is involved, too. Congressional Republicans can be dismissed far more easily than a federal judge in a black robe with a gavel.

It seems the IRS and EPA are not the only government agencies visited by this hungry dog. The Securities and Exchange Commission has lost hundreds of computers with information on them that could be used for insider trading purposes. ...

That leads us to the other dog living in the Obama White House. In "Silver Blaze," a short story about Sherlock Holmes by Sir Arthur Conan Doyle, a prized racehorse went missing the night before a major race. Holmes, investigating the disappearance and the related death of the horse's trainer, refers "to the curious incident of the dog in the nighttime." The curious incident was that the dog did not bark. The dog at the stables made no sound as the thief stole the horse because the dog knew the thief.

The Obama administration has not barked in these cases. Internal Revenue Service emails from employees under investigation by Congress have been deleted. The Obama administration's best guess is that there was just an unfortunate coincidence of timing with an obligatory reference to "partisan witch hunts." The same holds for the EPA and now the SEC.

The Obama administration has expressed little concern, mostly taking the opportunity to blame Republicans. Government data has been deleted, and no one in the White House seems concerned. The dog is not barking. ...

The matters on which the White House dogs are willing to bark and be quiet should direct the attention of an objective press. The silence on the IRS and EPA is very telling.

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October 14, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, October 13, 2014

Sanchirico Presents International Tax and Ownership Nationality Today at Florida

SanchiricoChris Sanchirico (Pennsylvania) presents As American as Apple, Inc.: International Tax and Ownership Nationality, 68 Tax L. Rev. ___ (2014), at Florida today as part of its Graduate Tax Program Colloquium Series:

The ownership nationality of large US multinational companies plays an implicit but important role in the current debate over how such companies should be taxed. This paper identifies that role and investigates what is actually known about where these companies’ shareholders reside.

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

Mayer Presents Taxing Politics Today at Loyola-L.A.

MayerLloyd Hitoshi Mayer (Notre Dame) presents Taxing Politics at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

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

Ellen Aprill (Loyola-L.A.) and Justin Levitt (Loyola-L.A.) are the commentators.

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

Does the USA Really Soak the Rich?

Next New Deal (Blog of the Roosevelt Institute), Does the USA Really Soak the Rich?:

There's a new argument about taxes: the United States is already far too progressive with taxation, it says, and if we want to build a better, eglitarian future we can't do it through a "soak the rich" agenda. It's the argument of this recent New York Times editorial by Edward D. Kleinbard, and a longer piece by political scientists Cathie Jo Martin and Alexander Hertel-Fernandez at Vox. I'm going to focus on the Vox piece because it is clearer on what they are arguing.

There, the researchers note that the countries “that have made the biggest strides in reducing economic inequality do not fund their governments through soak-the-rich, steeply progressive taxes.” They put up this graphic, based on OECD data, to make this point:

You can quickly see that the concept of "progressivity" is doing all the work here, and I believe the way they are going to use that word will be problematic. What does it mean for Sweden to be one of the least progressive tax state, and the United States the most? ... 

When average people usually talk about soaking the rich, they are talking about the marginal tax rates the highest income earners pay. But as we can see, in Sweden the rich pay a much higher marginal tax rate [56% v. 39%]. ... 

[Jo Martin and Hertel-Fernandez] are measuring how much of tax revenue comes from the top decile ...  and calling that the progressivity of taxation. ...  The fact that the United States gets so much more of its tax revenue from the rich when compared to Sweden means we have a much more progressive tax policy, one of the most progressive in the world. Congratulations?

The problem is, of course, that we get so much of our tax revenue from the rich because we have one of the highest rates of inequality across peer nations. How unequal a country is will be just as much of a driver of the progressivity of taxation as the actual tax polices. In order to understand how absurd this is, even flat taxes on a very unequal income distribution will mean that taxes are “progressive” as more income will come from the top of the income distribution, just because that’s where all the money is. Yet how would that be progressive taxation?

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

Why Do Lawyers Blog?

Legal Productivity, Why Do You Blog? 23 Lawyers Weigh In:

Blogging means different things to different people but I’m less interested in narrowly defining blogging, than examining why lawyers blog. So I went to the source and asked: “Why do you blog?” Twenty-three lawyers responded, some of whom have been at it for a very long time.

Several have their own practice or are part of a larger firm. Many still maintain their blog, while some write for other blogs. Topics range from their area of legal expertise to other interests like technology and practice management. But these blogging lawyers all have one thing in common: they write with passion and purpose. Business development doesn’t drive their writing. These lawyers blog because they love to write and share their knowledge, experience, and passions.

October 13, 2014 in Legal Education, Tax | Permalink | Comments (0)

Christians: It's Time to Fix FBAR

Tax Analysys Logo (2013)Allison Christians (McGill), Paperwork and Punishment: It's Time to Fix FBAR, 76 Tax Notes Int'l 147 (Oct. 13, 2014):

Allison Christians argues that the U.S. Foreign Bank Account Report regime is excessive and offers suggestions to narrow its scope and ease compliance burdens.

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

Congress, GAO Target ‘Supersize’ IRAs

Super Size MeFollowing up on my previous posts:

Wall Street Journal Tax Report:  Washington Scrutiny of ‘Supersize’ IRAs, by Laura Saunders:

Washington is taking a hard look at tax-sheltered retirement accounts, especially “supersize” ones worth millions of dollars. Savers should consider what it could mean for them.

The U.S. Government Accountability Office, an arm of Congress, recently released a report on individual retirement accounts, requested by Senate Finance Committee Chairman Ron Wyden (D., Ore.). Its publication coincided with Senate hearings on retirement savings held last month.

The GAO study addressed questions many people asked after disclosures that former presidential candidate Mitt Romney had a traditional IRA worth as much as $101 million and technology entrepreneur Max Levchin put more than 13.3 million shares of Yelp YELP -5.11% stock in a Roth IRA before the firm went public in 2012.

How many supersize IRAs are there? The GAO estimates more than 300 individuals or families have IRAs with balances greater than $25 million, while more than 9,000 have IRAs worth more than $5 million. The GAO wasn’t able to distinguish between regular and Roth IRAs, given the data. ...

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

The IRS Scandal, Day 522

IRS Logo 2New York Observer:  Sex, Lies, and . . . White House Counsel; Ruemmler Blunders Into Secret Service Mess, by Sidney Powell:

Enter Kathryn Ruemmler, former White House Counsel, repeatedly discussed on the “short list” for Attorney General. ...

As we reported previously, not only was Ms. Ruemmler in the middle of the IRS email scandal, the Benghazi cover-up, and the most vigorous “protector” of a president while increasing government secrecy and violating the rights of others, the Post places her squarely in the middle of the cover-up of the Cartagena sex scandal for which the Secret Service and the military took the sole blame for having several prostitutes spend the night before the President arrived. ...

According to Mr. Obama, those involved in the “Hookergate” scandal were just “a couple of knuckleheads” in the Secret Service. Wait, that sounds familiar. Oh yes, the IRS targeting of conservative political groups was just “a couple of boneheads” in the Cincinnati office of the IRS, and there wasn’t a “smidgeon of corruption” in Mr. Obama’s IRS.

Anyone still buying that must have been comatose for the last several months, during which we learned of the ever increasing number of computer crashes, and that the IRS deliberately destroyed Lois Lerner’s blackberry—a fact the IRS tried to hide from federal judge Emmet G. Sullivan. These developments may have a role to play in Mr. Holder’s departure—the real reasons for which I believe are yet to surface.

Our entire government is imploding in deceit and dishonesty. The United States has become the laughingstock of the world, and the vacuum in leadership of this country is sucking the very air we breathe. Nero fiddled while Rome burned. Mr. Obama golfs while ISIS beheads. Meanwhile, Kathryn Ruemmler’s on his short list for Attorney General.

There are reasons for his “trust” in her that are obvious to him, but she “ain’t no friend of mine.”

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October 13, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, October 12, 2014

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 on SSRN, with a new paper debuting on the list at #5.  The #1 paper is now #19 in all-time downloads among 10,386 tax papers:

  1. [3288 Downloads]  'Competitiveness' Has Nothing to Do with it, by Edward D. Kleinbard (USC)
  2. [336 Downloads]  2013 Developments in Connecticut Estate and Probate Law, by Jeffrey A. Cooper (Quinnipiac) & John R. Ivimey (Reid and Riege, Hartford)
  3. [219 Downloads]  The OECD'S Flawed and Dated Approach to Computer Servers Creating Permanent Establishments, by Monica Gianni (Florida)
  4. [131 Downloads]  Rights Without Remedies, by Matthew L. M. Fletcher (Michigan State)
  5. [126 Downloads]  Home-Country Effects of Corporate Inversions, by Omri Y. Marian (Florida)

October 12, 2014 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 521

IRS Logo 2Forbes:  Lois Lerner And The Terrible, Horrible, No Good, Very Bad Day, by Robert W. Wood:

Lois Lerner–the former IRS official at the heart of Tea Party targeting–is retired from the IRS. Despite being held in contempt of Congress for refusing to testify, she hasn’t been prosecuted. Yet after her long silence, her exclusive interview with Politico was anything but reticent and reserved. In it, Ms. Lerner said she did nothing wrong and considers herself  the victim.

Ms. Lerner bristled at any suggestion she had anything to do with destroying emails, switching to texts, letting her own liberal views influence her treatment of Tea Party a_holes, crazies. etc. Yet in a curious turn of events, journalist and Crapitalism author Jason Mattera showed up in her nice Bethesda neighborhood to pepper her with questions. They included such zingers as “Do you feel bad about turning the government into a weapon to crush political dissent?”

This time, Ms. Lerner wasn’t flanked by lawyers and facing softball questions at Politico. And who can blame her for not wanting to answer these questions. So she scurried to a neighbor’s house and started knocking on the door, begging to be admitted. Ms. Lerner’s day got worse when her neighbors seemed to, well, ‘Take the Fifth’ about letting her in. She  stood there on the porch, while Jason Mattera probes with barbs like, ‘it doesn’t feel good to be targeted does it?’

AlexanderOK, this may not be journalism’s finest hour, nor does it necessarily mean much that Ms. Lerner didn’t want to answer these questions. It may not even mean much that the neighbor has probably had enough, and didn’t want to be involved. That’s so no matter how much the neighbor may like Ms. Lerner, or her dogs for that matter.

I’m not saying that anyone wants to be hounded (excuse the pun), either. But being hounded and asked questions of this sort cannot be entirely unexpected and may not even be unfair, especially after Ms. Lerner’s exclusive interview with Politico. It all sounds a little like Alexander and the Terrible, Horrible, No Good, Very Bad Day, based on the book by Judith Viorst. Just like Lois Lerner’s day, from the moment Alexander wakes up, everything goes wrong. ...

Want even more terrible, horrible, no good items? How about those rogue employees in Cincinnati doing things they shouldn’t. I’ll bet all those missing emails would prove once and for all that those confused rogue Cincinnatians did all the targeting non-biased and careful review with no help from the boss. Too bad the hard drive is gone destroyed buried not available despite best efforts. Maybe Alexander had something. Maybe moving to Australia wouldn’t be such a bad idea after all?

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

Saturday, October 11, 2014

Ryan: Valuation Lessons From Estate of Adell

Tax Analysys Logo (2013)Kerry A. Ryan (St. Louis), Valuation Lessons From Estate of Adell, 144 Tax Notes 1455 (Sept. 22, 2014):

In Estate of Adell [T.C. Memo. 2014-155], the Tax Court determined that the correct value of a decedent’s interest in a closely held corporation was the figure reported on the original estate tax return. The court rejected alternative values as either using the incorrect valuation method or failing to account for the significant value of a key employee’s personal goodwill. 

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

The IRS Scandal, Day 520

IRS Logo 2Forbes: Is IRS A Smidgen Corrupt? Ask Lois Lerner, NetJets, Buffett & 150 Million Taxpayers, by Robert W. Wood:

[A]ny dealings with the IRS today may be more unsettling than in the past because many have less confidence today that the system is fair and impartial. It is hard to overstate how important this is. Some of it comes back to the last 18 month who’s-on-first routine on display from the IRS.

Lois Lerner wouldn’t talk to Congress, although she is collecting a nice pension. Despite being held in contempt of Congress for refusing to testify, she hasn’t been prosecuted. Maybe her refusal is constitutionally protected, maybe not. Yet after her long silence, in an exclusive interview with Politico, Ms. Lerner said she did nothing wrong and she considers herself the victim.

She bristled at any suggestion she had anything to do with destroying emails, switching to texts to avoid being traced, letting her own liberal views influence her treatment of tea party a_holes, etc. It isn’t only Ms. Lerner who comes off as above the law. IRS Commissioner Koskinen did his share of testifying about the email mess. Sadly, he somehow managed to seem arrogant, uninformed, and perhaps even a tad dismissive that his organization had any explaining to do.

The IRS and its thousands of dedicated employees deserve far better. Yet given the IRS’s current image problem, might some taxpayers feel justified in cheating on their taxes? I hope not, but I’ll bet some might think of this. Some of the public may not be able to get past the apparent stonewalling. Some of the public may wonder if they would get a pass from the IRS if their hard drive ate their tax records.

Some taxpayers may go beyond fudging their taxes and take their distrust to the courts. It already happened with True the Vote’s lawsuit against the IRS. But you can’t win without evidence. See Judge sides with IRS in search for Lerner emails. More suits could be impacted too. As noted in The Lois Lerner App, NetJets has asserted that the IRS “wiped clean a number of computer hard drives containing e-mails and other electronic documents that the government was required to produce.” ...

Will some taxpayers cheat after seeing this kind of behavior? I hope not, but some might justify it to themselves. When thousands of emails go missing from the key time period? And, when no one said anything about the emails being missing until one year into a federal investigation? Might some taxpayers cheat after seeing this kind of behavior? ...

Whatever one’s political views, politics are not supposed to matter to the IRS. Taxes and tax administration can’t be even remotely based on politics. We all need to believe that, and more generally, in the fairness of the system. One’s tolerance for coincidence should not have to be work overtime to be convinced.

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October 11, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Friday, October 10, 2014

Brooklyn Hosts 2014 Scholar’s Roundtable Today

Brooklyn Logo 1Brooklyn hosts the 2014 Scholar’s Roundtable today with this tax panel:

October 10, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Weekly Tax Roundup

October 10, 2014 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Weekly SSRN Tax Roundup

Weekly Student Tax Note Roundup

October 10, 2014 in Scholarship, Tax, Weekly Student Tax Note Roundup | Permalink | Comments (0)

Kleinbard: Don't Soak the Rich

New York Times op-ed:  Don’t Soak the Rich, by Edward D. Kleinbard (USC):

In response to the growing income disparity between the wealthy and the merely well off — not to mention the middle class and working class — an increasing number of economists and politicians have called for higher tax rates on top incomes. That would collect more revenues, and make our tax system more progressive, by collecting a disproportionate share of those new revenues from the highest income taxpayers, a fact that appeals to many people’s sense of fairness.

But even taking into account regressive state and local taxes, the American tax system already is the most progressive in the developed world. And the scars left by the 2013 fight over the “fiscal cliff” tax deal imply that trying to raise top marginal income tax rates to the levels suggested by some academics would be, well, a wholly academic exercise.

That does not mean, however, that we are bereft of instruments to tackle income inequality. In fact, achieving equality through the tax structure is the wrong way to think about the issue. Reformers have blundered by confusing what seems fair — more progressive taxation — with what is actually important, and lacking: a progressive fiscal system. As other developed countries have figured out, reducing inequality is not about where the money comes from, but where the money goes, and how much of it is spent.

A fiscal system encompasses both the tax and the spending sides of government. What we should care about is whether those two functions, taken as a whole, enhance the lives of average citizens. To that end, the right focus is not how progressively we finance government spending (i.e., tax ourselves), but rather the net effect of both sides of the equation — government taxing and government spending. Does the combination of the two advance or retard Americans’ prospects for a decent standard of living and equality of opportunity?

It turns out that progressive fiscal outcomes do not require particularly progressive tax systems — just big ones, to support substantial government investment and insurance programs. That’s because government spending invariably is very progressive: Lower-income Americans get disproportionately more value from government spending, relative to their incomes, than do the affluent, because they rely much more on public schools, social services and health care. ...

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October 10, 2014 in Tax | Permalink | Comments (1)

Boston College and Tax Analysts Host Conference Today on Reforming Entity Taxation

BCTABoston College and Tax Analysts host a conference today on Reforming Entity Taxation at Boston College:

Keynote Speaker:  Lee Sheppard (Tax Analysts)

Panel #1: Reforming Entity Taxation: Corporations

  • Papers: Mirit Eyal-Cohen (Alabama), Deborah Schenk (NYU), Dan Shaviro (NYU)
  • Moderator:  Jeremy Scott (Tax Analysts)
  • Commentator:  Brian Galle (Boston College)

Panel #2:  Reforming Entity Taxation: Partnerships

  • Papers:  Karen Burke (Florida), Andrea Monroe (Temple), Gregg Polsky (UNC)
  • Moderator:  Amy Elliot (Tax Analysts)
  • Commentator:  James Repetti (Boston College)

Panel #3: Reforming Entity Taxation: International

  • Papers:  Allison Christians (McGill), Robert Peroni (Texas), Martin Sullivan (Tax Analysts)
  • Moderator:  Sam Young (Tax Analysts)
  • Commentator:  Diane Ring (Boston College)

October 10, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 519

IRS Logo 2New York Sun:  Department of Injustice, by Conrad Black:

This brings us to the excruciating and horrifying saga of the Internal Revenue Service. It is clear, despite an administration effort to muddy the waters and strangle the congressional investigation, that the president and his party’s leaders in Congress launched a Herculean effort to bully the IRS to silence conservative organizations critical of the administration, and that the IRS, led by the head of the tax-exempt-organizations section, Lois Lerner, did its best to comply with this request. The extent of the collusion has been made difficult to fix with precision because Ms. Lerner’s hard drive disappeared and she has declined to answer congressional questions, exercising her right to avoid self-incrimination.

No one believes that her e-mails vanished accidentally, but let us note the contrast between the complacency with which the Democratic national media have assimilated this news with the hysteria that followed the revelation that Rose Mary Woods, Richard Nixon’s assistant, had lost only 18 minutes of a Watergate tape. Because of synchronized IRS non-cooperation and the likely destruction of evidence, it is hard to be sure of the extent of the contact between Democratic eminences and the national tax collector, but the existence of many meetings and e-mail exchanges has been established. (Senator Schumer had publicly urged the IRS to crack down on the “extraordinary influence” of the Tea Party and other Republican groups.) Ms. Lerner eventually took leave from her position and was accused of contempt of Congress. It is hard not to be contemptuous of the Congress, but that does not excuse refusal to answer amid the heavy suspicion of destruction of evidence.

President Obama installed John Koskinen, a “turn-around” expert from Fannie Mae, to clean up the IRS. But he has construed his role to be the obstruction of the congressional investigation, in appearances that were sanctimonious filibusters to explain the IRS’s conduct by standing on what he fancies to be his dignity and fuming with righteousness when the committee members suggested that he is not cooperating (which, of course, he isn’t). The administration’s own investigation has been a slapstick farce, largely led by Ms. Lerner’s chief associate in persecuting Republican political organizations, Jack Smith, now head of the public-integrity unit of the Justice Department. The administration is determined to kill the whole investigation, and there is little doubt that a thorough airing of the matter would show the conduct of much of the senior levels of the administration to be, to say the least, discreditable.

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

Thursday, October 9, 2014

Call for Tax Papers: Michigan Young Scholars’ Conference

The organizers of the 2015 Michigan Law School Young Scholars' Conference are seeking submissions for a tax panel:

MichiganThe University of Michigan Law School is pleased to invite submissions for its 2015 Young Scholars’ Conference to be held on March 27-28, 2015, at the University of Michigan Law School.

The conference is designated to provide aspiring doctoral students and recent graduates with a forum to present and discuss their work among academic peers from different nationalities and legal disciplines. The conference aims to promote fruitful research collaboration between its participants, and to encourage their integration in a community of legal scholars. ...

We welcome applications from current doctoral students, both in law and law-related disciplines, and from recent graduates of doctoral programs. The deadline for abstract submissions is December 2, 2014.

October 9, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

The Notorious R.B.G., Exercise, and Tax

The New Republic, Ruth Bader Ginsburg Is an American Hero, by Jeffrey Rosen:

RBGJeffrey Rosen: You are famously a huge opera fan. But recently you’ve become an Internet sensation because of another kind of music. There are all these T-shirts going around the Internet saying, “NOTORIOUS R.B.G.” So my first question is: Do you even know who the Notorious B.I.G. is?

Ruth Bader Ginsburg: My law clerks told me. ... 

JR: Your health is good?

RBG: Yes, and I’m still working out twice a week with my trainer, the same trainer I now share with Justice [Elena] Kagan. I have done that since 1999.

JR: Do you work out together?

RBG: No, she’s a lot younger than I am, younger than my daughter. She does boxing, a great way to take out your frustrations.

JR: And what do you do?

RBG: I do a variety of weight-lifting, elliptical glider, stretching exercises, push-ups. And I do the Canadian Air Force exercises almost every day.

JR: What are the Canadian Air Force exercises?

RBG: They were published in a paperback book put out by the Canadian Air Force.  When I was twenty-nine, that exercise guide was very popular. I was with Marty [Fn 3:  Justice Ginsburg’s husband, the tax law expert Martin D. Ginsburg, who died in 2010] at a tax conference in Syracuse. We stopped to pick up a lawyer to attend the morning program with us. He said, “Just a moment, I have to finish my exercises.” I asked him what those exercises were. He replied they were the Canadian Air Force exercises and said he wouldn’t let a day go by without doing them.

The lawyer who told me about the Canadian Air Force exercises stopped doing them years ago. I still do the warm-up and stretching regime almost every day. ...

JR: You were an admirer of Chief Justice Rehnquist. How have the workings of the Court changed under Chief Justice Roberts?

RBG: I was very fond of the old chief. I am also an admirer of the current chief, who had extraordinary skills as an advocate. He was a repeat player at oral argument, always super prepared, engaging in his presentation, and nimble in responding to the Court’s questions. As to the change, I regard the Roberts / Rehnquist change as a “like / kind exchange,” an expression tax lawyers use. ...

 (Hat Tip: Erik Jensen.)

October 9, 2014 in Tax | Permalink | Comments (1)

Kirk Stark Named Barrall Family Professor of Tax Law and Policy at UCLA

Kirk J. Stark (UCLA) has been named Barrall Family Professor of Tax Law and Policy at UCLA:

Stark (2014)James D. C. Barrall ’75 and Carole Barrall (UCLA ’75) established the UCLA School of Law Barrall Family Endowed Chair in Tax Law and Policy in honor of Jim's parents, Raymond C. and Shirley C. Barrall. James Barrall is a partner in the Los Angeles office of the international law firm Latham & Watkins and serves as the global co-chair of the firm's Benefits and Compensation Practice. The chair recognizes the achievements of a distinguished faculty member whose scholarship and teaching contribute to excellence in the field of tax law and and policy at UCLA School of Law. Professor Kirk J. Stark, whose research focuses on taxation and public finance, with a particular emphasis on state and local tax policy and U.S. fiscal federalism, is the first Barrall Family Endowed Chair in Tax Law and Policy.

 

October 9, 2014 in Legal Education, Tax | Permalink | Comments (0)

Abreu & Greenstein: The Rule of Law as a Law of Standards -- Interpreting the Internal Revenue Code

Alice Abreu (Temple) & Richard K. Greenstein (Temple), The Rule of Law as a Law of Standards: Interpreting the Internal Revenue Code, 63 Duke L.J. Online ___ (2014):

Although fields of law ordinarily comprise both rules and standards, and foundational tax scholars such as Professors Surrey, Warren, and Bittker understood the importance of standards in tax law, many tax scholars and professionals have come to regard federal tax law as “the paradigmatic system of rules.” The vision of tax-as-rules is particularly alluring because rules have been associated with rule-of-law values, and it seems that the rule of law might be especially important in the field of taxation. The rule of law constrains the coercive power of government, and perhaps few powers are viewed with as much suspicion as the taxing power. Our claim that the existence of many rules in the tax law does not dictate the interpretation of all tax formulations as rules seems to threaten critical rule-of-law values. Nevertheless, we believe with Surrey and Warren that tax, like other areas of law, can flourish only if the IRS and the courts are able to respond to “unforeseen cases as they arise” and that this flexibility demands that many Code provisions be interpreted as standards. We also believe that this use of standards does not threaten rule-of-law values. In this essay we defend both propositions.

To do so we engage pointedly with Professor Larry Zelenak’s critique of the position we took in our earlier article, Defining Income [11 Fla Tax Rev. 295 (2011)], where we claimed that the category of “gross income” in the Internal Revenue Code is best understood as a standard, not a rule. In Custom and the Rule of Law in the Administration of the Income Tax, Professor Zelenak worried that our position threatened the rule of law by “stretch[ing] beyond the breaking point” the concept of interpretation [Custom and the Rule of Law in the Administration of the Income Tax, 62 Duke L.J. 855 (2012)].

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October 9, 2014 in Scholarship, Tax | Permalink | Comments (1)

Washburn Seeks to Hire a TaxProf

Washburn LogoWashburn University School of Law invites applications for tenure-track faculty positions in taxation and decedent estates and trusts. For more information or to apply, contact Nancy G. Maxwell, Chair, Faculty Recruitment Committee.

October 9, 2014 in Tax, Tax Prof Jobs | Permalink | Comments (0)

WSJ: France Challenges Google's Tax Structure

Wall Street Journal, Google’s Tax Setup Faces French Challenge; Arrangement Channels European Revenue to Country With Favorable Tax Laws:

GoogleGoogle Chief Executive Larry Page met with France’s premier late last month and quietly pressed home a message: Google has invested heavily in France and is willing to do more. ...

Barely mentioned, according to one of the people, was an elephant in the room: Google is in the midst of a battle with France over a March tax assessment of possibly over a billion euros. More than just a wrangle over a bill, the fight calls into question an arrangement Google and many other companies use that shields revenue originating in European countries from those countries’ tax authorities.

“France is not anti-Google. But when you look at the profit that they make in France, and the number of customers they have, and the tax they pay, it’s outrageous,” says French Deputy Minister for Digital Affairs Axelle Lemaire.

Google’s prickly relationship with France reflects an era of conflict between Europe and technology’s superpowers. National governments and regulators are pursuing American tech firms over issues ranging from their handling of personal data to their marketplace power. The European Union on Tuesday said it will probe Amazon’s tax arrangements with Luxembourg, just a week after the EU attacked tax deals granted by Ireland to Apple as illegal state aid. ... 

The French tax dispute is one of the more fundamental conflicts because it takes aim at a structure in such widespread use. The structure channels most revenue from various European countries to a single corporate unit in a country that has favorable tax laws. [See How Google's French Tax Structure Works.]

This is a crucial first step in a process that some companies take further by ultimately routing much of the income to where it faces no tax at all. For Google to lose could have ripple effects for multinationals across Europe, potentially leading to other investigations and pressures to change structures.

“This could open the floodgates,” says Edward Kleinbard, a law professor at the University of Southern California and former chief of staff for Congress’s Joint Committee on Taxation. “If France falls, so do Germany and the rest.”

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October 9, 2014 in Tax | Permalink | Comments (0)

The IRS Scandal, Day 518

IRS Logo 2Bloomberg BNA, U.S. Sidesteps NetJets' Accusations It Destroyed E-Mail Evidence in $643 Million Tax Case, by Marc Heller:

The Justice Department avoided addressing accusations from fractional aircraft ownership company NetJets that the IRS destroyed e-mail evidence sought as part of a fight over $643 million in taxes in an Oct. 6 reply brief.

NetJets had argued in a Sept. 29 motion before the U.S. District Court for the Southern District of Ohio that the Internal Revenue Service was “reckless” in its destruction of hard drives that contained information being sought by the company and in violation of an order from a magistrate judge. NetJets said the proper sanctions against the government would be to deny DOJ's motion for summary judgment.

DOJ, however, dodged the issue of evidence and argued in its reply brief that changing Federal Aviation Administration regulations can't give NetJets a pass on paying federal transportation taxes on its fractional aircraft program.

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October 9, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Wednesday, October 8, 2014

The Tax Lawyer Publishes New Issue

The Tax Lawyer (2013)The Tax Lawyer has published Vol. 67, No. 4 (Summer 2014):

October 8, 2014 in ABA Tax Section, Scholarship, Tax | Permalink | Comments (0)

Smith: Changes in Agencies’ Interpretations of Their Own Regulations and Auer Deference

Patrick J. Smith (Ivins, Phillips & Barker, Washington, D.C.), Changes in Agencies’ Interpretations of Their Own Regulations and Auer Deference:

Perez v. Mortgage Bankers Association, a case that is currently pending before the Supreme Court, involves the validity of a D.C. Circuit rule relating to the Administrative Procedure Act notice-and-comment requirements for rulemaking. Under the APA, substantive rules are subject to the notice and comment requirements but interpretative rules are not. Under this D.C. Circuit rule, if an agency has adopted an interpretation of one of its own substantive regulations in a guidance document that would not itself otherwise be a substantive rule, the agency must nevertheless use notice-and-comment procedures to change the interpretation. Although the D.C. Circuit has not done so, this rule can be justified based on the Auer deference principle under which agency interpretations of their own regulations are given deference similar to the deference that is given under Chevron to agency statutory interpretations. Under Auer, an agency interpretation of its own regulation can be viewed as having the force of law, and as a result should be viewed as itself a substantive rule, since a substantive rule is a rule with the force of law. As a substantive rule, notice-and-comment procedures are required.

October 8, 2014 in Scholarship, Tax | Permalink | Comments (0)

Schizer: The Influence of Tax on Managerial Agency Costs

David Schizer (Columbia), Tax and Corporate Governance: The Influence of Tax on Managerial Agency Costs:

OxfordThis chapter of the Oxford Handbook on Corporate Law and Governance canvasses a broad range of ways that tax influences managerial agency costs, focusing especially on the United States. In doing so, this chapter has two goals. The first is to help corporate law experts target managerial agency costs more effectively. The analysis here flags when tax is likely to exacerbate agency costs, and when it is likely to mitigate them. Armed with this information, corporate law experts have a better sense of how vigorous a contractual or corporate law response they need. In some cases, a change in the tax law may also be justified. This chapter’s second goal, then, is to enhance our understanding of tax rules, shedding light on a set of welfare effects that are important but understudied. After all, tax policy is more likely to enhance welfare if policymakers weigh all possible welfare effects, including managerial agency costs.

Overall, the U.S. tax system’s record in influencing agency costs is not encouraging. After all, a tax system’s priority is not to reduce agency costs, but to raise revenue efficiently and fairly. Government tax experts do not usually have the expertise or motivation to tackle corporate governance problems. Tax also is a poor fit because it typically applies mandatorily and uniformly, while responses to agency cost should be molded to the context. For example, promoting stock options or leverage will be valuable in some settings, but disastrous in others. There also are political hurdles to be overcome. Accordingly, when tax rules target agency costs, the results often are poorly tailored or even counterproductive.

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October 8, 2014 in Scholarship, Tax | Permalink | Comments (0)

NYU Seeks to Hire Acting Assistant Professor of Tax Law

NYU Tax LogoThe NYU School of Law Graduate Tax Program is seeking applicants for its Acting Assistant Professor of Tax Law Program for the 2015-16 academic year, commencing August 1, 2015.

For over fifty years, the NYU Acting Assistant Professor of Tax Law (“Tax AAP”) program has launched the careers of dozens of tax academics.  Tax AAPs show promise as legal scholars and have a strong interest in teaching. They serve on a full-time, non-tenure track basis at the Law School for two academic years. At the start of their second year, Tax AAPs are expected to seek a tenure-track position on the law school academic job market.

While in residence at the Law School, Tax AAPs devote a substantial amount of time to their scholarship and begin to develop their research agendas. Tax AAPs teach one or two courses in the Graduate Tax Program each semester. Each Tax AAP also either serves an Assistant Editor of the Tax Law Review, the nation’s top tax policy journal, or works with the International Tax Program, the leading graduate tax program for non-U.S. lawyers.

How to Apply

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October 8, 2014 in Tax, Tax Prof Moves | Permalink | Comments (0)

ATPI Hosts Conference on Taxation and Migration

ATPI Logo (2015)The American Tax Policy Institute hosts a conference on Taxation and Migration organized by Reuven Avi-Yonah (Michigan) and Joel Slemrod (Michigan) in Washington, D.C. (Skadden, Arps, Slate, Meagher & Flom, 1441 New York Avenue, N.W.) on October 17 (free registration here):

The conference assesses the effects of taxation on the migration across national and state boundaries of individuals at various stages of their lives. It will also evaluate whether corporate migrations (such as "inversions") involve migration of individuals, and what are the tax policy implications for the US and other jurisdictions. 

October 8, 2014 in Conferences, Scholarship, Tax | Permalink | Comments (0)

Afield: Harnessing Taxpayer Choices to Improve Educational Quality

W. Edward Afield III (Ave Maria), Winning the Crowd: Harnessing Taxpayer Choices to Improve Educational Quality, 63 Cath. U. L. Rev. 297 (2014):

This article presents a novel approach to the debate over the best way to improve educational policy. Building off of research showing that decisions made by groups can be superior to those made by even the smartest members of those groups, this piece shows how this concept of a "wise crowd" can be applied to improve outcomes even in a complex policy debate like educational policy. Educational policy currently exhibits a host of competing ideas for the best mechanism to improve student outcomes. These competing ideas can be seen in the wide variety of schools that exist and that compete for resources to implement their approaches. Public schools, charter schools, magnet schools, International Baccalaureate programs, secular private schools, religious private schools, home schooling — all of these and more offer unique approaches to education. Even within these types of schools, different educational teaching philosophies abound. Although some schools unquestionably have better outcomes for students than others, there is not universal agreement about how to measure the quality of any particular school because of the host of factors involved in educating a student. In other words, some schools are likely better than others, but separating good schools from weak ones is difficult.

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October 8, 2014 in Scholarship, Tax | Permalink | Comments (0)

Winchester: Obama's Gift to the Rich: A Permanent Payroll Tax Holiday

Richard Winchester (Thomas Jefferson),  Obama's Gift to the Rich: A Permanent Payroll Tax Holiday, 48 Val. U. L. Rev. 83 (2013):

President Obama made a concerted effort to enact tax legislation that benefited middle and lower income individuals over the rich. The temporary payroll tax cut in effect during 2011 and 2012 is a case in point. However, many high-income individuals enjoyed an even greater measure of payroll tax relief as a result of legislation that he signed. But instead of being granted directly under the terms of a bill, this relief was made possible because the tax legislation that he signed perpetuated what had been only a temporary incentive for individuals to avoid the payroll tax entirely when they work for a corporation that they also own or otherwise control. Simply put, these individuals can take a payroll tax holiday by substituting a dividend for any wages they could otherwise receive. What’s more, this tax dodge operates in a way that favors the rich far more than anyone else. This tax dodge would have died after Mr. Obama’s second year in office. However, the legislation he signed gave it perpetual life, reinforcing the need to address the multiple defects in the nation’s employment tax system.

October 8, 2014 in Scholarship, Tax | Permalink | Comments (1)

The IRS Scandal, Day 517

IRS Logo 2Washington Post (The Volokh Conspiracy):  Lawsuit Based on Alleged Government Targeting of Tea Party Group Organizer Can Go Forward, by Eugene Volokh (UCLA):

From Zherka v. Ryan, 2014 WL 4928956 (S.D.N.Y. Sept. 30, 2014):

Plaintiff Selim Zherka filed this … action claiming that employees of the Internal Revenue Service hindered his application for tax exempt status and initiated an investigation against him as part of a broader effort to penalize members of the Tea Party for their political activities….

Beginning in 2009, plaintiff published newspaper articles and held rallies criticizing government officials for political corruption and “confiscatory tax policies.” Plaintiff organized and supported the creation of the Tea Party, a political party that received extensive publicity in the news media. At some point, plaintiff sought tax-exempt status for an organization he and others used primarily for educational purposes. However, plaintiff claims that defendant Lois Lerner …, an IRS employee, subjected his application to an inordinately high level of scrutiny, forcing him to abandon his efforts to obtain tax-exempt status. [The case against Lois Lerner was dismissed because “Plaintiff has not satisfied its burden of showing that [he] served defendant Lerner with a copy of the summons and complaint.” — EV]

Plaintiff alleges that in 2011, agent Ryan of the Federal Bureau of Investigation … and agent Ashcroft … of the IRS began an investigation into his commercial real estate dealings. Plaintiff claims these defendants issued over 75 subpoenas to his business associates, threatening them with criminal prosecution should they withhold information incriminating plaintiff. Plaintiff alleges that as a result, many of these business associates terminated their relationship with him out of a fear of “running asunder of federal agencies.” He asserts that defendants’ conduct was part of a broader government strategy to penalize Tea Party members for their political speech.

Plaintiff claims to have lost business as a result of the ongoing investigation. Moreover, he claims that defendants’ actions have chilled his political activities, damaged his reputation, and caused emotional injuries….

Plaintiff alleges First Amendment retaliation …. To state a claim for First Amendment retaliation, a plaintiff must show: (1) that the speech or conduct at issue was protected, (2) that the defendant took adverse action against the plaintiff, and (3) that there was a causal connection between the protected speech and the adverse action.” …

[P]laintiff alleges that defendants intentionally targeted him for investigation because of his active membership in a new political party. The First Amended Complaint indicates that defendants initiated their broad investigation solely against plaintiff because of his political efforts, and did not pursue similar investigations against apolitical businesses and taxpayers. Plaintiff’s activities centered on advocating for a reduction in local, state, and federal tax levies. Plaintiff claims that as a result of his political activities, defendants issued over 75 subpoenas to his business associates, and contacted dozens of them individually in a search for incriminating information. Defendants’ alleged conduct appears to have significantly damaged plaintiff’s business prospects and “curtailed his public advocacy.”

Plaintiff has made a plausible showing on his First Amendment and equal protection claims. His speech, which is directed at reforming government spending, is clearly protected. He has alleged facts showing that defendants targeted him for a wide-ranging investigation because of this speech, and that he was treated differently than other taxpayers and businessmen who did not espouse anti-taxation beliefs. Thus, plaintiff has pleaded sufficient facts to state a plausible claim for relief on his First Amendment [claim] ….

Plaintiff [also] alleges that defendants’ conduct is so shocking as to amount to a violation of his substantive due process rights…. Only “the most egregious official conduct” meets this threshold.

The question of whether conduct is shocking in a constitutional sense is highly context specific. ...

Here, plaintiff alleges that he has been subjected to more than two years of investigation by defendants. He claims that defendants have threatened his business associates with criminal prosecution in order to secure their cooperation in the investigation. Moreover, he claims that defendants have inquired into his political activities and political affiliations, demonstrating a motivation to retaliate against him for his political speech. Plaintiff claims that defendants’ conduct has severely damaged his reputation and harmed his business relationships.

These allegations are disturbing and sufficiently shocking to allow plaintiff’s claim to go forward. While defendants did not subject plaintiff to forced-stomach pumping or other physical deprivations, they have allegedly investigated him for nearly two years based solely on his political message. Defendants’ alleged conduct appears to have jeopardized many if not most of plaintiff’s business relationships, causing him dramatic and permanent harm. Given plaintiff’s low burden at this stage in the litigation, he has alleged facts egregious enough to shock the conscience in a constitutional sense….

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October 8, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, October 7, 2014

Shackelford Presents The Taxation of Foreign Investors in U.S. REITs Today at Columbia

ShackelfordDouglas Schackelford (North Carolina) presents Taxes, Investors, and Managers: Exploring the Taxation of Foreign Investors in U.S. REITs (with Margot Howard (North Carolina) & Katherine Pancak (Connecticut)) at Columbia today as part of its Tax Policy Colloquium Series hosted by Alex RaskolnikovDavid Schizer, and Wojciech Kopczuk:

Exploiting a 2004 reduction in a unique capital gains withholding tax for foreign investors in U.S. REITs, this paper explores both the sensitivity of real estate investors to changes in their own taxes and the reaction of real estate managers to changes in their investors’ taxes. We find that both foreign investors and REIT managers responded to the tax change. This is consistent with taxes both restricting the flow of foreign capital into U.S. REITs and affecting the management of their real estate properties. To our knowledge, this is the first paper documenting that U.S. managers change their U.S. operations in response to the tax positions of foreign investors. This work should spur further study of the interplay between real estate and income taxes, the role of taxes on foreign portfolio investment, and the role of taxes on real managerial decisions. It also should aid policymakers who are considering further relaxing the discriminatory tax treatment for foreign investors in U.S. real estate.

October 7, 2014 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

IRS Allows Bigger Tax Break for Donations to Needy College Students Than for Donations to Colleges

San Francisco Chronicle, Huge Tax Break for Donating to California College Students:

CalCalifornia has come up with a way to let the federal government help fund an increase the state’s Cal Grant B program, which provides money for books and living expenses to low-income college students. The program could expand the annual grant from $1,648 per student this year to as much as $3,000 to $5,000 over the next three years. ...

Money will come from a new College Access Tax Credit Fund. Individuals or companies that contribute to the fund will get a generous state tax credit equal to 60 percent of their donation this year, 55 percent next year and 50 percent in 2016. A credit is a dollar-for-dollar reduction in one’s tax bill, so a $10,000 donation to the fund in 2014 would reduce state taxes by $6,000.

Taxpayers can also deduct the donation as a charitable contribution on their federal, but not state, income taxes. ... Unlike a credit, a deduction reduces income before taxes are calculated, so the value of the federal deduction depends on the donor’s tax rate. ...

The tax deduction will benefit people who are subject to the alternative minimum tax more than people who don’t pay AMT. That’s because charitable contributions are deductible under the AMT, but state income taxes are not. People who are not subject to AMT can deduct both. ...

This outcome “may sound too good to be true,” UCLA law Professor Kirk Stark wrote in an April 2013 article in Tax Notes [Capturing Federal Dollars With State Charitable Tax Credits, 139 Tax Notes 53 (Apr. 1, 2013)]. However, “recent legal guidance from the IRS Office of Chief Counsel [ILM 201105010 (Oct. 27, 2010)] appears to support that strategy. Asked to opine on the effects of a state income tax credit for charitable donations, the chief counsel in 2010 concluded that the taxpayer was allowed to deduct the full amount of her charitable contribution to a state agency even though she received a state income tax credit for some (unspecified) percentage of that amount.”

The state is relying on that chief counsel memorandum to support the federal tax deduction for the contribution to the college access fund.

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

Gamage: On Double-Distortion Arguments, Distribution Policy, and the Optimal Choice of Tax Instruments

David Gamage (UC-Berkeley), On Double-Distortion Arguments, Distribution Policy, and the Optimal Choice of Tax Instruments:

There are both administrative and political constraints on the extent to which real-world tax systems might plausibly be reformed. No one seriously suggests that tax avoidance and evasion could be completely eliminated in real-world contexts. To better cope with tax avoidance and evasion, and to complement attempts to reform existing tax systems, this research project argues that governments should also raise revenues and promote distribution through a number of supplementary policy instruments. Among other applications, this research project argues that governments should probably: (a) levy both personal labor-income taxes and value-added consumption taxes, (b) tax both capital income and wealth, and (c) make use of a number of other tax and non-tax legal rules for distributive purposes.

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October 7, 2014 in Scholarship, Tax | Permalink | Comments (0)

Yin: Reforming (and Saving) the IRS by Respecting the Public’s Right to Know

TaxSymposiumHeaderGeorge K. Yin (Virginia), Reforming (and Saving) the IRS by Respecting the Public’s Right to Know, 100 Va. L. Rev. 1115 (2014):

The current controversy involving possible political targeting by the IRS in administering the exempt organization (“EO”) tax laws is simply the latest in a long succession of similar allegations spanning at least five decades. This Article proposes to address the problem through increased transparency of the IRS’s administrative actions involving EOs. Greater transparency responds directly to the public’s frustration in not being able to monitor the agency and gain confidence that the laws are being applied in an even-handed manner.

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October 7, 2014 in Scholarship, Tax | Permalink | Comments (1)

Adam Chodorow: Teaching Tax Policy with Senator Kyl

TaxProf Blog op-ed:  Teaching Tax Policy with Senator Kyl, by Adam Chodorow (Arizona State):

Chodorow KylePerhaps I’m a little biased, but after Basic Income Tax, I think Tax Policy is the best course in the law school curriculum. The course can be taught in a variety of ways, ranging from a traditional seminar, where students read and discuss academic articles and write a seminar paper or a series of reaction papers, or as a colloquium, where tax scholars present their works in progress to students, who are asked to engage with the works and provide feedback to the presenters. For the past two years, I have had the opportunity to teach tax policy with Senator Jon Kyl, who served on the Finance Committee for many years before he retired in 2012. Given his experience and interests, we decided to structure the class around current reform proposals and to combine the discussion of tax policy with some practical skills training. While I’m sure we’re not the first to hit upon this format, I offer up our experiences as food for thought for those looking to create or modify a tax policy course.

The basic idea is to alternate weeks between teaching and lobbying. In the first week, I assign readings on and teach the basic issues surrounding a particular reform under discussion, such as changes to the charitable deduction or switching from a global to territorial international tax regime. At the end of that class, I assign each student to an interest group and have them prepare a 3 page position paper. In week 2, Senator Kyl attends, pretending to be a senator on the finance committee (a real stretch on his part). We start each class with a discussion of the politics surrounding the proposals under discussion or some other aspect of the tax writing process, such as the scoring rules, after which the students lobby the senator. The class finishes with a broad discussion about the policy under consideration. At the end of the semester, the students must write a 5 page reflection piece on how their thoughts on tax policy had changed, or not, as a result of the semester’s journey.

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October 7, 2014 in Legal Education, Tax, Teaching | Permalink | Comments (1)

Madoff: A Better Way to Encourage Charity: Incentivize Private Foundations to Give More

New York Times op-ed:  A Better Way to Encourage Charity, by Ray D. Madoff (Boston College):

How can we increase the flow of money to charitable organizations? With the anemic economic recovery and cuts in government funding, the need for donations is greater than ever, yet funding for charities has remained largely stagnant.

One important source of funds for charitable organizations is private foundations, large ones like the Bill and Melinda Gates Foundation or small family foundations with assets of $1 million or less. These organizations do not usually engage in charitable work themselves, but rather provide funding to organizations that do — think of the Red Cross, food banks, museums, etc.

There is over $600 billion sitting in private foundations awaiting distribution. However, private foundations have typically limited their annual giving to the minimum amount required by law: 5 percent of their assets. Moreover, since the payment of salaries and other administrative expenses can also count toward the 5 percent requirement, charities often receive far less than the minimum distribution rule would suggest.

Charities have begged and pleaded for increased distributions from these warehouses of wealth, to no avail.

What is to be done? A bill currently making its way through Congress, called the America Gives More Act, purports to provide the answer. While much of the bill is benign, included among its provisions is one that lobbyists for private foundations have been seeking for years: a reduction in the excise tax on private foundations to 1 percent. ...

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October 7, 2014 in Tax | Permalink | Comments (1)

The IRS Scandal, Day 516

IRS Logo 2Power Line:  Is Another Obama Administration Scandal About to Explode:

While strong cases can be made for both Benghazi and Fast and Furious, most voters consider Barack Obama’s misuse of the IRS to be his administration’s worst scandal so far. But, as we wrote last year, targeting of conservative non-profits for harassment is not the only dimension of the IRS scandal. In addition, there is strong reason to believe that one or more White House political appointees have illegally accessed private taxpayer information and used it for political gain. 

Austan Goolsbee directed Obama’s Economic Recovery Advisory Board and later chaired his Council of Economic Advisers. In August 2010, Goolsbee conducted a telephone press briefing in which, according to the Washington Post, he purported to reveal confidential taxpayer information:

So in this country we have partnerships, we have S corps, we have LLCs, we have a series of entities that do not pay corporate income tax. Some of which are really giant firms, you know Koch Industries is a multibillion dollar businesses. So that creates a narrower base because we’ve literally got something like 50 percent of the business income in the U.S. is going to businesses that don’t pay any corporate income tax.

There are three possibilities here: either Goolsbee just made up the claim that Koch Industries doesn’t pay corporate income taxes; or he learned Koch’s tax status from some proper, legal source; or else he illegally accessed Koch’s tax returns and used the information he learned for political purposes in a call with reporters. ...

The wheels of justice, as they say, grind slowly. As with other Obama administration scandals, Barack’s effort is to run out the clock. It may be that by the time we learn the full extent of the Obama administration’s lawlessness, the administration will be over. But the remaining options are not good: either Austan Goolsbee, a senior adviser to Obama, made up a smear of Koch Industries out of whole cloth, or else Obama’s IRS allowed the White House illegal access to confidential taxpayer data for political purposes. That’s a crime for which at least two people should go to jail.

[I]t is likely that members of the Obama administration committed federal crimes by illegally sharing confidential taxpayer information with the White House for political purposes. With luck, we will find out for sure before our next president is inaugurated. The alternative is that a high-ranking White House official fabricated a baseless smear against the administration’s political opponents and passed it on to reporters to further the administration’s political agenda. Any way you look at it, this is a shameful episode in the already bleak history of the Obama administration.

Forbes, TIGTA Must Disclose More About Investigation Of Possible IRS Release Of Koch Industries Return Information, by Peter J. Reilly:

TIGTA has publicly acknowledged that it investigated whether Mr. Goosbee’s statement was based on improper disclosure by the IRS. There seems to be a good chance that it was a pretty easy investigation seeing as how it is extremely likely that Goosbee was flat out wrong in his speculation that KI was an S corporation. Taking that as the scenario, how can TIGTA then explain the results of the investigation without disclosing the very thing that was not supposed to be disclosed? Koch Industries’s status as either a C or an S Corporation.

Cause of Action still argued that TIGTA needed to be more forthcoming not only about its investigation of the Goosbee matter but also whether any of its other investigations of improper disclosure involve the White House. Mr. Epstein indicated that you might be able to connect the dots to the Tea Party scandal, if you could find out whether TIGTA is investigating breaches of taxpayer confidentiality involving the White House and applications for not for profit status. Using the very statute that is meant to protect taxpayers against breaches of confidentiality to protect the breachers does appeal to my inner villain as a masterful stroke, so I think Cause of Action has a point.

More important than my opinion is that of Judge Amy Berman Jackson, who was nominated by President Obama to serve on United States District Court for the District of Columbia, shortly before Mr. Goosbee’s unfortunate remark. Judge Jackson ruled that TIGTA should disclose more:

The Court finds that the fact of the existence of any records within the category of records that plaintiff seeks is not confidential “return information” under section 6103 of the Internal Revenue Code, and so defendant’s Glomar response is not supported by FOIA Exemption 3. Furthermore, although the existence of some records might be a fact protected by FOIA Exemption 7(C), the Court finds that defendant has waived reliance on both Exemption 7(C) and Exemption 6 by officially acknowledging its investigation into questions raised by the public statements of a particular administration official, and by failing to offer any other basis that would support a Glomar response on those grounds. Therefore, defendant’s motion for summary judgment will be denied, and plaintiff’s cross-motion for summary judgment will be granted. The Court will remand the case to the agency for further action consistent with this opinion. A separate order will issue.

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October 7, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Monday, October 6, 2014

Norman Presents Corporate Tax and Beyond: Compliance Norms Today at McGill

Norman 2Wayne Norman (Duke University, Department of Philosophy) presents Corporate Tax and Beyond: Compliance Norms at McGill today as part of its Spiegel Sohmer Tax Policy Colloquium hosted by Allison Christians and Daniel Weinstock:

Using the media's recent coverage of Apple's tax avoidance strategies as a case study, Professor Norman will discuss how we ought to understand and rationalize corporate social responsibility and self-regulation norms emerging around the taxation of multinationals, and whether these rationalizations are, or should be, different than the rationalization of corporate tax regulation.

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

Galle Presents The Price of Knowledge: Regulatory Design in an Uncertain World Today at Florida

GalleBrian Galle (Boston College) presents The Price of Knowledge: Regulatory Design in an Uncertain World at Florida today as part of its Graduate Tax Program Colloquium Series:

I examine a regulator’s choice of how and when to regulate when marginal costs and marginal social benefits of compliance vary across regulated parties and are costly to observe. Recent commentary suggests that heterogeneity of marginal cost favors “carrots” over “sticks.” Other commentary argues that heterogeneity of marginal social benefit may favor ex post over ex ante regulation, or may weigh in favor of “command and control” regulation rather than either sticks or carrots. While these recent papers add important nuance to the regulatory design literature, I argue here that their analysis overlooks several other critical factors that may alter their final policy recommendations. For example, I show that when marginal cost varies and moral hazard is possible, optimal government policy is a mix of stick and carrot, much as the optimal insurance contract provides for some co-payment by the insured. Ex post regulation does provide useful additional information when regulated parties are heterogeneous, but also carries significant and sometimes prohibitive social cost, especially when externalities are produced by limited-liability firms. Further, drawing on results from mathematical simulations, I show that the costs of heterogeneity can be sharply reduced even with a small degree of government flexibility. I apply these insights to a series of examples, including the pending U.S. cap-and-trade regulations, fat taxes, and the regulation of systemic risk in the banking sector.

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

McMahon Presents Reforming Taxation of Privately Held Businesses Today at Loyola-L.A.

McMahon (Marty)Martin J. McMahon Jr. (Florida) presents Reforming Taxation of Privately Held Businesses at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

This article proposes the repeal of current Subchapters K and S, as well as the removal from the ambit of Subchapter C of all privately held corporations and the replacement of the current tax regime for privately held business with a new regime under which all privately held businesses (including wholly owned corporations and limited liability companies, and unorganized sole proprietorships) would be taxed at the entity level under a uniform rate schedule, regardless of the form of organization. (All publicly traded companies, and their controlled corporate subsidiaries, would continue to be governed by all of the structural rules of Subchapter C (and any other relevant Code sections outside of Subchapter C.))

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

Tax Court: Tenured Art Professor Has Separate Trade or Business as Artist

Crile v. Commissioner, T.C. Memo. 2014-202 (Oct. 2, 2014):

CrilePetitioner is an artist and a tenured professor of studio art. ... This opinion addresses the first of respondent’s theories and concludes that petitioner during the years in issue was engaged in a “trade or business” with the objective of making a profit from her activity as an artist. Respondent’s contentions concerning the substantiation of her expenses, the character of those expenses as “ordinary and necessary,” and her liability for penalties and additions to tax will be resolved in due course.

Petitioner has had a long, varied, and distinguished career as an artist. She has worked for more than 40 years in media that include oil, acrylic, charcoal, pastels, printmaking, lithograph, woodcut, and silkscreen. She has exhibited and sold her art through leading galleries; she has received numerous professional accolades, residencies, and fellowships; and she is a full-time tenured professor of studio art at Hunter College in New York City. Respondent agrees that petitioner has been a successful, though rarely a profitable, artist.

During the academic year petitioner devotes roughly 30 hours per week to her art, working mainly at a small studio in her Manhattan apartment. During the summer, she works full time on her art business at a larger studio in upstate New York. The amount of time it takes petitioner to create a finished work of art varies greatly--from one week to two years--depending on its size and complexity. During her career petitioner has created more than 2,000 pieces of art.

Petitioner’s artwork hangs in the permanent collections of at least 25 museums. These include the Metropolitan Museum of Art, the Guggenheim Museum, the Brooklyn Museum of Art, the Phillips Collection, the Hirshhorn Museum, and art museums at eight colleges and universities. Museums have a rigorous vetting process for acquiring art. Museum acquisitions boost an artist’s reputation in the eyes of collectors and may contribute to price increases for the artist’s other works.

Petitioner’s artwork has been acquired by for-profit as well as nonprofit entities. Corporations that have purchased petitioner’s art (several of which have since merged) include AT&T, Exxon, Texaco, Standard Oil of Ohio, Bank of America, Chase Manhattan Bank, Chemical Bank, Charles Schwab, General Mills, Westinghouse, General Telephone & Electronics, Frito-Lay, Cigna, and Prudential. Her works hang in the collections of six major New York law firms. Governmental entities that have acquired her art include the Federal Reserve Board, the Library of Congress, and the State Department (for display in U.S. embassies abroad). Such acquisitions, like museum acquisitions, place a “seal of approval” on an artist’s works and have the potential to make them more attractive to private collectors. ...

Petitioner has generated substantial income from sales of her artwork. Respondent stipulated that the total value of works sold during her career is at least $937,150. Galleries usually took a 50% commission. ...

All in all, the Court finds that petitioner sold, directly or through galleries, a total of 356 works of art during 1971-2013. These sales generated gross proceeds of approximately $1,197,150. After subtracting gallery commissions and other reductions, petitioner earned income of approximately $667,902 from sales of her art during these years. ...

To be promoted and gain tenure, a studio artist must exhibit art; the sale of art is not required. There is an expectation that a professor, once tenured, will continue to make and exhibit art. However, a tenured professor is no longer subject to annual performance evaluations, and the expectation to exhibit art is not rigorously enforced. Petitioner plans to continue her art business following her retirement from Hunter College. ...

Petitioner filed Federal income tax returns for all years in issue. On those returns she reported wage income between $85,999 and $106,058, and she reported other taxable income (interest, dividends, capital gains, pensions, and Social Security payments) between $17,658 and $67,046. On her Schedules C, she reported income and claimed the following expenses as deductions in connection with her activity as an artist during the years at issue:

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Petitioner's theory for claiming deductions seems to have been that most experiences an artist has may contribute to her art and that most people with whom an artist socializes may become customers or otherwise advance her career. The trial established that a significant number of the deductions she claimed were not, within the meaning of section 162(a), "ordinary and necessary expenses" of conducting her art business but were "personal, living, or family expenses" non-deductible under section 262(a). The latter expenses appear to have included telephone and cable television bills, newspaper and magazine subscriptions, gratuities to doormen in her apartment building, taxicabs to the opera, museums, and social events, restaurant meals with friends and acquaintances, and international travel to gain inspiration from paintings in European museums. We have deferred to another day the calibration of petitioner's deductible business expenses. But it was clear to the Court that the economic losses she actually sustained in her art business were substantially smaller than the tax losses reported on her Schedules C, owing to the inclusion of many personal expenses when calculating her business income. ...

For any practitioner who teaches--whether a lawyer, an accountant, an economist, or an artist--there is an obvious intersection between the individual’s profession and his or her teaching. But the two activities have different job requirements and entail different skills.

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October 6, 2014 in Celebrity Tax Lore, New Cases, Tax | Permalink | Comments (5)

Wells: Pass-Through Entity Taxation -- A Tempest in the Tax Reform Teapot

Bret Wells (Houston), Pass-Through Entity Taxation: A Tempest in the Tax Reform Teapot, 14 Hous. Bus. & Tax L.J. 1 (2013):

Pass-through entities represent a major conceptual challenge for policy-makers today. But, pass-through entities did not occupy its dominant position with respect to growth-oriented small businesses prior to 1986, and the exponential growth in the importance of pass-through entity taxation since 1986 creates an impressive backdrop for the current business tax reform discussion. However, if tax reform proceeds along the path where corporate tax rates are significantly lower than individual tax rates, then small business taxpayers will be provided with a compelling economic incentive to exit pass-through entity structures in favor of C corporate entities. Tax reform that creates a monumental paradigm shift in the business planning premises of closely-held businesses will bring about transformative reactive tax planning on the part of the business community. Consequently, before enacting such a significant paradigm shift, Congress should clearly articulate the policy goals of this tax rate paradigm so that taxpayers will know which attempts to utilize C corporation vehicles as a mechanism to avoid the higher individual tax rate are acceptable and which such attempts cross the line. Where to draw the line is the historic challenge of the pre-1980 paradigm, but this reality has been shielded from our view due to the inverted rate structure that has existed since 1986.

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

Blanchard: Notice 2014-52 and the New Anti-Inversion Rules

Tax Analysys Logo (2013) Kimberly S. Blanchard (Weil, Gotshal & Manges, New York), Extensive New Anti-Inversion Rules Issued, 145 Tax Notes 89 (Oct. 6, 2014):

Blanchard summarizes the provisions of anti-inversion guidance Notice 2014-52 and suggests some practical tips for what it might mean in the future.

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

The IRS Scandal, Day 515

IRS Logo 2Red State:  IRS Cover-Up: IG Report Exposes IRS Lying to American Public, by Matthew Clark:

A new Inspector General (IG) report general report exposes yet more abuse and cover-up at the IRS. As the Washington Examiner reports:

A review of the Internal Revenue Service’s compliance with the Freedom of Information Act found the agency intentionally withheld or failed to “adequately search” for requested information in hundreds of cases.

In others, the IRS released more than it was authorized, dispensing “sensitive taxpayer information,” including individuals’ bank records.

Many of the FOIA requests centered around, you guessed it, the IRS targeting scandal.

The cover-up is stunning.  “The IRS concealed information it should have released in response to an estimated 336 requests in 2013, according to the report.”

In response to a report (from the same IG’s office) detailing the IRS targeting scandal, the American public demanded to know the truth.  The American people sent in numerous FOIA requests, and the IRS concealed pertinent information at least 336 times.

If that’s not a cover-up I don’t know what is.

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October 6, 2014 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)