TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Monday, August 24, 2015

TaxProf Blog Weekend Roundup

Sunday, August 23, 2015

Stephen Colbert's Secret Of Life (And Faith): 'I Love The Thing That I Most Wish Had Not Happened'

GQGQ, The Late, Great Stephen Colbert:

He used to have a note taped to his computer that read, “Joy is the most infallible sign of the existence of God.”

It's hard to imagine any comedian meditating every day on so sincere a message. It's even harder when you know his life story, which bears mentioning here—that he is the youngest of eleven kids and that his father and two of his brothers, Peter and Paul, the two closest to him in age, were killed in a plane crash when he was 10. His elder siblings were all off to school or on with their lives by then, and so it was just him and his mother at home together for years. They moved from James Island to downtown Charleston, and she sent him to a prep school, Porter-Gaud, where for the next several years he did next to nothing academically. “There was no way to threaten me,” he said. “It was like, ‘What? What's that? Oh, okay, I might get a bad grade? Oh no. Wouldn't want that.’ ”

He was completely traumatized, of course. And one way of contending with the cruel indifference of the universe is to be indifferent in return. But he was also raised in a deeply Catholic intellectual family (his father had been a dean of Yale Medical School and St. Louis University and the Medical College of South Carolina). And so his rebellion against the world was curiously self-driven and thoughtful. He refused to do anything his teachers required of him, but would come home every day and shut himself in his room and read books. “I had so many books taken away from me,” he said. “I read a book a day. Spent all of my allowance on books. Every birthday, confirmation, Christmas—books, please, stacks of books.” 

He barely graduated from high school and then went to Hampden-Sydney College in Virginia only because a friend had applied there. He studied philosophy; he joined the school's theater troupe. After his sophomore year he transferred to Northwestern's theater program, where he was purely focused on drama. “I was doing Stanislavsky and Meisner, and I was sharing my pain with everyone around me,” he says in an interview that appears in Judd Apatow's book Sick in the Head. “It was therapy as much as it was anything.”

And then he met Del Close, the legendary improv teacher and mentor and champion of the idea that improvisational comedy, when performed purely, was in fact high expressive art.

“I went, ‘I don't know what this is, but I have to do it,’ ” he said. “I have to get up onstage and perform extemporaneously with other people.” He was part of the same Second City class that included Amy Sedaris and Paul Dinello and Chris Farley. “Our first night professionally onstage,” he said, the longtime Second City director Jeff Michalski told them that the most important lesson he could pass on to them was this: “You have to learn to love the bomb.”

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August 23, 2015 in Legal Education, Tax | Permalink | Comments (0)

The Top 5 Tax Paper Downloads

The IRS Scandal, Day 836

IRS Logo 2Washington Examiner: Is This Woman the New Lois Lerner?:

As some at the Federal Election Commission seek to broaden the power of the agency, critics are arguing that it's beginning to look increasingly like the Internal Revenue Service under Lois Lerner, who has been accused of using her office for partisan purposes.

They take special aim at the commission's Democratic chairwoman, Ann Ravel, who also served as chairwoman of California's equivalent to the FEC, the Fair Political Practices Commission, before coming to Washington in 2013. Ravel has lambasted the commission as "dysfunctional" because votes on enforcement issues have often resulted in ties, and she has said the commission should go beyond its role of enforcing election laws by doing more to get women and minorities elected to political office. She has complained that super PACs are "95 percent run by white men," and that as a result, "the people who get the money are generally also white men."

To remedy those problems, Ravel sponsored a forum at the FEC in June to talk about getting more women involved in the political process. She has also proposed broadening disclosure laws to diminish the role of outside spending, and suggested that the FEC should claim authority to regulate political content on the Web. She's also voiced support for eliminating one member of the commission in order to create a partisan majority that doesn't have tie votes, saying in an interview with Roll Call, "I think it would help."

Hans von Spakovsky, who served on the FEC from 2006-2008, takes issue with Ravel's effort to go beyond the traditional purview of the commission's functions. "The FEC has one duty, and one duty only — to enforce the existing campaign finance laws. It has no business trying to 'encourage' or 'discourage' folks to get involved in politics, no matter who they are, minority or otherwise," Spakovsky told the Washington Examiner. ...

Wall Street Journal's editorial board has compared Ravel to the IRS' Lerner, who's also been accused of using her office to push a political agenda. "We'll take our chances with donations freely given than with the arbitrary and partisan rulings of Lois Lerner at the IRS or Ann Ravel at the Federal Election Commission," the editorial board wrote.

Spakovsky also referred to a June 2013 interview with Ravel in which she appeared to express support for Lerner's targeting of conservative organizations. In the interview, Ravel said, "The IRS has apparently sent some letters to a number of 501(c)(4)s [nonprofit, tax-exempt organizations] asking them to justify that they are in fact social welfare organizations, but so far there is no evidence that the IRS has taken any action against these organizations." She went on to say, "It is very important that it happen."

Asked about the comments, Ravel's office stated that she "was responding to a question and by stating 'apparently' made plain that she based her remarks on publicly available media reports, not on personal knowledge," and that "she was not referring to any particular cases."

Lerner had apologized the preceding May for the discovery that, under her leadership, the IRS had targeted groups with words such as "tea party" and "patriot" in their names. Lerner resigned the following September.

Ravel, Spakovsky said, "does not see her role as enforcing campaign finance laws," but rather "to use her government authority as a partisan weapon, particularly against the same type of conservative groups that Lois Lerner targeted."

Cleta Mitchell, a Republican campaign finance attorney in Washington, voiced a similar sentiment. "She and Lois Lerner are peas in a pod," Mitchell said. "She wants to weaponize government agencies to shut down and chill free political speech," which, she continued, is "a very odd position for someone who swore to uphold the Constitution."

Yet Ravel has supporters, and if she fails at the FEC, others have advocated using the IRS to accomplish some of her policy objectives.

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August 23, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Saturday, August 22, 2015

This Week's Ten Most Popular TaxProf Blog Posts

9th Circuit's Mortgage Interest Deduction Decision Adds To Tax Code's Marriage Penalty

9th CircuitFollowing up on last week's post, Ninth Circuit Gives Unmarried Couples Double The Mortgage Interest Deduction Available To Married Couples:  

Forbes, Does Ninth Circuit Mortgage Interest Decision Create Special Rights?, by Peter J. Reilly:

is kind of ironic for the Ninth Circuit, which played such a big role in advancing marriage equality, to be issuing a decision that discourages registered  domestic partners from marrying. That is an effect of the decision in the case Bruce Voss and Charles Sophy vs. IRS, although I imagine it is an unintended consequence.  It almost seems as if the Ninth Circuit  has instituted that conservative trope — special rights for homosexuals — with this decision. Closer analysis would show it would be more like special rights for homosexuals and geezers. ...

Thanks to the Ninth Circuit’s recent decision, there is now a new marriage penalty for couples with large mortgages.  The amount of the penalty depends on how much the mortgage exceeds $1.1 million, its interest rate and the marginal tax rate of the taxpayers.  My back of the envelope computation would put the maximum penalty at not a lot more than $20,000. ...

A committed unmarried couple who did some serious planning could really go to town exploiting the fact that they are considered unrelated for federal income tax purposes.  

Wall Street Journal, Another Reason Not to Get Married: Recent Court Ruling in California Gives Unmarried Couples a Big Tax Break:

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August 22, 2015 in New Cases, Tax | Permalink | Comments (3)

The IRS Scandal, Day 835

IRS Logo 2Statement of NTEU National President Tony Reardon:

IRS employees are dedicated and committed public servants who perform vital work for our country. No bipartisan report, including the bipartisan Senate Finance Committee report and reports by the Treasury Inspector General, has ever found any evidence of political motivation on the part of IRS employees.

Treasury Inspector General J. Russell George, the author of the TIGTA report, testified repeatedly under oath that the TIGTA report found no evidence of partisan motive or intentional wrongdoing on the part of IRS employees in the tax-exempt division. The report also noted that IRS officials stated that the criteria used to evaluate tax-exempt applications were not influenced by any individual or organization outside the IRS.

The frontline employees at IRS are represented by NTEU as part of the IRS bargaining unit. NTEU does not represent management officials, such as Lois Lerner.

NTEU members participated throughout the investigation, testified voluntarily in congressional hearings and were thanked by the chair and Republican members of the House Oversight and Government Reform Committee for their assistance and patriotism.

Oversight Committee Chairman Darryl Issa publicly told two frontline IRS employees at a hearing: "I just want to take a moment to say that I appreciate that both of you are not political folks, and that it is appropriate that, no surprise, you did everything as far as we know, very professionally." And Congressman Turner at the same hearing stated: "I want to thank both of you, because you're coming forward and being honest."

Without collective bargaining rights, frontline employees would have little protection against retaliation by senior management when reporting wrongdoing. This is not the first time eliminating collective bargaining rights has been proposed by Sen. Hatch. He has previously called for eliminating collective bargaining rights at IRS and other agencies long before this report was issued.

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August 22, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Friday, August 21, 2015

Weekly Tax Roundup

Weekly SSRN Tax Roundup

Yelp Is Now Rating The IRS: 2.5 Stars

IRS Yelp

The Atlantic, Can Yelp Make Government Agencies Work Better?:

The feds are partnering with the popular review site to encourage feedback on public services like the TSA and IRS—and preparing to get an earful.

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August 21, 2015 in IRS News, Tax | Permalink | Comments (1)

Trump Bashes $4 Billion In IRS Refunds To Illegals

TrumpForbes:  Trump Bashes $4 Billion In IRS Refunds To Illegals, by Robert W. Wood:

President Obama and Donald Trump see immigration differently. The President’s aggressive executive action on immigration is still being litigated, and Mr. Trump proposes action of a different kind. In the meantime, tax credits and refunds for illegal immigrants have become controversial. Mr. Trump says illegal immigrants get $4.2 billion in tax credits. He can point to a 2011 audit by the Treasury Inspector General for Tax Administration. It confirms that individuals who are not authorized to work in the United States were paid $4.2 billion in refundable credits.

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August 21, 2015 in Political News, Tax | Permalink | Comments (17)

The IRS Scandal, Day 834

IRS Logo 2Fox News op-ed:  IRS Targeting Scheme Is a Scandal With No End in Sight, by Jay Sekulow (American Center for Law and Justice) :

When the Senate Finance Committee released its findings on the Internal Revenue Service scheme targeting conservative organizations a couple of weeks ago, the initial determination was clear.

As I reported earlier: The findings of the bi-partisan report revealed gross mismanagement at the IRS. But more than that, the evidence shows partisan political animus resulted in the unwarranted targeting of conservative groups because of their political beliefs.

But in the weeks since, as we have dug further into the lengthy report, some important and disturbing comments by former top IRS official Lois Lerner, who served as director of the Exempt Organizations Unit, have come to light.

Remember, it was Lerner who tried to blame this scandal on low-level employees at the IRS in a faux apology issued May 2013 – a flawed attempt to get out in front of an explosive inspector general’s report about the targeting scheme released just days later.

Now we are learning more of the disturbing details about Lerner’s beliefs and behavior thanks to new emails released in conjunction with a two-year probe by the Senate Finance Committee.

The picture is not a pretty one. ...

The findings of the Senate Finance Committee – along with the ongoing probes by other congressional committees – ensure that we will continue to learn more about the depth and breadth of this scheme implemented by Lois Lerner and others.

But, unfortunately, we are no closer to holding those responsible for this unlawful targeting scheme accountable.

And that must become a priority.

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August 21, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Thursday, August 20, 2015

Wells: The Foreign Tax Credit War

FTCBret Wells (Houston), The Foreign Tax Credit War, 2016 BYU L. Rev. ___ :

The government has been involved in a sustained war against objectionable foreign tax credit transactions, and this war has caused the U.S. foreign tax credit regime to be riddled with complexity that spawns incoherent outcomes. The complexity contained in section 901 was created due to a legitimate concern. The threats posed by objectionable transactions that artificially generate excess foreign tax credits represent real policy problems. Since at least 1975, Congress and the Treasury Department have been convinced that the cross-crediting of excess foreign tax credits arising from “objectionable transactions” required a response in addition to simply relying on section 904. Thus, it is understandable that Congress and the Treasury Department would seek to redefine the foreign tax credit eligibility standards in response to transactions that generate foreign tax credits in objectionable ways. However, the historical record indicates that Congress and the Treasury Department ran roughshod over section 901 and used a scorched earth approach in their war against objectionable foreign tax credit transactions. The result is that the U.S. foreign tax credit regime is a “byzantine structure of staggering complexity.” In the rush to enact reforms, ill-conceived provisions were enacted that should not have been enacted.

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August 20, 2015 in Scholarship, Tax | Permalink | Comments (1)

Avi-Yonah & Zelik: Are We Trapped By Our Capital Gains?

Reuven S. Avi-Yonah (Michigan) & Dima Zelik (Michigan), Are We Trapped by Our Capital Gains?:

For political reasons, we seem to be stuck with the current realization-based system of taxing capital gains. This means that lock-in is a serious problem. Inflation can be dealt with by adjusting basis and bunching by averaging devices, but it is hard to address lock-in, especially if step-up on death is retained. The current rate structure is 39.6% for ordinary income (higher if limits of deductions are taken into account) and 23.8% for capital gains. This has already led to a proliferation of conversion transactions and to pressure on the labor/capital distinction. We are doubtful that an effective centrifuge can be devised to segregate income from labor from income from capital. This may work in Sweden, but it may not work in a country like the US with a hyper-sophisticated capital market and very aggressive tax advisors.

Thus, we have reluctantly come to the conclusion that we are indeed trapped by our capital gains, that the current rate structure is indefensible in practice, and that we should revert to an overall rate of 28% for all income.

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August 20, 2015 in Scholarship, Tax | Permalink | Comments (4)

Utah Seeks To Hire A Tax Prof

Utah Logo (2015)The University of Utah S.J. Quinney College of Law invites applications for a tenure-track faculty position at the rank of associate professor beginning academic year 2016-17:

Qualifications for the position include a record of excellence in academics, successful teaching experience or potential as a teacher, and strong scholarly distinction or promise. The College is particularly interested in candidates in the areas of business and tax law. Interested persons can submit an application to the University of Utah Human Resources website  (with a cover letter, CV, and list of references). If you have questions, contact Baiba Hicks, Administrative Assistant to the Faculty Appointments Committee.

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August 20, 2015 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)

The IRS Scandal, Day 833

IRS Logo 2Waterbury Republican American, IRS Scandal's Emerging Facts:

Sen. Ron Wyden, D-Ore., recently claimed there was nothing nefarious about the Obama Internal Revenue Service's 2010-12 scrutiny of conservative groups. Referencing a report from the Senate Finance Committee — of which he is ranking member — Sen. Wyden said, "The results of this in-depth, bipartisan investigation showcase pure bureaucratic mismanagement without any evidence of political interference."

The senator is dishonest or delusional. The facts of "IRSgate" leave no doubt there was intentional, systematic harassment. Indeed, the affair constitutes one of President Obama's biggest betrayals of Americans who bought the "hope" and "change" lines from 2008.

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August 20, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Wednesday, August 19, 2015

Fleischer: Stop Universities From Hoarding Money By Requiring Them To Spend 8% Of Endowment Each Year

8%New York Times op-ed:  Stop Universities From Hoarding Money, by Victor Fleischer (San Diego):

Who do you think received more cash from Yale’s endowment last year: Yale students, or the private equity fund managers hired to invest the university’s money?

It’s not even close.

Last year, Yale paid about $480 million to private equity fund managers as compensation — about $137 million in annual management fees, and another $343 million in performance fees, also known as carried interest — to manage about $8 billion, one-third of Yale’s endowment.

In contrast, of the $1 billion the endowment contributed to the university’s operating budget, only $170 million was earmarked for tuition assistance, fellowships and prizes. Private equity fund managers also received more than students at four other endowments I researched: Harvard, the University of Texas, Stanford and Princeton.

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August 19, 2015 in Legal Education, Tax | Permalink | Comments (8)

Pittsburgh Seeks To Hire A Tax Prof Or Tax Clinician

Pitt Logo (2015)The University of Pittsburgh School of Law invites applications from entry-level or lateral faculty for one position in a variety of fields, including tax, beginning in the 2016-17 academic year:

The appointment is expected to be either at the rank of assistant, associate or full professor, if tenure stream, or assistant clinical, associate clinical or full clinical professor, if non-tenure stream. This recruitment seeks to fill particular curricular needs in one of two ways: either a tenure-stream or tenured professor teaching in one or more of the following areas: Tax, Property, Estates and Trusts, or, alternatively, a clinical professor outside of the tenure stream who would direct our Tax Clinic and teach one or more courses in Tax Law. Preference will be given to those with an interest in experiential learning. ...

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August 19, 2015 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)

Divided D.C. Circuit Says Anti-Injunction Act Bars Challenge To IRS's Bank Reporting Regulation

In Florida Bankers Association v. Department of the Treasury, No. 14-5036 (D.C. Cir. Aug. 15, 2015), a sharply divided D.C. Circuit held that the Anti-Injunction Act (26 U.S.C. § 7421(a)) barred a challenge by two bank associations to tax regulations requiring U.S. banks to report to the IRS interest earned by non-resident aliens (even though such interest is not subject to U.S. tax). In a blistering dissent, Judge Henderson argues that the majority's decision is directly contrary to the Supreme COurt's recent decision in Direct Mktg. Ass’n v. Brohl, 135 S. Ct. 1124 (2015), and two prior D.C. Circuit decisions. For a detailed discussion of the opinion see Patrick J. Smith (Ivins, Phillips & Barker, Washington, D.C.), D.C. Circuit Majority Opinion in Florida Bankers Not Consistent with Supreme Court’s Direct Marketing Decision (Part 1, Part 2).  (Hat Tip: Kristin Hickman.)

August 19, 2015 in New Cases, Tax | Permalink | Comments (0)

The IRS Scandal, Day 832

Tuesday, August 18, 2015

WSJ: How Etsy Crafted A Tax Strategy In Ireland

ETSYWall Street Journal, How Etsy Crafted a Tax Strategy in Ireland:

Etsy, the online marketplace for artisans, works to keep its business “mindful, transparent and humane,” but that became tricky when it crafted a new tax strategy.

The startup, which built its eBay-like marketplace in Brooklyn, has been so serious about authenticity that its founder made his own underwear. But as it geared up for its initial public offering, the company adopted some ideas from rival technology companies that have been aggressive about routing their inventions and earnings through low-tax jurisdictions overseas to minimize what they might owe to Uncle Sam.

Its advisers proposed a number of more-complex options, but the company passed on structures known by nicknames like the “Double Irish” or “Dutch Sandwich” that have become flash points in the broader debate about gaps in the corporate tax code, according to people familiar with the company.

What it did agree to, though, was to relocate some of its intellectual property to Dublin earlier this year. While that approach ranks as relatively straightforward in the business of tax avoidance, it has taken Etsy into the realm of legalistic corporate-speak and vague disclosure that its founders long railed against. Etsy briefly described the moves this way in a May earnings release: “Etsy’s revised corporate structure was implemented to more closely align with its global operations and future expansion plans outside the U.S.”

The questions Etsy grappled with as it planned its tax strategy show the difficulty of staying true to values proclaimed on its website that include running a “mindful, transparent and humane business” while maturing into a publicly traded company that must compete globally with rivals that are often less idealistic.

August 18, 2015 in Tax | Permalink | Comments (0)

Tax Prof Baby

I am delighted to publicly welcome Rhema ("ray-ma"), daughter of my dear Pepperdine friend and tax colleague Khrista Johnson and her husband Alton.  Rhema was born on August 8 and checked in at 7 pounds, 11 ounces. 

Rhema

Khrista explains the origins of the name Rhema:

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August 18, 2015 in Legal Education, Tax, Tax Profs | Permalink | Comments (0)

IRS Underestimated By 200% The Number Of Taxpayer Victims Of Identity Theft By Hackers Who Gained Access To Tax Returns Through IRS Website

ID TheftThree months ago, the IRS disclosed that hackers gained access on the IRS website to tax returns for 100,000 taxpayers (more here). Yesterday, the IRS disclosed that the true number is 330,000.

August 18, 2015 in IRS News, Tax | Permalink | Comments (0)

John Oliver's OurLadyOfPerpetualExemption.com

The IRS Scandal, Day 831

Monday, August 17, 2015

Simkovic Presents The Knowledge Tax Today At Loyola-L.A.

Simkovic 2Michael Simkovic (Seton Hall) presents The Knowledge Tax, 82 U. Chi. L. Rev. ___ (2015), at Loyola-L.A. today as part of its Tax Policy Colloquium Series:

Labor economists struggle to explain why the rates of return to higher education have remained much higher than the rates of return to other investments. This article proposes a novel explanation: distortionary taxation.

Economic theory suggests that when investments that are substitutes for one another are taxed inconsistently, investors are less likely to choose the investment option that is taxed more heavily. Unfavorable tax treatment of higher education relative to other forms of investment could create an undersupply of educated labor. This distortion would reduce economic growth and social welfare.

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August 17, 2015 in Colloquia, Scholarship, Tax | Permalink | Comments (12)

IRS May Tax Free Employee Meals At Silicon Valley Tech Companies

ComfortSilicon Valley Business Journal, No More Free Meals for Tech Workers? IRS Advances Project That Could Tax On-Site Food Perks:

The idea that there’s no such thing as a free lunch could eventually ring true for Silicon Valley employees who get complimentary meals at work, as the Internal Revenue Service and Department of the Treasury have taken a step closer to potentially taxing such meals.

Last year, the IRS suggested in its Priority Guidance Plan that it was exploring modifying sections of the Tax Code concerning employer-provided meals that it believed were problematic. Two weeks ago, the agency suggested in its new annual Priority Guidance Plan that it has moved beyond exploring the possibility of making changes to actually starting a project that could change regulations on these meals. The move does not necessarily mean that the IRS will start taxing meals.

However, the guidance plan issued July 31 means the issue remains on the agency’s radar screen and it is devoting more time and resources to settling the question, which could indeed result in eventually taxing meals.

Silicon Valley companies like Google Inc., Yahoo Inc. and Facebook Inc., in addition to many non-tech companies, provide their employees with free meals and loads of snacks for convenience, and to keep them happy and at work. Google told the Silicon Valley Business Journal that in Mountain View alone, it serves 30,000 meals per day at its 30-plus campus cafés.

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August 17, 2015 in IRS News, Tax | Permalink | Comments (3)

Tax Papers At 2015 Big Ten Junior Law Faculty Conference

Big TenTax papers at last week's 2015 Big Ten Junior Law Faculty Conference at Indiana:

Margaret Ryznar (Indiana-Indianapolis), An Easy Solution to the Marriage Penalty:

The marriage penalty in the federal income tax continues to persist despite universal agreement that there is no place for it. This Article is modest yet revolutionary in its proposal to eliminate the marriage penalty: to create another tax filing status for two-income earning couples that earn an amount within a particular percentage of each other. This filing status would offer double the rates of single filers because it accommodates two incomes. Such a simple solution to the marriage penalty causes the least upheaval to the general legal framework that treats spouses as a single economic unit. It has the additional attributes of finally no longer penalizing a significant subset of women who work and marry.

Adam Thimmesch (Nebraska), Transacting in Data: Tax, Privacy, and the New Economy:

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August 17, 2015 in Conferences, Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 830

IRS Logo 2 Forbes:  Gross Mismanagement At IRS, Says Senate Report, by Robert W. Wood:

After a long wait, the Finance Committee has released a bipartisan report on the IRS scandal. Since some private taxpayer information was at issue, there have been closed door sessions and interviews leading up to the report. The IRS wasn’t really targeting, it was just incompetent, the report seems to suggest. Top IRS managers did not stay informed about the applications involving possible political advocacy.

And management, top management at least, didn’t really monitor things. Lois Lerner was on top of the issues as early as 2010, but failed to tell her superiors, the report suggests. In fact, the report says that under Ms. Lerner’s leadership, the IRS Exempt Organizations unit launched seven initiatives to handle applications from Tea Party and other groups for tax-exempt status. Each of the seven initiatives failed.

That meant long delays—as long as five years—for some organizations awaiting decisions on IRS tax exemption applications. What’s more, the report says IRS employees handling exemption applications did not appear to be worried about delays or customer service. In some cases, organizations got tired of waiting and disbanded. For others, the delays meant forgone grants.

This report was delayed for over a year after the IRS belatedly informed the Senate Finance Committee that the IRS could not recover large numbers of potentially responsive documents. They were lost when Lois Lerner’s hard drive crashed in 2011. 

The report acknowledges that the IRS functioned in a politicized atmosphere following the the Supreme Court’s Citizens United decision. ...

“Undoubtedly,” the report says ”these events will erode public confidence and sow doubt about the impartiality of the IRS. The lack of candor by IRS management about the circumstances surrounding Lois Lerner’s missing emails may only serve to reinforce those doubts.” It is hard to argue with that.

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August 17, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (5)

TaxProf Blog Weekend Roundup

Sunday, August 16, 2015

IRS: Identity Theft Victims Can Receive Tax-Free Data Protection Services

ID TheftIRS Announcement 2015-22

The IRS will not assert that an individual whose personal information may have been compromised in a data breach must include in gross income the value of the identity protection services provided by the organization that experienced the data breach. Additionally, the IRS will not assert that an employer providing identity protection services to employees whose personal information may have been compromised in a data breach of the employer’s (or employer’s agent or service provider’s) recordkeeping system must include the value of the identity protection services in the employees’ gross income and wages. The IRS will also not assert that these amounts must be reported on an information return (such as Form W-2 or Form 1099-MISC) filed with respect to such individuals. This announcement does not apply to cash received in lieu of identity protection services, or to identity protection services received for reasons other than as a result of a data breach, such as identity protection services received in connection with an employee’s compensation benefit package. This announcement also does not apply to proceeds received under an identity theft insurance policy; the treatment of insurance recoveries is governed by existing law.

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August 16, 2015 in IRS News, Tax | Permalink | Comments (1)

The Top 5 Tax Paper Downloads

The IRS Scandal, Day 829

IRS Logo 2Renew America, True the Vote Still Pursuing IRS, Lois Lerner and Election Integrity:

Sometimes turn around IS fair play.

Especially when a fair count of legitimate votes is at issue.

IRS targets True the Vote and its founder-president Catherine Engelbrecht are still pursuing the Internal Revenue Service, Lois Lerner, now retired in disgrace, and election integrity.

True the Vote's latest weekly email declared:

Just When You Thought the IRS Targeting Scheme Couldn't Get More Twisted...

You would think that TTV would eventually become jaded after years of bombshells in the wake of Lois Lerner's infamous May 2013 admission to targeting organizations presumed to be conservative. In recent days, however, we have come to understand new wrinkles in the case that offer a whole new dimension of insight. The Wall Street Journalrecently reported that Lerner was working directly with the chief officer of the Wisconsin Government Accountability Board – the public entity charged with enforcing election and campaign finance laws – during the targeting period. According to the report, "Emails we've seen show that between 2011 and 2013 the two were in contact on multiple occasions, sharing articles on topics including greater donor disclosure and Wisconsin's recall elections ... This timing is significant because those were the years when the IRS increased its harassment of conservative groups and Wisconsin prosecutors gathered information that would lead to the John Doe probe that officially opened in September 2012." This revelation helps make sense of the fact that multiple IRS targets were questioned about what they knew of TTV's involvement in the 2012 Verify the Recall effort in Wisconsin. The hits just keep on coming."

The Wisconsin Supreme Court just terminated the John Doe probe as baseless in law and reason.

The obviously political IRS targeting of conservative organizations and Engelbrecht personally may have been motivated by the desire to have President Obama reelected, but don't expect the Obama Justice Department to pursue that.

Fortunately, True the Vote remains on the case.

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August 16, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Saturday, August 15, 2015

This Week's Ten Most Popular TaxProf Blog Posts

Property Taxes Are Highest In New Jersey, Illinois; Lowest In Hawaii, Alabama

The IRS Scandal, Day 828

IRS Logo 2 MSNBC, The Rachel Maddow Show/The MaddowBlog:

Fox News’ Martha MacCallum posed a question to Louisiana Gov. Bobby Jindal (R), which he seemed eager to answer. From the transcript:

MACCALLUM: On the same topic, let’s go to Governor Jindal. Carly Fiorina, also on the stage, said that she would go so far as to shut down the government over the issue of defunding Planned Parenthood. Would you do that? Would you be willing to shut down the government when it comes to defunding this group?

JINDAL: Well, a couple of things. Planned Parenthood had better hope that Hillary Clinton wins this election, because I guarantee under President Jindal, January 2017, the Department of Justice and the IRS and everybody else that we can send from the federal government will be going in to Planned Parenthood.

This generated no real follow-up, which is a shame because it was an amazing answer. According to Jindal, his administration would dispatch the Internal Revenue Service to target Planned Parenthood because, well, Bobby Jindal doesn’t like Planned Parenthood.

But there’s a small problem with idea: it’s brazenly illegal.

Remember, Richard Nixon, among other things, tried to use the IRS as a political weapon to target his political foes – and had he not resigned in disgrace, Nixon would have been impeached for having done so. More recently, Republicans and much of the Beltway media accused President Obama of using the IRS to punish far-right Tea Party groups. The allegations proved baseless, but for a short while, Republicans saw this as a devastating scandal involving an abusive, out-of-control White House using the IRS as a political weapon.

And yet, there was Jindal – according to some, one of the smarter GOP officials on the national scene – offering a striking example of a presidential candidate vowing to commit impeachable offenses before the election even happens.

Mother Jones, Bobby Jindal Thinks the IRS Shouldn't Be Used to Target Political Enemies, Except For His

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August 15, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (2)

Friday, August 14, 2015

Weekly Tax Roundup

Weekly SSRN Tax Roundup

Controversies In Tax Law: A Matter Of Perspective

Controversies in Tax Law CoverControversies in Tax Law: A Matter of Perspective (Anthony C. Infanti, ed. Ashgate 2015):

This volume presents a new approach to today’s tax controversies, reflecting that debates about taxation often turn on the differing worldviews of the debate participants. For instance, a central tension in academic tax literature - which is filtering into everyday discussions of tax law - exists between 'mainstream' and 'critical' tax theorists. This tension results from a clash of perspectives: Is taxation primarily a matter of social science or of social justice? Should tax policy debates be grounded in economics or in critical race, feminist, queer, and other outsider perspectives?

To capture and interrogate what often seems like a chasm between the different sides of tax debates, this collection comprises a series of pairs of essays. Each pair approaches a single area of controversy from two different perspectives - with one essay usually taking a 'mainstream' perspective and the other a 'critical' perspective. In writing their contributions, the authors read and incorporated reactions to each other’s essays and paid specific attention to the influence of perspective on both the area of controversy and their contribution to the debate. With contributions from leading mainstream and critical tax scholars, this volume takes the first step toward bridging the gap between these differing perspectives on tax law and policy.

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August 14, 2015 in Book Club, Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 827

IRS Logo 2 Politico, Lerner Slammed ‘Evil and Dishonest’ GOP Inquisitors:

At the height of the scandal over the IRS’ handling of political nonprofits, Lois Lerner privately let loose at her Republican tormentors, saying she invoked the Fifth Amendment because they had been “evil and dishonest” and accusing them of “hate mongering.”

A POLITICO examination of thousands of pages of emails and other material recently released by the Senate Finance Committee found previously unreported comments from Lerner, the central figure in the controversy, on everything from the inability of career IRS agents to handle “the sensitive stuff” to her views on the fiscal cliff.

When she was under investigation by Congress, she offered a blistering critique of her inquisitors. In a March 6, 2014, email, Lerner told a friend: “They called me back to testify on the IRS ‘scandal,’ and I too[k] the 5th again because they had been so evil and dishonest in my lawyer’s dealings with them.” ...

Republicans see a clear link between Lerner’s comments and the agency’s actions; Democrats don’t. The lack of ironclad proof that agents deliberately targeted groups because of political bias — or that they didn’t — means neither party can separate itself from the narrative it has held to for two years.

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August 14, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (1)

Thursday, August 13, 2015

Tax Court Petition: Can Boston Bruins (And Other Pro Sports Teams) Deduct 100% Of Meal Expenses At Away Games; Is Hotel A Team's 'Business Premises'?

BruinBloomberg BNA, Boston Bruins Raise Controversy by Arguing That Meals Are Deductible, Team Is "World Class", by Syd Gernstein:

[A] recent case filed in the U.S. Tax Court, Jacobs v. Commissioner, No. 19009-15 (petition filed July 27, 2015), caught my eye. 

At issue is whether the Boston Bruins hockey club may deduct 100% of the costs it incurred to provide its players and staff with meals while travelling to away games. The case poses the IRS and Tax Court with some fairly interesting questions concerning the deductibility of employee fringe benefits. ...

And, although it is not clear on the face of the Bruins’ Tax Court petition, I think it is this employer operated eating facility exception that the Bruins are going to rely on to argue that the meals are 100% deductible.

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August 13, 2015 in New Cases, Tax | Permalink | Comments (5)

Tax Lawyer Charged With Kidnapping, Attempted Murder

Tax LawyerAbove the Law, Attempted Murder Charge Puts A Real Crimp In Man’s Tax Law Practice:

A North Carolina tax attorney earned a suspension over some criminal charges he faces in neighboring South Carolina. Is it anything serious? Depends on how you feel about kidnapping and attempted murder.

So… yeah, pretty serious.

Tax attorneys, man. Why is it always the quiet ones who get in this kind trouble?

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August 13, 2015 in Tax | Permalink | Comments (0)

University Of Auckland Seeks To Hire A Tax Prof

AucklandThe University of Auckland, Faculty of Business and Economics, seeks to hire a Professor of Taxation in the Department of Commercial Law:

The position is intended for candidates with leadership experience, a relevant PhD and an international research portfolio. The candidate must demonstrate a strong commitment to excellence in research in taxation and will be able to demonstrate excellence in the teaching at undergraduate and postgraduate levels. Evidence of leadership in research, a significant international standing, high quality teaching and supervision at PhD level is required. Ideally, in addition to research and teaching in taxation law, the candidate would also be researching, teaching and supervising in company law.

The main purpose of this position is to:

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August 13, 2015 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)

Republicans Seek To Ban Unions For IRS Employees

NTEUWashington Post, Republican Plan to Eliminate IRS Union, As It Elects New Leadership, Could Threaten Federal Unions Generally:

Republicans have an unwelcome gift for the retiring president of the National Treasury Employees Union (NTEU) and its newly elected officers.

A proposal by Senate Finance Committee Republicans would prohibit unions at the Internal Revenue Service. That would cut the labor organization’s membership in half.

If this attack is successful it would decimate NTEU and leave IRS staffers without union representation. More that than, it would weaken federal unions generally by making them all vulnerable to a similar assault.

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August 13, 2015 in IRS News, Tax | Permalink | Comments (9)

The IRS Scandal, Day 826

IRS Logo 2 Investor's Business Daily op-ed, Jailtime For IRS' Political Hacks:

Corruption: After a year's stalling by the IRS, the Senate Finance Committee has released its bipartisan report, denouncing the tax-collection agency's partisanship and incompetence. When are these people going to jail?

The Senate report wasn't entirely satisfactory, given that its criticism was primarily in the compromise language of "gross mismanagement" to describe the agency's targeting of Tea Party dissident groups.

Using legal technicalities to silence and repress political dissent under the color of the nation's most feared enforcement agency isn't mismanagement. It's a crime.

It's incompatible with democracy and it shatters public confidence in the rule of law. It's the very crime the State Department is now condemning in Venezuela: the use of legal technicalities to halt popular opposition candidates from running for office. Until now, this kind of activity has had no precedent in our country, and it must be stopped before it becomes the standard.

This is far from mere incompetence or gross mismanagement. It was a highly competent operation to silence dissent. Yet no one has been sanctioned or punished, despite there being laws on the books dating back to the beginning of a professional civil service, that forbid and punish partisan motives in what should be impartial law. Already some observers believe the IRS swung the last election for the Democrats with these activities.

Not only did the IRS target Tea Party groups with unconscionable delays and intrusive questions, it went for their families, too. Young Bristol Palin learned yesterday that just being the daughter of former Alaska Gov. and Tea Party favorite Sarah Palin put her in the IRS' sights. Sarah Palin's father was targeted, too.

The agency also obstructed justice, first falsely claiming that its illegal targeting was only the work of rogue agents in its Cincinnati office. Then, as that lie fell apart, IRS moved to destroy evidence in the thousands of missing emails on IRS tax exempt organizations chief Lois Lerner's computer. Conveniently for them, it was declared lost forever in a hard drive crash — until it wasn't.

Now it's relying on its allies in the Senate and among anti-Tea Party Democrats in the House for cover, having them declare it incompetence, not a crime.

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August 13, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Wednesday, August 12, 2015

NY Times: Let's Keep The Cadillac Tax

New York Times editorial, Keep the Tax on High-End Health Plans:

Congress is under pressure to repeal an impending tax on the so-called Cadillac health plans offered by many employers. Scores of legislators from each party have endorsed separate bills to repeal it, and candidates for office, pressed by lobbyists from labor unions, business groups and insurers, may join the call for repeal. The tax should probably be adjusted by Congress to eliminate inequities, but outright repeal would be a mistake that would undermine the viability of the Affordable Care Act.

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August 12, 2015 in Tax | Permalink | Comments (0)

Graetz: The End Of Energy

GraetzMichael Graetz (Columbia), The End of Energy The Unmaking of America's Environment, Security, and Independence (Chapters 11 & 12) (MIT Press, 2011):

With the permission of MIT Press, this document includes Chapters 11 and 12 from my 2011 book, The End of Energy: The Unmaking of America’s Environment, Security, and Independence. These two chapters discuss some of the history and merits of taxes, subsidies, and regulation (including cap and trade) as mechanisms to implement policies to curb greenhouse gases. In light of the renewed interest in and discussion of command and control regulations and carbon taxes, these chapters may be useful to readers who do not have the book. The bibliographic material relating to these chapters is contained in the book and has been omitted here.

Description of the book:

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August 12, 2015 in Book Club, Scholarship, Tax | Permalink | Comments (1)

The IRS Scandal, Day 825

IRS Logo 2 Forbes:  Bristol Palin At Heart Of IRS Scandal - Who Knew?, by Peter J. Reilly:

What Does Bristol Plain Have To Do With The IRS Scandal?
The section of the report where this revelation is included is titled “Lois Lerner’s Management of the EO Examination Unit Reveal Her Political Bias Against Conservative Organization”. In the subsection “Lois Lerner Intervened in Audit Decisions Involving Political Organizations” we have

Teen Pregnancy Organization Affiliated With Bristol Palin
Another example of Lerner’s interest in conservative organizations occurred in 2011, when Lerner considered opening an audit of a group with ties to Bristol Palin.  There were reports that Palin received $332,500 in compensation from the Candie’s Foundation, a nonprofit organization that seeks to prevent teen pregnancy. Upon receiving an article containing this information, Lerner took the initiative to ask her senior advisors if the IRS should open an audit of the organization:

“Thoughts on the Bristol Palin issue? I’m curious that a [private foundation] can pay any amount to someone who is not a [disqualified person]? It is a [private foundation] right? Even if it were a [public charity] – would that be private benefit – what are the consequences? I’m asking because I don’t know whether to send to Exam as a referral”.

Lerner’s willingness to act on this particular news article – among many that reached her inbox each day – shows that she was paying close attention to conservative politicians and organizations. In its review of nearly 1,500,000 pages of documents provided by the IRS, Majority staff did not find any instances where Lerner referred a progressive organization for audit based on a news article.

Whatever her faults might be Lois Lerner is up on the intersection of pop culture with tax law, although there is some indication that she is either not a careful reader or discerning in her choices of where to read, because she clearly did not grasp what was going on. It seems that her inference was that the Palin clan had started a teen pregnancy foundation, since they had some experience with it. That was not at all what had happened.  You actually don’t have to go beyond forbes.com to get the story behind the story. ...

What Does This Say About Lois Lerner?
I think the Republicans have busted her on this one.  That email really is evidence of reflexive anti-conservatism. Certain liberals have a Pavlovian response to the Palin clan. The only thing that gets them to jump up and bark better is mention of the Koch brothers, but there does not seem to be anything funny about them.  Conservatives seem to have more triggers – Jesse Jackson, Hillary Clinton, Benghazi, but the same principle is at work.

What Does This Say About The Scandal?
So what we have is a reflexive anit-conservative appointed to head the IRS Exempt Group during the Bush administration by an IRS Commissioner appointed by Bush.  Is it possible that the big money Republicans figured that they had the IRS exempt group outgunned, but that a reflexive anti-conservative in that position would be tough on the more conservative part of the party. The other thing that the report mentions is that during the whole period of the scandal no audits of exempts were initiated over the political spending issue.  So the established dark money organizations were let off scot-free.  All the grief went to the Tea Party insurgents who were least able to cope with it.

Remember Lois Lerner Is Not The IRS
The other thing that comes out in the report is that Lois Lerner did not like the line IRS people who were doing the mundane work of the agency and they did not feel supported by her.

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August 12, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Tuesday, August 11, 2015

Accounting Hiring, Enrollments Are At Record Levels

Journal of Accountancy, Hiring and Enrollments Reached Record Highs Last Year:

Unlike many in their Millennial cohort who face continued underemployment, accounting graduates find themselves in high demand from employers. Top students are often recruited, offered jobs during or after their internships, and enticed with signing bonuses.

According to the AICPA report Trends in the Supply of Accounting Graduates and the Demand for Public Accounting Recruits, hiring at public accounting firms jumped 7% to reach record levels in 2013–14. Ninety-one percent of all firms said they expect to hire accounting graduates at the same or higher levels in 2015.

CPA

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August 11, 2015 in Tax | Permalink | Comments (2)

Hillary Clinton And Bernie Sanders Want To Use The Tax Code To Weaken Wall Street

Wall StreetVox:  Hillary Clinton and Bernie Sanders Want to Use the Tax Code to Weaken Wall Street, by Ezra Klein:

In 2008, candidate Barack Obama's tax policies sought to achieve the normal ends of Democratic tax policy: Fund the basic operations of the federal government, give more money to the poor and middle class, and take more money from the rich. That is, for the most part, what we expect Democratic tax plans to do.

But the tax plans Hillary Clinton and Bernie Sanders have unveiled are more radical than that. Yes, they raise money to fund government operations, and sure, they redistribute wealth a bit. But their real aim is far more ambitious: They want to change the way the economy actually works.

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August 11, 2015 in Political News, Tax | Permalink | Comments (2)