TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

A Member of the Law Professor Blogs Network

Thursday, July 23, 2015

Cono Namorato Sails Through Senate Hearing On Nomination To Be Assistant Attorney General, Tax Division

ConoRepublicans and Democrats alike praised  Cono R. Namorato, President Obama's nominee to be Assistant Attorney General for the Tax Division of the Department of Justice, in a Senate Judiciary Committee hearing yesterday. Mr. Namorato's testimony is here.

Cono R. Namorato is currently a Member of the law firm Caplin & Drysdale, a position he has held since 2006 and previously from 1978 to 2004. From 2004 to 2006, Mr. Namorato served as Acting Deputy Commissioner for certain designated matters and as Director of the Office of Professional Responsibility for the Internal Revenue Service (IRS) in the Department of the Treasury. Before beginning his career at Caplin & Drysdale, Mr. Namorato held various positions within the Tax Division of the Department of Justice (DOJ), including Deputy Assistant Attorney General from 1977 to 1978, Assistant Chief and then Chief of the Criminal Section from 1973 to 1977, and Supervisory Trial Attorney and Trial Attorney from 1968 to 1973. Mr. Namorato began his career in 1963 as a Special Agent for the Criminal Investigation Division of the IRS in the Brooklyn District.

Continue reading

July 23, 2015 in Congressional News, Tax | Permalink | Comments (1)

George Washington Seeks To Hire A Tax Prof

George Washington Law Logo (2016)GW Jobs:

The George Washington University Law School may make one full-time junior faculty appointment in the Tax area. 

Applications for lateral positions are being accepted on an ongoing basis until the position is filled.

Continue reading

July 23, 2015 in Legal Education, Tax, Tax Prof Jobs | Permalink | Comments (0)

The IRS Scandal, Day 805

IRS Logo 2Washington Examiner, Obama to Jon Stewart: IRS Never Targeted Conservatives:

President Obama in a taped appearance with the Daily's Shows Jon Stewart Tuesday denied that IRS targeted conservatives, an assertion that Stewart then appeared to ridicule him for making. ...

[President Obama noted] that Stewart and others had jumped on a story that employees had been targeting conservatives.

"It turns out," Obama said, that wasn't true. He said Congress "passed a crummy law" that provided vague guidance to the people who worked at the IRS. And he said that employees implemented the law "poorly and stupidly."

"Boy, you really do have only a year left," Stewart interjected.

But Obama jumped back in, blaming Congress for not providing enough funds for both the IRS and the Department of Veterans Affairs to work properly.

The real scandal around the IRS, he said, "is that they have been so poorly funded that they cannot go after these folks who are deliberately avoiding tax payments."

Continue reading

July 23, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Wednesday, July 22, 2015

Rental Car Companies Cannot Deduct Collision Damages To Its Vehicles As § 165 Casualty Losses

Rental CarChief Counsel Memorandum 2015-29-008 (July 17, 2015):

[T]he Taxpayer operates E. The amount of the overall repair costs for damaged vehicles is large. The Taxpayer did not suffer unusual casualty or an abnormal loss because it is normal and expected that its vehicles will be damaged when it rents such vehicles to numerous customers to be operated over public highways.

Continue reading

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

Bernstein: The Case For A Financial Transaction Tax

FTTNew York Times op-ed:  The Case for a Tax on Financial Transactions, by Jared Bernstein (Center on Budget and Policy Priorities):

Senator Bernie Sanders ... [has proposed] a financial transaction tax: a small excise tax, typically a few hundredths of a percent, on trades of stocks, bonds, derivatives and other securities. An itty-bitty, one-basis-point transaction tax (a basis point is one-hundredth of a percentage point, or 0.01 percent) would raise $185 billion over 10 years, according to new estimates by the nonpartisan Tax Policy Center. That would be enough to finance an ambitious expansion of prekindergarten programs for 3- and 4-year-olds and restore funding of college assistance for low-income students.

Continue reading

July 22, 2015 in Tax | Permalink | Comments (0)

Who’s Right on Marijuana? Justice Or The IRS?

Vapor RoomFollowing up on my previous post, 9th Circuit: Marijuana Dispensaries Cannot Deduct Business Expenses, Must Pay Taxes On 100% Of Their Gross Income:  Newsweek, Who’s Right on Marijuana? Justice Or the IRS?:

In downtown Washington, D.C., the Department of Justice asserts that marijuana enterprises are free to exist, while immediately across 10th Street, the IRS tells those businesses they are illegal drug-trafficking operations ineligible for the benefits other corporate entities enjoy.

Which is it? Right now, it is both. This dual status presents commercial challenges for marijuana businesses, carrying serious consequences for individuals, patients, investors, law enforcement, courts, accountants and others.

Last week, one challenge—the issue of tax deductions for marijuana enterprises—had its day in court. In Olive v. Commissioner of Internal Revenue [CIR], the U.S. Court of Appeals for the Ninth Circuit reviewed whether a medical marijuana enterprise in California—Vapor Room Herbal Center in San Francisco—could deduct business expenses under U.S. tax law (the Internal Revenue Code).

The case made its way to the Ninth Circuit on appeal from a decision from the United States Tax Court. The Tax Court previously ruled in favor of the commissioner of the IRS because Vapor Room Herbal Center was a business that “consist[ed] of trafficking in controlled substances” (26 U.S.C. § 280E). Section 280E of the tax code limits businesses from deducting business expenses under such circumstances.

The Ninth Circuit upheld the Tax Court decision. The appeals court outlined two clear reasons (among others) why Vapor Room Herbal Center could not deduct business expenses.

Continue reading

July 22, 2015 in IRS News, New Cases, Tax | Permalink | Comments (1)

NYC Requires Disclosure Of LLC Members Who Buy/Sell Real Estate

I Love New YorkNew York Times, New Disclosure Rules for Shell Companies in New York Luxury Real Estate Sales:

Seeking to increase transparency in the luxury real estate market, the de Blasio administration has imposed new disclosure requirements on shell companies buying or selling property in New York City.

The changes will help remove a “veil of secrecy” surrounding high-end real estate sales by requiring that the names of all members of a shell company buying or selling property be disclosed to the city, the finance commissioner, Jacques Jiha, said.

Continue reading

July 22, 2015 in Tax | Permalink | Comments (1)

Tax Court Throws Marvel For $16 Million Loss In NOL Adjustment Case

MarvelMarvel Entertainment Group v. Commissioner, 145 T.C. No. 2 (July 21, 2015):

MEG was an affiliated group that filed consolidated returns. On Dec. 27, 1996, certain MEG member entities filed for bankruptcy under 11 U.S.C. ch. 11 and subsequently excluded cancellation of indebtedness (COD) income from their respective gross incomes under I.R.C. sec. 108(a)(1)(A) for MEG’s short taxable year ending Oct. 1, 1998. Pursuant to I.R.C. sec. 108(b)(2)(A), MEG reduced each member entity’s allocable share of consolidated net operating loss (CNOL) by each member entity’s previously excluded COD income. MEG carried forward into its successor affiliated group a $47,424,026 CNOL and used this amount to offset income of the successor group for its taxable years ending Dec. 31, 2003 and 2004.

Continue reading

July 22, 2015 in New Cases, Tax | Permalink | Comments (0)

Rand Paul: How Would You Kill The Tax Code?

July 22, 2015 in Political News, Tax | Permalink | Comments (3)

The IRS Scandal, Day 804

IRS Logo 2Senate Finance Committee Press Release, Finance Committee to Review IRS Report in Closed Session:

The Senate Finance Committee today voted to hold an upcoming executive session, which is required to be closed, to review findings from the Committee’s bipartisan investigation into the Internal Revenue Service (IRS) treatment of organizations applying for tax-exempt status and discuss release of the final report. In the closed session, as required by law, members will be briefed by Committee staff with 6103 authority to review private taxpayer information. This vote follows the completion of the Treasury Inspector General for Tax Administration (TIGTA) investigation into the cause of Lois Lerner’s hard drive crash, and TIGTA’s efforts to recover any emails that may have been lost as a result of the crash.”

“With TIGTA’s investigation completed, we are now able to move forward with the Committee’s bipartisan report into the IRS’s treatment of tax-exempt organizations,” Hatch and Wyden said. “Throughout this process, we have been committed to ensuring a complete and thorough investigation, and this closed session will give members an opportunity to review our findings and vote to submit the report to the full Senate if they choose.” 

The date for the closed session has not been announced but is expected to occur before the Senate breaks for the August state work period.

BACKGROUND

On May 20, 2013, the leaders of the Senate Finance Committee sent a detailed, 41-question document request to the Internal Revenue Service (IRS) seeking information about the alleged targeting by the IRS of certain social welfare organizations applying for tax-exempt status based on those organizations’ presumed political activities. That letter marked the beginning of a bipartisan investigation by the Committee into the IRS’ activities related to the review of tax-exempt applications and related issues raised by the Treasury Inspector General for Tax Administration (TIGTA) in his May 14, 2013, report. 

To date, Committee investigators have interviewed more than 30 current and former IRS and Treasury employees and have reviewed nearly 1.5 million pages of documents. In June 2014, the Committee learned that the IRS was not able to produce all emails originating from Lois Lerner and other IRS officials needed to complete the Senate Finance Committee investigation. As a result, Chairman Hatch and Ranking Member Wyden asked TIGTA to investigate the matter. Specifically, TIGTA looked into: 1) what records the IRS lost; 2) if there was any attempt to deliberately destroy records, or otherwise impede congressional and federal investigations; and 3) whether any of the missing information can be recovered.

TIGTA provided their findings to the Committee on June 30, 2015.

The Hill, Senate Finance to Discuss IRS in Secret:

The Senate Finance Committee is going to meet in secret in the coming weeks to delve into the panel's bipartisan inquiry into the IRS's improper treatment of Tea Party groups.

Finance Chairman Orrin Hatch (R-Utah) and the committee's top Democrat, Sen. Ron Wyden (D-Ore.), have said that they want to release the report before the Senate goes on its August recess, but have yet to set a date for the closed session. The committee needs to close the session over its IRS report to protect taxpayer information, the Finance panel said Tuesday.

Fox News, Senate Finance Working to Release IRS Targeting Report

Continue reading

July 22, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (4)

Tuesday, July 21, 2015

Diana Leyden Leaves UConn To Be NYC Taxpayer Advocate

LeydenFrom the Hartford Courant:

Thumbs up to Diana Leyden, founder and director of the UConn School of Law tax clinic. Since 1999, she has run the free legal service that helps low-income earners with their tax problems. She is leaving for a newly created position, taxpayer advocate for the New York City Finance Department. In Connecticut, she has trained and supervised many law students (as well as volunteer attorneys) to represent clients in audits and at tax court, and she has helped set up free tax-preparation sites around Hartford so families can claim the Earned Income Tax Credit. She even wrote the book on the topic: Advocating for Low Income Taxpayers: A Clinical Studies Casebook.

July 21, 2015 in Legal Education, Tax, Tax Prof Moves | Permalink | Comments (0)

Shobe: Disaggregating The State And Local Tax Deduction

Gladriel Shobe (Weil, Gotshal & Manges, New York), Disaggregating the State and Local Tax Deduction, 35 Va. Tax Rev. ___ (2015):

The appropriateness of a federal deduction for state and local taxes is a frequent point of contention among scholars and policymakers, and various proposals have been offered to limit or modify the deduction. All of the debates and proposals surrounding the deduction treat states and localities as if they were the same. This Article disaggregates state and local governments to show that the way they tax and spend is different in many ways that are relevant to the deduction. When state and local government revenues are disaggregated, it becomes clear that the “state and local tax deduction” is actually two distinct deductions, one primarily for state income taxes and another primarily for local property taxes. Property taxes, which make up nearly three-quarters of local taxes, are fully deductible. Sales taxes, which make up nearly half of state revenue, can only be deducted in lieu of income taxes, an option that few itemizing taxpayers take. When state and local expenditures are disaggregated, it becomes apparent that local expenditures provide more direct benefits to taxpayers living within relatively homogeneous localities while state expenditures provide fewer public benefits to those who pay state taxes and are more likely to result in redistribution.

Continue reading

July 21, 2015 in Scholarship, Tax | Permalink | Comments (2)

ABA Tax Section Publishes Summer 2015 Issue Of News Quarterly

ABA News QuarterlyThe ABA Tax Section has published 34 News Quarterly No. 4 (Summer 2015):

Continue reading

July 21, 2015 in ABA Tax Section, Tax | Permalink | Comments (0)

Microsoft, IRS Square Off In Court Today: 'The IRS Claims It Has No Money To Answer Its Phones, Yet Can Pay Millions To Hire Private Lawyers'

MicrosoftSeattle Times, Microsoft, IRS Going to Court Over Longtime Tax Scrutiny:

Microsoft and the federal government have squared off in court over the years, and this week another high-stakes match is in the offing, this time involving the Internal Revenue Service.

The case is part of the IRS’ campaign to ensure that U.S. companies, particularly those in the tech sector, follow the law when they make moves involving overseas subsidiaries that have tax consequences. Such practices have been the subject of congressional hearings and are a hotly debated political topic.

Continue reading

July 21, 2015 in IRS News, Tax | Permalink | Comments (6)

The IRS Scandal, Day 803

IRS Logo 2Forbes:  IRS Denies Exempt Status To Group Helping Undocumented Aliens Leave USA, by Peter J. Reilly:

I have been something of a skeptic of the narrative of the IRS Exempt Division targeting conservative organizations. As a matter of fact, one of my less than attentive commenters recently accused me of being, if you will excuse the expression, a Democrat. So when I see something, otherwise unremarked, that might support the narrative, I’m going to take notice. Such is Private Letter Ruling 201527043. The PLR is a denial of exempt status to an organization that I will call Ticket Back Home (TBH). (The public version of a private letter ruling does not include identifying information, so when I write about them I try to make up an appropriate name.)

TBH is concerned with illegal immigration, which is one of the Tea Party’s biggest issues. Being descended from some of the huddled masses yearning to breathe free, famine refugees no less, I have a hard time connecting emotionally with the Tea Party animus toward the undocumented. Even if he is breaking the law, I just can’t get mad at somebody who is shaping up at the Home Depot to go hang drywall or do some landscaping so he can send money home to the Old Country. ...

I have been unable to penetrate the redaction on this ruling, so I have no candidates for the particular organization that was denied exempt status by this ruling. Reading between the lines of the ruling, it does seem to be coming from a place of right-wing populism, that I am not really that sympathetic with. Nonetheless, I think the IRS case for denying exempt status is on the weak side.

One thing that I have noted about the exempt organization controversy is that a lot of noise is made about all the hoops that organizations have to jump through to get exempt status, but there is little attention paid when there is an outright denial. This ruling, which has received no other coverage I could find is another example of that phenomenon.

I can’t rule out that there is something altogether unsavory about this group that would cause me to sympathize with IRS in turning them down, but the rationale in the ruling does not really stand up.

Continue reading

July 21, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Monday, July 20, 2015

America's Best Program For The Poor May Be Even Better Than We Thought

EITC Logo (2014)Hilary W. Hoynes (UC-Berkeley) & Ankur J. Patel (U.S. Treasury Department), Effective Policy for Reducing Inequality? The Earned Income Tax Credit and the Distribution of Income:

In this paper, we examine the effect of the EITC on the employment and income of single mothers with children. We provide the first comprehensive estimates of this central safety net policy on the full distribution of after-tax and transfer income. We use a quasi-experiment approach, using variation in generosity due to policy expansions across tax years and family sizes. Our results show that a policy-induced $1000 increase in the EITC leads to a 7.3 percentage point increase in employment and a 9.4 percentage point reduction in the share of families with after-tax and transfer income below 100% poverty. Event study estimates show no evidence of differential pre-trends, providing strong evidence in support of our research design. We find that the income increasing effects of the EITC are concentrated between 75% and 150% of income-to-poverty with little effect at the lowest income levels (50% poverty and below) and at levels of 250% of poverty and higher. By capturing the indirect effects of the credit on earnings, our results show that static calculations of the anti-poverty effects of the EITC (such as those released based on the Supplemental Poverty Measure, Short 2014) may be underestimated by as much as 50 percent.

Vox, America's Best Program for the Poor May be Even Better Than We Thought:

Continue reading

July 20, 2015 in Scholarship, Tax | Permalink | Comments (5)

The Case For Replacing Investment Income Taxes With An Annual Wealth Tax

S. Douglas Hopkins (Krestel Consulting, Sparta, NJ), The Case for Replacing Investment Income Taxes with an Annual Wealth Tax, 147 Tax Notes 1305 (June 15, 2015):

The tax reform debate in America is largely framed as a conflict of competing principles rather than shared goals and the resulting politicized power struggle has left us blind to a critical flaw in fiscal policy: Structural preferences that shelter wealth from direct taxation are subsidizing unproductive and illiquid capital, thereby distorting investment incentives and obstructing sustainable economic growth and job creation. Those preferences are both inefficient and inequitable, contrary to core principles of both democracy and capitalism.

A properly designed annual wealth tax could facilitate removal of those preferences and serve as the cornerstone element of simultaneously more equitable and efficient comprehensive tax reform: a) stimulating more productive investment and thereby job growth, while allowing us to b) equalize effective tax rates between labor and capital, and c) lower the maximum marginal tax rate to 25%.

Continue reading

July 20, 2015 in Scholarship, Tax | Permalink | Comments (2)

The IRS Scandal, Day 802

IRS Logo 2IJReview, New Documents Link Justice Department to IRS Scandal, But How Ted Cruz Reacted is the Big Surprise:

Has Senator Ted Cruz lost his bark?

When the news broke in mid-2013 that the Internal Revenue Service (IRS) had spent much of the past three years singling out conservative groups for extra scrutiny in their nonprofit applications, Cruz was among the first to call for a special prosecutor to investigate the scandal rather than the Department of Justice (DOJ).

But now that a slew of new documents has come to light this week, revealing that the DOJ, along with the FBI, actually played a much more hands-on role with IRS than previously thought, Cruz has gone mum. ...

Since the release of Judicial Watch’s documents, Cruz has not commented on the documents or released an official press statement. Cruz’s office did not return multiple requests for comment on whether the Republican presidential candidate would call for Loretta Lynch, the current attorney general, to appoint a special prosecutor.

A DOJ spokesman told IJReview only that the “investigation into the IRS’ handling of applications by tax-exempt organizations” is ongoing and declined to comment further.

Continue reading

July 20, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

TaxProf Blog Weekend Roundup

Sunday, July 19, 2015

The Top 5 Tax Paper Downloads

SSRN LogoThere is quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with a new #1 paper and new papers debuting on the list at #4 and #5:

  1. [200 Downloads]  Citizenship Taxation, by Ruth Mason (Virginia)
  2. [196 Downloads]  Reducing Inequality With A Retrospective Tax On Capital, by James Kwak (Connecticut)
  3. [151 Downloads]  Capital Accounts in LLCs and in Partnerships: Powerful Default Rules and Potential Tax Significance, by Donald J. Weidner (Dean, Florida State)
  4. [106 Downloads]  How I Learned to Stop Worrying and Love Our Homeowner Tax Rules, by David Hasen (Colorado)
  5. [101 Downloads]  Safe Harbors, Sure Shipwrecks, by Susan C. Morse (Texas)

July 19, 2015 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

The IRS Scandal, Day 801

IRS Logo 2The Daily Signal, How the IRS, FBI and Justice Department Are Agents of Modern American Tyranny:

Imagine having a vision for your country.

You worked hard to start an organization to promote the ideas and values that you believe can fix our nation.

When you apply for tax-exempt status, which should be a simple matter of paperwork, you face repeated delays and demands from the government that stretch the process across months and years.

Then you learn—not from the government, but from an outside source—that your private information was shared with multiple government agencies, all of whom wanted to “piece together” criminal charges against you.

Imagine being awakened in the middle of the night by a gang of police, shouting and waving their weapons at you. They turn your house inside-out, steal your laptop and phone, then order you not to tell anyone they were there.

All this happened because your political beliefs landed on the wrong side of those officials in power.

This is not a scenario from China, Russia, or Iran.

Welcome to the very real tyranny of modern America.

Think it can’t happen here? Just do some reading on the John Doe proceedings in Wisconsin, or the IRS targeting scandal.

As documents slowly begin to trickle out, the scandal of the IRS targeting conservative political organizations only grows bigger.

We learned a year ago that the IRS was helping the Department of Justice trump up charges on conservative groups by 2013.

New documents show this was in the works as early as 2010.

These two dates perfectly bookend the period of time that conservative groups were intentionally harassed and their applications for tax-exempt status delayed. From the first reaction to Citizens United to the week of Lois Lerner’s misleading admission of targeting, multiple government agencies were in on it together. ...

We have now entered a time in America when citizens can be labeled as “political dissident” and targeted by their own government for harassment and prosecution.

Abuse that formerly only went on in places like China, Russia, and Iran has repeatedly happened right here within the USA. This is not the nation we used to know and love.

Continue reading

July 19, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

Saturday, July 18, 2015

This Week's Ten Most Popular TaxProf Blog Posts

P&G's Use Of Reverse Morris Trust In Selling 43 Beauty Brands To Coty For $12.5 Billion: 'A Thing Of Tax Beauty'

P&GWashington Post:  For Tax Techies, P&G’s Deal With Coty Is a Thing of Beauty, by Allan Sloan:

To most people, Procter & Gamble is known for powerhouse brands such as Tide, Tampax and Pampers. But to people whose stomachs churn when American companies go to great lengths to avoid taxes, there’s a more appropriate P&G product: Pepto-Bismol.

My stomach got a bit queasy when I examined P&G’s deal to sell 43 beauty brands to Coty, the big beauty company, for $12.5 billion (what Coty said it’s paying) or maybe $15 billion (the deal’s value the day it was announced last week).

Either way, the transaction is a thing of beauty to tax techies — although not to regular taxpayers. P&G is using a “Reverse Morris Trust” to avoid billions in taxes that it would have owed in a straight-up sale of the brands, which include Wella, Clairol, Max Factor and Covergirl.

Continue reading

July 18, 2015 in Tax | Permalink | Comments (3)

The IRS Scandal, Days 701-800

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

The IRS Scandal, Day 800

IRS Logo 2Forbes:  Court Agrees Lois Lerner's Group Did Not Trigger Individual Audits, by Peter J. Reilly:

The perennial never-ending IRS scandal now on Day 795 by TaxProf count , in part, is a search for smoking guns.  Sometimes it turns out that all that can be found is unloaded, never fired guns. The response of those promoting the scandal narrative is that, you have to look harder.  Enough is never enough. Sometimes the courts agree that the IRS must search its records more assiduously. Earlier this month, though the DC District issued an enough is enough ruling on one of Judicial Watch’s Freedom of Information Requests.

The FOIA request concerned Lois Lerner’s Cincinnati gang that couldn’t sort straight causing individuals connected in one way or another to the exempt applications to have their individual returns audited.  There is anecdotal evidence that this sort of thing was going on.  Various Tea Party people came forward and indicated that they were audited for the first time after they became involved.  The problem with that type of anecdotal evidence is that every year some number of people are going to be audited for the first time.  You would expect that some number of those audited in say 2011 were active in the Tea Party or similar groups.

You are never going to convince most of those people that it was just luck of the draw.  It would be very hard to make a statistical inference about whether Tea Party affiliation or something like that affected individual audit probability, since it is hard to define the group that the sample is being drawn from and it is possible, even likely, that the people who became involved in the conservative causes were people who already had a higher than average probability of being audited. ...

Certainly Judicial Watch thinks so.  They brought up indications that IRS had communicated with DOJ about prosecuting people for lying on 501(c)(4) exemption applications.  That particular assertion has created some media excitement.  I haven’t figured out what is scandalous about it, particularly since it appears nobody was ever prosecuted.  Those applications are signed under penalties of perjury and there is some indication that on some of them people were kind of shading the truth just a bit.  The Court noted, though, that the communication to DOJ had nothing to do with audit referrals. ...

I suspect that the IRS scandal will keep going at least through the upcoming Presidential election, since it allows Republicans to run against Lois Lerner.  It is apparently also pretty good for fundraising.  According to its 2013 Form 990, Judicial Watch raised over $20 million just shy of $6 million of that was spent on fundraising.  I didn’t see any mention of this DC District decision on their website in the weekly updates.

Continue reading

July 18, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Friday, July 17, 2015

Tax Prof Wedding: Allen Madison

Congratulations to Tax Prof Allen Madison and DaVida Russell, who were married yesterday in Stonington, Connecticut:

Madison

Continue reading

July 17, 2015 in Legal Education, Tax, Tax Prof Weddings, Tax Profs | Permalink | Comments (3)

Weekly Tax Roundup

Weekly SSRN Tax Roundup

Continue reading

July 17, 2015 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Taylor: Should Payroll Taxes Be Repealed?

Willard B. Taylor (NYU & Sullivan & Cromwell), Should Payroll Taxes Be Repealed?, 148 Tax Notes 213 (July 13, 2015):

This article argues that serious consideration should be given to the repeal or payroll taxes, i.e., of FICA and SECA, and of the 3.8% tax on net investment income, and Social Security and Medicare benefits funded with personal income tax revenues. There is no sound reason not to do so, apart from politics, and repeal would focus Congress on the regressive structure of taxes imposed on labor income and eliminate the complexity (and distortion with respect to, e.g., the choice of entity to carry on a business) of three separate taxes.

July 17, 2015 in Scholarship, Tax | Permalink | Comments (1)

Madison: The Denial Of IRS Access To The Taxpayer's Playbook

PlaybookAllen D. Madison (South Dakota), The Denial of IRS Access to its Adversary's Playbook, 60 S.D. L. Rev. 232 (2015):

When examining a corporate taxpayer, the IRS often seeks special accounting documents called tax accrual workpapers. These workpapers often contain privileged documents, but the IRS does not care. It believes it is entitled to the documents despite that the work product doctrine protects the documents from the IRS's investigation authority. Although the law seems clear, some courts appear to have ignored the law and permitted the IRS to obtain the documents in some cases. Differing results under similar circumstances have made the law less clear. The IRS should stop trying to obtain taxpayers' work product, and the Supreme Court should clear up the law with respect to these documents.

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

The IRS Scandal, Day 799

IRS Logo 2Library of Law & Liberty:  Impeachment of the IRS Commissioner, by Mike Rappaport (San Diego):

I have long believed that the House Republicans should be using their impeachment power against the IRS.  I thought that they should have seriously considered impeaching Lois Lerner (although I suppose there is question whether she was a constitutional officer).  I certainly believe that they should consider whether to impeach IRS Commissioner John Koskinen and other relevant IRS officials.  (Note: the House impeaches or accuses; the Senate tries the official and can convict with a two thirds majority.)

It is true that an impeachment of the IRS Commissioner will not directly affect the President or the White House.  But it is important to use the tools that the Congress has to police wrongdoing and impeachment is one of them. ...

Once it becomes clear that officials may be impeached, their will be greater reluctance on the part of officials to engage in wrongdoing.  Moreover, the impeachment may reveal information about wrongdoing by the White House. ...

It is true that while the House can impeach an official with a majority vote, a conviction and removal from office requires a two thirds vote of the Senate.  Thus, depending on the evidence against the official and the degree of politics at work in the Senate, it is possible that an official who should be removed would not be convicted in the Senate.  But that is not a serious problem in my view.

Washington Free Beacon, Rep. Jim Jordan: ‘Definitely’ Looking at Possibility of Impeaching IRS Commissioner:

Rep. Jim Jordan (R., Ohio) said that the House Oversight and Government Reform Committee is “definitely” looking at the possibility of impeaching IRS Commissioner John Koskinen in an interview with the Washington Free Beacon on Thursday.

“We are definitely looking at that,” Jordan said. “Definitely looking at that. I’ll say this, Mr. Koskinen has on more than one occasion come in front of the committee and conveyed information to the committee that later turned out not to be accurate.” ...

Jordan said that impeachment is a possibility for the IRS commissioner.

“When you have an individual who’s head of an agency with this kind of power the Internal Revenue Service has, who has stated things under oath that turned out later to be false, that’s a problem,” he said. “Couple that with the false information that was sent out to a lot of Obamacare enrollees that impacted their tax liability that was just false, and some of the data breaches that have taken place there too—so the main focus is, of course, the targeting scandal and his answers to questions in front of the committee under oath that I’ve said later turned out to be untrue.”

“But there’s also these other things, so that’s something that the committee is looking at but there’s a certain amount of homework you’ve got to do before you start down that path,” he said. “So we’re looking at it.” ...

Jordan also expressed skepticism about the Justice Department’s handling of the IRS controversy.

“Everyone knows the fix is in at the Justice Department,” said Jordan. “The FBI announced a year and a half ago, according to the Wall Street Journal, that no one was going to be prosecuted. The President made his famous statement on Super Bowl Sunday a year and a half ago that there’s no corruption, not even a smidgen, and the lead attorney on the case is Barbara Bosserman who’s a maxed-out contributor to the President’s campaign.”

“So everyone knows the fix is in, and what really tells you that the fix is in with the Justice Department investigation is Lois Lerner was willing to sit down with Justice Department attorneys, Ms. Bosserman and her team, and answer their questions but she’s not willing to answer members of Congress’ questions,” said Jordan.

Continue reading

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

Thursday, July 16, 2015

Osofsky: Tax Administration And Tax Scholarship

Leigh Osofsky (Miami) has a great series of posts on tax administration and tax scholarship:

Continue reading

July 16, 2015 in Scholarship, Tax | Permalink | Comments (0)

The Contemporary Tax Journal Publishes New Issue

Contemporary Tax JournalsThe San Jose State University Masters of Science in Taxation Program in the Lucas Graduate School of Business has published the sixth issue (Vol. 5, No. 1 (Spring/Summer 2015)) of The Contemporary Tax Journal.

July 16, 2015 in Scholarship, Tax | Permalink | Comments (0)

Chodorow: The Tax Consequences Of Catalyzed Fans

Red SoxAdam Chodorow (Arizona State), The Tax Consequences of Catalyzed Fans, 6 Harv. J. Sports & Ent. L. 187 (2015):

This article, in honor of Dan Markel, explores the tax issues that would arise were fans to band together as a Fan Action Committee (FAC) to offer players additional compensation or a donation to a favored charity as an incentive to sign with the fans’ team, the proposal at the heart of one of Dan’s last articles. Both the direct compensation and charitable models raise questions regarding whether the players and owners have income, the tax consequences for the FAC of both contributions and distributions, and the fans’ ability to deduct contributions to the FAC. Exploring these questions will help pave the way for FACs to move from academic discourse to the real world, offers the opportunity to consider a number of important tax policy issues that have far broader application, and seems like a wonderful way to honor Dan’s memory.

July 16, 2015 in Scholarship, Tax | Permalink | Comments (0)

Taxing Meat To Fight Climate Change

MeatMarya Torrez (American), Accounting for Taste: Trade Law Implications of Taxing Meat to Fight Climate Change, 27 Geo. Int'l Envtl. L. Rev. 61 (2014):

Global climate change threatens to have disastrous consequences for life as we know it. Animal agriculture makes a tremendous contribution to climate change. While largely ignored in the policy arena, in recent years, scientists have suggested a tax on meat to begin to address this issue.

Continue reading

July 16, 2015 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 798

IRS Logo 2Washington Examiner, With New Documents, Stench of IRS Scandal Reaches Into its Third Year:

In 2013, Lois Lerner, former head of the IRS non-profit section, pleaded the Fifth Amendment before the House Oversight Committee. She had been called to testify about her division's unjustifiable harassment of conservative applicants for nonprofit status.

Just over a year later, it was reported that a number of Lerner's work emails had gone missing due to a supposed problem with her hard drive. Then last month, the Treasury inspector general for tax administration testified that IRS employees — despite being under explicit orders not to destroy records — had "magnetically erased" as many as 24,000 of Lerner's missing emails from hundreds of data tapes where they were being stored.

Whether the emails' disappearance was innocent or not, the public is only now beginning to get more information about just what it concealed, thanks to an ongoing Freedom of Information Act lawsuit against the IRS by the conservative watchdog group Judicial Watch. Documents unearthed this week show that in Fall 2010, Lerner was working to get the Justice Department to prosecute nonprofits that engaged in political activity. This despite the fact that 501(c)4 groups, which cannot take tax-deductible donations, are permitted to engage in some political advocacy by law and by Civil Rights-era court precedents. ...

The original IRS scandal hinted at an intensive but narrow effort within one division to punish or at least make life difficult for the Obama administration's political opponents — the sort of thing that could perhaps be chalked up to a few bad actors. But the new documents suggest there were at least attempts to bring other agencies in on the wrongdoing. ...

This scandal continues to stink at least as badly as it did when IRS targeting of conservative non-profits was first acknowledged. This isn't a partisan political issue — unfair tax enforcement is unfair to everyone, and anyone can become a victim. Moreover, federal tax privacy laws exist because tax information is so sensitive and susceptible to abuse by politicians and ideologically interested parties.

Congress is right not to let go of this bureaucratic malfeasance, and to continue investigating what could prove to be a with a broader scope than anyone anticipated.

Daily Caller, Bozell On IRS Scandal: ‘A Tyrannical Administration Using Stalinist Tactics Against Its Political Opponents’:

The president of the Media Research Center, Brent Bozell, came out swinging Thursday in response to the revelations — uncovered by the watchdog Judicial Watch — that Lois Lerner, other officials from the IRS, the Department of Justice, and the FBI met in 2010 to discuss criminally prosecuting non-profit organizations targeted for illegal political activities.

Bozell was incensed that few media outlets bothered to cover the news. “The networks’ refusal to cover these devastating revelations borders on being complicit in a cover-up of criminal misconduct by a tyrannical administration using Stalinist tactics against its political opponents,” the conservative figure declared in a statement.

In Bozell’s opinion, the meeting revealed “criminal coordination between the IRS, FBI and the Department of Justice in an effort to politically persecute innocent, law-abiding Americans and independent organizations.”

Continue reading

July 16, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (6)

Wednesday, July 15, 2015

TurboTax To Drop Cloud Backup Option; Desktop Users Have 1 Week To Download Their Returns

Turbo Tax (2015)New York Times, TurboTax Drops Cloud Backup Option for Desktop Users:

If you used the desktop version of TurboTax during the most recent tax filing season and backed up your return online, you may want to make sure you have a copy of it stored on your computer.

Intuit, the maker of TurboTax tax preparation software, has notified some desktop customers that it is discontinuing a service that allowed them to store a copy of their return on TurboTax’s cloud system. (Desktop customers install the tax software on their own computer, by buying a CD-ROM or a download, rather than preparing their returns on the TurboTax website.)

Users have until July 21 to gain access to their tax returns on the cloud and resave them on their own computer if they need to do so. ...

Continue reading

July 15, 2015 in Tax | Permalink | Comments (0)

Soled & Gans: Asset Preservation And The Evolving Role Of Trusts In The 21st Century

AssetJay A. Soled (Rutgers) & Mitchell M. Gans (Hofstra), Asset Preservation and the Evolving Role of Trusts in the Twenty-First Century, 72 Wash. & Lee L. Rev. 257 (2015):

For the vast majority of the twentieth century, trusts served two pivotal roles. The first was as a vehicle to help mitigate federal and state estate tax burdens, the rates of which could be quite significant. The second was to assist in asset preservation, safeguarding trust beneficiaries from their profligacy, former spouses, creditors, and the like.

Continue reading

July 15, 2015 in Scholarship, Tax | Permalink | Comments (0)

Report: IRS Hung Up On 8.8 Million Taxpayers This Year (Up From 544k Last Year); ‘Courtesy Disconnects’ Increased 1,500 Percent

TAS 2National Taxpayer Advocate Nina Olson today released (IR-2015-97) her semi-annual report to Congress, FY 2016 Objectives Report to Congress:

“With funding down about 17 percent on an inflation-adjusted basis since FY 2010, and with the IRS having had to implement large portions of the [ACA] and the Foreign Account Tax Compliance Act (FATCA) this year without any supplemental funding, sharp declines in taxpayer service were inevitable,” Olson wrote. Likening the 2015 filing season to “A Tale of Two Cities,” however, the report says: “For the majority of taxpayers who filed their returns and did not require IRS assistance, the filing season was generally successful. For the segment of taxpayers who required help from the IRS, the filing season was by far the worst in memory.”

  • The IRS answered only 37 percent of taxpayer calls routed to customer service representatives overall, and the hold time for taxpayers who got through averaged 23 minutes. This level of service represents a sharp drop-off from the 2014 filing season, when the IRS answered 71 percent of its calls and hold times averaged about 14 minutes.
  • The IRS answered only 39 percent of calls from taxpayers seeking assistance from TAS on the National Taxpayer Advocate (NTA) Toll-Free hotline, and hold times averaged 19 minutes. TAS serves as the IRS’s “safety net” for taxpayers who are experiencing a financial or systemic hardship as a result of IRS action or inaction.
  • The IRS answered only 17 percent of calls from taxpayers who called after being notified that their tax returns had been blocked by the Taxpayer Protection Program (TPP) on suspicion of identity theft, and the hold times averaged about 28 minutes. In three consecutive weeks during the filing season, the IRS answered fewer than 10 percent of these calls.
  • The IRS answered only 45 percent of calls from practitioners who called the IRS on the Practitioner Priority Service line, and hold times averaged 45 minutes.
  • The number of “courtesy disconnects” received by taxpayers calling the IRS skyrocketed from about 544,000 in 2014 to about 8.8 million this filing season, an increase of more than 1,500 percent. The term “courtesy disconnect” is used when the IRS essentially hangs up on a taxpayer because its switchboard is overloaded and cannot handle additional calls.

Continue reading

July 15, 2015 in IRS News, Tax | Permalink | Comments (5)

Chorvat: Taxation And Liquidity — Evidence From Retirement Savings

Elizabeth Chorvat (Illinois), Taxation and Liquidity: Evidence from Retirement Savings:

This paper tests the response of a cross section of U.S. households to a reduction in the tax cost of holding liquid assets by the 2003 Jobs and Growth Tax Relief Reconciliation Act, whether that response was tax efficient, and the distribution of that response. Empirical results based on regression analyses of Survey of Consumer Finances data between 1998 and 2010 suggest that lower, middle, and high-income households responded to the enactment of the dividend preference in a tax-efficient manner, increasing allocations to liquid accounts and away from tax-preferred retirement accounts. Notwithstanding the conventional wisdom that behavioral responses to changes in the taxation of investments occur predominantly among the wealthy, the paper finds that the largest behavioral response to the 2003 dividend preference appears to have been among those households in the highest and lowest income groups, with the largest response among the lowest income households. If household income is an important determinant to the value of liquidity, we might well understand that those with the highest need for liquidity might have the largest response to a reduction in the cost of that liquidity. Curiously, while middle-income households responded to the lower cost of liquidity in a tax-efficient manner, theirs was a distinctly smaller response.

July 15, 2015 in Scholarship, Tax | Permalink | Comments (0)

Luke: The Taxing Problem of Debt Principal

Charlene Luke (Florida), Of More Than Usual Interest: The Taxing Problem of Debt Principal, 39 Seattle U. L. Rev. ___ (2015):

Leverage is an essential but often troubling component of the U.S. market. In the tax area, the potentially problematic incentive effects of interest deductibility have long engaged a wide array of tax commentators and policymakers. While interest deductibility rightly receives widespread scrutiny, a more comprehensive approach to leverage is needed. This Article focuses on the surprisingly complicated tax treatment of cash (and cash equivalent) borrowings. This Article highlights that using debt principal to finance business and investment tax benefits yields favorable tax timing mismatches for taxpayers and thereby theoretically amplifies any distortions caused by the deductibility of debt interest.

Continue reading

July 15, 2015 in Scholarship, Tax | Permalink | Comments (0)

The IRS Scandal, Day 797

IRS Logo 2The Hill, Senate Panel's IRS Report Due in Weeks:

The Senate Finance Committee plans to release its report on the IRS’s improper scrutiny of conservative groups before lawmakers leave Washington for the August recess, a panel spokesman said Tuesday. 

The committee’s IRS investigation has lasted for more than two years, ever since former agency official Lois Lerner apologized in May 2013 for the IRS’s treatment of groups seeking tax-exempt status.

Continue reading

July 15, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (0)

Tuesday, July 14, 2015

Browde: The Need For Increased Penalties To Deter Tax Identity Theft

Florida Tax ReviewPippa Browde (Montana), Many Unhappy Returns: The Need for Increased Tax Penalties for Identity Theft-Based Refund Fraud, 18 Fla. Tax Rev. ___ (2015):

The growing problem of fraudulent tax returns being submitted based on stolen identities is a “tsunami of fraud,” and victims, lawmakers, and law enforcement are struggling with how to deal with the fallout. The issues surrounding identity theft-based tax fraud are complex. Current IRS efforts to stem the tide involve pouring resources into assisting victims, updating IRS processes to detect and prevent refund fraud, and increasing the number of criminal investigations and prosecutions it pursues. The IRS’s approach and pending proposed legislation are not enough to address the problems created by identity theft-based tax fraud. This article argues the IRS and Congress must use a holistic approach to attack this specie of tax fraud. To that end, this article supports enhanced criminal penalties and proposes new civil tax penalties aimed specifically at identity theft tax fraud.

This article pursues two goals. First, it documents and explains the problem of identity theft-based refund fraud, highlighting particular issues with respect to tax compliance. In so doing it analyzes existing civil and criminal tax penalties to punish and deter identity thieves, an analysis which reveals that existing criminal penalties are insufficient and that there is no directly applicable existing civil penalty. Second, to address the gaps in existing law, the article proposes standards for Congress to use in crafting a comprehensive penalty scheme to apply to identity theft-based refund fraud.

Continue reading

July 14, 2015 in Scholarship, Tax | Permalink | Comments (0)

Hillary Clinton's Tax Plan

The IRS Scandal, Day 796

IRS Logo 2Fox News, IRS Ignores Deadline to Hand Over Lerner Emails:

The Internal Revenue Service is ignoring a court-imposed deadline to turn over newly found Lois Lerner email documents essential to investigations of the IRS tax-exempt scandal.

U.S. District Court Judge Emmet Sullivan last week ordered the agency to turn over 1,800 new emails from Lerner, who ran the tax exempt unit which decided which organizations could receive tax exempt status. The government watchdog group Judicial Watch has sought the emails in a Freedom of Information Act (FOIA) request. Monday, a spokesperson told  FOXBusiness.com that the group would not oppose the IRS producing something this Wednesday and every 2 weeks thereafter, assuming the Court agrees. At the time of publication there was no word from the IRS on this development or an amended order from the court. 

Judicial Watch President Tom Fitton said his organization has agreed to receive the information this week, but as of today no information has been received. Lerner is at the center of a scandal in which conservative groups, especially those that identified themselves as Tea Party groups, were denied tax exempt status.

Continue reading

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

Monday, July 13, 2015

The Relative Value of $100: Lowest In D.C. ($85), Highest In Mississippi ($115)

Tax Foundation, The Relative Value of $100: Which States Offer the Biggest Bang For Your Buck?:

Tax Foundation

The Bureau of Economic Analysis has been measuring this phenomenon for two years now; it recently published its data for prices in 2013. Using this data, we have adjusted the value of $100 to show how much it buys you in each state.

July 13, 2015 in Tax, Think Tank Reports | Permalink | Comments (3)

The IRS Scandal, Day 795

IRS Logo 2Tribune-Review, Another IRS 'Oops': Hardly Credible:

It was “an unbelievable set of circumstances” that led to the erasure of backup tapes of Lois G. Lerner's emails after a congressional subpoena sought these records in an investigation of the tax agency's targeting of tea party and conservative groups. Or so says the IRS' deputy inspector general.

In literature and in cinema, this would be referred to as suspension of disbelief. For the Obama administration in its dealings with Congress, it's business as usual.

As the script goes, Ms. Lerner formerly led the IRS agency accused in the targeting scandal. Once an investigation commenced, the IRS informed Congress that, by golly, her computer had suffered a debilitating hard drive crash and that her emails were lost.

Backup computer tapes of the sought emails later turned up. But — oops! — about 24,000 emails might have been permanently lost to erasure, The Washington Times reports. Of the 1,000 recovered emails that the IRS didn't turn over to Congress, none pertain to the targeting, according to the IG. Imagine that.

Why, nobody “did anything intentionally to hinder our investigation,” said Democrat Rep. Elijah E. Cummings.

A crashed hard drive. Now erased backup tapes. It is not unreasonable to suspect the destruction of evidence amid a succession of excuses during a two-year investigation. Congress must redouble its efforts to get to the bottom of this.

Newsmax, Judicial Watch's Fitton: More Lois Lerner Emails on the Way:

The IRS is dragging its feet on the court-ordered release of newly-discovered emails to and from Lois Lerner, the ex-agency official who allegedly targeted tea party groups seeking tax-exempt status, Tom Fitton, president of the government watchdog Judicial Watch, tells Newsmax TV.

"The government found 1,400-plus new Lois Lerner emails. Remember those emails that were deleted and weren't recoverable on backup tapes? Well, they weren't deleted, they were recoverable and they were on backup tapes," Fitton said Friday on "The Steve Malzberg Show." ...

Fitton said other Lerner emails that have been released thus far are "astonishing." "They provide an exhaustive account of a meeting that Lois Lerner and other IRS folks had with the Department of Justice.... It wasn't just the IRS stalling tea party applications, it was the Justice Department and the FBI talking about prosecuting these very groups," he said.

Continue reading

July 13, 2015 in IRS News, IRS Scandal, Tax | Permalink | Comments (3)

TaxProf Blog Weekend Roundup

Sunday, July 12, 2015

Brunson: Churches And Religiously-Affiliated Schools That Oppose Same-Sex Marriage Will Not Lose Their Tax Exemption After Obergefell

White House Same Sex MarriageFollowing up on my previous posts:

Sam Brunson (Loyola-Chicago), Tax Exemption, Post-Obergefell:

There’s been a lot of Sturm und Drang recently over what will happen to the tax exemptions of churches and religiously-affiliated schools that oppose same-sex marriage. The specter of loss of exemption has been bandied about. ...

[C]could the church or BYU lose its tax exemption as a result of their policies on homosexuality? Yes. ... Just because the government could, though, doesn’t mean that it’s likely. And, based on historical and current practice, revoking the church’s exemption is virtually impossible, and revoking BYU’s is tremendously unlikely. 

Sam Brunson (Loyola-Chicago), The Church Will Not Lose Its Tax-Exempt Status:

Do I seriously have to say this? Again? Look, Obergefell does not mark the end of churches’ tax-exempt status. It’s just not going to happen. ...

Continue reading

July 12, 2015 in Tax | Permalink | Comments (3)

The Wealthiest ZIP Codes In America

Wealthiest ZIP Codes in America:

America

(Hat Tip: Francine Lipman.)

July 12, 2015 in Tax, Think Tank Reports | Permalink | Comments (3)