TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, November 8, 2017

Satterthwaite: Can Audits Encourage Tax Evasion?

Florida Tax Review  (2015)Emily Ann Satterthwaite (Toronto), Can Audits Encourage Tax Evasion?: An Experimental Assessment, 20 Fla. Tax Rev. 1 (2016):

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

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November 8, 2017 in Scholarship, Tax | Permalink | Comments (2)

Tuesday, November 7, 2017

Death Of Regis Campfield (SMU)

CampfieldDallas Morning News:

Regis William Campfield, a man of faith and family, was born on January 8, 1942, in Pittsburgh, PA, and died on October 27, 2017, in Dallas, TX.

He is survived by his loving wife of 51 years, Mary Tarpley Campfield, and their two daughters and sons-in-law: Allison and Mike Taten; Claire and John Storino; six adoring and adored grandchildren: Matthew, Laura and Jane Taten; Mary, Anne Elise, and Catherine Storino; brother-in-law Charles Tarpley and his wife, Mary Ellen. Regis was the much beloved only child of Regis P. and Katherine A. Campfield of Rillton, PA.

Of the 93 graduates of his high school class, he was one of three to go to college. He graduated summa cum laude from the University of Notre Dame. His Notre Dame experience was foundational for his life. While at University of Virginia School of Law, he met and in 1966 married the love of his life, Mary Tarpley, a U.Va. Ph.D candidate from Dallas.

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November 7, 2017 in Legal Education, Obituaries, Tax | Permalink | Comments (0)

A 1st Pique At The Tax Bill: Passive Voice On Mortgage Interest

Tax Cuts And Jobs ActThis is the first of what I hope to be a series of small posts about small annoyances in the Tax Cuts and Jobs Act.  Thus the pun.  So if you think these posts resemble an Andy Rooney whine or a Seinfeldian rant please remember that I’m just a simple tax professor from West Texas, and a proceduralist to boot.

My first pique is with the proposed mortgage interest reform.  It completely ignores a great opportunity to fix a problem in the current statute.  The problem is with how the debt limit applies.  Current law uses the passive voice to limit the size of the loans that can generate the mortgage interest deduction.  For example, the $1,000,000 limit for acquisition indebtedness is written like this:  “The aggregate amount treated as acquisition indebtedness for any period shall not exceed $1,000,000 ($500,000 in the case of a married individual filing a separate return)” § 163(h)(3)(B)(ii).  The language limiting home equity indebtedness is similar.    

The problem with the passive voice is that you cannot tell whether the limit applies to each qualified residence or to each taxpayer.  In Voss v. Commissioner, 796 F.3d 1051 (9th Cir. 2015), the 9th Circuit complained that “Discerning an answer ... requires considerable effort on our part because the statute is silent as to how the debt limits should apply in co-owner situations.”  When Andy Rooney says it, it’s a whine, but when the 9th Circuit says it, it’s a problem.

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November 7, 2017 in Bryan Camp, News, Tax | Permalink | Comments (13)

Tax Rates Of S&P 100

WalletHub, Corporate Tax Rate Report:

WalletHub analyzed annual reports for the S&P 100 — the largest and most established companies on the stock market — in order to determine the federal, state and international tax rates they paid in 2016. You can find the results, our detailed methodology and additional expert commentary below.

S&P100

Ask the Experts: Should Corporations Pay Less than Consumers?

For insight into the country’s current corporate tax system as well as its potential fixes, we turned to experts [including Mark Gergen (UC-Berkeley), Jose Gabilondo (Florida International), and Ann Murphy (Gonzaga) in the fields of accounting and tax law for their thoughts on the following key questions:

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November 7, 2017 in Tax | Permalink | Comments (3)

Aprill: The Tax Consequences Of Legal Defense Funds

LDFEllen Aprill (Loyola-L.A.), Tax Consequences of Legal Defense Funds:

President Trump and a number of his associates have established legal defense funds (LDFs) in connection with various Congressional investigations, the investigation by Special Counsel Mueller, and in anticipation of possible legal action.  Legal defense funds for government officials have a long history.  The U.S. Senate and the House have detailed rules regarding LDFs for their members.  The most famous LDFs were the two Clinton LDFs.  Over the years, the Office of Government Ethics (OGE) has given some guidance on LDFs for members of the executive branch, particularly with regard to the solicitation and receipt of gifts. For example, it informed President Clinton that, although he was not subject as president to rules limiting the acceptance of gifts, because he and his wife established his first LDF, he and his agents were subject to laws forbidding executive branch official from soliciting gifts for that LDF.  OGE guidance regarding LDFs is far less complete than the Senate and House rules.  Recently, OGE issued an advisorythat an LDF must prohibit contributions from anonymous sources. 

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November 7, 2017 in Scholarship, Tax | Permalink | Comments (0)

U.S. News Annual Peer Assessment of Law School Tax Programs

U.S. NewsThe 2019 U.S. News Tax Rankings ballots are due on Friday (the 2018 rankings are here)  As in prior years, the survey is intended "to identify the law schools having the top programs in tax law."  The survey is sent "to a selection  of faculty members involved in tax law programs. Law schools supplied names of these faculty members to U.S. News in summer 2017."  Recipients are asked "to [i]dentify up to fifteen (15) schools that have the highest-quality tax law courses or programs. In making your choices consider all elements that contribute to a program's academic excellence, for example, the depth and breadth of the program, faculty research and publication record, etc."

As Donald Tobin (Dean, Maryland) has noted, it is more than strange that NYU has finished ahead of Florida and Georgetown each year that U.S. News has conducted the survey.  Because the survey ranks the schools by how often they appear on the respondents' "Top 15" lists, this means that some folks list NYU, but not Florida and Georgetown, among the Top 15 tax programs.

In filling out your ballot, you may want to consult our forthcoming book, Pursuing a Tax LLM Degree, which compiles information about 13 highly ranked tax LLM programs: (1) NYU; (2) Florida; (3) Georgetown; (4) Northwestern; (5) Miami; (6) Boston University; (7) San Diego; (8) Loyola-L.A./LMU; (9) SMU; (10) Denver; (11) University of Washington; (12) Villanova; and (13) Chapman. The topics on which information is reported in the book include:

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November 7, 2017 in Law School Rankings, Legal Education, Tax | Permalink | Comments (2)

New 'Paradise Papers' Data Leak

Paradise PapersA new investigative report from the International Consortium of Investigative Journalists (ICIJ) and its media partners broke on Sunday. (ICIJ is the investigative journalist consortium that brought us last year's Panama Papers investigation, for which they won a Pulitzer for Explanatory Reporting.)

ICIJ: Offshore Trove Exposes Trump-Russia Links And Piggy Banks Of The Wealthiest 1 Percent:

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November 7, 2017 in Political News, Shuyi Oei, Tax, Think Tank Reports | Permalink | Comments (1)

Monday, November 6, 2017

Tillotson Presents Give and Take: The Citizen-Taxpayer And The Rise Of Canadian Democracy Today At McGill

Give and TakeShirley Tillotson (Dalhousie University) presents Give and Take: The Citizen-Taxpayer and the Rise of Canadian Democracy (University of British Columbia Press Nov. 15, 2017) at McGill today as part of its Spiegel Sohmer Tax Policy Colloquium Series convened by Allison Christians:

Can a book about tax history be a page-turner? You wouldn’t think so. But Give and Take is full of surprises. A Canadian millionaire who embraced the new federal income tax in 1917. A socialist hero, J.S. Woodsworth, who deplored the burden of big government. Most surprising of all, Give and Take reveals that taxes deliver something more than armies and schools. They build democracy.

Tillotson launches her story with the 1917 war income tax, takes us through the tumultuous tax fights of the interwar years, proceeds to the remaking of income taxation in the 1940s and onwards, and finishes by offering a fresh angle on the fierce conflicts surrounding tax reform in the 1960s.

Taxes show us the power of the state, and Canadians often resisted that power, disproving the myth that we have all been good loyalists. But Give and Take is neither a simple tale of tax rebels nor a tirade against the taxman. Canadians also made real contributions to democracy when they taxed wisely and paid willingly.

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November 6, 2017 in Book Club, Colloquia, Scholarship, Tax | Permalink | Comments (0)

Haufler Presents Bonus Taxes And International Competition For Bank Managers Today At UC-Berkeley

HauflerAndreas Haufler (University of Munich) presents Bonus Taxes and International Competition for Bank Managers (with Daniel Gietl (University of Munich)) at UC-Berkeley today as part of its  Robert D. Burch Center for Tax Policy and Public Finance Seminar Series:

We analyze the competition in bonus taxation when banks compensate their managers by means of fixed and incentive pay and bankers are internationally mobile. Banks choose bonus payments that induce excessive managerial risk-taking to maximize their private benefits of existing government bailout guarantees. In this setting the international competition in bonus taxes may feature a ‘race to the bottom’ or a ‘race to the top’, depending on whether bankers are a source of net positive tax revenue or inflict net fiscal losses on taxpayers as a result of incentive pay.

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November 6, 2017 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Clausing Presents Corporate Tax Reform In The Age Of Trump Today At Loyola-L.A.

Clausing (2018)Kimberly Clausing (Reed College) presents Corporate Tax Reform in the Age of Trump at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Katie Pratt and Ted Seto:

After the failure of Ryan/Brady Blueprint, which relied on a destination-based cash flow tax, the Republicans have proposed dramatic changes to corporate taxation in their Unified Framework. This presentation will consider these reform proposals within the context of the larger role of the corporate tax. The corporate tax is an indispensible part of our larger tax system. It is our only comprehensive tool for taxing capital income, it helps protect the individual income tax system, and it plays an essential role in both the efficiency and equity of our tax system. Given the many functions that the corporate tax performs, potential reform proposals should address how they are affecting each of these considerations.

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November 6, 2017 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

37 Tax Professors Urge Supreme Court To Overrule Quill v. North Dakota

Debra Greenberg (Emery Celli) filed an amicus brief at the Supreme Court yesterday on behalf of 37 tax professors supporting the petitioner in South Dakota v. Wayfair. The brief calls on the Court to grant South Dakota's petition and overrule its 1992 decision in Quill v. North Dakota, which prohibits states from collecting sales taxes from out-of-state retailers. From the summary of the brief:

While the Supreme Court is rightly reluctant to overrule its own precedents under any circumstances, the force of stare decisis is less powerful in some contexts than in others. Specifically, stare decisis exerts a weaker pull when judicial doctrine in the relevant area is based not on statutory interpretation but on changing competitive circumstances and evolving economic understandings.

Antitrust law is a paradigmatic example of an area in which these conditions are met, but the argument for a flexible application of precedent is similarly strong with respect to dormant Commerce Clause tax cases such as this one. In Quill Corp. v. North Dakota, the Court emphasized that its dormant Commerce Clause analysis was based on “structural concerns about the effect of state regulation on the national economy.” 504 U.S. 298, 312 (1992). The Court was especially concerned about the effect of taxation on the mail-order industry, and it believed that maintaining the physical presence rule would “foster[] investment by businesses and individuals.” Id. at 315-18. It also believed that its rule would reduce compliance costs for businesses and individuals engaged in commerce across state lines. See id. at 313 n.6. For those reasons, the Court reaffirmed the physical presence rule first announced in National Bellas Hess, Inc. v. Department of Revenue of Illinois, 386 U.S. 753 (1967).

The Court’s decision in Quill was predicated on then-current competitive circumstances and economic understandings. And in the quarter century since Quill, those circumstances and understandings have evolved. While the Quill Court was focused on the mail-order industry, it could not and did not foresee the meteoric rise of online retail, which has magnified the revenue losses that result from the physical presence rule. In the age of online retail, the physical presence rule has become a drag on economic efficiency and a potential impediment to investment across state lines. Meanwhile, the development of tax automation software over the past quarter century has led to a dramatic reduction in sales tax compliance costs for multistate retailers—so much so that overruling Quill would likely reduce aggregate compliance costs for individuals and firms seeking to abide by state tax laws.

Thus, to overrule Quill now based on changed competitive circumstances and evolving economic understandings would be to take it on its “own terms.” See Kimble v. Marvel Entm't, LLC, 135 S. Ct. 2401, 2413 (2015). It would be to acknowledge that — regardless of whether Quill was rightly decided at the time — the factual assumptions upon which it was based do not apply to the Internet age. The Court should grant South Dakota’s petition so it can revisit those assumptions and update its dormant Commerce Clause jurisprudence to a new technological and economic environment.

Tax profs who joined the brief are:

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November 6, 2017 in New Cases, Tax | Permalink | Comments (2)

Lesson From The Tax Court: Remember The Alamo

Tax Court (2017)Last week, the Court decided Carlos Alamo v. Commissioner, T.C. Memo. 2017-215 (Oct. 31, 2017).  This is a case worth remembering for at least two reasons. First, it teaches a lesson about how sticking to your guns can get very expensive because of the accumulation of penalties and interest.  No matter how hard to work to contest a tax, penalties and interest work harder. 

In this case Mr. Alamo worked very hard to contest his 2009 taxes.  But his refusal to ever file a 2009 return resulted in some astonishing additions to his basic liability of $86,651 in unpaid taxes for that year.  The Service's levy CDP notice, issued on November 1, 2012, reflected accumulated penalties and interest of $46,474.  That equals 54% of his unpaid taxes.  And who knows what the total looks like now, some five years later.

The lesson, then, can borrow from the great American roots musician Ry Cooder’s classic “The Taxes on The Farmer Feed Us All.”  It might go like this:

We worked through Spring and Winter, through Summer and through Fall
But those penalties and interest worked the hardest of us all
They worked on nights and Sundays, they worked each holiday
They settled down among us and they never went away

The second lesson is about how the Service proves compliance with § 6212 notice requirements.  It appears that Mr. Alamo is a hobbyist, albeit more clever than most.  He tried to play the proof game.  He lost.  Still, his stubborn refusal to concede that the Service had properly sent him a Notice of Deficiency (NOD) is a great lesson in how to attack the adequacy of notice but also a warning that an obdurate refusal to cooperate during the CDP hearing can destroy the last chance to get the correct tax liability.  By insisting on his perceived “right” to make the Service prove compliance with procedure, Mr. Alamo lost this chance to get his tax liability corrected.  For more details on this second lesson, see below the fold:

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November 6, 2017 in Bryan Camp, New Cases, Tax, Tax Practice And Procedure | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, November 5, 2017

Jayne Caron, Marathon Runner (Nov. 2017), M.D. (May 2020)

My amazing daughter Jayne somehow found the time to train for and run her first marathon today while in medical school

Jayne NYC

Although I could not join my wife at the finish line, I watched Jayne's progress throughout the race thanks to the wonders of technology:

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

Tax Profs Among The Top 15 Faculty In Leiter's '24 Law Schools That Might Be In The Top 20'

In Top 20 Law Faculties in Terms of Scholarly Excellence, Brian Leiter lists the Top 15 professors by citations at the "24 Law Schools That Might Be In The Top 20":  Boston University, Chicago, Columbia, Cornell, Duke, Emory, George Washington, Georgetown, Harvard, Michigan, Minnesota, Northwestern, NYU, Pennsylvania, Stanford, Texas, UC-Berkeley, UC-Irvine, UCLA, USC, Vanderbilt, Virginia, Washington University, and Yale.  Nine Tax Profs are among the Top 15 faculty at these schools, including three at USC:

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November 5, 2017 in Legal Education, Tax, Tax Prof Rankings | Permalink | Comments (0)

The Top Five New Tax Papers

SSRN LogoThis week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list, with some re-shuffling of the order within the Top 5. The #1 paper is #21 among 13,081 tax papers in all-time downloads.

  1. [4,818 Downloads]  Private Benefits in Public Offerings: Tax Receivable Agreements in IPOs, by Gladriel Shobe (BYU)
  2. [361 Downloads]  Background and Current Status of FATCA and CRS, by William Byrnes (Texas A&M)
  3. [279 Downloads]  Rejecting Charity: Why the IRS Denies Tax Exemption to 501(C)(3) Applicants, by Terri Lynn Helge (Texas A&M)
  4. [277 Downloads]  The Rise of Trust Decanting in the United States, by Robert Sitkoff (Harvard)
  5. [176 Downloads]  Slicing and Dicing: The Structural Problems of the Tax Reform Framework, by Reuven Avi-Yonah (Michigan)

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

Saturday, November 4, 2017

This Week's Ten Most Popular TaxProf Blog Posts

Weekly SSRN Tax Article Review And Roundup

This week, David Gamage (Indiana) reviews a new draft paper by Daniel Hemel (Chicago), Easy on the SALT: A Qualified Defense of the Deduction for State and Local Taxes.

Gamage (2019)Prompted — at least in part — by Congressional Republicans’ recently released tax reform proposals, Daniel Hemel has written a thoughtful new piece on the state and local tax (SALT) deduction. Although Hemel’s paper is currently in preliminary draft form, this draft is nevertheless well worth a read for anyone interested in taxation at either the federal or state levels in the United States.

Hemel thoughtfully reviews arguments both for and against the SALT deduction, concluding that “the case against the SALT deduction fails on its own terms, and that the status quo of partial deductibility offers a number of underappreciated advantages vis-à-vis the alternative of full repeal.”

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November 4, 2017 in David Gamage, Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

McArdle: The Republicans Weaponized Tax Reform

Bloomberg View:  Republicans Turned the Tax Code Into a Weapon, by Megan McArdle:

It is hard not to notice that this bill is designed to spread benefits among Trump supporters, particularly the Republican donor class, while laying most of the costs on a single group of people: six-figure professionals living in blue states, a group known as the HENRYs (High Earning, Not Rich Yet). One can make a principled justification for levying high taxes on the rich, who can most easily spare the money. One can make a principled justification for taxing everyone equally, share and share alike. But what is the principle by which almost all of the pain of this tax bill should be borne by affluent, but not rich, people who happen to live on the coasts? Other than “we don’t like them.” ...

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November 4, 2017 in Tax | Permalink | Comments (17)

Friday, November 3, 2017

The Only Person Mentioned In The Republican Tax Bill Is ... Steph Curry

Tax Policy In The Trump Administration

List Of 140 Colleges With Endowments Greater Than $100,000 Per Student That Would Be Subject To GOP's Proposed 1.4% Tax On Investment Income

Chronicle of Higher Education, If House Republicans Get Their Way, These Colleges Would See Their Endowments Taxed:

In a sweeping plan to rework the tax code unveiled on Thursday, Republicans in the House of Representatives floated a new strategy for raising revenue: Tax college endowments.

Some college endowments, that is.

Deep within the plan — look here, on Page 75 — is the language that spells out which institutions would be affected. The bottom line: Only the most-affluent colleges need worry. Colleges would be subject to the tax, set at 1.4 percent of net investment income, only if their endowment assets total at least $100,000 per student.

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November 3, 2017 in Legal Education, Tax | Permalink | Comments (12)

Max Planck, Norwegian Centre For Taxation & Notre Dame Host Conference On BEPS: Tax Evasion Or Tax Avoidance

ConferenceThe Max Planck Institute for Tax Law and Public Finance, Norwegian Centre for Taxation, and Notre Dame are hosting a conference on From Panama to BEPS: Tax Evasion or Tax Avoidance —International and National Policies to Confront Personal and Corporate Tax Strategies in Bergen, Norway (program):

Session #1:  Shifting Income Between Schedules

Session #2:  Income and Investment Shifting

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

Book: Improving Refundable Credits While Reflecting The Lives Of The Working Poor

Leslie Book (Villanova), Meeting Taxpayers Where They Live: Improving US Refundable Credits While Reflecting the Lives of the Working Poor, 3 J. Tax Admin. ___ (2017):

This paper looks at the American experience in using tax law to deliver benefits to low and moderate-wage workers. First, examining two recent court cases where individuals improperly claimed the earned income tax credit, this paper explores some of the challenges to both taxpayers and tax administrators associated with using the tax system to deliver benefits that are dependent on levels of attachment to children and the presence of earned income. The paper then explores two approaches to improve compliance. One approach is a proposal in a recent Heritage Foundation policy briefing recommending that only parents with legal custody of their children should be entitled to receive the earned income tax credit. The state of California, in adopting the other approach, excludes self-employment income from its definition of earned income in its state earned income tax credit. Both measures fail to reflect characteristics of the lives of the working poor, including a growing reliance on multi-generational living arrangements and shared care of children and a surge in nontraditional employment associated with the gig economy.

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November 3, 2017 in Scholarship, Tax | Permalink | Comments (1)

$6.8 Billion Hedge Fund Tax Dispute Moves to IRS Appeals Office

RenaissanceFollowing up on my previous post, Senate Report Criticizes Hedge Funds' Use of Basket Options Tax Strategy:  Bloomberg, Mercer Hedge Fund Tax Dispute Moves to IRS Appeals Office:

A tax dispute involving Renaissance Technologies, the hedge fund firm whose co-chief executive officer is a prominent backer of President Donald Trump, is advancing to a new phase.

Members of the Internal Revenue Service’s Office of Appeals are scheduled to meet with lawyers for Renaissance in New York on Nov. 7, according to a person with knowledge of the matter. The meeting kicks off a review by an independent branch of the tax agency and suggests a resolution may be years away.

Although the dollar amount at issue has never been made public, Senate investigators estimated that Renaissance employees may have pocketed about $6.8 billion through what a bipartisan panel in 2014 called an “abusive” tax shelter. Renaissance executives maintain the transactions at issue were within the law and weren’t driven by tax savings.

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November 3, 2017 in IRS News, New Cases, Tax | Permalink | Comments (0)

Thursday, November 2, 2017

Kamin & Kysar: Temporary Tax Laws And The Budget Baseline

David Kamin (NYU) & Rebecca M. Kysar (Brooklyn), Temporary Tax Laws and the Budget Baseline, 157 Tax Notes 125 (Oct. 2, 2017):

In this article, we discuss the inconsistent use of the current policy baseline by policymakers, which undermines budget enforcement and represents a deep violation of Senate norms. We further describe how the potentially dangerous disruption to the budget process provides an opportunity to improve the official baseline.

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November 2, 2017 in Scholarship, Tax | Permalink | Comments (0)

Assessing President Trump's Child Care Proposals

Lily L. Batchelder (NYU), Elaine Maag (Urban Institute), Chye-Ching Huang (Auckland) & Emily Horton (Center on Budget and Policy Priorities), Assessing President Trump's Child Care Proposals, 70 Nat'l Tax J. ___ (2017):

During the presidential campaign, Donald Trump proposed three tax benefits for child care: a credit for low-income families, an above-the-line deduction, and tax-subsidized savings accounts. While these proposals laudably bring attention to the heavy burden that child care costs place on many low- and middle-income families, they are a case study in how not to reform child care policy. They are unduly complicated, arbitrarily exclude certain low-income families, deliver support well after child care payments are due, and provide the largest benefits to higher-income families who need the least help.

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November 2, 2017 in Scholarship, Tax | Permalink | Comments (0)

2017 International Tax Competitiveness Ranking: U.S. Is 6th From The Bottom

Tax Foundation Logo2017 International Tax Competitiveness Index:

The International Tax Competitiveness Index (ITCI) seeks to measure the extent to which a country’s tax system adheres to two important aspects of tax policy: competitiveness and neutrality. ... To measure whether a country’s tax system is neutral and competitive, the ITCI looks at more than 40 tax policy variables. These variables measure not only the level of taxes, but also how taxes are structured. The Index looks at a country’s corporate taxes, individual income taxes, consumption taxes, property taxes, and the treatment of profits earned overseas. The ITCI gives a comprehensive overview of how developed countries’ tax codes compare, explains why certain tax codes stand out as good or bad models for reform, and provides important insight into how to think about tax policy.

Tax Foundation

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November 2, 2017 in Tax, Think Tank Reports | Permalink | Comments (1)

Macroeconomic Modeling Of Tax Policy: A Comparison Of Current Methodologies

Alan Auerbach (UC-Berkeley), Itai Grinberg (Georgetown), Thomas Barthold (Joint Committee on Taxation), Nicholas Bull (Joint Committee on Taxation), Gavin Elkins (Tax Foundation), Pamela Moomau (Joint Committee on Taxation), Rachel Moore (Joint Committee on Taxation), Benjamin Page (Tax Policy Center), Brandon Pecoraro (Joint Committee on Taxation) & Kyle Pomerleau (Tax Foundation), Macroeconomic Modeling of Tax Policy: A Comparison of Current Methodologies, 70 Nat'l Tax J. ___ (2017):

The macroeconomic effects of tax reform are a subject of significant discussion and controversy. In 2015, the House of Representatives adopted a new “dynamic scoring” rule requiring a point estimate within the budget window of the deficit effect due to the macroeconomic response to certain proposed tax legislation. The revenue estimates provided by the staff of the Joint Committee on Taxation (JCT) for major tax bills often play a critical role in Congressional deliberations and public discussion of those bills. The JCT has long had macroeconomic analytic capability, and in recent years, responding to Congress’ interest in macrodynamic estimates for purposes of scoring legislation, outside think tank groups — notably the Tax Policy Center and the Tax Foundation — have also developed macrodynamic estimation models. The May 2017 National Tax Association (NTA) Spring Symposium brought together the JCT with the Tax Foundation and the Tax Policy Center for a panel discussion regarding their respective macrodynamic estimating approaches. This paper reports on that discussion.

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November 2, 2017 in Scholarship, Tax | Permalink | Comments (0)

The Tax Implications Of Game Of Thrones

GOTIn a recent post of mine I referenced Game of Thrones (“GOT”), which is an HBO TV series based on the book collection “A Song of Ice and Fire” by George R.R. Martin. A commentator asked “Would it surprise you to know that some of your readers don't have the faintest idea of what your reference to "Game of Thrones" means?”

For such readers, I regret that you have not read this incredible fantasy adventure series. Not only because it’s good, but because references such as mine abound. Me nem nesa. A particularly amusing and creative spin comes from the otherwise staid ABA Section on Taxation. Each year the Tax Section puts out a “Tax Challenge” for both J.D. students and LL.M. students. This year’s Tax Challenge looks at some tax implications from GOT. Here’s how it starts:

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November 2, 2017 in ABA Tax Section, Bryan Camp, Celebrity Tax Lore, Tax | Permalink | Comments (2)

Yin: Constructing Tax Legislation In A Highly Polarized Congress

George K. Yin (Virginia), Of Geodesic Domes and Mud Huts: Constructing Tax Legislation in a Highly Polarized Congress:

This essay attempts to connect the process and product of tax legislation. It argues that changes in the tax legislative process over the last 25-30 years have affected the type of legislation produced by Congress. After identifying several developments, including the changing composition of professional tax staffers working on legislation, the essay shows that a decline in one particular category of legislation — complex change to improve the execution of current policies by advancing the efficiency, equity, or administrability of existing law — may be a natural outgrowth of changing legislator and staff interests and incentives.

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November 2, 2017 in Scholarship, Tax | Permalink | Comments (1)

Wednesday, November 1, 2017

Tahk Presents The New Welfare Rights Today At Northwestern

Tahk (2017)Susannah Tahk (Wisconsin) presents The New Welfare Rights, 82 Brook. L. Rev. ___ (2017), at Northwestern as part of its Advanced Topics in Taxation Workshop Series hosted by Sarah Lawsky:

Participating in the tax system gives rise to what could be enormously powerful rights for poor people. The tax system has become one of the main tools the U.S. uses to fight poverty. A thick bundle of tax rights accompanies the many tax antipoverty programs. This paper is the first to recognize the potentially substantial rights that poor people have through the tax code. For decades, poverty law advocates and scholars have lamented the decline of the “welfare rights” that poor people once had in their benefits. No one has yet recognized that in fact poor people still have substantial rights in the tax code. These “new welfare rights” are not rights that lawmakers are attempting to weaken but rights that they are strengthening. However, lawyers and lawmakers have yet to unlock the potential that tax rights have to improve the lives of poor people. This paper discusses two methods by which this can happen.

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November 1, 2017 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Shaheen Presents Income Tax Treaty Aspects Of Nonincome Taxes Today At Penn

Shaheen (2017)Fadi Shaheen (Rutgers) presents Income Tax Treaty Aspects of Nonincome Taxes at Pennsylvania today as part of its Tax Policy Workshop Series hosted by Chris Sanchirico and Reed Shuldiner:

This discussion draft — prepared for the 7th Annual NYU/UCLA Tax Policy Symposium on New Approaches to Calculation and Allocation of the International Tax Base held on October 27, 2017 — considers the income tax treaty aspects of nonincome taxes such as the retail sales tax, the value added tax, the flat tax, the X tax and the destination-based cashflow tax. The current draft focuses on three main issues: one that the literature has thus far missed, another regarding an argument I disagree with, and a third the discussion of which was avoided. The point that was missed is the question of residence, which is a critical treaty gateway issue. The argument is that if the United States replaces the existing income tax with any nonincome tax discussed here, the affected U.S. taxpayers would no longer be U.S. residents for treaty purposes and as such would no longer be entitled to benefits under existing income tax treaties.

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November 1, 2017 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Marian Presents Is All Corporate Tax Planning Good For Shareholders? Today At Toronto

Marian (2016)Omri Marian (UC-Irvine) presents Is All Corporate Tax Planning Good for Shareholders? at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series:

Multiple commentators argue that corporate managers have an affirmative duty to engage in corporate tax planning. Underlying this argument is the assumption that reduced corporate tax liability enhances shareholder value. In this article, I explain that this common perception is frequently incorrect. Corporate tax reduction schemes may increase the overall tax burden on shareholders. I make the following descriptive arguments in this regard:

First, I show that in many cases, successful (and legal) corporate tax planning schemes are not Pareto-optimal to shareholders. Some classes of shareholders (generally, tax-exempt shareholders) may see a net benefit, while other shareholders (usually taxable shareholders) experience a net loss. Second, I show that in certain instances it is reasonable to expect that legal corporate tax planning schemes will be overall inefficient. Meaning, the losses to taxable shareholders may exceed the gains to tax-exempt shareholders. Lastly, I show that because of an underappreciated agency problem, shareholders approve inefficient corporate tax plans, even when information about the potential detriment is freely available.

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November 1, 2017 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

How Keeping The Property Tax Deduction Could Harm Middle-Class Homeowners

Republican lawmakers have reportedly reached a deal to preserve the deduction for state and local property taxes while repealing the deduction for other state and local taxes as part of their proposed tax overhaul. The compromise is apparently intended to win the support of House Republicans from high-property-tax states like New Jersey and New York, who think that the deal is a good one for middle-class homeowners in their districts. But as Jed Graham points out in a nice article at Investors.com, preserving the property tax deduction as part of the Republican plan might have negative consequences for the very people that it’s intended to help.

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November 1, 2017 in Daniel Hemel, Tax | Permalink | Comments (0)

SSRN Tax Professor Rankings

SSRN LogoSSRN has updated its monthly rankings of 750 American and international law school faculties and 3,000 law professors by (among other things) the number of paper downloads from the SSRN database.  Here is the new list (through October 1, 2017) of the Top 25 U.S. Tax Professors in two of the SSRN categories: all-time downloads and recent downloads (within the past 12 months):

 

 

All-Time

 

Recent

1

Reuven Avi-Yonah (Mich.)

72,112

Reuven Avi-Yonah (Mich.)

12,456

2

Michael Simkovic (USC)

37,386

Lily Batchelder (NYU)

7585

3

Paul Caron (Pepperdine)

33,609

D. Dharmapala (Chicago)

3792

4

D. Dharmapala (Chicago)

31,996

Michael Simkovic (USC)

3489

5

Louis Kaplow (Harvard)

28,618

Richard Ainsworth (BU)

3400

6

Vic Fleischer (San Diego)

24,032

Michael Graetz (Columbia)

2978

7

Ed Kleinbard (USC)

23,474

Andy Grewal (Iowa)

2940

8

James Hines (Michigan)

23,181

David Gamage (Indiana)

2926

9

Richard Kaplan (Illinois)

22,268

David Weisbach (Chicago)

2598

10

Ted Seto (Loyola-L.A.)

22,243

Ed Kleinbard (USC)

2451

11

Richard Ainsworth (BU)

22,137

Louis Kaplow (Harvard)

2079

12

Katie Pratt (Loyola-L.A.)

20,565

Hugh Ault (Boston College)

2075

13

David Weisbach (Chicago)

19,790

Darien Shanske (UC-Davis)

2027

14

Robert Sitkoff (Harvard)

19,293

Daniel Shaviro (NYU)

1891

15

Brad Borden (Brooklyn)

18,735

Steven Bank (UCLA)

1801

16

Carter Bishop (Suffolk)

18,366

William Byrnes (Texas A&M)

1771

17

Francine Lipman (UNLV)

17,969

Omri Marian (UC-Irvine)

1759

18

Chris Sanchirico (Penn)

17,924

Bridget Crawford (Pace)

1656

19

Daniel Shaviro (NYU)

17,883

Jordan Barry (San Diego)

1590

20

Jen Kowal (Loyola-L.A.)

17,734

Jeff Kwall (Loyola-Chicago)

1549

21

Bridget Crawford (Pace)

17,654

Paul Caron (Pepperdine)

1491

22

Dennis Ventry (UC-Davis)

16,634

Stephen Shay (Harvard)

1486

23

Steven Bank (UCLA)

15,762

Francine Lipman (UNLV)

1465

24

David Walker (BU)

15,759

Cliff Fleming (BYU)

1450

25

Gregg Polsky (Georgia)

14,286

Brad Borden (Brooklyn)

1439

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

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November 1, 2017 in Scholarship, Tax, Tax Prof Rankings | Permalink | Comments (0)

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November 1, 2017 in About This Blog, Legal Education, Tax | Permalink | Comments (0)

The Non-Intuitive Tax Implications of Bridge

Here’s a fun item I came across in the Washington Post: It’s Official: Bridge Is Definitely Not a Sport.

Turns out that in England sporting organizations do not have to pay the Value Added Tax and, hence, don’t include VAT charges on admission fees to sporting events.

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November 1, 2017 in Bryan Camp, News, Tax | Permalink | Comments (0)

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November 1, 2017 in About This Blog, Legal Education, Tax | Permalink | Comments (0)

Tuesday, October 31, 2017

Zwick Presents Capitalists In The Twenty-First Century Today At Columbia

ZwickEric Zwick (Chicago) presents Capitalists in the Twenty-First Century (with Matthew Smith (U.S. Treasury Department), Danny Yagan (UC-Berkeley) & Owen Zidar (Chicago)) at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium Series hosted by Alex Raskolnikov and Wojciech Kopczuk:

Have passive rentiers replaced the working rich at the top of the U.S. income distribution? Using administrative data linking 15 million firms to their owners, this paper shows that private business owners who actively manage their firms are key for top income inequality. Private business income accounts for most of the rise of top incomes since 2000, and the majority of top earners receive private business income — most of which accrues to active owner-managers of mid-market firms in relatively skill-intensive and unconcentrated industries. Profit falls substantially after premature owner deaths. Top-owned firms are twice as profitable per worker as other firms despite similar risk, and rising profitability without rising scale explains most of their profit growth.

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October 31, 2017 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Davis: Morrissey And The IRS's Hostility To Reproductive Choice

Following up on my previous posts:

Tessa Davis (South Carolina), Morrissey v. U.S. and the IRS's Hostility to Reproductive Choice:

I’ll begin with what the court of appeals got right. First, the court did not read a “disease” requirement into the “structure or function” route to a medical expense deduction. Second, the court did not summarily reason that ARTs are unrelated to a “function of the body.” The court of appeals thus avoided two errors that plagued the earlier Magdalin v. Comm’r  case (a Tax Court memorandum opinion summarily affirmed by the First Circuit, and which I’ve written about here).

Unfortunately, the court of appeals got just about everything else wrong.

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October 31, 2017 in IRS News, New Cases, Tax | Permalink | Comments (2)

Of Piketty And Perpetuities

PikettyEric A. Kades (William & Mary), Of Piketty and Perpetuities:

For the first time since independence, in a nation founded in large part on the rejection of a fixed nobility determined by birth and perpetuated by inheritance, America is paving the way for the creation of dynastic family wealth. Abolition or evisceration of the Rule Against Perpetuities in over half the states along with the likely repeal of the federal estate tax mean that there soon will be no obstacles to creating large pools of wealth that will insure lavish incomes to lucky heirs for generations without end.

The timing of these legal changes could hardly be worse. Marshaling innovative economic data extending back centuries, Thomas Picketty convincingly argues that the relatively egalitarian incomes enjoyed in developed economies from the end of World War II until around 1980 were an aberration and that we are in the process of returning to the historical norm of much greater income and wealth inequality. The driving force is the return to a world in which the rate of return to capital (r) exceeds the growth rate of national income (g) — another historical norm temporarily abrogated during the 20th century. The wealthy hold an extremely high fraction of national wealth, and when returns to that wealth exceed the growth rate of national income, their relative economic power (and all that goes with that) increases proportionally.

Table 1

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October 31, 2017 in Scholarship, Tax | Permalink | Comments (0)

Some Positive News About The IRS

IRS Logo 2The IRS does not have an easy job.  Remember, it's NOT the "IRS Code" because the IRS is just the agency stuck with the task of carrying out the will of Congress.   And the IRS must do this job all while being a political soccer ball — and since the mid-1990's the Republican team has hogged that ball, kicking with more enthusiasm than enlightenment.  So it was nice to see a positive story about tax administration picked up by USA Today, especially because USA stories also appear in little town newspapers, like the one I read here in Lubbock, Texas (the Lubbock Avalanche-Journal:  IRS: Public-private Crackdown Slashes Identity Theft, Tax Refund Fraud, the story comes from a press release by the IRS that explained:

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October 31, 2017 in Bryan Camp, IRS News, Tax, Tax Practice And Procedure | Permalink | Comments (1)

Monday, October 30, 2017

Scharff Presents Pricing Externalities Under State Law Today At Loyola-L.A.

Scharff (2017)Erin Scharff (Arizona State) presents Green Fees: Pricing Externalities Under State Law at Loyola-L.A. today as part of its Tax Policy Colloquium Series hosted by Katie Pratt and Ted Seto:

Policymakers at the state and local level are increasingly interested in using market-based pricing mechanisms as regulatory tools. At the state level, Massachusetts, Rhode Island, and Washington have recently considered state-level carbon pricing, while California is moving forward with its own cap-and-trade program. At the local level, municipal governments are increasingly turning to stormwater remediation fees to pay for the treatment of municipal runoff required by the Clean Water Act. And Philadelphia, Berkeley, and Seattle all recently joined Chicago and impose a soda tax on high-caloric beverages.

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October 30, 2017 in Colloquia, Scholarship, Tax | Permalink | Comments (0)

Hemel: A Qualified Defense Of The State And Local Tax Deduction

Daniel J. Hemel (Chicago), Easy on the SALT: A Qualified Defense of the Deduction for State and Local Taxes:

Congressional Republicans and Trump administration officials have said that they plan to repeal the deduction for nonbusiness state and local taxes (SALT) as part of a comprehensive tax reform package. This essay critically examines the major arguments for repealing the SALT deduction. Repealing the deduction and using the resulting revenues to reduce federal rates across the board would likely lead to greater tax-induced deadweight loss overall. Repealing the deduction also would distort decisions about the financing of education and health care, which together account for more than half of all state and local government spending. Repeal would further encourage a shift from nonbusiness to business taxes at the state and local level, and potentially would result in more borrowing by subnational governments in the short and medium term. It would have ambiguous effects on the progressivity of the overall tax system, and it would exacerbate existing differences in federal tax burdens across states.

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October 30, 2017 in Scholarship, Tax | Permalink | Comments (0)

NY Times: The GOP's 'Pathetic' Proposal To Eliminate The State & Local Tax Deduction

New York Times editorial, Who Does Benefit From the Tax Cut Anyway?:

The House on Thursday narrowly approved a budget blueprint that Republican leaders and President Trump hope to use as a legislative vehicle to cut taxes. Very wealthy American families will be the biggest beneficiaries of these cuts while many in the upper middle class could actually see their taxes go up.

While Republicans still have not produced a detailed proposal, a tax framework they published last month and their public comments make clear that they are doing everything they can to enrich the 1 percent — a group that would receive 80 percent of the benefits, according to the Urban-Brookings Tax Policy Center.

One change is getting a lot of attention: Republican leaders want to eliminate the state and local tax deduction. This would hurt many Americans, especially those who live in states like California and New York with high state and local taxes.

NY Times Map

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October 30, 2017 in Tax | Permalink | Comments (6)

Lesson From The Tax Court: Substantiation And The Cohan Rule

Tax Court (2017)The married taxpayers in Partyka v. Commissioner, T.C. Sum. Op. 2017-79 (Oct. 25, 2017), fell prey to scammers who scheme was to rent a furnished house and then steal the furnishing. The scammers stole a substantial amount of household furnishings from the taxpayers and the taxpayer pegged the value of the stolen items at just under $30,000 for which they claimed a §165 loss deduction.

There was an interesting timing issue in the case, but what struck me was the long discussion of substantiation, and how what may be sufficient documentation of loss for one purpose (police investigation, prosecution) may not be enough for tax purposes. Indeed, the Tax Court found that the taxpayers were potentially liable for the §6662 accuracy-related penalty. I question, however, whether the Tax Court properly applied the Cohan rule. For details, see below the fold.

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October 30, 2017 in Bryan Camp, New Cases, Tax | Permalink | Comments (7)

Graetz: Are We Heading Off A Fiscal Cliff?

Michael J. Graetz (Columbia), Heading Off a Cliff?:

The major tax policy challenge of the 21st century is the need to address the nation’s fiscal condition fairly and in a manner conducive to economic growth. But since California adopted Proposition 13 nearly forty years ago, antipathy to taxes has served as the glue that has held the Republican coalition together. Even though our taxes as a percentage of our economy are low by OECD standards and low by our own historical experience, anti-tax attitudes have become even more important for Republicans politically, since they now find it hard to agree on almost anything else. So revenue-positive, or even revenue-neutral, forms of tax reform — at least as long as the GOP maintains its legislative majority — are politically impossible.

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October 30, 2017 in Scholarship, Tax | Permalink | Comments (0)

TaxProf Blog Weekend Roundup

Sunday, October 29, 2017

The Top Five New Tax Papers

SSRN LogoThis week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list. The #1 paper is #29 among 13,063 tax papers in all-time downloads.

  1. [3,734 Downloads]  Private Benefits in Public Offerings: Tax Receivable Agreements in IPOs, by Gladriel Shobe (BYU)
  2. [334 Downloads]  Background and Current Status of FATCA and CRS, by William Byrnes (Texas A&M)
  3. [259 Downloads]  The Rise of Trust Decanting in the United States, by Robert Sitkoff (Harvard)
  4. [236 Downloads]  Rejecting Charity: Why the IRS Denies Tax Exemption to 501(C)(3) Applicants, by Terri Lynn Helge (Texas A&M)
  5. [166 Downloads]  Slicing and Dicing: The Structural Problems of the Tax Reform Framework, by Reuven Avi-Yonah (Michigan)

October 29, 2017 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)