TaxProf Blog

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

Friday, December 29, 2017

'Orwellian' Offshore Tax Will Hit Some Firms Harder Than Others

Bloomberg:  'Orwellian' Offshore Tax Will Hit Some Firms Harder Than Others, by Lynnley Browning:

The name that Republican tax writers gave to a new, multi billion-dollar business levy implies that it targets foreign earnings from “intangible” intellectual property — hitting tech firms and drugmakers like Apple and Pfizer.

But experts agree that the little-understood “global intangible low-taxed income” levy, or GILTI, will also apply to earnings that go far beyond patents, royalties and licensing, and could end up snaring many global firms that earn little such income. Private equity partnerships that aren’t publicly traded, including Bain Capital, stand to pay rates three times as high as corporate competitors’, tax lawyers say. Law and advertising firms with overseas offices may also be hit — as will many U.S. companies that make “excess” profit from foreign plants, equipment and inventory.

The name is “Orwellian,” said James Duncan, a tax partner at the law firm Cleary Gottlieb Steen & Hamilton, in a Dec. 20 webcast. “Its most significant effect is on income that is neither intangible nor low-taxed.”

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December 29, 2017 in Tax | Permalink | Comments (1)

Confusion Reigns As People Race To Prepay (And Deduct) Property Taxes By Year-End

IR-2017-210, Prepaid Real Property Taxes May Be Deductible in 2017 if Assessed and Paid in 2017:

The Internal Revenue Service advised tax professionals and taxpayers today that pre-paying 2018 state and local real property taxes in 2017 may be tax deductible under certain circumstances.

The IRS has received a number of questions from the tax community concerning the deductibility of prepaid real property taxes. In general, whether a taxpayer is allowed a deduction for the prepayment of state or local real property taxes in 2017 depends on whether the taxpayer makes the payment in 2017 and the real property taxes are assessed prior to 2018.  A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017.  State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed.

The following examples illustrate these points.

Example 1: Assume County A assesses property tax on July 1, 2017 for the period July 1, 2017 – June 30, 2018.  On July 31, 2017, County A sends notices to residents notifying them of the assessment and billing the property tax in two installments with the first installment due Sept. 30, 2017 and the second installment due Jan. 31, 2018.   Assuming taxpayer has paid the first installment in 2017, the taxpayer may choose to pay the second installment on Dec. 31, 2017, and may claim a deduction for this prepayment on the taxpayer’s 2017 return.

Example 2: County B also assesses and bills its residents for property taxes on July 1, 2017, for the period July 1, 2017 – June 30, 2018. County B intends to make the usual assessment in July 2018 for the period July 1, 2018 – June 30, 2019.  However, because county residents wish to prepay their 2018-2019 property taxes in 2017, County B has revised its computer systems to accept prepayment of property taxes for the 2018-2019 property tax year.  Taxpayers who prepay their 2018-2019 property taxes in 2017 will not be allowed to deduct the prepayment on their federal tax returns because the county will not assess the property tax for the 2018-2019 tax year until July 1, 2018.

Victor Thuronyi, Can You Prepay 2018 Property Tax in 2017?:

It turns out this question get[s] more complex by the day. ...

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December 29, 2017 in IRS News, Tax | Permalink | Comments (11)

President Trump: 'I Know The Details Of Taxes Better Than Anybody. Better Than The Greatest CPA.'

From the New York Times thirty minute interview with President Trump:

"I know the details of taxes better than anybody. Better than the greatest C.P.A."

December 29, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Thursday, December 28, 2017

Feminist Judgments: Rewritten Tax Opinions

Feminist JudgmentsFeminist Judgments: Rewritten Tax Opinions (Bridget J. Crawford (Pace) & Anthony C. Infanti (Pittsburgh), eds.) (Cambridge University Press Dec. 28, 2017):

Could a feminist perspective change the shape of tax laws? Feminist reasoning and analysis are recognized as having tremendous potential to affect employment discrimination, sexual harassment, and reproductive rights laws - but they can likewise transform tax law (as well as other statutory or code-based areas of the law). By highlighting the importance of perspective, background, and preconceptions on reading and interpreting statutes, this volume shows what a difference feminist analysis can make to statutory interpretation. Feminist Judgments: Rewritten Tax Opinions brings together a group of scholars and lawyers to rewrite tax decisions in which a feminist emphasis would have changed the outcome, the court's reasoning, or the future direction of the law. Featuring cases including medical expense deductions for fertility treatment, gender confirmation surgery, tax benefits for married individuals, the tax treatment of tribal lands, and business expense deductions, this volume opens the way for a discussion of how viewpoint is a key factor in statutory interpretation.

Tax Prof contributors: 

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December 28, 2017 in Book Club, Scholarship, Tax | Permalink | Comments (0)

Tax Reform’s Growth Whisperer

ToomeyWall Street Journal, Tax Reform’s Growth Whisperer:

President Trump signed tax reform into law Friday, but in late November it almost had a heart attack in committee. Sens. Ron Johnson of Wisconsin and Bob Corker of Tennessee were balking, the former over the details of business taxation and the latter over the deficit. The GOP has a bare 12-11 majority on the Senate Budget Committee, and Democrats were united in opposition, so a single Republican dissenter would have stalled the bill. But Messrs. Corker and Johnson voted aye, and it advanced.

Much of the behind-the-scenes credit for tax reform belongs to Sen. Pat Toomey of Pennsylvania, who as a member of both the Budget and Finance committees helped persuade a rotating cast of Republican critics. When the GOP celebrated its victory at the White House this week, Nevada’s Dean Heller mugged for the cameras toward the front. Mr. Toomey stood less conspicuously a row back. He’s the player who doesn’t dance in the end zone but stays up watching game film.

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December 28, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

SSRN Tax Professor Rankings

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

 

 

All-Time

 

Recent

1

Reuven Avi-Yonah (Mich.)

74,442

Gladriel Shobe (BYU)

22,319

2

Michael Simkovic (USC)

38,095

Reuven Avi-Yonah (Mich.)

13,009

3

Paul Caron (Pepperdine)

33,900

D, Dharmapala (Chicago)

3569

4

D. Dharmapala (Chicago)

32,606

Lily Batchelder (NYU)

3519

5

Louis Kaplow (Harvard)

28,866

Richard Ainsworth (BU)

3443

6

Vic Fleischer (San Diego)

24,212

Michael Simkovic (USC)

3388

7

Ed Kleinbard (USC)

23,871

Michael Graetz (Columbia)

3020

8

James Hines (Michigan)

23,354

David Gamage (Indiana)

2895

9

Gladriel Shobe (BYU)

22,768

Andy Grewal (Iowa)

2878

10

Richard Ainsworth (BU)

22,690

Hugh Ault (Boston College)

2676

11

Richard Kaplan (Illinois)

22,477

David Weisbach (Chicago)

2579

12

Ted Seto (Loyola-L.A.)

22,388

Kyle Rozema (Chicago)

2532

13

Katie Pratt (Loyola-L.A.)

20,774

Daniel Hemel (Chicago)

2517

14

David Weisbach (Chicago)

19,999

Ed Kleinbard (USC)

2412

15

Robert Sitkoff (Harvard)

19,713

William Byrnes (Texas A&M)

2283

16

Chris Sanchirico (Penn)

18,905

Omri Marian (UC-Irvine)

2127

17

Brad Borden (Brooklyn)

18,887

Darien Shanske (UC-Davis)

1967

18

Carter Bishop (Suffolk)

18,513

Louis Kaplow (Harvard)

1895

19

Daniel Shaviro (NYU)

18,198

Chris Sanchirico (Penn)

1853

20

Francine Lipman (UNLV)

18,144

Steven Bank (UCLA)

1796

21

Bridget Crawford (Pace)

17,946

Daniel Shaviro (NYU)

1746

22

Jen Kowal (Loyola-L.A.)

17,867

Jordan Barry (San Diego)

1650

23

Dennis Ventry (UC-Davis)

16,676

Stephen Shay (Harvard)

1617

24

Steven Bank (UCLA)

16,046

Bridget Crawford (Pace)

1591

25

David Walker (BU)

15,860

Paul Caron (Pepperdine)

1508

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

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December 28, 2017 in Scholarship, Tax, Tax Prof Rankings | Permalink | Comments (0)

Harvard Business Review: Breaking Down The New U.S. Corporate Tax Law

Harvard Business Review LogoHarvard Business Review, Breaking Down the New U.S. Corporate Tax Law:

Mihir Desai, a professor of finance at Harvard Business School, breaks down the brand-new U.S. tax law. He says it will affect everything from how corporate assets are financed to how business are structured. He predicts many individuals will lower their tax burdens by setting themselves up as corporations. And he discusses how the law shifts U.S. tax policy toward a territorial system of corporate taxes, one that will affect multinationals and national competitiveness. Finally, Desai explains what he would have done differently with the $1.5 trillion the tax cut is projected to cost. ...

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December 28, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Wednesday, December 27, 2017

New Tax Law May Give Big Edge To Pro Sports Teams In Florida, Nevada, Texas, And Washington

Washington Post, Florida, Texas May Attract Athletes After Tax Law Change:

Teams in Texas, Florida, Nevada and Washington state may have become more attractive destinations for free agents following the enactment of tax law changes.

Deductions for state and local taxes are capped at $10,000 in the year starting Jan. 1 for married couples filing jointly. That has a huge impact for athletes with seven- and eight-figure salaries.

“Obviously, the zero income-tax states have now more of an advantage than before,” said baseball agent Scott Boras, who is negotiating big-money deals this offseason for free agents J.D. Martinez, Eric Hosmer, Mike Moustakas, Jake Arrieta and Greg Holland. ...

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December 27, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

Waiting Until Jan. 3 To Sign Tax Reform Would Not Have Delayed A PAYGO Sequestration

Yale Notice & CommentFollowing up on my previous posts:

Sam Wice, Waiting Until January 3 to Sign Tax Reform Would Not Have Delayed a PAYGO Sequestration, Yale J. on Reg.: Notice & Comment (2017):

In an earlier post, I suggested that Republicans should wait until January 2018 to pass tax reform so that they can delay a Pay-As-You-Go (PAYGO) sequestration.  President Trump appears to have taken this idea to heart and decided that if Congress did not waive the PAYGO sequestration, he would wait until January 3, 2018 to sign tax reform into law.  Although in a Festivus miracle Congress waived the PAYGO sequestration, for future reference I explain here why President Trump could not have delayed a PAYGO sequestration by merely waiting until 2018 to sign tax reform into law.  The plain meaning of PAYGO and prior Office of Management and Budget (OMB) practice indicated that no matter when President Trump signed tax reform, it must still have been included in the 2017 PAYGO annual report, which would have triggered an immediate sequestration. ...

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December 27, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

The Impact Of The New Tax Law On Law Firm Partners

Tuesday, December 26, 2017

Ono Academic College (Israel) Hosts Tax Policy Roundtable Today On Fairness in Taxation

OnoOno Academic College Faculty of Law (Israel) hosts a Tax Policy Roundtable today on Fairness in Taxation:

  • Moshe Asher (Commissioner, Israel Tax Authority)
  • Kamil Atila (Head of Fiscal Division, Israel Department of Treasury)
  • Yuval Elbashan (Dean, Ono)
  • Sagit Leviner (Senior Lecturer, Ono)
  • Mina Zemach (Public Opinion Expert)

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December 26, 2017 in Conferences, Tax | Permalink | Comments (0)

More On AT&T's $1,000 Tax Cut Bonus To Workers

AT&T LogoFollowing up on last week's post, AT&T's Tax Cut Bonus Isn't Just A Gimmick:

Wall Street Journal, Timing Is Vital as Companies Set Bonuses, Spending Before New Tax Law:

The timing of AT&T Inc.’s pledge this week to give $1,000 bonuses to more than 200,000 workers once President Donald Trump signs the tax overhaul may have saved it $28 million.

That is because committing to making the payment now could let it record the expense in 2017 for tax purposes. In AT&T’s case, that would mean a $70 million deduction under the existing 35% tax rate. By contrast, recording the bonus expense in 2018, when the new 21% corporate rate is in effect, would mean a $42 million deduction.

Similar calculations may be under way for other businesses that have also promised tax-bill bonuses or are considering charitable contributions or other year-end expenses ahead of the tax-law changes.

Wall Street Journal editorial, The Corporate Tax-Cut Dividend:

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December 26, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

TaxProf Blog Holiday Weekend Roundup

Monday, December 25, 2017

A Hallelujah Christmas

A Pepperdine Christmas

Christmas And The Salvation of ‘Napalm Girl’

Fire RoadWall Street Journal op-ed:  The Salvation of ‘Napalm Girl’, by Kim Phuc Phan Thi (author, Fire Road: The Napalm Girl’s Journey through the Horrors of War to Faith, Forgiveness, and Peace (Oct. 2017):

You may not recognize me now, but you almost certainly know who I am. My name is Kim Phuc, though you likely know me by another name. It is one I never asked for, a name I have spent a lifetime trying to escape: “Napalm Girl.”

You have probably seen my picture a thousand times. Yes, that picture. The image that made the world gasp. Some called it a turning point in the Vietnam War—a Pulitzer Prize-winning photograph of me in 1972, age 9, running along a puddled roadway in front of an expressionless soldier. I was photographed with arms outstretched, naked and shrieking in pain and fear, with the dark contour of a napalm cloud billowing in the distance. ...

Those bombs have caused me immeasurable pain over the course of my life. Forty-five years later I am still receiving treatment for the burns that cover my arms, back and neck. But even worse than the physical pain was the emotional and spiritual pain. For years I bore the crippling weight of anger, bitterness and resentment toward those who caused my suffering. Yet as I look back over a spiritual journey that has spanned more than three decades, I realize the same bombs that caused so much pain and suffering also brought me to a place of great healing. Those bombs led me to Jesus Christ.

My salvation experience occurred on Christmas Eve.

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December 25, 2017 in Book Club, Legal Education, Tax | Permalink | Comments (0)

Where Jesus Would Spend Christmas

Lesbos 3New York Times op-ed:  Where Jesus Would Spend Christmas, by Stephanie Saldaña:

In the city of Mytilene on the Greek island of Lesbos, Christmas is approaching. A tree on the main square is alight in blue; a Nativity scene has Mary and Joseph standing vigil beside the baby Jesus. Locals are busily shopping for gifts and sipping coffee at cafes.

Just 15 minutes up the road, at the refugee and migrant camp called Moria, it is not Christmas but winter that is approaching. More than 6,000 souls fleeing the world’s most violent conflicts — in Syria, Iraq, Afghanistan, Yemen and the Democratic Republic of Congo — are crowded in a space meant for 2,330. The scene is grim: piles of trash, barbed wire, children wailing, rows of cheap summer tents with entire families crammed inside and fights regularly breaking out on the camp’s periphery. The stench is overwhelming.

I have visited many refugee camps in the Middle East, but never have I seen anything like Moria, a place Pope Francis has likened to a concentration camp. I have also never understood the true meaning of Christmas — a story in which Jesus was born into a family that became refugees — until I visited the people who are now forced to call it home. ...

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December 25, 2017 in Legal Education, Tax | Permalink | Comments (0)

In Hoc Anno Domini

The Wall Street Journal has published this wonderful editorial each Christmas since 1949, In Hoc Anno Domini:

When Saul of Tarsus set out on his journey to Damascus the whole of the known world lay in bondage. There was one state, and it was Rome. There was one master for it all, and he was Tiberius Caesar.

Everywhere there was civil order, for the arm of the Roman law was long. Everywhere there was stability, in government and in society, for the centurions saw that it was so.

But everywhere there was something else, too. There was oppression -- for those who were not the friends of Tiberius Caesar. There was the tax gatherer to take the grain from the fields and the flax from the spindle to feed the legions or to fill the hungry treasury from which divine Caesar gave largess to the people. There was the impressor to find recruits for the circuses. There were executioners to quiet those whom the Emperor proscribed. What was a man for but to serve Caesar?

There was the persecution of men who dared think differently, who heard strange voices or read strange manuscripts. There was enslavement of men whose tribes came not from Rome, disdain for those who did not have the familiar visage. And most of all, there was everywhere a contempt for human life. What, to the strong, was one man more or less in a crowded world?

Then, of a sudden, there was a light in the world, and a man from Galilee saying, Render unto Caesar the things which are Caesar's and unto God the things that are God's.

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December 25, 2017 in Legal Education, Tax | Permalink | Comments (0)

Sunday, December 24, 2017

'Twas The Night Before Christmas (Legal Edition)

Twas 6

Check out the original and legal versions of the classic poem, 'Twas the Night Before Christmas [click on chart to enlarge]:

Twas_the_night_before_christmas_pag

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December 24, 2017 in Legal Education, Tax | Permalink | Comments (0)

The Top Five New Tax Papers

SSRN LogoThis week's list of the Top 5 Recent Tax Paper Downloads is the same as last week's list. The #1 paper is already #1 (by over 25,000 downloads) among 13,266 tax papers in all-time downloads:

  1. [37,967 Downloads]  The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the New Legislation, by Ari Glogower (Ohio State), David Kamin (NYU), Rebecca Kysar (Brooklyn) & Darien Shanske (UC-Davis) et al.
  2. [477 Downloads]  The Senate Introduced a Pragmatic and Geopolitically Savvy Inbound Base Erosion Rule, by Itai Grinberg (Georgetown)
  3. [443 Downloads]  Tax Reform: Process Failures, Loopholes and Wealth Windfalls , by Stephen Shay (Harvard)
  4. [290 Downloads]  Once More, with Feeling: The 'Tax Cuts and Jobs' Act and the Original Intent of Subpart F, by Reuven Avi-Yonah (Michigan) & Nir Fishbien (S.J.D. 2018, Michigan)
  5. [191 Downloads]  Heading Off a Cliff?, by Michael Graetz (Columbia)

December 24, 2017 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, December 23, 2017

This Week's Ten Most Popular TaxProf Blog Posts

The New Tax Law Is 'Manna From Heaven' For Tax Lawyers, Especially Young Tax Lawyers

Law 360, Tax Bill Like ‘Manna From Heaven’ For Work-Hungry Firms
National Law Journal, Brew a Pot of Coffee, This Big Law Tax Attorney Is Burning the Midnight Oil:

[T]ax attorneys have already been hard at work ever since the bill started down the fast track in Congress, according to corporate tax lawyer David Miller, a partner at Proskauer Rose in New York. ... We asked Miller about how the tax bill has already impacted his work life, and the legal business that tax lawyers expect to see once Congress passes the new law. ...

On a scale of one to five, with five being the busiest, what’s your prediction for your practice next year?
For me and tax lawyers generally, definitely a five. The tax bill represents the most significant change in the federal tax laws in the last 30 years, and businesses will seek advice on how to restructure to take advantage of the new regime, and help implement the changes. ...

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December 23, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Friday, December 22, 2017

Weekly SSRN Tax Article Review And Roundup: Glogower Reviews Hasen's The Tax Treatment Of Gifts

This week, Ari Glogower (Ohio State) reviews a new work by David Hasen (Florida), How Should Gifts Be Treated Under the Federal Income Tax?, 2018 Mich. St. L. Rev. __ (forthcoming). 

Glogower (2016)David Hasen’s new work revisits the question of how gifts should be treated under the income tax.  His essential point:  It depends.

Consider the simple case of donor A making a gift to donee B. There are three plausible treatments under the income tax: (1) single donor tax (no deduction to A and B excludes), which is the treatment under current law, (2) single donee tax (A deducts and B includes), and (3) double tax (no deduction to A and B includes). 

How is one to choose? Hasen argues that there is no clear answer, because there is no clear normative definition of income that would suggest one answer or another. Rather, the income definition, and its implication for the proper taxation of gifts, will depend upon one’s normative views on the purpose and shape of the tax system.

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December 22, 2017 in Scholarship, Tax, Weekly SSRN Roundup | Permalink | Comments (0)

Tax Policy In The Trump Administration

Tax (And Other) Profs:

Other:

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December 22, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

The Farmer, The Pickup, And The Elephant: A Post-Modern Fable

Once upon a time in West Texas there lived a farmer. In addition to raising crops, he kept a collection of interesting animals as a hobby. Always keen to make some money, however, he used the output of the animals for compost and sold the excess to surrounding farms. More about that below the fold. But first I need to tell you about the farmer’s pickup truck, “Iris.”

The farmer’s dad had bought a fine Ford F250 in the early 2000’s. His dad was very fond of the truck and called it “Iris.” But the farmer did not like Iris and so he used it exclusively to haul the animal product to market. Of course that meant Iris stank. The stink offended people, who thought Iris was to blame for payload the farmer asked Iris to carry.

When the farmer took over farming operations from his dad in 2008 he began neglecting Iris by not putting in the money to make needed upkeep and repairs. For example, he used a really cheap motor oil because he liked its name “Liberty,” and he liked the pennies he saved. But that oil actually did the exact opposite of what oils are supposed to do: it exacerbated the wear on the engine Then the farmer started using an even cheaper lubricant: chicken grease. When the once proud 5.2L Voodoo V8 engine failed, the farmer replaced it with an 4-cylinder engine taken from a Ford Fiesta, ‘cause that was cheap. More pennies saved! As parts failed, Iris became increasingly unreliable.  Still, the farmer kept relying on Iris to carry the load for him.

And now, for the Elephant part, below the fold.

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December 22, 2017 in Bryan Camp, IRS News, Tax, Tax Policy in the Trump Administration, Tax Practice And Procedure | Permalink | Comments (3)

Mazur: Taxing Social Impact Bonds

SIBOrly Mazur (SMU), Taxing Social Impact Bonds, 20 Fla. Tax Rev. 431 (2017):

An exciting new way to fund social services has recently emerged. This new financing mechanism, called a social impact bond (SIB), has the potential to help us tackle some of our nation’s most challenging social problems. Broadly speaking, a SIB is a type of “pay for success” contract where private investors provide the upfront capital to finance a social program, but only recoup their investment and realize returns if the program is successful. Like any new financing instrument, SIBs create numerous regulatory challenges that have not yet been addressed. One unresolved issue is the tax implications of a SIB investment. This Article argues that the current law allows for multiple possible characterizations of the SIB arrangement for tax purposes.

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December 22, 2017 in Scholarship, Tax | Permalink | Comments (0)

Thursday, December 21, 2017

The Tax Bill Will Not Help The GOP In 2018

FiveThirtyEight, Will Passing The Tax Bill Help The GOP In 2018? Probably Not.:

President Trump’s first year has been marked by an almost complete lack of major policy wins. But that could come to an end this week. [The tax bill] would be the first major legislative victory for Trump and the Republicans. And it would accomplish a long-held GOP goal: cutting the corporate tax rate.

But policy wins and political wins don’t always go hand in hand. Republicans who believe that failing to pass this tax bill will be a disaster for them in the 2018 midterm elections, like Trump and Sen. Lindsey Graham, are likely to be disappointed.

This tax bill remains historically unpopular. According to an average of nine surveys taken this month, 33 percent of Americans are in favor of it, and 52 percent are opposed. That -19 percentage point split between support and opposition makes it the least popular major tax bill since at least the Ronald Reagan tax cuts in 1981.

538

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December 21, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (4)

Kahn & Kahn: The Fallacious Objections To The Tax Treatment Of Carried Interest

Florida Tax Review  (2015)Douglas A. Kahn (Michigan) & Jeffrey H. Kahn (Florida State), The Fallacious Objections to the Tax Treatment of Carried Interest, 20 Fla. Tax Rev. 319 (2017):

Carried interest is the term used to describe a profits interest in a partnership that invests in entities. A managing partner typically will receive a 20% profits interest in exchange for managing the investments of the partnership. The complaint against the treatment of carried interest is aimed at the characterization of the managing partner's share of the partnership's subsequent capital gains. The contention is that since the managing partner receives her share of the partnership's income for services performed, she should be taxed at ordinary income tax rates rather than the preferentially lower capital gains rate.

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December 21, 2017 in Scholarship, Tax | Permalink | Comments (0)

AT&T's Tax Cut Bonus Isn't Just A Gimmick

AT&T LogoBloomberg View:  AT&T's Tax Cut Bonus Isn't Just a Gimmick, by Justin Fox:

Yes, AT&T chief executive Randall Stephenson's announcement that his company will be paying out $1,000 bonuses to 200,000 workers in the wake of the passage of a big corporate tax cut is probably to some extent a lobbying ploy. AT&T, as many, many people have noted this afternoon, has a giant acquisition (of Time Warner) currently being held up by antitrust regulators. It has every reason, then, to want to curry favor with the man for whom the tax bill represents a first major legislative victory, President Donald Trump.

But Stephenson's move is also a simple representation of what a lot of economists think is the natural result of a cut in corporate taxes. Corporations themselves don't ultimately pay taxes.

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December 21, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Treating College Athletes As Employees And The Tax Implications Of Their Scholarships

Marc Edelman (CUNY), From Student-Athletes to Employee-Athletes: Why a 'Pay for Play' Model of College Sports Would Not Necessarily Make Educational Scholarships Taxable, 58 B.C. L. Rev. 1137 (2017):

In recent years, numerous commentators have called for the National Collegiate Athletic Association (“NCAA”) to relax its rules prohibiting athlete pay. This movement to allow athletes to share in the revenues of college sports arises from the belief that college athletes sacrifice too much time, personal autonomy, and physical health to justify their lack of pay. It further criticizes the NCAA’s “no pay” rules for keeping the revenues derived from college sports “in the hands of a select few administrators, athletic directors, and coaches.” Nevertheless, opponents of “pay for play” contend that several problems will emerge from lifting the NCAA’s “no pay” rules. One problem, opponents argue, is that granting college athletes the legal status of “employees” would convert the athletes’ tax-exempt scholarships into taxable income—a result that may offset any economic benefits of “pay for play.” Their argument, however, is not necessarily accurate. This article discusses the economic and legal landscape of big-time college sports, and introduces the fallacious legal argument that “pay for play” would saddle college athletes with substantial tax liability related to their educational scholarships.

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December 21, 2017 in Scholarship, Tax | Permalink | Comments (1)

Wednesday, December 20, 2017

Lawsky: A Logic For Statutes

Florida Tax Review  (2015)Sarah B. Lawsky (Northwestern), A Logic for Statutes, 20 Fla. Tax Rev. ___ (2018):

Case-based reasoning is, without question, a puzzle. When students are taught to “think like lawyers” in their first year of law school, they are taught case-based common-law reasoning. Books on legal reasoning are devoted almost entirely to the topic. How do courts reason from one case to the next? Is case-based reasoning reasoning from analogy? How should case-based reasoning be modeled? How can it be justified?

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December 20, 2017 in Scholarship, Tax | Permalink | Comments (3)

Afield: Compromising Student Loans

W. Edward Afield (Georgia State), Compromising Student Loans, 69 S.C. L. Rev. 81 (2017):

Access to higher education is on the road to becoming a public crisis as it increasingly becomes unaffordable. Given the decline in public funding for universities, other forms of public investment designed to make higher education more affordable, such as income based repayment programs, are becoming increasingly important. The income based repayment programs currently in place do not properly allocate benefits, however, and they also produce unnecessary economic distortions because these programs do not consider all of the relevant variables that establish a borrower’s true ability to repay the loan.

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December 20, 2017 in Scholarship, Tax | Permalink | Comments (4)

Kahn & Kahn: The Inappropriateness Of The Bad Checks Penalty

Douglas A. Kahn (Michigan) & Jeffrey H. Kahn (Florida State), The Inappropriateness of the Bad Checks Penalty, 157 Tax Notes 835 (Nov. 6, 2017):

The Internal Revenue Code of 1986 provides many penalties for actions or failures to act on matters concerning the tax law. Section 6657 applies a penalty to a person who tenders an instrument to the IRS as a payment if the instrument is not duly paid. The penalty does not apply if the person tendered the instrument in good faith and with reasonable cause to believe that it would be duly paid.

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December 20, 2017 in Scholarship, Tax | Permalink | Comments (0)

Kysar & Sugin: The Built-In Instability Of The GOP’s Tax Bill

New York Times op-ed:  The Built-In Instability of the G.O.P.’s Tax Bill, by Rebecca Kysar (Brooklyn) & Linda Sugin (Fordham):

Republicans are on the verge of achieving their decades-long goal: an overhaul of the tax code. But the system they have built will not last.

The plan’s instability is partly a result of the process Republican Party leaders chose to make it happen. Reconciliation, which allows escape from the Senate filibuster, means that Republicans did not have to reach across the aisle. Not a single Democrat supported the legislation.

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December 20, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (3)

Holderness: Taking Tax Due Process Seriously — The Give And Take Of State Taxation

Florida Tax Review  (2015)Hayes Holderness (Richmond), Taking Tax Due Process Seriously: The Give and Take of State Taxation, 20 Fla. Tax Rev. 371 (2017):  

As the Internet has increased the ease and amount of interstate transactions, the states have struggled to require “remote vendors” — vendors without a physical presence in the taxing state — to collect or pay taxes. The states are attempting to overcome these struggles by lowering Commerce Clause limitations on their jurisdiction to tax, but meaningful limitations on such jurisdiction imposed by the Due Process Clause await the states. The Due Process Clause requires that state actions be fundamentally fair, and, to meet this standard, a state must provide a person with a benefit and the person must indicate acceptance of that benefit before the state can require the person to collect or pay taxes.

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December 20, 2017 in Scholarship, Tax | Permalink | Comments (0)

Drennan: Conspicuous Philanthropy — Reconciling Contract And Tax Laws

William A. Drennan (Southern Illinois), Conspicuous Philanthropy: Reconciling Contract and Tax Laws, 66 Am. U. L. Rev. 1323 (2017):

It sold for $15 million, and the IRS treated it as worthless. Avery Fisher, a titan of industry and a lover of classical music, made a generous contribution to renovate a charity’s building, and in exchange the charity agreed to name the building after Fisher in perpetuity. Forty years later, the Fisher family sold the naming rights back to the charity for $15 million in cash. The IRS treats these publicity rights as worthless when charities grant them, and this generates substantial tax benefits for the donor and the donor’s family. In contrast, the common law can treat these publicity rights as valuable consideration supporting an enforceable contract, and a charity may be liable for damages if it renames a building. Why the contradiction? What are the consequences? Should we reconcile these positions? How?

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December 20, 2017 in Scholarship, Tax | Permalink | Comments (0)

Tuesday, December 19, 2017

The Games They Will Play: An Update On The Conference Committee Tax Bill

Reuven Avi-Yonah (Michigan), Lily Batchelder (NYU), Cliff Fleming (BYU), David Gamage (Indiana), Ari Glogower (Ohio State), Daniel Hemel (Chicago), David Kamin (NYU), Mitchell Kane (NYU), Rebecca Kysar (Brooklyn), David Miller (Proskauer), Darien Shanske (UC-Davis), Dan Shaviro (NYU) & Manoj Viswanathan (UC-Hastings), The Games They Will Play: An Update on the Conference Committee Tax Bill:

Earlier this month, we posted a report identifying key weaknesses in the Senate and House tax legislation, titled the Tax Cuts and Jobs Act (TCJA). Based on the conference bill released last week, this report updates our analysis describing some of the major games, legal roadblocks, and glitches in the legislation. This represents the continued work of a group of legal experts from across the country.

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December 19, 2017 in Scholarship, Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Revenue Aspects Of Carbon Taxation

Shi-Ling Hsu (Florida State), A Complete Analysis of Carbon Taxation: Considering the Revenue Side, 65 Buff. L. Rev. 857 (2017):

Climate policy in the United States always seems to face strong political headwinds. It is not so much that voters dismiss the threat of climate change, or that they believe climate change is a “hoax,” but coming up with a fair and effective policy has always seemed so daunting. This Article argues that the simplest answer is not, contrary to initial appearances, daunting at all. The most effective and most efficient climate policy at the federal, state, and local level is a carbon tax.

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December 19, 2017 in Scholarship, Tax | Permalink | Comments (1)

GOP Could Use Treasury Gimmick To Avoid PAYGO Sequestration From Tax Bill

Following up on my previous post, Why the End of This Year Is the Worst Possible Time to Pass Tax Reform:  Sam Wice, The Gimmick Republicans Could Use to Avoid a PAYGO Sequestration, Yale J. on Reg.: Notice & Comment (2017):

Republicans plan to pass a deficit increasing tax-reform proposal, but the Pay-As-You-Go Act (PAYGO) would require a sequestration, an automatic reduction in spending, if tax reform increased the deficit.  Republicans could avoid a sequestration by convincing Senate Democrats to support legislation lifting the sequestration.  Democrats, however, might not be willing to compromise on an issue that they believe that Republicans caused.  Nevertheless, Republicans have a gimmick they could unilaterally use to avoid a sequestration.  Specifically, Republicans could use the Treasury Department’s estimate, which claims that the economic growth from tax reform would pay for its costs.

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December 19, 2017 in Congressional News, Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Trump, Corker, And Other Real Estate Investors Get Last-Minute Perk in Tax Bill

Bloomberg, Trump, Real Estate Investors Get Last-Minute Perk in Tax Bill:

Lawmakers scrambling to lock up Republican support for the tax reform bill added a complicated provision late in the process — one that would provide a multimillion-dollar windfall to real estate investors such as President Donald Trump.

The change, which would allow real estate businesses to take advantage of a new tax break that’s planned for partnerships, limited liability companies and other so-called “pass-through” businesses, combined elements of House and Senate legislation in a new way. Its beneficiaries are clear, tax experts say, and they include a president who’s said that the tax legislation wouldn’t help him financially. ,,,

James Repetti, a tax law professor at Boston College Law School, said: “This is a windfall for real estate developers like Trump.”

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December 19, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (0)

Monday, December 18, 2017

The Impact Of The GOP Tax Bill On Higher Education: Taxes On Large Endowments, $1 Million Compensation Are In; Taxes On Tuition Remission And Logo Licensing, Private Activity Bond Restrictions Are Out

Chronicle of Higher Education, Final Tax Bill Would Spare Some Higher-Ed Worries, but Could Lead to State Budget Cuts:

The Republican-backed tax overhaul is headed for final floor votes in Congress without some of the measures that would directly target higher education. Notably, a proposed tax on tuition waivers for graduate students and other college employees is no longer in the compromise legislation. But a high-profile tax on the investment earnings of some of the largest college endowments stayed in the bill. ...

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December 18, 2017 in Congressional News, Tax, Tax Policy in the Trump Administration | Permalink | Comments (2)

New York Times, Wall Street Journal On The GOP Tax Bill

New York Times editorial, The Tax Bill That Inequality Created:

Most Americans know that the Republican tax bill will widen economic inequality by lavishing breaks on corporations and the wealthy while taking benefits away from the poor and the middle class. What many may not realize is that growing inequality helped create the bill in the first place.

As a smaller and smaller group of people cornered an ever-larger share of the nation’s wealth, so too did they gain an ever-larger share of political power. They became, in effect, kingmakers; the tax bill is a natural consequence of their long effort to bend American politics to serve their interests.

As things stand now, the top 1 percent of the population by wealth — the group that would primarily benefit from the tax bill — controls nearly 40 percent of the country’s wealth. The bottom 90 percent has just 27 percent, according to the economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman. Just three decades ago these numbers were almost exactly the reverse: The bottom 90 percent owned nearly 40 percent of all wealth. To find a time when such a tiny minority was so dominant, you have to go back to the Great Depression. ...

NYT 1

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December 18, 2017 in Tax, Tax Policy in the Trump Administration | Permalink | Comments (2)

Davis Polk's Tax Cuts And Jobs Act Navigator

Davis PolkFollowing up on my weekend posts:

Davis Polk, Tax Cuts and Jobs Act Navigator:

We are pleased to release our first “TCJA Navigator,” a hyperlinked version of the Conference Committee’s tax reform bill released on December 15th.

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December 18, 2017 in Congressional News, Tax, Tax Policy in the Trump Administration | Permalink | Comments (1)

The IRS Scandal, Day 1684: Fallout From Allegations Of Tea Party Targeting Hampers IRS Oversight Of Nonprofits

IRS Logo 2Washington Post, Fallout From Allegations of Tea Party Targeting Hamper IRS Oversight of Nonprofits:

Years of conservative attacks on the Internal Revenue Service have greatly diminished the ability of agency regulators to oversee political activity by charities and other nonprofits, documents and interviews show.

The fall in oversight, a byproduct of repeated cuts to the IRS budget, comes at a time when the number of charities is reaching a historic high and they are becoming more partisan and financially complex.

It represents a success for conservatives who have long sought to scale back the IRS and shrink the federal government. They capitalized on revelations in 2013 that IRS officials focused inappropriately on tea party and other conservative groups based on their names and policy positions, rather than on their political activity, in assessing their applications for tax-exempt status. Among conservatives, the episode has come to be known as the “IRS targeting scandal.”

Under the federal tax code, charities may not directly or indirectly support a political candidate, but they are allowed to participate in educational debates about the issues. Other nonprofits known as social welfare groups may be involved in politics, but only as long as it is not their primary purpose.

The main part of government tasked with policing those lines, the IRS’s Exempt Organizations division, has seen its budget decline from a peak of $102 million in 2011 to $82 million last year. At the same time, division employees have fallen from 889 to 642.

The division now lacks expertise, resources and the will needed to effectively oversee more than 1.2 million charities and tens of thousands of social welfare groups, according to interviews with two dozen nonprofit specialists and current and former IRS officials.

“This completely neutered them,” said Philip Hackney, a tax law professor at Louisiana State University and former Exempt Organizations lawyer at the IRS. “The will is totally gone.” ...

Conservatives have likened the IRS’s extra scrutiny of the tea party groups to Watergate and called it a political witch hunt. Among the leading critics was Cleta Mitchell, a veteran Republican activist and nonprofit lawyer. In 2014, she told a House oversight panel that Congress ought to abolish the IRS, saying the agency “is so corrupt and so rotten to the core that it cannot be salvaged.”

But while investigations by Congress and federal agencies found that IRS officials selected tea party groups for added attention, the investigators concluded there was no proof of political intent, a liberal conspiracy or White House involvement. ...

More charities have now begun to recognize they face little chance of an examination or sanction, which can involve terminating a group’s tax-exempt status and the ability of its donors to deduct their contributions, specialists said. “More and more groups are going to discover that they get away with doing politics,” said Lloyd Hitoshi Mayer, a law professor at Notre Dame and a former nonprofit lawyer. ...

In interviews and an email exchange with The Post, Mitchell said the investigations failed to highlight the essence of IRS wrongdoing. She maintains the scandal was grounded in abusive, politically motivated targeting, as chronicled by the Issa report in 2014. “I have no intention of ‘schooling’ anyone on why the IRS / Obama / Democrats’ narrative is wrong,” she wrote. “I’m not going to get into an argument to try to convince you of why that narrative is wrong. It just is. You either believe it or you don’t and if you don’t think there was a Political targeting scandal, then you don’t need to talk to me.”

Miriam Galston, a law professor at George Washington University, said there’s growing evidence that many charities are “flagrantly violating” the expectation that they contribute to “the public good.” She said IRS regulators are not in a position to do anything about it. “They’ve been burned. They’ve been hammered. They’ve been bludgeoned,” said Galston, a specialist in state and federal nonprofit law. “They’re trying to survive.”

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December 18, 2017 in IRS News, IRS Scandal, Tax | Permalink | Comments (8)

TaxProf Blog Weekend Roundup

Sunday, December 17, 2017

Johnson Amendment Repeal Removed From Final GOP Tax Bill

Christianity Today, Johnson Amendment Repeal Removed from Final GOP Tax Bill:

President Donald Trump’s biggest religious freedom policy promise to evangelicals—repealing the Johnson Amendment—will no longer take place via Republican tax reform.

A Democratic senator announced Thursday night that the repeal included in the House version of the tax bill, which would allow churches and other nonprofits to endorse candidates without losing their tax-exempt status, was removed during the reconciliation process with the Senate version, which did not include a repeal.

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December 17, 2017 in Tax | Permalink | Comments (0)

The Top Five New Tax Papers

SSRN LogoThere is a quite a bit of movement in this week's list of the Top 5 Recent Tax Paper Downloads, with new papers debuting on the list at #1 and #5.  The #1 paper is already #1 (by over 20,000 downloads) among 13,183 tax papers in all-time downloads:

  1. [31,359 Downloads]  The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the New Legislation, by Ari Glogower (Ohio State), David Kamin (NYU), Rebecca Kysar (Brooklyn) & Darien Shanske (UC-Davis) et al.
  2. [436 Downloads]  The Senate Introduced a Pragmatic and Geopolitically Savvy Inbound Base Erosion Rule, by Itai Grinberg (Georgetown)
  3. [408 Downloads]  Tax Reform: Process Failures, Loopholes and Wealth Windfalls , by Stephen Shay (Harvard)
  4. [261 Downloads]  Once More, with Feeling: The 'Tax Cuts and Jobs' Act and the Original Intent of Subpart F, by Reuven Avi-Yonah (Michigan) & Nir Fishbien (S.J.D. 2018, Michigan)
  5. [176 Downloads]  Heading Off a Cliff?, by Michael Graetz (Columbia)

December 17, 2017 in Scholarship, Tax, Top 5 Downloads | Permalink | Comments (0)

Saturday, December 16, 2017

This Week's Ten Most Popular TaxProf Blog Posts

GOP Finalizes Tax Bill, House And Senate Expected To Approve Conference Agreement Next Week

Friday, December 15, 2017

Tax Policy In The Trump Administration